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CAI International, Inc. Reports Results for the First Quarter of 2021

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·16 min read
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CAI International, Inc. ("CAI" or the "Company") (NYSE: CAI), one of the world’s leading transportation finance companies, today reported results for the first quarter of 2021.

Highlights

  • Net income from continuing operations attributable to CAI common stockholders for the first quarter of 2021 was $32.5 million, or $1.85 per fully diluted share.

  • Return on common equity on adjusted net income from continuing operations1 was 21.3% in the first quarter of 2021.

  • Total leasing revenue for the first quarter of 2021 was $80.8 million, compared to $69.1 million in the first quarter of 2020.

  • CAI’s Board of Directors declared a cash dividend of $0.30 per common share payable on June 25, 2021 to shareholders of record as of June 10, 2021.

  • CAI leased out $129 million of new containers on long-term or finance leases in the first quarter of 2021 and has leased, or has commitments to lease, an additional $350 million in the second and third quarters.

  • Average CEU utilization for CAI’s owned container fleet during the first quarter of 2021 was 99.7%, compared to 99.3% for the fourth quarter of 2020. Current CEU utilization is 99.7%.

Financial and Operating Highlights

Three Months Ended

March 31,
2021

December 31,
2020

March 31,
2020

Total leasing revenue

$

80,800

$

81,567

$

69,113

Continuing operations GAAP

Net income attributable to common stockholders

$

32,470

$

32,511

$

10,462

Net income per share - diluted

$

1.85

$

1.81

$

0.59

Continuing operations non-GAAP 1

Adjusted net income attributable to common stockholders

$

32,470

$

31,622

$

10,462

Adjusted net income per share - diluted

$

1.85

$

1.76

$

0.59

Return on common equity (continuing operations) 2

21.3

%

21.2

%

7.1

%

Total container fleet size in CEUs at end of period

1,837,560

1,798,520

1,705,059

Container fleet utilization at end of period

99.7

%

99.6

%

98.2

%

1 Refer to the "Reconciliation of GAAP Amounts to Non-GAAP Amounts" and "Use of Non-GAAP Financial Measures" set forth below.
2 Refer to the "Calculation of Return on Equity" set forth below.

Timothy Page, Interim President and Chief Executive Officer of CAI, commented, "We are very pleased with our results for the quarter. Adjusted net income from continuing operations attributable to CAI common stockholders was a record $32.5 million, 3% greater than the fourth quarter of 2020, and 210% greater than the first quarter of 2020. Total leasing revenue was $81 million in the quarter, an increase of 17% as compared to the first quarter of last year.

"Our strong results for the quarter were driven by a number of positive factors. During the quarter utilization remained strong at an average of 99.7%, and we leased out $129 million of new containers with an average lease tenor of 9.7 years. The resale market continued to be strong during the quarter and we realized $6.7 million in gains on sale, as we saw a significant increase in average sale prices. Additionally, we continue to benefit from low financing costs, ending the quarter with an average cash interest rate cost of 2.10%. The result of these positive factors was an ROE in the quarter of 21.3%."

Mr. Page continued, "The global container market continues to benefit from an exceptional level of customer demand and we don’t expect to see any softening in market conditions through at least the remainder of the year. As mentioned earlier, we leased out $129 million of equipment in the first quarter, a quarter which is traditionally the weakest in the global container shipping market. Global container traffic is only expected to increase as the global economy slowly recovers from the pandemic. Additionally, the global logistics supply chain continues to be stressed as evidenced by the disruptions that were created by the grounding of the Ever Given in the Suez Canal, and the growing congestion impacting the Port of Long Beach. All of these factors point towards continued strong demand for shipping containers.

"We currently have $350 million of commitments from our customers for delivery of containers in the second and third quarters and are confident that demand will accelerate as we enter the traditionally strongest time of the year for containerized shipping. We continue to maintain historically high levels of liquidity and are well positioned to take advantage of the expected increase in demand.

"Given our expectation that our container fleet will be effectively fully utilized, we don’t expect that we will be able to realize the same level of gains on sale that we achieved in the first quarter. Nonetheless, driven by our strong order book, we expect Q2 net income to be at or slightly exceed that of Q1 and will provide the basis for continued growth in the coming quarters."

Mr. Page concluded, "We continue to be very optimistic about our business for the remainder of 2021 and well into next year. We have strong and increasing cash flows from a robust forward customer order book that we expect will generate attractive long-term returns. We have virtually no off-lease equipment and see nothing on the horizon that would impact utilization. On the cost side of the equation, we have almost 80% of our funding costs locked in at very low rates for multiple years. As a result of these favorable factors, we expect to continue to deliver exceptional high teen or greater ROE’s for our shareholders."

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.

CAI International, Inc.

