CAI - CAI International Inc. Reports Results for the Fourth Quarter and Full Year of 2018
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 2018.
Record net income for the year of $73.5 million driven by strong container demand
Logistics revenue grew to a record $111.5 million up 38% driven by demand for truck brokerage and intermodal services
Highlights
- Net income attributable to CAI common stockholders for the year ended December 31, 2018 was $73.5 million, or $3.71 per fully diluted share, both records. Net income for the year ended December 31, 2017 was $72.1 million, or $3.68 per fully diluted share. Excluding one-time net tax benefits, adjusted net income for the year ended December 31, 2017 was $56.2 million, or $2.87 per fully diluted share1.
- CAI reported record lease-related revenue of $320.6 million for the year ended December 31, 2018, an increase of 20% compared to the year-ended December 31, 2017.
- CAI’s logistics revenue grew 38% in 2018 to a record $111.5 million.
- Net income attributable to CAI common stockholders for the fourth quarter of 2018 was $17.2 million, or $0.89 per fully diluted share, compared to net income for the fourth quarter of 2017 of $36.6 million, or $1.81 per fully diluted share. Excluding one-time net tax benefits, adjusted net income for the fourth quarter of 2017 was $20.7 million, or $1.03 per fully diluted share1.
- CAI’s lease-related revenue grew to a record level of $85.3 million for the fourth quarter of 2018, an increase of 14% compared to the fourth quarter of 2017.
- Logistics revenue for the fourth quarter of 2018 was $30.2 million, an increase of 55% compared to the fourth quarter of 2017.
- Average utilization for CAI’s owned container fleet during the fourth quarter of 2018 was 99.2% compared to 99.0% for the fourth quarter of 2017.
- CAI sold 385 railcars in the fourth quarter of 2018 for $40 million, reporting a $1.8 million gain on sale.
- Under the previously approved share repurchase program, CAI repurchased approximately 542,000 shares of common stock during the fourth quarter of 2018 at an average price of $23.83 per share.
- Return on average common equity for 2018 was 13%.
1 Refer to the “Reconciliation of GAAP Amounts to Non-GAAP Amounts” and “Use of Non-GAAP Financial Measures” set forth below
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, “2018 was a tremendous year for our company as we expanded each of our core businesses. For the year we reported record lease related revenue of $320.6 million, growth of 20% over 2017, and record logistics revenue of $111.5 million, growth of 38% compared to 2017. For the full year we reported record net income of $73.5 million, or $3.71 per fully diluted share, compared to net income for the year ended December 31, 2017 of $72.1 million, or $3.68 per fully diluted share. Excluding one-time net tax benefits, adjusted net income in 2017 was $56.2 million, or $2.87 per fully diluted share.
Our results for the fourth quarter remained very strong as we continued to benefit from the container investments made in the second and third quarters of the year. We reported net income for the fourth quarter of $17.2 million, or $0.89 per fully diluted share. The average utilization of our container fleet for the fourth quarter was 99.2% and is currently 98.8%. Despite the strong momentum, interest expense in the quarter increased by $3.4 million compared to the third quarter, reflecting the increase in our proportion of fixed rate debt, as well as overall increases in both debt levels and interest rates.
Mr Garcia continued, “We are optimistic regarding the prospects for our container business in 2019. We begin 2019 from a position of strength, with utilization at 99% and 92% of our on-lease owned fleet (in CEUs) on long-term committed leases. In the last two years we have leased over $1.0 billion of new containers with an average lease term of 8.6 years. We expect our overall utilization to remain strong as we benefit from our tight contract structure and long lease commitments. Secondary prices of containers continue to be strong in most markets.
“During the fourth quarter of 2018, we sold 385 railcars for $40 million and reported a gain of $1.8 million. We continue to see improving utilization and rental rate trends in our rail segment. Our rail car utilization in the fourth quarter increased to 87% for all railcars as compared to 84% in the third quarter of 2018. Rental rates for most rail car types have increased by 30 to 80% as compared to the levels in 2017 and we expect this strengthening of lease rates to bring improved overall financial returns for rail car owners. Our commitment to new railcar deliveries will be complete during the first half of 2019 when we will take delivery of $64 million of additional railcars, most of which are already on committed leases with attractive financial returns.
“We continue to be focused on growth in our logistics business, particularly as it relates to domestic intermodal and truck brokerage where we have had the most success in increasing our customer portfolio and volume. We expect continued double-digit revenue growth in our logistics business in 2019 as we continue to expand our overall operation and gain additional customers.
