CAI International's (CAI) CEO Victor Garcia on Q2 2016 Results - Earnings Call Transcript

| About: CAI International, (CAI)

CAI International Inc (NYSE:CAI)

Q2 2016 Results Earnings Conference Call

August 08, 2016, 5:00 pm ET

Executives

Timothy Page - Chief Financial Officer

Victor Garcia - President, Chief Executive Officer, Director

Analysts

Michael Webber - Wells Fargo

Brian Hogan - William Blair

Doug Mewhirter - SunTrust

Helane Becker - Cowen and Company

Operator

Good day, ladies and gentlemen and welcome to the CAI International second quarter 2016 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 follow at that time. [Operator Instructions]. As a reminder, this conference call is being recorded.

I would now like to turn the conference call over to Timothy Page, Chief Financial Officer. 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 and Exchange Act of 1934 and involve risks and uncertainties that could cause actual results to differ materially from our 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.

Finally, we remind you that the company's views, expected results, plans, outlook and strategies as detailed in this call might change subsequent to this discussion. If this happens, the company is under no obligation to modify or update any of the statements the company made during this discussion regarding its views, estimates, plans, outlook, or strategies for the future.

I will now turn the call over to our President and Chief Executive Officer, Victor Garcia.

Victor Garcia

Thank you Tim. Good afternoon and welcome to CAI's second quarter 2016 conference call. For the quarter, we reported a revenue increase of 21% from the second quarter of 2015 and lease related revenue was flat. During the quarter, we reported net income of $3.8 million or $0.19 per fully diluted share. Our financial results reflect the challenging environment we faced during the quarter, including weak economic growth and low container sale prices.

Leasing demand for containers has increased over the course of the year, resulting in our average container utilization increasing from 91.2% in the first quarter to 92.8% in the second quarter. Total fleet utilization at the end of July was 93.3% and 94% in our own fleet. The improvement in utilization reflects some moderate seasonal improvement in container demand and the ongoing effort we are making to sell older units from the fleet. Our focus will be to continue to increase utilization by positioning assets for lease and selling older units out of the fleet.

Our results during the quarter reflect a $5.1 million charge for impairment and loss on sale of containers during the quarter. We have continued to focus on selling the oldest and most damaged units in our fleet as we do not expect those units to be placed on lease. We continue to position assets into markets where we can achieve a better sales price and we have been effective at improving the average realization on our sale containers as a result of those efforts. We expect container sale prices in the third quarter to remain low by historical standards considering the level of equipment available for sale and the current low price of new equipment.

Equipment that is turned in during the quarter will likely need to be impaired or a loss incurred on the sale of the units. Despite the weak sales price for used containers, we believe that overall supply and demand for leasing containers is relatively in balance with inventory levels for new factory equipment estimated by us at approximately 700,000 TEUs and utilization of lessors remaining relatively high. There are aggressive volumes of equipment being sold in the industry which, with limited new building, we believe will keep the market tight for equipment in the future quarters.

For instance, we have had a material decline in available equipment for lease in China. And in some locations, we have almost no leasable equipments for certain equipment types. That is the good news. The per diem rates have not materially increased although we would expect them to improve as the availability of equipment continues to be constrained. We expect the low per diem rate to limit new investment by leasing companies in new equipment assuming that they act rationally. Moreover, shipping lines have been operating during the quarter with weak freight rates due to moderate demand globally and an ongoing excess supply of ships. As a result, we believe that shipping lines will also limit their investment in new containers.

The U.S. rail market has also been challenged this quarter due to the continued high rail velocity that resulted in part from lower shipments of coal and reduced domestic fracing activity that affects crude tank and tank car shipment. Most of our railcar fleet is under long-term contracts and so we expect the current environment to have limited impact on our financial results. However, rental rates on new railcars are aggressive as deliveries of new equipment from prior backlogs put pressure on those rates.

We have seen some change in the market over the last couple of weeks. The warm summer has resulted in more coal cars being brought out of storage to move to coal utilities. Agricultural instruments are also strong, which is adding equipment to the network. Both of these will increase traffic, which may slow velocity in the near term.

During the quarter, we enhanced our logistics capabilities with the addition of Hybrid. With their in-house truck brokerage capabilities, we are able to leverage all of those relationships and services within our logistics business to increase revenue as well as find opportunities to improve the efficiencies of our container assets. The overall demand across our logistics services has also been weak due to the moderate growth in freight movements.

