UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended ~~September~~June 30, ~~2017~~2018

☐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 900
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)

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ☒ No ☐

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	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
(Do not check if a smaller reporting company)		Emerging growth company	☐

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. ☐

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

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


Common		~~September 30, 2017~~July 31, 2018
Common Stock, $.0001 par value per share		~~19,268,083~~ 19,306,377 shares

Table of Contents

CAI INTERNATIONAL, INC.

INDEX



		Page No.
Part I — Financial Information		5
		4
Item 1.	Financial Statements (Unaudited)	5
		4
	Consolidated Balance Sheets at ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017	5
		4
	Consolidated Statements of Income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017	7
		5
	Consolidated Statements of Comprehensive Income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017	8
		6
	Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017	9
		7
	Notes to Unaudited Consolidated Financial Statements	10
		8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
		20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
		31
Item 4.	Controls and Procedures	29
		31
Part II — Other Information		29
		32
Item 1.	Legal Proceedings	29
		32
Item 1A.	Risk Factors	29
		32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
		32
Item 3.	Defaults Upon Senior Securities	30
		32
Item 4.	Mine Safety Disclosures	30
		32
Item 5.	Other Information	30
		32
Item 6.	Exhibits	30
		33
Signatures		3134

Table of Contents

SPECIAL NOTE REGARDING ~~FORWARD LOOKING~~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 and service development efforts. 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, ~~2016~~2017 filed with the Securities and Exchange Commission (SEC) on ~~March 13, 2017~~February 27, 2018 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.

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,		June 30,		December 31,
	2017		2016		2018		2017
Assets
Current assets
Cash	$	12,508	$	15,685	$	16,462	$	14,735
Cash held by variable interest entities		22,445		30,449		24,348		20,685
Accounts receivable, net of allowance for doubtful accounts of $1,636 and
$1,340 at September 30, 2017 and December 31, 2016, respectively		69,478		63,745
Accounts receivable, net of allowance for doubtful accounts of $2,110 and
$1,440 at June 30, 2018 and December 31, 2017, respectively						83,278		68,324
Current portion of net investment in direct finance leases		27,947		19,959		53,961		30,063
Prepaid expenses and other current assets		5,016		5,315		2,541		4,258
Total current assets		137,394		135,153		180,590		138,065
Restricted cash		12,217		6,192		21,066		11,789
Rental equipment, net of accumulated depreciation of $484,428 and
$421,153 at September 30, 2017 and December 31, 2016, respectively		1,979,012		1,807,010
Rental equipment, net of accumulated depreciation of $550,426 and
$505,546 at June 30, 2018 and December 31, 2017, respectively						2,218,212		2,004,961
Net investment in direct finance leases		199,994		80,582		275,826		246,450
Goodwill		15,794		15,794		15,794		15,794
Intangible assets, net of accumulated amortization of $2,974 and
$2,681 at September 30, 2017 and December 31, 2016, respectively		8,156		9,691
Furniture, fixtures and equipment, net of accumulated depreciation of $3,131 and
$2,833 at September 30, 2017 and December 31, 2016, respectively		370		550
Intangible assets, net of accumulated amortization of $4,495 and
$3,407 at June 30, 2018 and December 31, 2017, respectively						6,635		7,723
Furniture, fixtures and equipment, net of accumulated depreciation of $3,265 and
$3,201 at June 30, 2018 and December 31, 2017, respectively						464		338
Other non-current assets		3,220		962		1,871		3,008
Total assets (1)	$	2,356,157	$	2,055,934	$	2,720,458	$	2,428,128

Liabilities and Stockholders' Equity
Current liabilities
Accounts payable	$	6,320	$	13,804	$	6,530	$	7,831
Accrued expenses and other current liabilities		13,540		11,778		17,206		15,706
Due to container investors		4,119		7,077		-		1,845
Unearned revenue		8,361		10,613		7,526		7,811
Current portion of debt		133,322		95,527		159,599		132,049
Rental equipment payable		190,180		25,207		184,258		92,415
Total current liabilities		355,842		164,006		375,119		257,657
Debt		1,450,588		1,380,499		1,679,492		1,570,773
Deferred income tax liability		51,193		51,804		37,099		35,853
Other long term liabilities		-		2,121
Total liabilities (2)		1,857,623		1,598,430		2,091,710		1,864,283

Stockholders' equity
Preferred stock, par value $.0001 per share; authorized 10,000,000 and 5,000,000 at
June 30, 2018 and December 31, 2017, respectively; 8.50% Series A fixed-to-floating rate
cumulative redeemable perpetual preferred stock, issued and outstanding 2,199,610 and 0 shares
at June 30, 2018 and December 31, 2017, respectively, at liquidation preference						54,990		-
Common stock: par value $.0001 per share; authorized 84,000,000 shares; issued and outstanding
19,268,083 and 19,057,217 shares at September 30, 2017 and December 31, 2016, respectively		2		2
19,306,377 and 20,390,622 shares at June 30, 2018 and December 31, 2017, respectively						2		2
Additional paid-in capital		143,845		141,058		146,210		172,325
Accumulated other comprehensive loss		(6,390)		(8,132)		(6,360)		(6,122)
Retained earnings		361,077		324,576		433,906		397,640
Total stockholders' equity		498,534		457,504		628,748		563,845
Total liabilities and stockholders' equity	$	2,356,157	$	2,055,934	$	2,720,458	$	2,428,128



	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016		2018		2017		2018		2017
Revenue
Container lease income	$	61,870	$	49,661	$	169,784	$	152,875
Rail lease income		7,279		7,614		23,459		22,462
Container lease revenue									$	68,333	$	54,960	$	132,967	$	107,914
Rail lease revenue										9,119		8,127		18,223		16,180
Logistics revenue		21,012		21,197		61,116		41,743		28,253		19,605		49,889		40,104
Total revenue		90,161		78,472		254,359		217,080		105,705		82,692		201,079		164,198

Operating expenses
Depreciation of rental equipment		27,788		29,873		82,814		77,401		29,402		27,054		58,249		55,026
Storage, handling and other expenses		3,506		8,802		16,651		27,176		2,613		6,192		6,713		13,145
Logistics transportation costs		17,855		18,045		51,608		35,127		24,330		16,682		42,995		33,753
(Gain) loss on sale of used rental equipment		(1,663)		3,323		(2,539)		7,950
Gain on sale of used rental equipment										(2,719)		(1,749)		(4,914)		(876)
Administrative expenses		10,781		11,067		31,212		28,750		12,160		9,745		23,401		20,431
Total operating expenses		58,267		71,110		179,746		176,404		65,786		57,924		126,444		121,479

Operating income		31,894		7,362		74,613		40,676		39,919		24,768		74,635		42,719

Other expenses
Net interest expense		13,959		10,902		37,916		31,535		18,440		12,285		35,339		23,957
Other expense		449		85		651		407
Other expense (income)										429		(112)		394		202
Total other expenses		14,408		10,987		38,567		31,942		18,869		12,173		35,733		24,159

Income (loss) before income taxes and non-controlling interest		17,486		(3,625)		36,046		8,734
Income tax (benefit) expense		(101)		1,826		549		3,320
Income before income taxes										21,050		12,595		38,902		18,560
Income tax expense (benefit)										753		(43)		1,467		650

Net income (loss)		17,587		(5,451)		35,497		5,414
Net income attributable to non-controlling interest		-		-		-		37
Net income (loss) attributable to CAI common stockholders	$	17,587	$	(5,451)	$	35,497	$	5,377
Net income										20,297		12,638		37,435		17,910
Preferred stock dividends										1,148		-		1,169		-
Net income attributable to CAI common stockholders									$	19,149	$	12,638	$	36,266	$	17,910

Net income (loss) per share attributable to CAI common
stockholders
Net income per share attributable to CAI common stockholders
Basic	$	0.92	$	(0.28)	$	1.86	$	0.28	$	0.98	$	0.66	$	1.81	$	0.94
Diluted	$	0.90	$	(0.28)	$	1.83	$	0.28	$	0.97	$	0.65	$	1.79	$	0.93

Weighted average shares outstanding
Basic		19,180		19,130		19,108		19,427		19,613		19,131		20,013		19,071
Diluted		19,633		19,130		19,422		19,498		19,843		19,419		20,259		19,332

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

Net income (loss)

$
17,587

$
(5,451)

$
35,497

$
5,414
Other comprehensive income, net of tax:

Foreign currency translation adjustments

698

137

1,742

1,047
Comprehensive income (loss)

18,285

(5,314)

37,239

6,461
Comprehensive income attributable to non-controlling interest

-

-

-

37
Comprehensive income (loss) attributable to CAI common

stockholders

$
18,285

$
(5,314)

$
37,239

$
6,424



	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017

Net income	$	20,297	$	12,638	$	37,435	$	17,910
Other comprehensive income, net of tax:
Foreign currency translation adjustments		(548)		793		(238)		1,044
Comprehensive income before preferred stock dividends		19,749		13,431		37,197		18,954
Dividends on preferred stock		(1,148)		-		(1,169)		-
Comprehensive income available to CAI common stockholders	$	18,601	$	13,431	$	36,028	$	18,954



	Nine Months Ended September 30,				Six Months Ended June 30,
	2017		2016		2018		2017
Cash flows from operating activities
Net income	$	35,497	$	5,414	$	37,435	$	17,910
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		83,088		77,636		58,319		55,211
Amortization of debt issuance costs		2,400		2,217		2,158		1,498
Amortization of intangible assets		1,536		682		1,087		1,102
Stock-based compensation expense		1,539		1,320		1,350		995
Reduction in contingent consideration		(2,211)		(1,000)		-		(631)
Unrealized loss on foreign exchange		42		82		266		109
(Gain) loss on sale of used rental equipment		(2,539)		7,950
Loss on disposal of subsidiary		-		146
Gain on sale of used rental equipment						(4,914)		(876)
Deferred income taxes		393		2,193		1,248		411
Bad debt expense		750		2,458
Bad debt expense (recovery)						317		(12)
Changes in other operating assets and liabilities:
Accounts receivable		(6,280)		(7,560)		(14,211)		(5,627)
Prepaid expenses and other assets		(72)		(191)		(2,096)		(1,807)
Accounts payable, accrued expenses and other current liabilities		(5,887)		1,540		(1,931)		(3,613)
Due to container investors		(2,958)		(32)		(540)		72
Unearned revenue		(540)		1,013		(76)		(1,696)
Net cash provided by operating activities		104,758		93,868		78,412		63,046
Cash flows from investing activities
Purchase of rental equipment		(277,769)		(170,582)		(271,961)		(128,593)
Acquisitions, net of cash acquired		-		(15,620)
Proceeds from sale of used rental equipment		48,863		46,137		25,458		35,660
Disposal of subsidiary, net of cash disposed of		-		(460)
Purchase of furniture, fixtures and equipment		(91)		(92)		(196)		(85)
Receipt of principal payments from direct financing leases		12,362		17,368
Receipt of principal payments from direct finance leases						19,046		8,942
Net cash used in investing activities		(216,635)		(123,249)		(227,653)		(84,076)
Cash flows from financing activities
Proceeds from debt		556,544		432,540		708,289		155,131
Principal payments on debt		(448,436)		(408,375)		(566,937)		(156,036)
Debt issuance costs		(3,129)		(1,461)		(6,201)		(463)
(Increase) decrease in restricted cash		(6,025)		765
Repurchase of stock		-		(9,176)
Proceeds from issuance of common and preferred stock						56,699		-
Repurchase of common stock						(27,946)		-
Exercise of stock options		1,362		-		24		1,215
Net cash provided by financing activities		100,316		14,293
Net cash provided by (used in) financing activities						163,928		(153)
Effect on cash of foreign currency translation		380		1		(20)		35
Net decrease in cash		(11,181)		(15,087)
Cash at beginning of the period		46,134		52,553
Cash at end of the period	$	34,953	$	37,466
Net increase (decrease) in cash and restricted cash						14,667		(21,148)
Cash and restricted cash at beginning of the period (1)						47,209		52,326
Cash and restricted cash at end of the period (2)					$	61,876	$	31,178

Supplemental disclosure of cash flow information
Cash paid during the period for:
Income taxes	$	174	$	752	$	172	$	134
Interest		35,014		29,617		27,651		21,638
Supplemental disclosure of non-cash investing and financing activity
Transfer of rental equipment to direct finance lease	$	144,907	$	14,816	$	71,807	$	23,912
Transfer of direct finance lease to rental equipment		291		-		-		291
Rental equipment payable						184,258		65,336

CAI International, Inc., together with its subsidiaries (collectively, CAI or the Company), is a transportation finance and logistics company. The Company purchases equipment, primarily intermodal shipping containers and railcars, which it leases to its customers. The Company also manages equipment for third-party investors. In operating its fleet, the Company leases, re-leases and disposes of equipment and contracts for the repair, repositioning and storage of equipment. The Company also provides domestic and international logistics services.

In February 2016, the Company purchased Challenger Overseas LLC (Challenger), a Non-Vessel Operating Common Carrier, for approximately $10.8 million. Challenger is headquartered in Eatontown, New Jersey.

In June 2016, the Company purchased Hybrid Logistics, Inc. and its affiliate, General Transportation Services, Inc. (collectively, Hybrid), asset light truck brokers, for approximately $12.0 million. Hybrid is headquartered in Portland, Oregon.

The Company’s common stock isand 8.50% Series A Fixed-to-Floating Rate Cumulative Redeemable Perpetual Stock are traded on the New York Stock Exchange under the ~~symbol “CAI.~~symbols “CAI” and “CAI-PA,” respectively. The Company’s corporate headquarters are located in San Francisco, California.

The accompanying unaudited consolidated financial statements include the financial statements of CAI International, Inc., and its wholly-owned ~~subsidiaries, and its previously 80%-owned subsidiary, CAIJ, Inc. (CAIJ), up to its date of disposal in April 2016.~~subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

In the opinion of management, the accompanying unaudited consolidated financial statements contain all normal, recurring adjustments necessary to present fairly the Company’s financial position as of ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, the Company’s results of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, and the Company’s cash flows for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016.~~2017. The results of operations and cash flows for the periods presented are not necessarily indicative of the results of operations or cash flows which may be reported for the remainder of ~~2017~~2018 or in any future period. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) have been condensed or omitted. The accompanying unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, ~~2016,~~2017, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on ~~March 13, 2017.~~February 27, 2018.

