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by loaded 1956. until stevedores—dominated and shipping—goods transportation longshoremen freight Low-tech 1950 T R Inc. O P E R
L A 2013 U N International, N A CAI
and progress: of back forward years moving Looking 25
CAI International, Inc. 2013 ANNUAL REPORT Inc. 1 International, CAI 1 Market Plaza Steuart Tower, Suite 900 San Francisco, CA 94105 415.788.0100 www.capps.com 14336_CAI Cvr_CS6.r2.indd 4:24 PM 4/1/14
by loaded 1956. until stevedores—dominated and shipping—goods transportation longshoremen freight Low-tech 1950 T R Inc. O P E R
L A 2013 U N International, N A CAI
and progress: of back forward years moving Looking 25
CAI International, Inc. 2013 ANNUAL REPORT Inc. 1 International, CAI 1 Market Plaza Steuart Tower, Suite 900 San Francisco, CA 94105 415.788.0100 www.capps.com 14336_CAI Cvr_CS6.r2.indd E CAI OF HISTORY A BRIEF Corporate information 2014 A brief history of CAI Today’s sophisticated container ships are loaded
and unloaded by highly automated and highly CAI develops presence in European after market efficient cranes, and they have grown dramatically business segment 588,000 TEU in capacity. The biggest—“Ultra Large Container CAI enters CAI completes first container IPO of common Ships”— can hold 18,000+ TEUs (“twenty-foot management stock (listed on agreement the New York Stock equivalent units”). Exchange under the Interpool, Inc., 37,000 TEU symbol CAP). Sold replaces Mitsui 5.8 million shares & Co. as a 50% of common stock investor in CAI 754,000 TEU 285,000 TEU CAI is founded by Hiromitsu Ogawa Directors (pictured left to right) Stockholder Inquiries Annual Meeting Gary M. Sawka Investor Relations The 2014 annual meeting of stock- Director Steuart Tower, 1 Market Plaza holders will be held on Friday, June 6, ‘89 ‘92 ‘93 ‘96 ‘98 ‘01 ‘04 ‘06 ‘07 Suite 900 ‘13 Hiromitsu Ogawa 2014 at 10:00 a.m. (PDT) at the offices San Francisco, CA 94105 of Perkins Coie located at 3150 Porter Chairman of the Board of Directors Tel: 415-788-0100 Drive, Palo Alto, CA 94304. William W. Liebeck Stock Listing Web Site Chairman of the Compensation Our common shares are listed on The company’s Web site provides Committee, and Director the NYSE under the symbol CAP. access to a wide range of information 430,000 TEU 1.1 million TEU Mitsui & Co., Masaaki (John) Nishibori about the company and our products. one of Japan’s CAI begins developing Director Please visit us at www.capps.com. its after market network, largest trading David G. Remington Investor Relations on the Web leasing containers to companies, Chairman of the Nominating and For more information related to the domestic storage Legal Counsel invests in CAI 669,000 TEU Corporate Governance Committee, investing in the company, please see industry and selling used Perkins Coie LLP and Director the Investors tab on our Web site at containers on a wholesale On October 1st, CAI 3150 Porter Drive www.capps.com. and retail basis repurchases the 50% Victor Garcia Palo Alto, CA 94304 President, Chief Executive Officer, common equity interest Stock Transfer Agent in CAI formerly held by and Director Design by: Michael Patrick Partners Computershare Investor Services www.michaelpatrickpartners.com Interpool. On November Marvin Dennis 250 Royall Street Inside front cover photo: 1st, Hiromitsu assumes Chairman of the Audit Committee, Canton, MA 02021 Courtesy of the Port of Oakland Archives 100% ownership and takes 181,000 TEU and Director Tel: 781-575-2879 on role as Chairman of CAI worldwide Investor Center: the Board Corporate Headquarters marketing office Steuart Tower, 1 Market Plaza www.computershare.com/investor and agency Suite 900 Annual Report (Form 10-K) network in place San Francisco, CA 94105 A copy of the company’s 2013 Annual Tel: 415-788-0100 Report on Form 10-K filed with the Independent Accountants Securities and Exchange Commission KPMG LLP is available to stockholders, without charge, by accessing the company’s Web site at www.capps.com or upon written request to the company’s This document is printed on paper certified to the environmental and social standards of the headquarters. Forest Stewardship CouncilTM (FSC®).
