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CAI International Inc. (NYSE:CAP)

Q1 2013 Results Earnings Call

April 24, 2013 5:00 PM ET

Executives

Timothy Page - Chief Financial Officer

Victor Garcia - President and CEO

Analysts

Bob Napoli - William Blair

Steven Kwok - KBW

Michael Webber - Wells Fargo

Helane Becker - Cowen Securities

Daniel Furtado - Jefferies

Doug Mewhirter - SunTrust

Sal Vitale - Sterne Agee

Operator

Good day, ladies and gentlemen. And welcome to the CAI International First Quarter 2013 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. (Operator Instructions)

Today’s conference is being recorded. I would now like to turn the call over to Timothy Page. Please go ahead, sir.

Timothy Page

Good afternoon and thank you for joining us today. Certain statements made during this conference call maybe forward-looking and are made pursuant to the Safe Harbor provisions of Section 21E of the Securities Exchange Act of 1934 and involve risk 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 will now turn the call over to our President and Chief Executive Officer, Victor Garcia. Victor?

Victor Garcia

Thanks Tim. Good afternoon, everyone. Our first quarter of 2013 financial performance resulted in CAI reporting our 12th quarter in a row of record quarterly rental revenue. In the most recent quarter, we reported total revenue of $51 million and net income of $16.1 million or $0.71 per fully diluted share. During the quarter we were active in refinancing a number of debt facilities which Tim Page will discuss in detail during his remarks.

As a result of those refinancing activity, we wrote-off approximately $1.1 million of deferred financing fees during the quarter. Excluding this one-time charge, our net income for the quarter was $17 million or $0.75 per fully diluted share. This represents a 3% increase from the first quarter of 2012, a quarter that included a $1.3 million gain on sale of container portfolios.

We are pleased that we now have 57% of our outstanding debt under fixed rate financing at an average interest rate of 3.3%. We believe the fixed rate facilities in place effectively reduce as a significant amount of the interest rate risk in our business at interest rates comparable to the historically low floating interest rates that we had benefited from prior quarters.

During the quarter, we also successfully close on two managed container portfolios and a sale-leaseback transaction representing 66,000 TEUs of containers and a total investment of $82 million. These three transactions represent attractive investment that will contribute to our earnings this year and beyond.

During the first quarter our average fleet utilization remained around 92.2% and continues to be about that level today, because we are operating a larger fleet in that purchased managed container portfolios over the past 12 months that included off-hire equipment, our storage and handling costs has increased to $4.3 million, compared to $2 million during the first quarter of 2012.

The current equipment activity is fairly balanced with lease outs and turn-ins being generally matched. The March issue of Clarkson Research Services container intelligence monthly predicts world container traffic volume growth of 6.1% for 2013 as compared to only 3.4% in 2012.

As a result, we continue to believe that the overall trade growth expected in 2013 combined with relatively high utilization of lesser fleets should result in a strong market for new container demand over the remainder of this year.

Demand for new containers is typically seasonal in nature with customers beginning to make increase for new containers in March or April. However, so far this year the level of increase for new equipment has been below what we had expected.

We believe that the economic weakness in Europe is resulting in shipping company exercising caution and delaying as long as possible any new capital commitment, because of the relatively high utilization level, we believe any incremental increase in global trade will trigger a need for new containers and that the limited request for new containers are temporary in nature. We are expecting activity level will pick up over the next few weeks and months.

We are pleased that prices for disposal of older and used containers remain generally strong and we expect these prices to continue for the remainder of the year. I would like to summarize by saying that although the level of demand for new containers remains uncertain, we remain optimistic about future equipment demand and the remainder, during the remainder of this year, and we expect investment opportunities will bring revenue and profit contribution over the coming quarters.

In addition, we expect to continue to have opportunities to invest through sale-leaseback transactions with our customers, transactions which have generally yielded superior returns to new container transaction.

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

Timothy Page

Thank you, Victor. Good afternoon, everyone. Earlier today we reported our 2013 first quarter results. For the 12th quarter in a row we achieved record quarterly total revenue. Total revenue in the quarter was $51 million, 29% higher than the first quarter of 2012 and 2% higher than the fourth quarter of 2012.

Net income in the first quarter of 2013 was $16.1 million, a 12% increase over the first quarter of last year. Earnings per fully diluted share were $0.71. In the quarter, we rolled out approximately $1.1 million of deferred financing cost as a result of refinancing a number of our credit facilities during the quarter.