As the GDP figures for the first and second quarters have shown, the U.S. is in a very slow growth environment and the effects have been shown in the results of many transportation companies in the United States. However, because of the potential in our business and our relative size, we expect to continue to grow this segment with our existing infrastructure, despite the overall weak market.

In summary, the markets we operate in remain challenged due to the weak overall economic environment. Lower container prices have resulted in us reporting impairment charges and loss on sale of equipment that has reduced our profitability compared to prior periods. We are working through these challenges. Despite the difficult environment, we have made significant progress in enhancing our logistics capabilities and diversifying our business.

We are continuing to improve utilization each quarter and our enhanced capabilities allow us to optimize our financial results during this weak economic period. Our growing logistics capabilities create several opportunities to add shareholder value and increase returns as the economic environment improves and we believe it differentiates our company from our competitors.

Our priority during this weak economic period is to maximize the return on capital we already have committed through the higher utilization sale of low returning equipment. We have continued our share repurchase program and have repurchased 900,000 shares in the year-to-date period. We do not currently believe that returns, in general, for new investments are attractive and we will continue to focus on reducing debt and additional opportunities to repurchase our shares.

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

Timothy Page

Thank you Victor. Good afternoon everyone. Lease related revenue in the quarter was $59.3 million, 1% greater than the first quarter of 2016 and basically flat with Q2 of last year. Rail lease revenue was $7.6 million, up 5% as compared to Q1 and 100% greater than Q2 of last year. Container related revenue was $0.1 million higher than Q2 versus Q1 at 7% lower than last year, primarily as a result of a 70 basis point lower utilization and the lower average per diem rates.

Our rail business continued to show quarter-over-quarter growth in rental income, accounting for 13% of our total rental revenue in Q2 as compared to 12% in Q1 and only 6% in Q2 of last year. We continue to focus on diversification and expect rail to continue to increase its share of our overall rental investment and revenue in the coming quarters.

During the second quarter, operating margins in our rail business were 45% as compared to 37% in Q2 of last year. Pretax rail margins in the quarter were 25% as compared to 21% a year ago. Rail accounted for 46% of our pretax income in Q2 of this year versus 6% in Q2 of last year.

Total revenue in the quarter was $72 million, 7% higher than the first quarter and 21% higher than Q2 of last year. Besides the growth in rail revenue I just mentioned, topline growth was driven by our June 1 acquisition of Hybrid Logistics, an asset-light truck brokerage business, the mid-February acquisition of Challenger Overseas, an asset-light NVOCC freight forwarding business and our July 2015 acquisition of ClearPointt logistics, an asset-light intermodal rail provider. Altogether, these businesses have an annualized revenue run rate of around $90 million and we expect them to be accretive to earnings.

Net income in the quarter was $3.8 million or $0.19 per fully diluted share, as compared to $7.2 million in Q1. The $3.4 million reduction in net income in Q2 versus Q1 is primarily result of $3.2 million of incremental losses on the disposition of container rental equipment during the quarter and a $1.2 million impairment charge related to the write-down of damaged older equipments, of which $0.6 million was higher than what occurred in the first quarter. These increased costs were offset to some extent by a lower tax rate which is based on our estimate of the mix of international versus U.S. sourced income in 2016.

At quarter and our total container fleet consisted of 1.2 million CEU, 1.4% lower than the end of the first quarter. Our own container fleet was one million CEUs, 0.6% lower than at the end of Q1. Average total container fleet CEU utilization was 92.8% in the quarter as compared to 91.2% for the first quarter and 93.3% in Q2 of 2015. Our average owned fleet CEU utilization for the quarter was 93.6% as compared to 92% in Q1 of 2016 and 94.3% in Q2 of last year. Our own fleet utilization at the end of June was 94% and has remained at that level since then. We have ended the second quarter with approximately 1.6 billion of container revenue assets, 1% less than the end of Q1 and 5% less than at the end of Q2 of last year.

During the quarter, we invested $32 million in container assets, none of which were standard dry containers. As of the end of Q2, we had only $15 million of commitments to purchase containers, none of which are standard dry containers and most of which have attractive yield and committed leases associated with them.

We invested a total of $63 million in our rail fleet in Q2 of which $56 million was for the purchase of 548 new cars and $0.5 million dollars for the purchase of 49 used cars. Our rail fleet now consists of a diversified portfolio of 5,936 railcars with a net book value of $315 million, a year-over-year increase of 90%-plus. We have commitments to acquire approximately $68 million of new railcars during the balance of this year and $150 million additional new car commitments spread over 2017 and 2018. The average utilization of our railcar fleet was 94.6% during the second quarter.

