CAI International, Inc. Reports Results for the First Quarter of 2020
Summary
-
Container lease revenue for the first quarter of 2020 was
$69.1 million , compared to$73.5 million in the fourth quarter of 2019. -
Logistics revenue for the first quarter of 2020 was
$30.1 million , compared to$29.9 million in the fourth quarter of 2019. -
Rail lease revenue for the first quarter of 2020 was
$5.8 million , compared to$5.9 million in the fourth quarter of 2019. - Average utilization for CAI’s owned container fleet during the first quarter of 2020 was 98.4% compared to 98.5% for the fourth quarter of 2019.
-
During the first quarter of 2020, CAI incurred a
$19.2 million pre-tax impairment charge against the carrying value of its railcar fleet. InApril 2020 , the Company sold approximately$10 million of railcars at a gain of$0.3 million that will be reported in the second quarter. -
Net loss attributable to CAI common stockholders for the first quarter of 2020 was
$3.5 million , or$0.20 per fully diluted share. -
Adjusted net income1 attributable to CAI common stockholders for the first quarter of 2020 was
$12.0 million , or$0.67 per fully diluted share. -
The book value per outstanding CAI common share was
$33.49 as ofMarch 31, 2020 . -
In
April 2020 , the Company refinanced$113 million of asset-backed notes which provided additional liquidity of approximately$40 million . -
The Company has approximately
$155 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
December 16, 2019 , CAI has been working withCenterview 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.
“Despite the changing economic outlook during the first quarter, CAI’s operating performance during the quarter was supported by the strong 98.4% utilization of our owned container fleet, compared to 98.5% in the fourth quarter of 2019 and current utilization of 98.1%. The minimal decrease 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.
“For the quarter, CAI reported a net loss of
“Due to market conditions, we have decided to terminate the sales process for our rail division. As a result, we will again account for rail as part of our ongoing operations. Our strategy remains focused on improving utilization and returns, while seeking opportunities to reduce our overall investment in rail. We will continue to look for ways to monetize our investment in the assets, with a future exit of the business when the market outlook is more conducive to a sale. As part of valuing the railcar assets at the end of the quarter, we recognized a
“During the first quarter our railcar operating performance remained stable with utilization of 85% during the quarter, compared to 84% in the fourth quarter of 2019. The overall market for railcars is weak due to the current economic downturn, however, we have ongoing inquiries for many of our off-lease rail cars and we have minimal lease expirations during the remainder of 2020, which we expect to provide support for the ongoing cash flows of the business. The credit profile of rail customers is strong and diversified so we do not expect ongoing payment concerns with the portfolio.
“The revenue and gross margin of the logistics segment was strong during the first quarter including during the month of March. In March we experienced a change in the mix of our customer shipments as there was an increase in shipments of goods deemed essential and a drop off in demand for non-essential shipments. We are in the process of making some cost reductions in the segment to bring costs in line with expected revenue. Logistics revenue for the first quarter of 2020 grew to
“The COVID-19 pandemic and the global reaction to it have created an unprecedented level of uncertainty in the business and increased credit risk with our shipping line customers. Our results for the remainder of the year will be driven by the performance of the container division and the contractual performance of our customers. Despite limited incremental container demand in the second quarter, we expect utilization to remain strong due to the long-term nature of our contracts with our customers and the disciplined management of our off-hire container fleet. Also, we believe that there will be financial support provided to many of our customers, particularly in
“Our largest customer credit exposures are with the European shipping carriers and we believe that because of their market share, expansive scope of operations and importance to the global supply chain, they will be able to gain sufficient financial support to manage through the expected contraction in container shipping demand. Through March and April our customers have met their payment terms with us. We believe that we will be able to work collaboratively with our customers over the next few months and that the contractual obligations our customers have to us will be met.