The aftertax impact of this write-off was approximately $1 million or $0.04 per fully diluted share. Absent this write-off, first quarter net income would have been $17 million, an 18% increase over the first quarter of 2012. Additionally, the first quarter of 2012 included a pre-tax gain of $1.3 million from the sale of container portfolio to a group of investors.

First quarter of 2013 had no such transaction. Therefore on a comparable basis Q1 of 2013 had net income of $17 million and Q1 of 2012 had $13.3 million of net income, an increase of 28%.

At the end of the first quarter of 2013, our total fleet consisted of approximately 1.1 million TEUs, 72% of which represented our own fleet as compared to the same period of last year, where we owned 51% of the fleet.

During the quarter, we completed the purchase of two portfolios from our managed container fleet, we purchased a total of 53,000 TEUs for $68 million, which equates to an average cost of $1,274 per TEU for equipment with an average age approximately seven to eight years.

As a point of reference in the first quarter of this year we received on average about $1,400 per TEU for containers we sold and those containers had an average age of almost 15 years.

In the quarter we also completed a sale-leaseback transaction with one of our customers for 13,000 TEUs at a cost of $14.5 million. In total, we acquired 66,000 TEUs from these three transactions for $82 million.

Additionally, in the first quarter of 2013, we purchased 29,000 TEUs of new containers at a cost of $72 million, bringing our total capital investment in the quarter to $154 million, about $100 million more than we invested in the first quarter of 2012.

Our average overall fleet utilization during the first quarter on a TEU basis was 92.2% as compared to 93.4% in the fourth quarter of 2012. This decrease in utilization from fourth quarter levels was as expected and reflect the normal shipping patterns -- normal seasonal shipping patterns we see in most years. Utilization has been relatively stable over the first quarter and we expected to improve over the coming months as we enter the seasonally busy time of the year for our customers.

Management fee income in the first quarter of 2013 was $2.2 million as compared to $4.2 million for the same period last year. This decline in management fee revenues was expected and is largely a result of the reduction in the size of our management fleet. As we have purchased portfolios that use to be part of our managed fleet containing more than 150,000 TEUs during the past 12 months.

Total operating expenses in the first quarter of 2013 were $23.1 million, compared to $20.3 million in the fourth quarter of 2012, an increase of $2.8 million. The increase in operating expenses was primarily reflection of three factors. First, depreciation expense increased $1.2 million as a result of an increase in the size of our own fleet as a result of the portfolio of the sale-leaseback transactions we completed during the first quarter of 2013 and the fourth quarter of last year.

Second, the gain we realized from the sale of you used containers was $1 million less this quarter as compared to last quarter, reflecting a seasonal decrease in the quantity of container sold during the Chinese New Year holiday period.

We experience an increase in the volume of container sales in March as we do in most years and would expect that trend to continue in the coming months.

Finally, the larger fleet size and slight decrease in utilization I mentioned earlier, resulted in an increase in storage and handling expense of $0.9 million. These three areas of increase costs were offset by $0.3 million currency related gain.

The first quarter was a very busy time for us in the credit markets, building on the equity offering we completed in December of 2012, our strong financial results in 2012 and a very receptive credit market we were able to enter into several bank and debt capital market transactions with very favorable terms.

In March we refinanced our primary container revolving credit facility with the syndicate of banks and extended the maturity five years to March 2018, reduce our average borrowing costs under these facility by about 75 basis points and amended a number of terms in the agreement to provide us with greater operating flexibility.

In addition, we also amended a large term loan with a different syndicate of banks but this amendment will reduce the total borrowings under this facility from approximately $250 million to $125 million, reduce the rate of quarterly amortization and also decrease the interest rate by 75 basis points.

We also entered into a new $30 million five-year term loan agreement with the Japanese bank and finally, we completed our second ADS term transaction in the past six months. This was a 10-year fixed note ADS transaction priced at a fixed rate of 3.35%. The net result all of this transaction was to significantly extend the maturity of debt and significantly reduced our average interest rate.

As of the end of March, we had approximately $1 billion in debt, with the consolidated funded debt to equity ratio of 2.9. We ended the quarter with about $680 million of committed availability under various credit facilities. Approximately, 43% of our debt at the end of the first quarter was floating-rate. The remaining 57% consisted of fixed rate debt with maturities ranging from 2 to 10 years, with an average rate on this fixed debt of approximately 3.3%.

