UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant
to Section 13 OR 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) November 1, 2016 |
CAI International, Inc.
(Exact
name of registrant as specified in its charter)
Delaware |
001-33388 |
94-3109229 |
||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
Steuart Tower, 1 Market Plaza, Suite 900
San Francisco, California |
94105 |
(Address of principal executive office) | (Zip Code) |
Registrant's telephone number, including area code: (415)
788-0100
|
(Former name or former address, if changed since last report) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
⃞
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
⃞
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
⃞
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
⃞
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition.
On November 1, 2016, CAI International, Inc. issued a press release reporting its results of operations for the third quarter ended September 30, 2016. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
99.1 Press release issued by CAI International, Inc. dated November 1, 2016.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
CAI International, Inc. |
||
(Registrant) |
||
November 1, 2016 |
/s/ Timothy B. Page |
|
(Date) |
Timothy B. Page Chief Financial Officer |
Exhibit 99.1
CAI International, Inc. Reports Results for the Third Quarter of 2016
SAN FRANCISCO--(BUSINESS WIRE)--November 1, 2016--CAI International, Inc. (CAI) (NYSE:CAI), one of the world’s leading transportation finance and logistics companies, today reported results for the third quarter of 2016.
Highlights
1 Refer to the Reconciliation of GAAP Amounts to Non-GAAP Amounts set out below.
Revenue for the third quarter of 2016 was $78.5 million, compared to $66.1 million for the third quarter of 2015, an increase of 19%. Revenue from CAI’s railcar assets increased over the same period by $2.5 million to $7.6 million as a result of growth in the railcar fleet, whereas revenue from the container leasing business decreased by $5.5 million to $49.2 million, reflecting $1.8 million of lost revenue from the Hanjin bankruptcy, as well as a decrease in the size of the owned container fleet and a reduction in lease rates during the period. Management fee revenue for the third quarter of 2016 was $0.5 million, a decrease of $0.4 million, compared to the third quarter of 2015, primarily due to the decrease in size of the managed fleet. Logistics revenue for the third quarter of 2016 was $21.2 million, compared to $5.4 million for the third quarter of 2015, primarily arising from our acquisitions during the past twelve months.
Net loss attributable to CAI common stockholders for the third quarter 2016 was $5.4 million, or $0.28 per fully diluted share, compared to net income of $13.0 million, or $0.62 per fully diluted share, for the third quarter of 2015.
The results for the third quarter of 2016 were impacted by the following:
Victor Garcia, President and Chief Executive Officer of CAI, commented, “Our financial results continue to reflect the challenging environment we faced during the quarter, including weak economic growth and low container sale prices. For the third quarter of 2016, we reported a net loss of $5.4 million, or $0.28 per fully diluted share. The loss is primarily attributable to $9.3 million of discrete charges incurred during the quarter, including $4.5 million related to the Hanjin bankruptcy and $3.4 million of additional depreciation related to a change in residual value.
“Though the quarter’s results are disappointing, there continues to be improvement in our operating statistics. We have reduced our total off-hire inventory from the peak in Q1 2016 by 27% through a combination of sale and leasing activity. This is part of our ongoing effort to reduce off-hire costs and provide a lower base line of operating expenses in the future, thereby enhancing our cash flow and return on our assets. Our primary focus remains optimizing the financial returns on our existing fleet.
“We believe the fundamentals of the container business are improving. Demand for leased containers has continued to increase over the course of the quarter, particularly after the market disruption caused by the Hanjin bankruptcy at the end of August. We have very limited inventory in China and are seeing expanded lease-out activity throughout Asia. We are repositioning equipment back to China to continue to meet the increasing demand. Although we will incur costs for positioning equipment, we expect those efforts to improve our utilization over the course of 2017.
