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CAI International, Inc.$21.96($.02)(.09%)

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 CAI International, Inc. Reports Results for the Second Quarter of 2019 and Announces Its Intention to Sell Its Remaining Railcar Fleet
   Wednesday, August 07, 2019 4:00:00 PM ET

SAN FRANCISCO--(BUSINESS WIRE)--CAI International, Inc. (CAI) (NYSE: CAI), one of the world’s leading transportation finance and logistics companies, today reported results for the second quarter of 2019.

Highlights

  • Net income from continuing operations attributable to CAI common stockholders for the second quarter of 2019 was $12.3 million, or $0.69 per fully diluted share, compared to $19.5 million, or $0.99 per fully diluted share, in the second quarter of 2018.
  • Container lease revenue for the second quarter of 2019 was $75.8 million, an increase of 11% compared to the second quarter of 2018.
  • CAI is actively negotiating the sale of its remaining railcar fleet and if successful expects the sale to be completed before the end of 2019. As a result, the railcar business has been reclassified as a discontinued operation and the railcars reclassified as assets held for sale in the attached financial statements.
  • CAI has restructured its logistics operation reducing its logistics workforce by 23% to bring costs more in line with its existing revenue. The segment is prioritizing near term profitability through a focused strategy around core accounts.
  • Logistics revenue for the second quarter of 2019 was $29.8 million, an increase of 5% compared to the second quarter of 2018.
  • Average utilization for CAI’s owned container fleet during the first quarter of 2019 was 98.8% compared to 99.3% for the second quarter of 2018, and 98.9% for the first quarter of 2019.
  • Under the previously approved share repurchase program, CAI repurchased approximately 0.9 million shares of common stock during the second quarter of 2019 at an average price of $23.36 per share.


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 growth in revenue from continuing operations of 9% compared to the second quarter of 2018 and net income from continuing operations of $12.3 million, or $0.69 per fully diluted share. In our container leasing segment, our revenue growth was 11% in the second quarter as compared to the same quarter in 2018 primarily due to a larger fleet size. We are pleased that our utilization remains strong, averaging 98.8% for the second quarter of 2019. We expect utilization to remain strong for the rest of the year based on continued trade growth and the long-term structure of our lease contracts.

“Despite the strong utilization of our fleet, we have not seen the traditional peak season demand that would normally commence during the second quarter. We believe that the ongoing tariff discussions between the United States and China have created uncertainty around the level of global trade and economic activity. As a result, we do not expect demand for new containers to increase significantly until there is greater certainty around tariff discussions and a stronger economic environment. We have thus limited our incremental committed container investment to $27 million during the second quarter.

“Prices for new containers have declined slightly to approximately $1,750 for a new 20 ft container but we see little incremental ordering by shipping lines or container lessors. Used container prices have declined slightly in Asia, particularly in China where most idle equipment is based. However, in general prices for used containers remain strong outside of Asia due to the overall high utilization rates of lessors and limited equipment being made available by shipping lines.

“During the second quarter we have been actively managing our various businesses to reflect the current uncertain economic environment, and as a result, have made the decision to sell our remaining railcar fleet. Although we continue to see improving trends in the returns and utilization of our railcars, we believe it is in the interest of our shareholders to reallocate the capital invested in our railcar fleet to other investments including the potential repurchase of additional shares. As such, we are in active dialogue with prospective acquirers regarding the sale of our railcar portfolio. We cannot provide assurance that a sale will be successfully concluded, however, we are optimistic that a sale can be completed before the end of 2019. Because we have made the decision to seek a sale of our remaining railcar fleet, we have accounted for the railcar business in the second quarter as a discontinued operation. Under accounting rules for discontinued operations, the railcar business reported a net loss for the quarter of $5.2 million, or $0.29 per fully diluted share. The net loss of the rail business included an impairment arising from the reclassification of rail assets as assets held for sale.

“We believe that global uncertainty around trade growth and tariffs has also affected transportation and logistics demand in the United States this year. Coming into 2019 we expected continued strong demand for transportation services, and as a result, increased our logistics personnel. However, because demand has been softer than we planned we have downsized and restructured our logistics business with a 23% reduction in workforce and the closure of one of our offices. Our priority is to bring costs closer in line with our existing revenue and to place more emphasis on core customers where we have the opportunity to expand the level of business and more efficiently service those customers. Because of the restructuring we recorded a pre-tax charge of $0.5 million in the second quarter related to severance and office closure. We expect third quarter logistics revenue to be more in line with costs.”

Mr. Garcia concluded, “We are focused on positioning the company for the future and deploying our capital to increase shareholder value. We think the decisions we have made during the second quarter position CAI well to achieve those goals.”