In conclusion, our results for the first quarter of 2013 were consistent with what we expected. As Victor mentioned, current demand for new containers was somewhat softer than we would have generally expected at this time of the year. But we still believe overall macro indications of the demand for new equipment this year should be similar to last year.

We continued to believe that the maritime shipping industry and the financial markets trends we saw in 2012, which benefitted the container leasing industry, will continue in 2013. We expect the continuation of strong utilization rates, the strong resale market and a continuation of investment opportunities.

We also believe shipping companies will continue to look to the container leasing companies for a substantial portion of their new equipment needs. But the equity offering we completed last December and the credit facility restructuring I just commented on, we are well positioned to take advantage of the market and look forward to continuing revenue and net income growth in the coming quarters.

That concludes our comments. Operator, please open the call for questions?

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from Bob Napoli from William Blair.

Bob Napoli - William Blair

Thank you. Good afternoon. Maybe, if you could give some color on your thoughts around CapEx for the balance of the year given that you're seeing a slower market. I’m not sure if you are looking at additional sale leaseback or purchase of additional containers out of your managed portfolio. You did 150 in the first quarter. Do you think 400 to 500 for the year is somewhere in that range, or what are your thoughts around, how are you going to manage the CapEx budget?

Timothy Page

Because I think our CapEx budget, we have invested, as you said about $150 million, not all of which is leased out. I would think the overall level would be lower than the range that you are indicating given where we are seeing demand right now. I think something in the lower level will probably is what we would recommend.

As I said the market started up little bit slower than we thought, we are not seeing quite as much inquiry. We think that that goes to week-to-week. But when you look at the global apartment, I think we’ve had as an industry and as a company in the last couple of years, a significant amount of investment and it’s hard to predict that that -- if those investments on the slope will be guaranteed this year.

Bob Napoli - William Blair

Okay. And then just the tax -- the effective interest rate on your debt, I guess as we look at second quarter, trying to look at our interest expense numbers. The 3.3% number blended average will do, now there are fees on top of that. What should we expect this kind of a blended average interest rate -- effective interest rate?

Victor Garcia

Somewhere in that range is a right estimate because we have a number of floating-rate issuances as well as fixed rate. But when I think, when we look at the overall blend, the floating rate is still less than the fixed rate. But somewhere in that range would seem reasonable.

Bob Napoli - William Blair

Thanks. Then, last question would be on the gain on sale of used equipment. What prices are you seeing, when you were a little bit in below, what we were modeling for? Is there -- it sounded like the prices held up, so I was little bit confused as why did you just not sell as much in the first quarter? Should we see more in future quarters?

Victor Garcia

Well, I think, generally speaking, prices have held up. There are certain markets where we’ve seen some slight weakness. But as the biggest -- when we say the biggest trends in the first quarter was the fact that, particularly in Asia the markets were closed for an extended period of time in the Chinese New Year. So, I think that has probably the biggest effect. I think something in the order of $3 million of a gain on sale is kind of a reasonable estimate for what we would expect this coming quarter.

Bob Napoli - William Blair

Great. Thank you.

Victor Garcia

Yeah.

Operator

The next question comes from Steven Kwok with KBW.

Steven Kwok - KBW

Hi. Thanks for taking my questions. Great quarter. I was just wondering if there is -- what are you guys are seeing in terms of the rental rates? In terms of when we look at kind of average rates it kind of declined a bit. I was wondering would the investments kind of back-end loaded or was there something, going on with the rental rate.

Victor Garcia

Steve, I would just say that if there is an average decline then the average rental rate has more do with the additions that we’ve added on in terms of the portfolios we’ve added as well as the sale of lease back transactions, which has largely been used equipment at lower per diem rates. But effective returns were actually more attractive than the overall market.

So, I wouldn't say that ratio is a depiction of a trend. What I would say in that, as to the car market, when every time you have limited demand or inquiry and talking about smaller batches of equipment being needed, that does create a more competitive environment. And so we have seen transactions become new pretty competitive over the course of first quarter. But again the volume has been fairly late.

Steven Kwok - KBW

Got it. And then in terms of the storage freight ticking up a little bit, is that good run rate going forward or should we expect that to decline as the utilization rates picks up a bit?

Victor Garcia

We would expect that the decline has utilization increases. So it’s directly tied to utilization rate.

