CAI International
Oct 30,2018

CAI International, Inc. Reports Results for the Third Quarter of 2018

SAN FRANCISCO--(BUSINESS WIRE)--Oct. 30, 2018-- CAI International, Inc. (CAI) (NYSE: CAI), one of the world’s leading transportation finance and logistics companies, today reported results for the third quarter of 2018.

Record lease revenue up 22% on strong container demand and improved rail fundamentals

Record logistics revenue up 49% driven by demand for truck brokerage and intermodal services

Record pre-tax income up 31% driven by strong container demand

Highlights

  • Net income attributable to CAI common stockholders for the third quarter of 2018 was $20.0 million, or $1.03 per fully diluted share, compared to $17.6 million, or $0.90 per fully diluted share, in the third quarter of 2017.
  • CAI reported record lease-related revenue for the third quarter of 2018 of $84.1 million, an increase of 22% compared to the third quarter of 2017.
  • Average utilization for CAI’s owned container fleet during the third quarter of 2018 was 99.2% compared to 98.2% for the third quarter of 2017.
  • During the third quarter of 2018, CAI leased out $296 million of container equipment.
  • During the first nine months of 2018, CAI has invested or committed to invest approximately $720 million in container equipment, the vast majority of which is already on lease or committed to be leased.
  • During the third quarter of 2018, CAI had net lease outs of 584 railcars, and has firm customer commitments to lease an additional 625 new cars. Utilization of the railcar fleet is currently 87%, up from 78% at the end of the second quarter of 2018.
  • During the third quarter of 2018, CAI issued $343.5 million of fixed rate asset-backed notes.
  • During the third quarter of 2018, CAI issued approximately two million shares of its 8.5% Series B fixed-to-floating rate cumulative redeemable perpetual preferred stock for net proceeds of $47.3 million.
  • Annualized return on average common equity for the third quarter of 2018 was 14%.
  • CAI recently entered into a $100 million five-year fixed rate term loan agreement. Fixed rate debt now represents approximately 70% of CAI’s total outstanding debt.
  • Earlier this month, CAI announced a new 3.0 million common stock share repurchase program.

Additional information on CAI's results, as well as comments on market trends, is available in a presentation posted today on the "Investors" section of CAI's website, www.capps.com.

Victor Garcia, President and Chief Executive Officer of CAI, commented, “The strong momentum we witnessed in the first half of this year has continued during the third quarter. We reported record quarterly revenue of $115.5 million and net income attributable to CAI common stockholders for the quarter of $20.0 million, or $1.03 per fully diluted share. Our container business continues to operate near full utilization, with utilization today of 99.3%. For the first nine months of the year we have invested, or committed to invest, $721 million in container equipment. We have leased out $558 million of containers with an average lease tenor of approximately 9 years, and have lease commitments for a further $140 million of deliveries in the fourth quarter of 2018. Container demand has remained strong and we expect it to continue to remain strong due to the overall strength of the world economy. With continued high worldwide utilization of equipment, we continue to see strong demand for secondary sales of container equipment and we expect continued strong secondary sales prices.

“We remain optimistic about container demand over the coming year and do not believe that tariffs and the imposition of IMO 2020 will have a material negative impact on our business. To date we have not seen any slowing of container demand as a result of tariffs and believe container demand is likely to remain very strong through the end of the year as shippers attempt to avoid larger tariffs that may come into effect in early 2019. In the longer term we believe that the potential of permanent imposition of tariffs will result in supply chain disruption as manufacturers source products from other regions creating logistical bottlenecks and increasing the overall demand for containers. Moreover, we do not believe that the imposition of IMO 2020 regulations requiring shipping lines to deploy scrubbers on their ships or consume low sulfur fuel will negatively impact our business. Shipping lines are already modifying their bunker adjustment calculations to take into account the higher costs, which we believe will be passed on to their customers in the form of higher freight costs.

“We continue to see improvement in the utilization of rail assets and rental rates have improved on most car types from the levels of last year. During the third quarter of 2018, we had net lease outs of 584 railcars and have commitments to lease out a further 625 new cars to be delivered over the fourth quarter of 2018 and first quarter of 2019. Our railcar utilization, including new cars not yet leased out, has improved to 84% during the third quarter, compared to 78% during the second quarter. Our utilization today is 87% and we expect it will increase to 90% by the end of the year. By the end of the first quarter of 2019 we will have taken delivery of all of the rail assets under our three year purchase commitment with one of the rail manufacturers. Our ongoing focus will be to find the best opportunities to improve results, which include increasing utilization, renewing leases at higher rates and, where it makes sense, selling equipment.