In May 2014, the Financial Accounting Standards Board FASB issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606) (ASU 2014-09), which supersedes previous revenue recognition guidance. Leasing revenue recognition is specifically excluded, and therefore, the new standard is only applicable to the Company’s logistics services agreements, management services agreements, and the sale of used rental ~~equipment~~equipment. The new standard defines a five-step process to achieve the core principle of ASU 2014-09, which is ~~recorded at original cost~~to recognize revenue when promised goods or services are transferred to customers in amounts that reflect the consideration the Company expects to receive in exchange for those goods or services. The Company adopted ASU 2014-09 effective January 1, 2018, which did not have a material impact on the Company’s consolidated financial statements and ~~depreciated~~related disclosures. See Note 2(b) for further details.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (ASU 2016-15), which clarifies the classification of certain cash receipts and cash payments in the statement of cash flows, including debt prepayment or extinguishment costs, settlement of contingent consideration arising from a business combination and insurance settlement proceeds. The Company adopted ASU 2016-15 effective January 1, 2018, which did not result in any changes to ~~an estimated residual value~~the presentation of amounts shown on ~~a straight-line basis over its estimated useful life.~~the Company’s consolidated statements of cash flows for all periods presented.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (ASU 2016-18), that requires the inclusion of restricted cash and restricted cash equivalents with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The ~~estimated useful lives and residual values~~Company adopted ASU 2016-18 effective January 1, 2018, which resulted in the inclusion of the Company’s ~~container equipment are based on historical disposal experience and~~restricted cash balances along with cash in the Company’s ~~expectations for future used container sale prices. Depreciation estimates are reviewed on a regular basis to determine whether sustained~~consolidated statements of cash flows and separate line items showing changes ~~have taken place~~ in ~~the useful lives of equipment or assigned residual values, which would suggest that a change in depreciation estimates is warranted.~~

~~After the Company conducted its regular depreciation policy review for 2016, it concluded that a change in the estimated residual value for 40-foot high cube dry van containers~~restricted cash balances were eliminated from ~~$1,650 to $1,400 per container, effective July 1, 2016, was appropriate. The change increased~~ the Company’s ~~depreciation expense by $4.4 million, decreased net income by $4.3 million, and decreased diluted earnings per share by $0.22, for the nine months ended September 30, 2017.~~consolidated statements of cash flows. ASU 2016-18 was applied retrospectively to all periods presented.

~~The Company continuously monitors disposal prices across its entire portfolio for indications~~

Except as described ~~below in “Recent Accounting Pronouncements,”~~above, there were no changes to the Company’s accounting policies during the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. See Note 2 to the audited consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2017, filed with the SEC on ~~March 13, 2017,~~February 27, 2018, for a description of the Company’s significant accounting policies.

The Company provides a range of services to its customers incorporating the rental, sale and management of equipment and the provision of logistics services. Revenue for all forms of service is recognized when earned following the guidelines under Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 606, Revenue Recognition and FASB ASC Topic 840, Leases. Revenue is reported net of any related sales tax.

The Company recognizes revenue from operating leases of its owned equipment as earned over the term of the lease. Where minimum lease payments vary over the lease term, revenue is recognized on a straight-line basis over the term of the lease. The Company recognizes revenue on a cash basis for certain railcar leases that are billed on an hourly or mileage basis through a third-party railcar manager. Early termination of the rental contracts subjects the lessee to a penalty, which is included in lease revenue upon such termination. Finance lease income is recognized using the effective interest method, which generates a constant rate of interest over the period of the lease.

Included in lease revenue is revenue consisting primarily of fees charged to the lessee for handling, delivery, and repairs, which are recognized as earned.

Also included in lease revenue is revenue from management fees earned under equipment management agreements. Management fees are generally calculated as a percentage of the monthly net operating income for an investor’s portfolio and recognized as revenue in the month of service.

The Company’s logistics business derives its revenue from three principal sources: (1) truck brokerage services, (2) intermodal transportation services, and (3) international ocean freight and freight forwarding services. For truck brokerage services, which typically involve a short transit time, revenue is recognized when delivery has been completed due to the lack of reliable information to reasonably measure progress toward complete satisfaction of the performance obligation. For intermodal transportation services, which can take a longer time to complete, revenue is recognized over time by measuring progress toward complete satisfaction of the performance obligation, utilizing input methods. For any such services completed as of the end of a reporting period, a percentage of completion method based on costs incurred to date is used to allocate the appropriate revenue to each separate reporting period. The Company provides international freight forwarding services as an indirect carrier, sometimes referred to as a Non-Vessel Operating Common Carrier (NVOCC). Due to the lack of reliable information to reasonably measure progress toward complete satisfaction of the performance obligation, revenue for these shipments is recognized at the time the freight departs the terminal of origin, which is when the customer is billed and the Company has no further obligation to the customer.

The Company reports logistics revenue on a gross basis as it is primarily responsible for fulfilling the promise to provide the specified service desired by the customer and has discretion in establishing the price for the specified service.

The Company records unearned revenue when cash payments are received in advance of the Company satisfying its performance obligations.

Payment terms vary by customer and type of service. The term between invoicing and when payment is due is not significant. For certain customers or services, the Company may require payment before the services are delivered to the customer.

The Company expenses sales commissions when incurred because the amortization would have been one year or less. These costs are recorded within administrative expenses.

~~In March 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-09,~~ ~~Improvements to Employee Share-Based Payment Accounting~~ (ASU 2016-09). The new standard simplifies certain aspects of the accounting for share-based payment transactions, including income taxes, classification of awards and classification on the statement of cash flows. The new guidance also allows an entity to make a policy election to account for forfeitures as they occur. The Company adopted ASU 2016-09 effective January 1, 2017. Accordingly, excess tax benefits or deficiencies from stock-based compensation are now reflected in the consolidated statements of income as a component of the provision for income taxes, whereas they were previously recognized in equity. As a result of the adoption of ASU 2016-09, the Company recognized $1.0 million in deferred tax assets associated with excess tax benefitsdoes not previously recognized in deferred taxes as a cumulative-effect adjustment to retained earnings as of January 1, 2017. Adoption of the new standard did not have a material impact on our provision for income taxes for the three and nine months ended September 30, 2017. The Company elected to apply the change in presentation to the statements of cash flows prospectively and elected to account for forfeitures as they occur, rather than estimate expected forfeitures, which did not have a material impact on the Company’s consolidated financial statements.

In August 2016, Hanjin Shipping Co., Ltd. (Hanjin) filed for bankruptcy protection from its creditors. Based on the recovery of Hanjin containers to date and prior experience, the Company believes that most of its containers will be recovered. As of ~~September 30, 2017, the Company has recovered approximately 92% of the containers that were on lease to Hanjin. The Company maintains insurance to cover~~disclose the value of ~~containers~~unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts with variable consideration for a distinct good or service that ~~are unlikely to be recovered from its customers, the cost to recover and repair containers, and up to 180 days~~forms part of ~~lost lease rental income, subject to deductibles of $0.5 million and $2.0 million.~~

During the year ended December 31, 2016, the Company recorded an impairment of $3.2 million representing the book value of containers the Company estimated would not be recovered from Hanjin. As of December 31, 2016, an insurance receivable of $3.8 million was recorded for $1.2 million of estimated unrecoverable containers in excess of the insurance deductible, which was recorded in depreciation expense, and $2.6 million of recovery costs, which was recorded as a ~~reduction to storage, handling and other expenses for the year ended December 31, 2016. During the nine months ended~~ ~~September~~ 30, 2017, the Company recorded an additional insurance receivable of $7.4 million for $2.2 million of lost lease rental income, recognized as container lease income, and $1.5 million of repair costs and $3.7 million of recovery costs, recorded as a reduction to storage, handling and other expenses. The Company also received insurance proceeds of $8.0 million, which was recorded as a reduction to the insurance receivable. As of ~~September 30, 2017, the insurance receivable related to this customer was $3.2 million, of which payment of $1.5 million was received in October 2017.~~single performance obligation.

The Company regularly performs a review of its container fund arrangements with investors to determine whether or not it has a variable interest in the fund and if the fund is a variable interest entity (VIE). If it is determined that the Company does not have a variable interest in the fund, further analysis is not required and the Company does not consolidate the fund. If it is determined that the Company does have a variable interest in the fund and the fund is a VIE, a further analysis is performed to determine if the Company is a primary beneficiary of the VIE and meets both of the following criteria under FASB ASC Topic ~~810:~~810, Consolidation:

If in the Company’s judgment both of the above criteria are met, the VIE’s financial statements are included in the Company’s consolidated financial statements as required under FASB ASC Topic 810, ~~Consolidation~~. Consolidation.

The Company currently enters into two types of container fund arrangements with investors which are reviewed under FASB ASC Topic 810, ~~Consolidation~~.Consolidation. These arrangements include container funds that the Company manages for investors and container funds that have entered into financing arrangements with investors. ~~Several~~All of the ~~funds that the Company manages and~~ funds under financing arrangements are Japanese container funds that were established under separate investment agreements allowed under Japanese commercial ~~laws (see Note 14).~~laws. Each of the funds is financed by unrelated Japanese third-party investors.

The fees earned by the Company for arranging, managing and establishing container funds are commensurate with the level of effort required to provide those services, and are at or above the same level of seniority as other operating liabilities of the funds that are incurred in the normal course of business. As such, the Company does not have a variable interest in the managed containers funds and does not consolidate those funds. The Company recognizes gain on sale of containers to the unconsolidated funds as sales in the ordinary course of business. No container portfolios were sold to the ~~Japanese~~ funds induring the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016.~~

The Company has transferred containers to Japanese investor funds while concurrently entering into lease agreements for the same containers, under which the Company leases the containers back from the Japanese investors. In accordance with FASB ASC Topic 840, Sale-Leaseback Transactions, the Company concluded these were financing transactions under which sale-leaseback accounting was not applicable.

The terms of the transactions with container funds under financing arrangements include options for the Company to purchase the containers from the funds at a fixed price. As a result of the residual interest resulting from the fixed price call option, the Company concluded that it may absorb a significant amount of the variability associated with the funds’ anticipated economic performance and, as a result, the Company has a variable interest in the funds. The funds are considered VIEs under FASB ASC Topic 810, Consolidation, because, as lessee of the funds, the Company has the power to direct the activities that most significantly impact each entity’s economic performance, including the leasing and managing of containers owned by the funds. As the Company has the power to direct the activities that most significantly impact the economic performance of the VIEs and the variable interest provides the Company with the right to receive benefits from the entity that could potentially be significant to the funds, the Company determined that it is the primary beneficiary of these VIEs and included the VIEs’ assets and liabilities as of ~~September~~June 30, ~~2017,~~2018, and December 31, ~~2016,~~2017, and the results of the VIEs’ operations and cash flows for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, in the Company’s consolidated financial statements.

The containers that were transferred to the Japanese investor funds had a net book value of ~~$66.1~~$76.3 million as of ~~September~~June 30, ~~2017.~~2018. The container equipment, together with ~~$22.4~~$24.3 million of cash held by the investor funds that can only be used to settle the liabilities of the VIEs, has been included on the Company’s consolidated balance sheets with the related liability presented in the debt section of the Company’s consolidated balance sheets as collateralized financing obligations of ~~$90.7~~$96.4 million and term loans held by VIE of ~~$3.7~~$2.4 million. No gain or loss was recognized by the Company on the initial consolidation of the VIEs. Containers sold to the Japanese investor funds during the three months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, had a net book value of ~~$6.0~~$7.3 million and ~~$9.2~~$7.2 million, ~~respectively. Containers sold to the Japanese investor funds during the nine months ended September 30, 2017 and 2016, had a book value of $13.2 million and $26.1 million, respectively.~~

In 2016, the Company completed the acquisitions of Challenger and Hybrid, for total consideration of $22.8 million, $6.0 million of which was contingent and based on their future performance. The aggregate allocation of the combined purchase price included $1.2 million of cash, $9.9 million of identifiable intangible assets, $12.9 million of residual goodwill, and $1.2 million of net liabilities assumed.

The contingent consideration liability was $2.2 million as of December 31, 2016. Expected future payments of $2.1 million and $0.1 million were recorded in Other long-term liabilities and Accrued expenses and Other current liabilities, respectively, in the Company’s consolidated balance sheets at December 31, 2016. Based on the forecasted future performance of Challenger and Hybrid, it has been estimated that there will be no future payments made and, as a result, the fair value of the contingent consideration liability has been estimated to be zero at September 30, 2017. The following table provides a reconciliation of the contingent consideration liability measured at estimated fair value based on the balance as of December 31, 2016 and updated quarterly for the nine months ended ~~September~~ ~~30, 2017 (in thousands):~~

~~(6)~~respectively. Containers sold to the Japanese investor funds during the six months ended June 30, 2018 and 2017, had a net book value of $15.2 million and $7.2 million, respectively.

The following table provides a summary of the Company’s rental equipment (in thousands):

The following table represents the components of the Company’s net investment in direct finance leases (in thousands):

In order to estimate the allowance for losses contained in gross finance lease receivables, the Company reviews the credit worthiness of its customers on an ongoing basis. The review includes monitoring credit quality indicators, the aging of customer receivables and general economic conditions.

The categories of gross finance lease receivables based on the Company's internal customer credit ratings can be described as follows:

Tier 1— These customers are typically large international shipping lines that have been in business for many years and have world-class operating capabilities and significant financial resources. In most cases, the Company has had a long commercial relationship with these customers and currently maintains regular communication with them at several levels of management, which provides the Company with insight into the customer's current operating and financial performance. In the Company's view, these customers have the greatest ability to withstand cyclical down turns and would likely have greater access to needed capital than lower-rated customers. The Company views the risk of default for Tier 1 customers to range from minimal to moderate.

Tier 2— These customers are typically either smaller shipping lines or freight forwarders with less operating scale or with a high degree of financial leverage, and accordingly the Company views these customers as subject to higher volatility in financial performance over the business cycle. The Company generally expects these customers to have less access to capital markets or other sources of financing during cyclical down turns. The Company views the risk of default for Tier 2 customers as moderate.

Tier 3— Customers in this category exhibit volatility in payments on a regular basis.

