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 2017.
Highlights
- Strong fundamentals in the container
leasing market in the third quarter of 2017 resulted in continued
revenue and net income growth.
- Lease-related revenue for the third
quarter of 2017 was $69.1 million, an increase of 21% compared to
the third quarter of 2016, and 10% compared to the second quarter
of 2017.
- Net income for the third quarter of
2017 was $17.6 million, or $0.90 per fully diluted share, compared
to a net loss per fully diluted share of $0.28 in the third quarter
of 2016, and net income per fully diluted share of $0.65 in the
second quarter of 2017.
- Average utilization for our owned
container fleet during the third quarter of 2017 was 98.2% (on a
CEU basis) compared to 94.0% for the third quarter of 2016, and
97.2% for the second quarter of 2017. Current utilization is
98.8%.
- Average railcar utilization, excluding
new railcars not yet leased, during the third quarter of 2017 was
89.3% compared to 96.2% for the third quarter of 2016, and 91.0%
for the second quarter of 2017.
- CAI acquired $253 million containers in
the third quarter of 2017, $217 million of which were new
containers. Virtually all of these containers have already been
leased.
- On July 6, 2017, CAI issued $253
million of asset-backed securitized notes at a weighted-average
interest rate of 3.7%.
Revenue for the third quarter of 2017 was $90.2 million,
compared to $78.5 million for the third quarter of 2016, an
increase of 15%. Revenue from CAI’s container leasing business was
$61.9 million, compared to $49.7 million for the third quarter of
2016, an increase of 25%, primarily due to investment in the owned
fleet and an increase in utilization.
Net income for the third quarter of 2017 was $17.6 million, or
$0.90 per fully diluted share, compared to a net loss of $5.5
million, or $0.28 per fully diluted share, for the third quarter of
2016, and net income of $12.6 million, or $0.65 per fully diluted
share, for the second quarter of 2017. Net income for the third
quarter of 2017 benefitted from the recognition of $1.5 million of
pre-tax insurance proceeds related to previously recorded repair
costs from the bankruptcy of Hanjin, and the pre-tax release of an
earn-out liability of $1.6 million associated with acquisitions in
the logistics business completed in prior periods. These were
partially offset by a foreign exchange loss of $0.5 million caused
by the settlement of Euro denominated intercompany loans.
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, “The momentum in our business has continued as the year
has developed, with the third quarter being particularly strong.
For the quarter, we reported net income of $17.6 million, or $0.90
per fully diluted share. That compares to $12.6 million, or $0.65
per fully diluted share in the second quarter of 2017. During the
quarter, we benefitted from the recognition of insurance proceeds
related to the bankruptcy of Hanjin and the release of an earn-out
liability associated with acquisitions made in prior periods,
partially offset by a significant foreign exchange loss. These
items increased our net income for the quarter by $2.2 million.
“We are very pleased with the momentum in our business and the
rapid improvement in our results. The core fundamentals in our
container leasing business remain strong as can be seen by the
average utilization of our owned container fleet which was 98.2% in
the third quarter of 2017 and is currently 98.8%, effectively fully
utilized. Our available inventory for lease or sale is at historic
lows and we expect utilization to remain at these elevated levels
for the coming months as there is limited new investment in
containers by lessors who remain constrained in their ability to
deploy capital. We believe those constraints will keep supply and
demand for containers tight over the coming months assuming a
continued steady demand for containerized cargo around the globe.
Most of our new leases have required that equipment be returned to
high demand areas in China which we expect will enable us to
redeploy the equipment if it is returned.”
Mr. Garcia continued, “For the year-to-date, we have committed
investment in containers of $470 million, virtually all of which
are subject to long-term leases with an average lease duration of
over 8 years. Of the container investment made this year, $253
million was delivered in the third quarter. We have an additional
$64 million of containers to be delivered in the fourth quarter,
all of which are fully booked under attractive long-term leases. We
expect our fourth quarter results to see some benefit from the full
quarter effect of the equipment placed on lease during the third
quarter. Because we have limited equipment available for sale, we
expect our gain on sale to decrease in the coming quarter. However,
the price of containers in the secondary market continues to rise
due to limited supply and, as a result, we expect the average gain
per unit to increase.
“Our rail segment continues to work through a difficult market
environment. Leases on new equipment continue to be priced
aggressively as we believe other lessors are prioritizing having
units on lease rather than on overall lease rental rates. However,
we have diversified equipment being delivered and we continue to
try and reach a broad market of customers to place our equipment.