“We are also seeing that with the steady rise in the price of Chinese steel over the course of the last few months, new container prices are also increasing and are now closer to $1,550 per CEU and higher for units produced in factories that have adopted waterborne paint into the manufacturing process. As a result, per diem rates on new and depot equipment have also increased. We expect that container prices will continue to rise if steel prices remain at the current levels. We have also begun to see improving secondary prices of containers in China as inventory levels available by lessors have reduced. We expect there to be additional improvement over the coming months due to all of these factors. There has been very limited ordering of new equipment by lessors, which should continue to help improve the supply and demand balance for containers. Although sale prices in the secondary market are improving, we expect to continue reporting net losses on sale of equipment over the next couple of quarters.”
Mr. Garcia continued, “The rail market remains challenging but we are seeing some fundamental improvements. We believe that the production capacity for new railcars is being reduced and that there is limited incremental ordering of equipment. As a result, we are finding an improving market for our equipment that is being delivered. During the quarter we leased out 324 railcars at attractive rates and expect to have continued success marketing the remainder of our railcars to be delivered in 2017. The utilization of our railcar fleet remained strong at 96.2% during the quarter and most of our railcars remain under long term leases that should provide steady revenue and earnings over the coming quarters.
“During the quarter, our logistics business faced a challenging market environment due to the slow growth of the U.S. economy. As a result, the peak season freight demand has been limited and competition has remained strong. However, we continue to gain additional customers in our logistics business and are having success cross-marketing services to all our customers. We continue to see our logistics capabilities as providing us a competitive advantage in increasing our asset utilization and returns.”
Mr. Garcia concluded, “Our priority during this weak economic period is to maximize the return on the capital we already have committed through higher utilization and the sale of low returning equipment. We have continued our share repurchase program, and have repurchased 1.1 million shares in the year-to-date. We do not currently believe that returns in general for new investment are attractive and we will continue to focus on reducing debt and additional opportunities to repurchase our shares. We think that the smaller size of our fleet and diversification efforts benefit us as we position ourselves for 2017.”
CAI International, Inc. | ||||||||||
Consolidated Balance Sheets | ||||||||||
(In thousands, except share information) | ||||||||||
(UNAUDITED) | ||||||||||
September 30, | December 31, | |||||||||
2016 | 2015 | |||||||||
Assets | ||||||||||
Current assets | ||||||||||
Cash | $ | 15,450 | $ | 17,447 | ||||||
Cash held by variable interest entities | 22,016 | 35,106 | ||||||||
Accounts receivable, net of allowance for doubtful accounts of $805 and $548 at September 30, 2016 and December 31, 2015, respectively |
67,199 | 55,284 | ||||||||
Current portion of direct finance leases | 31,129 | 21,158 | ||||||||
Prepaid expenses and other current assets | 1,873 | 2,155 | ||||||||
Total current assets | 137,667 | 131,150 | ||||||||
Restricted cash | 6,447 | 7,212 | ||||||||
Rental equipment, net of accumulated depreciation of $406,061 and $349,810 at September 30, 2016 and December 31, 2015, respectively |
1,786,374 | 1,748,211 | ||||||||
Net investment in direct finance leases | 69,705 | 82,210 | ||||||||
Goodwill | 15,579 | 2,905 | ||||||||
