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CAI International, Inc. Reports Results for the Third Quarter of 2019

SAN FRANCISCO--(BUSINESS WIRE)--

CAI International, Inc. (CAI) (CAI), one of the world’s leading transportation finance and logistics companies, today reported results for the third quarter of 2019.

Summary

  • Net income from continuing operations attributable to CAI common stockholders for the third quarter of 2019 was $13.0 million, or $0.74 per fully diluted share, compared to $12.3 million, or $0.69 per fully diluted share, for the second quarter of 2019.

  • As was previously announced, the company impaired its railcar fleet by $25.6 million, resulting in a $19.9 million loss for the quarter from discontinued operations. Overall, the company reported a loss of $7.0 million, or $0.40 per fully diluted share, for the third quarter of 2019.

  • CAI is engaged in ongoing discussions with potential purchasers regarding the sale of its railcar fleet. As a result, the company continues to account for its railcar business as a discontinued operation.

  • Container lease revenue for the third quarter of 2019 was $77.3 million, an increase of 2% compared to the second quarter of 2019.

  • Logistics revenue for the third quarter of 2019 was $30.3 million, an increase of 2% compared to the second quarter of 2019.

  • Average utilization for CAI’s owned container fleet during the third quarter of 2019 was 98.6% compared to 98.8% for the second quarter of 2019.

Additional information on CAI's results, as well as comments on market trends, is available in a presentation posted today on the "Investors" section of CAI's website, www.capps.com.

Victor Garcia, President and Chief Executive Officer of CAI, commented, “For the quarter, CAI reported modest year-over-year growth in revenue from continuing operations despite weak demand conditions that have persisted as a result of the ongoing trade disputes between the United States and China. These geopolitical dynamics and softening economic conditions continue to challenge the overall market for container leasing, impacting the demand for new containers and new factory equipment. We expect this demand profile to continue into the fourth quarter, which is typically a slower time of year. We are encouraged, however, that during the quarter we maintained utilization of 98.6% in our owned fleet.

“New container pricing was steady during the quarter in spite of low demand and minimal production of new equipment. Secondary container pricing in most regions has remained strong and we expect this trend to continue, assuming utilization continues to be high and overall container availability remains limited. We expect to see increased demand in the coming year as a result of higher anticipated container replacement and used container needs in 2020. We estimate that replacement needs alone account for approximately 40% of overall container investment. As we prepare for demand conditions to improve, our primary focus is unchanged – we intend to maintain high utilization rates, position our equipment in high-demand locations, and continue to apply our disciplined approach of only investing when returns are attractive.

“As we announced last quarter, we have been in discussions regarding the sale of our railcar business. While there can be no assurance if or when a transaction to sell all or part of the fleet can be completed, we are engaged in continued discussions with potential purchasers that have expressed interest in the portfolio. In the interim, demand for our railcar fleet in the third quarter has been solid. We continue to get inquiries for many of our railcars and overall monthly lease rates have been steady for most equipment types. For the quarter, the utilization of the railcar fleet was 85.3%.

“The improved results in the logistics segment are a reflection of our continued restructuring efforts initiated in the second quarter. Although the challenging global trade environment and other economic factors impacted demand for transportation services this year, we have continued to add new customer accounts in each of the services we offer and we expect further improvement in the fourth quarter.”

Mr. Garcia concluded, “As we look to the rest of 2019 and beyond, we are actively managing our businesses through the current economic and global trade environment, and taking decisive action to maximize shareholder returns. Above all, we are acting with urgency to achieve a strategic solution for the rail business, drive sustainable growth through considered investment and disciplined cost management across our core businesses, and create value for all stakeholders.”

CAI International, Inc.