Based on the above categories, the Company's gross finance lease receivables were as follows (in thousands):

Contractual maturities of the Company's gross finance lease receivables subsequent to ~~and as of September~~June 30, ~~2017~~2018 for the years ending ~~September~~June 30 ~~were~~are as follows (in thousands):

The Company amortizes intangible assets on a straight line-basis over their estimated useful lives as follows:

The Company’s intangible assets as of ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017 were as follows (in thousands):



	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
September 30, 2017
June 30, 2018
Trademarks and tradenames	$	1,786	$	(1,269)	$	517	$	1,786	$	(1,691)	$	95
Customer relationships		9,344		(1,705)		7,639		9,344		(2,804)		6,540
	$	11,130	$	(2,974)	$	8,156	$	11,130	$	(4,495)	$	6,635
December 31, 2016
December 31, 2017
Trademarks and tradenames	$	3,028	$	(1,850)	$	1,178	$	1,786	$	(1,411)	$	375
Customer relationships		9,344		(831)		8,513		9,344		(1,996)		7,348
	$	12,372	$	(2,681)	$	9,691	$	11,130	$	(3,407)	$	7,723

~~Total amortization~~Amortization expense was $0.5 million and $0.4 million for ~~both~~ the three months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, respectively, and ~~$1.5~~$1.1 million and ~~$0.7~~$1.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, respectively, and was included in administrative expenses in the consolidated statements of income.

As of ~~September~~June 30, ~~2017,~~2018, estimated future amortization expenses are as follows (in thousands):

Details of the Company’s debt as of ~~September~~June 30, ~~2017~~2018 and December 31, ~~2016~~2017 were as follows (dollars in thousands):

										��

	September 30, 2017					December 31, 2016						June 30, 2018					December 31, 2017
	Outstanding				Average	Outstanding				Average		Outstanding				Average	Outstanding				Average
	Current		Long-term		Interest	Current		Long-term		Interest	Maturity	Current		Long-term		Interest	Current		Long-term		Interest	Maturity

Revolving credit facility	$	-	$	407,000	3.0%	$	-	$	526,000	2.5%	March 2020
Revolving credit												$	5,500	$	322,000	3.8%	$	-	$	528,000	3.2%	June 2023
Revolving credit facility - Rail		-		254,000	2.7%		-		223,500	2.4%	October 2020		-		305,000	3.6%		-		272,000	3.2%	October 2020
Revolving credit facility - Euro		-		14,534	2.0%		-		-	-	September 2020		-		19,867	2.0%		-		14,736	2.0%	September 2020
Term loan		22,350		-	3.2%		1,800		21,900	2.9%	April 2018		1,800		28,200	4.4%		21,900		-	3.4%	April 2023
Term loan		9,000		114,000	2.8%		9,000		120,750	2.3%	October 2019		9,000		107,250	3.7%		9,000		111,750	3.1%	October 2019
Term loan		7,000		84,250	3.0%		7,000		89,500	2.5%	June 2021		7,000		79,000	3.8%		7,000		82,500	3.3%	June 2021
Term loan		1,188		16,827	3.4%		1,158		17,723	3.4%	December 2020		1,219		15,909	3.4%		1,198		16,524	3.4%	December 2020
Term loan		2,780		44,270	3.6%		2,705		46,365	3.6%	August 2021		2,856		42,119	3.6%		2,805		43,560	3.6%	August 2021
Senior secured notes		6,110		58,885	4.9%		6,110		64,995	4.9%	September 2022		6,110		55,830	4.9%		6,110		58,885	4.9%	September 2022
Asset-backed notes		65,307		394,311	3.5%		40,000		202,875	3.4%	June 2042		100,197		647,711	3.8%		65,307		377,984	3.5%	June 2042
Collateralized financing obligations		23,365		67,343	1.3%		28,693		71,346	1.1%	September 2020		28,408		68,018	1.2%		22,549		69,441	1.2%	March 2021
Term loans held by VIE		-		3,743	2.7%		2,287		3,541	2.5%	June 2019		1,829		542	3.0%		-		3,286	2.7%	June 2019
		137,100		1,459,163			98,753		1,388,495				163,919		1,691,446			135,869		1,578,666
Debt issuance costs		(3,778)		(8,575)			(3,226)		(7,996)				(4,320)		(11,954)			(3,820)		(7,893)
Total Debt	$	133,322	$	1,450,588		$	95,527	$	1,380,499			$	159,599	$	1,679,492		$	132,049	$	1,570,773

On June 16, 2017, the Company entered into an amendment to the Third Amended and Restated Revolving Credit Agreement, pursuant to which the revolving credit facility was amended to increase the commitment level from $775.0 million to $960.0 million.

The Company maintains its revolving credit facilities to finance the acquisition of rental equipment and for general working capital purposes. As of ~~September~~June 30, ~~2017,~~2018, the Company had ~~$813.9~~$976.7 million in total availability under its revolving credit facilities (net of $0.1 million in letters of credit). subject to the Company’s ability to meet the collateral requirements under the agreements governing the facilities. Based on the borrowing base and collateral requirements at June 30, 2018, the borrowing availability under the Company’s revolving credit facilities was $117.1 million, assuming no additional contributions of assets.

On ~~July 6, 2017,~~February 28, 2018, CAL Funding III Limited (CAL Funding III), a wholly-owned indirect subsidiary of CAI, issued ~~$240.9~~$332.0 million of ~~3.6%~~4.0% Class A fixed rate asset-backed notes and ~~$12.2~~$16.9 million of ~~4.6%~~4.8% Class B fixed rate asset-backed notes (collectively, the Series 2018-1 Asset-Backed Notes). Principal and interest on the Series 2018-1 Asset-Backed Notes is payable monthly commencing on ~~July 25, 2017,~~March 26, 2018, with the Series 2018-1 Asset-Backed Notes maturing in ~~June 2042.~~February 2028. The proceeds ~~from the Notes~~ were used for general corporate purposes, including repayment of debt by the Company.

On April 19, 2018, the Company entered into a $30.0 million five-year term loan agreement with a bank. The ~~Notes are secured~~loan is payable in 19 quarterly installments of $0.5 million starting July 31, 2018 and a final payment of $21.5 million on April 30, 2023. The loan bears interest at a variable rate based on LIBOR.

On June 27, 2018, the Company entered into an amendment to its Third Amended and Restated Revolving Credit Agreement, pursuant to which the Company’s senior revolving credit facility was amended to, among other things, increase the commitment level from $960 million to $1.1 billion with the ability to increase the revolving credit facility by ~~all~~an additional $250 million without lender approval, subject to certain conditions. The amendment also extended the maturity date of the ~~assets~~revolving credit facility to June 26, 2023 and revised certain covenants, restrictions and events of ~~CAL Funding III.~~default to provide the Company with additional flexibility, including an increase in the maximum total leverage ratio from 3.75:1.00 to 4.00:1.00, subject to certain conditions.

The agreements relating to all of the Company’s debt contain various financial and other covenants. As of ~~September~~June 30, ~~2017,~~2018, the Company was in compliance with all of its debt covenants.

For further information on the Company’s debt instruments, see Note 10 to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2017, filed with the SEC on ~~March 13, 2017.~~February 27, 2018.

The Company grants stock options from time to time to certain employees and independent directors pursuant to its 2007 Equity Incentive Plan, as amended (Plan). Under the Plan, a maximum of 3,421,980 share awards may be granted.

Stock options granted to employees have a vesting period of four years from the grant date, with 25% vesting after one year, and 1/48th vesting each month thereafter until fully vested. Stock options granted to independent directors vest in one year. All of the stock options have a contractual term of ten years.

The following table summarizes the Company’s stock option activities for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016:~~2017:



		Nine Months Ended September 30,								Six Months Ended June 30,
	2017				2016				2018				2017
			Weighted				Weighted				Weighted				Weighted
			Average				Average				Average				Average
	Number of		Exercise		Number of		Exercise		Number of		Exercise		Number of		Exercise
	Shares		Price		Shares		Price		Shares		Price		Shares		Price
Options outstanding at January 1		1,428,255	$	16.31		1,189,255	$	18.08		859,560	$	16.44		1,428,255	$	16.31
Options granted		230,500	$	16.80		245,000	$	7.87		-	$	-		230,500	$	16.80
Options exercised		(240,173)	$	11.40		-	$	-		(9,393)	$	14.76		(205,100)	$	10.30
Options forfeited/cancelled		-	$	16.94		(6,000)	$	21.99
Options outstanding at September 30		1,418,582	$	17.22		1,428,255	$	16.31
Options outstanding at June 30										850,167	$	16.46		1,453,655	$	17.24
Options exercisable		975,087	$	18.24		1,033,518	$	17.47		593,043	$	17.71		982,531	$	18.30
Weighted average remaining term		5.0 years				4.7 years				6.1 years				4.8 years

The aggregate intrinsic value of stock options exercised during the ~~nine~~six months ended ~~September~~June 30, 2018 and 2017 was ~~$2.2 million.~~less than $0.1 million and $1.8 million, respectively. The aggregate intrinsic value of all options outstanding as of ~~September~~June 30, ~~2017~~2018 was ~~$18.6~~$5.9 million based on the closing price of the Company’s common stock of ~~$30.32~~$23.24 per share on ~~September~~June 29, ~~2017,~~2018, the last trading day of the quarter.

The Company recognized stock-based compensation expense relating to stock options of $0.4 million ~~and $0.3 million~~ for the three months ended ~~September~~June 30, 2018 and 2017, and ~~2016, respectively, and $1.2~~$0.8 million and ~~$1.0~~$0.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, respectively. As of ~~September~~June 30, ~~2017,~~2018, the remaining unamortized stock-based compensation cost relating to stock options granted to the Company’s employees and independent directors was approximately ~~$2.9~~$1.6 million, which is to be recognized over the remaining weighted average vesting period of approximately ~~2.5~~2.2 years.

The fair value of stock options granted to the Company’s employees and independent directors was estimated using the Black-Scholes-Merton pricing model using the following weighted average assumptions:

The expected option term is calculated using the simplified method in accordance with SEC guidance. The expected volatility was derived from the average volatility of the Company’s common stock over a period approximating the expected term of the options. The risk-free rate is based on the daily U.S. Treasury yield curve with a term approximating the expected term of the options. No forfeiture rate was estimated on all options granted during the ~~nine~~six months ended ~~September~~June 30, 2017, as the Company accounts for forfeitures as they ~~occur (see Note 2).~~occur.

The Company grants restricted stock, comprising restricted stock units and restricted stock awards, from time to time to certain employees and non-employee directors pursuant to the Plan. The Company recognizes the compensation cost associated with restricted stock ~~is valued~~over a specified award vesting period based on the closing price of the Company’s common stock on the date of ~~grant~~grant.

The Company grants performance stock to selected executives and ~~has~~other key employees. The performance stock vests at the end of a ~~vesting period~~3-year performance cycle if certain financial performance targets are met. The Company recognizes compensation cost associated with the performance stock ratably over the 3-year term based on the likelihood of ~~four years.~~ performance targets being met. Compensation cost is based on the closing price of the Company’s common stock on the date of grant.

The following table summarizes the activity of restricted stock and performance stock under the Plan:

Number of

Weighted

Shares of

Average

Restricted

Grant Date

Stock

Fair Value
Restricted stock outstanding, December 31, 2016

65,802

$
14.75
Restricted stock granted

37,414

$
17.14
Restricted stock vested

(24,674)

$
17.83
Restricted stock outstanding, September 30, 2017

78,542

$
14.92



		Weighted
		Average
	Number of	Grant Date
	Shares	Fair Value
Outstanding at December 31, 2017	78,542	$	14.92
Granted	154,165	$	22.48
Vested	(28,359)	$	15.96
Outstanding at June 30, 2018	204,348	$	20.48

The Company recognized $0.4 million and $0.1 million of stock-based compensation expense relating to restricted stock and performance stock awards for ~~both~~ the three months ended ~~September~~June 30, 2018 and 2017, respectively, and ~~2016, and $0.4~~$0.6 million and ~~$0.3~~$0.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, respectively. As of ~~September~~June 30, ~~2017,~~2018, unamortized stock-based compensation expense relating to restricted stock and performance stock was ~~$1.0~~$3.7 million, which will be recognized over the remaining average vesting period of ~~2.6~~2.5 years.

Stock-based compensation expense is recorded as a component of administrative expenses in the Company’s consolidated statements of income with a corresponding credit to additional paid-in capital in the Company’s consolidated balance sheets.

The consolidated income tax expense for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, was determined based upon estimates of the Company’s consolidated annual effective income tax rate for the years ending December 31, ~~2017~~2018 and ~~2016,~~2017, respectively. The difference between the consolidated annual effective income tax rate and the U.S. federal statutory rate is primarily attributable to foreign income taxes, state income taxes and the effect of certain permanent differences.

The Company’s estimated effective tax rate was ~~1.5%~~3.8% at ~~September~~June 30, ~~2017,~~2018, compared to ~~38.0%~~3.5% at ~~September~~June 30, ~~2016. The lower estimated effective tax rate at September 30, 2017 was due to a significant increase in the proportion of pretax income generated in lower tax jurisdictions.~~2017.

The Company accounts for uncertain tax positions based on an evaluation as to whether it is more likely than not that a position will be sustained on audit, including resolution of any related appeals or litigation processes. This evaluation is based on all available evidence and assumes that the appropriate tax authorities have full knowledge of all relevant information concerning the tax position. Once it has been determined that a tax position is more likely than not to be sustained on its technical merits, the tax benefit recognized is based on the largest amount that is greater than 50% likely of being realized upon ultimate settlement. As of ~~September~~June 30, ~~2017,~~2018, the Company had unrecognized tax benefits of ~~$0.2~~$0.3 million, which if recognized, would reduce the Company’s effective tax rate. Total accrued interest relating to unrecognized tax benefits was less than $0.1 million as of ~~September~~June 30, ~~2017.~~2018. The Company does not believe the total amount of unrecognized tax benefits as of ~~September~~June 30, ~~2017~~2018 will change for the remainder of ~~2017.~~2018.

The Company was notified on May 1, 2017 that ~~their~~its 2015 federal income tax return was selected for examination. ~~An initial meeting with the examining agent was held in August 2017.~~ The examination ~~is in its preliminary data gathering stage.~~was concluded on June 20, 2018 with no impact to tax expense.