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

June 30,

 

December 31,

2019

 

2018

Assets
Current assets
Cash

$

22,183

 

$

20,104

 

Cash held by variable interest entities

 

35,105

 

 

25,211

 

Accounts receivable, net of allowance for doubtful accounts of $3,049 and $2,042 at June 30, 2019 and December 31, 2018, respectively

 

97,070

 

 

95,942

 

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

 

75,174

 

 

75,975

 

Assets held for sale

 

320,793

 

 

449,730

 

Prepaid expenses and other current assets

 

6,783

 

 

1,525

 

Total current assets

 

557,108

 

 

668,487

 

Restricted cash

 

28,733

 

 

30,668

 

Rental equipment, net of accumulated depreciation of $604,417 and $557,559 at June 30, 2019 and December 31, 2018, respectively

 

1,882,452

 

 

1,816,794

 

Net investment in sales-type and direct finance leases

 

460,235

 

 

473,792

 

Financing receivable

 

31,948

 

 

-

 

Goodwill

 

15,794

 

 

15,794

 

Intangible assets, net of accumulated amortization of $6,202 and $5,397 at June 30, 2019 and December 31, 2018, respectively

 

4,928

 

 

5,733

 

Other non-current assets

 

3,692

 

 

1,349

 

Total assets

$

2,984,890

 

$

3,012,617

 

 
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable

$

8,225

 

$

7,371

 

Accrued expenses and other current liabilities

 

21,509

 

 

25,069

 

Unearned revenue

 

6,448

 

 

7,573

 

Current portion of debt

 

313,064

 

 

311,381

 

Rental equipment payable

 

75,810

 

 

74,139

 

Total current liabilities

 

425,056

 

 

425,533

 

Debt

 

1,825,858

 

 

1,847,633

 

Deferred income tax liability

 

40,006

 

 

38,319

 

Other non-current liabilities

 

1,784

 

 

-

 

Total liabilities

 

2,292,704

 

 

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 17,419,585 and 18,764,459 shares at June 30, 2019 and December 31, 2018, respectively

 

2

 

 

2

 

Additional paid-in capital

 

100,301

 

 

132,666

 

Accumulated other comprehensive loss

 

(6,589

)

 

(6,513

)

Retained earnings

 

494,607

 

 

471,112

 

Total stockholders' equity

 

692,186

 

 

701,132

 

Total liabilities and stockholders' equity

$

2,984,890

 

$

3,012,617

 

 
CAI International, Inc.
Consolidated Statements of Income
(In thousands, except per share data)
(UNAUDITED)
 
Three Months Ended Six Months Ended
June 30, June 30,

2019

2018

2019

2018

Revenue
Container lease revenue

$

75,774

 

$

68,333

 

$

151,285

 

$

132,967

 

Logistics revenue

 

29,802

 

 

28,253

 

 

57,518

 

 

49,889

 

Total revenue

 

105,576

 

 

96,586

 

 

208,803

 

 

182,856

 

 
Operating expenses
Depreciation of rental equipment

 

28,657

 

 

26,103

 

 

57,069

 

 

51,281

 

Storage, handling and other expenses

 

4,063

 

 

969

 

 

7,959

 

 

3,297

 

Logistics transportation costs

 

26,091

 

 

24,330

 

 

50,610

 

 

42,995

 

Gain on sale of used rental equipment

 

(1,583

)

 

(2,662

)

 

(3,025

)

 

(4,897

)

Administrative expenses

 

12,338

 

 

11,325

 

 

25,408

 

 

21,550

 

Total operating expenses

 

69,566

 

 

60,065

 

 

138,021

 

 

114,226

 

 
Operating income

 

36,010

 

 

36,521

 

 

70,782

 

 

68,630

 

 
Other expenses
Net interest expense

 

20,021

 

 

14,594

 

 

39,926

 

 

27,948

 

Other expense

 

119

 

 

429

 

 

157

 

 

394

 

Total other expenses

 

20,140

 

 

15,023

 

 

40,083

 

 

28,342

 

 
Income before income taxes

 

15,870

 

 

21,498

 

 

30,699

 

 

40,288

 

Income tax expense

 

1,335

 

 

847

 

 

1,719

 

 

1,758

 

 
Income from continuing operations

 

14,535

 

 

20,651

 

 

28,980

 

 

38,530

 

Loss from discontinued operations, net of income taxes

 

(5,200

)

 

(354

)

 

(1,071

)

 

(1,095

)

Net income

 

9,335

 

 

20,297

 

 

27,909

 

 

37,435

 

Preferred stock dividends

 

2,207

 

 

1,148

 

 

4,414

 

 

1,169

 

Net income attributable to CAI common stockholders

$

7,128

 

$

19,149

 

$

23,495

 

$

36,266

 

 
Amounts attributable to CAI common stockholders
Net income from continuing operations

$

12,328

 

$

19,503

 

$

24,566

 

$

37,361

 

Net loss from discontinued operations

 

(5,200

)

 

(354

)

 

(1,071

)

 

(1,095

)

Net income attributable to CAI common stockholders

$

7,128

 

$

19,149

 

$

23,495

 

$

36,266

 

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

$

0.70

 

$

1.00

 

$

1.36

 

$

1.86

 

Discontinued operations

 

(0.30

)

 

(0.02

)

 

(0.06

)

 

(0.05

)

Total basic

$

0.40

 

$

0.98

 

$

1.30

 

$

1.81

 

Diluted
Continuing operations

$

0.69

 

$

0.99

 

$

1.34

 

$

1.84

 

Discontinued operations

 

