UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


 
FORM 8-K
 

 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

August 7, 2019
Date of Report (Date of earliest event reported)
 

 
CAI International, Inc.
(Exact name of registrant as specified in its charter)


         
Delaware
 
001-33388
 
94-3109229
(State or other jurisdiction
of incorporation)
 
(Commission File Number)
 
(I. R. S. Employer
Identification No.)
 
Steuart Tower, 1 Market Plaza, Suite 900, San Francisco, CA 94105
(Address of principal executive offices, including ZIP Code)
 
Registrant’s telephone number, including area code: (415) 788-0100
 
N/A
(Former name or former address, if changed since last report)
 

 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:
Le
   
Title of each class
Trading symbols
Name of exchange on which registered
Common Stock, par value $0.0001 per share
CAI
 New York Stock Exchange
8.50% Series A Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Stock, par value $0.0001 per share
CAI-PA
New York Stock Exchange
8.50% Series B Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Stock, par value $0.0001 per share
CAI-PB
New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
 
Emerging growth company  ☐
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
 

Item 2.02.
Results of Operations and Financial Condition.

On August 7, 2019, CAI International, Inc. issued a press release reporting its results of operations for the second quarter of 2019.  A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.

 
Item 9.01.                          Financial Statements and Exhibits.

(d)  Exhibits.

Exhibit No.
 
Description
 

SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
  CAI INTERNATIONAL, INC.  
       
       
       
Dated:  August 7, 2019
By:
/s/ Timothy B. Page  
    Name: Timothy B. Page  
    Title: Chief Financial Officer  
       

 
 

Exhibit 99.1

CAI International, Inc. Reports Results for the Second Quarter of 2019 and Announces Its Intention to Sell Its Remaining Railcar Fleet

SAN FRANCISCO--(BUSINESS WIRE)--August 7, 2019--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.

Contacts

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