Total storage, handling and maintenance expense in the quarter was $9.3 million, approximately $0.3 million greater than Q1. All the increase is attributable to increased maintenance expense as a consequence of our larger railcar fleet and some repositioning and temporary storage cost related to taking delivery of new rail cars we acquired in the quarter. MG&A expense in the quarter was $8.9 million, $0.2 million higher than Q1. The Challenger Overseas and Hybrid acquisitions added about $0.9 million of incremental expense. Absent these two acquisitions, MG&A would have been $0.6 point to $0.9 million lower than Q1.

Interest expense in the quarter was $10.7 million, $0.6 million higher than Q1 and reflects an increase of 25 basis points in our revolving credit facility spreads in Q2 versus Q1. On a year-to-date basis, our effective tax rate is now 12%, a decrease from our Q1 rate of 13.6% and reflects our current view of the mix of U.S. and international sourced income, we expect for the balance of 2016.

At the end of the second quarter, we had total funded debt, net of restricted cash and cash held in durable interest entities of approximately $1.4 billion. The amount of our undrawn rail and container revolving credit facilities at the end of Q2 was $518 million.

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

Question-and-Answer Session

Operator

[Operator Instructions]. Our first question comes from Michael Webber with Wells Fargo. Your line is open.

Michael Webber

Hi. Good morning guys. How are you?

Victor Garcia

Good.

Michael Webber

Victor, just to start off, I wanted to touch on utilization. It picked up on the quarter. Just curious, can you talk to how much of that is seasonal as opposed to a lack of new investment? And I believe you already give an inter-quarter figure on where we stand quarter-to-date. But any color on that would be helpful?

Victor Garcia

I would say, it's hard to quantify how much is actually the seasonal improvement versus just the ongoing selling of older assets that we have. But the way I would characterize is, there has been a seasonal upturn but it's been moderate. I think it reflects the fact that in part, there hasn't been much of an investment by anybody. So what we are seeing is equipment being picked up in the area of China. That's where we have seen the most improvement. And like I said in my opening remarks, we have very limited inventory in China these days. So whether it's 50/50 or some other ratio, I can't really you tell you but it's a combination of both.

Michael Webber

Fair enough. Just around prices, just the stock's prices. We saw delayed uptick in box prices this year after the big move in iron ore and steel that start the year through December through kind of April, May time frame. Do you think we have seen or we are going to see out of that move in box prices? And where do you stand right now in terms of your residual value, specifically not just in dry vans but also when you look across your 40-foot high cubes and reefers? Whether or not you guys are comfortable with those where they stand now?

Victor Garcia

Sure. As far as new box prices, there really has been almost no ordering. If you look at where fuel prices are, they retrace about 50% of where they were at the peak. That would have indicated to us that kind of the container price would be closer to $1,600 on a 20-foot. Pricing today is probably more reflected in the low $1,400. And that's, I think, in large part because nobody is ordering. And I am not sure that the manufacturers are making money at that.

So I do think box prices, if there was demand, would be moving up from where they are being quoted now but there is very limited demand, even during this seasonal uptick. We really haven't seen anybody ordering equipment which is encouraging to us. So that's my thoughts on that.

As far as our equipment, we look at our residual dollar time and have to make an assessment. We will continue to look at it clearly today. The sale prices that we have are lower than that but we have to look at it on a longer-term basis but we will continue to be evaluating that and looking at whether or not we think on a long-term residual values are appropriate.

Michael Webber

Got you. Okay. Makes sense. Just a couple of more and I will turn it over. If we look at the return profile right now around drive-in versus rail car and I know there's not a ton of new business to benchmark this off of, but can you talk to where those stands mid-summer? And then, I guess, how that shapes your longer-term view around CapEx? And I kind of want to specifically hone in on the railcars and I got a follow-up for that but maybe I will just let you kind of talk about the return profile there first.

Victor Garcia

Okay. The return profile of railcars largely depends on the types of equipment that you have. We have equipment types coming in that are in the strongest demand parts of the market. So we have covered hoppers that serve the agricultural market as well as the petrochemical for plastics. There's strong demand for both of those. We will continue to have. We are confident that we will be able to market those at an attractive price. But generally speaking, when we look at investments, we have to look in a broader environment.

