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CAI International, Inc. Reports Results for the Second Quarter of 2015; Announces the Acquisition of ClearPointt Logistics LLC and a One Million Share Repurchase Authorization

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SAN FRANCISCO--(BUSINESS WIRE)--

CAI International, Inc. (CAI) (NYSE: CAP), one of the world's leading transportation finance and logistics companies, today reported results for the second quarter of 2015.

Highlights

  • CAI reported rental revenue for the second quarter of 2015 of $56.7 million, an increase of $5.2 million, or 10%, compared to the second quarter of 2014.
  • CAI reported net income attributable to CAI common stockholders for the second quarter of 2015 of $12.9 million, a decrease of $0.6 million, or 4%, compared to the second quarter of 2014.
  • Net income attributable to CAI common stockholders per fully diluted share was $0.60 for the second quarter of 2015, unchanged from the second quarter of 2014. Adjusting for a prior period, non-recurring charge of approximately $0.8 million relating to container management fees, adjusted net income attributable to CAI common stockholders1 for the second quarter of 2015 was $13.4 million, or $0.63 per fully diluted share.
  • CAI closed an agreement to purchase ClearPointt Logistics LLC, a domestic intermodal logistics company, for approximately $4.1 million.
  • CAI entered into a multi-year agreement for the manufacture of 2,000 railcars for delivery between 2016 and 2018. Total investment under the equipment order is expected to be in excess of $200 million.
  • Adjusted EBITDA1 for the second quarter of 2015 was $51.4 million, an increase of 8% compared to the second quarter of 2014.
  • Average utilization during the second quarter of 2015 was 93.3% (on a CEU basis) compared to 91.2% for the second quarter of 2014.
  • CAI acquired approximately 22,000 CEU of containers at a cost of $46 million, and 1,022 railcars at a cost of $67 million, during the second quarter of 2015.
  • CAI's Board of Directors approved a share repurchase program under which CAI is authorized to repurchase up to one million shares of its outstanding common stock.

Total revenue for the second quarter of 2015 was $59.4 million, compared to $55.3 million for the second quarter of 2014, an increase of 7%. Rental revenue for the second quarter of 2015 was $56.7 million, compared to $51.5 million for the second quarter of 2014. The increase in rental revenue was primarily due to an increase in the average number of owned containers on lease and the growth in our railcar business. Management fee revenue for the second quarter of 2015 was $0.3 million, compared to $1.6 million for the second quarter of 2014. Management fee revenue in the second quarter of 2015 was reduced by a non-recurring charge of $0.8 million, relating to an adjustment of prior period management fees on some of CAI's container management agreements. Finance lease income for the second quarter of 2015 was $2.3 million, unchanged compared to the second quarter of 2014.

CAI's Board of Directors has approved a share repurchase program under which CAI is authorized to repurchase up to one million shares of its outstanding common stock from time to time and at prices considered appropriate by the company. The stock repurchases may be made in the open market, block trades or privately negotiated transactions. The primary purpose of the share repurchase program is to allow CAI the flexibility to repurchase its common stock as a means to return value to stockholders. The number of shares of common stock actually acquired, if any, by CAI will depend on subsequent developments, corporate needs, economic outlook and market conditions.

Victor Garcia, Chief Executive Officer of CAI commented, "For the quarter we reported net income of $12.9 million, or $0.60 per fully diluted share. Our results for the three month period include a non-recurring charge related to an adjustment of prior period management fees on some of our container management agreements. Excluding this one-time item, our adjusted net income1 for the quarter was $13.4 million, or $0.63 per fully diluted share.

"The second quarter has traditionally been the fiscal quarter when we observe the seasonal upturn in demand for containers. However, the seasonal pattern did not materialize this quarter and utilization declined slightly during the quarter. We attribute the lower demand for equipment to weaker economic growth, particularly around China. Overall demand from port locations in China has been weak and most of the inventory that has been returned has been to Asia. Demand in other global locations, such as within the United States, and in particular within Europe, has been stronger but has not offset the slowness around China.

