CAI International, Inc. Reports Results for the Third Quarter of 2020

·18-min read

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

Highlights

  • Net income from continuing operations attributable to CAI common stockholders for the third quarter of 2020 was $14.8 million, or $0.83 per fully diluted share.

  • Adjusted net income from continuing operations attributable to CAI common stockholders1 for the third quarter of 2020 was $18.4 million, or $1.04 per fully diluted share.

  • Container lease revenue for the third quarter of 2020 was $73.9 million, compared to $69.4 million in the second quarter of 2020.

  • CAI’s Board of Directors declared a cash dividend of $0.25 per common share payable on December 24, 2020 to shareholders of record as of December 9, 2020.

  • Average utilization for CAI’s owned container fleet during the third quarter of 2020 was 98.4%, compared to 98.0% for the second quarter of 2020. Current utilization is 99.2%.

  • During the quarter, the Company disposed of its logistics business and continues to explore opportunities to divest of its railcar leasing business.

  • In September 2020, the Company issued $742.7 million of asset-backed notes at a fixed rate averaging 2.3%. The proceeds have been used to refinance $709.4 million of asset-backed debt with an average interest rate of 4.1%.

Financial and Operating Highlights

Three Months Ended

September 30,
2020

June 30,
2020

September 30,
2019

Container lease revenue

$

73,890

$

69,443

$

75,535

Continuing operations GAAP

Net income (loss) attributable to common stockholders

$

14,758

$

13,749

$

(7,350

)

Net income per share - diluted

$

0.83

$

0.78

$

(0.42

)

Continuing operations non-GAAP 1

Adjusted net income attributable to common stockholders

$

18,399

$

14,869

$

12,027

Adjusted net income per share - diluted

$

1.04

$

0.84

$

0.69

Return on equity (continuing operations) 2

12.5

%

10.2

%

8.3

%

Total container fleet size in CEUs at end of period

1,732,547

1,709,697

1,737,958

Container fleet utilization at end of period

99.0

%

97.8

%

98.4

%

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.

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 third quarter. Adjusted net income from continuing operations attributable to CAI common stockholders was $18.4 million an increase of 24% compared to the second quarter, as the Company benefited from very strong container demand.

"During the third quarter and continuing into the fourth quarter, global containerized trade volumes were ahead of the same period last year. Many shipping lines had significantly reduced the acquisition of new containers last year as a result of uncertainties surrounding the US/China trade disputes and then again in the first half of this year because of uncertainties as result of the global pandemic. Consequently, as trade volumes increased, many shipping lines were in the position of having to add container capacity well in excess of normal growth and fleet attrition. We expect this outsized demand for containers to continue well into next year.

"As global shipping volumes increased, we were able to quickly respond to our customers’ needs for additional containers. CAI’s growth in lease revenue during the quarter benefited from the lease-out of approximately $130 million of new and sale leaseback containers. Customer demand for leasing mid-life and older containers has also been strong. We have a robust forward order book and expect to take delivery of $110 million of new containers during the fourth quarter, with an additional $160 million of new containers scheduled for delivery early next year; in total $400 million of new investment since the end of the second quarter, which represents approximately 17% of our second quarter container book value. Virtually all of this new investment is supported by committed long term leases with attractive mid-teen plus returns.

"The Company continues to maintain its exceptional industry leading utilization. Average utilization in the quarter was 98.4%. Utilization was 99.1% at quarter end and is currently 99.2%. Our continuing strong performance in utilization reflects the long-term nature of our contracts, our focus on tight contract redelivery terms 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 2.52%. Approximately 82% of the Company’s debt is now fixed rate. During the quarter, we issued $742.7 million of new ABS notes which carry a cash interest rate of 2.27%. These notes were primarily used to refinance $709.4 million of higher interest rate ABS notes. As a result of this refinancing we expect our average cash interest rate across all of our debt facilities will be in the range of 2.0% in the fourth quarter. The refinancing of the ABS notes is estimated to result in a $11.4 million reduction in cash interest expense in 2021."

Mr. Page concluded, "The revenue generated from our strong order book combined with our industry-leading utilization, a robust re-sale market and lower interest costs should all result in an expected double-digit growth in net income from continuing operations in the fourth quarter and a significant increase in ROE, setting the stage for a strong beginning to 2021."

CAI International, Inc.