We don't find a new investment, whether it be containers or rail to be as compelling as taking, looking at our own shares and where we are. So our priority today is to maximize the capital that we have already invested in the business and manage appropriately but also look for opportunities to repurchase shares because for us, we don't think it makes a lot of sense to be putting capital out to work at low returns. So we are being very, very selective.

Michael Webber

No. That's a good lead-in there I guess to my few follow-ups. Just around, you mentioned kind of the capital you guys have already slated to invest .When we look at your commitments around the rail space, specifically for 2017 and 2018, contractually can those be canceled? And is that something that you guys look at doing?

Victor Garcia

No. We have a commitment for it. It's very well spaced out. We can still have some flexibility with the manufacturers on changing the timing and the types of cars but the equipment that we have is so spaced out that, for us, getting it in, evenly over time makes the most sense for us.

Michael Webber

Can you talk of the flexibility you have in terms of, you mentioned some flexibility there?

Victor Garcia

Yes. We have flexibility in terms of the equipment types, being able to change it. And we have had a good ongoing dialogue with the manufacturers who we are willing to work with them to see what makes sense for them and what makes sense for us. But in any regard, I think we are very comfortable with what we have coming.

Timothy Page

To clarify, Michael, the $150 million I mentioned of commitments for 2017 and 2018 is a total of $150 million. It's not $150 million a year.

Michael Webber

Right. Victor, does that flexibility extend to delivery timing? And how far out could you push those, if need be?

Victor Garcia

Within the year, there's some flexibility to deliver but also we can have discussions with manufacturers about when exactly some of that equipment gets delivered. So I am not in a position right now to talk about that. But it's something that we have a good working relationship with the manufacturers. And so I am sure they will work with us to make sure that whatever we get delivered makes sense for us and for them.

Michael Webber

Fair enough. Just one more for me and I will turn it over. In the release, you guys mentioned buying back a little under a million shares in 2016. And then also this summer, you guys spent some money around the logistics business. So can you talk a bit about how you guys see those relative returns and weighing up whether to buy back more stock versus continuing to spend money and building out that logistics business and how you think about those specific return parameters for each of those two potential investments?

Victor Garcia

Okay. So generally speaking, let me just be pretty clear. Our strategic objectives right now for this current month, is to maximize the cash flow that we have in the business so that we can look at the ability to repurchase shares. So we are going to continue to manage the business. If return opportunities improve, whether that's in looking at new acquisitions and all that, we can evaluate. But our main focus right now is to increase our utilization, to maximize cash flow and to take the opportunity of where our shares are trading.

Michael Webber

Okay. I appreciate the time, guys. Thank you very much.

Operator

Our next question comes from Brian Hogan with William Blair. Your line is open.

Brian Hogan

Good afternoon. A follow-up to the last question. Maximizing the capital and repurchases, what are your thoughts around leverage?

Victor Garcia

It's something we have to be mindful of and it's something we have to manage through. That's why we continue to focus on ways of reducing our off-hire costs, getting equipment out, so that we can through this process look at reducing debt as well as the opportunity to repurchase. But we do have to manage the business. We have commitments to make on investments that we have already committed to. So we have to balance all of that. What I would say though is that just from what we are seeing, we don't see it as a priority right now based on where investments are to aggressively be looking for new investment.

Brian Hogan

All right. Do you have a target leverage ratio in mind?

Victor Garcia

I think right around 3:1 is where we would like to be, 2.75 to 3:1. We are a little bit above that because of the acquisitions we have made. So again, that's why we are looking at ways of just continuing to enhance our profitability and cash flow.

Brian Hogan

All right. And in your prepared remarks, you talked about taking maybe additional impairments or loss on sale coming this third quarter on equipments that is returned. I guess, in an average quarter, typical quarter, how much equipment comes in over? And then how long would you persist, expected in the current environment, for these impairments to persist?

Victor Garcia

It's really hard to say, Brian. We are in the seasonally stronger period of the year. So we wouldn't expect in the third quarter there to be relatively speaking a higher percentage of equipment coming in. So it depends on what part of the year and how strong the market is. So it's hard to predict.

But I will say, generally speaking, what we have seen over the last year, in a certain way it's already accelerated. The amount of equipment that's being sold out of the market, not only by ourselves but our peers, is much more aggressive than it was before. And I think that the rebalancing that's occurring, even in this low demand environment which we are in, is going to accelerate the recovery.

