CAI - Earnings call transcript Q2 2019 | CAI International, Inc.

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Operator

Good afternoon, ladies and gentlemen, and welcome to the CAI International Second Quarter 2019 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to turn the conference over to your host, Mr. Timothy Page, Chief Financial Officer.

You may begin.

Timothy Page

you us thank and afternoon, for today. joining Good

Exchange and you the conference documents be the that annual to and not demand, this conditions, results contained refer the risks that competition forward-looking statements X-K. the Harbor its Form made International Securities Form to are and but may materially current this during Securities Form from from documents its of cause forward-looking call. XXE results, differ statements on on to expected quarterly We increased Certain uncertainties and These on factors that CAI and actual including could call made including economic XX-Q, from of contain customer our with Section cause to limited reports of important conference others. expectations, in expectations has could and reports to filed Act actual XXXX, provisions and results involve filed Exchange Safe report its differ XX-K, pursuant Commission, current additional

under this expected the company you might plans, the made subsequent views, detailed regarding views, If or the discussion this company's its in outlook the obligation no change estimates, or outlook plans, modify update we remind any for discussion. strategies Finally, this and is that call company future. to statements results, to as happens, the of during this strategies

President over call our the and Executive turn to now Garcia. will Officer, Chief I Victor

Victor Garcia

on and under Investor the conference on welcome CAI’s Thank in of our view call. presentation also we you, second our today, earnings our our the state our Along released quarter Tim. with website, Good company of a results XXXX industry. posted earnings section to afternoon and have

any going be the related to address on questions will the We can through this specific call. remarks presentation in but prepared slides not

XX% The income common or results shareholders XXXX, per fully reported operations of of share. second second from we which diluted $X.XX a the our quarter leasing grew compared by to net the fleet container For million revenue to $XX.X quarter of larger segment, continuing size. as by were due XXXX, driven attributable to primarily its

down per reported quarter continuing lower $X.XX. equipment, Our insurance to is costs, from compared a largely second of operations when income tax of The XXXX reduced and and net a storage rate. expense are as comparatively quarter second to higher we million share quarter-over-quarter XXXX, sale in of of gain results decline the the higher $X.X recovery that due handling on interest

of leasing the strong, the averaging remains segment, for our very second In container XX.X% utilization quarter XXXX.

Our current and expectation have quarter. season Despite normally the is and United demand China peak the growth not the traditional will based remain continued uncertainty strong second the trade the on activity. our commence global have believe rest strong that that States the year and fleet, that during tariff We of our the around lease the ongoing structure level trade would of seen of utilization long-term between the economic we created contracts. utilization for of discussions

intends he that raise creates September about of over year President X to this demand U.S. the uncertainty near-term. by tariffs declaration trade recent the additional most The on additional

around containers not result, significantly and new there do As environment. demand tariff economic to greater is for stronger increase we until a a certainty expect discussions

second committed incremental thus quarter. $XX investment our container the limited have We to million during

Prices ordering but container XX for incremental a for to little or we container lessors. foot approximately new containers $X,XXX have shipping see lines slightly new by declined

facilities close despite in may We the lower some weeks of manufacturing that some China manufacturers because coming the over containers, prices. limited demand expecting are for container

is China where Asia, based. in idle most slightly declined have prices container in equipment Used particularly

shipping and limited lines. for due the rates available by to Asia remain high of of being used overall However, utilization containers in outside lessors general made prices strong equipment

we uncertain have and our actively made railcar currently our to of managing fleet. we economic sell Because the remaining are decision businesses environment, have been various experiencing,

improving see returns our capital fleet of potential in the to the to of invested to in continue other shares. reallocate shareholders we including is our trends interest and we in Although the the utilization of believe our it railcar additional railcars, investments, repurchase

quarter XXXX. have As with business as we reported are second net of be assets a provide sale in sale accounting an business accounted the The of for for from rail are can operations, sale per the of have decision dialogue a net portfolio. that that we the in to optimistic loss Under held Because remaining a rules our operation. assurance concluded, railcar We be reclassification the $X.XX of before regarding made $X.X end prospective completed such, however, railcar we the for acquirers loss the will or discontinued for sale fleet, share. cannot seek million railcar railcar a included the our assets as a of we of successfully fully discontinued arising the railcar impairment business diluted the sale. quarter

believe We growth demand for personnel. around tariffs year. demand transportation and as our services, the States and XXXX affected result, transportation United continued in uncertainty Coming logistics increased and a strong global this into logistics that trade has we expected

in downsized and reduction offices. However, one of a logistics our and with we demand been closure we has softer restructured because planned than workforce the our business of XX% have

to second in core in expand and to $X.X business to bring service the a and our level the and restructuring with to we of related Because we costs those the severance office line where revenue closure. is charge customers Our opportunity more efficiently the existing quarter of emphasis of priority million recorded more have customers. place closer pre-tax on

to logistics in be revenue expect quarter line third with more We costs.

