Business Wire | Oct 29, 2020 04:00PM EDT

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

Oct. 29, 2020

SAN FRANCISCO--(BUSINESS WIRE)--Oct. 29, 2020--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, June 30, September 30, 2020 2020 2019 Container lease $ $ $ revenue 73,890 69,443 75,535

Continuing operations GAAPNet income(loss) $ $ $ )attributable to 14,758 13,749 (7,350commonstockholdersNet income per $ $ $ )share - diluted 0.83 0.78 (0.42

Continuingoperations non-GAAP ^1Adjusted netincome $ $ $ attributable to 18,399 14,869 12,027commonstockholdersAdjusted net $ $ $ income per 1.04 0.84 0.69share - diluted Return onequity 12.5 % 10.2 % 8.3 %(continuingoperations) ^2 Total container fleet size in 1,732,547 1,709,697 1,737,958 CEUs at end ofperiodContainer fleet 99.0 % 97.8 % 98.4 %utilization at end of period 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 $7,671at September 30, 2020 and December 31, 2019, 65,574 72,984 respectivelyCurrent portion of net investment in finance 75,240 71,274 leasesPrepaid 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 $620,990at September 30, 2020 and December 31, 2019, 2,018,142 2,102,839 respectivelyNet 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 26,423 25,206 liabilitiesUnearned 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 10,000,0008.50% Series A fixed-to-floating rate cumulative redeemable perpetual preferredstock, issued and outstanding 2,199,610 54,990 54,990 shares, at liquidation preference8.50% Series B fixed-to-floating rate cumulative redeemable perpetual preferredstock, issued and outstanding 1,955,000 48,875 48,875 shares, at liquidation preferenceCommon stock: par value $.0001 per share;authorized 84,000,000 shares; issued and outstanding17,742,443 and 17,479,127 shares at September 2 2 30, 2020 and December 31, 2019, respectivelyAdditional 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 30,428 28,030 86,322 89,629 equipmentImpairment of rental - 25,632 19,724 32,955 equipmentStorage, handling and 6,686 8,125 18,908 18,444 other expensesGain on sale of rental (2,729 ) (3,168 ) (6,451 ) (12,265 )equipmentAdministrative 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 3,641 - 3,641 - issuance costsOther (income) expense (306 ) 380 (157 ) 537

Total other expenses 19,965 23,482 58,088 70,702

Income (loss) before 18,314 (9,973 ) 31,661 19,580 income taxesIncome tax expense 1,349 (4,830 ) (594 ) (2,098 )(benefit) Income (loss) from 16,965 (5,143 ) 32,255 21,678 continuing operationsLoss from discontinued (1,522 ) (636 ) (18,768 ) (3,389 )operations, net of income taxesNet income (loss) 15,443 (5,779 ) 13,487 18,289

Preferred stock dividends 2,207 2,207 6,621 6,621

Net income (loss) $ 13,236 $ (7,986 ) $ 6,866 $ 11,668 attributable to CAI common stockholders Amounts attributable to CAI common stockholdersNet income (loss) from $ 14,758 $ (7,350 ) $ 25,634 $ 15,057 continuing operationsNet loss from (1,522 ) (636 ) (18,768 ) (3,389 )discontinued operationsNet income (loss) $ 13,236 $ (7,986 ) $ 6,866 $ 11,668 attributable to CAI common stockholders Net income (loss) per share attributable toCAI 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 outstandingBasic 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 (18,768 ) (3,389 )taxesIncome from continuing operations 32,255 21,678

Adjustments to reconcile income from continuingoperations 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 6,839 3,579 costsStock-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 214 3,541 liabilitiesUnearned revenue (437 ) (1,772 )

Net cash provided by operating activities of 195,321 189,625 continuing operationsNet cash provided by (used in) operating 2,883 (1,423 )activities of discontinued operationsNet 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 4,052 1,825 receivablePurchase of furniture, fixtures and equipment (441 ) (1,416 )

Net cash provided by (used in) investing 10,990 (113,577 )activities of continuing operationsNet cash provided by (used in) investing 5,614 (305 )activities of discontinued operationsNet cash provided by (used in) investing 16,604 (113,882 )activitiesCash 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 94,415 (73,399 )activities of continuing operationsNet cash used in financing activities of - - discontinued operationsNet cash provided by (used in) financing 94,415 (73,399 )activitiesEffect 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 73,239 75,983 periodCash 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 Nine Months Ended Ended

September 30, September 30,

2020 2019 2020 2019

Average UtilizationContainer fleet utilization in 98.4 % 98.4 % 98.2 % 98.7 %CEUsOwned container fleet 98.4 % 98.6 % 98.3 % 98.7 %utilization in CEUsRailcar fleet utilization in 87.8 % 85.3 % 87.5 % 88.1 %units - excluding new units notyet leasedRailcar fleet utilization in 85.1 % 82.1 % 84.6 % 84.6 %units - including new units notyet leased As of September 30,

2020 2019

Period Ending UtilizationContainer fleet utilization in 99.0 % 98.4 %CEUsOwned container fleet 99.1 % 98.5 %utilization in CEUsRailcar fleet utilization in 88.7 % 85.3 %units - excluding new units notyet leasedRailcar fleet utilization in 86.1 % 82.1 %units - including new units notyet leasedUtilization 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 ourvarious equipment types to that of a standard 20 foot dry van container. For example, the CEU ratio for a standard 40 foot dry vancontainer is 1.6, and a 40 foot high cube container is 1.7.Utilization of containers is computed by dividing the total units on lease inCEUs (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 unitsdesignated for sale.Utilization of railcars is computed by dividing the total number of railcars onlease by the total number of railcars in our fleet.The impact on utilization of including new units not yet leased in the totalrailcar fleet has been included in the table above. CEU is a ratio used to convert the actual number of containers in our fleet toa figure based on the relative purchase prices of ourvarious equipment types to that of a standard 20 foot dry van container. Forexample, the CEU ratio for a standard 40 foot dry vancontainer 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 June 30, September 30, 30,

2020 2020 2019

Amounts attributable to CAI commonstockholders Net income (loss) from continuing $ 14,758 $ 13,749 $ (7,350 )operationsWrite-off of debt issuance costs 3,641 432 -

Impairment of rental equipment - 557 25,362

Tax effect of impairment of rental - 131 (5,985 )equipmentAdjusted net income from continuing $ 18,399 $ 14,869 $ 12,027 operations Diluted net income (loss) per share $ 0.83 $ 0.78 $ (0.42 )from continuing operations Diluted adjusted net income per share $ 1.04 $ 0.84 $ 0.69 from continuing operations Weighted average number of commonshares used to calculateDiluted net income (loss) per share 17,706 17,601 17,330 from continuing operationsDiluted adjusted net income per share 17,706 17,601 17,525 from continuing operations CAI International, Inc.Calculation of Return on Equity(In thousands)(UNAUDITED) Three Months Ended

September June 30, September 30, 30,

2020 2020 2019

Adjusted net income from continuing $ 18,399 $ 14,869 $ 12,027 operationsAnnualized adjusted net income from 73,596 59,478 48,106 continuing operations 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.

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