Business Wire | Aug 6, 2020 04:00PM EDT

CAI International, Inc. Reports Results for the Second Quarter of 2020 and Declares Quarterly Dividend

Aug. 06, 2020

SAN FRANCISCO--(BUSINESS WIRE)--Aug. 06, 2020--CAI International, Inc. ("CAI" or the "Company") (NYSE: CAI), one of the world's leading transportation finance and logistics companies, today reported results for the second quarter of 2020.

Summary

* Net loss attributable to CAI common stockholders for the second quarter of 2020 was $2.8 million, or $0.16 per fully diluted share, primarily due to intangible asset write-offs as a result of accounting for the logistics business as a discontinued operation. * Net income from continuing operations attributable to CAI common stockholders for the second quarter of 2020 was $13.7 million, or $0.78 per fully diluted share. * Container lease revenue for the second quarter of 2020 was $69.4 million, compared to $69.1 million in the first quarter of 2020. * CAI's Board of Directors declared the Company's first quarterly cash dividend of $0.25 per common share payable on September 25, 2020 to shareholders of record as of September 11, 2020. * The Company is currently experiencing strong demand from a number of customers for new container leases. Container costs are stable and lease returns are attractive. * Average utilization for CAI's owned container fleet during the second quarter of 2020 was 98.0%, compared to 98.4% for the first quarter of 2020. Current utilization is 98.2%. * In early July 2020, the Company entered into an interest rate swap fixing $500 million of its variable rate debt. Approximately 77% of the Company's debt is now fixed rate. * The Company has approximately $180 million of liquidity in the form of available cash on hand and ability to draw on its credit facilities without additional collateral being provided. * As previously announced, on June 15, 2020, CAI terminated its formal strategic alternatives review process. The Company is committed to focusing solely on the container business and is actively pursuing its strategy to divest of non-core businesses. * CAI's Board of Directors has adopted formal stock ownership guidelines for its non-executive directors.

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 second quarter. Net income from continuing operations attributable to CAI common stockholders was $13.7 million, or $0.78 per fully diluted share. The quarter began with a great deal of uncertainty as we were in the depths of the COVID-19 global pandemic. As the quarter progressed, markets began to stabilize, liquidity returned and expectations for recovery improved. The global container shipping industry right sized fleets, rationalized pricing and moved to profitability. Consequently, the Company did not experience any meaningful payment delays or credit issues and we have been generating strong free cash flow. As we have entered the third quarter, utilization is increasing, and we are experiencing strong demand from our customers for both depot and new equipment.

"During the first half of 2020, we saw limited customer demand for leased containers. Consequently, the Company took delivery of only $41 million, or 30,000 TEU, of containers in the first two quarters of 2020. However, demand has been particularly strong since mid-June and we have commitments from customers to lease approximately 70,000 TEU of containers, all of which we expect to be picked up before the end of the third quarter. Additionally, we have lease commitments for approximately 50,000 TEU of containers for delivery in the fourth quarter of 2020. All of these transactions have attractive returns associated with them. As a result of this strong customer demand, we expect our core container business to generate increasing net income in the coming quarters.

"CAI's operating performance during the quarter was supported by the strong 98.0% utilization of our owned container fleet. Utilization increased towards the end of June and currently stands at 98.2%. We expect a continuation in the trend of increasing utilization in the coming months as global demand increases. Our continuing strong performance in utilization reflects the long-term nature of our contracts, tight redelivery restrictions 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 2.88%. In early July we completed an interest rate hedging transaction swapping one month LIBOR for a fixed rate of 0.29% on $500 million of our floating rate debt for a term of five years. Approximately 77% of the Company's debt is now fixed rate. Going forward, we plan to maintain fixed rate debt between 75% and 85% of our total debt.

"During the second quarter, we terminated our previously announced strategic review process and made a decision to focus on our container business and divest our non-core businesses. We have accounted for the logistics business in the second quarter as a discontinued operation. Under accounting rules for discontinued operations, the logistics business reported a net loss for the quarter of $16.6 million, or $0.94 per fully diluted share, primarily due to the non-cash impairment of goodwill and intangible assets arising from the reclassification of logistics assets as assets held for sale. We are pleased to report that we are engaged in advanced discussions with a potential purchaser of our logistics business. We continue to explore disposing of our rail investments in the most beneficial manner for shareholders.

"We also are pleased to announce that we have initiated a program of returning capital to our shareholders through the payment of regular quarterly dividends, the first of which is a dividend of $0.25 per share payable on September 25, 2020 to common shareholders of record as of September 11, 2020."

Mr. Page concluded, "We are focused on deploying our capital to increase shareholder value, whether that be through regular shareholder dividends, investing in containers during periods when returns are attractive, or share repurchases when container returns don't meet our investment return thresholds. We believe the actions taken and the decisions we have made during the second quarter will provide the momentum to position CAI to achieve enhanced shareholder returns."

