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

SAN FRANCISCO--(BUSINESS WIRE)--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.


Contacts

Tim Page, Interim President and Chief Executive Officer
(415) 788-0100
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Corporate Offices

Technology Systems Corporation
8502 SW Kansas Ave
Stuart, FL 34997

Phone: +1 772.221.7720

 

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