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CAI International, Inc. (



Q4 2011 Earnings Call

February 21, 2012 05:00 a.m. ET


Victor Garcia – President, CEO

Timothy Page – CFO, Investor Relations


John Stilmar – SunTrust

Helane Becker – Dahlman Rose

Vitale Salvatore – Sterne Agee

Gregory Lewis – Gregory Lewis

John Mims – FBR Capital Markets



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Good day, ladies and gentlemen, and welcome to your CAI International Q4, 2011 Earnings Conference Call. At this time, all participants will be in a listen-only mode. Later, we will conduct a question-and-answer session, which instructions will be given at that time. (Operator Instructions) And as a reminder, today’s conference is being recorded. And now, I would like to introduce your host for today, Timothy Page.

Timothy Page

Good afternoon, and thank you for joining us today. Certain statements made during this conference call may be forward-looking and are made pursuant to the Safe Harbor provisions of Section 21E of the Securities and Exchange Act of 1934 and involve risks and uncertainties that could cause actual results to differ materially from current expectations, including but not limited to, economic conditions, expected results, customer demand, increased competition and others.

We refer you to the documents that CAI International has filed with the Securities and Exchange Commission, including its Annual Report on Form 10-K, its Quarterly Reports filed on Form 10-Q and its 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 conference call.

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

Victor Garcia

Thank you, Tim. Good afternoon. We are very pleased with our fourth quarter results with quarterly year-over-year revenue growth of 44% and earnings per fully diluted share up 16% to $0.66 per share.

For the full-year period, we reported year-over-year revenue growth of 61% and earnings per fully diluted share up 63% to $2.55 per share. Our results during the fourth quarter were driven by the continued strong utilization of our fleet and the new containers delivered from the factories to our customers during the quarter.

Utilization in the fourth quarter remained strong at approximately 97%, slightly below the 98% we reported in the third quarter of this year, but strong nonetheless. As we indicated in the conference call last quarter, we expected a seasonal decline in utilization, and the result was consistent with what we expected.

We expect utilization to decline slightly further in the first quarter of 2012. However, we are very optimistic about container demand beginning in the second quarter and expect our utilization of equipment to increase over the course of the final nine months of 2012. We believe that lease rates on equipment off-hired at depots would strengthen over the coming weeks as a result of increased demand from our customers as we approach the seasonally stronger part of the year.

Prices being quoted by manufacturers for new containers have recently risen compared to the end of 2011, and if that price trend continues, we would expect lease rates on in-fleet equipment to benefit, if lease rates on new boxes increase because of the new – because of the higher new box cost.

As I mentioned, we believe demand for containers will be strong in 2012. Our view is based on the current high utilization of the worldwide lease fleet, the limited capital budgets for purchase via shipping rights and the limited new container production since the second quarter of 2011. Those three factors along with an expected containerized trade growth of 8% core pass by Containerization International, supported by growing U.S. and Asian economies implied to us expected strong demand for containers and utilization.

During the quarter, we leased to customers 13,000 TEUs of new equipment and completed the sale leaseback of 26,000 TEUs of containers with one of our customers. We think that some shipping lines will continue to look to sell and leaseback some units over the course of 2012 and we’re very interested in those types of transactions where we believe we have purchased the assets at attractive prices.

Our results also continue to benefit from the secondary sales market, which has remained strong throughout the year. This quarter, we generated $3.2 million in income from the disposition of containers. Container prices have come down modestly in certain locations, but remained strong worldwide by historical standards.

During the fourth quarter of 2011, we sold 33% fewer TEU than in the fourth quarter of 2010, but we’re able to obtain a higher average gain per TEU. Compared to the third quarter of 2011, we often sold slightly fewer units than in the fourth quarter, but again, our average gain on sale was higher.

We believe that prices per the sale of used containers will remain strong in 2012 because of the expected high utilization of containers worldwide during the year and the relatively high price of new containers.

In summary, we have enjoyed spectacular revenue and earnings growth over the past year with a relatively tight supply of factory inventory, improved growth within the U.S. and European economies and continued strong trade amongst less developed regions, we are expecting ongoing growth of our business in 2012.

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

Timothy Page

Thank you, Victor. Earlier today we reported 2011 fourth quarter net income attributed – attributable to common stockholders of 12.9 million, an increase of 23% compared to the fourth quarter of 2010, and as we indicated in our earnings release, a record result for the fourth quarter for CAI.

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