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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 June 30, 2021

or

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

 

July 29, 2021

Common Stock, $0.0001 par value per share

 

17,357,549 shares

1


CAI INTERNATIONAL, INC.

INDEX

 

 

 

Page No.

Part I — Financial Information

4

Item 1.

Financial Statements (Unaudited)

4

 

Consolidated Balance Sheets at June 30, 2021 and December 31, 2020

4

Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020

6

 

Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2021 and 2020

7

Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2021 and 2020

8

 

Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020

9

 

Notes to Unaudited Consolidated Financial Statements

11

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

24

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

33

Item 4.

Controls and Procedures

34

Part II — Other Information

34

Item 1.

Legal Proceedings

34

Item 1A.

Risk Factors

34

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

36

Item 3.

Defaults Upon Senior Securities

36

Item 4.

Mine Safety Disclosures

36

Item 5.

Other Information

36

Item 6.

Exhibits

37

Signatures

38

 


2


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, but not limited to, statements relating to the proposed Merger (as defined herein), the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement (as defined herein), the failure to obtain requisite stockholder approval of the proposed Merger or the failure to satisfy the closing conditions in the Merger Agreement (including the Migration (as defined herein)), risks related to disruption of management’s attention from the Company’s ongoing business operations due to the proposed Merger, the effect of the announcement of the proposed Merger on the ability of the Company to retain and hire key personnel and maintain relationships with its customers, suppliers, operating results and business generally, unexpected costs, liabilities or delays involving the proposed Merger, uncertainty surrounding the proposed Merger, including the timing of the consummation of the Merger, the outcome of any legal proceeding relating to the proposed Merger, our business, operations, growth strategy, service development efforts 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, 2020 filed with the Securities and Exchange Commission (SEC) on March 1, 2021, our Quarterly Reports 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.

Unless stated otherwise, any forward-looking information contained herein does not take into account or give any effect to the impact of the proposed Merger.


3


PART I — FINANCIAL INFORMATION

 

ITEM 1.  FINANCIAL STATEMENTS

CAI INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share information)

(UNAUDITED)

June 30,

December 31,

2021

2020

Assets

Current assets

Cash

$

17,554

$

26,691 

Cash held by variable interest entities

21,256

26,856 

Current portion of restricted cash

600 

600 

Accounts receivable, net of allowance for doubtful accounts of $418 and

$393 at June 30, 2021 and December 31, 2020, respectively

63,917

65,310 

Current portion of net investment in finance leases

87,830

78,992 

Current portion of financing receivable

14,354

9,550 

Prepaid expenses and other current assets

5,405

6,663 

Total current assets

210,916

214,662 

Restricted cash

11,819

12,355 

Rental equipment, net of accumulated depreciation of $715,911 and

$669,360 at June 30, 2021 and December 31, 2020, respectively

1,944,221

1,781,321 

Net investment in finance leases

728,971

550,573 

Financing receivable

47,798

48,888 

Derivative instruments

7,830

-

Other non-current assets

3,793

4,833 

Total assets (1)

$

2,955,348

$

2,612,632 

Liabilities and Stockholders' Equity

Current liabilities

Accounts payable

$

4,380

$

3,666 

Accrued expenses and other current liabilities

31,921

29,598 

Unearned revenue

2,438

3,029 

Current portion of debt

116,433

183,448 

Rental equipment payable

311,871

100,509 

Total current liabilities

467,043

320,250 

Debt

1,706,731

1,562,283 

Derivative instruments

-

80 

Net deferred income tax liability

22,324

24,442 

Other non-current liabilities

2,989

3,337 

Total liabilities (2)

2,199,087

1,910,392 

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

17,357,549 and 17,562,779 shares at June 30, 2021 and December 31, 2020, respectively

2 

2 

Additional paid-in capital

90,098

100,795 

Accumulated other comprehensive loss

96

(5,743)

Retained earnings

562,200

503,321 

Total stockholders' equity

756,261

702,240 

Total liabilities and stockholders' equity

$

2,955,348

$

2,612,632 


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(1)Total assets at June 30, 2021 and December 31, 2020 include the following assets of certain variable interest entities (VIEs) that can only be used to settle the liabilities of those VIEs: Cash, $21,256 and $26,856; Net investment in finance leases, $1,813 and $2,683; and Rental equipment, net of accumulated depreciation, $68,579, and $77,907, respectively.