14336_CAI Cvr_CS6.r2.indd 2 4/1/14 4:23 PM E CAI OF HISTORY A BRIEF Corporate information 2014 A brief history of CAI Today’s sophisticated container ships are loaded
and unloaded by highly automated and highly CAI develops presence in European after market efficient cranes, and they have grown dramatically business segment 588,000 TEU in capacity. The biggest—“Ultra Large Container CAI enters CAI completes first container IPO of common Ships”— can hold 18,000+ TEUs (“twenty-foot management stock (listed on agreement the New York Stock equivalent units”). Exchange under the Interpool, Inc., 37,000 TEU symbol CAP). Sold replaces Mitsui 5.8 million shares & Co. as a 50% of common stock investor in CAI 754,000 TEU 285,000 TEU CAI is founded by Hiromitsu Ogawa Directors (pictured left to right) Stockholder Inquiries Annual Meeting Gary M. Sawka Investor Relations The 2014 annual meeting of stock- Director Steuart Tower, 1 Market Plaza holders will be held on Friday, June 6, ‘89 ‘92 ‘93 ‘96 ‘98 ‘01 ‘04 ‘06 ‘07 Suite 900 ‘13 Hiromitsu Ogawa 2014 at 10:00 a.m. (PDT) at the offices San Francisco, CA 94105 of Perkins Coie located at 3150 Porter Chairman of the Board of Directors Tel: 415-788-0100 Drive, Palo Alto, CA 94304. William W. Liebeck Stock Listing Web Site Chairman of the Compensation Our common shares are listed on The company’s Web site provides Committee, and Director the NYSE under the symbol CAP. access to a wide range of information 430,000 TEU 1.1 million TEU Mitsui & Co., Masaaki (John) Nishibori about the company and our products. one of Japan’s CAI begins developing Director Please visit us at www.capps.com. its after market network, largest trading David G. Remington Investor Relations on the Web leasing containers to companies, Chairman of the Nominating and For more information related to the domestic storage Legal Counsel invests in CAI 669,000 TEU Corporate Governance Committee, investing in the company, please see industry and selling used Perkins Coie LLP and Director the Investors tab on our Web site at containers on a wholesale On October 1st, CAI 3150 Porter Drive www.capps.com. and retail basis repurchases the 50% Victor Garcia Palo Alto, CA 94304 President, Chief Executive Officer, common equity interest Stock Transfer Agent in CAI formerly held by and Director Design by: Michael Patrick Partners Computershare Investor Services www.michaelpatrickpartners.com Interpool. On November Marvin Dennis 250 Royall Street Inside front cover photo: 1st, Hiromitsu assumes Chairman of the Audit Committee, Canton, MA 02021 Courtesy of the Port of Oakland Archives 100% ownership and takes 181,000 TEU and Director Tel: 781-575-2879 on role as Chairman of CAI worldwide Investor Center: the Board Corporate Headquarters marketing office Steuart Tower, 1 Market Plaza www.computershare.com/investor and agency Suite 900 Annual Report (Form 10-K) network in place San Francisco, CA 94105 A copy of the company’s 2013 Annual Tel: 415-788-0100 Report on Form 10-K filed with the Independent Accountants Securities and Exchange Commission KPMG LLP is available to stockholders, without charge, by accessing the company’s Web site at www.capps.com or upon written request to the company’s This document is printed on paper certified to the environmental and social standards of the headquarters. Forest Stewardship CouncilTM (FSC®).
14336_CAI Cvr_CS6.r2.indd 2 4/1/14 4:23 PM 1989 The modern intermodal container industry was born in Newark, New Jersey, in 1956, and “containerization” ignited a boom in global shipping and global trade. In 1989, CAI was founded to provide container leasing services to this growing market. In 2014, we celebrate our 25th anniversary: a quarter century of evolution and progress that has made CAI one of the largest container leasing companies in the world.
New York Stock Exchange under symbol: CAP
CAI INTERNATIONAL 2013 ANNUAL REPORT | 01
14336_CAI Editorials_CS6.r2.indd 1 4/1/14 5:24 PM CAI today: 1.1 million TEUs around the world
CAI was founded 25 years ago. Our initial strategy focused on establishing strong, long-term relationships with the world’s shipping lines and building our fleet of containers around the world. As of December 31, 2013, CAI’s fleet included approximately 1.1 million TEUs— roughly 1.5 billion cubic feet of container space.