Timothy Page

Although, we do have a larger -- going into the second quarter, we do have a larger fleet with the purchases that we made in the two portfolios. So, I think, generally speaking, we would expect that utilization, closer to that number comes down. But we are going into second quarter with a larger archive of fleets then we started the quarter.

Steven Kwok - KBW

Okay. So is that a good run rate to use going into the second quarter?

Victor Garcia

It’s a reasonable range.

Steven Kwok - KBW

Okay. Got it. Thanks for taking my questions.

Victor Garcia

Sure.

Operator

The next question comes from Michael Webber from Wells Fargo.

Michael Webber - Wells Fargo

Hi. Good afternoon, guys. How are you?

Victor Garcia

Good.

Timothy Page

Good.

Michael Webber - Wells Fargo

Victor, I wanted to jump back to your commentary around, I guess potentially I guess sluggish demand to start the year. And I’m just curious as to what, you are hearing from your clients around that kind of sluggishness. It seems like -- I guess the initial question was whether there was more wait-and-see approach or whether you thought that it was going to be little bit softer just year-over-year from a kind of peak perspective.

And I guess and the answer to your first question kind of talking into the bottom end of that CapEx range. It seems like this is just a bit. It is going to be just a bit softer year-over-year from a peak perspective. Is that purely topline demand driven or are you seeing any kind of market share givebacks? You see people coming and buying containers, creating less of an opportunity for you guys. Just kind of little bit of color around what you guys are seeing for the next quarter or two?

Victor Garcia

We do think that the peak season will come. Our customers tell us that they are partially optimistic about the year. At this point, probably maybe softer than what they would have otherwise expected, but that view I will take as a firmly held view with more kind of ongoing adjusted view.

I think with what you are seeing in developed countries or developed regions, particularly in Europe. Certainly around that a lot of sluggishness, that clearly has had an impact on how people look at situations. As far as -- I’m trying to think of the second part to your question.

Michael Webber - Wells Fargo

Just whether now if we’ve seen any lines kind of restart their own purchasing programs, and whether that might be getting in the way of some growth opportunities?

Victor Garcia

We have seen some shipping lines going into the market and so that’s been a factor. But I would say there is probably a base level of investment that shipping lines are going to make and probably the shipping lines have made those investments. It was also of view in the first quarter, particularly prior to February that container prices were likely to escalate through the year. And so, I think some of those purchases by shipping lines, if they were going to make some, were pushed forward before prices had risen. I still think that as demand rises overall, the leasing share of it should be fairly stronger.

Michael Webber - Wells Fargo

Got you. I mean, if you had a number on that, say in terms of the incremental blocks, CAI and the rest of the group kind of cashiering, call it 60%, 65% of the incremental box was produced. Are we still at that level or it just flipped off a bit?

Victor Garcia

It’s really -- I mean, this becomes more of a speculative game. I would say we probably would be surprised, if at least 50% of the boxes weren’t coming from the leasing community. And probably more likely, they are not going to be a percentage higher than that, whether it close to be 60% or not, I can’t tell at this point of time.

Michael Webber - Wells Fargo

That’s fair. You mentioned the $72 million acquired, I think you mentioned that they were not all leased. Can you give a breakdown in terms of what is and what is not leased to that $72 million?

Victor Garcia

Of the $72 million, a significant portion is not all leased. We just have started to get the units delivered.

Michael Webber - Wells Fargo

Got it.

Timothy Page

Just the point of clarification. Last year, out total capital investment was $525 million last year versus this year. About half of what we invested last year came through sale lease backs in portfolio acquisitions. So only about $225 million, $230 million was actually new containers.

Michael Webber - Wells Fargo

Yeah.

Timothy Page

We don’t expect quite the level of portfolio acquisition. So only about $225 million to $230 million was actually new containers.

Michael Webber - Wells Fargo

Yeah.

Victor Garcia

I want to extract quite a level of portfolio in sale-leaseback transactions this year that we have last year. New containers might be around the same level. So our total CapEx would be less. But it’s not a reflection on the new container market as we purchased up most of the container portfolios that we could.

Michael Webber - Wells Fargo

Got you. No, no, that makes sense. Just one more from me and I’ll turn it over, around utilization, you had mentioned it had started to firm, I guess, so far this quarter. Can you maybe give a little bit of week-over-week, a little bit of more color in terms of where utilization stands today versus with another quarter?

Victor Garcia

Well, I would say, generally it’s been, throughout the whole quarter, it’s been fairly flat around that low 92%. But we’ve had some lease outs and churnings but it’s been fairly consistent around the low 92% range.