Consolidated Balance Sheets

(In thousands, except share information)

(UNAUDITED)

March 31,

December 31,

2021

2020

Assets

Current assets

Cash

$

23,971

$

26,691

Cash held by variable interest entities

23,942

26,856

Current portion of restricted cash

600

600

Accounts receivable, net of allowance for doubtful accounts of $400 and $393

at March 31, 2021 and December 31, 2020, respectively

61,843

65,310

Current portion of net investment in finance leases

80,308

78,992

Current portion of financing receivable

10,615

9,550

Prepaid expenses and other current assets

5,788

6,663

Total current assets

207,067

214,662

Restricted cash

12,087

12,355

Rental equipment, net of accumulated depreciation of $691,842 and $669,360

at March 31, 2021 and December 31, 2020, respectively

1,808,001

1,781,321

Net investment in finance leases

585,016

550,573

Financing receivable

50,568

48,888

Derivative instruments

9,586

-

Other non-current assets

4,280

4,833

Total assets

$

2,676,605

$

2,612,632

Liabilities and Stockholders' Equity

Current liabilities

Accounts payable

$

3,231

$

3,666

Accrued expenses and other current liabilities

26,569

29,598

Unearned revenue

3,260

3,029

Current portion of debt

183,878

183,448

Rental equipment payable

61,582

100,509

Total current liabilities

278,520

320,250

Debt

1,642,879

1,562,283

Derivative instruments

-

80

Net deferred income tax liability

25,532

24,442

Other non-current liabilities

3,467

3,337

Total liabilities

1,950,398

1,910,392

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

17,304,111 and 17,562,779 shares at March 31, 2021 and December 31, 2020, respectively

2

2

Additional paid-in capital

89,308

100,795

Accumulated other comprehensive loss

1,370

(5,743

)

Retained earnings

531,662

503,321

Total stockholders' equity

726,207

702,240

Total liabilities and stockholders' equity

$

2,676,605

$

2,612,632

CAI International, Inc.

Consolidated Statements of Operations

(In thousands, except per share data)

(UNAUDITED)

Three Months Ended

March 31,

2021

2020

Leasing revenue

Operating leases

$

63,867

$

54,629

Finance leases

13,245

11,590

Other

3,688

2,894

Total leasing revenue

80,800

69,113

Operating expenses

Depreciation of rental equipment

28,551

27,048

Storage, handling and other expenses

2,489

4,429

Gain on sale of rental equipment

(6,743

)

(1,647

)

Administrative expenses

7,740

6,895

Total operating expenses

32,037

36,725

Operating income

48,763

32,388

Other expenses

Net interest expense

11,172

18,274

Other expense

410

246

Total other expenses

11,582

18,520

Income before income taxes

37,181

13,868

Income tax expense

2,504

1,199

Income from continuing operations

34,677

12,669

Income (loss) from discontinued operations, net of income taxes

1,063

(13,999

)

Net income (loss)

35,740

(1,330

)

Preferred stock dividends

2,207

2,207

Net income (loss) attributable to CAI common stockholders

$

33,533

$

(3,537

)

Amounts attributable to CAI common stockholders

Net income from continuing operations

$

32,470

$

10,462

Net income (loss) from discontinued operations

1,063

(13,999

)

Net income (loss) attributable to CAI common stockholders

$

33,533

$

(3,537

)

Net income (loss) per share attributable to

CAI common stockholders

Basic

Continuing operations

$

1.88

$

0.60

Discontinued operations

0.06

(0.80

)

Total basic

$

1.94

$

(0.20

)

Diluted

Continuing operations

$

1.85

$

0.59

Discontinued operations

0.06

(0.79

)

Total diluted

$

1.91

$

(0.20

)

Weighted average shares outstanding

Basic

17,271

17,433

Diluted

17,518

17,715

CAI International, Inc.

Consolidated Statements of Cash Flows

(In thousands, except per share data)

(UNAUDITED)

Three Months Ended
March 31,

2021

2020

Cash flows from operating activities

Net income (loss)

$

35,740

$

(1,330

)

Income (loss) from discontinued operations, net of income taxes

1,063

(13,999

)

Income from continuing operations

34,677

12,669

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

Depreciation

28,766

27,259

Amortization of debt issuance costs

815

893

Stock-based compensation expense

540

725

Unrealized loss on foreign exchange

400

220

Gain on sale of rental equipment

(6,743

)

(1,647

)

Deferred income taxes

(940

)

(3,504

)

Bad debt recovery

(30

)

(1,287

)

Changes in other operating assets and liabilities:

Accounts receivable

488

3,849

Prepaid expenses and other assets

1,218

723

Net investment in finance leases

21,605

17,102

Accounts payable, accrued expenses and other liabilities

(2,823

)

130

Unearned revenue

(7

)

(591

)

Net cash provided by operating activities of continuing operations

77,966

56,541

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

(2,177

)

3,584

Net cash provided by operating activities

75,789

60,125

Cash flows from investing activities

Purchase of rental equipment

(171,625

)

(27,500

)

Purchase of financing receivable

(5,174

)

-

Proceeds from sale of rental equipment

28,783

24,534

Receipt of principal payments from financing receivable

2,645

325

Purchase of furniture, fixtures and equipment

(22

)

(310

)

