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 fourth quarter and full year of 2019.
Summary
- Net income attributable to CAI common stockholders for the fourth quarter of 2019 was $10.5 million, or $0.60 per fully diluted share.
- Net income from continuing operations attributable to CAI common stockholders for the year ended December 31, 2019 was $42.2 million, or $2.34 per fully diluted share.
- Average utilization for CAI’s owned container fleet during the fourth quarter of 2019 was 98.5% compared to 98.6% for the third quarter of 2019.
- During the fourth quarter of 2019, CAI incurred a $5.2 million pre-tax charge related to a reserve against a customer receivable.
- Container lease revenue for the year ended December 31, 2019 was $298.9 million, an increase of 5% compared to 2018.
- Logistics revenue for the year ended December 31, 2019 was $117.7 million, an increase of 6% compared to 2018.
- As previously announced on December 16, 2019, CAI has been working with Centerview Partners as its strategic financial advisor to explore and evaluate strategic alternatives for CAI to maximize stockholder value. That review is ongoing. There can be no assurance that a transaction or other action will result, or if a transaction is undertaken, its terms or timing.
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, “During the fourth quarter, we continued to take strategic steps to strengthen our business in light of today’s challenged market conditions and other headwinds. We are focused on improving our performance by increasing utilization, disposing of low-yielding assets and reducing operating costs. As we work urgently to enhance near-term financial results, we are also evaluating the best path to maximize long-term shareholder value.”
CAI’s operating performance in the fourth quarter was supported by the strong utilization of its container fleet, with 98.5% average utilization of the Company’s owned fleet, compared to 98.6% in the third quarter and current utilization of 98.3%. This minimal decrease in utilization reflects the Company’s commitment to long-dated operating and finance leases, and compares favorably to the typical increased turn-in of containers in the fourth quarter.
Container lease revenue in the fourth quarter was impacted by the extension of two large customer operating lease contracts that converted into finance leases. While the lease extensions had no impact on cash flow, the GAAP accounting treatment resulted in a reduction in lease revenue.
During the fourth quarter, CAI reserved $5.2 million against receivables from one of its shipping line customers. The customer has fallen behind on its regular payment schedule, but continues to operate and has made intermittent payments. CAI is proactively working with this customer to implement a schedule to bring payments back in line with existing agreements.
The developing coronavirus epidemic has resulted in the extended closure of Chinese manufacturing operations, including container manufacturing, and reduced cargo exports out of Chinese ports. While manufacturing in China is slowly resuming and exports from the region are increasing, CAI expects container shipping activity overall to be down during the first half of 2020. While the Company expects a rebound in production and increased cargo demand, the economic impact remains uncertain at this time. CAI is engaging in ongoing discussions with its customers regarding potential impacts to their operations and outlook for the remainder of the year.
While the overall market for railcar leasing has experienced modest customer demand during the past three months, CAI has made substantial progress in reducing the level of its idle railcars. During the fourth quarter, the Company entered into lease commitments representing nearly 30% of its off-hire fleet, and expects that most of these railcars will be placed on lease during the first quarter of 2020. For the three months ended December 31, 2019, rail segment net income from discontinued operations was $1.0 million, or $0.06 per fully diluted share.
The performance of the logistics segment improved in the fourth quarter, despite a challenging freight market. The segment benefited from reduced overhead costs and a focused development of those customer relationships with the highest potential for improved margins. In the first quarter of 2020, CAI reduced the personnel in its international logistics operation to drive progress towards ongoing profitability.