“Our logistics business continues to gain momentum and has a growing customer portfolio that led to record revenue during the quarter. Growth has been particularly strong in our domestic intermodal and truck brokerage businesses. We reported logistics revenue during the quarter of $31.4 million, an increase of 49% compared to the third quarter of 2017. Similarly, gross margin in logistics has increased 21% during the quarter, compared to the third quarter of 2017. The difference in revenue and gross margin growth rates reflects the change in mix between our domestic intermodal, truck brokerage and international businesses. We are focused on expanding our portfolio of customers and gaining more penetration with our key clients. We expect continued double digit expansion of our logistics business into 2019.”

Mr. Garcia, continued, “We have also been active in enhancing the strength of our balance sheet. We successfully issued approximately 2.0 million shares of our Series B perpetual preferred stock during the quarter, for net proceeds of $47.3 million. We also issued $343.5 million of fixed rate asset backed notes during the quarter which, together with a recently completed $100 million fixed rate term loan agreement, has increased our proportion of fixed rate debt to approximately 70%.”

Mr. Garcia, concluded, “We have successfully improved our financial performance over the course of this year and based on the most recent quarter achieved an annualized return on equity of 14%. Our container segment was the driver of those results and had a comparable annualized return on equity of 18%. Although we are pleased with our performance, we are focused on continued improvement on those results. Our focus is to deploy capital where the returns are strongest which includes repurchasing shares. We announced a 3 million common stock share repurchase program earlier this month and believe the repurchase of outstanding shares provides a compelling investment that will benefit our long-term shareholders.”

 
CAI International, Inc.
Consolidated Balance Sheets
(In thousands, except share information)
(UNAUDITED)
 
    September 30,   December 31,
      2018       2017  
Assets        
Current assets        
Cash   $ 14,550     $ 14,735  
Cash held by variable interest entities     23,779       20,685  

Accounts receivable, net of allowance for doubtful accounts of $1,455 and $1,440 at September 30, 2018 and December 31, 2017, respectively

    83,698       68,324  
Current portion of net investment in direct finance leases     74,637       30,063  
Prepaid expenses and other current assets     2,600       4,258  
Total current assets     199,264       138,065  
Restricted cash     31,634       11,789  

Rental equipment, net of accumulated depreciation of $575,866 and $505,546 at September 30, 2018 and December 31, 2017, respectively

    2,299,955       2,004,961  
Net investment in direct finance leases     444,741       246,450  
Goodwill     15,794       15,794  

Intangible assets, net of accumulated amortization of $4,946 and $3,407 at September 30, 2018 and December 31, 2017, respectively

    6,184       7,723  

Furniture, fixtures and equipment, net of accumulated depreciation of $3,303 and $3,201 at September 30, 2018 and December 31, 2017, respectively

    619       338  
Other non-current assets     974       3,008  
Total assets   $ 2,999,165     $ 2,428,128  
         
Liabilities and Stockholders' Equity        
Current liabilities        
Accounts payable   $ 6,269     $ 7,831  
Accrued expenses and other current liabilities     18,882       15,706  
Due to container investors     993       1,845  
Unearned revenue     8,345       7,811  
Current portion of debt     194,563       132,049  
Rental equipment payable     257,947       92,415  
Total current liabilities     486,999       257,657  
Debt     1,777,420       1,570,773  
Deferred income tax liability     38,277       35,853  
Total liabilities     2,302,696       1,864,283  
         
Stockholders' equity        

 

       

Preferred stock, par value $.0001 per share; authorized 10,000,000 and 5,000,000 at September 30, 2018 and December 31, 2017, respectively:

       

8.50% Series A fixed-to-floating rate cumulative redeemable perpetual preferred stock, issued and outstanding 2,199,610 and 0 shares at September 30, 2018 and December 31, 2017, respectively, at liquidation preference

    54,990       -  

8.50% Series B fixed-to-floating rate cumulative redeemable perpetual preferred stock, issued and outstanding 1,955,000 and 0 shares at September 30, 2018 and December 31, 2017, respectively, at liquidation preference

    48,875       -  

Common stock: par value $.0001 per share; authorized 84,000,000 shares; issued and outstanding 19,306,202 and 20,390,622 shares at September 30, 2018 and December 31, 2017, respectively

