News Column

CAI International, Inc. Reports Results for the Second Quarter of 2014

July 29, 2014

SAN FRANCISCO--(BUSINESS WIRE)-- CAI International, Inc. (CAI) (NYSE: CAP), one of the world’s leading lessors of intermodal freight containers, today reported results for the second quarter of 2014.

Highlights

  • CAI reported rental revenue for the second quarter of 2014 of $51.5 million, an increase of 6% compared to the second quarter of 2013, and 2% compared to the first quarter of 2014.
  • Net income attributable to CAI common stockholders for the second quarter of 2014 was $13.4 million, or $0.60 per fully diluted share. During the quarter, the Company reported a non-recurring, non-cash tax charge of $0.6 million. Excluding this charge, earnings were $14.1 million, or $0.63 per fully diluted share.
  • At the end of the second quarter of 2014, total container fleet utilization increased to 92.1% on a CEU basis, compared to 90.7% at the end of the first quarter of 2014, and today is 92.4%.
  • CAI purchased approximately 39,000 CEU of containers at a cost of $86 million during the second quarter of 2014. CAI has purchased approximately 66,000 CEU of containers at a total cost of $129 million in the first six months of 2014.
  • During the second quarter of 2014, CAI entered into an agreement with rail car manufacturers to purchase 750 new rail cars for approximately $65 million. These cars will be delivered beginning in the fourth quarter of 2014 and throughout 2015.
  • Under CAI’s share repurchase program announced in February 2014, CAI has purchased approximately 1.1 million shares of common stock (approximately 5% of the Company’s fully diluted shares), of which approximately 0.9 million shares were purchased during the second quarter of 2014.
  • On July 28, 2014 CAI amended its rail car revolving credit facility, extending the term five years from the closing date, reducing its interest rate by fifty basis points and increasing the commitment level from $85 million to $250 million.

    Net income attributable to CAI common stockholders for the second quarter of 2014 decreased by 21% to $13.4 million (or $0.60 per fully diluted share), from $16.9 million (or $0.75 per fully diluted share) for the second quarter of 2013. During the quarter, CAI incurred a non-recurring, non-cash tax charge of $0.6 million. Excluding this charge, net income per fully diluted share attributable to CAI common stockholders for the second quarter of 2014 was $0.63, which is consistent with the first quarter 2014 results.

    Total revenue for the second quarter of 2014 was $55.3 million, compared to $53.0 million for the second quarter of 2013, an increase of 4%. Rental revenue for the second quarter of 2014 was $51.5 million, an increase of 6% compared to $48.4 million for the second quarter of 2013. The increase in rental revenue was primarily due to an increase in the average number of owned containers on lease. Management fee revenue for the second quarter of 2014 was $1.6 million, compared to $2.3 million for the second quarter of 2013, reflecting the reduction in the size of the managed fleet as CAI has acquired a number of its previously managed portfolios during the last twelve months. Finance lease income for the second quarter of 2014 was $2.2 million, consistent with the second quarter of 2013.

    Victor Garcia, Chief Executive Officer of CAI, commented, “We have seen a significant increase in demand for containers during the seasonally stronger second quarter. During the quarter we leased out 68,000 CEUs of equipment, 31,000 CEUs of which were newly manufactured, most of which occurred during the latter half of the quarter. Pricing during the quarter remained very competitive. We believe this aggressive pricing has hampered the pickup of off-lease depot equipment, with some customers choosing to redeliver older units and lease newly manufactured units at very attractive rates.

    “While the aggressive pricing environment has created headwinds in our effort to further improve utilization during the second quarter, we have implemented a number of strategies to reduce our long term storage costs and improve overall utilization, including, repositioning assets to higher demand locations, aggressively selling assets where it makes economic sense and re-evaluating how we manage contractual redelivery options. Some of these actions have short term costs associated with them; the repositioning of containers, for example, has contributed to an increase in storage and handling costs in the second quarter. We expect to continue to reposition and sell assets aggressively in the third quarter, which will result in additional expenses related to those assets. However, we expect net income in the third quarter to increase from the second quarter as we have already begun to realize the benefit from the higher revenues and lower storage costs associated with improved utilization. In addition, we will have the benefit of a full quarter of revenue from the new containers we leased out during the second quarter of this year. The average utilization of our total container fleet during the quarter increased slightly to 91.2% on a CEU basis, however, at the end of the quarter it was 92.1% and as of today stands at 92.4%.”

    Mr. Garcia continued, “We are excited about the continued development of our rail business. Our fleet is effectively fully utilized and during the quarter we significantly expanded our rail marketing and operational personnel. Because of the strong rail market and attractive return opportunities we are experiencing, we have committed to purchase 750 new rail cars at a cost of $65 million for delivery beginning in the fourth quarter of 2014 and throughout 2015. These rail cars are expected to carry equipment and sand to serve the demand for equipment created by the growing US energy market. Not only has this demand resulted in a shortage of car types across various segments of the energy market, the rail market in general is experiencing industry wide growth. Consequently, we expect to make materially higher investments in rail equipment in 2015 to serve our customers’ transportation needs.”