| CAI International, Inc. | |||||||
| Consolidated Balance Sheets | |||||||
| (In thousands, except share information) | |||||||
| (UNAUDITED) | |||||||
December 31, | December 31, | ||||||
2019 | 2018 | ||||||
| Assets | |||||||
| Current assets | |||||||
| Cash | $ | 19,870 | $ | 20,104 | |||
| Cash held by variable interest entities | 26,594 | 25,211 | |||||
| Accounts receivable, net of allowance for doubtful accounts of $8,171 and $2,042 at December 31, 2019 and 2018, respectively | 88,452 | 95,942 | |||||
| Current portion of net investment in sales-type and direct finance leases | 71,228 | 75,975 | |||||
| Assets held for sale | 284,513 | 449,730 | |||||
| Prepaid expenses and other current assets | 8,471 | 1,525 | |||||
| Total current assets | 499,128 | 668,487 | |||||
| Restricted cash | 26,775 | 30,668 | |||||
| Rental equipment, net of accumulated depreciation of $588,815 and $557,559 at December 31, 2019 and 2018, respectively | 1,820,735 | 1,816,794 | |||||
| Net investment in sales-type and direct finance leases | 495,488 | 473,792 | |||||
| Financing receivable | 30,693 | - | |||||
| Goodwill | 15,794 | 15,794 | |||||
| Intangible assets, net of accumulated amortization of $5,221 and $3,611 at December 31, 2019 and 2018, respectively | 4,123 | 5,733 | |||||
| Other non-current assets | 9,029 | 1,349 | |||||
| Total assets | $ | 2,901,765 | $ | 3,012,617 | |||
| Liabilities and Stockholders' Equity | |||||||
| Current liabilities | |||||||
| Accounts payable | $ | 7,291 | $ | 7,371 | |||
| Accrued expenses and other current liabilities | 30,479 | 25,069 | |||||
| Unearned revenue | 6,405 | 7,573 | |||||
| Current portion of debt | 218,094 | 311,381 | |||||
| Rental equipment payable | 25,137 | 74,139 | |||||
| Total current liabilities | 287,406 | 425,533 | |||||
| Debt | 1,880,122 | 1,847,633 | |||||
| Deferred income tax liability | 35,376 | 38,319 | |||||
| Other non-current liabilities | 5,621 | - | |||||
| Total liabilities | 2,208,525 | 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 17,479,127 and 18,764,459 shares at December 31, 2019 and 2018, respectively | 2 | 2 | |||||
| Additional paid-in capital | 102,709 | 132,666 | |||||
| Accumulated other comprehensive loss | (6,630 | ) | (6,513 | ) | |||
| Retained earnings | 493,294 | 471,112 | |||||
| Total stockholders' equity | 693,240 | 701,132 | |||||
| Total liabilities and stockholders' equity | $ | 2,901,765 | $ | 3,012,617 | |||
| CAI International, Inc. | |||||||||||||||
| Consolidated Statements of Income | |||||||||||||||
| (In thousands, except per share data) | |||||||||||||||
| (UNAUDITED) | |||||||||||||||
| Three Months Ended | Year Ended | ||||||||||||||
| December 31, | December 31, | ||||||||||||||
2019 | 2018 | 2019 (1) | 2018 | ||||||||||||
| Revenue | |||||||||||||||
| Container lease revenue | $ | 73,521 | $ | 76,626 | $ | 298,853 | $ | 284,924 | |||||||
| Logistics revenue | 29,899 | 30,220 | 117,687 | 111,471 | |||||||||||
| Total revenue | 103,420 | 106,846 | 416,540 | 396,395 | |||||||||||
| Operating expenses | |||||||||||||||
| Depreciation of rental equipment | 27,536 | 28,093 | 111,917 | 107,109 | |||||||||||
| Storage, handling and other expenses | 4,902 | 3,050 | 17,533 | 8,853 | |||||||||||
| Logistics transportation costs | 26,462 | 26,634 | 104,109 | 97,170 | |||||||||||
| Gain on sale of rental equipment | (1,555 | ) | (2,356 | ) | (4,402 | ) | (9,886 | ) | |||||||
| Administrative expenses | 14,589 | 12,795 | 52,699 | 46,240 | |||||||||||
| Total operating expenses | 71,934 | 68,216 | 281,856 | 249,486 | |||||||||||
| Operating income | 31,486 | 38,630 | 134,684 | 146,909 | |||||||||||
| Other expenses | |||||||||||||||
| Net interest expense | 19,109 | 18,815 | 79,158 | 62,573 | |||||||||||
| Other (income) expense | (224 | ) | 167 | 313 | 677 | ||||||||||
| Total other expenses | 18,885 | 18,982 | 79,471 | 63,250 | |||||||||||