    2       2  
Additional paid-in capital     145,069       172,325  
Accumulated other comprehensive loss     (6,379 )     (6,122 )
Retained earnings     453,912       397,640  
Total stockholders' equity     696,469       563,845  
Total liabilities and stockholders' equity   $ 2,999,165     $ 2,428,128  

 

 
CAI International, Inc.
Consolidated Statements of Income
(In thousands, except per share data)
(UNAUDITED)
 
    Three Months Ended   Nine Months Ended
    September 30,   September 30,
      2018       2017       2018       2017  
Revenue                
Container operating lease revenue   $ 75,331     $ 61,870     $ 208,298     $ 169,784  
Rail lease revenue     8,759       7,279       26,982       23,459  
Logistics revenue     31,362       21,012       81,251       61,116  
Total revenue     115,452       90,161       316,531       254,359  
                 
Operating expenses                
Depreciation of rental equipment     31,272       27,788       89,521       82,814  
Storage, handling and other expenses     3,514       3,506       10,227       16,651  
Logistics transportation costs     27,541       17,855       70,536       51,608  
Gain on sale of used rental equipment     (2,625 )     (1,663 )     (7,539 )     (2,539 )
Administrative expenses     12,869       10,781       36,270       31,212  
Total operating expenses     72,571       58,267       199,015       179,746  
                 
Operating income     42,881       31,894       117,516       74,613  
                 
Other expenses                
Net interest expense     19,783       13,959       55,122       37,916  
Other expense     116       449       510       651  
Total other expenses     19,899       14,408       55,632       38,567  
                 
Income before income taxes     22,982       17,486       61,884       36,046  
Income tax expense (benefit)     1,228       (101 )     2,695       549  
                 
Net income     21,754       17,587       59,189       35,497  
Preferred stock dividends     1,748       -       2,917       -  

Net income attributable to CAI common stockholders

  $ 20,006     $ 17,587     $ 56,272     $ 35,497  
                 
                 

Net income per share attributable to CAI common stockholders

               
Basic   $ 1.04     $ 0.92     $ 2.85     $ 1.86  
Diluted   $ 1.03     $ 0.90     $ 2.81     $ 1.83  
                 
Weighted average shares outstanding                
Basic     19,214       19,180       19,741       19,108  
Diluted     19,492       19,633       19,997       19,422  

 

 
CAI International, Inc.
Consolidated Statements of Cash Flows
(In thousands, except per share data)
(UNAUDITED)
 
    Nine Months Ended
    September 30,
      2018       2017  
Cash flows from operating activities        
Net income   $ 59,189     $ 35,497  
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation     89,635       83,088  
Amortization of debt issuance costs     3,173       2,400  
Amortization of intangible assets     1,538       1,536  
Stock-based compensation expense     2,101       1,539  
Reduction in contingent consideration     -       (2,211 )
Unrealized loss on foreign exchange     317       42  
Gain on sale of used rental equipment     (7,539 )     (2,539 )
Deferred income taxes     2,424       393  
Bad debt (recovery) expense     (14 )     750  
Changes in other operating assets and liabilities:        
Accounts receivable     (7,305 )     (10,715 )
Prepaid expenses and other assets     (2,130 )     (72 )
Accounts payable, accrued expenses and other current liabilities     (901 )     (5,887 )
Due to container investors     (852 )     (697 )
Unearned revenue     (49 )     (540 )
Net cash provided by operating activities     139,587       102,584  
Cash flows from investing activities        
Purchase of rental equipment     (529,230 )     (277,769 )
Proceeds from sale of used rental equipment     44,373       48,863  
Purchase of furniture, fixtures and equipment     (394 )     (91 )
Receipt of principal payments from direct finance leases     26,982       14,536  
Net cash used in investing activities     (458,269 )     (214,461 )
Cash flows from financing activities        
Proceeds from debt     1,302,912       556,544  
Principal payments on debt     (1,025,954 )     (448,436 )
Debt issuance costs     (9,882 )     (3,129 )
Proceeds from issuance of common and preferred stock     103,681       -  
Repurchase of common stock     (27,946 )     -  
Dividends paid to preferred stockholders     (1,376 )     -  
Exercise of stock options     24       1,362  
Net cash provided by financing activities     341,459       106,341  
Effect on cash of foreign currency translation     (23 )     380  
Net increase (decrease) in cash and restricted cash     22,754       (5,156 )
Cash and restricted cash at beginning of the period     47,209       52,326  
Cash and restricted cash at end of the period   $ 69,963     $ 47,170  

 