Consolidated Balance Sheets

(In thousands, except share information)

(UNAUDITED)

September 30,

December 31,

2020

2019

Assets

Current assets

Cash

$

15,516

$

19,870

Current portion of restricted cash

316,915

-

Cash held by variable interest entities

26,784

26,594

Accounts receivable, net of allowance for doubtful accounts of $418 and $7,671

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

65,574

72,984

Current portion of net investment in finance leases

75,240

71,274

Prepaid expenses and other current assets

15,746

9,606

Assets held for sale

-

37,781

Total current assets

515,775

238,109

Restricted cash

23,232

26,775

Rental equipment, net of accumulated depreciation of $676,330 and $620,990

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

2,018,142

2,102,839

Net investment in finance leases

455,168

496,094

Financing receivable

51,384

30,693

Other non-current assets

5,493

7,255

Total assets

$

3,069,194

$

2,901,765

Liabilities and Stockholders' Equity

Current liabilities

Accounts payable

$

3,868

$

4,534

Accrued expenses and other current liabilities

26,423

25,206

Unearned revenue

6,851

6,405

Current portion of debt

502,013

218,094

Rental equipment payable

89,634

25,137

Liabilities held for sale

-

8,752

Total current liabilities

628,789

288,128

Debt

1,706,170

1,880,122

Derivative instruments

1,820

-

Deferred income tax liability

29,626

35,376

Other non-current liabilities

3,759

4,899

Total liabilities

2,370,164

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

17,742,443 and 17,479,127 shares at September 30, 2020 and December 31, 2019, respectively

2

2

Additional paid-in capital

106,990

102,709

Accumulated other comprehensive loss

(7,560

)

(6,630

)

Retained earnings

495,733

493,294

Total stockholders' equity

699,030

693,240

Total liabilities and stockholders' equity

$

3,069,194

$

2,901,765

CAI International, Inc.

Consolidated Statements of Operations

(In thousands, except per share data)

(UNAUDITED)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2020

2019

2020

2019

Revenue

Container lease revenue

$

73,890

$

75,535

$

212,446

$

225,332

Rail lease revenue

5,162

5,871

17,247

20,214

Total revenue

79,052

81,406

229,693

245,546

Operating expenses

Depreciation of rental equipment

30,428

28,030

86,322

89,629

Impairment of rental equipment

-

25,632

19,724

32,955

Storage, handling and other expenses

6,686

8,125

18,908

18,444

Gain on sale of rental equipment

(2,729

)

(3,168

)

(6,451

)

(12,265

)

Administrative expenses

6,388

9,278

21,441

26,501

Total operating expenses

40,773

67,897

139,944

155,264

Operating income

38,279

13,509

89,749

90,282

Other expenses

Net interest expense

16,630

23,102

54,604

70,165

Write-off of debt issuance costs

3,641

-

3,641

-

Other (income) expense

(306

)

380

(157

)

537

Total other expenses

19,965

23,482

58,088

70,702

Income (loss) before income taxes

18,314

(9,973

)

31,661

19,580

Income tax expense (benefit)

1,349

(4,830

)

(594

)

(2,098

)

Income (loss) from continuing operations

16,965

(5,143

)

32,255

21,678

Loss from discontinued operations, net of income taxes

(1,522

)

(636

)

(18,768

)

(3,389

)

Net income (loss)

15,443

(5,779

)

13,487

18,289

Preferred stock dividends

2,207

2,207

6,621

6,621

Net income (loss) attributable to CAI common stockholders

$

13,236

$

(7,986

)

$

6,866

$

11,668

Amounts attributable to CAI common stockholders

Net income (loss) from continuing operations

$

14,758

$

(7,350

)

$

25,634

$

15,057

Net loss from discontinued operations

(1,522

)

(636

)

(18,768

)

(3,389

)

Net income (loss) attributable to CAI common stockholders

$

13,236

$

(7,986

)

$

6,866

$

11,668

Net income (loss) per share attributable to

CAI common stockholders

Basic

Continuing operations

$

0.84

$

(0.42

)

$

1.47

$

0.84

Discontinued operations

(0.09

)

(0.04

)

(1.08

)

(0.19

)

Total basic

$

0.75

$

(0.46

)

$

0.39

$

0.65

Diluted

Continuing operations

$

0.83

$

(0.42

)

$

1.45

$

0.83

Discontinued operations

(0.08

)

(0.04

)

(1.06

)

(0.19

)

Total diluted

$

0.75

$

(0.46

)

$

0.39

$

0.64

Weighted average shares outstanding

Basic

17,570

17,330

17,491

17,850

Diluted

17,706

17,330

17,664

18,122

CAI International, Inc.

Consolidated Statements of Cash Flows

(In thousands, except per share data)

(UNAUDITED)

Nine Months Ended
September 30,

2020

2019

Cash flows from operating activities

Net income

$

13,487

$

18,289

Loss from discontinued operations, net of income taxes

(18,768

)

(3,389

)

Income from continuing operations

32,255

21,678

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

Depreciation

86,919

89,664

Impairment of rental equipment

19,724

32,955

Amortization and write-off of debt issuance costs

6,839

3,579

Stock-based compensation expense

1,416

2,202

Unrealized (gain) loss on foreign exchange

(229

)

345

Gain on sale of rental equipment

(6,451

)

(12,265

)

Deferred income taxes

(5,021

)

(4,796

)

Bad debt (recovery) expense

(6,236

)