And I don't know if it's going to be in a quarter, two quarters or four quarters but I could tell you that my belief is that with the way that equipment is being disposed out of the market and that the limited investment that we are seeing in the marketplace, my expectation is that it's going to accelerate whenever this recovery comes. And that's our priority. We don't know exactly when it's good to be. So what we are doing is again, focusing on utilization and we think that that's a good indicator for us about how well we are positioning for the eventual upturn.

Brian Hogan

All right. Can I get a better understanding of the impairment charge you took? Because if I do my math and correct me if I am wrong, maybe it's in a different line item, but you said reported an impairment charge of $5.1 million. I think it's in the line of loss/gain on sale of used rental equipment. But if you back that out, you would actually have a gain on sale of $2 million or so. Is that correct? Can you just go through that math please?

Victor Garcia

Sure. There's about a $3.9 million loss of sales. Plus within the depreciation charge, there was about $1.2 million of write-down of equipment that we have had. That's included as depreciation. So if you add those two up, it's about $5.1 million of expense that we incurred this quarter as a result of --

Brian Hogan

Okay. So there's another $1.2 million in the depreciation then.

Victor Garcia

Yes.

Brian Hogan

Got you. Can I switch over to steel prices and kind of an adjacent question. Have you seen any impact from, we have heard rumblings of this shift to water-based paint from oil-based paint and basically having a material impact to the price of the container. Have you heard anything or can you comment on that, please?

Timothy Page

I believe as of July that in Southern China all containers there will be using water-based paint which will add about $150 to the price of a container. And so the rest of China, I believe in 2017, it will phase in. So it is going to increase the cost of the equipment and that cost increase is in addition to anything else that would be going on. So there will be a step up in the cost of equipment. At least, that's our expectation.

Brian Hogan

And is your expectation that would actually transfer over into the lease rates then?

Victor Garcia

Well, I mean, regardless for the reason for an increase in the cost of equipment, per diem rates reflects the investment that you are making in it. So we would expect that it would.

Brian Hogan

And then a final question for me is. Your logistics business obviously made several acquisitions and you are getting to a bigger scale but you are obviously going up against some incumbent players there that are very large and have very sophisticated technology. Do you need to make some technology investments? What is the status there to remain competitive on this increasingly global technology driven scale business?

Victor Garcia

We are making technology investments. We will continue to look for technology investments. The amount of investment that would take relative to what we invest, generally speaking in equipment, is pretty small. We have a number of businesses that are regional and we are trying to make them national. There's a lot of opportunities.

So within this broad universe, there's a lot of opportunities for a player of our size to continue to grow. And so we will make investments to compete broadly but there are plenty of opportunities for us to continue to grow the business with the same investment in technology that we already have.

Brian Hogan

All right. Thanks for your time.

Victor Garcia

Sure.

Operator

Our next question comes from Doug Mewhirter with SunTrust. Your line is open.

Doug Mewhirter

Hi. Good afternoon. The first interesting, I was trying to square up your comments on utilization with what's going on in China, I mean, if you have seen the last data point out. I think it came out this morning or last night. It was pretty awful Chinese trade data. But you mentioned that utilization's actually improved a bit. I assume that is because of just supplies drying up and not necessarily the demand is improving? Did I read that correctly?

Victor Garcia

Well, let's say that overall, as I said before, the seasonal upturn has been tepid. There has been a demand by customers for equipment but it hasn't been at the level that we would have ideally wanted. But when you put that in combination with the aggressive selling of equipment that is going out, that's caused the utilization to rise. If we get a much stronger improvement in demand, there really will be a shortage of equipment. The fact that utilization is rising even when there's tepid demand is pretty indicative of how aggressively equipment is being sold out of the market.

Doug Mewhirter

And do you think there's any breathing room left in the so-called seasonal peak? It's getting a little late now. We are in August. Is there a chance that you will see this sort of seasonal demand through September? Or does it pretty much end in August?

Victor Garcia

No. We would expect it to go through September and October.

Doug Mewhirter

Okay. Thanks. And my last question on the logistics business. It seems like you bought a couple of different unique companies. Is there a desire to integrate them? Or do they each have their own special relationship, special capabilities were there's not a lot of opportunity for putting them together?

Victor Garcia

One of the big efforts is to integrate their respective services amongst each other as well as integrating it into our asset owning businesses, primarily on the container side. So we are treating it as a independent business unit but we think it's extremely complementary to our container business and it really gives us a competitive advantage and we are continuing to build on that. So I would say, at least 50% of the effort is on working to integrate how the companies work together.

