Segment Information

9 Months Ended

Sep. 30, 2014

Segment Information [Abstract]

Segment Information

(12)Segment Information

The Company operates in one industry segment, equipment leasing, but has two reportable business segments: equipment leasing and equipment management. The equipment leasing segment derives its revenue primarily from the ownership and leasing of containers to container shipping lines and freight forwarders. The equipment management segment derives its revenue from management fees earned from portfolios of equipment and associated leases which are managed on behalf of third-party investors. The Company also derives revenue from the sale of equipment to third-party investors who in turn enter into management agreements with the Company. There are no inter-segment revenues.

With the exception of amortization of intangible assets and marketing, general and administrative expenses (MG&A), operating expenses are directly attributable to the equipment leasing segment. Amortization of intangible assets relating to owned and third party contracts is charged directly to the equipment leasing segment and equipment management segment, respectively. The amortization of remaining intangible assets relating to the trademark is allocated to the segments based on the average number of twenty-foot equivalent units (TEUs) of containers in each segment during the year.

MG&A expenses are allocated to each segment based on either revenue or the number of TEUs in each segment, depending on the function of the department which incurred the expense, after directly assigning MG&A expenses relating to CAI Consent Sweden AB (Consent) and CAI Rail to the equipment leasing segment and MG&A expenses relating to CAIJ and CAI Deutschland GmbH to the equipment management segment.

The Company does not allocate interest income and income tax expense to its segments.

Total assets of the equipment management segment consist of managed accounts receivable and a portion of the intangible asset relating to trademarks (determined based on the percentage of average TEUs of managed containers to total average TEUs). The remaining balance of total assets is allocated to the equipment leasing business.

CAI INTERNATIONAL, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following tables show condensed segment information for the three and nine months ended September 30, 2014 and 2013, reconciled to the Company’s net income before income taxes and non-controlling interest as shown in its consolidated statements of income (in thousands): 

	Three Months Ended September 30, 2014
	Equipment Leasing		Equipment Management		Unallocated		Total
Total revenue	$	57,642	$	1,561	$	-	$	59,203
Total operating expenses		31,350		674		-		32,024
Operating income		26,292		887		-		27,179
Net interest expense		9,265		-		(1)		9,264
Net income before income taxes and non-controlling interest	$	17,027	$	887	$	1	$	17,915
Total assets	$	1,784,305	$	8,670	$	-	$	1,792,975
	Three Months Ended September 30, 2013
	Equipment Leasing		Equipment Management		Unallocated		Total
Total revenue	$	52,395	$	1,503	$	-	$	53,898
Total operating expenses		26,345		1,350		-		27,695
Operating income		26,050		153		-		26,203
Net interest expense		9,546		-		-		9,546
Net income before income taxes and non-controlling interest	$	16,504	$	153	$	-	$	16,657
Total assets	$	1,618,009	$	10,714	$	-	$	1,628,723
	Nine Months Ended September 30, 2014
	Equipment Leasing		Equipment Management		Unallocated		Total
Total revenue	$	164,098	$	4,681	$	-	$	168,779
Total operating expenses		90,827		2,000		-		92,827
Operating income		73,271		2,681		-		75,952
Net interest expense		26,943		-		(6)		26,937
Net income before income taxes and non-controlling interest	$	46,328	$	2,681	$	6	$	49,015
	Nine Months Ended September 30, 2013
	Equipment Leasing		Equipment Management		Unallocated		Total
Total revenue	$	151,817	$	6,027	$	-	$	157,844
Total operating expenses		71,877		4,073		-		75,950
Operating income		79,940		1,954		-		81,894
Net interest expense		28,013		-		(4)		28,009
Net income before income taxes and non-controlling interest	$	51,927	$	1,954	$	4	$	53,885

CAI INTERNATIONAL, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Geographic Data

The Company’s container lessees use containers for their global trade utilizing many worldwide trade routes. The Company earns its revenue primarily from international carriers when the containers are in use and carrying cargo around the world. Most of the Company’s leasing related revenue is denominated in U.S. dollars. Since all of the Company’s containers are used internationally and typically no container is domiciled in one particular place for a prolonged period of time, all of the Company’s long-lived container assets are considered to be international with no single country of use.

The Company’s railcars, with a net book value of $78.3  million as of September 30, 2014, are used primarily to transport cargo within North America.