Consolidated Balance Sheets

(In thousands, except share information)

(UNAUDITED)

September 30,

December 31,

2019

2018

Assets

Current assets

Cash

$

21,503

$

20,104

Cash held by variable interest entities

26,772

25,211

Accounts receivable, net of allowance for doubtful accounts of $3,626 and $2,042 at September 30, 2019 and December 31, 2018, respectively

93,142

95,942

Current portion of net investment in sales-type and direct finance leases

66,977

75,975

Assets held for sale

284,791

449,730

Prepaid expenses and other current assets

6,394

1,525

Total current assets

499,579

668,487

Restricted cash

27,755

30,668

Rental equipment, net of accumulated depreciation of $598,545 and $557,559 at September 30, 2019 and December 31, 2018, respectively

1,889,266

1,816,794

Net investment in sales-type and direct finance leases

472,790

473,792

Financing receivable

31,661

-

Goodwill

15,794

15,794

Intangible assets, net of accumulated amortization of $6,605 and $5,397 at September 30, 2019 and December 31, 2018, respectively

4,525

5,733

Other non-current assets

9,364

1,349

Total assets

$

2,950,734

$

3,012,617

Liabilities and Stockholders' Equity

Current liabilities

Accounts payable

$

10,668

$

7,371

Accrued expenses and other current liabilities

25,981

25,069

Unearned revenue

6,355

7,573

Current portion of debt

309,500

311,381

Rental equipment payable

54,202

74,139

Total current liabilities

406,706

425,533

Debt

1,819,649

1,847,633

Deferred income tax liability

33,054

38,319

Other non-current liabilities

5,333

-

Total liabilities

2,264,742

2,311,485

Stockholders' equity

Preferred stock, par value $.0001 per share; authorized 10,000,000

8.50% Series A fixed-to-floating rate cumulative redeemable perpetual preferred stock, issued and outstanding 2,199,610 shares, at liquidation preference

54,990

54,990

8.50% Series B fixed-to-floating rate cumulative redeemable perpetual preferred stock, issued and outstanding 1,955,000 shares, at liquidation preference

48,875

48,875

Common stock: par value $.0001 per share; authorized 84,000,000 shares; issued and outstanding 17,425,754 and 18,764,459 shares at September 30, 2019 and December 31, 2018, respectively

2

2

Additional paid-in capital

101,317

132,666

Accumulated other comprehensive loss

(6,845

)

(6,513

)

Retained earnings

487,653

471,112

Total stockholders' equity

685,992

701,132

Total liabilities and stockholders' equity

$

2,950,734

$

3,012,617

CAI International, Inc.

Consolidated Statements of Operations

(In thousands, except per share data)

(UNAUDITED)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2019

2018

2019

2018

Revenue

Container lease revenue

$

77,300

$

75,331

$

228,585

$

208,298

Logistics revenue

30,270

31,362

87,788

81,251

Total revenue

107,570

106,693

316,373

289,549

Operating expenses

Depreciation of rental equipment

28,750

27,735

85,819

79,016

Storage, handling and other expenses

4,672

2,506

12,631

5,803

Logistics transportation costs

27,037

27,541

77,647

70,536

Gain on sale of used rental equipment

(2,411

)

(2,633

)

(5,436

)

(7,530

)

Administrative expenses

12,702

11,895

38,110

33,445

Total operating expenses

70,750

67,044

208,771

181,270

Operating income

36,820

39,649

107,602

108,279

Other expenses

Net interest expense

20,123

15,811

60,049

43,758

Other expense

380

116

537

510

Total other expenses

20,503

15,927

60,586

44,268

Income before income taxes

16,317

23,722

47,016

64,011

Income tax expense

1,152

1,403

2,871

3,197

Income from continuing operations

15,165

22,319

44,145

60,814

Loss from discontinued operations, net of income taxes

(19,912

)

(565

)

(20,983

)

(1,625

)

Net (loss) income

(4,747

)

21,754

23,162

59,189

Preferred stock dividends

2,207

1,748

6,621

2,917

Net (loss) income attributable to CAI common stockholders

$

(6,954

)

$

20,006

$

16,541

$

56,272

Amounts attributable to CAI common stockholders

Net income from continuing operations

$

12,958

$

20,571

$

37,524

$

57,897

Net loss from discontinued operations

(19,912

)