“We continue to manage our balance sheet to reduce interest rate risk and improve overall financial returns. During the quarter we purchased 542,000 shares of our common stock at an average price per share of $23.83. We have approximately 2.4 million shares remaining of the 3 million share repurchase authorization we announced in the third quarter of 2018. We continue to view our shares as an attractive investment for long term shareholder value creation and expect to continue repurchasing shares in 2019. We are comfortable with our mix of fixed and floating rate debt with 62% being fixed at the end of the fourth quarter.
Mr. Garcia concluded, “2018 was a tremendous year for our company as we continued to expand our businesses and reported record financial returns. As we look into 2019, we remain confident in the financial strength of our company and will make decisions that have both immediate benefits to our results and enhance the long-term strategic development of our company.”
| CAI International, Inc. |
| Consolidated Balance Sheets |
| (In thousands, except share information) |
| (UNAUDITED) |
| December 31, |
| December 31, |
| 2018 |
| 2017 |
| Assets |
| Current assets |
|
Cash |
| $ |
| 20,104 |
| $ |
| 14,735 |
| Cash held by variable interest entities |
| 25,211 |
| 20,685 |
| Accounts receivable, net of allowance for doubtful accounts of $2,042 and $1,440 |
| at December 31, 2018 and 2017, respectively |
| 95,280 |
| 68,324 |
| Current portion of net investment in direct finance leases |
| 75,975 |
| 30,063 |
| Prepaid expenses and other current assets |
| 2,789 |
| 4,258 |
| Total current assets |
| 219,359 |
| 138,065 |
| Restricted cash |
| 30,668 |
| 11,789 |
| Rental equipment, net of accumulated depreciation of $599,443 and $505,546 |
| at December 31, 2018 and 2017, respectively |
| 2,265,260 |
| 2,004,961 |
| Net investment in direct finance leases |
| 473,792 |
| 246,450 |
| Goodwill |
| 15,794 |
| 15,794 |
| Intangible assets, net of accumulated amortization of $5,397 and $3,407 |
| at December 31, 2018 and 2017, respectively |
| 5,733 |
| 7,723 |
| Furniture, fixtures and equipment, net of accumulated depreciation of $2,635 and $3,201 |
| at December 31, 2018 and 2017, respectively |
| 964 |
| 338 |
| Other non-current assets |
| 385 |
| 3,008 |
| Total assets |
| $ |
| 3,011,955 |
| $ |
| 2,428,128 |
| Liabilities and Stockholders' Equity |
| Current liabilities |
| Accounts payable |
| $ |
| 7,371 |
| $ |
| 7,831 |
| Accrued expenses and other current liabilities |
| 21,798 |
| 15,706 |
| Due to container investors |
| 2,609 |
| 1,845 |
| Unearned revenue |
| 7,573 |
| 7,811 |
| Current portion of debt |
| 311,381 |
| 132,049 |
| Rental equipment payable |
| 74,139 |
| 92,415 |
| Total current liabilities |
| 424,871 |
| 257,657 |
| Debt |
| 1,847,633 |
| 1,570,773 |
| Deferred income tax liability |
| 38,319 |
| 35,853 |
| Total liabilities |
| 2,310,823 |
| 1,864,283 |
| Stockholders' equity |
| Preferred stock, par value $.0001 per share; authorized 10,000,000 and 5,000,000 at |
| December 31, 2018 and 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 December 31, 2018 and |
| 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 December 31, 2018 and |
| 2017, respectively, at liquidation preference |
| 48,875 |
| - |
| Common stock: par value $.0001 per share; authorized 84,000,000 shares; issued and outstanding |
| 18,764,459 and 20,390,622 shares at December 31, 2018 and 2017, respectively |
| 2 |
| 2 |
| Additional paid-in capital |
| 132,666 |
| 172,325 |
| Accumulated other comprehensive loss |
| (6,513 |
| ) |
| (6,122 |
| ) |
| Retained earnings |
| 471,112 |
| 397,640 |
| Total stockholders' equity |
| 701,132 |
| 563,845 |
| Total liabilities and stockholders' equity |
| $ |
| 3,011,955 |
| $ |
| 2,428,128 |
| CAI International, Inc. |
| Consolidated Statements of Income |
| (In thousands, except per share data) |
| (UNAUDITED) |
| Three Months Ended |
| Year Ended |
| December 31, |
