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 fourth quarter and full year of 2017.

Highlights

• Net income for the fourth quarter of 2017 was $36.6 million, or $1.81 per fully diluted share, compared to $0.6 million, or $0.03 per fully diluted share, in the fourth quarter of 2016.
• Net income for the fourth quarter of 2017 included a tax benefit of $16.9 million associated with the recently enacted Tax Cuts and Jobs Act (the Act), and a non-recurring, non-cash tax charge of $1.1 million. Excluding the net tax benefit of $15.8 million, adjusted net income for the fourth quarter of 2017 was $20.7 million, or $1.03 per fully diluted share1.
• Net income for the year ended December 31, 2017 was $72.1 million, or $3.68 per fully diluted share, compared to $6.0 million, or $0.31 per fully diluted share, in the year ended December 31, 2016.
• Lease-related revenue for the fourth quarter of 2017 was $74.6 million, an increase of 30% compared to the fourth quarter of 2016, and 8% compared to the third quarter of 2017.
• Lease-related revenue for the year ended December 31, 2017 was $267.8 million, an increase of 15% compared to the year ended December 31, 2016.
• Average utilization for our owned container fleet during the fourth quarter of 2017 was 99.0% (on a CEU basis) compared to 94.3% for the fourth quarter of 2016, and 98.2% for the third quarter of 2017. Current utilization is 99.2%.
• During the fourth quarter of 2017 we leased out 243 new railcars and have commitments to lease out a further 564 new cars in the first half of 2018.
• Average railcar utilization during the fourth quarter of 2017, excluding new railcars not yet leased, was 87.1% compared to 94.1% for the fourth quarter of 2016, and 89.3% for the third quarter of 2017.
• During the fourth quarter of 2017, CAI issued approximately 890,000 shares of its common stock through an at-the-market offering for net proceeds of $29.1 million, or $32.81 per average share issued.

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 very pleased with the exceptional performance of our company during the fourth quarter and the fundamentals of the business remain strong. Excluding the tax benefit from the recently enacted Tax Cuts and Jobs Act and the non-recurring, non-cash tax charge, we reported net income per fully diluted share of $20.7 million, or $1.03 per share. Our results were driven by the ongoing momentum in our container leasing business, which reported average utilization of 99% during the quarter. We benefited from continued investment during the quarter at lease rates that remained attractive, and also from gains on the sale of containers as we looked to maximize the sale price of our available idle equipment. For the full year we invested $569 million on equipment, of which $487 million was related to containers.

“Our rail segment continues to work through a difficult market environment. However, during the fourth quarter we experienced increased momentum in leasing our railcars. During the quarter we leased out 243 new railcars and have commitments to lease out a further 564 new cars in the first half of 2018. We continue to see increased inquiry for railcars across various equipment categories, although lease rates remain below our targeted levels due to continued aggressive pricing from competitors. We believe rail velocity amongst Class 1 railroads has decreased and that customers are looking for additional equipment due to economic growth in the United States and the slowing of rail velocity in the United States rail network. We are becoming more optimistic about the opportunities for our rail segment due to the expected increased economic growth in the United States in 2018. We also believe that our rail segment will benefit if there is increased level of manufacturing and distribution activity as a result of companies increasing their investment in the United States due to the regulatory and tax changes that have been enacted.

“Our logistics business continued to work through the integration of our intermodal and truck brokerage operation. The segment as a whole reported a loss for the quarter due to lost productivity as a result of the hurricane disruptions in the southeastern United States during the quarter and reduced activity with some of our truck brokerage customers. Nonetheless, our international NVOCC and freight forwarding business had growing profitability in the quarter and full year as compared to the same periods in 2016. We are proceeding with the integration of our domestic logistics operations and are seeing increased momentum as we gain new customers and increase volumes with existing customers. Trucking capacity remains very tight in the United States as a result of the implementation of electronic logging and the continued strength of the United States economy. We think that tightness in capacity will continue in 2018 and are focused on working with customers to meet their transportation needs. Beyond individual segment results, we continue to see opportunities to cross-market assets and customers between our container leasing, rail and logistics segments.”

Mr. Garcia, concluded, “We enjoyed record earnings in 2017 and expect 2018 to be a very strong demand year for containers as the world economy continues to expand and lessors continue to operate with high utilization. Offsetting the impact of strong demand in the coming year is the expectation of increased competition from container equipment lessors who are active in the market, lower expected gain on sale of equipment due to a lack of equipment availability and higher expected interest costs. We expect interest costs to increase due to ongoing equipment investment in 2018 and, more importantly, due to the expected higher floating and fixed interest rates in 2018.”

