Cai International, Inc. (CAP)

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CAI International, Inc. (CAP)

Q3 2009 Earnings Call

November 05, 2009 17:00 p.m. ET

Executives

Victor Garcia - CFO and SVP

John Nishibori - President and CEO

Analysts

Rick Shane - Jefferies

Bob Napoli - Piper Jaffray

Sameer Gokhale - Keefe, Bruyette & Woods

David Long - William Blair

Presentation

Operator

Good day everyone and welcome to today's CAI International third quarter 2009 earnings conference call. As a reminder, today's call is being recorded. At this time I would like to turn the call over to the Mr. Victor Garcia. Please go ahead sir.

Victor Garcia

Good afternoon and thank you for joining us for CAI International's third quarter 2009 earnings call. Please note that today's call is being recorded and will be available for 30 days on the Investor Relations portion of our website, www.caiintl.com. There will be an opportunity for you to ask questions at the end of today's presentation.

Certain statements made during this conference call maybe forward-looking and are made pursuant to the Safe Harbor Provisions of Section 21-E of the Securities 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, 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 would now like to turn it over the conference call to John Nishibori the President and CEO of CAI international.

John Nishibori

Welcome to CAI's third quarter 2009 earnings conference call. I'm pleased with our results of the third quarter. We continue to report good results with net income for the quarter of $3.2 million or earnings per share of $0.18 on an average of fully diluted share count of 17.9 million shares.

During this period of economic weakness over the past four quarters, we have been focused on ways to manage expenses, credit risk and utilization in order to position the company for both long-term profitability and growth. We remain vigilant on all these items. On the expense side, we have been implementing a cost containment program and overhead that we estimate will save us $1 million this year. We have also entered into various agreements with depots to review storage cost across our system.

On credit risk, we have remained vigilant and are please to see many of our customers, recapitalizing themselves in order to weather a current downturn. We believe we have diversity amongst our customers, which mitigates some of the credit risk in the market place.

We have also reinforced our decision to take early delivery of containers from some customers that expressed the credit concern. We reduced our credit risk with these customers despite lower utilization in the short-term. We have also worked with some of our customers in renegotiating lease terms that help their short-term financial needs. However, we have been unwilling to renegotiate leases on terms that have not been in the long-term interest of our company. In those cases, we have decided it was better to accept redelivery of equipment.

We are now experiencing increase in demand for containers and we believe our company is well positioned to benefit by the emerging upturn in the market. Our utilization for first quarter of 2009 averaged 80%, our utilization bottomed in August and improved over the course of September and October. The utilization as of November 1 was 81.2% and we are now experiencing on a daily basis more lease-outs than turn-ins which we expect to continue through the end of the year.

As I indicated in the press release issued earlier today, the recovery has been moderate so far and we expect the more pronounced upturn to occur in the second quarter of 2010. We believe this upturn will provide attractive lease opportunities with a half [tire] equipment we delivered earlier in the year.

During the quarter, we purchased a $10 million container portfolio from one of our container investors. We believe this transaction was beneficial for both parties and will provide CAI with attractive returns. During the third quarter, we entered into $10 million five year term loan facility with the Development Bank of Japan. We entered into this agreement to broaden our financing sources as we prepare for increased container investment in 2010. The Development Bank of Japan is a 9.4% shareholder in our company and we appreciate their continued support and interest in the growth and development of CAI.

Secondary container prices remain stable and we are very pleased with the average price we are receiving for our holding containers. We expect that secondary prices of containers will improve back to levels last year as demand for containers and utilization rates increase over the course of 2010. During the third quarter, we sold 43% more containers on a TEU basis than we did during the third quarter of 2008. Over the past year, we have sold many older assets from our fleet which has reduced our average number of TEU owned this past quarter as compared to the third quarter of 2008. We viewed that the secondary market offered attractive sales price levels permitting redeployment of the capital into new containers.

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