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CAI International, Inc. Reports Results for the Fourth Quarter and Full Year of 2019

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 fourth quarter and full year of 2019.

Summary

  • Net income attributable to CAI common stockholders for the fourth quarter of 2019 was $10.5 million, or $0.60 per fully diluted share.
  • Net income from continuing operations attributable to CAI common stockholders for the year ended December 31, 2019 was $42.2 million, or $2.34 per fully diluted share.
  • Average utilization for CAI’s owned container fleet during the fourth quarter of 2019 was 98.5% compared to 98.6% for the third quarter of 2019.
  • During the fourth quarter of 2019, CAI incurred a $5.2 million pre-tax charge related to a reserve against a customer receivable.
  • Container lease revenue for the year ended December 31, 2019 was $298.9 million, an increase of 5% compared to 2018.
  • Logistics revenue for the year ended December 31, 2019 was $117.7 million, an increase of 6% compared to 2018.
  • As previously announced on December 16, 2019, CAI has been working with Centerview Partners as its strategic financial advisor to explore and evaluate strategic alternatives for CAI to maximize stockholder value. That review is ongoing. There can be no assurance that a transaction or other action will result, or if a transaction is undertaken, its terms or timing.

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, "During the fourth quarter, we continued to take strategic steps to strengthen our business in light of today’s challenged market conditions and other headwinds. We are focused on improving our performance by increasing utilization, disposing of low-yielding assets and reducing operating costs. As we work urgently to enhance near-term financial results, we are also evaluating the best path to maximize long-term shareholder value."

CAI’s operating performance in the fourth quarter was supported by the strong utilization of its container fleet, with 98.5% average utilization of the Company’s owned fleet, compared to 98.6% in the third quarter and current utilization of 98.3%. This minimal decrease in utilization reflects the Company’s commitment to long-dated operating and finance leases, and compares favorably to the typical increased turn-in of containers in the fourth quarter.

Container lease revenue in the fourth quarter was impacted by the extension of two large customer operating lease contracts that converted into finance leases. While the lease extensions had no impact on cash flow, the GAAP accounting treatment resulted in a reduction in lease revenue.

During the fourth quarter, CAI reserved $5.2 million against receivables from one of its shipping line customers. The customer has fallen behind on its regular payment schedule, but continues to operate and has made intermittent payments. CAI is proactively working with this customer to implement a schedule to bring payments back in line with existing agreements.

The developing coronavirus epidemic has resulted in the extended closure of Chinese manufacturing operations, including container manufacturing, and reduced cargo exports out of Chinese ports. While manufacturing in China is slowly resuming and exports from the region are increasing, CAI expects container shipping activity overall to be down during the first half of 2020. While the Company expects a rebound in production and increased cargo demand, the economic impact remains uncertain at this time. CAI is engaging in ongoing discussions with its customers regarding potential impacts to their operations and outlook for the remainder of the year.

While the overall market for railcar leasing has experienced modest customer demand during the past three months, CAI has made substantial progress in reducing the level of its idle railcars. During the fourth quarter, the Company entered into lease commitments representing nearly 30% of its off-hire fleet, and expects that most of these railcars will be placed on lease during the first quarter of 2020. For the three months ended December 31, 2019, rail segment net income from discontinued operations was $1.0 million, or $0.06 per fully diluted share.

The performance of the logistics segment improved in the fourth quarter, despite a challenging freight market. The segment benefited from reduced overhead costs and a focused development of those customer relationships with the highest potential for improved margins. In the first quarter of 2020, CAI reduced the personnel in its international logistics operation to drive progress towards ongoing profitability.

CAI International, Inc.
Consolidated Balance Sheets
(In thousands, except share information)
(UNAUDITED)
 

December 31,

December 31,

 

2019

 

 

2018

 

Assets
Current assets
Cash

$

19,870

 

$

20,104

 

Cash held by variable interest entities

 

26,594

 

 

25,211

 

Accounts receivable, net of allowance for doubtful accounts of $8,171 and $2,042 at December 31, 2019 and 2018, respectively

 

88,452

 

 

95,942

 

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

 

71,228

 

 

75,975

 

Assets held for sale

 

284,513

 

 

449,730

 

Prepaid expenses and other current assets

 

8,471

 

 

1,525

 

Total current assets

 

499,128

 

 

668,487

 

Restricted cash

 

26,775

 

 

30,668

 

Rental equipment, net of accumulated depreciation of $588,815 and $557,559 at December 31, 2019 and 2018, respectively

 

1,820,735

 

 

1,816,794

 

Net investment in sales-type and direct finance leases

 

495,488

 

 

473,792

 

Financing receivable

 

30,693

 

 

-

 

Goodwill

 

15,794

 

 

15,794

 

Intangible assets, net of accumulated amortization of $5,221 and $3,611 at December 31, 2019 and 2018, respectively

 

4,123

 

 

5,733

 

Other non-current assets

 

9,029

 

 

1,349

 

