CAI - CAI International Inc. Reports Results for the Third Quarter of 2019
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.
View source version on businesswire.com: https://www.businesswire.com/news/home/20191029006047/en/
Tim Page, Chief Financial Officer
(415) 788-0100
tpage@capps.com