CAI International Inc. (NYSE: CAI), a leading container-leasing and logistics company, said it had modest year-over-year growth in revenue from continuing operations in the third quarter but that it had a net loss because of its decision to seek a buyer for its railcar fleet.
The company reported total revenue of $107.6 million in the three months ending Sept. 30, 2019, compared to $106.7 million in the same 2018 period. The company said container lease revenue accounted for the majority, $77.3 million in the third quarter of this year, compared to $75.3 million in the same 2018 period. Logistics revenue for the third quarter of 2019 was $30.3 million, down from $31.4 million in the third quarter of 2018.
CAI had a total container fleet of 1,696,050 TEUs on Sept. 30, 2019 (1,623,588 TEUs owned and 72,462 TEUs managed), up from 1,511,388 TEUs (1,435,516 owned and 75,872 managed) a year earlier.
Income from continuing operations was $15.2 million in the third quarter of 2019, compared with $22.3 million in the same 2018 quarter. Net income from continuing operations attributable to CAI common stockholders for the third quarter of 2019 was $13 million, or $0.74 per fully diluted share, compared to $20.6 million, or $1.06 per fully diluted share, in the third quarter of 2018.
CAI had a net loss of $4.7 million in the third quarter this year compared to a profit of $21.8 million in the third quarter of 2018.
Victor Garcia, president and chief executive officer of CAI, said the increased revenue came "despite weak demand conditions that have persisted as a result of the ongoing trade disputes between the United States and China. These geopolitical dynamics and softening economic conditions continue to challenge the overall market for container leasing, impacting the demand for new containers and new factory equipment."
Drewry Shipping Consultants noted earlier this month that prices for both new and secondhand shipping containers as well as lease rates have fallen in the third quarter of 2019 as stocks of containers have built up and prospects for container shipping have cooled.
Drewry said a growing number of containers — estimated at over 1 million — are stockpiled in depots around China, and that it's no surprise that the container-manufacturing and -leasing sectors are posting disappointing results.
Garcia added, "We expect this demand profile to continue into the fourth quarter, which is typically a slower time of year. We are encouraged, however, that during the quarter we maintained utilization of 98.6% in our owned fleet."
The company impaired its railcar fleet by $25.6 million, resulting in a $19.9 million loss for the quarter from discontinued operations. Overall, the company reported a loss of $7 million, or $0.40 per fully diluted share, for the third quarter of 2019. The company said it is "engaged in ongoing discussions with potential purchasers regarding the sale of its railcar fleet. As a result, the company continues to account for its railcar business as a discontinued operation." CAI owned a fleet of 5,504 rail cars at the end of September, compared with 7,489 a year earlier.
"While there can be no assurance if or when a transaction to sell all or part of the fleet can be completed, we are engaged in continued discussions with potential purchasers that have expressed interest in the portfolio," Garcia said. "In the interim, demand for our railcar fleet in the third quarter has been solid. We continue to get inquiries for many of our railcars, and overall monthly lease rates have been steady for most equipment types. For the quarter, the utilization of the railcar fleet was 85.3%."
Garcia said the company has seen improved results in its logistics business as a result of "continued restructuring efforts initiated in the second quarter. Although the challenging global trade environment and other economic factors impacted demand for transportation services this year, we have continued to add new customer accounts in each of the services we offer and we expect further improvement in the fourth quarter."
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