The carrying amounts reported in the consolidated balance sheets for cash, accounts receivable and accounts payable approximate fair value because of the immediate or short-term maturity of these financial instruments. The Company’s asset-backed notes of ~~$459.6~~$747.9 million and collateralized financing obligations of ~~$90.7~~$96.4 million as of ~~September~~June 30, ~~2017~~2018 were estimated to have a fair value of approximately ~~$458.0~~$763.1 million and ~~$92.2~~$97.7 million, respectively, based on the fair value of estimated future payments calculated using prevailing interest rates. The fair value of these financial instruments would be categorized as Level 2 in the fair value hierarchy. Management believes that the balances of the Company’s revolving credit facilities of ~~$675.5~~$652.4 million, variable-rate term loans ~~totaling $301.7~~of $232.3 million, fixed-rate term loans of $62.1 million, senior secured notes of ~~$65.0~~$61.9 million, term loans held by VIE of ~~$3.7~~$2.4 million and net investment in direct finance leases of ~~$227.9~~$329.8 million approximate their fair values as of ~~September~~June 30, ~~2017.~~2018. The fair value of these financial instruments would be categorized as Level 2 in the fair value hierarchy.

In addition to its debt obligations described in Note 97 above, the Company had commitments to purchase approximately ~~$63.9~~$179.7 million of containers and ~~$150.2~~$61.4 million of railcars as of ~~September~~June 30, ~~2017; $63.9 million of containers and $113.5 million of railcars~~2018, all in the twelve months ending ~~September 30, 2018 and $36.7 million of railcars in the twelve months ending September~~June 30, 2019. The Company also utilizes certain office facilities and equipment under long-term non-cancellable operating lease agreements with total future minimum lease payments of approximately ~~$4.3~~$4.5 million as of ~~September~~June 30, ~~2017.~~2018.

In October 2017, the Company commenced an ATM offering program with respect to its common stock, which allows the Company to issue and sell up to 2.0 million shares of its common stock. During the six months ended June 30, 2018, the Company issued 100,000 shares of common stock under the ATM offering program for net proceeds of $2.8 million. The Company paid commissions to the sales agent of $0.1 million in connection with the sales of common stock under this ATM offering program during the six months ended June 30, 2018. The net proceeds were used for general corporate purposes. The Company has remaining capacity to issue up to approximately 1.0 million of additional shares of common stock under this ATM offering program.

In March 2018, the Company completed an underwritten public offering of 1,600,000 shares of its 8.5% Series A Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Stock, par value $0.0001 per share and liquidation preference $25.00 per share (Series A Preferred Stock), resulting in net proceeds to the Company of approximately $38.3 million, after deducting the underwriting discount and other offering expenses. Dividends on the Series A Preferred Stock accrue daily and are cumulative from and including the date of original issuance and are payable quarterly in arrears on the 15th day of each April, July, October and January. Dividends accrue at the Fixed Dividend Rate (as defined in the certificate of designations for the Series A Preferred Stock (Certificate of Designations)) at an annual rate of 8.5% of the $25.00 liquidation preference per annum from, and including, the date of original issuance to, but not including, April 15, 2023. On and after April 15, 2023, dividends on the Series A Preferred Stock shall accrue at an annual rate equal to the sum of (a) Three-Month LIBOR (as defined in the Certificate of Designations) as calculated on each applicable date and (b) 5.82% of the $25.00 liquidation preference per share of Series A Preferred Stock. The Series A Preferred Stock ranks senior to the Company’s common stock with respect to dividend rights and rights upon the Company’s liquidation, dissolution or winding up.

The Series A Preferred Stock becomes redeemable by the Company beginning April 25, 2023 for cash at a redemption price of $25.00 per share of Series A Preferred Stock, plus accrued but unpaid dividends thereon to, but not including, the date fixed for redemption. In addition, upon the occurrence of a Change of Control (as defined in the Certificate of Designations), subject to certain restrictions, the Company may, at its option, upon not less than thirty (30) days’ nor more than sixty (60) days’ written notice, redeem the Series A Preferred Stock, in whole or in part, within one hundred twenty (120) days after the first date on which such Change of Control occurred, for cash at a redemption price of $25.00 per share, plus any accumulated and unpaid dividends thereon to, but not including, the date fixed for redemption. There is no mandatory redemption of the Series A Preferred Stock or redemption at the option of the holders. Holders of the Series A Preferred Stock generally have no voting rights except for limited voting rights if the Company fails to pay dividends on the Series A Preferred Stock for six or more quarterly periods (whether or not consecutive) or the Company fails to maintain the listing of the Series A Preferred Stock on a National Exchange (as defined in the Certificate of Designations) for a period of 180 consecutive days.

In April 2018, the Company sold an additional 170,900 shares of Series A Preferred Stock upon the partial exercise by the underwriters of their option to purchase additional Series A Preferred Stock, resulting in net proceeds to the Company of approximately $4.1 million, after deducting the underwriting discount of $0.1 million.

In May 2018, the Company commenced an ATM offering program with respect to its Series A Preferred Stock, which allows the Company to issue and sell up to 2.2 million shares of its Series A Preferred Stock. During the three months ended June 30, 2018, the Company issued 428,710 shares of Series A Preferred Stock under the ATM offering program for net proceeds of $10.5 million. The Company paid commissions to the sales agent of $0.2 million in connection with the sales of Series A Preferred Stock under this ATM offering program during the three months ended June 30, 2018. The net proceeds were used for repayment of debt and general corporate purposes. The Company has remaining capacity to issue up to approximately 1.8 million of additional shares of Series A Preferred Stock under this ATM offering program.

In May 2018, the Company purchased, and subsequently cancelled, 1,225,214 shares of its common stock, from an affiliate of Andrew S. Ogawa in a privately-negotiated transaction. Mr. Ogawa is a member of the Company’s Board of Directors. The ~~Company has transferred legal ownership~~stock was purchased at a price of certain containers to Japanese container funds that were established by Japan Investment Adviser Co., Ltd. (JIA) and CAIJ, Inc. (CAIJ). Prior to April 2016, CAIJ was an 80%-owned subsidiary of CAI with the remaining 20% owned by JIA. Prior$22.81 per share, which represented a 2% discount to the ~~transfer~~closing price on the date of containers from the Company, the container funds received contributions from unrelated Japanese investors, under separate Japanese investment agreements allowed under Japanese commercial laws. The contributions were used to purchase container equipment from the Company. Under the terms of the agreements, the CAI-related Japanese entities manage the activities of certain Japanese entities but may outsource the whole or part of each operation to a third party. Pursuant to its services agreements with investors, the Japanese container funds outsourced the general management of their operations to CAIJ. The Japanese container funds also entered into equipment management service agreements and financing arrangements whereby the Company managed the leasing activity of containers owned by the Japanese container funds.

As described in Note 4, the Japanese managed container funds and financing arrangements are considered VIEs. However, with the exception of the financing arrangements described in Note 4, the Company does not consider its interest in the managed Japanese container funds to be a variable interest. As such, the Company did not consolidate the assets and liabilities, results of operations or cash flows of these funds in its consolidated financial statements.

As described in Note 4, the Company has included in its consolidated financial statements, the assets and liabilities, results of operations, and cash flows of the financing arrangements, in accordance with FASB ASC Topic 810, ~~Consolidation~~. purchase.

The Company organizes itself by the nature of the services it provides which includes equipment leasing (consisting of container leasing and rail leasing) and logistics.

The container leasing segment is aggregated with equipment management and derives its revenue from the ownership and leasing of containers and fees earned for managing container portfolios on behalf of third party investors. The rail leasing segment derives its revenue from the ownership and leasing of railcars. The logistics segment derives its revenue from the provision of logistics services. There are no inter-segment revenues.

With the exception of administrative expenses, operating expenses are directly attributable to each segment. Administrative expenses that are not directly attributable to a segment are allocated to ~~container~~the segments based upon relative asset values or ~~rail leasing based on the net book value of equipment in each segment.~~revenue.

The following tables show condensed segment information for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, reconciled to the Company’s income before income taxes ~~and non-controlling interest~~ as shown in its consolidated statements of income for such periods (in thousands):

(1) Represents cash disbursements for purchasing of rental equipment as reflected in the consolidated statements of cash flows for the periods indicated.

The Company earns its revenue primarily from intermodal containers, which are deployed by its customers in a wide variety of global trade routes. Virtually all of the Company’s containers are used internationally and typically no container is domiciled in one particular place for a prolonged period of time. As such, substantially all of the Company’s long-lived assets are considered to be international, with no single country of use.

The Company’s railcars, with a net book value of ~~$397.2~~$457.0 million as of ~~September~~June 30, ~~2017,~~2018, are used primarily to transport cargo within North America.

The following table represents the geographic allocation of revenue for the periods indicated based on customers’ primary domicile (in thousands):

Basic earnings per share is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock; however, potential common equivalent shares are excluded if their effect is anti-dilutive.

The following table sets forth the reconciliation of basic and diluted net income per share for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017 (in thousands, except per share data):

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016
Numerator

Net income (loss) attributable to CAI common stockholders used

in the calculation of basic and diluted earnings per share

$
17,587

$
(5,451)

$
35,497

$
5,377
Denominator

Weighted-average shares used in the calculation of basic

earnings per share

19,180

19,130

19,108

19,427
Effect of dilutive securities:

Stock options and restricted stock

453

-

314

71
Weighted-average shares used in the calculation of diluted

earnings per share

19,633

19,130

19,422

19,498

Net income (loss) per share attributable to CAI common

stockholders:

Basic

$
0.92

$
(0.28)

$
1.86

$
0.28
Diluted

$
0.90

$
(0.28)

$
1.83

$
0.28



	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Numerator
Net income attributable to CAI common stockholders	$	19,149	$	12,638	$	36,266	$	17,910
Denominator
Weighted-average shares used in per share computation - basic		19,613		19,131		20,013		19,071
Effect of dilutive securities:
Stock options and restricted stock		230		288		245		261
Weighted-average shares used in per share computation - diluted		19,843		19,419		20,259		19,332

Net income per share attributable to CAI common stockholders:
Basic	$	0.98	$	0.66	$	1.81	$	0.94
Diluted	$	0.97	$	0.65	$	1.79	$	0.93

The calculation of diluted earnings per share for the three months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, excluded from the denominator ~~41,989~~161,870 and ~~1,231,455~~858,739 shares, respectively, of common stock options because their effect would have been anti-dilutive. The calculation of diluted earnings per share for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, excluded from the denominator ~~822,226~~ 161,163 and ~~1,103,495~~936,486 shares, respectively, of common stock options because their effect would have been anti-dilutive.

2019

Table of Contents

ITEM 2:2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and related notes thereto, included in our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2017 filed with the SEC on ~~March 13, 2017.~~February 27, 2018. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results may differ materially from those contained in or implied by any forward-looking statements. The financial information included in this discussion and in our consolidated financial statements may not be indicative of our consolidated financial position, operating results, changes in equity and cash flows in the future. See “Special Note Regarding Forward-Looking Statements” included earlier in this report.

Unless the context requires otherwise, references to “CAI,” the “Company,” “we,” “us” or “our” in this Quarterly Report on Form 10-Q refer to CAI International, Inc. and its subsidiaries.

Overview

We are one of the world’s leading transportation finance and logistics companies. We purchase equipment, primarily intermodal shipping containers and railcars, which we lease to our customers. We also manage equipment for third-party investors. In operating our fleet, we lease, re-lease and dispose of equipment and contract for the repair, repositioning and storage of equipment. We also provide domestic and international logistics ~~services, through CAI Logistics, Challenger Overseas LLC and Hybrid Logistics, Inc.~~ services.

~~In February 2016, we purchased Challenger Overseas LLC (Challenger), a Non-Vessel Operating Common Carrier, for approximately $10.8 million. Challenger is headquartered in Eatontown, New Jersey.~~

In June 2016, we purchased Hybrid Logistics, Inc. and its affiliate, General Transportation Services, Inc. (collectively, Hybrid), asset light truck brokers, for approximately $12.0 million. Hybrid is headquartered in Portland, Oregon.

The following tables show the composition of our fleet as of ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, and our average utilization for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016:~~2017:



	As of September 30,				As of June 30,
	2017		2016		2018		2017
Owned container fleet in TEUs		1,121,355		941,345		1,293,361		962,111
Managed container fleet in TEUs		83,086		174,162		77,680		149,218
Total container fleet in TEUs		1,204,441		1,115,507		1,371,041		1,111,329

Owned container fleet in CEUs		1,188,078		1,010,083		1,344,842		1,049,057
Managed container fleet in CEUs		75,596		156,543		70,772		134,400
Total container fleet in CEUs		1,263,674		1,166,626		1,415,614		1,183,457

Owned railcar fleet in units		6,795		6,136		7,430		6,560

The intermodal marine container industry-standard measurement unit is the 20-foot equivalent unit (TEU), which compares the size of a container to a standard 20-foot container. For example, a 20-foot container is equivalent to one TEU and a 40-foot container is equivalent to two TEUs. Containers can also be measured in cost equivalent units (CEUs), whereby the cost of each type of container is expressed as a ratio relative to the cost 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.

Utilization of containers is computed by dividing the average total units on lease during the period in CEUs, by the average total CEUs in our container fleet during the period. Utilization of railcars is computed by dividing the average number of railcars on lease during the period by the average total number of railcars in our fleet during the period. In both cases, the total fleet excludes new units not yet leased and off-hire units designated for sale. If new units not yet leased are included in the total fleet, utilization would be ~~97.2%~~97.0% and ~~95.9%~~97.3% for the total container fleet, ~~97.2%~~96.9% and ~~95.9%~~97.2% for the owned container fleet, and ~~77.4%~~77.9% and ~~79.9%~~76.6% for the railcar fleet, for the three and ~~nine~~six months ended ~~September~~June 30, 2018, respectively~~, 2017, respectively.~~.