CAI International, Inc.Consolidated Balance Sheets(In thousands, except share information)(UNAUDITED) June 30, December 31, 2020 2019

AssetsCurrent assetsCash $ 20,159 $ 19,870

Cash held by variable interest entities 27,703 26,594

Accounts receivable, net of allowance fordoubtful accounts of $3,942 and $7,671at June 30, 2020 and December 31, 2019, 70,020 72,984 respectivelyCurrent portion of net investment in finance 75,906 71,274 leasesPrepaid expenses and other current assets 14,880 9,606

Assets held for sale 13,143 37,781

Total current assets 221,811 238,109

Restricted cash 22,188 26,775

Rental equipment, net of accumulated depreciation 1,978,826 2,102,839 of $660,418 and $620,990 at June 30, 2020 andDecember 31, 2019, respectivelyNet investment in finance leases 463,251 496,094

Financing receivable 53,821 30,693

Other non-current assets 6,036 7,255

Total assets $ 2,745,933 $ 2,901,765

Liabilities and Stockholders' EquityCurrent liabilitiesAccounts payable $ 4,557 $ 4,534

Accrued expenses and other current liabilities 24,365 25,206

Unearned revenue 6,802 6,405

Current portion of debt 251,250 218,094

Rental equipment payable 3,356 25,137

Liabilities held for sale 6,517 8,752

Total current liabilities 296,847 288,128

Debt 1,728,310 1,880,122

Deferred income tax liability 29,161 35,376

Other non-current liabilities 4,148 4,899

Total liabilities 2,058,466 2,208,525

Stockholders' equityPreferred stock, par value $.0001 per share;authorized 10,000,0008.50% Series A fixed-to-floating rate cumulativeredeemable perpetual preferred stock, issued and 54,990 54,990 outstanding 2,199,610 shares, at liquidationpreference8.50% Series B fixed-to-floating rate cumulativeredeemable perpetual preferred stock, issued and 48,875 48,875 outstanding 1,955,000 shares, at liquidationpreferenceCommon stock: par value $.0001 per share;authorized 84,000,000 shares; issued and 2 2 outstanding 17,553,491 and 17,479,127 shares atJune 30, 2020 and December 31, 2019, respectivelyAdditional paid-in capital 103,342 102,709

Accumulated other comprehensive loss (6,666 ) (6,630 )

Retained earnings 486,924 493,294

Total stockholders' equity 687,467 693,240

Total liabilities and stockholders' equity $ 2,745,933 $ 2,901,765

CAI International, Inc.Consolidated Statements of Operations(In thousands, except per share data)(UNAUDITED) Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019

RevenueContainer lease revenue $ 69,443 $ 74,286 $ 138,556 $ 149,797

Rail lease revenue 6,282 6,462 12,085 14,343

Total revenue 75,725 80,748 150,641 164,140

Operating expensesDepreciation of rental 28,846 29,816 55,894 61,599 equipmentImpairment of rental 557 7,323 19,724 7,323 equipmentStorage, handling and other 6,474 5,199 12,222 10,319 expensesGain on sale of rental (2,108 ) (265 ) (3,722 ) (9,097 )equipmentAdministrative expenses 7,389 8,049 15,053 17,223

Total operating expenses 41,158 50,122 99,171 87,367

Operating income 34,567 30,626 51,470 76,773

Other expensesNet interest expense 17,595 23,209 37,974 47,063

Other (income) expense (97 ) 119 149 157

Total other expenses 17,498 23,328 38,123 47,220

Income before income taxes 17,069 7,298 13,347 29,553

Income tax expense (benefit) 1,113 583 (1,943 ) 2,732

Income from continuing 15,956 6,715 15,290 26,821 operationsLoss from discontinued (16,582 ) (1,221 ) (17,246 ) (2,753 )operations, net of incometaxesNet (loss) income (626 ) 5,494 (1,956 ) 24,068

Preferred stock dividends 2,207 2,207 4,414 4,414

Net (loss) income $ (2,833 ) $ 3,287 $ (6,370 ) $ 19,654 attributable to CAI commonstockholders Net income from continuing $ 13,749 $ 4,508 $ 10,876 $ 22,407 operations attributable toCAI common shareholdersNet loss from discontinued (16,582 ) (1,221 ) (17,246 ) (2,753 )operations attributable toCAI common shareholdersNet (loss) income $ (2,833 ) $ 3,287 $ (6,370 ) $ 19,654 attributable to CAI commonstockholders Net (loss) income per shareattributable to CAI commonstockholdersBasicContinuing operations $ 0.79 $ 0.26 $ 0.62 $ 1.24

Discontinued operations (0.95 ) (0.07 ) (0.99 ) (0.15 )