1,319

Changes in other operating assets and liabilities:

Accounts receivable

11,774

4,562

Prepaid expenses and other assets

(106

)

(40

)

Net investment in finance leases

54,660

48,653

Accounts payable, accrued expenses and other liabilities

214

3,541

Unearned revenue

(437

)

(1,772

)

Net cash provided by operating activities of continuing operations

195,321

189,625

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

2,883

(1,423

)

Net cash provided by operating activities

198,204

188,202

Cash flows from investing activities

Purchase of rental equipment

(48,782

)

(335,849

)

Purchase of financing receivable

(30,846

)

(37,139

)

Proceeds from sale of rental equipment

87,007

259,002

Receipt of principal payments from financing receivable

4,052

1,825

Purchase of furniture, fixtures and equipment

(441

)

(1,416

)

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

10,990

(113,577

)

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

5,614

(305

)

Net cash provided by (used in) investing activities

16,604

(113,882

)

Cash flows from financing activities

Proceeds from debt

1,025,527

581,582

Principal payments on debt

(915,157

)

(614,006

)

Debt issuance costs

(8,304

)

(768

)

Proceeds from issuance of common stock

116

-

Repurchase of common stock

-

(34,118

)

Dividends paid to common stockholders

(4,427

)

-

Dividends paid to preferred stockholders

(6,621

)

(6,621

)

Exercise of stock options

3,281

532

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

94,415

(73,399

)

Net cash used in financing activities of discontinued operations

-

-

Net cash provided by (used in) financing activities

94,415

(73,399

)

Effect on cash of foreign currency translation

(15

)

(874

)

Net increase in cash and restricted cash

309,208

47

Cash and restricted cash at beginning of the period

73,239

75,983

Cash and restricted cash at end of the period

$

382,447

$

76,030

CAI International, Inc.

Fleet Data

(UNAUDITED)

As of September 30,

2020

2019

Owned container fleet in TEUs

1,622,102

1,623,588

Managed container fleet in TEUs

60,085

72,462

Total container fleet in TEUs

1,682,187

1,696,050

Owned container fleet in CEUs

1,657,067

1,649,465

Managed container fleet in CEUs

75,480

88,493

Total container fleet in CEUs

1,732,547

1,737,958

Owned railcar fleet in units

5,039

5,504

Three Months Ended

Nine Months Ended

September 30,

September 30,

2020

2019

2020

2019

Average Utilization

Container fleet utilization in CEUs

98.4

%

98.4

%

98.2

%

98.7

%

Owned container fleet utilization in CEUs

98.4

%

98.6

%

98.3

%

98.7

%

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

87.8

%

85.3

%

87.5

%

88.1

%

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

85.1

%

82.1

%

84.6

%

84.6

%

As of September 30,

2020

2019

Period Ending Utilization

Container fleet utilization in CEUs

99.0

%

98.4

%

Owned container fleet utilization in CEUs

99.1

%

98.5

%

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

88.7

%

85.3

%

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

86.1

%

82.1

%

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.

CAI International, Inc.

Reconciliation of GAAP Amounts to Non-GAAP Amounts

(In thousands, except per share data)

(UNAUDITED)

Three Months Ended

September 30,

June 30,

September 30,

2020

2020

2019

Amounts attributable to CAI common stockholders

Net income (loss) from continuing operations

$

14,758

$

13,749

$

(7,350

)

Write-off of debt issuance costs

3,641

432

-

Impairment of rental equipment

-

557

25,362

Tax effect of impairment of rental equipment

-

131

(5,985

)

Adjusted net income from continuing operations

$

18,399

$

14,869

$

12,027

Diluted net income (loss) per share from continuing operations

$

0.83

$

0.78

$

(0.42

)

Diluted adjusted net income per share from continuing operations

$

1.04

$

0.84

$

0.69

Weighted average number of common shares used to calculate

Diluted net income (loss) per share from continuing operations

17,706

17,601

17,330

Diluted adjusted net income per share from continuing operations

17,706

17,601

17,525

CAI International, Inc.

Calculation of Return on Equity

(In thousands)

(UNAUDITED)

Three Months Ended

September 30,

June 30,

September 30,

2020

2020

2019

Adjusted net income from continuing operations

$

18,399

$

14,869

$

12,027

Annualized adjusted net income from continuing operations

73,596

59,478

48,106

Average shareholders' equity 1

$

589,384

$

584,942

$

580,867

Return on equity

12.5

%

10.2

%

8.3

%

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 third quarter of 2020 will be held on Thursday, October 29, 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 "Q3 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 third quarter 2020 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, the impairment of rental equipment and the tax effects of such impairment. 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 September 30, 2020, CAI operated a worldwide fleet of approximately 1.7 million CEUs of containers, and owned a fleet of 5,039 railcars that it leases within North America. CAI operates through 14 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/20201029006192/en/

Contacts

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