Three Months Ended ~~September~~June 30, ~~2017~~2018 Compared to Three Months Ended ~~September~~June 30, ~~2016~~2017

The following table summarizes our operating results for the three months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017 (dollars in thousands):

Total revenue for the three months ended ~~September~~June 30, ~~2017~~2018 increased ~~$11.7~~$23.0 million, or ~~15%~~28%, compared to the three months ended ~~September~~June 30, ~~2016,~~2017, due to a ~~$12.2~~$13.4 million, or ~~25%~~24%, increase in container lease ~~income, offset by~~revenue, a ~~$0.3~~$1.0 million, or 4%12%, ~~decrease~~increase in rail lease ~~income~~revenue and ~~a $0.2~~an $8.6 million, or 1%44%, ~~decrease~~increase in logistics revenue. Operating expenses for the three months ended ~~September~~June 30, ~~2017 decreased $12.8~~2018 increased $7.9 million, or ~~18%~~14%, compared to the three months ended ~~September~~June 30, ~~2016,~~2017, as a result of a ~~$2.1~~$7.6 million, or 7%46%, ~~decrease~~increase in logistics transportation costs, a $2.3 million, or 9%, increase in depreciation expense, and a ~~$5.3~~$2.4 million, or ~~60%~~25%, increase in administrative expenses, partially offset by a $3.6 million, or 58% decrease in storage, handling and other expenses and a ~~$0.2~~$1.0 million, or 1%55%, ~~decrease~~increase in ~~logistics transportation costs, a $5.0 million, or 150%, decrease in loss~~gain on sale of used rental ~~equipment, and a $0.3 million, or 3%, decrease in administrative expenses.~~equipment. Total other expenses ~~primarily net interest expense,~~ for the three months ended ~~September~~June 30, ~~2017~~2018 increased ~~$3.4~~$6.7 million, or ~~31%~~55%, compared with the three months ended ~~September~~June 30, ~~2016.~~2017, primarily due to a $6.2 million, or 50%, increase in net interest expense. A dividend of $1.1 million on our 8.50% Series A Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Stock (Series A Preferred Stock) was recorded in the three months ended June 30, 2018. The increase in revenue, ~~and decrease~~partially offset by the increase in operating expenses, the increase in total other expenses, and the Series A Preferred Stock dividend resulted in a ~~$23.0~~$6.5 million, or ~~423%~~52%, increase in net income attributable to CAI common stockholders for the three months ended ~~September~~June 30, ~~2017~~2018 compared to the three months ended ~~September~~June 30, ~~2016.~~2017.

The ~~following discussion explains the significant changes~~increase in ~~the composition of our total~~container lease revenue for the three months ended ~~September~~June 30, ~~2017,~~2018 compared to the three months ended ~~September 30, 2016:~~

~~Container Lease Income.~~ ~~Container lease income increased $12.2 million, or 25%, to $61.9 million for the three months ended September~~June 30, 2017 ~~from $49.7~~was mainly attributable to a $9.1 million ~~for the three months ended September 30, 2016. Rental~~increase in rental revenue, ~~increased by $10.7 million,~~ primarily due to a ~~23%~~28% increase in the average number of CEUs of on-lease owned containers, ~~and a $0.9 million increase in handling revenues as a result of an increase in lease-outs between the two periods. The increase in rental revenue was~~ partially offset by a ~~$0.5 million decrease resulting from a~~ 1% ~~decrease~~reduction in ~~average owned container~~the per diem ~~rental rates and a $0.5 million decrease in repair fees and other container revenue as a result of our efforts in the prior year to off-load older containers from our fleet.~~rate. In addition to the net increase in rental revenue, there was an increase of ~~$1.4~~$4.4 million in finance lease income as a result of an increase in our investment in direct finance ~~leases.~~leases between the two periods.

Rail lease revenue increased for the three months ended ~~September~~June 30, ~~2017, from $7.6 million for the three months ended September 30, 2016, primarily due to a $0.4 million decrease resulting from the expiration of a significant lease.~~

~~Logistics Revenue.~~ Logistics revenue remained relatively consistent between the two periods, decreasing by $0.2 million, or 1%, to $21.0 million for the three months ended September 30, 2017, from $21.2 million for the three months ended September 30, 2016.

~~Expenses.~~ ~~The following discussion explains the significant changes in expenses for the three months ended September 30, 2017~~2018 compared to the three months ended ~~September 30, 2016:~~

~~Depreciation of Rental Equipment.~~ ~~Depreciation of rental equipment decreased by $2.1 million, or 7%, to $27.8 millionfor the three months ended September~~June 30, 2017, ~~from $29.9 million for the three months ended September 30, 2016. This decrease was~~ primarily due to the one-time impairment charge of $2.0 million, related to the Hanjin bankruptcy, recorded during the three months ended September 2016. Increased depreciation caused by investment in the owned container fleet has been offset by the decreasing impact of the change in residual values that was made effective on July 1, 2016.

~~Storage, Handling and Other Expenses.~~ Storage, handling and other expenses decreased by $5.3 million, or 60%, to $3.5 million for the three months ended September 30, 2017, from $8.8 million for the three months ended September 30, 2016. The decrease was primarily attributable to a $3.6 million decrease in storage costs as the size of the off-lease fleet decreased and $1.5 million of insurance proceeds recorded related to repair costs associated with the previously reported Hanjin bankruptcy. These decreases were partially offset by a $0.5 million increase in storage and handling expenses in the Rail business as the size of the fleet increased, and decreased utilization led to increased storage costs.

~~Logistics Transportation Costs.~~ Logistics transportation costs remained relatively consistent between the two periods, decreasing by $0.2 million, or 1%, to $17.9 million for the three months ended September 30, 2017, from $18.0 million for the three months ended September 30, 2016. The gross margin generated from our logistics business also remained consistent between the two periods at $3.2 million for both the three months ended September 30, 2017 and 2016.

~~Gain on Sale of Used Rental Equipment.~~ We recorded a gain on the sale of used rental equipment of $1.7 million during the three months ended September 30, 2017, compared to a loss of $3.3 million for the three months ended September 30, 2016. While we sold approximately 41% less used containers compared to the prior year, there was an increase of 175% in the average margin per unit, resulting in an increase in gain on sale of used rental equipment.

~~Administrative Expenses.~~ Administrative expenses decreased by $0.3 million, or 3%, to $10.8 million for the three months ended September 30, 2017, from $11.1 million for the three months ended September 30, 2016. Administrative expenses during the three months ended September 30, 2016 included $2.2 million of bad debt expense related to the Hanjin bankruptcy. Excluding this expense, administrative expenses would have increased by $1.9 million, primarily due to a $1.4 million increase in payroll-related costs as a result of an increase in headcount and an increase in the bonus accrual, as well as a $0.7 million increase in bad debt expense arising from certain slow paying customers. These increases were partially offset by a $0.6 million reduction in the contingent consideration liability related to acquisitions.

~~Net Interest Expense~~. Net interest expense increased by $3.1 million, or 28%, to $14.0 million for the three months ended September 30, 2017, from $10.9 million for the three months ended September 30, 2016. The increase was due to an increase in the average loan principal balance between the two periods, as well as an increase in our average interest rate, caused by an increase in LIBOR, from approximately 2.6% to 3.1%.

~~Other Expense~~. Other expense increased by $0.4 million, or 428%, to $0.4 million for the three months ended September 30, 2017, from a $0.1 million loss for the three months ended September 30, 2016, due to foreign exchange losses. Gains and losses on foreign currency primarily occur when foreign denominated financial assets and liabilities are either settled or re-measured in U.S. dollars. The loss on foreign exchange for the three months ended September 30, 2017 was caused primarily by settling intercompany loans that were denominated in Euros.

~~Income Tax Expense.~~ Income tax expense decreased by $1.9 million, or 106%, to a benefit of $0.1 million for the three months ended September 30, 2017, from an expense of $1.8 million for the three months ended September 30, 2016. The estimated effective tax rate at September 30, 2017 was 1.5%, compared to 38.0% for the three months ended September 30, 2016. The lower estimated effective tax rate at September 30, 2017 was due to an increase in the proportion of pretax income generated in lower tax jurisdictions.

~~Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016~~

~~The following table summarizes our operating results for the nine months ended September 30, 2017 and 2016 (dollars in thousands):~~

Total revenue for the nine months ended September 30, 2017 increased $37.3 million, or 17%, compared to the nine months ended September 30, 2016, due to a $16.9 million, or 11%, increase in container lease income, a $1.0 million, or 4%, increase in rail lease income and a $19.4 million, or 46%, increase in logistics revenue. Operating expenses for the nine months ended September 30, 2017 increased $3.3 million, or 2%, compared to the nine months ended September 30, 2016, as a result of a ~~$5.4 million, or 7%, increase in depreciation expense, a $16.5 million, or 47%, increase in logistics transportation costs, and a $2.5 million, or~~ 9%, increase in administrative expenses, offset by a $10.5 million, or 39%, decrease in storage, handing and other expenses and a $10.5 million, or 132%, decrease in loss on sale of used rental equipment. Total other expenses, primarily net interest expense, for the nine months ended September 30, 2017 increased $6.6 million, or 21%, compared with the nine months ended September 30, 2016. The increase in revenue was partially offset by the increase in operating expenses, and resulted in a $30.1 million, or 560%, increase in net income attributable to CAI common stockholders for the nine months ended September 30, 2017 compared to the same nine-month period in 2016.

~~Revenue.~~ ~~The following discussion explains the significant changes in the composition of our total revenue for the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016:~~

~~Container Lease Income.~~ Container lease income increased $16.9 million, or 11%, to $169.8 million for the nine months ended September 30, 2017, from $152.9 million for the nine months ended September 30, 2016. Rental revenue increased by $21.0 million due to a 15% increase in the average number of CEUs of on-lease owned containers, partially offset by a $4.3 million decrease resulting from a 3% decrease in average owned container per diem rental rates. The reduction in average container per diem rental rates has been caused by competitive market pressure.

~~Rail Lease Income.~~ ~~Rail lease income increased $1.0 million, or 4%, to $23.5 million for the nine months ended September 30, 2017, from $22.5 million~~ ~~for the nine months ended September 30, 2016, primarily as a result of an 8%~~ increase in the average size of our on-lease railcar fleet during the last twelve months ~~partially offset by~~and a ~~$0.4~~$0.2 million ~~decrease resulting from the expiration of a significant lease.~~ increase in repair fee revenue.

Logistics revenue ~~increased $19.4 million, or 46%, to $61.1 million~~and gross margin

The increase in logistics revenue for the ~~nine~~three months ended ~~September~~June 30, 2017, from $41.7 million for the nine months ended September 30, 2016. The increase was primarily due to an additional $17.9 million of revenue from the acquisition of Challenger in February 2016 and Hybrid in June 2016, as well as new customers generating an additional $1.5 million of revenue at CAI Logistics.

~~Expenses.~~ ~~The following discussion explains the significant changes in expenses for the nine months ended September 30, 2017~~2018, compared to the ~~nine~~three months ended ~~September 30, 2016:~~

~~Depreciation of Rental Equipment.~~ ~~Depreciation of rental equipment increased by $5.4 million, or 7%, to $82.8 millionfor the nine months ended September~~June 30, 2017, ~~from $77.4 million for the nine months ended September 30, 2016. This increase~~ was ~~primarily attributable~~due to ~~an increase~~a combination of ~~$4.4 million resulting from~~increased load numbers and increased rates in our intermodal and truck brokerage operations. Transportation costs increased at a slightly higher rate than revenue due to increased carrier costs and resulted in a decrease in the ~~residual value estimate~~gross margin percentage from 14.9% for 40-foot high cube dry van containers implemented in 2016, a $1.3 million write-off of rental equipment on lease to a bankrupt customer, and an increase of $1.9 million in depreciation attributable to our railcar fleet, reflecting the increase in size of our railcar fleet over the past twelve months. The increase was partially offset by a decrease due to the one-time impairment charge of $2.0 million, related to the Hanjin bankruptcy, recorded during the ninethree months ended ~~September 2016.~~

~~Storage, Handling and Other Expenses.~~ ~~Storage, handling and other expenses decreased by $10.5 million, or 39%,~~June 30, 2017 to ~~$16.7 million~~13.9% for the ~~nine~~three months ended ~~September~~June 30, 2017, from $27.2 million for the nine months ended September 30, 2016. The decrease was primarily attributable to a $10.6 million decrease in storage costs as the size of the off-lease fleet decreased compared to the prior year and $1.5 million of insurance proceeds recorded related to repair costs associated with the previously reported Hanjin bankruptcy. These decreases were partially offset by a $1.3 million increase in storage and handling expenses in the Rail business as the size of the fleet increased, while utilization decreased by 5%, and an increase of $0.5 million in container liability insurance premium resulting from the Hanjin insurance claim.

~~Logistics Transportation Costs.~~ Logistics transportation costs increased by $16.5 million, or 47%, to $51.6 million for the nine months ended September 30, 2017, from $35.1 million for the nine months ended September 30, 2016. The increase was mainly attributable to an additional $15.3 million of costs from the acquisition of Challenger in February 2016 and Hybrid in June 2016, as well as an increase of $1.2 million in CAI Logistics costs as a result of new customer activity. The gross margin generated from our logistics business increased from $6.6 million for the nine months ended September 30, 2016 to $9.5 million for the nine months ended September 30, 2017, primarily due to the acquisitions made in the logistics business in 2016.

~~Gain on Sale of Used Rental Equipment.~~ We recorded a gain on the sale of used rental equipment of $2.5 million during the nine months ended September 30, 2017, compared to a loss of $8.0 million for the nine months ended September 30, 2016. While we sold 13% less used containers compared to the prior year, there was an increase of 137% in the average margin per unit, resulting in a gain on sale of used rental equipment.

~~Administrative Expenses.~~ Administrative expenses increased by $2.5 million, or 9%, to $31.2 million for the nine months ended September 30, 2017, from $28.8 million for the nine months ended September 30, 2016. The increase was primarily a result of $3.7 million of additional administrative expenses incurred by our newly acquired logistics companies, partially offset by a $1.2 million reduction in the contingent consideration liability related to the acquisitions.2018.

The increase in depreciation expense for the three months ended June 30, 2018 compared to the three months ended June 30, 2017 was primarily attributable to an increase in the average size of the owned container fleet, the impact of which was partially offset by an increase in container equipment on direct finance leases which is not depreciated.

The increase in depreciation expense for the three months ended June 30, 2018 compared to the three months ended June 30, 2017 was primarily attributable to an increase in the average size of the railcar fleet during the three months ended June 30, 2018 as well as an increase in the proportion of new railcars in the fleet.

The decrease in storage, handling and other expenses for the three months ended June 30, 2018 compared to the three months ended June 30, 2017 was primarily attributable to a $1.4 million credit recorded in recovery costs as a result of insurance proceeds received relating to the bankruptcy of Hanjin Shipping Co. Ltd. (Hanjin) in August 2016, a $0.9 million decrease in repair and positioning fees and a $1.1 million decrease in storage and handling expenses, both due to a decrease in the average size of the off-lease fleet and a 2% increase in average utilization between the two periods, and the impact of a $0.5 million container liability insurance premium recorded during the three months ended June 30, 2017, related to the Hanjin insurance claim.