| December 31, |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
| Revenue |
| Container lease revenue |
| $ |
| 76,626 |
| $ |
| 65,581 |
| $ |
| 284,924 |
| $ |
| 235,365 |
| Rail lease revenue |
| 8,721 |
| 9,017 |
| 35,703 |
| 32,476 |
| Logistics revenue |
| 30,220 |
| 19,436 |
| 111,471 |
| 80,552 |
| Total revenue |
| 115,567 |
| 94,034 |
| 432,098 |
| 348,393 |
| Operating expenses |
| Depreciation of rental equipment |
| 31,777 |
| 28,138 |
| 121,298 |
| 110,952 |
| Storage, handling and other expenses |
| 4,318 |
| 4,267 |
| 14,545 |
| 20,918 |
| Logistics transportation costs |
| 26,634 |
| 16,547 |
| 97,170 |
| 68,155 |
| Gain on sale of used rental equipment |
| (4,186 |
| ) |
| (2,808 |
| ) |
| (11,725 |
| ) |
| (5,347 |
| ) |
| Administrative expenses |
| 14,035 |
| 11,487 |
| 50,305 |
| 42,699 |
| Total operating expenses |
| 72,578 |
| 57,631 |
| 271,593 |
| 237,377 |
| Operating income |
| 42,989 |
| 36,403 |
| 160,505 |
| 111,016 |
| Other expenses |
| Net interest expense |
| 23,223 |
| 15,136 |
| 78,345 |
| 53,052 |
| Other expense |
| 167 |
| 114 |
| 677 |
| 765 |
| Total other expenses |
| 23,390 |
| 15,250 |
| 79,022 |
| 53,817 |
| Income before income taxes |
| 19,599 |
| 21,153 |
| 81,483 |
| 57,199 |
| Income tax expense (benefit) |
| 192 |
| (15,410 |
| ) |
| 2,887 |
| (14,861 |
| ) |
| Net income |
| 19,407 |
| 36,563 |
| 78,596 |
| 72,060 |
| Preferred stock dividends |
| 2,207 |
| - |
| 5,124 |
| - |
| Net income attributable to CAI |
| common stockholders |
| $ |
| 17,200 |
| $ |
| 36,563 |
| $ |
| 73,472 |
| $ |
| 72,060 |
| Net income per share attributable to |
| CAI common stockholders |
| Basic |
| $ |
| 0.90 |
| $ |
| 1.86 |
| $ |
| 3.76 |
| $ |
| 3.74 |
| Diluted |
| $ |
| 0.89 |
| $ |
| 1.81 |
| $ |
| 3.71 |
| $ |
| 3.68 |
| Weighted average common shares outstanding |
| Basic |
| 19,034 |
| 19,682 |
| 19,562 |
| 19,253 |
| Diluted |
| 19,297 |
| 20,154 |
| 19,818 |
| 19,607 |
| CAI International, Inc. |
| Consolidated Statements of Cash Flows |
| (In thousands, except per share data) |
| (UNAUDITED) |
|
Year Ended
December 31, |
| 2018 |
| 2017 |
| Cash flows from operating activities |
| Net income |
| $ |
| 78,596 |
| $ |
| 72,060 |
| Adjustments to reconcile net income to net cash provided by operating activities: |
| Depreciation |
| 121,494 |
| 111,294 |
| Amortization of debt issuance costs |
| 4,350 |
| 3,306 |
| Amortization of intangible assets |
| 1,989 |
| 1,969 |
| Stock-based compensation expense |
| 2,867 |
| 2,087 |
| Reduction in contingent consideration |
| - |
| (2,211 |
| ) |
| Unrealized loss on foreign exchange |
| 436 |
| 106 |
| Gain on sale of used rental equipment |
| (11,725 |
| ) |
| (5,347 |
| ) |
| Deferred income taxes |
| 2,466 |
| (14,947 |
| ) |
| Bad debt expense |
| 492 |
| 402 |
| Changes in other operating assets and liabilities: |
| Accounts receivable |
| (18,607 |
| ) |
| (4,994 |
| ) |
| Prepaid expenses and other assets |
| (2,361 |
| ) |
| 735 |
| Accounts payable, accrued expenses and other current liabilities |
| 2,820 |
| (2,206 |
| ) |
| Due to container investors |
| 764 |
| (5,766 |
| ) |
| Unearned revenue |
| (344 |
| ) |
| (1,296 |
| ) |
| Net cash provided by operating activities |
| 183,237 |
| 155,192 |
| Cash flows from investing activities |
| Purchase of rental equipment |
| (812,021 |
| ) |
| (502,050 |
| ) |
| Proceeds from sale of used rental equipment |
| 105,487 |
| 66,364 |
| Purchase of furniture, fixtures and equipment |
| (823 |
| ) |
| (126 |
| ) |
| Receipt of principal payments from direct finance leases |
| 40,547 |
| 24,061 |
| Net cash used in investing activities |
| (666,810 |
| ) |
| (411,751 |
| ) |
| Cash flows from financing activities |
| Proceeds from debt |
| 1,695,064 |
| 754,340 |
| Principal payments on debt |
| (1,236,912 |
| ) |
| (527,850 |
| ) |
| Debt issuance costs |
| (5,130 |
| ) |
| (3,441 |
| ) |
| Proceeds from issuance of common and preferred stock |
| 103,433 |
| 28,028 |
| Repurchase of common stock |
| (40,869 |
| ) |