Intangible assets, net of accumulated amortization of $1,919 and $1,237 at September 30, 2016 and December 31, 2015, respectively |
10,453 | 1,223 | ||||||||
Furniture, fixtures and equipment, net of accumulated depreciation of $2,876 and $2,027 at September 30, 2016 and December 31, 2015, respectively |
667 | 674 | ||||||||
Total assets | $ | 2,026,892 | $ | 1,973,585 | ||||||
Liabilities and Stockholders' Equity | ||||||||||
Current liabilities | ||||||||||
Accounts payable | $ | 13,237 | $ | 11,962 | ||||||
Accrued expenses and other current liabilities | 12,313 | 4,813 | ||||||||
Due to container investors | 5,769 | 5,801 | ||||||||
Unearned revenue | 13,011 | 11,990 | ||||||||
Current portion of debt | 99,751 | 169,596 | ||||||||
Rental equipment payable | 24,435 | 10,901 | ||||||||
Total current liabilities | 168,516 | 215,063 | ||||||||
Debt | 1,343,276 | 1,249,057 | ||||||||
Deferred income tax liability | 52,581 | 48,204 | ||||||||
Other long term liabilities | 3,500 | - | ||||||||
Total liabilities | 1,567,873 | 1,512,324 | ||||||||
Stockholders' equity |
||||||||||
Common stock: par value $.0001 per share; authorized 84,000,000 shares; issued and outstanding 19,057,453 and 20,132,706 shares at September 30, 2016 and December 31, 2015, respectively |
2 | 2 | ||||||||
Additional paid-in capital | 140,649 | 148,523 | ||||||||
Accumulated other comprehensive loss | (6,875 | ) | (7,922 | ) | ||||||
Retained earnings | 325,243 | 319,735 | ||||||||
Total CAI stockholders' equity | 459,019 | 460,338 | ||||||||
Non-controlling interest | - | 923 | ||||||||
Total stockholders' equity | 459,019 | 461,261 | ||||||||
Total liabilities and stockholders' equity | $ | 2,026,892 | $ | 1,973,585 | ||||||
CAI International, Inc. | |||||||||||||||||||
Consolidated Statements of Income | |||||||||||||||||||
(In thousands, except per share data) | |||||||||||||||||||
(UNAUDITED) | |||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||||||
Revenue | |||||||||||||||||||
Container lease income | $ | 49,196 | $ | 54,696 | $ | 151,270 | $ | 164,274 | |||||||||||
Rail lease income | 7,614 | 5,102 | 22,462 | 11,770 | |||||||||||||||
Logistics revenue | 21,197 | 5,406 | 41,743 | 5,474 | |||||||||||||||
Management fee revenue | 465 | 913 | 1,605 | 2,457 | |||||||||||||||
Total revenue | 78,472 | 66,117 | 217,080 | 183,975 | |||||||||||||||
Operating expenses | |||||||||||||||||||
Depreciation of rental equipment | 29,873 | 22,655 | 77,401 | 65,907 | |||||||||||||||
Storage, handling and other expenses | 8,802 | 8,148 | 27,176 | 21,837 | |||||||||||||||
Logistics transportation costs | 18,045 | 4,818 | 35,127 | 4,888 | |||||||||||||||
Loss (gain) on sale of used rental equipment | 3,323 | (72 | ) | 7,950 | (237 | ) | |||||||||||||
Administrative expenses | 11,067 | 7,312 | 28,750 | 21,540 | |||||||||||||||
Total operating expenses | 71,110 | 42,861 | 176,404 | 113,935 | |||||||||||||||
Operating income | 7,362 | 23,256 | 40,676 | 70,040 | |||||||||||||||
Other expenses | |||||||||||||||||||
Net interest expense | 10,866 | 8,967 | 31,404 | 26,792 | |||||||||||||||
Other expense | 85 | 2 | 407 | 61 | |||||||||||||||
Total other expenses | 10,951 | 8,969 | 31,811 | 26,853 | |||||||||||||||
Net (loss) income before income taxes and non-controlling interest |
(3,589 | ) | 14,287 | 8,865 | 43,187 | ||||||||||||||
Income tax expense | 1,826 | 1,272 | 3,320 | 3,671 | |||||||||||||||
Net (loss) income | (5,415 | ) | 13,015 | 5,545 | 39,516 | ||||||||||||||
Net income attributable to non-controlling interest |
- | 26 | 37 | 96 | |||||||||||||||
Net (loss) income attributable to CAI common stockholders |
$ | (5,415 | ) | $ | 12,989 | $ | 5,508 | $ | 39,420 | ||||||||||
Net (loss) income per share attributable to CAI common stockholders |
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Basic | $ | (0.28 | ) | $ | 0.62 | $ | 0.28 | $ | 1.88 | ||||||||||