 
CAI International, Inc.
Fleet Data
(UNAUDITED)
 
            As of September 30,
            2018   2017
                 
Owned container fleet in TEUs           1,435,516     1,121,355  
Managed container fleet in TEUs           75,872     83,086  
Total container fleet in TEUs           1,511,388     1,204,441  
                 
Owned container fleet in CEUs           1,475,142     1,188,078  
Managed container fleet in CEUs           69,134     75,596  
Total container fleet in CEUs           1,544,276     1,263,674  
                 
Owned railcar fleet in units           7,489     6,795  
                 
                 
    Three Months Ended   Nine Months Ended
    September 30,   September 30,
    2018   2017   2018   2017
Average Utilization                
Container fleet utilization in CEUs   99.2 %   98.0 %   99.2 %   96.9 %
Owned container fleet utilization in CEUs   99.2 %   98.2 %   99.2 %   97.1 %
Railcar fleet utilization in units - excluding new units not yet leased   89.0 %   89.3 %   88.1 %   91.0 %
Railcar fleet utilization in units - including new units not yet leased   84.0 %   77.4 %   79.1 %   79.8 %
                 
            As of September 30,
            2018   2017
Period Ending Utilization                
Container fleet utilization in CEUs           99.3 %   98.5 %
Owned container fleet utilization in CEUs           99.3 %   98.6 %
Railcar fleet utilization in units - excluding new units not yet leased           90.0 %   86.8 %
Railcar fleet utilization in units - including new units not yet leased           86.6 %   74.1 %
 
Utilization of containers is computed by dividing the total units on lease in CEUs (cost equivalent units), by the total units in our fleet in CEUs.
The total container fleet excludes new units not yet leased and off-hire units designated for sale.
Utilization of railcars is computed by dividing the total number of railcars on lease by the total number of railcars in our fleet.
The impact on utilization of including new units not yet leased in the total railcar fleet has been included in the table above.
 
CEU is a ratio used to convert the actual number of containers in our fleet to a figure based on the relative purchase prices of our various equipment types to that of a standard 20 foot dry van container. For example, the CEU ratio for a standard 40 foot dry van container is 1.6, and a 40 foot high cube container is 1.7.
 

 

Conference Call

A conference call to discuss the financial results for the third quarter of 2018 will be held on Tuesday, October 30, 2018 at 5:00 p.m. ET. The dial-in number for the teleconference is 1-888-398-8098; outside of the U.S., call 1-707-287-9363. The call may be accessed live over the internet (listen only) under the “Investors” section of CAI’s website, www.capps.com, by selecting “Q3 2018 Earnings Conference Call.” A webcast replay will be available for 30 days on the “Investors” section of our website.

Earnings Presentation

A presentation summarizing our third quarter 2018 results is available on the “Investors” section of our website, www.capps.com.

About CAI International, Inc.

CAI is one of the world’s leading transportation finance and logistics companies. As of September 30, 2018, CAI operated a worldwide fleet of approximately 1.5 million CEUs of containers, and owned a fleet of 7,489 railcars that it leases within North America. CAI operates through 23 offices located in 14 countries including the United States.

Forward-Looking Statements

This press release contains forward-looking statements regarding future events and the future performance of CAI, including but not limited to, the statements regarding management's business outlook on the container leasing business, management's outlook for growth of CAI’s leasing investments and the outlook of its logistics business. These statements and others herein are forward-looking statements within the meaning of the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934 and involve risks and uncertainties that could cause actual results of operations and other performance measures to differ materially from current expectations including, but not limited to, utilization rates, expected economic conditions, expected growth of international trade, availability of credit on commercially favorable terms or at all, customer demand, container investment levels, container prices, lease rates, increased competition, volatility in exchange rates, growth in world trade and world container trade, the ability of CAI to convert letters of intent with its customers to binding contracts, potential to sell CAI’s securities to the public and others.

CAI refers you to the documents that it has filed with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2017, its Quarterly Reports on Form 10-Q and its Current Reports on Form 8-K. These documents contain additional important factors that could cause actual results to differ from current expectations and from forward-looking statements contained in this press release. Furthermore, CAI is under no obligation to (and expressly disclaims any such obligation to) update or alter any of the forward-looking statements contained in this press release whether as a result of new information, future events or otherwise, unless required by law.

 

Source: CAI International, Inc.

CAI International, Inc.
Tim Page, 415-788-0100
Chief Financial Officer
tpage@capps.com

Stock Information

2017 Annual Report

2017 Annual Report