1 Refer to the “Reconciliation of GAAP Amounts to Non-GAAP Amounts” and “Use of Non-GAAP Financial Measures” set forth below.

  CAI International, Inc. Consolidated Balance Sheets (In thousands, except share information) (UNAUDITED)     December 31,   December 31,   2017     2016   Assets Current assets Cash $ 14,735 $ 15,685 Cash held by variable interest entities 20,685 30,449

Accounts receivable, net of allowance for doubtful accounts of $1,440 and $1,340 at December 31, 2017 and 2016, respectively

70,598 63,745 Current portion of net investment in direct finance leases 30,063 19,959 Prepaid expenses and other current assets   4,258     5,315   Total current assets 140,339 135,153 Restricted cash 11,789 6,192

Rental equipment, net of accumulated depreciation of $505,546 and $421,153 at December 31, 2017 and 2016, respectively

2,004,961 1,807,010 Net investment in direct finance leases 246,450 80,582 Goodwill 15,794 15,794

Intangible assets, net of accumulated amortization of $3,407 and $2,681 at December 31, 2017 and 2016, respectively

7,723 9,691

Furniture, fixtures and equipment, net of accumulated depreciation of $3,201 and $2,833 at December 31, 2017 and 2016, respectively

338 550 Other non-current assets   3,008     962   Total assets $ 2,430,402   $ 2,055,934     Liabilities and Stockholders' Equity Current liabilities Accounts payable $ 7,831 $ 13,804 Accrued expenses and other current liabilities 15,706 11,778 Due to container investors 4,119 7,077 Unearned revenue 7,811 10,613 Current portion of debt 132,049 95,527 Rental equipment payable   92,415     25,207   Total current liabilities 259,931 164,006 Debt 1,570,773 1,380,499 Deferred income tax liability 35,853 51,804 Other long term liabilities   -     2,121   Total liabilities   1,866,557     1,598,430     Stockholders' equity

Common stock: par value $.0001 per share; authorized 84,000,000 shares; issued and outstanding 20,390,622 and 19,057,217 shares at December 31, 2017 and 2016, respectively

