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CAI International, Inc. Reports Results for the Second Quarter of 2020 and Declares Quarterly Dividend

·16 mins read

CAI International, Inc. ("CAI" or the "Company") (NYSE: CAI), one of the world’s leading transportation finance and logistics companies, today reported results for the second quarter of 2020.

Summary

  • Net loss attributable to CAI common stockholders for the second quarter of 2020 was $2.8 million, or $0.16 per fully diluted share, primarily due to intangible asset write-offs as a result of accounting for the logistics business as a discontinued operation.

  • Net income from continuing operations attributable to CAI common stockholders for the second quarter of 2020 was $13.7 million, or $0.78 per fully diluted share.

  • Container lease revenue for the second quarter of 2020 was $69.4 million, compared to $69.1 million in the first quarter of 2020.

  • CAI’s Board of Directors declared the Company’s first quarterly cash dividend of $0.25 per common share payable on September 25, 2020 to shareholders of record as of September 11, 2020.

  • The Company is currently experiencing strong demand from a number of customers for new container leases. Container costs are stable and lease returns are attractive.

  • Average utilization for CAI’s owned container fleet during the second quarter of 2020 was 98.0%, compared to 98.4% for the first quarter of 2020. Current utilization is 98.2%.

  • In early July 2020, the Company entered into an interest rate swap fixing $500 million of its variable rate debt. Approximately 77% of the Company’s debt is now fixed rate.

  • The Company has approximately $180 million of liquidity in the form of available cash on hand and ability to draw on its credit facilities without additional collateral being provided.

  • As previously announced, on June 15, 2020, CAI terminated its formal strategic alternatives review process. The Company is committed to focusing solely on the container business and is actively pursuing its strategy to divest of non-core businesses.

  • CAI’s Board of Directors has adopted formal stock ownership guidelines for its non-executive directors.

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.

Timothy Page, Interim President and Chief Executive Officer of CAI, commented, "We are very pleased with our results during the second quarter. Net income from continuing operations attributable to CAI common stockholders was $13.7 million, or $0.78 per fully diluted share. The quarter began with a great deal of uncertainty as we were in the depths of the COVID-19 global pandemic. As the quarter progressed, markets began to stabilize, liquidity returned and expectations for recovery improved. The global container shipping industry right sized fleets, rationalized pricing and moved to profitability. Consequently, the Company did not experience any meaningful payment delays or credit issues and we have been generating strong free cash flow. As we have entered the third quarter, utilization is increasing, and we are experiencing strong demand from our customers for both depot and new equipment.

"During the first half of 2020, we saw limited customer demand for leased containers. Consequently, the Company took delivery of only $41 million, or 30,000 TEU, of containers in the first two quarters of 2020. However, demand has been particularly strong since mid-June and we have commitments from customers to lease approximately 70,000 TEU of containers, all of which we expect to be picked up before the end of the third quarter. Additionally, we have lease commitments for approximately 50,000 TEU of containers for delivery in the fourth quarter of 2020. All of these transactions have attractive returns associated with them. As a result of this strong customer demand, we expect our core container business to generate increasing net income in the coming quarters.

"CAI’s operating performance during the quarter was supported by the strong 98.0% utilization of our owned container fleet. Utilization increased towards the end of June and currently stands at 98.2%. We expect a continuation in the trend of increasing utilization in the coming months as global demand increases. Our continuing strong performance in utilization reflects the long-term nature of our contracts, tight redelivery restrictions and ongoing fleet management, all of which underscore the long-term committed nature of our cash flow.

"Our average cash interest rate in the second quarter was 2.88%. In early July we completed an interest rate hedging transaction swapping one month LIBOR for a fixed rate of 0.29% on $500 million of our floating rate debt for a term of five years. Approximately 77% of the Company’s debt is now fixed rate. Going forward, we plan to maintain fixed rate debt between 75% and 85% of our total debt.

"During the second quarter, we terminated our previously announced strategic review process and made a decision to focus on our container business and divest our non-core businesses. We have accounted for the logistics business in the second quarter as a discontinued operation. Under accounting rules for discontinued operations, the logistics business reported a net loss for the quarter of $16.6 million, or $0.94 per fully diluted share, primarily due to the non-cash impairment of goodwill and intangible assets arising from the reclassification of logistics assets as assets held for sale. We are pleased to report that we are engaged in advanced discussions with a potential purchaser of our logistics business. We continue to explore disposing of our rail investments in the most beneficial manner for shareholders.

"We also are pleased to announce that we have initiated a program of returning capital to our shareholders through the payment of regular quarterly dividends, the first of which is a dividend of $0.25 per share payable on September 25, 2020 to common shareholders of record as of September 11, 2020."