capital decisions company during to the CAI the future and position value. think positioning increase made our quarter achieve on deploy focused for goals. second are the well have We those the to shareholder We we

the review detail. I'll greater call the our Page, Chief financial Officer quarter now Tim the Financial for to in turn results over to

Timothy Page

an the unless million, $XXX of note date total an continuing operations comments, to I Total continuing My everyone. otherwise, for lease $X.X quarter his million will afternoon, revenue revenue conditions soft was higher as our comments. to the increase market in on was increase compared that million million, XXXX, Container reflecting QX QX. year-to-year good date $XXX and mentioned Year Victor X.X% than $XX.X was Victor, QX, you, from focus Thank XX.X%. $XXX to versus of revenue in operations. million

fleet. last the of date second Logistics in revenue was than of rate of revenue experienced is container lease to half Year to in run million QX has Depreciation increase year we on the in QX, higher QX reflecting QX expense XX.X% was XXXX. QX. period revenue the a date same size X.X% the higher Year XXXX. an increased than compared reflects impact to to which lease market the $X.X increase as in date logistics compared primarily our XX.X% strong million, to $XX.X year, slight of container as

which to in we are a of average QX an decrease the we Storage year, would to of the a related to quarters all expense similar We strong $X.X million $X.X compared were utilization of in and increase this and handling million not slight operating in QX rate QX. primarily million, coming depreciation containers as related was lease $X.X two container at increase experienced in in this incremental new anticipating versus QX investment or are balance in related other as year. expense expect outs of

increased QX As storage related operating handling $X expenses and other million. XXXX, compared to

the million with remain to to increase expense year during insurance in of million year-over-year historically experienced will seasonal this fleet last $X.X year. the in expense levels. will we XXXX primarily all utilization We reflective fall the slightly expectation remainder QX the record utilization handling slight while decrease and and the a high we It an our level that likely from would compared associated reflects during as of utilization QX had it’s high year. expect recovery, of $X.X increase storage remaining credit container our the seen modestly the in have the year, at balance time

margin cost increase $X.X sales million of $X.X Gross $X.X by portion – it or our an from international percent of the QX Logistics gross driven to in XX.X%. $XX.X compared margin million as million by increase of Logistics dollars compared increased the driven QX gross business. in million was in $XX.X was gross to The margin forwarding XX.X% logistics percent in was primarily XX.X% incremental in improvement million $X.X QX million. freight QX, in was QX, and QX. an of in to margin

decrease coming million. on in General and rental expense million would compared quarters compared of the sale QX. the used as be to equipment to on million in to $X.X million administrative Gain container of in QX quarter QX, $X.X million as was $XX.X in in $XX.X million the range. $X to $X.X in a expect sale gains million was We $X.X

$X.X decrease QX. was G&A. debt the related in and right the to business. During coming to expect we to be overhead million quarters our is in the other charge our The charge G&A the related quarter logistics million We took container decrease by in the in in decrease bad This in expense in range logistics million related primarily expense. $X.X G&A G&A in of quarter, the reduction a related would same container sizing as $X.X offset

of to $XX.X related The million improvement Total of increased container of was versus of logistics logistics in occurred to in $X business. mentioned. balance the seasonal million operations but of QX spite continuing the $XX results or increase The was of in operating income X.X%. in income $X.X an for from improvement the million also QX logistics. somewhat from year QX, I in $X.X $X.X in fact nature in million million just to operating million operating QX increase the income was related this included charges restructuring belt the

same Year-to-date balance in period $X.X our compared average the continuing slight or million quarter continuing operations operating increased the increase X.X% the as increased Interest in million debt year. from $X.X to operations income last reflecting expense for quarter. a in the

quarters. would the expectations our of and slightly the container in rates, LIBOR balance for investment we falling coming year expense expect limited decrease interest the to for Given

of in our The X.X% funded with QX QX. was debt flat weighted average interest rate

change QX. be We’re income changes sources over and operations where increased quarter. year. in average the $X expense increase million continuing of mix in the relatively interest balance on average expected income expecting as related will in compared the constant the to that incremental The the generated expense Income be remain our tax to will debt next in borrowing rates balance. Any our pre-tax will

tax in effective was our Year-to-date, tax X.X%. QX rate effective rate X.X%. The was

tax the range. in be effective rate expect quarters this in coming to X.X% We

was quarter. end an during fleet CEU the container million the of XX,XXX owned CEU increase Our of as X.X of QX,

new average levels high historically utilization at there’s also the QX. in our of demand been has XX.X% Consequently, turn for containers. and remain in XX.X%, containers older end this as of there limited quarter been While limited our year, the with

XX.X%. at stands As utilization of today,

of increased value restricted book Rail our the the cash entities quarter At net we billion. to of held container total assets end revenue million The $X.X funded and $X.X quarter, had flat variable accounted in with $XXX approximately billion, earning total QX. approximately the of in of debt for interest $XX related million. first cash debt

related of upon will all debt be assets. rail that rail expect retired a our of We sale consummation