The increase in storage, handling and other expenses for the three months ended June 30, 2018 compared to the three months ended June 30, 2017 was primarily attributable to a $0.2 million increase in storage expenses as the size of the railcar fleet increased and utilization decreased by 3%, between the two periods.

~~Net Interest Expense~~While we sold approximately 33% fewer CEUs of used containers during the three months ended June 30, 2018 compared to the three months ended June 30, 2017, there was a significant increase in the average sales price per unit, which reflected the recovery in new equipment prices in the last twelve months as well as a limited supply of used equipment.

The increase in administrative expenses for the three months ended June 30, 2018 compared to the three months ended June 30, 2017 was primarily attributable to a $0.4 million increase in payroll-related costs, largely due to increased incentive compensation, a $0.2 million increase in rent expense between the two periods, and a $0.6 million reduction in contingent consideration liability related to acquisitions that was recorded during the three months ended June 30, 2017.

Administrative expenses for the three months ended June 30, 2018 remained consistent with the three months June 30, 2017.

The increase in net interest expense for the ~~nine~~three months ended ~~September~~June 30, 2018 compared to the three months ended June 30, 2017 ~~from $31.5 million for the nine months ended September 30, 2016. The increase~~ was due primarily to an increase in the average loan principal balance between the two periods, as we continue to increase borrowings to finance the acquisition of additional rental equipment, as well as an increase in ~~our~~the average interest rate on our outstanding debt, caused by an increase in LIBOR, from approximately ~~2.6%~~3.0% to ~~3.1%~~3.6%.

Other expense, ~~increased by $~~0.2 million, or 60%, to $0.7 million for the nine months ended September 30, 2017, from $0.4 million for the nine months ended September 30, 2016, which related to foreign exchange losses. Gains and losses on foreign currency primarily occur when foreign denominated financial assets and liabilities are either settled or re-measured in U.S. dollars. Therepresenting a loss on foreign exchange of $0.4 million for the three months ended ~~September~~June 30, ~~2017 was caused primarily by settling intercompany loans that were denominated in Euros.~~

~~Income Tax Expense.~~ ~~Income tax expense decreased by $2.8~~2018, increased $0.5 million ~~or 83%, to $0.5~~from a gain of $0.1 million for the ~~nine~~three months ended ~~September~~June 30, 2017, ~~from $3.3 million for~~primarily as a result of movements in the ~~nine months ended September 30, 2016.~~ U.S. Dollar exchange rate against the Euro.

The estimated effective tax rate at ~~September~~June 30, ~~2017~~2018 was ~~1.5%~~3.8%, compared to ~~38.0%~~3.5% for the ~~nine~~three months ended ~~September~~June 30, ~~2016.~~2017. The ~~lower~~increase in estimated effective tax rate at ~~September~~June 30, 2018 was primarily caused by an increase in the amount of interest income generated by foreign direct finance leases subject to both foreign and U.S. income tax.

An accrual for preferred stock dividends of $1.1 million was recorded in the three months ended June 30, 2018 as a result of 2.2. million shares of Series A Preferred Stock being issued and sold in 2018. See Note 12 to our consolidated financial statements in this Quarterly Report on Form 10-Q for additional information related to our Series A Preferred Stock.

The following table summarizes our operating results for the six months ended June 30, 2018 and 2017 (dollars in thousands):

Total revenue for the six months ended June 30, 2018 increased $36.9 million, or 22%, compared to the six months ended June 30, 2017, due to a $25.1 million, or 23%, increase in container lease revenue, a $2.0 million, or 13%, increase in rail lease revenue and a $9.8 million, or 24%, increase in logistics revenue. Operating expenses for the six months ended June 30, 2018 increased $5.0 million, or 4%, compared to the six months ended June 30, 2017, as a result of a $9.2 million, or 27%, increase in logistics transportation costs, a $3.2 million, or 6%, increase in depreciation expense, and a $3.0 million, or 15%, increase in administrative expenses, partially offset by a $6.4 million, or 49%, decrease in storage, handling and other expenses and a $4.0 million, or 461%, increase in gain on sale of used rental equipment. Total other expenses for the six months ended June 30, 2018 increased $11.6 million, or 48%, compared with the six months ended June 30, 2017, primarily due to a $11.4 million, or 48%, increase in net interest expense. A dividend of $1.2 million on our Series A Preferred Stock was recorded in the six months ended June 30, 2018. The increase in revenue, partially offset by the increases in operating expenses, total other expenses and the dividend on our Series A Preferred Stock, resulted in an $18.4 million, or 102%, increase in net income attributable to CAI common stockholders for the six months ended June 30, 2018 compared to the six months ended June 30, 2017.

The increase in container lease revenue for the six months ended June 30, 2018 compared to the six months ended June 30, 2017 was mainly attributable to a $16.9 million increase in rental revenue, primarily due to a 28% increase in the average number of CEUs of on-lease owned containers, and $2.2 million of container lease revenue from insurance proceeds recognized during the six months ended June 30, 2017. In addition to the increase in rental revenue, there was an increase of $8.5 million in finance lease income as a result of an increase in our investment in direct finance leases between the two periods.

Rail lease revenue increased for the six months ended June 30, 2018 compared to the six months ended June 30, 2017, primarily as a result of a 6% increase in the average size of our on-lease railcar fleet during the last twelve months and a $1.5 million increase in repair fee revenue.

The increase in logistics revenue for the six months ended June 30, 2018, compared to the six months ended June 30, 2017, was due to a combination of increased load numbers and increased rates in our intermodal and truck brokerage operations. Transportation costs increased at a slightly higher rate than revenue due to increased carrier costs and resulted in a decrease in the gross margin percentage from 15.8% for the six months ended June 30, 2017 to 13.8% for the six months ended June 30, 2018.

Depreciation expense of $51.3 million for the six months ended June 30, 2018 remained relatively consistent with depreciation expense of $249.5 million for the six months ended June 30, 2017. While there was an increase in depreciation expense attributable to an increase in the ~~proportion~~average size of ~~pretax~~our owned fleet, the increase was partially offset by a $1.3 million write-off of rental equipment on lease to a bankrupt customer, which was recognized during the six months ended June 30, 2017, and an increase in assets on direct finance leases.

The increase in depreciation expense for the six months ended June 30, 2018 compared to the six months ended June 30, 2017 was primarily attributable to an increase in the average size of the railcar fleet and an impairment charge of $0.6 million related to off-lease railcars designated for scrap recognized during the six months ended June 30, 2018.

The decrease in storage, handling and other expenses for the six months ended June 30, 2018 compared to the six months ended June 30, 2017 was primarily attributable to a $3.6 million decrease in storage and handling expenses, as well as a $2.0 million decrease in repair and positioning fees, both due to a decrease in the average size of the off-lease fleet and a 2% increase in average utilization between the two periods, a $1.4 million credit recorded in recovery costs as a result of insurance proceeds received relating to the Hanjin bankruptcy, and the impact of a $0.5 million container liability insurance premium recorded during the six months ended June 30, 2017, related to the Hanjin insurance claim.

The increase in storage, handling and other expenses for the six months ended June 30, 2018 compared to the six months ended June 30, 2017 was primarily attributable to a $0.4 million increase in storage and handling expenses as the size of the railcar fleet increased and utilization decreased by 5%, between the two periods, as well as a $0.4 million increase in repair related costs.

While we sold approximately 50% fewer CEUs of used containers during the six months ended June 30, 2018 compared to the six months ended June 30, 2017, there was a significant increase in the average sales per unit, which reflected the recovery in the new equipment prices in the last twelve months as well as a limited supply of sued equipment.

The increase in administrative expenses for the six months ended June 30, 2018 compared to the six months ended June 30, 2017 was primarily attributable to a $0.6 million increase in payroll-related costs, largely due to increased incentive compensation, a $0.4 million increase in rent expense between the two periods, and a $0.6 million reduction in contingent consideration liability related to acquisitions recorded during the six months ended June 30, 2017.

Administrative expenses of $2.6 million for the six months ended June 30, 2018 remained relatively consistent with administrative expenses of $2.4 million for the six months ended June 30, 2018.

The increase in administrative expenses of $0.5 million for the six months ended June 30, 2018 compared to the six months ended June 30, 2017 was primarily caused by an increase of $0.5million in payroll related costs due to additional headcount.

The increase in net interest expense for the six months ended June 30, 2018 compared to the six months ended June 30, 2017 was due primarily to an increase in the average loan principal balance between the two periods, as we continue to increase borrowings to finance the acquisition of additional rental equipment, as well as an increase in the average interest rate on our outstanding debt, caused by an increase in LIBOR, from approximately 3.0% to 3.6%.

Other expense, representing a loss on foreign exchange of $0.4 million for the six months ended June 30, 2018, increased $0.2 million from $0.2 million for the six months ended June 30, 2017, primarily as a result of movements in the U.S. Dollar exchange rate against the Euro.

The estimated effective tax rate at June 30, 2018 was 3.8%, compared to 3.5% at June 30, 2017. The increase in estimated effective tax rate at June 30, 2018 was primarily caused by an increase in the amount of interest income generated by foreign direct finance leases subject to both foreign and U.S. income tax.

An accrual for preferred stock dividends of $1.2 million was recorded in ~~lower tax jurisdictions.~~the six months ended June 30, 2018 as a result of 2.2. million shares of Series A Preferred Stock being issued and sold in 2018. See Note 12 to our consolidated financial statements in this Quarterly Report on Form 10-Q for additional information related to our Series A Preferred Stock.

As of ~~September~~June 30, ~~2017,~~2018, we had cash and cash equivalents of ~~$35.0~~$61.9 million, including ~~$22.4~~$24.3 million of cash held by variable interest ~~entities.~~entities (VIEs). Our principal sources of liquidity are cash in-flows provided by operating activities, proceeds from the sale of rental equipment, borrowings from financial institutions, and equity and debt offerings. Our cash in-flows are used to finance capital expenditures and meet debt service requirements.

As of ~~September~~June 30, ~~2017,~~2018, our outstanding indebtedness and current maximum borrowing level was ~~comprised of the following~~as follows (in thousands):

As of ~~September~~June 30, ~~2017,~~2018, we had ~~$813.9~~$976.7 million in availability under our revolving credit facilities (net of $0.1 million in letters of credit), subject to our ability to meet the collateral requirements under the agreements governing the facilities. Based on the borrowing base and collateral requirements at ~~September~~June 30, ~~2017,~~2018, the borrowing availability under our revolving credit facilities was ~~$74.6~~$117.1 million, assuming no additional contributions of assets.

On ~~July 6, 2017,~~February 28, 2018, CAL Funding III Limited (CAL Funding III), aour wholly-owned indirect subsidiary, ~~of CAI,~~ issued ~~$240.9~~$332.0 million of ~~3.6%~~4.0% Class A fixed rate asset-backed notes and ~~$12.2~~$16.9 million of ~~4.6%~~4.8% Class B fixed rate asset-backed notes (collectively, the Series 2018-1 Asset-Backed Notes). Principal and interest on the Series 2018-1 Asset-Backed Notes is payable monthly commencing on ~~July 25, 2017,~~March 26, 2018, with the Series 2018-1 Asset-Backed Notes maturing in ~~June 2042.~~February 2028. The proceeds ~~from the Notes~~ were used for general corporate purposes, including repayment of outstanding debt.

On April 19, 2018, we entered into a $30.0 million five-year term loan agreement with a bank. The ~~Notes are secured~~loan is payable in 19 quarterly installments of $0.5 million starting July 31, 2018 and a final payment of $21.5 million on April 30, 2023. The loan bears interest at a variable rate based on LIBOR.

On June 27, 2018, we entered into an amendment to our Third Amended and Restated Revolving Credit Agreement, pursuant to which our senior revolving credit facility was amended to, among other things, increase the commitment level from $960 million to $1.1 billion, with the ability to increase the revolving credit facility by ~~all~~an additional $250.0 million without lender approval, subject to certain conditions. The amendment also extended the maturity date of the ~~assets~~revolving credit facility to June 23, 2023 and revised certain covenants, restrictions and events of ~~CAL Funding III.~~default to provide us with additional flexibility, including an increase in the maximum total leverage ratio from 3.75:1.00 to 4.00:1.00, subject to certain conditions.

For further information on our debt instruments, see Note 97 to the consolidated financial statements in this Quarterly Report on Form 10-Q and Note 10 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2017, filed with the SEC on ~~March 13, 2017.~~February 27, 2018.

Assuming that our lenders remain solvent, we currently believe that cash provided by operating activities and existing cash, proceeds from the sale of rental equipment, and borrowing availability under our debt facilities are sufficient to meet our liquidity needs for at least the next twelve months. We will continue to monitor our liquidity and the credit markets.

In addition to customary events of default, the agreements governing our ~~revolving credit facilities and term loans~~indebtedness contain restrictive covenants, including limitations on certain liens, indebtedness and investments. In addition, ~~all of~~the agreements governing our ~~debt facilities~~indebtedness contain various restrictive financial and other covenants. The financial covenants in the agreements governing our ~~debt facilities~~indebtedness require us to maintain: (1) in the case of our debt facilities, a consolidated funded debt to consolidated tangible net worth ratio of no more than 3.75:1.00, and in the case of our asset-backed notes, of no more than 4.50:1.00; and (2) in the case of our debt facilities, a fixed charge coverage ratio of at least 1.20:1.00, and in the case of our asset-backed notes, of at least 1.10:1.00. As of ~~September~~June 30, ~~2017,~~2018, we were in compliance with all of the applicable debt covenants.