"As a result of the soft economic conditions in China, steel prices, and new container prices, have declined, which placed some pressure on per diem rates and secondary container prices during the quarter. However, overall the secondary demand for containers remains strong and the decline in prices has been limited. During the quarter, we reported a slight loss on sale of equipment as we moved out some older, damaged units from our fleet and some units from sale leasebacks that had higher net book values. We would expect pricing on secondary containers to remain under pressure if steel and new container prices decline further in future periods."

Mr. Garcia continued, "We are excited about the acquisition of ClearPointt Logistics. ClearPointt is a U.S. based intermodal logistics company focused on the domestic intermodal market. The company has 22 employees and agents serving over 280 customers in the United States. ClearPointt is an asset light company that generated $32 million of revenue in 2014. We believe that the acquisition of ClearPointt complements and advances CAI's strategy of being a fully operational logistics provider, and we expect numerous synergies in bringing the two companies together. CAI intends to utilize ClearPointt's operations and marketing capabilities to expand its logistics business within ClearPointt's 53-foot domestic intermodal market, as well as by utilizing CAI's traditional container assets. With ClearPointt we believe we will better manage utilization of our container fleet and better position our equipment into higher demand sale or lease locations. We believe that the acquisition will have a neutral effect on 2015 earnings per share but expect it to be accretive in 2016 and beyond.

"We continue to benefit from the ongoing delivery and lease-out of rail equipment. Revenue from our rail business during the quarter was $3.8 million, an increase of 29% from the first quarter. Operating income from our rail business during the quarter was $1.4 million, an increase of 72% compared to the first quarter. The operating income margin of our rail business also increased in the second quarter, and we expect to benefit from further margin expansion with the continued delivery of rail equipment in 2015, and the delivery of 2,000 railcars between 2016 and 2018 under a new multi-year railcar order. The rail business continues to extend leases at or above prior rates, and together with new additions to the fleet will be a more significant contributor to our business."

Mr. Garcia concluded, "Although we faced some headwinds in our container leasing business, the second quarter was an exciting quarter for our company. We have great momentum in our rail operation which allows us opportunities to better balance and diversify our overall business. We have also added a strategically important acquisition to our company in ClearPointt, which we believe helps solidify and differentiate CAI as a finance and logistics company, expanding our customer base, adding value to our existing customers and increasing returns to our shareholders. With the ClearPointt acquisition, CAI now has approximately 20 marketing employees and agents in the United States, which we believe is a significantly larger marketing team than at our traditional competitors, giving us relationships with more U.S. customers and offering a wider range of services. We will use that strength to our advantage. Our marketing group will be focused on expanding its customer base and cross marketing products to our customers. We intend to build on this outstanding franchise in future quarters."

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)
 
June 30, December 31,
  2015     2014  
Assets
Current assets
Cash $ 20,271 $ 27,810
Cash held by variable interest entities 40,859 26,011
Accounts receivable (owned fleet), net of allowance for doubtful accounts of $896 and $680 at June 30, 2015 and December 31, 2014, respectively
48,172 49,524
Accounts receivable (managed fleet) 7,348 8,498
Current portion of direct finance leases 20,288 18,150
Prepaid expenses and other current assets   17,404     14,806  
Total current assets 154,342 144,799
Restricted cash 7,723 8,232
Rental equipment, net of accumulated depreciation of $311,726 and
$274,333 at June 30, 2015 and December 31, 2014, respectively 1,721,187 1,564,777
Net investment in direct finance leases 82,288 76,814
Furniture, fixtures and equipment, net of accumulated depreciation of
$2,232 and $2,019 at June 30, 2015 and December 31, 2014, respectively 780 945
Intangible assets, net of accumulated amortization of $4,807 and $4,817
at June 30, 2015 and December 31, 2014, respectively   137     273  
Total assets $ 1,966,457   $ 1,795,840  
 
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 6,722 $ 8,414
Accrued expenses and other current liabilities 8,116 9,029
Due to container investors 8,791 12,984
Unearned revenue 10,352 7,172
Current portion of debt 231,181 203,199
Current portion of capital lease obligations 92 1,015
Rental equipment payable   17,999     7,381  
Total current liabilities 283,253 249,194
Debt
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