“We believe that we are going through this downturn in a strong position. Although credit risk is elevated, we are comfortable that we have strong contractual commitments on our lease portfolio, strong redelivery provisions in our contracts and a very proactive equipment management focus that will enable us to continue reporting strong cash flow and utilization through the remainder of this year. In the first quarter, we received commitments to lease 80% of our new factory equipment and currently have less than 5,000 TEU of equipment unbooked and available to lease. The combination of practically full utilization and committed lease outs for the vast majority of our factory equipment places us in a competitive position to benefit from what we expect to be an eventual upturn in demand for equipment. Our focus and priorities over the coming months are to maximize our cash flow by maximizing utilization and remaining focused on the credit performance of our customers. We plan on utilizing our free cash flow to repay our debt until there is a more positive demand outlook for trade growth and investment.”
____________________________
1 Refer to the “Reconciliation of GAAP Amounts to Non-GAAP Amounts” and “Use of Non-GAAP Financial Measures” set forth below.
Consolidated Balance Sheets | ||||||||
(In thousands, except share information) | ||||||||
(UNAUDITED) | ||||||||
|
|
|||||||
2020 |
2019 |
|||||||
Assets | ||||||||
Current assets | ||||||||
Cash |
$ |
87,727 |
|
$ |
19,870 |
|
||
Cash held by variable interest entities |
|
21,016 |
|
|
26,594 |
|
||
Accounts receivable, net of allowance for doubtful accounts of |
|
86,177 |
|
|
88,452 |
|
||
Current portion of net investment in finance leases |
|
75,730 |
|
|
71,274 |
|
||
Prepaid expenses and other current assets |
|
9,638 |
|
|
10,228 |
|
||
Total current assets |
|
280,288 |
|
|
216,418 |
|
||
Restricted cash |
|
25,799 |
|
|
26,775 |
|
||
Rental equipment, net of accumulated depreciation of |
|
2,035,342 |
|
|
2,102,839 |
|
||
Net investment in finance leases |
|
479,276 |
|
|
496,094 |
|
||
Financing receivable |
|
29,739 |
|
|
30,693 |
|
||
|
15,794 |
|
|
15,794 |
|
|||
Intangible assets, net of accumulated amortization of |
|
3,720 |
|
|
4,123 |
|
||
Other non-current assets |
|
8,520 |
|
|
9,029 |
|
||
Total assets |
$ |
2,878,478 |
|
$ |
2,901,765 |
|
||
Liabilities and Stockholders' Equity | ||||||||
Current liabilities | ||||||||
Accounts payable |
$ |
8,928 |
|
$ |
7,291 |
|
||
Accrued expenses and other current liabilities |
|
26,180 |
|
|
30,479 |
|
||
Unearned revenue |
|
6,478 |
|
|
6,405 |
|
||
Current portion of debt |
|
216,519 |
|
|
218,094 |
|
||
Rental equipment payable |
|
4,596 |
|
|
25,137 |
|
||
Total current liabilities |
|
262,701 |
|
|
287,406 |
|
||
Debt |
|
1,888,634 |
|
|
1,880,122 |
|
||
Deferred income tax liability |
|
31,872 |
|
|
35,376 |
|
||
Other non-current liabilities |
|
5,124 |
|
|
5,621 |
|
||
Total liabilities |
|
2,188,331 |
|
|
2,208,525 |
|
||
Stockholders' equity | ||||||||
Preferred stock, par value |
||||||||
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 |
|
2 |
|
|
2 |
|
||
Additional paid-in capital |
|
103,290 |
|
|
102,709 |
|
||
Accumulated other comprehensive loss |
|
(6,767 |
) |
|
(6,630 |
) |
||
Retained earnings |
|
489,757 |
|
|
493,294 |
|
||
Total stockholders' equity |
|
690,147 |
|
|
693,240 |
|
||
Total liabilities and stockholders' equity |
$ |
2,878,478 |
|
$ |
2,901,765 |