Michael Webber - Wells Fargo

Okay. Great. That’s all I have guys. Thanks for the time.

Victor Garcia

Thank you.

Operator

The next question comes from Helane Becker from Cowen Securities.

Helane Becker - Cowen Securities

Thanks very much operator. Hi guys. Thanks for the time. Just one question, do you have any or have your clients seen any impact on -- from the strike at Port of Hong Kong. And does that help your pickups at all?

Timothy Page

From the acreage we’ve made, we haven’t seen any kind of significant effect. Most of our customers have planned around it and have alternatives locally to be able to move the cargo when announced. So it really hasn’t been too much of a factor at all.

Helane Becker - Cowen Securities

Okay. All right. That’s all I had. Everything else is kind of asked and answered. So I’m okay.

Timothy Page

Great. Thank you.

Operator

The next question comes from Daniel Furtado from Jefferies.

Daniel Furtado - Jefferies

Good afternoon. Thank you for the time. I may have misunderstood you but I just wanted to reconcile commentary between expected strength and user container prices versus moderating new higher rates. Or did I not hear you correctly?

Victor Garcia

I think we have two different concepts. We’re saying that as we looking at the sale of equipment containers, that’s held up fairly well. And we continue to see some good demand around the globe on that. And as far as, new equipment demand that in terms of getting that lease, that’s been softer than what we had initially planned.

Daniel Furtado - Jefferies

Okay. Great. And so, does this mean that you would look to, I guess, to use that come offlease during the course of the year. And I know it’s back but I mean, you do have the option to sell it in the used market which sounds like that still pretty strong. Is that something you would entertain or would you rather just kind of sit on that inventory until the seasonality comes back to business?

Victor Garcia

Well, we are getting into the seasonality part of the year. So I would say what we see in general is that most of the equipment that we’re getting returns is older equipment. So we would expect a lot of that equipment that we likely will sell it to the market overtime. So if demand got very strong, we would consider making some repairs to the units and putting back on lease. But the normal course would be as units 10 years and older start coming back and we look to start disposing some of those units depending on location, depending on the damage, that kind of thing.

Daniel Furtado - Jefferies

Excellent. All right. Thank you for the time.

Victor Garcia

Thank you.

Operator

Your next question comes from Doug Mewhirter from SunTrust.

Doug Mewhirter - SunTrust

Hi. Good evening. Just on the maths on your acquisitions, your new box acquisitions, it looks like it works out to be a little less than $2500 per TEU. Is that sort of a general market rate now, about $2400, $2500 for TEU for new box?

Timothy Page

That’s little high.

Doug Mewhirter - SunTrust

Okay.

Timothy Page

We have some refrigerator containers in there. I would say on the new (inaudible), 2250-ish is approximately where we would expect new waters to be. And there has been from what we can gather significant new order. So if somebody wanted significant order, it might be cheap in that.

Doug Mewhirter - SunTrust

Okay. It’s a very helpful answer. Thank you. And my second and final question is Tim, I don’t know if you have the number handy. I know when you say you committed to buy but there is some accounting about, if they are not unleased and they are considered official CapEx yet. Do you know -- do you have a number for your actual growth and/or net CapEx for this quarter?

Timothy Page

The number I quoted was the gross CapEx.

Doug Mewhirter - SunTrust

Okay. Thank you That’s helpful. And that’s all my question and thanks.

Operator

The next question comes from Sal Vitale from Sterne Agee.

Sal Vitale - Sterne Agee

Good afternoon, gentlemen. First question is on the tax rate. How do we think about that going forward? Do we think about that continuing to decline over the next few quarters?

Victor Garcia

I think every quarter we estimate what we think that the full tax rate will be for the year. And so the number that we report in the first quarter is approximately what you will expect. So expectation is somewhere around plus or minus 12%?

Sal Vitale - Sterne Agee

Okay. And then just if I could just peel the onion a little bit on the -- what you said about the CapEx range. When you mentioned somewhere towards the lower end of the $400 million to $500 million is a good expectation at this point. Given what you’re seeing in the market place. Just to be clear, are you baked into that as there is some expectation for railcar CapEx?

Timothy Page

When we’re looking at the CapEx budget, we talk about total which would include rail. So it’s all in my total investment. But just to clarify what they said in response to that question was that, I thought that range was high, higher than what we would probably expect. So that time, we would be on the low end of that range but that we’ll probably be below that range?