We put that fleet, along with our logistical expertise, to work on behalf of our global customer base, which includes more than 300 of the world’s largest container shipping companies, by leveraging our network of representatives and agents in 21 countries. Last year, our fleet utilization rate (in terms of TEUs) was 91.8 percent.
CONTAINER SHIP CAPACITY (TEUs) PERCENTAGE INCREASE
1988 2013 4,540 1 18,270 400%
1 Source: Harrison Consulting
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14336_CAI Editorials_CS6.r2.indd 2 4/1/14 5:24 PM THE PORT OF LOS ANGELES
Occupying 7,500 acres of land and water in San Pedro Bay, the Port of Los Angeles uses multiple high-speed cranes to unload approximately eight million TEUs each year. This makes Los Angeles the busiest container port in the United States. Its five largest trading partners are all in Asia: China, Japan, Taiwan, South Korea, and Thailand.2 2 Source: Wikipedia “Port of Los Angeles”
14336_CAI Editorials_CS6.r2.indd 3 4/1/14 5:24 PM Moving forward: The future of global trade
The high cost of global shipping had been one of the chief obstacles for global trade, but containerization made the shipping of goods around the world dramatically less expensive. The result has been a decades-long explosion in global trade.
Today, it has become absolutely routine for manufacturers to produce goods for export. From automotive parts to appliances, from consumer electronics to clothing, more and more of the world’s tangible goods are loaded into containers, which are then loaded onto container ships, criss-crossing the globe to connect markets in the Americas, Europe, and Asia. Global trade continues to increase, but that growth is most dramatic in the Asia-Pacific countries— especially China. The Port of Shanghai alone handles 32 million TEUs every year (four times the volume of the Port of Los Angeles). If the global economy continues to rebound, demand for containers should remain strong. CAI is well-prepared, and well-positioned, to take advantage of that opportunity.
GROWTH IN WORLD TRADE PERCENTAGE INCREASE
1989 2012 $3.1T 3 $18.4T 595% 3 Source: WTO Statistical Database, January 2013
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14336_CAI Editorials_CS6.r2.indd 4 4/1/14 5:24 PM THE PORT OF SHANGHAI
Shanghai has long been an important shipping and transportation hub, but during China’s recent economic boom, the Port of Shanghai has become the world’s busiest container port, handling more than 32 million TEUs and 736 million tons of goods in 2012.4 4 Source: Wikipedia “Shanghai Port”
14336_CAI Editorials_CS6.r2.indd 5 4/1/14 5:24 PM Fellow stockholders,
The Year In Review: In 2013, CAI performed well in what proved to be a challenging environment. Revenues for the year totaled $212.4 million, an increase of 22 percent over the $173.9 million we reported for 2012.
Significantly, in each of the past 15 consecutive quarters, CAI has posted record total revenue and lease-related revenue. We are proud of this accomplishment, particularly in light of a soft environment for container demand during 2013. According to Clarkson Research, containerized trade grew approximately five percent in 2013. This was somewhat lower than Clarkson had predicted for 2013 and is believed to be largely attributable to continued economic weakness and uncertainties in the European and American economies. Demand was strong in the first two quarters of 2013, but fell off somewhat in the third quarter, which is typically the best quarter of the year. The result was excess inventory and a very competitive pricing environment resulting in reduced per diem rates. Net income attributable to CAI common stockholders for 2013 of $63.9 million increased by one percent over the $63.5 million reported in 2012. CAI’s average number of fully diluted shares outstanding increased by 14 percent in 2013, resulting in lower net income per share. Despite this 14 percent increase, fully diluted net income per share of $2.82 declined 11 percent from the $3.18 reported in 2012. CAI’s 2013 operating metrics were solid. Our average overall container fleet utilization for 2013 was 92.7 percent (in CEU terms), a slight reduction from an average of 94.7 percent in 2012. Our total container fleet at year-end consisted of 1.2 million CEUs, an increase of eight percent over 2012. CAI’s owned fleet represented 78 percent of the total, up 21 percent. At year-end, we owned approximately $1.5 billion of container assets and approximately $70 million of railcar assets. CAI’s average return on shareholders’ equity for 2013 was approximately 17 percent, which we believe is a good indication of the strength of our lease portfolio and asset management. Tactical & Strategic Changes: Our investment activity, particularly investment in new containers, declined in 2013. During the year, we invested $312 million. Most of our investment occurred in the first half of 2013; however, as we moved through the year it became clear that the market was soft and, consequently, we scaled back our investment in the second half of the year. Reducing our investment activity was a business response to a changed and more competitive environment. In the face of this new environment, we have taken a number of other steps to improve our results and increase returns to our shareholders. We believe these steps will strengthen our competitive position going forward. One of our primary focuses is to optimize the performance of our existing fleet. We are striving to improve utilization by moving containers into locations that are experiencing higher demand and where the market for container purchases is stronger. We are continuing to invest in our business to be as prepared as possible in the near-term for an improvement in market conditions. And finally, we are actively looking at opportunities to further expand and diversify our business. For example, we continue to invest in the railcar sector as a way to diversify our revenue stream. During 2013 we added 10 new customers to our business, and we now serve 23 customers with our railcar fleet. We expect to find additional investments in 2014 while maintaining our disciplined approach to equipment purchases and financial returns for the business.
