CAI International (CAI) 8-K Results of Operations and Financial Condition

Exhibit 99.1

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

SAN FRANCISCO--(BUSINESS WIRE)--July 28, 2015--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		1,165,324			1,058,754
Deferred income tax liability		43,848			43,419
Capital lease obligations		-			1,568
Total liabilities		1,492,425			1,352,935
Stockholders' equity
Common stock: par value $.0001 per share; authorized 84,000,000 shares; issued and outstanding
21,201,743 and 20,788,277 shares at June 30, 2015 and December 31, 2014, respectively		2			2
Additional paid-in capital		161,481			154,894
Accumulated other comprehensive loss		(7,638	)		(5,677	)
Retained earnings		319,328			292,897
Total CAI stockholders' equity		473,173			442,116
Non-controlling interest		859			789
Total stockholders' equity		474,032			442,905
Total liabilities and stockholders' equity	$	1,966,457		$	1,795,840

CAI International, Inc.
Consolidated Statements of Income
(In thousands, except per share data)
(UNAUDITED)
	Three Months Ended						Six Months Ended
	June 30,						June 30,
		2015			2014			2015			2014
Revenue
Rental revenue	$	56,734		$	51,493		$	111,617		$	102,177
Management fee revenue		287			1,595			1,544			3,120
Finance lease income		2,345			2,224			4,697			4,279
Total revenue		59,366			55,312			117,858			109,576
Operating expenses
Depreciation of rental equipment		22,029			19,056			43,252			37,719
Amortization of intangible assets		45			99			129			198
Loss (gain) on sale of used rental equipment		192			(1,534	)		(165	)		(3,324	)
Storage, handling and other expenses		6,994			6,797			13,759			12,790
Marketing, general and administrative expenses		6,972			6,397			14,099			13,103
Loss on foreign exchange		100			153			59			317
Total operating expenses		36,332			30,968			71,133			60,803
Operating income		23,034			24,344			46,725			48,773
Interest expense		9,048			8,883			17,829			17,678
Interest income		(1	)		(1	)		(4	)		(5	)
Net interest expense		9,047			8,882			17,825			17,673
Net income before income taxes and non-controlling interest		13,987			15,462			28,900			31,100
Income tax expense		1,057			1,968			2,399			3,375
Net income		12,930			13,494			26,501			27,725
Net income attributable to non-controlling interest		(41	)		(48	)		(70	)		(8	)
Net income attributable to CAI common stockholders	$	12,889		$	13,446		$	26,431		$	27,717
Net income per share attributable to
CAI common stockholders
Basic	$	0.61		$	0.61		$	1.26		$	1.26
Diluted	$	0.60		$	0.60		$	1.24		$	1.23
Weighted average shares outstanding
Basic		21,095			21,910			21,000			22,061
Diluted		21,398			22,355			21,346			22,506

CAI International, Inc.
Consolidated Statements of Cash Flows
(In thousands, except per share data)
(UNAUDITED)
	Six Months Ended June 30,
		2015			2014
Cash flows from operating activities
Net income	$	26,501		$	27,725
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		43,466			37,973
Amortization of debt issuance costs		1,338			1,375
Amortization of intangible assets		129			198
Stock-based compensation expense		969			842
Loss on foreign exchange		170			122
Gain on sale of used rental equipment		(165	)		(3,324	)
Deferred income taxes		429			630
Bad debt expense (recovery)		193			(19	)
Changes in other operating assets and liabilities:
Accounts receivable		(4,387	)		(4,688	)
Prepaid expenses and other assets		(2,273	)		(291	)
Accounts payable, accrued expenses and other current liabilities		3,808			1,776
Due to container investors		(4,193	)		(1,789	)
Unearned revenue		3,216			1,920
Net cash provided by operating activities		69,201			62,450
Cash flows from investing activities
Purchase of rental equipment		(236,330	)		(157,767	)
Net proceeds from disposition of used rental equipment		27,585			26,496
Purchase of furniture, fixtures and equipment		(49	)		(19	)
Receipt of principal payments from direct financing leases		10,504			7,297
Net cash used in investing activities		(198,290	)		(123,993	)
Cash flows from financing activities
Proceeds from debt		236,831			240,560
Principal payments on debt		(104,714	)		(159,282	)
Debt issuance costs		(1,662	)		-
Decrease in restricted cash		509			510
Repurchase of stock		-			(19,387	)
Exercise of stock options		4,645			28
Excess tax benefit from share-based compensation awards		1,006			-
Net cash provided by financing activities		136,615			62,429
Effect on cash of foreign currency translation		(217	)		358
Net increase in cash		7,309			1,244
Cash at beginning of the period		53,821			45,741
Cash at end of the period	$	61,130		$	46,985