Diluted | $ | (0.28 | ) | $ | 0.62 | $ | 0.28 | $ | 1.86 | ||||||||||
Weighted average shares outstanding | |||||||||||||||||||
Basic | 19,130 | 20,920 | 19,427 | 20,973 | |||||||||||||||
Diluted | 19,130 | 21,059 | 19,498 | 21,236 | |||||||||||||||
CAI International, Inc. | ||||||||||
Consolidated Statements of Cash Flows | ||||||||||
(In thousands, except per share data) | ||||||||||
(UNAUDITED) | ||||||||||
Nine Months Ended | ||||||||||
September 30, | ||||||||||
2016 | 2015 | |||||||||
Cash flows from operating activities | ||||||||||
Net income | $ | 5,545 | $ | 39,516 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||
Depreciation | 77,636 | 66,228 | ||||||||
Amortization of debt issuance costs | 2,086 | 1,983 | ||||||||
Amortization of intangible assets | 682 | 157 | ||||||||
Stock-based compensation expense | 1,320 | 1,436 | ||||||||
Reduction in contingent consideration | (1,000 | ) | - | |||||||
Unrealized loss on foreign exchange | 82 | 185 | ||||||||
Loss (gain) on sale of used rental equipment | 7,950 | (237 | ) | |||||||
Loss on disposal of subsidiary | 146 | - | ||||||||
Deferred income taxes | 2,193 | 458 | ||||||||
Bad debt expense | 2,458 | 326 | ||||||||
Changes in other operating assets and liabilities: | ||||||||||
Accounts receivable | (7,560 | ) | 2,692 | |||||||
Prepaid expenses and other assets | 119 | 822 | ||||||||
Accounts payable, accrued expenses and other current liabilities | 1,230 | (594 | ) | |||||||
Due to container investors | (32 | ) | (5,369 | ) | ||||||
Unearned revenue | 1,013 | 2,263 | ||||||||
Net cash provided by operating activities | 93,868 | 109,866 | ||||||||
Cash flows from investing activities | ||||||||||
Purchase of rental equipment | (170,582 | ) | (304,588 | ) | ||||||
Acquisitions, net of cash acquired | (15,620 | ) | (4,100 | ) | ||||||
Net proceeds from sale of used rental equipment | 46,137 | 51,188 | ||||||||
Disposal of subsidiary, net of cash disposed of | (460 | ) | - | |||||||
Purchase of furniture, fixtures and equipment | (92 | ) | (73 | ) | ||||||
Receipt of principal payments from direct financing leases | 17,368 | 16,071 | ||||||||
Net cash used in investing activities | (123,249 | ) | (241,502 | ) | ||||||
Cash flows from financing activities | ||||||||||
Proceeds from debt | 432,540 | 450,731 | ||||||||
Principal payments on debt | (408,375 | ) | (301,234 | ) | ||||||
Debt issuance costs | (1,461 | ) | (1,662 | ) | ||||||
Decrease in restricted cash | 765 | 765 | ||||||||
Repurchase of stock | (9,176 | ) | (12,158 | ) | ||||||
Exercise of stock options | - | 4,744 | ||||||||
Excess tax benefit from share-based compensation awards | - | 1,006 | ||||||||
Net cash provided by financing activities | 14,293 | 142,192 | ||||||||
Effect on cash of foreign currency translation | 1 | (209 | ) | |||||||
Net (decrease) increase in cash | (15,087 | ) | 10,347 | |||||||
Cash at beginning of the period | 52,553 | 53,821 | ||||||||
Cash at end of the period | $ | 37,466 | $ | 64,168 | ||||||
CAI International, Inc. | ||||||||||||||||
Fleet Data | ||||||||||||||||
(UNAUDITED) | ||||||||||||||||
As of September 30, | ||||||||||||||||
2016 | 2015 | |||||||||||||||
Owned container fleet in TEUs | 941,345 | 981,783 | ||||||||||||||
Managed container fleet in TEUs | 174,162 | 206,957 | ||||||||||||||
Total container fleet in TEUs | 1,115,507 | 1,188,740 | ||||||||||||||
Owned container fleet in CEUs | 1,010,083 | 1,026,395 | ||||||||||||||
Managed container fleet in CEUs | 156,543 | 185,875 | ||||||||||||||
Total container fleet in CEUs | 1,166,626 | 1,212,270 | ||||||||||||||
Owned railcar fleet in units | 6,136 | 3,955 | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Average Utilization | ||||||||||||||||
Container fleet utilization in CEUs | 93.3 | % | 92.0 | % | 92.5 | % | 92.9 | % | ||||||||
Owned container fleet utilization in CEUs | 94.0 | % | 92.9 | % | 93.2 | % | 93.8 | % | ||||||||
