CAI CAI International Inc

CAI International, Inc. (CAI) (NYSE:CAI), one of the world’s leading transportation finance and logistics companies, today reported results for the first quarter of 2017.

Highlights

• CAI reported revenue for the first quarter of 2017 of $81.5 million, an increase of $14.5 million compared to the first quarter of 2016. The increase in revenue was primarily due to acquisitions made by our logistics business in 2016. Lease-related revenue for the first quarter of 2017 was $61.0 million, compared to $58.8 million in the first quarter of 2016.
• Net income attributable to CAI common stockholders for the first quarter of 2017 was $5.3 million, or $0.27 per fully diluted share.
• Average container utilization for our owned fleet during the first quarter of 2017 was 95.7% (on a CEU basis) compared to 92.0% for the first quarter of 2016, and 94.3% for the fourth quarter of 2016.
• Average railcar utilization during the first quarter of 2017 was 92.7% compared to 93.5% for the first quarter of 2016, and 94.1% for the fourth quarter of 2016.
• In order to optimize its capital allocation, the Company has amended its new railcar delivery schedule to defer delivery of approximately $24 million of its remaining $95 million 2017 commitment to now be delivered in 2018, with delivery of most of the remaining $71 million being deferred to the third and fourth quarter of 2017.

Revenue for the first quarter of 2017 was $81.5 million, compared to $67.0 million for the first quarter of 2016, an increase of 22%. Revenue from the container leasing business increased by $1.4 million to $53.0 million, and included approximately $2.2 million of insurance proceeds related to lost revenue from the previously reported bankruptcy of Hanjin, partially offset by a decrease in the size of the owned container fleet and a reduction in lease rates during the period. Revenue from CAI’s railcar assets increased over the same period by $0.8 million to $8.1 million as a result of growth in the railcar fleet. Logistics revenue for the first quarter of 2017 was $20.5 million, primarily arising from our acquisitions during the past twelve months.

Net income attributable to CAI common stockholders for the first quarter of 2017 was $5.3 million, or $0.27 per fully diluted share, compared to $7.1 million, or $0.36 per fully diluted share, for the first quarter of 2016.

Additional information on CAI's results, as well as the state of the industry, 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, “We are extremely excited about the improvement in our results this quarter and the prospects for the coming year. For the quarter, we reported revenue of $81.5 million and net income per fully diluted share of $5.3 million, or $0.27 per fully diluted share. During the quarter, we increased our average owned container fleet utilization to 95.7% compared to 94.3% for the fourth quarter of 2016. This is particularly noteworthy considering that the first quarter is traditionally our weakest demand period and reflects the strong demand for equipment we are witnessing. The utilization of our owned container fleet is currently 96.9% and we expect it to increase further during the second quarter when we expect utilization to exceed 97%.

“During the quarter, we experienced a couple of noteworthy items. We recognized $2.2 million of income from insurance related to lost income from the Hanjin bankruptcy. We also recorded an unexpected equipment loss of $1.3 million related to a U.S. lease and sale customer that sold the containers we had on lease without paying for the units. The net result of these two items increased our net income for the quarter by $0.9 million.”

Mr. Garcia added, “Considering the strong and improving market environment, we have invested in new containers and placed the equipment purchased on leases with attractive lease rates. We invested $63 million in containers in the first quarter and are committed to an additional $56 million for delivery in the second quarter, all of which are booked for lease. Per diem rates are currently three times the levels they were this time last year and relative returns are much improved. We expect that the improvement in returns will continue for the rest of the year.

“We believe that the current equipment supply constraints will persist longer than is currently expected or understood, and may have a material effect on the supply and availability of containers to the shipping lines and their customers. The leasing industry is a primary provider of annual container investment and limited ordering could constrain overall production of containers. In addition, no other financing source provides equipment prior to a commitment being in place by the shipping line. We believe that a potential lack of on-the-ground investment may create a container shortage over the remainder of this year.”