The following table sets forth certain cash flow information for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017 (in thousands):

Net cash provided by operating activities ~~of $104.8~~was $78.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017, increased $10.9~~2018, an increase of $15.4 million ~~from $93.9~~compared to $63.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2017. The increase was due to a ~~$21.4~~$21.5 million increase in net income as adjusted for depreciation, amortization and other non-cash items, partially offset by a ~~$10.5~~$6.2 million ~~decrease~~increase in our net working capital adjustments. The increase in net income as adjusted for non-cash items was primarily due to an increase of ~~$30.1~~$19.5 million in net income and an increase of ~~$5.5~~$3.1 million in depreciation expense, ~~and an increase of $0.9 million in amortization of intangible assets,~~ partially offset by a ~~$10.5~~$4.0 million ~~decrease~~increase in the ~~loss~~gain on sale of used rental ~~equipment, a $1.8 million decrease in deferred income taxes, a $1.7 million decrease in bad debt expense, and a $1.2 million reduction in contingent consideration.~~equipment. Net working capital used in operating activities of ~~$15.7~~$18.9 million in the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, was due to a ~~$6.3~~$14.2 million increase in accounts receivable, primarily caused by an increase in lease and logistics activity, a ~~$5.9~~$2.1 million increase in prepaid expenses and other assets, and a $1.9 million increase in accounts payable, accrued expenses and other liabilities, primarily caused by the timing of payments. Net working capital used in operating activities of $12.7 million in the six months ended June 30, 2017, was due to a $5.6 million increase in accounts receivable, primarily caused by an increase in lease and logistics activity, a $1.8 million increase in prepaid expenses and other assets, primarily due to an increase in the insurance receivable related to the Hanjin bankruptcy, a $3.6 million decrease in accounts payable, accrued expenses and other liabilities, primarily caused by the timing of payments, ~~a $3.0 million decrease in due to container investors due to the decrease in our managed fleet,~~ and a ~~$0.5~~$1.7 million decrease in unearned ~~revenue. Net working capital used~~revenue, primarily due a decrease in ~~operating activities of $5.2 million in the nine months ended September 30, 2016, was due to~~deferred payments for a $7.6 million increase in accounts receivable, primarily a result of the logistics acquisitions, partially offset by a $1.5 million increase in accounts payable, accrued expenses and other liabilities, primarily caused by the timing of payments, and a $1.0 million increase in unearned revenue.Rail contract.

Net cash used in investing activities ~~increased $93.4 million to $216.6~~was $227.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017, from $123.2~~2018, an increase of $143.6 million compared to $84.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2017. The increase in cash usage was primarily attributable to a ~~$107.2~~$143.4 million increase in the purchase of rental equipment and a $5.0 million decrease in receipt of principal payments from direct financing leases, partially offset by a $15.6 million decrease in acquisition costs and a $2.7 million increase in proceeds from the sale of used containers.equipment.

Net cash provided by financing activities was $163.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017, increased $86.0~~2018, an increase of $164.1 million compared to net cash used in financing activities of $0.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2017. During the ~~nine~~

six months ended ~~September~~June 30, ~~2017,~~2018, our net cash inflow from borrowings was ~~$108.1~~$141.4 million compared to ~~$24.2~~a net cash outflow of $0.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016, reflecting~~2017, which reflected an increase in net borrowings used for the acquisition of rental equipment during the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018 compared to the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2017. The increase was also a result of a ~~decrease of $9.2 million used to repurchase our stock pursuant to our previously announced stock repurchase plan and a $1.4~~$56.7 million increase in proceeds received from the ~~exercise~~issuance of common stock ~~options,~~and Series A Preferred Stock during the six months ended June 30, 2018, partially offset by a ~~$6.8~~$27.9 million ~~increase in restricted cash~~repurchase of common stock and a ~~$1.7~~$6.2 million increase in debt issuance costs ~~both primarily related to~~during the ~~asset-backed notes issued in the current year.~~

OnIn December ~~14,~~ 2015, we announced that our Board of Directors had approved the repurchase of up to one million shares of our outstanding common stock.On In February 4, 2016, ~~the Company’s~~our Board of Directors approved a one million share increase in the previously approved share repurchase program, bringing the total authorized for repurchase to two million shares of our outstanding common stock. The number, price, structure and timing of the repurchases, if any, will be at our sole discretion and future repurchases will be evaluated by us depending on market conditions, liquidity needs and other factors. Stock repurchases may be made in the open market, block trades or privately negotiated transactions. The repurchase authorization does not have an expiration date and does not oblige us to acquire any particular amount of our common stock. As of ~~September~~June 30, 2018 ~~30, 2017,~~, approximately 0.8 million shares remained available for repurchase under our ~~share~~stock repurchase plan.

In May 2018, we purchased, and subsequently cancelled, 1.2 million shares of its common stock, from an affiliate of Andrew S. Ogawa in a privately-negotiated transaction. Mr. Ogawa is a member of our Board of Directors. The stock was purchased at a price of $22.81 per share, which represented a 2% discount to the closing price on the date of purchase.

In October 2017, we commenced an ATM offering program with respect to our common stock, which allows us to issue and sell up to 2.0 million shares of our common stock. During the six months ended June 30, 2018, we issued 100,000 shares of common stock under the ATM offering program for net proceeds of $2.7 million. We paid commissions to the sales agent of $0.1 million in connection with the sales of common stock under this ATM offering program during the six months ended June 30, 2018. We did not issue and sell any shares of common stock under this ATM offering during the three months ended June 30, 2018. The net proceeds were used for general corporate purposes. As of June 30, 2018, we have remaining capacity to issue up to approximately 1.0 million of additional shares of common stock under this ATM offering program.

In March 2018, we completed an underwritten public offering of 1,600,000 shares of our 8.50% Series A Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Stock, par value $0.0001 per share and liquidation preference $25.00 per share (Series A Preferred Stock), resulting in net proceeds to us of approximately $38.3 million, after deducting the underwriting discount and other offering expenses.

In April 2018, we sold an additional 170,900 shares of our Series A Preferred Stock upon the exercise by the underwriters of their option to purchase additional Series A Preferred Stock, resulting in net proceeds to us of approximately $4.1 million, after deducting the underwriting discount.

See Note 12 to our consolidated financial statements in this Quarterly Report on Form 10-Q for additional information related to our Series A Preferred Stock.

In May 2018, we commenced an ATM offering program with respect to our Series A Preferred Stock, which allows us to issue and sell up to 2.2 million shares of our Series A Preferred Stock. During the three months ended June 30, 2018, we issued 428,710 shares of Series A Preferred Stock under the ATM offering program for net proceeds of $10.5 million. We paid commissions to the sales agent of $0.2 million in connection with the sales of Series A Preferred Stock under this ATM offering program during the three months ended June 30, 2018. The net proceeds were used for debt repayment and general corporate purposes. We have remaining capacity to issue up to approximately 1.8 million of additional shares of Series A Preferred Stock under this ATM program.

The following table sets forth our contractual obligations and commercial commitments by due date as of ~~September~~June 30, ~~2017~~2018 (in thousands):



	Payments Due by Period														Payments Due by Period
			Less than		1-2		2-3		3-4		4-5		More than				Less than		1-2		2-3		3-4		4-5		More than
	Total		1 year		years		years		years		years		5 years		Total		1 year		years		years		years		years		5 years
Total debt obligations:
Revolving credit facilities	$	675,534	$	-	$	-	$	421,534	$	254,000	$	-	$	-	$	652,367	$	5,500	$	-	$	324,867	$	-	$	322,000	$	-
Term loans		301,665		42,318		17,862		118,511		122,974		-		-		294,353		21,876		120,273		91,518		37,886		22,800		-
Senior secured notes		64,995		6,110		6,110		6,110		6,110		40,555		-		61,940		6,110		6,110		6,110		6,110		37,500		-
Asset-backed notes		459,618		65,307		65,307		65,307		65,307		65,307		133,083		747,908		100,197		100,197		100,197		100,197		83,072		264,048
Collateralized financing obligations		90,708		23,365		37,468		29,875		-		-		-		96,427		28,407		33,058		27,969		6,992		-		-
Term loans held by VIE		3,743		-		3,743		-		-		-		-		2,371		1,829		542		-		-		-		-
Interest on debt and capital lease obligations (1)		153,276		46,815		43,831		30,235		13,833		7,930		10,632		243,362		64,212		56,984		42,819		30,877		25,676		22,795
Rental equipment payable		190,180		190,180		-		-		-		-		-		184,258		184,258		-		-		-		-		-
Rent, office facilities and equipment		4,342		2,140		1,801		230		97		74		-		4,505		2,370		1,079		431		342		143		140
Equipment purchase commitments - Containers		63,927		63,927		-		-		-		-		-		179,698		179,698		-		-		-		-		-
Equipment purchase commitments - Rail		150,179		113,478		36,701		-		-		-		-		61,401		61,401		-		-		-		-		-
Total contractual obligations	$	2,158,167	$	553,640	$	212,823	$	671,802	$	462,321	$	113,866	$	143,715	$	2,528,589	$	655,859	$	318,242	$	593,911	$	182,404	$	491,191	$	286,982

As of ~~September~~June 30, ~~2017,~~2018, we had no material off-balance sheet arrangements or obligations that have or are reasonably likely to have a current or future effect on our financial condition, change in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that are material to investors.

Container rental equipment is recorded at original cost and depreciated to an estimated residual value on a straight-line basis over its estimated useful life. The estimated useful lives and residual values of our container equipment are based on historical disposal experience and our expectations for future used container sale prices. Depreciation estimates are reviewed on a regular basis to determine whether sustained changes have taken place in the useful lives of our equipment or assigned residual values, which would suggest that a change in depreciation estimates is warranted.

After we conducted our regular depreciation policy review for 2016, we concluded that a change in the estimated residual value for 40-foot high cube dry van containers from $1,650 to $1,400 per container, effective July 1, 2016, was appropriate. The change increased our depreciation expense by $4.4 million, decreased net income by $4.3 million, and decreased diluted earnings per share by $0.22,Except for the ~~nine months ended September 30, 2017.~~

~~We continuously monitor disposal prices across our entire portfolio for indications of a sustained market downturn. If necessary, we will adjust our estimates if~~ Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606), there ~~are indicators that the current weak market for containers will be sustained over a longer time horizon.~~

~~There~~ have been no changes to our critical accounting policies during the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. See Critical Accounting Policies and Estimates in our Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on February 27, 2018.

In ~~August~~February 2016, the Financial Accounting Standards Board (FASB) issued ~~Accounting Standards Update (ASU) No. 2016-15,~~ ~~Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments~~ (ASU ~~2016-15). ASU 2016-15 is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. In November 2016, the FASB also issued ASU No. 2016-18,~~ ~~Statement of Cash Flows (Topic 230): Restricted Cash~~, which will require amounts generally described as restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the total beginning and ending amounts for the periods shown on the statement of cash flows. ASU 2016-15 and ASU 2016-18 are effective for interim and annual periods beginning after December 15, 2017, using a retrospective transition method to each period presented. We are currently evaluating the potential impact adoption of the standard will have on our consolidated statements of cash flows.

~~In February 2016, the~~ ~~FASB issued ASU~~ No. 2016-02, Leases (Topic 842) (ASU 2016-02). The FASB issued ASU 2016-02 to increase transparency and comparability among organizations recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Under ASU 2016-02, lessors will account for leases using an approach that is substantially equivalent to existing U.S. GAAP for sales-type leases, direct financing leases and operating leases. Unlike current guidance, however, a lease with collectability uncertainties may be classified as a sales-type lease. If collectability of lease payments, plus any amount necessary to satisfy a lessee residual value guarantee, is not probable, lease payments received will be recognized as a deposit liability and the underlying assets will not be derecognized until collectability of the remaining amounts becomes probable. ASU 2016-02 is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted, and must be adopted using a modified retrospective transition. We plan to adopt this guidance effective January 1, 2019 and are currently evaluating the potential impact adoption will have on our consolidated financial statements and related disclosures.

~~In May 2014, the~~ ~~FASB issued ASU No. 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606)~~ (ASU 2014-09), which supersedes previous revenue recognition guidance. ASU 2014-09 requires that a company recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration the company expects to receive in exchange for those goods or services. Companies will need to use more judgment and estimates than under the guidance currently in effect, including estimating the amount of variable revenue to recognize over each identified performance obligation. Additional disclosures will be required to help users of financial statements understand the nature, amount and timing of revenue and cash flows arising from contracts. In July 2016, the FASB deferred the effective date for interim and annual periods beginning after December 15, 2017. Early adoption is permitted to the original effective date of periods beginning after December 15, 2016. The amendments may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of initial application. We plan to adopt this guidance effective January 1, 2018 using the modified retrospective approach and are currently in the process of evaluating the impact adoption will have on our consolidated financial statements and related disclosures. While we have not completed our full assessment, we do not believe that adoption will have a material impact on the amount or timing of revenue recognized or our revenue recognition policies. We expect to complete our assessment of the impact towards the end of ~~2017.~~2018.

The most recent adopted accounting pronouncements are described in Note 2(b) to our unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q.

Market risk represents the risk of changes in value of a financial instrument, derivative or non-derivative, caused by fluctuations in foreign exchange rates and interest rates. Changes in these factors could cause fluctuations in our results of operations and cash flows. We are exposed to the market risks described below.

Foreign Exchange Rate Risk. Although we have significant foreign-based operations, the U.S. Dollar is our primary operating currency. Thus, most of our revenue and expenses are denominated in U.S. Dollars. We have equipment sales in British Pound Sterling, Euros and Japanese Yen and incur overhead costs in foreign currencies, primarily in British Pound Sterling and Euros. During the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, the U.S. Dollar ~~decreased~~increased in value in relation to other major foreign currencies (such as the Euro and British Pound Sterling). The ~~decrease~~increase in the U.S. Dollar has ~~decreased~~increased our revenues and expenses denominated in foreign currencies. ~~The~~However, the associated decrease in the value of certain foreign currencies as compared to the U.S. Dollar ~~relative to foreign currencies~~ will also ~~result in U.S. dollar denominated~~cause assets held at some of our foreign subsidiaries to decrease in value relative to the ~~foreign subsidiaries’ local currencies.~~US dollar. For the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, we recognized a loss on foreign exchange of ~~$0.7~~$0.4 million. A 10% change in foreign exchange rates would not have a material impact on our ~~business,~~ financial position, results of operations or cash flows.

Interest Rate Risk. The nature of our business exposes us to market risk arising from changes in interest rates to which our variable-rate debt is linked. As of ~~September~~June 30, ~~2017,~~2018, the principal amount of debt outstanding under the variable-rate arrangements of our revolving credit facilities was ~~$675.5~~$652.4 million. In addition, at ~~September~~June 30, ~~2017,~~2018, we had balances on our variable-rate term loans of ~~$236.6~~$294.4 million and our variable-rate term loans held by VIE of ~~$3.7~~$2.4 million. As of ~~September~~June 30, ~~2017,~~2018, our total outstanding variable-rate debt was ~~$915.9~~$885.2 million, which represented ~~57%~~48% of our total debt at that date. The average interest rate on our variable-rate debt was ~~2.9%~~3.7% as of ~~September~~June 30, ~~2017,~~2018, based on LIBOR plus a margin based on certain conditions set forth in our debt agreements.