Our focus on the rail segment is to delay equipment deliveries
where possible and place as much equipment on short-term leases to
bridge to a potentially better market in the future. We do not
intend to invest uncommitted, incremental capital in our rail
segment until the market opportunity improves. We expect all
uncommitted, incremental capital investment to be focused on our
container segment where returns are currently higher and demand is
clearly stronger.
“We have made leadership changes in our logistics business to
better integrate our various product offerings and to streamline
our processes. The results for the logistics segment have been
below our expectations and we believe the leadership changes were
necessary for the long-term growth of the segment. Overall, the
underlying market demand for logistics services has improved
significantly over the course of the third quarter and we expect to
pick up momentum with our existing customers in the fourth
quarter.”
Mr. Garcia, concluded, “We have great momentum in our operating
results, and with equipment due to be delivered in the coming
quarters on committed leases, we expect to maintain growth in our
utilization and revenue for the remainder of the year. We will
continue to look for opportunities to increase our overall return
on capital by increasing the utilization and returns on our
equipment.”
CAI International, Inc. Consolidated Balance Sheets
(In thousands, except share information) (UNAUDITED)
September 30, December 31, 2017
2016 Assets Current assets Cash $ 12,508 $ 15,685
Cash held by variable interest entities 22,445 30,449
Accounts receivable, net of allowance for
doubtful accounts of $1,636 and $1,340 at September 30, 2017 and
December 31, 2016, respectively
69,478 63,745 Current portion of net investment in direct finance
leases 27,947 19,959 Prepaid expenses and other current assets
5,016 5,315 Total current assets
137,394 135,153 Restricted cash 12,217 6,192
Rental equipment, net of accumulated
depreciation of $484,428 and $421,153 at September 30, 2017 and
December 31, 2016, respectively
1,979,012 1,807,010 Net investment in direct finance leases 199,994
80,582 Goodwill 15,794 15,794
Intangible assets, net of accumulated
amortization of $2,974 and $2,681 at September 30, 2017 and
December 31, 2016, respectively
8,156 9,691
Furniture, fixtures and equipment, net of
accumulated depreciation of $3,131 and $2,833 at September 30, 2017
and December 31, 2016, respectively
370 550 Other non-current assets 3,220 962
Total assets $ 2,356,157 $ 2,055,934
Liabilities and Stockholders' Equity Current
liabilities Accounts payable $ 6,320 $ 13,804 Accrued expenses and
other current liabilities 13,540 11,778 Due to container investors
4,119 7,077 Unearned revenue 8,361 10,613 Current portion of debt
133,322 95,527 Rental equipment payable 190,180
25,207 Total current liabilities 355,842 164,006 Debt
1,450,588 1,380,499 Deferred income tax liability 51,193 51,804
Other long term liabilities - 2,121
Total liabilities 1,857,623 1,598,430
Stockholders' equity
Common stock: par value $.0001 per share;
authorized 84,000,000 shares; issued and outstanding 19,268,083 and
19,057,217 shares at September 30, 2017 and December 31, 2016,
respectively
2 2 Additional paid-in capital 143,845 141,058 Accumulated other
comprehensive loss (6,390 ) (8,132 ) Retained earnings
361,077 324,576
Total stockholders'
equity 498,534 457,504
Total
liabilities and stockholders' equity $ 2,356,157 $
2,055,934
CAI International, Inc. Consolidated
Statements of Income (In thousands, except per share
data) (UNAUDITED) Three
Months Ended Nine Months Ended September 30,
September 30, 2017 2016 2017
2016 Revenue Container lease income $ 61,870 $ 49,661
$ 169,784 $ 152,875 Rail lease income 7,279 7,614 23,459 22,462
Logistics revenue 21,012 21,197
61,116 41,743
Total revenue 90,161
78,472 254,359 217,080
Operating expenses Depreciation of rental equipment
27,788 29,873 82,814 77,401 Storage, handling and other expenses
3,506 8,802 16,651 27,176 Logistics transportation costs 17,855
18,045 51,608 35,127 (Gain) loss on sale of used rental equipment
(1,663 ) 3,323 (2,539 ) 7,950 Administrative expenses 10,781
11,067 31,212 28,750
Total operating expenses 58,267 71,110
179,746 176,404
Operating
income 31,894 7,362 74,613
40,676
Other expenses Net interest
expense 13,959 10,902 37,916 31,535 Other expense 449