Sal Vitale - Sterne Agee

Okay. And in terms of railcar CapEx, I think last year, it was about $50 million. Would you expect to share to be about the same?

Timothy Page

I’ll probably expect it to be somewhere around that range.

Sal Vitale - Sterne Agee

Okay. Just moving on the utilization, last, I think, last couple of quarters, you provided a utilization rate for your own fleet. Can you just provide that for 1Q if you have that and maybe just refresh my memory on what it was in 4Q as well?

Timothy Page

It’s around -- I think it was like 4.3 but it was round that 94%. And we’re had about 93.5% on the own fleet.

Sal Vitale - Sterne Agee

Okay. So I’m sorry. 93.5% is the 1Q number, 94.3% was the 4Q number?

Timothy Page

Right.

Sal Vitale - Sterne Agee

Okay. Thank you. So that slipped. I guess, by about the same order of magnitude as the overall rate, right?

Timothy Page

Yeah. And right now, we owned approximately three quarters of our fleet. So those -- the gap between the total fleet and the on fleet is going to continue to narrow because of the percentage ownership we have.

Sal Vitale - Sterne Agee

Right. And then just on other question on the new container prices, you mentioned about $22.50. Do you think that’s being impacted at all by the roughly 10% reduction decline in weather and steel prices? If you look at hot rolled steel prices in China, they are down about 10% over the last month and half or so?

Timothy Page

It’s moved a little up and down. But obviously, field prices are big factor. The main factories tells us that it’s not a direct correlation but certainly something that we look at. We think that’s a factor I think. Also just a overall level of increase is a factory. So I think from what we gather investment or new investment over the last few weeks in containers has been dialed back a bit. So I think that’s probably having an impact.

Sal Vitale - Sterne Agee

I see dichotomy when I look at what you’re -- when I hear what you’re saying about new container investment. And I compare that to say, if I look at the container throughput volumes in the top 10 ports in China or even some of the other ports, if I look at the west coast, U.S. ports, regarding the statistics for the Chinese ports, I think 1Q is roughly 6% or 7% growth.

The growth seems to be there. And Clarkson is maintaining it’s roughly 6% growth forecast but yet you’re not seeing that materialize in terms of orders. Do you just attribute that to general caution on the part of your customers?

Timothy Page

I would say so, I mean, this time of the year in particular is a difficult time of year because we know that around the end of the first quarter, first half of the second quarter I is win, a lot of increase starts coming in. And it moves from week-to-week. So when we look at over the coming months, we would be equally -- we would not expect that investment in Florida, increase would increase.

So it could be just a slightly delay because of cautions and slower trade growth or could be a more moderate year. But I think at this point, we continue to think that when we look at the factories that you noted. And the level of all of overall production and the level of investment that chipping lines have made even with the production that they’ve had this year.

We should see some good increase over the course of the coming weeks and months. It slips from week-to-week but we continue to be fairly optimistic about the year.

Sal Vitale - Sterne Agee

Okay. And then just the last question, really, just a clarification. Earlier when you said, you would be surprised if the lesser share of new container purchases this year is less than -- did you say 50% or 60%?

Timothy Page

Sal, just, I was asked about what we think the percentage would be. It’s a guesstimate. It changes. I was surprised if I was expecting leasing community will represent at least 50%, represent, whether it represent 60%, let see on the strength of the market.

Sal Vitale - Sterne Agee

That would be a step down from last year where it was about two thirds?

Timothy Page

Correct.

Sal Vitale - Sterne Agee

Okay. Thank you very much. I appreciate it.

Operator

(Operator Instructions) The next question comes from Bob Napoli, William Blair.

Bob Napoli - William Blair

Just the acquisitions of sales lease back and what was the timing. I’m sorry if I missed it if you said that -- when during the quarter did you -- did the sales leaseback and acquire the managed portfolios?

Victor Garcia

Largely speaking the effect on the quarter was middle of the quarter?

Bob Napoli - William Blair

Okay. I think that’s all I had. Thank you.

Victor Garcia

Sure.

Operator

And I’m showing no further questions, I would now like to turn the call back over to Timothy Page.

Timothy Page

Thank you everyone for your support. And we look forward to speaking with you again soon.

Operator

Ladies and gentlemen, that does conclude the conference for today. Again, thank you for your participation. You may all disconnect. Have a good day.

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