SEC Filing | CAI International

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cai-20200930x10q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-33388

CAI International, Inc.

(Exact name of registrant as specified in its charter)


Delaware		94-3109229
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Steuart Tower, 1 Market Plaza, Suite 2400
San Francisco, California		94105
(Address of principal executive offices)		(Zip Code)

415-788-0100

(Registrant’s telephone number, including area code)

None

(Former name, former address and former fiscal year, if changed since last report)

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 (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	o	Accelerated filer	x
Non-accelerated filer	o	Smaller reporting company	o
		Emerging growth company	o

If an emerging growth company, indicate by check mark of 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. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock		October 31, 2020
Common Stock, $0.0001 par value per share		17,742,443 shares

Table of Contents

CAI INTERNATIONAL, INC.

INDEX


		Page No.
Part I — Financial Information		4
Item 1.	Financial Statements (Unaudited)	4
	Consolidated Balance Sheets at September 30, 2020 and December 31, 2019	4
	Consolidated Statements of Operations for the three and nine months ended September 30, 2020 and 2019	6
	Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2020 and 2019	7
	Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2020 and 2019	8
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019	10
	Notes to Unaudited Consolidated Financial Statements	12
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	37
Part II — Other Information		38
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3.	Defaults Upon Senior Securities	39
Item 4.	Mine Safety Disclosures	39
Item 5.	Other Information	39
Item 6.	Exhibits	40
Signatures		41

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Table of Contents

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains certain forward-looking statements, including, without limitation, statements concerning the conditions in our industry, our operations, our economic performance and financial condition, including, in particular, statements relating to our business, operations, growth strategy, service development efforts, our plans regarding our logistics business and the impact of the novel coronavirus (COVID-19) on our business, financial condition, liquidity and results of operations. The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for certain forward-looking statements so long as such information is identified as forward-looking and is accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those projected in the information. When used in this Quarterly Report on Form 10-Q, the words “may,” “might,” “should,” “estimate,” “project,” “plan,” “anticipate,” “expect,” “intend,” “outlook,” “believe” and other similar expressions are intended to identify forward-looking statements and information. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. These forward-looking statements are based on estimates and assumptions by our management that, although we believe to be reasonable, are inherently uncertain and subject to a number of risks and uncertainties. These risks and uncertainties include, without limitation, those in our Annual Report on Form 10-K for the year ended December 31, 2019 filed with the Securities and Exchange Commission (SEC) on March 5, 2020, this Quarterly Report on Form 10-Q and our other reports filed with the SEC. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law. Reference is also made to such risks and uncertainties detailed from time to time in our other filings with the SEC.

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Table of Contents

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

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
$7,671 at September 30, 2020 and December 31, 2019, respectively		65,574		72,984
Current portion of net investment in finance leases		75,240		71,274
Prepaid 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
$620,990 at September 30, 2020 and December 31, 2019, respectively		2,018,142		2,102,839
Net investment in finance leases		455,168		496,094
Financing receivable		51,384		30,693
Other non-current assets		5,493		7,255
Total assets (1)	$	3,069,194	$	2,901,765

Liabilities and Stockholders' Equity
Current liabilities
Accounts payable	$	3,868	$	4,534
Accrued expenses and other current liabilities		26,423		25,206
Unearned 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)		2,370,164		2,208,525

Stockholders' equity
Preferred stock, par value $0.0001 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 $0.0001 per share; authorized 84,000,000 shares; issued and outstanding
17,742,443 and 17,479,127 shares at September 30, 2020 and December 31, 2019, respectively		2		2
Additional 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

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Table of Contents

(1)Total assets at September 30, 2020 and December 31, 2019 include the following assets of certain variable interest entities (VIEs) that can only be used to settle the liabilities of those VIEs: Cash, $26,784 and $26,594; Net investment in finance leases, $3,326 and $4,790; and Rental equipment, net of accumulated depreciation, $84,938, and $101,907, respectively.

(2)Total liabilities at September 30, 2020 and December 31, 2019 include the following VIE liabilities for which the VIE creditors do not have recourse to CAI International, Inc.: Current portion of debt, $33,899 and $26,931; Debt, $74,602 and $100,849, respectively.

See accompanying notes to unaudited consolidated financial statements.

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Table of Contents

CAI INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(UNAUDITED)



	Three Months Ended September 30,				Nine Months Ended 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 equipment		30,428		28,030		86,322		89,629
Impairment of rental equipment		-		25,632		19,724		32,955
Storage, handling and other expenses		6,686		8,125		18,908		18,444
Gain on sale of rental equipment		(2,729)		(3,168)		(6,451)		(12,265)
Administrative 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 issuance costs		3,641		-		3,641		-
Other (income) expense		(306)		380		(157)		537
Total other expenses		19,965		23,482		58,088		70,702

Income (loss) before income taxes		18,314		(9,973)		31,661		19,580
Income tax expense (benefit)		1,349		(4,830)		(594)		(2,098)

Income (loss) from continuing operations		16,965		(5,143)		32,255		21,678
Loss from discontinued operations, net of income taxes		(1,522)		(636)		(18,768)		(3,389)
Net income (loss)		15,443		(5,779)		13,487		18,289
Preferred stock dividends		2,207		2,207		6,621		6,621
Net income (loss) attributable to CAI common stockholders	$	13,236	$	(7,986)	$	6,866	$	11,668

Amounts attributable to CAI common stockholders
Net income (loss) from continuing operations	$	14,758	$	(7,350)	$	25,634	$	15,057
Net loss from discontinued operations		(1,522)		(636)		(18,768)		(3,389)
Net income (loss) attributable to CAI common stockholders	$	13,236	$	(7,986)	$	6,866	$	11,668

Net income (loss) per share attributable to CAI
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 outstanding
Basic		17,570		17,330		17,491		17,850
Diluted		17,706		17,330		17,664		18,122

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

CAI INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(UNAUDITED)



Three Months Ended September 30,		Nine Months Ended September 30,
2020	2019	2020	2019