85 651 407
Total other
expenses 14,408 10,987
38,567 31,942
Income before income taxes
and non-controlling interest 17,486 (3,625 ) 36,046 8,734
Income tax (benefit) expense (101 ) 1,826
549 3,320
Net income 17,587
(5,451 ) 35,497 5,414 Net income attributable to non-controlling
interest - - - 37
Net income attributable to CAI common stockholders $
17,587 $ (5,451 ) $ 35,497 $ 5,377
Net income per share attributable to CAI common
stockholders Basic $ 0.92 $ (0.28 ) $ 1.86 $ 0.28 Diluted $
0.90 $ (0.28 ) $ 1.83 $ 0.28
Weighted average shares
outstanding Basic 19,180 19,130 19,108 19,427 Diluted 19,633
19,130 19,422 19,498
CAI International, Inc. Consolidated
Statements of Cash Flows (In thousands, except per share
data) (UNAUDITED) Nine Months Ended
September 30,
2017 2016 Cash flows from operating activities
Net income $ 35,497 $ 5,414 Adjustments to reconcile net income to
net cash provided by operating activities: Depreciation 83,088
77,636 Amortization of debt issuance costs 2,400 2,217 Amortization
of intangible assets 1,536 682 Stock-based compensation expense
1,539 1,320 Reduction in contingent consideration (2,211 ) (1,000 )
Unrealized loss on foreign exchange 42 82 (Gain) loss on sale of
used rental equipment (2,539 ) 7,950 Loss on disposal of subsidiary
- 146 Deferred income taxes 393 2,193 Bad debt expense 750 2,458
Changes in other operating assets and liabilities: Accounts
receivable (6,280 ) (7,560 ) Prepaid expenses and other assets (72
) (191 ) Accounts payable, accrued expenses and other current
liabilities (5,887 ) 1,540 Due to container investors (2,958 ) (32
) Unearned revenue (540 ) 1,013
Net cash
provided by operating activities 104,758
93,868
Cash flows from investing activities Purchase
of rental equipment (277,769 ) (170,582 ) Acquisitions, net of cash
acquired - (15,620 ) Net proceeds from sale of used rental
equipment 50,036 46,137 Disposal of subsidiary, net of cash
disposed of - (460 ) Purchase of furniture, fixtures and equipment
(91 ) (92 ) Receipt of principal payments from direct financing
leases 11,189 17,368
Net cash used
in investing activities (216,635 ) (123,249 )
Cash flows from financing activities Proceeds from debt
556,544 432,540 Principal payments on debt (448,436 ) (408,375 )
Debt issuance costs (3,129 ) (1,461 ) Decrease in restricted cash
(6,025 ) 765 Repurchase of stock - (9,176 ) Exercise of stock
options 1,362 -
Net cash provided by
financing activities 100,316 14,293
Effect on cash of foreign currency translation 380
1
Net (decrease) increase in cash (11,181 )
(15,087 ) Cash at beginning of the period 46,134
52,553
Cash at end of the period $ 34,953
$ 37,466
CAI International, Inc. Fleet
Data (UNAUDITED) As of
September 30, 2017 2016 Owned container
fleet in TEUs 1,121,355 941,345 Managed container fleet in TEUs
83,086 174,162 Total container fleet in TEUs
1,204,441 1,115,507 Owned container fleet in
CEUs 1,188,078 1,010,083 Managed container fleet in CEUs 75,596
156,543 Total container fleet in CEUs 1,263,674
1,166,626 Owned railcar fleet in units 6,795
6,136
Three Months Ended Nine
Months Ended September 30, September 30,
2017 2016 2017 2016 Average
Utilization Container fleet utilization in CEUs 98.0 % 93.3 %
96.9 % 92.5 % Owned container fleet utilization in CEUs 98.2 % 94.0
% 97.1 % 93.2 % Railcar fleet utilization in units 89.3 % 96.2 %
91.0 % 96.0 %
As of September 30, 2017
2016 Period Ending Utilization Container fleet
utilization in CEUs 98.5 % 93.3 % Owned container fleet utilization
in CEUs 98.6 % 93.9 % Railcar fleet utilization in units 86.8 %
92.8 %
Utilization is computed by dividing total units on lease in CEUs
(cost equivalent units), by the total units in our fleet in
CEUs,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 third
quarter of 2017 will be held on Thursday, October 19, 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
“Q3 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 third 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 September 30, 2017, CAI operated a
worldwide fleet of approximately 1.3 million CEUs of containers,
and owned a fleet of 6,795 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.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171019006408/en/
CAI International, Inc.Tim Page, 415-788-0100Chief Financial
Officertpage@capps.com
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