Total assets

$

2,901,765

 

$

3,012,617

 

 
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable

$

7,291

 

$

7,371

 

Accrued expenses and other current liabilities

 

30,479

 

 

25,069

 

Unearned revenue

 

6,405

 

 

7,573

 

Current portion of debt

 

218,094

 

 

311,381

 

Rental equipment payable

 

25,137

 

 

74,139

 

Total current liabilities

 

287,406

 

 

425,533

 

Debt

 

1,880,122

 

 

1,847,633

 

Deferred income tax liability

 

35,376

 

 

38,319

 

Other non-current liabilities

 

5,621

 

 

-

 

Total liabilities

 

2,208,525

 

 

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 17,479,127 and 18,764,459 shares at December 31, 2019 and 2018, respectively

 

2

 

 

2

 

Additional paid-in capital

 

102,709

 

 

132,666

 

Accumulated other comprehensive loss

 

(6,630

)

 

(6,513

)

Retained earnings

 

493,294

 

 

471,112

 

Total stockholders' equity

 

693,240

 

 

701,132

 

Total liabilities and stockholders' equity

$

2,901,765

 

$

3,012,617

 

CAI International, Inc.
Consolidated Statements of Income
(In thousands, except per share data)
(UNAUDITED)
 
Three Months Ended Year Ended
December 31, December 31,

 

2019

 

 

2018

 

 

2019 (1)

 

2018

 

Revenue
Container lease revenue

$

73,521

 

$

76,626

 

$

298,853

 

$

284,924

 

Logistics revenue

 

29,899

 

 

30,220

 

 

117,687

 

 

111,471

 

Total revenue

 

103,420

 

 

106,846

 

 

416,540

 

 

396,395

 

 
Operating expenses
Depreciation of rental equipment

 

27,536

 

 

28,093

 

 

111,917

 

 

107,109

 

Storage, handling and other expenses

 

4,902

 

 

3,050

 

 

17,533

 

 

8,853

 

Logistics transportation costs

 

26,462

 

 

26,634

 

 

104,109

 

 

97,170

 

Gain on sale of rental equipment

 

(1,555

)

 

(2,356

)

 

(4,402

)

 

(9,886

)

Administrative expenses

 

14,589

 

 

12,795

 

 

52,699

 

 

46,240

 

Total operating expenses

 

71,934

 

 

68,216

 

 

281,856

 

 

249,486

 

 
Operating income

 

31,486

 

 

38,630

 

 

134,684

 

 

146,909

 

 
Other expenses
Net interest expense

 

19,109

 

 

18,815

 

 

79,158

 

 

62,573

 

Other (income) expense

 

(224

)

 

167

 

 

313

 

 

677

 

Total other expenses

 

18,885

 

 

18,982

 

 

79,471

 

 

63,250

 

 
Income before income taxes

 

12,601

 

 

19,648

 

 

55,213

 

 

83,659

 

Income tax expense

 

852

 

 

1,357

 

 

4,192

 

 

4,554

 

 
Income from continuing operations

 

11,749

 

 

18,291

 

 

51,021

 

 

79,105

 

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

 

973

 

 

1,116

 

 

(20,010

)

 

(509

)

Net income

 

12,722

 

 

19,407

 

 

31,011

 

 

78,596

 

Preferred stock dividends

 

2,208

 

 

2,207

 

 

8,829

 

 

5,124

 

Net income attributable to CAI common stockholders

$

10,514

 

$

17,200

 

$

22,182

 

$

73,472

 

 
Amounts attributable to CAI common stockholders
Net income from continuing operations

$

9,541

 

$

16,084

 

$

42,192

 

$

73,981

 

Net income (loss) from discontinued operations

 

973

 

 

1,116

 

 

(20,010

)

 

(509

)

Net income attributable to CAI common stockholders

$

10,514

 

$

17,200

 

$

22,182

 

$

73,472

 

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

$

0.54

 

$

0.84

 

$

2.38

 

$

3.78

 

Discontinued operations

 

0.06

 

 

0.06

 

 

(1.13

)

 

(0.02

)

Total basic

$

0.60

 

$

0.90

 

$

1.25

 

$

3.76

 

Diluted
Continuing operations

$

0.54

 

$

0.83

 

$

2.34

 

$

3.73

 

Discontinued operations

 

0.06

 

 

0.06

 

 

(1.11

)

 

(0.02

)

Total diluted

$

0.60

 

$

0.89

 

$

1.23

 

$

3.71

 

 
Weighted average common shares outstanding
Basic

 

17,379

 

 

19,034

 

 

17,731

 

 

19,562

 

Diluted

 

17,667

 

 

19,296

 

 

18,011

 

 

19,822

 

 
(1) The results for the year ended December 31, 2019 include immaterial corrections made to the previously reported results for the periods ended June 30 and September 30, 2019.
CAI International, Inc.
Consolidated Statements of Cash Flows
(In thousands, except per share data)
(UNAUDITED)
 

Year Ended
December 31,

 

