CAI International, Inc. Reports Results for the Second Quarter of 2018
Jul. 31, 2018
SAN FRANCISCO--(BUSINESS WIRE)--Jul 31, 2018--CAI International, Inc. (CAI) (NYSE: CAI), one of the world’s leading transportation finance and logistics companies, today reported results for the second quarter of 2018.
Record lease revenue up 23% on strong container demand and improved rail fundamentals
Record logistics revenues grew 44% on the heels of the rebranding of CAI Logistics
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, “The strong momentum we experienced in the first quarter has continued through the second quarter of this year. We reported record quarterly revenue of $105.7 million and net income attributable to CAI common stockholders for the quarter of $19.1 million, or $0.97 per fully diluted share. We continue to operate near full utilization that averaged 99.3% during the second quarter of this year. During the first half of 2018 we have invested, or committed to invest, $630 million in container equipment, of which $208 million was leased during the second quarter and $290 million is due to be leased in the third quarter. The average lease term of the container equipment we have invested this year, including units to be delivered, is approximately nine years. As our investment level indicates, demand for containers has remained very strong as a result of the strong global economy and we expect that demand to continue through the remainder of the year as we approach the historically strong demand months. As a result of the high worldwide utilization of equipment, we continue to benefit from strong secondary prices of containers and this quarter reported a gain on sale of equipment of $2.7 million. We expect continued strong secondary sales prices through the rest of the year.
“The impact of the discussions regarding tariffs has not had an impact on container demand to date but has created some uncertainty around future global trade growth. If tariffs were to be permanently implemented and overall tariff levels were to increase, we would expect supply chain disruption as international companies adjust their supply chains. Some level of export-oriented manufacturing would likely move to other countries not affected by the tariffs such as countries in South East Asia. These changes in supply chain are a positive for CAI as our customers will need more equipment to adjust for the supply chain inefficiencies created by sourcing changes. We believe that CAI remains well positioned to operate during this time of uncertainty, with 91% of our on-lease and committed owned container fleet being on long-term leases with an average remaining lease term of 56 months. In addition, we have worked with our customers over the past several years to improve redelivery terms ensuring that equipment is returned to high demand locations which will provide us with better opportunities to release the units.
“Our rail segment continues to experience improved lease out activity, and rental rates have significantly improved on most car types from the levels of last year. During the second quarter of 2018, we had net lease outs of 316 railcars and have commitments to lease out a further 746 cars to be delivered later in 2018. Our railcar utilization, including new cars not yet leased out, has improved to 78% during the second quarter, compared to 75% during the first quarter. We expect that our utilization will increase to 90% by the end of the year. We will continue to focus on increasing fleet utilization during the second half of the year as well as seeking higher rates on new leases. Energy related demand for rail cars, particularly tank cars, has improved significantly with rental rates in many cases having doubled from prior levels. We expect the strong demand to continue and particularly benefit us on the remainder of the equipment we have to be delivered from the manufacturers.
“Our logistics business is gaining momentum and a growing customer portfolio has led to record logistics revenue this quarter for our company. During the quarter we reported logistics revenue of $28.3 million, an increase of 31% compared to the first quarter of 2018 and a 44% increase compared to the second quarter of last year. Similarly, gross margin in logistics has increased 32% during the second quarter, compared to the first quarter of 2018. The overall domestic logistics market remains very strong with high demand relative to available equipment capacity. We expect that strong demand to continue through the remainder of the year due to the strong US economy. Specifically, we are gaining significant customer wins in our truck brokerage and intermodal services. We have recently consolidated all of our services under the CAI Logistics brand which we expect will create more customer awareness of our logistics capabilities and allow us to continue to recruit personnel to maintain the momentum we have reported.”
Mr. Garcia, continued, “During the second quarter we successfully issued 0.6 million shares of our Series A perpetual preferred stock for net proceeds of $14.7 million. During the first half of 2018 we have raised $53 million from the sale of our Series A perpetual preferred stock which has enabled us to repurchase 1.2 million shares of our outstanding common stock and continue record levels of investment in equipment.”
Mr. Garcia, concluded, “The momentum in our business remains very strong with each of our segments showing improved results. We have achieved 23% revenue growth in our container business so far this year and have made record container investment of $630 million, representing 34% of our container assets at the beginning of the year. The vast majority of this investment is already on lease or committed to be leased in the third quarter, with average lease terms of nine years. Rail utilization is increasing and lease rates are improving. Our logistics segment is experiencing very strong quarterly momentum and we expect continued double digit year over year growth in revenue and gross margin from the segment.”
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