(565

)

(20,983

)

(1,625

)

Net (loss) income attributable to CAI common stockholders

$

(6,954

)

$

20,006

$

16,541

$

56,272

Net (loss) income per common share attributable to CAI common stockholders

Basic

Continuing operations

$

0.75

$

1.07

$

2.10

$

2.93

Discontinued operations

(1.15

)

(0.03

)

(1.17

)

(0.08

)

Total basic

$

(0.40

)

$

1.04

$

0.93

$

2.85

Diluted

Continuing operations

$

0.74

$

1.06

$

2.07

$

2.90

Discontinued operations

(1.14

)

(0.03

)

(1.16

)

(0.09

)

Total diluted

$

(0.40

)

$

1.03

$

0.91

$

2.81

Weighted average shares outstanding

Basic

17,330

19,214

17,850

19,741

Diluted

17,525

19,492

18,122

19,997

CAI International, Inc.

Consolidated Statements of Cash Flows

(In thousands, except per share data)

(UNAUDITED)

Nine Months Ended
September 30,

2019

2018

Cash flows from operating activities

Net income

$

23,162

$

59,189

Loss from discontinued operations, net of income taxes

(20,983

)

(1,625

)

Income from continuing operations

44,145

60,814

Adjustments to reconcile income from continuing operations to net cash provided by operating activities:

Depreciation

85,988

79,128

Amortization of debt issuance costs

3,005

2,648

Amortization of intangible assets

1,208

1,538

Stock-based compensation expense

2,142

1,888

Unrealized loss on foreign exchange

345

317

Gain on sale of rental equipment

(5,436

)

(7,530

)

Deferred income taxes

1,260

2,424

Bad debt expense (recovery)

1,224

(149

)

Changes in other operating assets and liabilities:

Accounts receivable

2,556

(6,889

)

Prepaid expenses and other assets

398

(1,611

)

Net investment in sales-type and direct finance leases

45,400

-

Accounts payable, accrued expenses and other current liabilities

4,057

(477

)

Unearned revenue

(151

)

(86

)

Net cash provided by operating activities of continuing operations

186,141

132,015

Net cash provided by operating activities of discontinued operations

2,016

7,572

Net cash provided by operating activities

188,157

139,587

Cash flows from investing activities

Purchase of rental equipment

(256,469

)

(477,703

)

Purchase of financing receivable

(37,139

)

-

Proceeds from sale of rental equipment

56,422

43,645

Purchase of furniture, fixtures and equipment

(1,720

)

(393

)

Receipt of principal payments from financing receivable

1,825

-

Receipt of principal payments from sales-type and direct finance leases

-

26,982

Net cash used in investing activities of continuing operations

(237,081

)

(407,469

)

Net cash provided by (used in) investing activities of discontinued operations

123,199

(50,800

)

Net cash used in investing activities

(113,882

)

(458,269

)

Cash flows from financing activities

Proceeds from debt

500,582

1,227,412

Principal payments on debt

(419,908

)

(981,465

)

Debt issuance costs

(724

)

(9,882

)

Proceeds from issuance of common and preferred stock

-

103,681

Repurchase of common stock

(34,118

)

(27,946

)

Dividends paid to preferred stockholders

(6,620

)

(1,376

)

Exercise of stock options

532

24

Net cash provided by financing activities of continuing operations

39,744

310,448

Net cash (used in) provided by financing activities of discontinued operations

(113,098

)

31,011

Net cash (used in) provided by financing activities

(73,354

)

341,459

Effect on cash of foreign currency translation

(874

)

(23

)

Net increase in cash and restricted cash

47

22,754

Cash and restricted cash at beginning of the period

75,983

47,209

Cash and restricted cash at end of the period

$

76,030

$

69,963

CAI International, Inc.