(0.29

)

 

(0.02

)

 

(0.06

)

 

(0.05

)

Total diluted

$

0.40

 

$

0.97

 

$

1.28

 

$

1.79

 

 
Weighted average shares outstanding
Basic

 

17,648

 

 

19,613

 

 

18,098

 

 

20,013

 

Diluted

 

17,926

 

 

19,843

 

 

18,401

 

 

20,258

 

 
CAI International, Inc.
Consolidated Statements of Cash Flows
(In thousands, except per share data)
(UNAUDITED)
 
Six Months Ended
June 30,

2019

2018

Cash flows from operating activities
Net income

$

27,909

 

$

37,435

 

Loss from discontinued operations, net of income taxes

 

(1,071

)

 

(1,095

)

Net income from continuing operations

 

28,980

 

 

38,530

 

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

 

57,179

 

 

51,350

 

Amortization of debt issuance costs

 

2,011

 

 

1,808

 

Amortization of intangible assets

 

805

 

 

1,087

 

Stock-based compensation expense

 

1,401

 

 

1,206

 

Unrealized loss on foreign exchange

 

90

 

 

266

 

Gain on sale of used rental equipment

 

(3,025

)

 

(4,897

)

Deferred income taxes

 

1,652

 

 

1,248

 

Bad debt expense

 

529

 

 

315

 

Changes in other operating assets and liabilities:
Accounts receivable

 

(922

)

 

(14,567

)

Prepaid expenses and other assets

 

(654

)

 

(2,121

)

Net investment in sales-type and direct financing leases

 

31,336

 

 

-

 

Accounts payable, accrued expenses and other current liabilities

 

(2,279

)

 

(1,115

)

Unearned revenue

 

(129

)

 

14

 

Net cash provided by operating activities of continuing operations

 

116,974

 

 

73,124

 

Net cash provided by operating activities of discontinued operations

 

919

 

 

5,288

 

Net cash provided by operating activities

 

117,893

 

 

78,412

 

Cash flows from investing activities
Purchase of rental equipment

 

(167,442

)

 

(226,033

)

Purchase of financing receivable

 

(36,379

)

 

-

 

Proceeds from sale of used rental equipment

 

33,479

 

 

25,124

 

Purchase of furniture, fixtures and equipment

 

(249

)

 

(196

)

Receipt of principal payments from financing receivable

 

973

 

 

-

 

Receipt of principal payments from direct finance leases

 

-

 

 

19,046

 

Net cash used in investing activities of continuing operations

 

(169,618

)

 

(182,059

)

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

 

122,770

 

 

(45,594

)

Net cash used in investing activities

 

(46,848

)

 

(227,653

)

Cash flows from financing activities
Proceeds from debt

 

387,082

 

 

675,289

 

Principal payments on debt

 

(324,263

)

 

(564,953

)

Debt issuance costs

 

(496

)

 

(6,201

)

Proceeds from issuance of stock

 

-

 

 

56,699

 

Repurchase of common stock

 

(34,118

)

 

(27,946

)

Dividends paid to preferred stockholders

 

(4,414

)

 

-

 

Exercise of stock options

 

335

 

 

24

 

Net cash provided by financing activities of continuing operations

 

24,126

 

 

132,912

 

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

 

(85,056

)

 

31,016

 

Net cash (used in) provided by financing activities

 

(60,930

)

 

163,928

 

Effect on cash of foreign currency translation

 

(77

)

 

(20

)

Net increase in cash and restricted cash

 

10,038

 

 

14,667

 

Cash and restricted cash at beginning of the period

 

75,983

 

 

47,209

 

Cash and restricted cash at end of the period

$

86,021

 

$

61,876

 

 
CAI International, Inc.
Fleet Data
(UNAUDITED)
 

As of June 30,

2019

2018

 
Owned container fleet in TEUs

1,553,231

1,293,361

Managed container fleet in TEUs

69,805

77,680

Total container fleet in TEUs

1,623,036

1,371,041

 
Owned container fleet in CEUs

1,584,456

1,344,842

Managed container fleet in CEUs

63,492

70,772

Total container fleet in CEUs

1,647,948

1,415,614

 
Owned railcar fleet in units

5,631

7,430

 
 

Three Months Ended

Six Months Ended

June 30,

June 30,

2019

2018

2019

2018

Average Utilization
Container fleet utilization in CEUs

98.8%

99.3%

98.8%

99.3%

Owned container fleet utilization in CEUs

98.8%

99.3%

98.8%

99.3%

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

88.1%

87.2%

89.3%

87.6%

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

84.5%

77.9%

85.7%

76.6%

 

As of June 30,

2019

2018

Period Ending Utilization
Container fleet utilization in CEUs

98.8%

99.2%

Owned container fleet utilization in CEUs

98.8%

99.2%

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

85.9%

87.8%

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

82.4%

79.4%

 
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 second quarter of 2019 will be held on Tuesday, August 7, 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 “Q2 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 second 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 June 30, 2019, CAI operated a worldwide fleet of approximately 1.6 million CEUs of containers, and owned a fleet of 5,631 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.

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

Source: CAI International, Inc.



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