Mr. Garcia continued, “We are excited about the opportunity for investment this year, but we are even more focused on improving the return on our existing assets. We have been able to increase prices on the sale of used containers and expect that in the second quarter of this year we are likely to report a gain on sale, compared to the losses we have incurred in recent quarters. In March, we essentially broke even on used container sales and have since increased prices going into the second quarter. We are also seeking opportunities to increase per diem rates on low per diem leases that are expiring.

“We believe that with the improved returns on the sale of equipment, higher utilization of the current fleet, higher lease rate renegotiations and ongoing new investment, our earnings will accelerate in each of the following quarters. Our aim is to reach annualized double digit return on equity by the end of the third or fourth quarter of this year. We believe that our market leading utilization and improving returns is in large part due to our enhanced logistics focus and ability to diversify our investments to achieve the best returns that are available in the market. We are able to grow our business, while remaining selective in the terms and type of business we pursue.”

Mr. Garcia concluded, “Earlier this month, we renegotiated the delivery schedule of our multi-year railcar purchase program, deferring approximately 25% of our 2017 $95 million committed railcar investment into 2018 with most of the remainder being deferred to the third and fourth quarters of this year. We have had success in entering into attractive lease renewals and the level of inquiry for rail equipment is increasing as rail velocity has declined due to increased energy related traffic. We expect that rail activity will be stronger over the second half of the year and the revised redelivery schedule provides us a better environment to market our railcars and frees up capital in the short term to add to our investment in containers.”

    CAI International, Inc. Consolidated Balance Sheets (In thousands, except share information) (UNAUDITED)   March 31, December 31, 2017 2016 Assets Current assets Cash $ 12,141 $ 15,685 Cash held by variable interest entities 20,382 30,449

Accounts receivable, net of allowance for doubtful accounts of $1,543 and $1,340 at March 31, 2017 and December 31, 2016, respectively

63,426 63,745 Current portion of direct finance leases 20,154 19,959 Prepaid expenses and other current assets   9,598     5,315   Total current assets 125,701 135,153 Restricted cash 5,937 6,192

Rental equipment, net of accumulated depreciation of $440,406 and $421,153 at March 31, 2017 and December 31, 2016, respectively

1,832,291 1,807,010 Net investment in direct finance leases 77,036 80,582 Goodwill 15,794 15,794

Intangible assets, net of accumulated amortization of $3,350 and $2,681 at March 31, 2017 and December 31, 2016, respectively

9,022 9,691

Furniture, fixtures and equipment, net of accumulated depreciation of $2,924 and $2,833 at March 31, 2017 and December 31, 2016, respectively

509 550 Other non-current assets   2,020     962   Total assets $ 2,068,310   $ 2,055,934     Liabilities and Stockholders' Equity Current liabilities Accounts payable $ 9,873 $ 13,804 Accrued expenses and other current liabilities 11,529 11,778 Due to container investors 6,245 7,077 Unearned revenue 8,241 10,613 Current portion of debt 85,204 95,527 Rental equipment payable   51,357     25,207   Total current liabilities 172,449 164,006 Debt 1,377,931 1,380,499 Deferred income tax liability 52,405 51,804 Other long term liabilities   1,710     2,121   Total liabilities   1,604,495     1,598,430     Stockholders' equity

Common stock: par value $.0001 per share; authorized 84,000,000 shares; issued and outstanding 19,192,687 and 19,057,217 shares at March 31, 2017 and December 31, 2016, respectively

2 2 Additional paid-in capital 141,846 141,058 Accumulated other comprehensive loss (7,881 ) (8,132 ) Retained earnings   329,848     324,576   Total stockholders' equity   463,815     457,504   Total liabilities and stockholders' equity $ 2,068,310   $ 2,055,934         CAI International, Inc. Consolidated Statements of Income (In thousands, except per share data) (UNAUDITED)  