Net cash used in investing activities of continuing operations

(145,393

)

(2,951

)

Net cash provided by investing activities of discontinued operations

1,285

42

Net cash used in investing activities

(144,108

)

(2,909

)

Cash flows from financing activities

Proceeds from debt

141,000

110,000

Principal payments on debt

(59,887

)

(102,681

)

Repurchase of common stock

(12,788

)

-

Dividends paid to common stockholders

(5,192

)

-

Dividends paid to preferred stockholders

(2,207

)

(2,207

)

Exercise of stock options

1,499

113

Net cash provided by financing activities of continuing operations

62,425

5,225

Net cash used in financing activities of discontinued operations

-

(1,061

)

Net cash provided by financing activities

62,425

4,164

Effect on cash of foreign currency translation

(8

)

(77

)

Net (decrease) increase in cash and cash equivalents

(5,902

)

61,303

Cash and restricted cash at beginning of the period

66,502

73,239

Cash and restricted cash at end of the period

$

60,600

$

134,542

CAI International, Inc.

Fleet Data

(UNAUDITED)

As of March 31,

2021

2020

Owned container fleet in TEUs

1,714,552

1,590,880

Managed container fleet in TEUs

55,226

66,721

Total container fleet in TEUs

1,769,778

1,657,601

Owned container fleet in CEUs

1,767,305

1,622,354

Managed container fleet in CEUs

70,255

82,705

Total container fleet in CEUs

1,837,560

1,705,059

Three Months Ended

March 31,

2021

2020

Average Utilization

Container fleet utilization in CEUs

99.6

%

98.2

%

Owned container fleet utilization in CEUs

99.7

%

98.4

%

As of March 31,

2021

2020

Period Ending Utilization

Container fleet utilization in CEUs

99.7

%

98.2

%

Owned container fleet utilization in CEUs

99.7

%

98.3

%

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.

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.

CAI International, Inc.

Reconciliation of GAAP Amounts to Non-GAAP Amounts

(In thousands, except per share data)

(UNAUDITED)

Three Months Ended

March 31,

December 31,

March 31,

2021

2020

2020

Amounts attributable to CAI common stockholders

Net income from continuing operations

$

32,470

$

32,511

$

10,462

Write-off of debt issuance costs

-

2,297

-

Revaluation of deferred tax liability as a result of a change in future state

apportionment caused by the sale of the logistics and rail businesses

-

(3,186

)

-

Adjusted net income from continuing operations

$

32,470

$

31,622

$

10,462

Diluted net income per share from continuing operations

$

1.85

$

1.81

$

0.59

Diluted adjusted net income per share from continuing operations

$

1.85

$

1.76

$

0.59

Weighted average diluted common shares outstanding

17,518

17,949

17,715

CAI International, Inc.

Calculation of Return on Equity

(In thousands)

(UNAUDITED)

Three Months Ended

March 31,

December 31,

March 31,

2021

2020

2020

Adjusted net income from continuing operations

$

32,470

$

31,622

$

10,462

Annualized adjusted net income from continuing operations

129,882

126,488

41,848

Average shareholders' equity 1

$

610,359

$

596,770

$

587,829

Return on equity

21.3

%

21.2

%

7.1

%

1 Average shareholders' equity was calculated using the quarter's beginning and ending shareholders' equity, excluding preferred stock.

Conference Call

A conference call to discuss the financial results for the first quarter of 2021 will be held on Thursday, April 29, 2021 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 "Q1 2021 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 first quarter 2021 results is available on the "Investors" section of our website, www.capps.com.

Use of Non-GAAP Financial Measures

This press release contains non-GAAP financial measures, and includes net income and earnings per share adjusted to reflect the impact of a non-recurring write-off of debt issuance costs and a non-recurring revaluation of deferred tax liability. This press release also refers to return on equity, which is calculated using the non-GAAP financial measure, adjusted net income. These measures are not in accordance with, or an alternative for, generally accepted accounting principles, or GAAP, and may be different from non-GAAP financial measures used by other companies. We believe the presentation of non-GAAP financial measures provides useful information to management and investors regarding various financial and business trends relating to our financial condition and results of operations, and that when GAAP financial measures are viewed in conjunction with non-GAAP financial measures, investors are provided with a more meaningful understanding of our ongoing operating performance. Management utilizes return on equity in evaluating how much profit the Company generates on the shareholders’ equity in the Company and believes it is useful for comparing the profitability of companies in the same industry. Non-GAAP financial measures are not intended to be considered in isolation or as a substitute for GAAP financial measures. To the extent this release contains historical non-GAAP financial measures, we have also provided a reconciliation to the corresponding GAAP financial measures for comparative purposes.

About CAI International, Inc.

CAI is one of the world’s leading transportation finance companies. As of March 31, 2021, CAI operated a worldwide fleet of approximately 1.8 million CEUs of containers. CAI operates through 13 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, 2020, 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/20210429006069/en/

Contacts

David Morris, Chief Accounting Officer
(415) 788-0100
dmorris@capps.com