    Mr. Garcia added, “To support the expansion of our rail business, yesterday we closed an amendment to our rail revolving credit facility, which increases lending commitments available for rail investment from $85 million to $250 million, extends the term of the facility for five years and decreases our average borrowing costs by a half of a percent. We appreciate the support we have received from our lending partners as we increase our focus on asset growth in this part of our business.

    “We continue to be very confident in our Company’s future earnings and financial condition. As such, we have been purchasing our shares; an investment which we believe will result in attractive returns for our long term shareholders. Since the beginning of the second quarter we have purchased approximately 1.1 million shares at a total cost of $24.9 million. Depending on future market conditions, we expect to purchase additional shares under our previously approved share repurchase program.”

    Mr. Garcia concluded, “The focus in our Company is to enhance long term shareholder value. We intend to continue to work towards achieving this goal by remaining disciplined with our pricing/return strategy, by reducing costs and improving asset utilization, by continuing to expand the mix of our investments to take advantage of the long term growth opportunities in different market segments, and through a disciplined, reasoned capital return strategy.”

             
     
    CAI International, Inc.
    Consolidated Balance Sheets
    (In thousands, except share information)
    (UNAUDITED)
           
    June 30,December 31,
      2014     2013  
    Assets
    Current assets
    Cash $ 19,814 $ 31,141
    Cash held by variable interest entities 27,171 14,600
    Accounts receivable (owned fleet), net of allowance for doubtful accounts
    of $411 and $503 at June 30, 2014 and December 31, 2013, respectively 44,544 41,226
    Accounts receivable (managed fleet) 10,257 10,646
    Current portion of direct finance leases 16,220 12,998
    Prepaid expenses 13,705 14,803
    Other current assets   5,569     5,553  
    Total current assets 137,280 130,967
    Restricted cash 8,743 9,253
    Rental equipment, net of accumulated depreciation of $244,057 and $210,165 at June 30, 2014 and December 31, 2013, respectively
    1,520,886 1,465,092
    Net investment in direct finance leases 78,889 68,210
    Furniture, fixtures and equipment, net of accumulated depreciation of $1,891 and $1,697 at June 30, 2014 and December 31, 2013, respectively
    1,155 1,390
    Intangible assets, net of accumulated amortization of $4,822 and $4,638 at June 30, 2014 and December 31, 2013, respectively
      476     677  
    Total assets $ 1,747,429   $ 1,675,589  
     
    Liabilities and Stockholders' Equity
    Current liabilities
    Accounts payable $ 7,552 $ 8,002
    Accrued expenses and other current liabilities 6,799 6,230
    Due to container investors 13,025 14,815
    Unearned revenue 8,777 6,862
    Short term line of credit 75,000 -
    Current portion of debt 154,906 74,080
    Current portion of capital lease obligations 1,429 1,921
    Rental equipment payable   25,506     45,181  
    Total current liabilities 292,994 157,091
    Debt 985,860 1,058,628
    Deferred income tax liability 41,979 41,378
    Capital lease obligations   2,189     3,366  
    Total liabilities   1,323,022     1,260,463  
     
    Stockholders' equity
    Common stock: par value $.0001 per share; authorized 84,000,000 shares; issued and outstanding 21,375,914 and 22,240,673 shares at June 30, 2014 and December 31, 2013, respectively
    2 2
    Additional paid-in capital 165,746 184,263
    Accumulated other comprehensive loss (2,367 ) (2,356 )
    Retained earnings   260,340     232,623  
    Total CAI stockholders' equity 423,721 414,532
    Non-controlling interest   686     594  
    Total stockholders' equity   424,407     415,126  
    Total liabilities and stockholders' equity $ 1,747,429   $ 1,675,589  


                                     
     
    CAI International, Inc.
    Consolidated Statements of Income
    (In thousands, except per share data)
    (UNAUDITED)
     
    Three Months EndedSix Months Ended
    June 30,June 30,
      2014     2013     2014     2013  
    Revenue
    Rental revenue $ 51,493 $ 48,387 $ 102,177 $ 95,010
    Management fee revenue 1,595 2,294 3,120 4,524
    Finance lease income   2,224     2,306     4,279     4,412  
    Total revenue   55,312     52,987     109,576     103,946  
     
    Operating expenses
    Depreciation of rental equipment 19,056 16,285 37,719 31,618
    Amortization of intangible assets 99 227 198 454
    Gain on disposition of used rental equipment (1,534 ) (1,857 ) (3,324 ) (4,493 )
    Storage, handling and other expenses 6,797 4,333 12,790 8,632
    Marketing, general and administrative expenses 6,397 6,031 13,103 12,219
    Loss on foreign exchange   153     125     317     (175 )
    Total operating expenses   30,968     25,144     60,803     48,255  
     
    Operating income   24,344     27,843     48,773     55,691  
     
    Interest expense 8,883 8,955 17,678 17,359
    Write-off of deferred financing costs - - - 1,108
    Interest income   (1 )   (1 )   (5 )   (4 )
    Net interest expense   8,882     8,954     17,673     18,463  
     