Three Months EndedMarch 31,

2017 2016 Revenue Container lease income $ 52,954 $ 51,545 Rail lease income 8,053 7,257 Logistics revenue   20,499   8,164   Total revenue   81,506   66,966     Operating expenses Depreciation of rental equipment 27,972 23,034 Storage, handling and other expenses 6,953 9,051 Logistics transportation costs 17,071 6,942 Loss on sale of used rental equipment 873 733 Administrative expenses   10,686   8,750   Total operating expenses   63,555   48,510     Operating income   17,951   18,456     Other expenses Net interest expense 11,672 10,042 Other expense   314   130   Total other expenses   11,986   10,172     Net income before income taxes and non-controlling interest 5,965 8,284 Income tax expense   693   1,133     Net income 5,272 7,151 Net income attributable to non-controlling interest   -   (34 ) Net income attributable to CAI common stockholders $ 5,272 $ 7,117       Net income per share attributable to CAI common stockholders Basic $ 0.28 $ 0.36 Diluted $ 0.27 $ 0.36   Weighted average shares outstanding Basic 19,010 19,774 Diluted 19,231 19,833      

CAI International, Inc.

Consolidated Statements of Cash Flows

(In thousands, except per share data)

(UNAUDITED)  

Three Months EndedMarch 31,

2017 2016 Cash flows from operating activities Net income $ 5,272 $ 7,151 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 28,058 23,113 Amortization of debt issuance costs 747 754 Amortization of intangible assets 669 76 Stock-based compensation expense 461 470 Unrealized loss (gain) on foreign exchange 236 (7 ) Loss on sale of used rental equipment 873 733 Deferred income taxes 601 100 Bad debt expense 187 150 Changes in other operating assets and liabilities: Accounts receivable (1,069 ) (7,993 ) Prepaid expenses and other assets (4,134 ) (53 ) Accounts payable, accrued expenses and other current liabilities (4,763 ) 4,040 Due to container investors (832 ) 194 Unearned revenue   (648 )   1,383   Net cash provided by operating activities   25,658     30,111   Cash flows from investing activities Purchase of rental equipment (48,116 ) (45,844 ) Acquisitions, net of cash acquired - (6,680 ) Proceeds from sale of used rental equipment 19,325 12,740 Purchase of furniture, fixtures and equipment (44 ) (25 ) Receipt of principal payments from direct financing leases   2,741     7,073   Net cash used in investing activities   (26,094 )   (32,736 ) Cash flows from financing activities Proceeds from debt 85,787 145,200 Principal payments on debt (100,541 ) (136,445 ) Debt issuance costs - (10 ) Decrease in restricted cash 255 255 Repurchase of stock - (6,032 ) Exercise of stock options   327     -   Net cash (used in) provided by financing activities   (14,172 )   2,968   Effect on cash of foreign currency translation   997     206   Net (decrease) increase in cash (13,611 ) 549 Cash at beginning of the period   46,134     52,553   Cash at end of the period $ 32,523   $ 53,102         CAI International, Inc. Fleet Data (UNAUDITED)   As of March 31, 2017 2016   Owned container fleet in TEUs 933,241 969,994 Managed container fleet in TEUs 155,362   193,269   Total container fleet in TEUs 1,088,603   1,163,263     Owned container fleet in CEUs 1,024,176 1,025,413 Managed container fleet in CEUs 139,873   173,618   Total container fleet in CEUs 1,164,049   1,199,031     Owned railcar fleet in units 6,546   5,338         Three Months Ended March 31, 2017 2016 Average Utilization Container fleet utilization in CEUs 95.4 % 91.2 % Owned container fleet utilization in CEUs 95.7 % 92.0 % Railcar fleet utilization in units 92.7 % 93.5 %   As of March 31, 2017 2016 Period Ending Utilization Container fleet utilization in CEUs 96.3 % 92.5 % Owned container fleet utilization in CEUs 96.5 % 93.2 % Railcar fleet utilization in units 91.9 % 94.6 %

Utilization is computed by dividing total units on lease, in CEUs (cost equivalent units) or TEUs (twenty foot equivalent units), by the total units in our fleet, in CEUs or TEUs, excluding new units not yet leased and off-hire units designated for sale. 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 first quarter of 2017 will be held on Thursday, April 20, 2017 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 “Q1 2017 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 first quarter 2017 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 March 31, 2017, CAI operated a worldwide fleet of approximately 1.2 million CEUs of containers, and owned a fleet of 6,546 railcars that it leases within North America. CAI operates through 24 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 railcar leasing investments and the outlook, of our 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, 2016, 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.

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