Doug Mewhirter

Actually, that just triggered one last follow-up. I know that when you bought your first logistics business, you were talking about how you can improve your one-way lease opportunities at the end of life and get better sales prices and again improve utilization. Do you think that now that you have a stable logistics business, you have been integrating this for a while, have it made any kind of material impact on either utilization or average selling price that you would actually notice on the P&L now?

Victor Garcia

It has had some improvement. Remember, two of the three acquisitions we made have really been over the last four or five months. So we just purchased Hybrid in June. And prior to that, I believe it was in February that we purchased Challenger. So it's a relatively short period of time that we have had the companies in. But I could tell you, in our internal discussions, we continue to find more and more opportunities to be more of a value-added player to serve our customers, our growing customer base.

And in many ways, we are providing a unique proposition that isn't available in the market. And it runs across a lot of different types of opportunities. And where we are right now, we know what the types of opportunities are, we just need to continue to increase the quantity of it. Hard to kind of quantify exactly what the impact is but again, what we look at, at the end of the day is, when everything is going on the right path, it's return on capital, return to an equity.

We think that the acquisitions that we made, not only will we expect them to get a return on their capital but will lift up the return on capital that we are getting on our existing businesses. And that's where really our effort is. With what we have in place now, we have all the tools and capabilities we need to execute on what we want to do. And so that's where we are focused.

Doug Mewhirter

Okay. Thanks. That's all my questions.

Operator

[Operator Instructions] Our next question comes from Helane Becker with Cowen and Company. Your line is open.

Helane Becker

Thanks operator. Hi guys. Thank you for the time.

Victor Garcia

Sure.

Helane Becker

Victor, just two questions for me. One is on forward placements for rail cars. I know you talked a little bit about that, but what are you seeing in terms of the rates you are getting on forward placements? You talked a little bit about the demand but not really the rate. So I wonder if you could flush that out a little?

Victor Garcia

The rates that have come in have been, what I would say is, probably three months ago what we saw in the quarter, we didn't have a lot of equipment already delivered by then but rates were pretty aggressive. And I think what we were facing was a number of players who had switched their equipments types that were initially dedicated over to the energy market whether they would be tank cars or they were tank cars to be delivered. They switched that to the other car types that would have better rates. So there was an influx of equipment coming in and so things got aggressive.

What we are seeing now is the next phase of that, at least my expectation of the next phase, which is actually it appears to us that manufacturing capacity is being curtailed. And that it's going to be significantly curtailed over the next 12 months. And my belief is that the fact that we actually have equipment being delivered over the next 12 months to 24 months will prove to be an advantage for us because just like in our container business, having equipment when the customer needs it is part of our value-added proposition.

You can talk to a customer but you can't expect to get a premium rate if you don't have the equipment. And as we get this equipment in, we think having the availability of the equipment will give us a leg up particularly in a market that's going to be constrained which we believe that the amount of manufacturing capacity is going to be constrained over the next 12 to 18 months.

Helane Becker

Got it. And then can you say actually what percent of your future deliveries are placed? Or does it not work that way?

Victor Garcia

Well, I mean we could say what we have today but we typically don't want to get into that level. We have equipment that is coming in, in successive quarters. The outer quarters, it's still too early for us to be talking to you. We are talking to customers but in order to get into serious discussions, that's going to be a little bit closer. But we have good flexibility in being able to do it. So I think our success has been so far is when equipment is either about to be delivered or has been delivered and the customer knows that if they need it right now, that we have it, that we can change the discussion in terms of simply talking about rate and talking about our particular equipment that's available.

Helane Becker

Got you. And then my other question is, have you guys thought about it all, how the two candidates that are running for President, how either one winning would change trade and how the impact that might have on your container business?

Victor Garcia

Yes. I would just say that without getting into any politics or political leanings or anything. Trade, it's the lifeblood of how the global economy works. My expectation is that we won't see a material change in the amount of global trade that's occurring. That's my view. I know there's been a lot of focus around it. Certainly, we are focused around it. But these are long-term economic decisions in terms of where people decide to manufacture, where they decide to distribute where their customers are. It doesn't get changed overnight and I would be personally surprised if at the end of the day, there was a material impact in world trade.

Helane Becker

Got you. Okay. Well, thank you. Those were really all of my questions.

Victor Garcia

Thank you.

Operator

Thank you. I am showing no further questions. I would like to turn the call back to Victor Garcia for closing remarks.

Victor Garcia

I would like to thank everybody for being on the call and we look forward to discussing our third quarter results in a few months. Thank you.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program and you may all disconnect. Everyone have a great day.

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