|
Consolidated Statements of Operations | ||||||
(In thousands, except per share data) | ||||||
(UNAUDITED) | ||||||
Three Months Ended
|
||||||
2020 |
2019 |
|||||
Revenue | ||||||
Container lease revenue |
|
|
|
|
||
Rail lease revenue |
5,803 |
|
7,881 |
|
||
Logistics revenue |
30,106 |
|
27,716 |
|
||
Total revenue |
105,022 |
|
111,108 |
|
||
Operating expenses | ||||||
Depreciation of rental equipment |
27,048 |
|
31,784 |
|
||
Impairment of rental equipment |
19,167 |
|
- |
|
||
Storage, handling and other expenses |
5,748 |
|
5,120 |
|
||
Logistics transportation costs |
26,815 |
|
24,519 |
|
||
Gain on sale of rental equipment |
(1,614 |
) |
(8,832 |
) |
||
Administrative expenses |
11,826 |
|
14,396 |
|
||
Total operating expenses |
88,990 |
|
66,987 |
|
||
Operating income |
16,032 |
|
44,121 |
|
||
Other expenses | ||||||
Net interest expense |
20,376 |
|
23,850 |
|
||
Other expense |
246 |
|
38 |
|
||
Total other expenses |
20,622 |
|
23,888 |
|
||
(Loss) income before income taxes |
(4,590 |
) |
20,233 |
|
||
Income tax (benefit) expense |
(3,260 |
) |
1,659 |
|
||
Net (loss) income |
(1,330 |
) |
18,574 |
|
||
Preferred stock dividends |
2,207 |
|
2,207 |
|
||
Net (loss) income attributable to CAI common stockholders |
$ (3,537 |
) |
|
|
||
Net (loss) income per share attributable to CAI common stockholders | ||||||
Basic |
$ (0.20 |
) |
|
|
||
Diluted |
$ (0.20 |
) |
|
|
||
Weighted average shares of common stock outstanding | ||||||
Basic |
17,433 |
|
18,555 |
|
||
Diluted |
17,433 |
|
18,870 |
|
Consolidated Statements of Cash Flows | ||||||
(In thousands, except per share data) | ||||||
(UNAUDITED) | ||||||
Three Months Ended
|
||||||
2020 |
2019 |
|||||
Cash flows from operating activities | ||||||
Net (loss) income |
$ (1,330 |
) |
|
|
||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||||||
Depreciation |
27,314 |
|
31,839 |
|
||
Impairment of rental equipment |
19,167 |
|
- |
|
||
Amortization of debt issuance costs |
988 |
|
1,202 |
|
||
Amortization of intangible assets |
403 |
|
403 |
|
||
Stock-based compensation expense |
874 |
|
839 |
|
||
Unrealized loss on foreign exchange |
220 |
|
26 |
|
||
Gain on sale of rental equipment |
(1,614 |
) |
(8,832 |
) |
||
Deferred income taxes |
(3,504 |
) |
630 |
|
||
Bad debt (recovery) expense |
(1,076 |
) |
738 |
|
||
Changes in other operating assets and liabilities: | ||||||
Accounts receivable |
4,409 |
|
1,158 |
|
||
Prepaid expenses and other assets |
830 |
|
(1,132 |
) |
||
Net investment in finance leases |
17,113 |
|
16,442 |
|
||
Accounts payable, accrued expenses and other liabilities |
(3,231 |
) |
(5,520 |
) |
||
Unearned revenue |
(438 |
) |
(2,038 |
) |
||
Net cash provided by operating activities |
60,125 |
|
54,329 |
|
||
Cash flows from investing activities | ||||||
Purchase of rental equipment |
(27,500 |
) |
(141,212 |
) |
||
Proceeds from sale of rental equipment |
24,576 |
|
180,331 |
|
||
Purchase of furniture, fixtures and equipment |
(310 |
) |
(50 |
) |
||
Receipt of principal payments from financing receivable |
325 |
|
- |
|
||
Net cash (used in) provided by investing activities |
(2,909 |
) |
39,069 |
|
||
Cash flows from financing activities | ||||||
Proceeds from debt |
110,000 |
|
306,582 |
|
||
Principal payments on debt |
(103,742 |
) |
(382,847 |
) |
||
Debt issuance costs |
- |
|
(419 |
) |
||
Repurchase of common stock |
- |
|
(13,946 |
) |
||
Dividends paid to preferred stockholders |
