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

SAN FRANCISCO--()--CAI International, Inc. (CAI) (NYSE: 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.

Contacts

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

Contacts

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