Total basic $ (0.16 ) $ 0.19 $ (0.37 ) $ 1.09

DilutedContinuing operations $ 0.78 $ 0.25 $ 0.62 $ 1.22

Discontinued operations (0.94 ) (0.07 ) (0.98 ) (0.15 )

Total diluted $ (0.16 ) $ 0.18 $ (0.36 ) $ 1.07

Weighted average sharesoutstandingBasic 17,470 17,648 17,451 18,098

Diluted 17,601 17,926 17,641 18,401

CAI International, Inc.Consolidated Statements of Cash Flows(In thousands, except per share data)(UNAUDITED) Six Months Ended June 30, 2020 2019

Cash flows from operating activitiesNet (loss) income $ (1,956 ) $ 24,068

Loss from discontinued operations, net of income (17,246 ) (2,753 )taxesIncome from continuing operations 15,290 26,821

Adjustments to reconcile income from continuingoperations to net cash provided by operatingactivities:Depreciation 56,299 61,623

Impairment of rental equipment 19,724 7,323

Amortization of debt issuance costs 2,312 2,394

Stock-based compensation expense 801 1,421

Unrealized loss on foreign exchange 63 90

Gain on sale of rental equipment (3,722 ) (9,097 )

Deferred income taxes (3,127 ) 2,135

Bad debt (recovery) expense (3,582 ) 687

Changes in other operating assets and liabilities:Accounts receivable 4,441 1,200

Prepaid expenses and other assets 606 (2,114 )

Net investment in finance leases 35,746 32,824

Accounts payable, accrued expenses and other (1,146 ) (3,568 )liabilitiesUnearned revenue (394 ) (1,862 )

Net cash provided by operating activities of 123,311 119,877 continuing operationsNet cash provided by (used in) operating activities 2,315 (1,984 )of discontinued operationsNet cash provided by operating activities 125,626 117,893

Cash flows from investing activitiesPurchase of rental equipment (32,620 ) (231,595 )

Purchase of financing receivable (30,846 ) (36,379 )

Proceeds from sale of rental equipment 58,467 220,403

Purchase of furniture, fixtures and equipment (310 ) (136 )

Receipt of principal payments from financing 2,225 973 receivableNet cash used in investing activities of continuing (3,084 ) (46,734 )operationsNet cash used in investing activities of (1 ) (114 )discontinued operationsNet cash used in investing activities (3,085 ) (46,848 )

Cash flows from financing activitiesProceeds from debt 227,000 468,082

Principal payments on debt (348,331 ) (490,319 )

Debt issuance costs (25 ) (496 )

Proceeds from issuance of common stock 116 -

Repurchase of common stock - (34,118 )

Dividends paid to preferred stockholders (4,414 ) (4,414 )

Exercise of stock options 113 335

Net cash provided by financing activities of (125,541 ) (60,930 )continuing operationsNet cash used in financing activities of - - discontinued operationsNet cash used in financing activities (125,541 ) (60,930 )

Effect on cash of foreign currency translation (189 ) (77 )

Net (decrease) increase in cash and restricted cash (3,189 ) 10,038

Cash and restricted cash at beginning of the period 73,239 75,983

Cash and restricted cash at end of the period $ 70,050 $ 86,021

CAI International, Inc.Fleet Data(UNAUDITED) As of June 30, 2020 2019

Owned container fleet in TEUs 1,597,898 1,553,231

Managed container fleet in TEUs 63,757 69,805

Total container fleet in TEUs 1,661,655 1,623,036

Owned container fleet in CEUs 1,630,054 1,584,456

Managed container fleet in CEUs 79,643 63,492

Total container fleet in CEUs 1,709,697 1,647,948

Owned railcar fleet in units 5,276 5,631

Three Months Six Months Ended Ended June 30, June 30, 2020 2019 2020 2019

Average UtilizationContainer fleet utilization in CEUs 98.0 % 98.8 % 98.1 % 98.8 %

Owned container fleet utilization in 98.0 % 98.8 % 98.2 % 98.8 %CEUsRailcar fleet utilization in units - 89.6 % 88.1 % 87.3 % 89.3 %excluding new units not yet leasedRailcar fleet utilization in units - 86.6 % 84.5 % 84.3 % 85.7 %including new units not yet leased As of June 30, 2020 2019

Period Ending UtilizationContainer fleet utilization in CEUs 97.8 % 98.8 %

Owned container fleet utilization in 97.9 % 98.8 %CEUsRailcar fleet utilization in units - 88.3 % 85.9 %excluding new units not yet leasedRailcar fleet utilization in units - 85.3 % 82.4 %including new units not yet leased

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.

Conference Call

A conference call to discuss the financial results for the second quarter of 2020 will be held on Thursday, August 6, 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 "Q2 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 second quarter 2020 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, 2020, CAI operated a worldwide fleet of approximately 1.7 million CEUs of containers, and owned a fleet of 5,276 railcars that it leases within North America. CAI operates through 22 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/20200806005994/en/

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