(2,207 |
) |
(2,207 |
) |
||
Exercise of stock options |
113 |
|
107 |
|
||
Net cash provided by (used in) financing activities |
4,164 |
|
(92,730 |
) |
||
Effect on cash of foreign currency translation |
(77 |
) |
238 |
|
||
Net increase in cash |
61,303 |
|
906 |
|
||
Cash and restricted cash at beginning of the period |
73,239 |
|
75,983 |
|
||
Cash and restricted cash at end of the period |
|
|
|
|
Fleet Data | ||||
(UNAUDITED) | ||||
As of |
||||
2020 |
2019 |
|||
Owned container fleet in TEUs |
1,590,880 |
1,522,907 |
||
Managed container fleet in TEUs |
66,721 |
72,363 |
||
Total container fleet in TEUs |
1,657,601 |
1,595,270 |
||
Owned container fleet in CEUs |
1,622,354 |
1,551,465 |
||
Managed container fleet in CEUs |
82,705 |
65,872 |
||
Total container fleet in CEUs |
1,705,059 |
1,617,337 |
||
Owned railcar fleet in units |
5,459 |
5,609 |
||
Three Months Ended |
||||
|
||||
2020 |
2019 |
|||
Average Utilization | ||||
Container fleet utilization in CEUs |
98.2% |
98.9% |
||
Owned container fleet utilization in CEUs |
98.4% |
98.9% |
||
Railcar fleet utilization in units - excluding new units not yet leased |
85.1% |
90.2% |
||
Railcar fleet utilization in units - including new units not yet leased |
82.1% |
86.7% |
||
As of |
||||
2020 |
2019 |
|||
Period Ending Utilization | ||||
Container fleet utilization in CEUs |
98.2% |
98.8% |
||
Owned container fleet utilization in CEUs |
98.3% |
98.8% |
||
Railcar fleet utilization in units - excluding new units not yet leased |
91.3% |
87.5% |
||
Railcar fleet utilization in units - including new units not yet leased |
88.3% |
83.3% |
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. |
Reconciliation of GAAP Amounts to Non-GAAP Amounts | |||||
(In thousands, except per share data) | |||||
(UNAUDITED) | |||||
Three Months Ended
|
|||||
2020 |
2019 |
||||
Net (loss) income attributable to CAI common stockholders |
$ (3,537 |
) |
|
||
Impairment of rental equipment |
19,167 |
|
- |
||
Costs associated with strategic review |
1,114 |
|
- |
||
Tax effect of impairment and strategic review costs |
(4,794 |
) |
- |
||
Adjusted net income attributable to CAI common stockholders |
|
|
|
||
Diluted net (loss) income per share attributable to CAI common stockholders |
$ (0.20 |
) |
|
||
Diluted adjusted net income per share attributable to CAI common stockholders |
|
|
|
||
Weighted average number of common shares (in thousands) used to calculate: | |||||
Diluted net (loss) income per share attributable to CAI common stockholders |
17,433 |
|
18,870 |
||
Diluted adjusted net income per share attributable to CAI common stockholders |
17,715 |
|
18,870 |
Conference Call
A conference call to discuss the financial results for the first quarter of 2020 will be held on
Earnings Presentation
A presentation summarizing our first 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 an impairment charge and costs associated with our strategic review, and related tax effects. 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. 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 is one of the world’s leading transportation finance and logistics companies. As of
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 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
View source version on businesswire.com: https://www.businesswire.com/news/home/20200505005970/en/
(415) 788-0100
tpage@capps.com
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