| Income before income taxes | 12,601 | 19,648 | 55,213 | 83,659 | |||||||||||
| Income tax expense | 852 | 1,357 | 4,192 | 4,554 | |||||||||||
| Income from continuing operations | 11,749 | 18,291 | 51,021 | 79,105 | |||||||||||
| Income (loss) from discontinued operations, net of income taxes | 973 | 1,116 | (20,010 | ) | (509 | ) | |||||||||
| Net income | 12,722 | 19,407 | 31,011 | 78,596 | |||||||||||
| Preferred stock dividends | 2,208 | 2,207 | 8,829 | 5,124 | |||||||||||
| Net income attributable to CAI common stockholders | $ | 10,514 | $ | 17,200 | $ | 22,182 | $ | 73,472 | |||||||
| Amounts attributable to CAI common stockholders | |||||||||||||||
| Net income from continuing operations | $ | 9,541 | $ | 16,084 | $ | 42,192 | $ | 73,981 | |||||||
| Net income (loss) from discontinued operations | 973 | 1,116 | (20,010 | ) | (509 | ) | |||||||||
| Net income attributable to CAI common stockholders | $ | 10,514 | $ | 17,200 | $ | 22,182 | $ | 73,472 | |||||||
| Net income (loss) per share attributable to CAI common stockholders | |||||||||||||||
| Basic | |||||||||||||||
| Continuing operations | $ | 0.54 | $ | 0.84 | $ | 2.38 | $ | 3.78 | |||||||
| Discontinued operations | 0.06 | 0.06 | (1.13 | ) | (0.02 | ) | |||||||||
| Total basic | $ | 0.60 | $ | 0.90 | $ | 1.25 | $ | 3.76 | |||||||
| Diluted | |||||||||||||||
| Continuing operations | $ | 0.54 | $ | 0.83 | $ | 2.34 | $ | 3.73 | |||||||
| Discontinued operations | 0.06 | 0.06 | (1.11 | ) | (0.02 | ) | |||||||||
| Total diluted | $ | 0.60 | $ | 0.89 | $ | 1.23 | $ | 3.71 | |||||||
| Weighted average common shares outstanding | |||||||||||||||
| Basic | 17,379 | 19,034 | 17,731 | 19,562 | |||||||||||
| Diluted | 17,667 | 19,296 | 18,011 | 19,822 | |||||||||||
| (1) The results for the year ended December 31, 2019 include immaterial corrections made to the previously reported results for the periods ended June 30 and September 30, 2019. | |||||||||||||||
| CAI International, Inc. | |||||||
| Consolidated Statements of Cash Flows | |||||||
| (In thousands, except per share data) | |||||||
| (UNAUDITED) | |||||||
Year Ended
| |||||||
2019 | 2018 | ||||||
| Cash flows from operating activities | |||||||
| Net income | $ | 31,011 | $ | 78,596 | |||
| Loss from discontinued operations, net of income taxes | (20,010 | ) | (509 | ) | |||
| Income from continuing operations | 51,021 | 79,105 | |||||
| Adjustments to reconcile income from continuing operations to net cash provided by operating activities: | |||||||
| Depreciation | 112,317 | 107,304 | |||||
| Amortization of debt issuance costs | 3,921 | 3,650 | |||||
| Amortization of intangible assets | 1,610 | 1,989 | |||||
| Stock-based compensation expense | 2,758 | 2,583 | |||||
| Unrealized loss on foreign exchange | 16 | 436 | |||||
| Gain on sale of rental equipment | (4,402 | ) | (9,886 | ) | |||
| Deferred income taxes | 3,734 | 4,172 | |||||
| Bad debt expense | 5,885 | 388 | |||||
| Changes in other operating assets and liabilities: | |||||||
| Accounts receivable | 3,864 | (18,365 | ) | ||||
| Prepaid expenses and other assets | (2,245 | ) | (1,131 | ) | |||
| Net investment in sales-type and direct finance leases | 65,688 | - | |||||
| Accounts payable, accrued expenses and other current liabilities | 6,518 | (834 | ) | ||||
| Unearned revenue | 5 | (174 | ) | ||||
| Net cash provided by operating activities of continuing operations | 250,690 | 169,237 | |||||
| Net cash provided by operating activities of discontinued operations | 3,307 | 10,533 | |||||
| Net cash provided by operating activities | 253,997 | 179,770 | |||||
| Cash flows from investing activities | |||||||
| Purchase of rental equipment | (316,857 | ) | (739,944 | ) | |||
| Purchase of financing receivable | (37,139 | ) | - | ||||
| Proceeds from sale of rental equipment | 81,692 | 65,602 | |||||
| Purchase of furniture, fixtures and equipment | (2,285 | ) | (823 | ) | |||