Fleet Data

(UNAUDITED)

As of September 30,

2019

2018

Owned container fleet in TEUs

1,623,588

1,435,516

Managed container fleet in TEUs

72,462

75,872

Total container fleet in TEUs

1,696,050

1,511,388

Owned container fleet in CEUs

1,649,465

1,475,142

Managed container fleet in CEUs

88,493

69,134

Total container fleet in CEUs

1,737,958

1,544,276

Owned railcar fleet in units

5,504

7,489

Three Months Ended

Nine Months Ended

September 30,

September 30,

2019

2018

2019

2018

Average Utilization

Container fleet utilization in CEUs

98.4%

99.2%

98.7%

99.2%

Owned container fleet utilization in CEUs

98.6%

99.2%

98.7%

99.2%

Railcar fleet utilization in units - excluding new units not yet leased

85.3%

89.0%

88.1%

88.1%

Railcar fleet utilization in units - including new units not yet leased

82.1%

84.0%

84.6%

79.1%

As of September 30,

2019

2018

Period Ending Utilization

Container fleet utilization in CEUs

98.4%

99.3%

Owned container fleet utilization in CEUs

98.5%

99.3%

Railcar fleet utilization in units - excluding new units not yet leased

85.3%

90.0%

Railcar fleet utilization in units - including new units not yet leased

82.1%

86.6%

Utilization of containers is computed by dividing the total units on lease in CEUs (cost equivalent units), by the total units in our fleet in CEUs.

The total container fleet excludes new units not yet leased and off-hire units designated for sale.

Utilization of railcars is computed by dividing the total number of railcars on lease by the total number of railcars in our fleet.

The impact on utilization of including new units not yet leased in the total railcar fleet has been included in the table above.

CEU is a ratio used to convert the actual number of containers in our fleet to a figure based on the relative purchase prices of our various equipment types to that of a standard 20 foot dry van container. For example, the CEU ratio for a standard 40 foot dry van container is 1.6, and a 40 foot high cube container is 1.7.

Conference Call

A conference call to discuss the financial results for the third quarter of 2019 will be held on Tuesday, October 29, 2019 at 5:00 p.m. ET. The dial-in number for the teleconference is 1-888-398-8098; outside of the U.S., call 1-707-287-9363. The call may be accessed live over the internet (listen only) under the “Investors” section of CAI’s website, www.capps.com, by selecting “Q3 2019 Earnings Conference Call.” A webcast replay will be available for 30 days on the “Investors” section of our website.

Earnings Presentation

A presentation summarizing our third quarter 2019 results is available on the “Investors” section of our website, www.capps.com.

About CAI International, Inc.

CAI is one of the world’s leading transportation finance and logistics companies. As of September 30, 2019, CAI operated a worldwide fleet of approximately 1.7 million CEUs of containers, and owned a fleet of 5,504 railcars that it leases within North America. CAI operates through 21 offices located in 12 countries including the United States.

Forward-Looking Statements

This press release contains forward-looking statements regarding future events and the future performance of CAI, including but not limited to: the statements regarding CAI’s intention to sell its remaining railcar fleet, management’s business outlook on the container leasing business and management's outlook for growth of CAI’s leasing investments. These statements and others herein are forward-looking statements within the meaning of the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934 and involve risks and uncertainties that could cause actual results of operations and other performance measures to differ materially from current expectations including, but not limited to: utilization rates, expected economic conditions, expected growth of international trade, availability of credit on commercially favorable terms or at all, customer demand, container investment levels, container prices, lease rates, increased competition, volatility in exchange rates, growth in world trade and world container trade, the ability of CAI to convert letters of intent with its customers to binding contracts, potential to sell CAI’s securities to the public and others.

CAI refers you to the documents that it has filed with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2018, its Quarterly Reports on Form 10-Q and its Current 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 press release. Furthermore, CAI is under no obligation to (and expressly disclaims any such obligation to) update or alter any of the forward-looking statements contained in this press release whether as a result of new information, future events or otherwise, unless required by law.

View source version on businesswire.com: https://www.businesswire.com/news/home/20191029006047/en/