    Net income before income taxes and non-controlling interest 15,462 18,889 31,100 37,228
    Income tax expense   1,968     1,958     3,375     4,230  
     
    Net income 13,494 16,931 27,725 32,998
    Net income attributable to non-controlling interest   (48 )   -     (8 )   -  
    Net income attributable to CAI common stockholders $ 13,446   $ 16,931   $ 27,717   $ 32,998  
     
     
    Net income per share attributable toCAI common stockholders
     
    Basic $ 0.61 $ 0.76 $ 1.26 $ 1.49
    Diluted $ 0.60 $ 0.75 $ 1.23 $ 1.45
     
    Weighted average shares outstanding
    Basic 21,910 22,144 22,061 22,115
    Diluted 22,355 22,711 22,506 22,690


                                     
     
    CAI International, Inc.
    Fleet Data
    (UNAUDITED)
     
    As of June 30,
    2014   2013  
     
    Owned container fleet in TEUs 907,210 846,905
    Managed container fleet in TEUs 266,860   295,576  
    Total container fleet in TEUs 1,174,070   1,142,481  
     
    Owned container fleet in CEUs 949,711 882,809
    Managed container fleet in CEUs 245,460   274,296  
    Total container fleet in CEUs 1,195,171   1,157,105  
     
    Owned railcar fleet in units 1,973   1,477  
     
     
    Three Months EndedSix Months Ended
    June 30,June 30,
    2014   2013   2014   2013  
    Average Utilization
    Container Fleet Utilization in TEUs 90.2 % 92.1 % 90.2 % 92.2 %
    Container Fleet Utilization in CEUs 91.2 % 93.1 % 91.2 % 93.1 %
     
    As of June 30,
    2014   2013  
    Period Ending Utilization
    Container Fleet Utilization in TEUs 91.3 % 92.3 %
    Container Fleet Utilization in CEUs 92.1 % 93.1 %

     



    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.

                                           
     
    Reconciliation of GAAP Amounts to Non-GAAP Amounts
    (In thousands, except per share data)
    (UNAUDITED)
     
    Three Months EndedSix Months Ended
    June 30,June 30,
      2014   2013     2014   2013  
    GAAP net income attributable to CAI common stockholders $ 13,446 $ 16,931 $ 27,717 $ 32,998
    Non-recurring tax charge 626 (27 ) 626 (54 )
    Write-off of deferred financing costs - - - 1,108
    Tax effect of write-off of deferred financing costs   -   -     -   (137 )
     
    Non-GAAP net income attributable to CAI common stockholders $ 14,072 $ 16,904   $ 28,343 $ 33,915  
     
    Diluted net income per share attributable to CAI common stockholders
    GAAP $ 0.60 $ 0.75 $ 1.23 $ 1.45
    Non-GAAP (excluding non-recurring tax charge and the write-off of deferred financing costs and related tax effects) $ 0.63 $ 0.74 $ 1.26 $ 1.49
     
    Weighted average number of common shares used to calculate (in thousands)
    GAAP and non-GAAP diluted net income per share attributable to CAI common stockholders 22,355 22,711 22,506 22,690



    Conference Call

    A conference call to discuss the financial results for the second quarter of 2014 will be held on Tuesday, July 29, 2014 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” tab of CAI’s website, www.capps.com, by selecting “Q2 2014 Earnings Conference Call.” A webcast replay will be available for 30 days on the “Investors” tab of our website.

    Use of Non-GAAP Financial Measures

    This press release contains non-GAAP financial measures, and includes net income and earnings per share adjusted to reflect the impact of a non-recurring tax charge, and the write-off of certain deferred financing costs and related tax effects. These measures are not in accordance with, or an alternative for, generally accepted accounting principles, or GAAP, and may be different from non-GAAP financial measures used by other companies. We believe the presentation of non-GAAP financial measures provides useful information to management and investors regarding various financial and business trends relating to our financial condition and results of operations, and that when GAAP financial measures are viewed in conjunction with non-GAAP financial measures, investors are provided with a more meaningful understanding of our ongoing operating performance. Non-GAAP financial measures are not intended to be considered in isolation or as a substitute for GAAP financial measures. To the extent this release contains historical non-GAAP financial measures, we have also provided a reconciliation to the corresponding GAAP financial measures for comparative purposes.

    About CAI International, Inc.

    CAI is one of the world’s leading managers and lessors of intermodal freight containers. As of June 30, 2014, the company operated a worldwide fleet of approximately 1,174,000 TEUs of containers through 17 offices located in 13 countries including the United States. CAI also owns a fleet of railcars, which it leases within North America.

    This press release contains forward-looking statements regarding future events and the future performance of CAI International, Inc. These statements 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, 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, potential to sell the company’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, 2013 and its interim reports on Form 10-Q and its 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.




    CAI International, Inc.

    Tim Page, 415-788-0100

    Chief Financial Officer

    tpage@capps.com

    Source: CAI International, Inc.


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