| Receipt of principal payments from financing receivable | 2,720 | - | |||||
| Receipt of principal payments from sales-type and direct finance leases | - | 43,352 | |||||
| Net cash used in investing activities of continuing operations | (271,869 | ) | (631,813 | ) | |||
| Net cash provided by (used in) investing activities of discontinued operations | 123,424 | (31,530 | ) | ||||
| Net cash used in investing activities | (148,445 | ) | (663,343 | ) | |||
| Cash flows from financing activities | |||||||
| Proceeds from debt | 705,045 | 1,605,564 | |||||
| Principal payments on debt | (631,875 | ) | (1,143,908 | ) | |||
| Debt issuance costs | (839 | ) | (3,861 | ) | |||
| Proceeds from issuance of common and preferred stock | - | 103,433 | |||||
| Repurchase of common stock | (34,118 | ) | (40,869 | ) | |||
| Dividends paid to preferred stockholders | (8,828 | ) | (3,260 | ) | |||
| Exercise of stock options | 1,285 | 24 | |||||
| Net cash provided by financing activities of continuing operations | 30,670 | 517,123 | |||||
| Net cash used in financing activities of discontinued operations | (139,149 | ) | (4,773 | ) | |||
| Net cash (used in) provided by financing activities | (108,479 | ) | 512,350 | ||||
| Effect on cash of foreign currency translation | 183 | (3 | ) | ||||
| Net (decrease) increase in cash and restricted cash | (2,744 | ) | 28,774 | ||||
| Cash and restricted cash at beginning of the period | 75,983 | 47,209 | |||||
| Cash and restricted cash at end of the period | $ | 73,239 | $ | 75,983 | |||
| CAI International, Inc. | ||||||||
| Fleet Data | ||||||||
| (UNAUDITED) | ||||||||
| As of December 31, | ||||||||
2019 | 2018 | |||||||
| Owned container fleet in TEUs | 1,611,527 | 1,465,799 | ||||||
| Managed container fleet in TEUs | 69,650 | 74,246 | ||||||
| Total container fleet in TEUs | 1,681,177 | 1,540,045 | ||||||
| Owned container fleet in CEUs | 1,642,118 | 1,501,060 | ||||||
| Managed container fleet in CEUs | 85,698 | 67,647 | ||||||
| Total container fleet in CEUs | 1,727,816 | 1,568,707 | ||||||
| Owned railcar fleet in units | 5,498 | 7,279 | ||||||
| Three Months Ended | Year Ended | |||||||
| December 31, | December 31, | |||||||
2019 | 2018 | 2019 | 2018 | |||||
| Average Utilization | ||||||||
| Container fleet utilization in CEUs | 98.4% | 99.2% | 98.6% | 99.2% | ||||
| Owned container fleet utilization in CEUs | 98.5% | 99.2% | 98.7% | 99.2% | ||||
| Railcar fleet utilization in units - excluding new units not yet leased | 84.3% | 90.0% | 87.2% | 88.6% | ||||
| Railcar fleet utilization in units - including new units not yet leased | 81.1% | 86.7% | 83.8% | 81.0% | ||||
| As of December 31, | ||||||||
2019 | 2018 | |||||||
| Period Ending Utilization | ||||||||
| Container fleet utilization in CEUs | 98.3% | 99.0% | ||||||
| Owned container fleet utilization in CEUs | 98.4% | 99.1% | ||||||
| Railcar fleet utilization in units - excluding new units not yet leased | 84.0% | 90.3% | ||||||
| Railcar fleet utilization in units - including new units not yet leased | 80.9% | 86.8% | ||||||
| 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 fourth quarter and full year of 2019 will be held on Thursday, March 5, 2020 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 “Q4 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 fourth 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 December 31, 2019, CAI operated a worldwide fleet of approximately 1.7 million CEUs of containers, and owned a fleet of 5,498 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: the statements regarding CAI’s intention to sell its remaining railcar fleet, management’s business outlook on the container leasing business, management's outlook for growth of CAI’s leasing investments and CAI’s ongoing exploration of its strategic alternatives. 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/20200305005825/en/
Contacts:
(415) 788-0100
tpage@capps.com