CAI International, Inc.
Fleet Data
(UNAUDITED)
			As of June 30,
			2015	2014
Owned container fleet in TEUs			966,459	907,210
Managed container fleet in TEUs			222,140	266,860
Total container fleet in TEUs			1,188,599	1,174,070
Owned container fleet in CEUs			1,008,050	949,711
Managed container fleet in CEUs			200,925	245,460
Total container fleet in CEUs			1,208,975	1,195,171
Owned railcar fleet in units			3,671	1,973
	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2015	2014	2015	2014
Average Utilization
Container Fleet Utilization in TEUs	92.6%	90.2%	92.7%	90.2%
Container Fleet Utilization in CEUs	93.3%	91.2%	93.4%	91.2%
			As of June 30,
			2015	2014
Period Ending Utilization
Container Fleet Utilization in TEUs			92.1%	91.3%
Container Fleet Utilization in CEUs			92.7%	92.1%

Utilization is computed by dividing total units on lease, in CEUs (cost equivalent units) or TEUs (twenty foot equivalent units), by

the total units in our fleet, in CEUs or TEUs, 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					Six Months Ended
	June 30,					June 30,
		2015			2014		2015			2014
Net income attributable to CAI common stockholders	$	12,889		$	13,446	$	26,431		$	27,717
Non-recurring tax charge		-			626		-			626
Non-recurring container management charge		828			-		828			-
Tax effect of non-recurring management charge		(298	)		-		(298	)		-
Adjusted net income attributable to CAI common stockholders	$	13,419		$	14,072	$	26,961		$	28,343
Diluted net income per share attributable to CAI common stockholders	$	0.60		$	0.60	$	1.24		$	1.23
Diluted net income per share attributable to CAI common stockholders	$	0.63		$	0.63	$	1.26		$	1.26
Weighted average number of common shares used to calculate (in thousands)
Diluted net income per share and diluted adjusted net income per share attributable to CAI common stockholders		21,398			22,355		21,346			22,506
Net income attributable to CAI common stockholders	$	12,889		$	13,446	$	26,431		$	27,717
Net interest expense		9,047			8,882		17,825			17,673
Depreciation		22,136			19,183		43,466			37,973
Amortization of intangible assets		45			99		129			198
Income tax expense		1,057			1,968		2,399			3,375
EBITDA		45,174			43,578		90,250			86,936
Principal payments from direct finance leases		5,350			3,951		10,504			7,297
Non-recurring management charge		828			-		828			-
Adjusted EBITDA	$	51,352		$	47,529	$	101,582		$	94,233

EBITDA represents net income before interest, income taxes, depreciation and amortization of intangible assets. Adjusted EBITDA represents EBITDA plus principal payments from direct finance leases, less a non-recurring net settlement received from a customer.

Conference Call

A conference call to discuss the financial results for the second quarter of 2015 will be held on Tuesday, July 28, 2015 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 “Q2 2015 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 container management charge and related tax effects, and a non-recurring tax charge. In addition, this press release contains EBITDA and adjusted EBITDA, both of which are non-GAAP financial measures, and are defined in the tables above. 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 June 30, 2015, CAI operated a worldwide fleet of approximately 1,209,000 CEUs of containers through 16 offices located in 13 countries including the United States. As of June 30, 2015, CAI also owned a fleet of 3,671 railcars, which it leases within North America.

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, the stock repurchase authorization and the flexibility it provides as an effective way to return value to stockholders, management's outlook for growth of CAI’s railcar leasing investments and the outlook, benefits and synergies expected from the acquisition of ClearPointt Logistics LLC. 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, 2014 and 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