Railcar fleet utilization in units | 96.2 | % | 97.4 | % | 96.0 | % | 95.5 | % | ||||||||
As of September 30, | ||||||||||||||||
2016 | 2015 | |||||||||||||||
Period Ending Utilization | ||||||||||||||||
Container fleet utilization in CEUs | 93.3 | % | 91.2 | % | ||||||||||||
Owned container fleet utilization in CEUs | 93.9 | % | 92.0 | % | ||||||||||||
Railcar fleet utilization in units | 92.8 | % | 98.3 | % |
Utilization is computed by dividing total units on lease in CEUs (cost equivalent units), by the total units in our fleet in CEUs, 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 Ended | Nine Months Ended | ||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||||||
Net (loss) income attributable to CAI common stockholders | $ | (5,415 | ) | $ | 12,989 | $ | 5,508 | $ | 39,420 | ||||||||||
Non-recurring write-off of accounts receivable from bankrupt customer | 2,530 | - | 2,530 | - | |||||||||||||||
Non-recurring estimate of irrecoverable equipment from bankrupt customer, net of insurance |
2,000 | - | 2,000 | - | |||||||||||||||
Tax effect of non-recurring costs related to bankrupt customer | (75 | ) | - | (75 | ) | - | |||||||||||||
Additional depreciation expense caused by a decrease in container residual values |
3,360 | - | 3,360 | - | |||||||||||||||
Tax effect of additional depreciation expense | (122 | ) | - | (122 | ) | - | |||||||||||||
Adjustment to contingent consideration | (1,000 | ) | - | (1,000 | ) | - | |||||||||||||
Tax effect of adjustment to contingent consideration | 350 | - | 350 | - | |||||||||||||||
Non-recurring tax charge related to the sale of a subsidiary | 1,360 | - | 1,360 | - | |||||||||||||||
Non-recurring container management charge | - | - | - | 828 | |||||||||||||||
Tax effect of non-recurring management charge | - | - | - | (298 | ) | ||||||||||||||
Adjusted net income attributable to CAI common stockholders | $ | 2,988 | $ | 12,989 | $ | 13,911 | $ | 39,950 | |||||||||||
Diluted net (loss) income per share attributable to CAI common stockholders |
$ | (0.28 | ) | $ | 0.62 | $ | 0.28 | $ | 1.86 | ||||||||||
Diluted adjusted net income per share attributable to CAI common stockholders |
$ | 0.16 | $ | 0.62 | $ | 0.71 | $ | 1.88 | |||||||||||
Weighted average number of common shares used to calculate (in thousands) | |||||||||||||||||||
Diluted net (loss) income per share and diluted adjusted net income per share attributable to CAI common stockholders |
19,130 | 21,059 | 19,498 | 21,236 | |||||||||||||||
Conference Call
A conference call to discuss the financial results for the third quarter of 2016 will be held on Tuesday, November 1, 2016 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 “Q3 2016 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 write-off of accounts receivable from a bankrupt customer, a non-recurring estimate of irrecoverable equipment from a bankrupt customer, tax effect of non-recurring costs related to a bankrupt customer, additional depreciation expense caused by a decrease in container residual values and related tax effect, adjustment to contingent consideration and related tax effect, a non-recurring tax charge related to the sale of a subsidiary, and a non-recurring container management charge and related tax effect. 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 September 30, 2016, CAI operated a worldwide fleet of approximately 1.2 million CEUs of containers, and owned a fleet of 6,136 railcars that it leases within North America. CAI operates through 24 offices located in 13 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, benefits and synergies expected from the acquisitions of ClearPointt, Challenger and Hybrid. 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, 2015, 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.
CONTACT:
CAI International, Inc.
Tim Page, 415-788-0100
Chief
Financial Officer
tpage@capps.com