QX billion cash quarters. Funded as the net end would to $X.X compared continuing to coming fund debt the of $X.XX of was in to range operations decrease debt remain the in expect in balance related to this QX. at to We slightly billion

During the XXX,XXX our approximately shares stock. of quarter, repurchased we

beginning repurchased have of approximately which have beginning approximately X.X% outstanding we of shares shares, that the Year-to-date, as of of the of X.X time. shares at the represents or XX.X% the shares outstanding million year. the XXXX, X.X we repurchased Since million

committed best capital shareholders. our on returns based are long term investments the generate to for allocate to We continuing that

our please comments. concludes for Operator, the questions. open That call

Operator

from comes line Compass with Valentin Scott the question first Your Instructions] Point. of [Operator

You are now live.

Scott Valentin

afternoon. Thanks my question. taking for Good

the capital capital value, guys much regard book of that up unknown, them to would so up Just with be the much it free can estimate balance obviously negotiating know sale, close prices, some but you the there I freed is would sell the you to still sheet? if are you any how railcar prices railcar, you on if – sell how can

Victor Garcia

railcar have. about, we talk are to we hesitated capital really sale, with even I’m how the much where

open in an right process we’re So now.

that. preferred a talk in I So really about don’t position to sale. – the We not we’re really rail

Scott Valentin

just seasonally. then mentioned you And with obviously um, historically, Okay, of, being weaker seasonal, enough. CapEx, terms demand than fair in

contracting sales. where it’s of Or think and about fleet Just the wondering a fleet to I take sell of prices? you container containers maintain do goal as mean, see advantage you the it more you size is? about stable container use all, the how

Victor Garcia

of in age Our those units profile interests many will be on the and to locations. sell dependent how units containers come and

equipment, to consider units lost of equipment. If to in selling on won’t a selling come selling – if lot So hold we a customer’s be a and lot. to

would fleet quarters. on We’re the trickles And really expand well The by the expect or wouldn’t significant a for in size positioning just big and I monthly contract couple higher a focused contract, wouldn’t the fleet more get say, over fleet utilization. we the the of basis amount. level on next we a of that the wouldn’t in fleet difference so

Scott Valentin

And just was some that your concern fail. then question. around guess one I company, credit, announced Okay, thanks. or There a one peers they final had shipping bankrupt of

as looks. Just watching changes slowing global you any wondering and trade, been think slowing about this your economy as the and you’re in watchlist how

Victor Garcia

terms standpoint. our similar in is good. we’re situation what would speaking, situation We generally recovering they say to it’s I But have, through is speaking, credit working say, I’d generally manageable particular a it of have the from situation but a units. good. And level credit do

Our not in still a good we’re seeing and with history customers deterioration. position is payment

Scott Valentin

Thanks All Okay. questions. for my right. taking

Operator

next [Operator from Becker the comes line of Instructions] Your Helane with question Cowen.

You’re now live.

Helane Becker

Are some operator. is that. have with actually for two in I goes other One tied LIBOR of Slide the LIBOR really. or just guys. just that’s Becker past provisions on balance to determined and get far you by way, XXXX. didn’t question the for XX, It’s lessor? a on there sheet, Thanks so that in you Hi replace questions Helane there

Timothy Page

whenever Yes, rate to move that credit credit other that – negotiated facilities of provisions floating happens. some in that base them in to have be type depth to the

Helane Becker

your the other then had for question on. for And with maybe all Victor you. was, I comments Thanks Okay.

kind feel So are and that ups gotten and since the logistics going you’ve about now is? is? like this you business are business you’ve happy further you with where the happy to business restructuring after feel if be I – just we wondering downs the into lot like with talk I’m I and a be where latest of have

Victor Garcia

changes significant say better I I’m wouldn’t the a We’ll think with we we’ve logistics that logistics optimistic. are made business. and I on on business put us happy progress path. the

have We a alluding expectation would and a business been and entered the with that profits would business to it that it us. be profitable growing we be it the business have

are can’t an that focused sure is future So overall of we’re of side. important now. contributor results a where happy kind business And I’m to very on making the that company. I that’s the say with right we

Helane Becker

a Okay. And remarks. I bunch else of have I other All right. covered the and questions asked Scott think, everything you prepared in your

it we’ll leave at So that. you. Thank

Victor Garcia

Thank you.

Operator

questions now to at showing further I’m the back will And this time. call hand Garcia. no I Victor

Victor Garcia

Great. our Thank quarter Thank look we in the call the months. to coming for being forward and third everyone you results reporting on you.

Operator

day. conference. and Thank have today’s for participation you Ladies this wonderful your a concludes and gentlemen,

Here we all disconnect.

CAI International (CAI) 7 Aug 192019 Q2 Earnings call transcript