2 2 Additional paid-in capital 172,325 141,058 Accumulated other comprehensive loss (6,122 ) (8,132 ) Retained earnings   397,640     324,576   Total stockholders' equity   563,845     457,504   Total liabilities and stockholders' equity $ 2,430,402   $ 2,055,934     CAI International, Inc. Consolidated Statements of Income (In thousands, except per share data) (UNAUDITED)     Three Months Ended   Year Ended December 31, December 31,   2017       2016   2017       2016 Revenue Container lease revenue $ 65,581 $ 49,453 $ 235,365 $ 202,328 Rail lease revenue 9,017 8,028 32,476 30,490 Logistics revenue   19,436     19,793   80,552     61,536 Total revenue   94,034     77,274   348,393     294,354   Operating expenses Depreciation of rental equipment 28,138 27,476 110,952 104,877 Storage, handling and other expenses 4,267 8,686 20,918 35,862 Logistics transportation costs 16,547 16,853 68,155 51,980 (Gain) loss on sale of used rental equipment (2,808 ) 4,721 (5,347 ) 12,671 Administrative expenses   11,487     6,928   42,699     35,678 Total operating expenses   57,631     64,664   237,377     241,068   Operating income   36,403     12,610   111,016     53,286   Other expenses Net interest expense 15,136 11,219 53,052 42,754 Other expense   114     247   765     654 Total other expenses   15,250     11,466   53,817     43,408   Income before income taxes and non-controlling interest 21,153 1,144 57,199 9,878 Income tax (benefit) expense   (15,410 )   524   (14,861 )   3,844   Net income 36,563 620 72,060 6,034 Net income attributable to non-controlling interest   -     -   -     37 Net income attributable to CAI common stockholders $ 36,563   $ 620 $ 72,060   $ 5,997     Net income per share attributable to CAI common stockholders Basic $ 1.86 $ 0.03 $ 3.74 $ 0.31 Diluted $ 1.81 $ 0.03 $ 3.68 $ 0.31   Weighted average shares outstanding Basic 19,682 18,992 19,253 19,318 Diluted 20,154 19,081 19,607 19,393   CAI International, Inc. Consolidated Statements of Cash Flows (In thousands, except per share data) (UNAUDITED)     Year Ended December 31,   2017       2016   Cash flows from operating activities Net income $ 72,060 $ 6,034 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 111,294 105,236 Amortization of debt issuance costs 3,306 2,975 Amortization of intangible assets 1,969 1,443 Stock-based compensation expense 2,087 1,732 Reduction in contingent consideration (2,211 ) (3,789 ) Unrealized loss on foreign exchange 106 276 (Gain) loss on sale of used rental equipment (5,347 ) 12,671 Loss on disposal of subsidiary - 146 Deferred income taxes (14,947 ) 1,138 Excess tax benefit from share-based compensation awards (1,858 ) - Bad debt expense 402 3,151 Changes in other operating assets and liabilities: Accounts receivable (8,922 ) (1,799 ) Prepaid expenses and other assets 735 (2,691 ) Accounts payable, accrued expenses and other current liabilities (348 ) 3,572 Due to container investors (2,958 ) 1,276 Unearned revenue   (1,296 )   (2,115 ) Net cash provided by operating activities   154,072     129,256   Cash flows from investing activities Purchase of rental equipment (502,050 ) (251,165 ) Acquisitions, net of cash acquired - (15,599 ) Net proceeds from sale of used rental equipment 66,364 66,073 Disposal of subsidiary, net of cash disposed of - (460 ) Purchase of furniture, fixtures and equipment (126 ) (82 ) Receipt of principal payments from direct finance leases   24,061     19,633   Net cash used in investing activities   (411,751 )   (181,600 ) Cash flows from financing activities Proceeds from debt 754,340 552,540 Principal payments on debt (527,850 ) (496,270 ) Debt issuance costs (3,441 ) (1,515 ) (Increase) decrease in restricted cash (5,597 ) 1,020 Proceeds from issuance of stock 29,148 - Repurchase of stock - (9,176 ) Exercise of stock options   145     -   Net cash provided by financing activities   246,745     46,599   Effect on cash of foreign currency translation   220     (674 ) Net decrease in cash (10,714 ) (6,419 ) Cash at beginning of the period   46,134     52,553   Cash at end of the period $ 35,420   $ 46,134     CAI International, Inc. Fleet Data (UNAUDITED)         As of December 31, 2017   2016   Owned container fleet in TEUs 1,146,268 921,694 Managed container fleet in TEUs 80,736   162,582   Total container fleet in TEUs 1,227,004   1,084,276     Owned container fleet in CEUs 1,209,209 1,014,078 Managed container fleet in CEUs 73,530   146,258   Total container fleet in CEUs 1,282,739   1,160,336     Owned railcar fleet in units 7,172   6,459       Three Months Ended Year Ended December 31, December 31, 2017 2016 2017 2016 Average Utilization Container fleet utilization in CEUs 98.9 % 93.8 % 97.4 % 92.8 % Owned container fleet utilization in CEUs 99.0 % 94.3 % 97.6 % 93.5 % Railcar fleet utilization in units - excluding new units not yet leased 87.1 % 94.1 % 90.0 % 93.9 % Railcar fleet utilization in units - including new units not yet leased 73.8 % 86.0 % 78.3 % 88.7 %   As of December 31, 2017 2016 Period Ending Utilization Container fleet utilization in CEUs 99.2 % 94.9 % Owned container fleet utilization in CEUs 99.2 % 95.2 % Railcar fleet utilization in units - excluding new units not yet leased 87.9 % 93.1 % Railcar fleet utilization in units - including new units not yet leased 73.4 % 82.9 %   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.

  CAI International, Inc. Reconciliation of GAAP Amounts to Non-GAAP Amounts (In thousands, except per share data) (UNAUDITED)     Three Months Ended December 31,   2017       2016   Net income $ 36,563 $ 620 Non-recurring tax benefit (16,944 ) - Non-recurring tax charge   1,103     - Adjusted net income $ 20,722   $ 620   Diluted net income per share $ 1.81 $ 0.03   Diluted adjusted net income per share $ 1.03 $ 0.03   Weighted average number of common shares used to calculate (in thousands) Diluted net income per share and diluted adjusted net income per share 20,154 19,081

Conference Call

A conference call to discuss the financial results for the fourth quarter of 2017 will be held on Wednesday, February 14, 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 “Q4 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 fourth quarter and full year 2017 results is available on the “Investors” section of our website, www.capps.com.

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 benefit and a non-recurring tax charge. 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 transportation finance and logistics companies. As of December 31, 2017, CAI operated a worldwide fleet of approximately 1.3 million CEUs of containers, and owned a fleet of 7,172 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 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