Mr. Page concluded, "We are focused on deploying our capital to increase shareholder value, whether that be through regular shareholder dividends, investing in containers during periods when returns are attractive, or share repurchases when container returns don’t meet our investment return thresholds. We believe the actions taken and the decisions we have made during the second quarter will provide the momentum to position CAI to achieve enhanced shareholder returns."

CAI International, Inc.

Consolidated Balance Sheets

(In thousands, except share information)

(UNAUDITED)

June 30,

December 31,

2020

2019

Assets

Current assets

Cash

$

20,159

$

19,870

Cash held by variable interest entities

27,703

26,594

Accounts receivable, net of allowance for doubtful accounts of $3,942 and $7,671

at June 30, 2020 and December 31, 2019, respectively

70,020

72,984

Current portion of net investment in finance leases

75,906

71,274

Prepaid expenses and other current assets

14,880

9,606

Assets held for sale

13,143

37,781

Total current assets

221,811

238,109

Restricted cash

22,188

26,775

Rental equipment, net of accumulated depreciation of $660,418 and $620,990 at June 30, 2020 and December 31, 2019, respectively

1,978,826

2,102,839

Net investment in finance leases

463,251

496,094

Financing receivable

53,821

30,693

Other non-current assets

6,036

7,255

Total assets

$

2,745,933

$

2,901,765

Liabilities and Stockholders' Equity

Current liabilities

Accounts payable

$

4,557

$

4,534

Accrued expenses and other current liabilities

24,365

25,206

Unearned revenue

6,802

6,405

Current portion of debt

251,250

218,094

Rental equipment payable

3,356

25,137

Liabilities held for sale

6,517

8,752

Total current liabilities

296,847

288,128

Debt

1,728,310

1,880,122

Deferred income tax liability

29,161

35,376

Other non-current liabilities

4,148

4,899

Total liabilities

2,058,466

2,208,525

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 17,553,491 and 17,479,127 shares at June 30, 2020 and December 31, 2019, respectively

2

2

Additional paid-in capital

103,342

102,709

Accumulated other comprehensive loss

(6,666

)

(6,630

)

Retained earnings

486,924

493,294

Total stockholders' equity

687,467

693,240

Total liabilities and stockholders' equity

$

2,745,933

$

2,901,765

CAI International, Inc.

Consolidated Statements of Operations

(In thousands, except per share data)

(UNAUDITED)

Three Months Ended

Six Months Ended

June 30,

June 30,

2020

2019

2020

2019

Revenue

Container lease revenue

$

69,443

$

74,286

$

138,556

$

149,797

Rail lease revenue

6,282

6,462

12,085

14,343

Total revenue

75,725

80,748

150,641

164,140

Operating expenses

Depreciation of rental equipment

28,846

29,816

55,894

61,599

Impairment of rental equipment

557

7,323

19,724

7,323

Storage, handling and other expenses

6,474

5,199

12,222

10,319

Gain on sale of rental equipment

(2,108

)

(265

)

(3,722

)

(9,097

)

Administrative expenses

7,389

8,049

15,053

17,223

Total operating expenses

41,158

50,122

99,171

87,367

Operating income

34,567

30,626

51,470

76,773

Other expenses

Net interest expense

17,595

23,209

37,974

47,063

Other (income) expense

(97

)

119

149

157

Total other expenses

17,498

23,328

38,123

47,220

Income before income taxes

17,069

7,298

13,347

29,553

Income tax expense (benefit)

1,113

583

(1,943

)

2,732

Income from continuing operations

15,956

6,715

15,290

26,821

Loss from discontinued operations, net of income taxes

(16,582

)

(1,221

)

(17,246

)

(2,753

)

Net (loss) income

(626

)

5,494

(1,956

)

24,068

Preferred stock dividends

2,207

2,207

4,414

4,414

Net (loss) income attributable to CAI common stockholders

$

(2,833

)

$

3,287

$

(6,370

)

$

19,654

Net income from continuing operations attributable to CAI common shareholders

$

13,749

$

4,508

$

10,876

$

22,407

Net loss from discontinued operations attributable to CAI common shareholders

(16,582

)

(1,221

)

(17,246

)

(2,753

)

Net (loss) income attributable to CAI common stockholders

$

(2,833

)

$

3,287

$

(6,370

)

$

19,654

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

Basic

Continuing operations

$

0.79

$

0.26

$

0.62

$

1.24

Discontinued operations

(0.95

)

(0.07

)

(0.99

)

(0.15

)

Total basic

$

(0.16

)

$

0.19

$

(0.37

)

$

1.09

Diluted

Continuing operations

$

0.78

$

0.25

$

0.62

$

1.22

Discontinued operations

(0.94

)

(0.07

)

(0.98

)

(0.15

)

Total diluted

$

(0.16

)

$

0.18

$

(0.36

)

$

1.07

Weighted average shares outstanding

Basic

17,470

17,648

17,451

18,098

Diluted

17,601

17,926

17,641

18,401

CAI International, Inc.