| - |
| Dividends paid to preferred stockholders |
| (3,260 |
| ) |
| - |
| Exercise of stock options |
| 24 |
| 145 |
| Net cash provided by financing activities |
| 512,350 |
| 251,222 |
| Effect on cash of foreign currency translation |
| (3 |
| ) |
| 220 |
| Net increase (decrease) in cash and restricted cash |
| 28,774 |
| (5,117 |
| ) |
| Cash and restricted cash at beginning of the period |
| 47,209 |
| 52,326 |
| Cash and restricted cash at end of the period |
| $ |
| 75,983 |
| $ |
| 47,209 |
| CAI International, Inc. |
| Fleet Data |
| (UNAUDITED) |
| As of December 31, |
| 2018 |
| 2017 |
| Owned container fleet in TEUs |
| 1,465,799 |
| 1,146,268 |
| Managed container fleet in TEUs |
| 74,246 |
| 80,736 |
| Total container fleet in TEUs |
| 1,540,045 |
| 1,227,004 |
| Owned container fleet in CEUs |
| 1,501,060 |
| 1,209,209 |
| Managed container fleet in CEUs |
| 67,647 |
| 73,530 |
| Total container fleet in CEUs |
| 1,568,707 |
| 1,282,739 |
| Owned railcar fleet in units |
| 7,279 |
| 7,172 |
| Three Months Ended |
| Year Ended |
| December 31, |
| December 31, |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
| Average Utilization |
| Container fleet utilization in CEUs |
| 99.2 |
| % |
| 98.9 |
| % |
| 99.2 |
| % |
| 97.4 |
| % |
| Owned container fleet utilization in CEUs |
| 99.2 |
| % |
| 99.0 |
| % |
| 99.2 |
| % |
| 97.6 |
| % |
| Railcar fleet utilization in units - excluding new units not yet leased |
| 90.0 |
| % |
| 87.1 |
| % |
| 88.6 |
| % |
| 90.0 |
| % |
| Railcar fleet utilization in units - including new units not yet leased |
| 86.7 |
| % |
| 73.8 |
| % |
| 81.0 |
| % |
| 78.3 |
| % |
| As of December 31, |
| 2018 |
| 2017 |
| Period Ending Utilization |
| Container fleet utilization in CEUs |
| 99.0 |
| % |
| 99.2 |
| % |
| Owned container fleet utilization in CEUs |
| 99.1 |
| % |
| 99.2 |
| % |
| Railcar fleet utilization in units - excluding new units not yet leased |
| 90.3 |
| % |
| 87.9 |
| % |
| Railcar fleet utilization in units - including new units not yet leased |
| 86.8 |
| % |
| 73.4 |
| % |
| 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 |
| Net income attributable to CAI common stockholders |
| $ |
| 36,563 |
| Non-recurring tax benefit |
| (16,944 |
| ) |
| Non-recurring tax charge |
| 1,103 |
| Adjusted net income attributable to common stockholders |
| $ |
| 20,722 |
| Diluted net income per share attributable to common stockholders |
| $ |
| 1.81 |
| Diluted adjusted net income per share attributable to common stockholders |
| $ |
| 1.03 |
| Weighted average common shares outstanding |
| Diluted |
| 20,154 |
| Year Ended |
| December 31, |
| 2017 |
| Net income attributable to CAI common stockholders |
| $ |
| 72,060 |
| Non-recurring tax benefit |
| (16,944 |
| ) |
| Non-recurring tax charge |
| 1,103 |
| Adjusted net income attributable to common stockholders |
| $ |
| 56,219 |
| Diluted net income per share attributable to common stockholders |
| $ |
| 3.68 |
| Diluted adjusted net income per share attributable to common stockholders |
| $ |
| 2.87 |
| Weighted average common shares outstanding |
| Diluted |
| 19,607 |
Conference Call
A conference call to discuss the financial results for the fourth quarter of 2018 will be held on Wednesday, February 20, 2019 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 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 fourth quarter 2018 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, 2018, CAI operated a worldwide fleet of approximately 1.6 million CEUs of containers, and owned a fleet of 7,279 railcars that it leases within North America. CAI operates through 22 offices located in 12 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, and management's outlook for growth of CAI’s leasing investments. 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.
View source version on businesswire.com: https://www.businesswire.com/news/home/20190220005891/en/
Tim Page, Chief Financial Officer
(415) 788-0100
tpage@capps.com