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14336_CAI Editorials_CS6.r2.indd 6 4/1/14 5:24 PM We believe we have significant growth opportunities in container leasing for several years to come. At the same time, we believe we can strengthen our business by expanding our focus into new, related leasing investments. The strength of CAI is the longstanding relationships it has with its customers and the contracts that are associated with them. We believe an expanded customer base broadens our business, providing new investment opportunities and mitigating some customer and industry risks. With 2014 underway, we are optimistic for improved demand this coming year. We were off to a strong start in January, for example, when we experienced an increase in demand for new containers from the factories in China, and we leased out four times as many containers during the month as we did in January 2013. In addition, container inventories at factories at the beginning of 2014 were below the levels seen during the middle of last year. We believe the market could be favorable for CAI, and we are confident that we have the platform to take advantage of an improved environment. In addition, in February 2014, we announced a plan to repurchase up to 1.5 million shares of CAI common stock. We intend to be more active in purchasing our shares with this buyback program and acquiring shares when we believe our shares are undervalued, while still investing in equipment for future growth. Our Platform For Growth: The CAI platform has many elements. We have a large and growing fleet. Our workforce around the world is capable and professional. Our company has built strong, enduring relationships with the world’s leading shipping firms. And we operate in a market that continues to grow, particularly in Asia. All of these factors give us confidence about our future opportunities and our ability to take advantage of them. The roots of the CAI platform date back to 1989 and the founding of our company; we are pleased to note that we are celebrating our 25th anniversary in 2014. This year’s annual report highlights some of our own milestones over the past quarter century, but even as we pause to take a look back, our focus is on moving forward. We believe global shipping represents an important growth opportunity, and we are well prepared, and eager, to transform that opportunity into enhanced shareholder value. We thank our shareholders for your continued confidence, and look forward to reporting on our progress in 2014 and beyond.
Hiromitsu Ogawa Victor Garcia Chairman of the Board President and Chief Executive Officer
CAI INTERNATIONAL 2013 ANNUAL REPORT | 07
14336_CAI Editorials_CS6.r3.indd 7 4/3/14 2:07 PM Financial highlights
YEAR 2010 2011 2012 2013 (dollars in millions)
Total Revenue $77.9 $125.7 $173.9 $212.4 Operating Income 36.9 78.0 102.9 108.7 Net Income 28.4 50.2 63.5 63.9 Adjusted EBITDA 64.9 118.8 160.6 188.8 Net Income Margin 36.4% 39.9% 36.5% 30.1%
TOTAL REVENUE NET INCOME ADJUSTED EBITDA dollars in million dollars in million dollars in million 188.8 212.4 160.6 63.5 63.9 173.9 50.2 118.8
125.7
28.4 64.9 77.9
10 11 12 13 10 11 12 13 10 11 12 13
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14336_CAI Editorials_CS6.r2.indd 8 4/1/14 5:24 PM Form 10-K CAI International, Inc.
2013 ANNUAL REPORT
14336_CAI 10K TitlePG_CS6.r1.indd 1 4/1/14 5:42 PM 14336_CAI 10K TitlePG_CS6.r1.indd 2 4/1/14 5:42 PM UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
FORM 10-K