Consolidated Statements of Cash Flows

(In thousands, except per share data)

(UNAUDITED)

Six Months Ended
June 30,

2020

2019

Cash flows from operating activities

Net (loss) income

$

(1,956

)

$

24,068

Loss from discontinued operations, net of income taxes

(17,246

)

(2,753

)

Income from continuing operations

15,290

26,821

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

Depreciation

56,299

61,623

Impairment of rental equipment

19,724

7,323

Amortization of debt issuance costs

2,312

2,394

Stock-based compensation expense

801

1,421

Unrealized loss on foreign exchange

63

90

Gain on sale of rental equipment

(3,722

)

(9,097

)

Deferred income taxes

(3,127

)

2,135

Bad debt (recovery) expense

(3,582

)

687

Changes in other operating assets and liabilities:

Accounts receivable

4,441

1,200

Prepaid expenses and other assets

606

(2,114

)

Net investment in finance leases

35,746

32,824

Accounts payable, accrued expenses and other liabilities

(1,146

)

(3,568

)

Unearned revenue

(394

)

(1,862

)

Net cash provided by operating activities of continuing operations

123,311

119,877

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

2,315

(1,984

)

Net cash provided by operating activities

125,626

117,893

Cash flows from investing activities

Purchase of rental equipment

(32,620

)

(231,595

)

Purchase of financing receivable

(30,846

)

(36,379

)

Proceeds from sale of rental equipment

58,467

220,403

Purchase of furniture, fixtures and equipment

(310

)

(136

)

Receipt of principal payments from financing receivable

2,225

973

Net cash used in investing activities of continuing operations

(3,084

)

(46,734

)

Net cash used in investing activities of discontinued operations

(1

)

(114

)

Net cash used in investing activities

(3,085

)

(46,848

)

Cash flows from financing activities

Proceeds from debt

227,000

468,082

Principal payments on debt

(348,331

)

(490,319

)

Debt issuance costs

(25

)

(496

)

Proceeds from issuance of common stock

116

-

Repurchase of common stock

-

(34,118

)

Dividends paid to preferred stockholders

(4,414

)

(4,414

)

Exercise of stock options

113

335

Net cash provided by financing activities of continuing operations

(125,541

)

(60,930

)

Net cash used in financing activities of discontinued operations

-

-

Net cash used in financing activities

(125,541

)

(60,930

)

Effect on cash of foreign currency translation

(189

)

(77

)

Net (decrease) increase in cash and restricted cash

(3,189

)

10,038

Cash and restricted cash at beginning of the period

73,239

75,983

Cash and restricted cash at end of the period

$

70,050

$

86,021

CAI International, Inc.

Fleet Data

(UNAUDITED)

As of June 30,

2020

2019

Owned container fleet in TEUs

1,597,898

1,553,231

Managed container fleet in TEUs

63,757

69,805

Total container fleet in TEUs

1,661,655

1,623,036

Owned container fleet in CEUs

1,630,054

1,584,456

Managed container fleet in CEUs

79,643

63,492

Total container fleet in CEUs

1,709,697

1,647,948

Owned railcar fleet in units

5,276

5,631

Three Months Ended

Six Months Ended

June 30,

June 30,

2020

2019

2020

2019

Average Utilization

Container fleet utilization in CEUs

98.0

%

98.8

%

98.1

%

98.8

%

Owned container fleet utilization in CEUs

98.0

%

98.8

%

98.2

%

98.8

%

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

89.6

%

88.1

%

87.3

%

89.3

%

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

86.6

%

84.5

%

84.3

%

85.7

%

As of June 30,

2020

2019

Period Ending Utilization

Container fleet utilization in CEUs

97.8

%

98.8

%

Owned container fleet utilization in CEUs

97.9

%

98.8

%

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

88.3

%

85.9

%

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

85.3

%

82.4

%

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 second quarter of 2020 will be held on Thursday, August 6, 2020 at 5:00 p.m. ET. The dial-in number for the teleconference is 1-855-327-6837; outside of the U.S., call 1-631-891-4304. The call may be accessed live over the internet (listen only) under the "Investors" section of CAI’s website, www.capps.com, by selecting "Q2 2020 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 second quarter 2020 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 June 30, 2020, CAI operated a worldwide fleet of approximately 1.7 million CEUs of containers, and owned a fleet of 5,276 railcars that it leases within North America. CAI operates through 22 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: management’s business outlook for the container leasing business, management’s decision to divest of CAI’s non-core businesses 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, as amended, 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, 2019, 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/20200806005994/en/

Contacts

Tim Page, Interim President and Chief Executive Officer
(415) 788-0100
tpage@capps.com