(2)Total liabilities at June 30, 2021 and December 31, 2020 include the following VIE liabilities for which the VIE creditors do not have recourse to CAI International, Inc.: Current portion of debt, $42,542 and $41,344; Debt, $40,407 and $59,519, respectively.

See accompanying notes to unaudited consolidated financial statements. 


5


CAI INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(UNAUDITED)

Three Months Ended June 30,

Six Months Ended June 30,

2021

2020

2021

2020

Leasing revenue

Operating leases

$

65,821 

$

54,750 

$

129,688 

$

109,378 

Finance leases

14,259 

11,260 

27,504 

22,850 

Other

5,615 

3,433 

9,303 

6,328 

Total leasing revenue

85,695 

69,443 

166,495 

138,556 

Operating expenses

Depreciation of rental equipment

29,270 

26,750 

57,821 

53,798 

Storage, handling and other expenses

2,444 

5,163 

4,933 

9,592 

Gain on sale of rental equipment

(7,026)

(1,788)

(13,769)

(3,435)

Administrative expenses

10,168 

6,825 

17,908 

13,720 

Total operating expenses

34,856 

36,950 

66,893 

73,675 

Operating income

50,839 

32,493 

99,602 

64,881 

Other expenses

Net interest expense

11,114 

15,702 

22,286 

33,976 

Write-off of debt issuance costs

-

432 

-

432 

Other (income) expense

(74)

(97)

336 

149 

Total other expenses

11,040 

16,037 

22,622 

34,557 

Income before income taxes

39,799 

16,456 

76,980 

30,324 

Income tax expense

1,856 

904 

4,360 

2,103 

Income from continuing operations

37,943 

15,552 

72,620 

28,221 

(Loss) income from discontinued operations, net of income taxes

-

(16,178)

1,063 

(30,177)

Net income (loss)

37,943 

(626)

73,683 

(1,956)

Preferred stock dividends

2,207 

2,207 

4,414 

4,414 

Net income (loss) attributable to CAI common stockholders

$

35,736 

$

(2,833)

$

69,269 

$

(6,370)

Amounts attributable to CAI common stockholders

Net income from continuing operations

$

35,736 

$

13,345 

$

68,206 

$

23,807 

Net (loss) income from discontinued operations

-

(16,178)

1,063 

(30,177)

Net income (loss) attributable to CAI common stockholders

$

35,736 

$

(2,833)

$

69,269 

$

(6,370)

Net income (loss) per share attributable to CAI

common stockholders

Basic

Continuing operations

$

2.07 

$

0.76 

$

3.95 

$

1.36 

Discontinued operations

-

(0.92)

0.06 

(1.73)

Total basic

$

2.07 

$

(0.16)

$

4.01 

$

(0.37)

Diluted

Continuing operations

$

2.04 

$

0.76 

$

3.90 

$

1.35 

Discontinued operations

-

(0.92)

0.06 

(1.71)

Total diluted

$

2.04 

$

(0.16)

$

3.96 

$

(0.36)

Weighted average shares outstanding

Basic

17,281 

17,470 

17,276 

17,451 

Diluted

17,479 

17,601 

17,504 

17,641 

See accompanying notes to unaudited consolidated financial statements.


6


CAI INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(UNAUDITED)

Three Months Ended June 30,

Six Months Ended June 30,

2021

2020

2021

2020

Net income (loss)

$

37,943 

$

(626)

$

73,683 

$

(1,956)

Other comprehensive income (loss), net of tax:

Change in fair value of derivative instruments designated

as cash flow hedges

(1,990)

-

7,519 

-

Reclassification of realized loss on derivative instruments designated