2019

 

 

2018

 

Cash flows from operating activities
Net income

$

31,011

 

$

78,596

 

Loss from discontinued operations, net of income taxes

 

(20,010

)

 

(509

)

Income from continuing operations

 

51,021

 

 

79,105

 

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

 

112,317

 

 

107,304

 

Amortization of debt issuance costs

 

3,921

 

 

3,650

 

Amortization of intangible assets

 

1,610

 

 

1,989

 

Stock-based compensation expense

 

2,758

 

 

2,583

 

Unrealized loss on foreign exchange

 

16

 

 

436

 

Gain on sale of rental equipment

 

(4,402

)

 

(9,886

)

Deferred income taxes

 

3,734

 

 

4,172

 

Bad debt expense

 

5,885

 

 

388

 

Changes in other operating assets and liabilities:
Accounts receivable

 

3,864

 

 

(18,365

)

Prepaid expenses and other assets

 

(2,245

)

 

(1,131

)

Net investment in sales-type and direct finance leases

 

65,688

 

 

-

 

Accounts payable, accrued expenses and other current liabilities

 

6,518

 

 

(834

)

Unearned revenue

 

5

 

 

(174

)

Net cash provided by operating activities of continuing operations

 

250,690

 

 

169,237

 

Net cash provided by operating activities of discontinued operations

 

3,307

 

 

10,533

 

Net cash provided by operating activities

 

253,997

 

 

179,770

 

Cash flows from investing activities
Purchase of rental equipment

 

(316,857

)

 

(739,944

)

Purchase of financing receivable

 

(37,139

)

 

-

 

Proceeds from sale of rental equipment

 

81,692

 

 

65,602

 

Purchase of furniture, fixtures and equipment

 

(2,285

)

 

(823

)

Receipt of principal payments from financing receivable

 

2,720

 

 

-

 

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

 

-

 

 

43,352

 

Net cash used in investing activities of continuing operations

 

(271,869

)

 

(631,813

)

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

 

123,424

 

 

(31,530

)

Net cash used in investing activities

 

(148,445

)

 

(663,343

)

Cash flows from financing activities
Proceeds from debt

 

705,045

 

 

1,605,564

 

Principal payments on debt

 

(631,875

)

 

(1,143,908

)

Debt issuance costs

 

(839

)

 

(3,861

)

Proceeds from issuance of common and preferred stock

 

-

 

 

103,433

 

Repurchase of common stock

 

(34,118

)

 

(40,869

)

Dividends paid to preferred stockholders

 

(8,828

)

 

(3,260

)

Exercise of stock options

 

1,285

 

 

24

 

Net cash provided by financing activities of continuing operations

 

30,670

 

 

517,123

 

Net cash used in financing activities of discontinued operations

 

(139,149

)

 

(4,773

)

Net cash (used in) provided by financing activities

 

(108,479

)

 

512,350

 

Effect on cash of foreign currency translation

 

183

 

 

(3

)

Net (decrease) increase in cash and restricted cash

 

(2,744

)

 

28,774

 

Cash and restricted cash at beginning of the period

 

75,983

 

 

47,209

 

Cash and restricted cash at end of the period

$

73,239

 

$

75,983

 

CAI International, Inc.
Fleet Data
(UNAUDITED)
 
As of December 31,

2019

2018

 
Owned container fleet in TEUs

1,611,527

1,465,799

Managed container fleet in TEUs

69,650

74,246

Total container fleet in TEUs

1,681,177

1,540,045

 
Owned container fleet in CEUs

1,642,118

1,501,060

Managed container fleet in CEUs

85,698

67,647

Total container fleet in CEUs

1,727,816

1,568,707

 
Owned railcar fleet in units

5,498

7,279

 
 
Three Months Ended Year Ended
December 31, December 31,

2019

2018

2019

2018

Average Utilization
Container fleet utilization in CEUs

98.4%

99.2%

98.6%

99.2%

Owned container fleet utilization in CEUs

98.5%

99.2%

98.7%

99.2%

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

84.3%

90.0%

87.2%

88.6%

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

81.1%

86.7%

83.8%

81.0%

 
As of December 31,

2019

2018

Period Ending Utilization
Container fleet utilization in CEUs

98.3%

99.0%

Owned container fleet utilization in CEUs

98.4%

99.1%

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

84.0%

90.3%

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

80.9%

86.8%

 
 
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 fourth quarter and full year of 2019 will be held on Thursday, March 5, 2020 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 "Q4 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 fourth 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 December 31, 2019, CAI operated a worldwide fleet of approximately 1.7 million CEUs of containers, and owned a fleet of 5,498 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: the statements regarding CAI’s intention to sell its remaining railcar fleet, management’s business outlook on the container leasing business, management's outlook for growth of CAI’s leasing investments and CAI’s ongoing exploration of its strategic alternatives. 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/20200305005825/en/

Contacts

Tim Page, Chief Financial Officer
(415) 788-0100
tpage@capps.com