A 1.0% increase or decrease in underlying interest rates for these debt obligations ~~will~~would increase or decrease interest expense by approximately ~~$9.2~~$8.8 million annually assuming debt remains constant at ~~September~~June 30, ~~2017~~2018 levels.

While we actively manage our interest exposure, we do not currently participate in hedging in the form of interest rate swaps or other derivative instruments to manage the market risks described above.

In accordance with Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the Exchange Act), we carried out an evaluation, under the supervision and with the participation of our management, including our President and Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon such evaluation, our President and Chief Executive Officer and our Chief Financial Officer concluded that as of ~~September~~June 30, ~~2017~~2018 our disclosure controls and procedures were effective with respect to controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and are accumulated and communicated to the Company’s management, including the Company’s principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under Exchange Act) that occurred during the quarter ended ~~September~~June 30, ~~2017,~~2018, which has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

From time to time we may be a party to litigation matters or disputes arising in the ordinary course of business, including in connection with enforcing our rights under our leases. Currently, we are not a party to any legal proceedings which are material to our business, financial condition, results of operations or cash flows.

Before making an investment decision, investors should carefully consider the risks in the “Risk Factors” in Part 1: Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2017 filed with the SEC on ~~March 13, 2017.~~February 27, 2018. These risks are not the only ones facing our company. Additional risks not currently known to us or that we currently believe are immaterial may also impair our business operations. Any of these risks could adversely affect our business, cash flows, financial condition and results of operations. The trading price of our common stock could fluctuate due to any of these risks, and investors may lose all or part of their investment. In assessing these risks, investors should also refer to the other information contained or incorporated by reference in this Quarterly Report on Form 10-Q. ~~There~~Except as described below, there have been no material changes in our risk factors from those discussed in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2017.

As a result of recent policy changes of the U.S. presidential administration and recent U.S. government proposals, there may be greater restrictions and economic disincentives on international trade. The new tariffs and other changes in U.S. trade policy could trigger retaliatory actions by affected countries, and certain foreign governments have instituted or are considering imposing trade sanctions on certain U.S. goods. We do a significant amount of business that would be impacted by changes to the trade policies of the U.S. and foreign countries (including governmental action related to tariffs, international trade agreements, or economic sanctions). Such changes have the potential to adversely impact the U.S. economy or certain sectors thereof, our industry and the global demand for our products and services, and as a result, could have an adverse effect on our business, financial condition and results of operations.

See ~~the Exhibit Index following the signature page to this Quarterly Report on Form 10-Q~~below for a list of exhibits filed or furnished with this report, which are incorporated by reference herein.

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 thereunto duly authorized.


	~~2017~~
~~January 1~~	$	~~2,211~~
~~Net decrease in estimated fair value of contingent consideration~~
~~included in Administrative expenses~~
~~Three months ended March 31, 2017~~		-
~~Three months ended June 30, 2017~~		~~(631)~~
~~Three months ended September 30, 2017~~		~~(1,580)~~
~~September 30~~	$	-


	September 30,		December 31,		June 30,		December 31,
	2017		2016		2018		2017
Dry containers	$	1,529,405	$	1,322,508	$	1,727,678	$	1,533,063
Refrigerated containers		346,996		350,776		344,831		345,744
Other specialized equipment		162,357		164,934		202,730		160,529
Railcars		424,682		389,945		493,399		471,171
		2,463,440		2,228,163		2,768,638		2,510,507
Accumulated depreciation		(484,428)		(421,153)		(550,426)		(505,546)
Rental equipment, net of accumulated depreciation	$	1,979,012	$	1,807,010	$	2,218,212	$	2,004,961



	September 30,		December 31,		June 30,		December 31,
	2017		2016		2018		2017
Gross finance lease receivables (1)	$	329,223	$	123,563	$	473,327	$	412,489
Unearned income (2)		(101,282)		(23,022)		(143,540)		(135,976)
Net investment in direct finance leases	$	227,941	$	100,541	$	329,787	$	276,513



	September 30,		December 31,		June 30,		December 31,
	2017		2016		2018		2017
Tier 1	$	273,742	$	74,777	$	414,440	$	366,629
Tier 2		55,481		48,786		58,887		45,860
Tier 3		-		-		-		-
	$	329,223	$	123,563	$	473,327	$	412,489



2018	$	46,735
2019		62,606	$	80,710
2020		32,929		63,856
2021		30,873		53,202
2022		27,974		47,925
2023 and thereafter		128,106
2023				40,583
2024 and thereafter				187,051
	$	329,223	$	473,327


Trademarks and tradenames	2-3 years
Customer relationships	85-8 years


2018	$	1,637
2019		1,213	$	1,702
2020		1,167		1,609
2021		1,167		1,609
2022		1,167		950
2023 and thereafter		1,805
2023				474
2024 and thereafter				291
	$	8,156	$	6,635



	Number of	Weighted
	Shares of	Average
	Restricted	Grant Date
	Stock	Fair Value
Restricted stock outstanding, December 31, 2016	65,802	$	14.75
Restricted stock granted	37,414	$	17.14
Restricted stock vested	(24,674)	$	17.83
Restricted stock outstanding, September 30, 2017	78,542	$	14.92


	Three Months Ended June 30, 2018
	Container Leasing		Rail Leasing		Logistics		Total
Total revenue	$	68,333	$	9,119	$	28,253	$	105,705
Total operating expenses		31,081		6,026		28,679		65,786
Operating income (loss)		37,252		3,093		(426)		39,919
Net interest and other expenses (income)		15,031		3,846		(8)		18,869
Income (loss) before income taxes	$	22,221	$	(753)	$	(418)	$	21,050
Goodwill	$	-	$	-	$	15,794	$	15,794
Total assets	$	2,211,492	$	465,513	$	43,453	$	2,720,458
Purchase of rental equipment (1)	$	148,777	$	10,421	$	-	$	159,198


	Three Months Ended September 30, 2017
	Container Leasing		Rail Leasing		Logistics		Total
Total revenue	$	61,870	$	7,279	$	21,012	$	90,161
Total operating expenses		30,270		5,534		22,463		58,267
Operating income (loss)		31,600		1,745		(1,451)		31,894
Total other expenses		11,537		2,871		-		14,408
Income (loss) before income taxes and non-controlling interest	$	20,063	$	(1,126)	$	(1,451)	$	17,486
Goodwill	$	-	$	-	$	15,794	$	15,794
Total assets	$	1,910,899	$	405,118	$	40,140	$	2,356,157
Purchase of rental equipment (1)	$	132,405	$	16,771	$	-	$	149,176


	Three Months Ended September 30, 2016								Three Months Ended June 30, 2017
	Container Leasing		Rail Leasing		Logistics		Total		Container Leasing		Rail Leasing		Logistics		Total
Total revenue	$	49,661	$	7,614	$	21,197	$	78,472	$	54,960	$	8,127	$	19,605	$	82,692
Total operating expenses		45,184		4,367		21,559		71,110		32,234		5,375		20,315		57,924
Operating income (loss)		4,477		3,247		(362)		7,362		22,726		2,752		(710)		24,768
Total other expenses		9,159		1,827		1		10,987
(Loss) income before income taxes and non-controlling interest	$	(4,682)	$	1,420	$	(363)	$	(3,625)
Net interest and other expenses										9,395		2,778		-		12,173
Income (loss) before income taxes									$	13,331	$	(26)	$	(710)	$	12,595
Goodwill	$	-	$	-	$	15,579	$	15,579	$	-	$	-	$	15,794	$	15,794
Total assets	$	1,643,929	$	343,214	$	40,059	$	2,027,202	$	1,684,166	$	386,648	$	39,890	$	2,110,704
Purchase of rental equipment (1)	$	19,730	$	20,613	$	-	$	40,343	$	76,479	$	3,998	$	-	$	80,477


	Nine Months Ended September 30, 2017								Six Months Ended June 30, 2018
	Container Leasing		Rail Leasing		Logistics		Total		Container Leasing		Rail Leasing		Logistics		Total
Total revenue	$	169,784	$	23,459	$	61,116	$	254,359	$	132,967	$	18,223	$	49,889	$	201,079
Total operating expenses		99,788		16,038		63,920		179,746		62,430		12,932		51,082		126,444
Operating income (loss)		69,996		7,421		(2,804)		74,613		70,537		5,291		(1,193)		74,635
Total other expenses		30,346		8,220		1		38,567
Income (loss) before income taxes and non-controlling interest	$	39,650	$	(799)	$	(2,805)	$	36,046
Net interest and other expenses (income)										28,353		7,391		(11)		35,733
Income (loss) before income taxes									$	42,184	$	(2,100)	$	(1,182)	$	38,902
Purchase of rental equipment (1)	$	246,378	$	31,391	$	-	$	277,769	$	225,893	$	46,068	$	-	$	271,961


	Nine Months Ended September 30, 2016								Six Months Ended June 30, 2017
	Container Leasing		Rail Leasing		Logistics		Total		Container Leasing		Rail Leasing		Logistics		Total
Total revenue	$	152,875	$	22,462	$	41,743	$	217,080	$	107,914	$	16,180	$	40,104	$	164,198
Total operating expenses		121,519		12,363		42,522		176,404		69,518		10,504		41,457		121,479
Operating income (loss)		31,356		10,099		(779)		40,676		38,396		5,676		(1,353)		42,719
Total other expenses		27,203		4,738		1		31,942
Income (loss) before income taxes and non-controlling interest	$	4,153	$	5,361	$	(780)	$	8,734
Net interest and other expenses										18,809		5,349		1		24,159
Income (loss) before income taxes									$	19,587	$	327	$	(1,354)	$	18,560
Purchase of rental equipment (1)	$	68,183	$	102,399	$	-	$	170,582	$	113,973	$	14,620	$	-	$	128,593


	Three Months Ended				Nine Months Ended
	September 30,				September 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016		2018		2017		2018		2017
United States	$	30,131	$	30,777	$	90,208	$	70,156	$	39,195	$	29,567	$	71,767	$	60,077
Switzerland										11,213		6,413		22,317		11,905
France		8,938		7,138		25,600		21,447		9,223		8,238		18,140		16,662
Switzerland		9,182		4,874		21,087		14,883
Japan		5,132		5,368		15,199		16,806
Korea										6,813		4,497		13,220		8,265
Singapore		5,345		3,846		14,669		12,486		5,422		5,012		10,738		9,324
Korea		5,831		3,616		14,096		11,158
Other Asia		11,151		10,184		32,614		31,475		17,746		15,751		33,780		31,530
Other Europe		11,815		9,950		32,904		30,138		13,674		11,276		26,158		21,089
Other International		2,636		2,719		7,982		8,531		2,419		1,938		4,959		5,346
Total revenue	$	90,161	$	78,472	$	254,359	$	217,080	$	105,705	$	82,692	$	201,079	$	164,198



	Three Months Ended
	September 30,				Increase/(Decrease)				Three Months Ended June 30,				Increase
	2017		2016		Amount		Percent		2018		2017		Amount		Percent
Total revenue	$	90,161	$	78,472	$	11,689	15	%	$	105,705	$	82,692	$	23,013	28	%
Operating expenses		58,267		71,110		(12,843)	(18)			65,786		57,924		7,862	14	%
Total other expenses		14,408		10,987		3,421	31			18,869		12,173		6,696	55	%
Net income (loss) attributable to CAI common stockholders		17,587		(5,451)		23,038	(423)
Net income attributable to CAI common stockholders										19,149		12,638		6,511	52	%


	Three Months Ended June 30,				Increase
($ in thousand)	2018		2017		Amount		Percent
Container lease revenue	$	68,333	$	54,960	$	13,373	24	%


Exhibit No.		Description
3.1		Amended and Restated Certificate of Incorporation of CAI International, Inc. (incorporated by reference to Exhibit 3.1 of our Registration Statement on Form S-1, as amended, File No. 333-140496 filed on April 24, 2007).
3.2		Certificate of Amendment to the Amended and Restated Certificate of Incorporation of CAI International, Inc., dated June 4, 2018 (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed on June 5, 2018).
3.3		Certificate of Designations of Rights and Preferences of 8.50% Series A Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Stock, dated March 28, 2018 (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed on March 28, 2018).
3.4		Amended and Restated Bylaws of CAI International, Inc. (incorporated by reference to Exhibit 3.1 of our Current Report on Form 8-K filed on March 10, 2009).
10.1		Stock Repurchase Agreement, dated May 1, 2018, between CAI International, Inc. and the Ogawa Family Trust dated 7/6/98 (incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed on May 1, 2018).
10.2		At the Market Issuance Sales Agreement, dated May 2, 2018, between CAI International, Inc. and B. Riley FBR, Inc. (incorporated by reference to Exhibit 1.1 of our Current Report on Form 8-K filed on May 2, 2018).
10.3		Amendment No. 6 to Third Amended and Restated Revolving Credit Agreement, dated June 26, 2018, by and among CAI International, Inc., Container Applications Limited, the guarantors named therein, Bank of America, N.A., as a lender and administrative agent, the other lending institutions party thereto, Merrill Lynch, Pierce, Fenner & Smith Incorporated (“Merrill Lynch”), MUFG Union Bank, N.A. and Wells Fargo Bank, N.A., as syndication agents, Merrill Lynch, as lead arranger and book runner, and ABN AMRO Capital USA, LLC, Compass Bank, Bank of Montreal, Royal Bank of Canada and PNC Bank, National Association, as documentation agents (incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed on June 28, 2018).
31.1		Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a)/15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a)/15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of Chief Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of Chief Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101		The following financial statements, formatted in XBRL: (i) Consolidated Balance Sheets as of June 30, 2018 and December 31, 2017, (ii) Consolidated Statements of Income for the three and six months ended June 30, 2018 and 2017, (iii) Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2018 and 2017, (iv) Consolidated Statements of Cash Flows for the six months ended June 30, 2018 and 2017, and (v) Notes to Unaudited Consolidated Financial Statements.


	CAI International, Inc.
	(Registrant)

~~October 20, 2017~~August 3, 2018	/s/ VICTOR M. GARCIA
	Victor M. Garcia
	President and Chief Executive Officer
	(Principal Executive Officer)

~~October 20, 2017~~August 3, 2018	/s/ TIMOTHY B. PAGE
	Timothy B. Page
	Chief Financial Officer
	(Principal Financial and Accounting Officer)


~~Exhibit No.~~		~~Description~~
~~3.1~~		Amended and Restated Certificate of Incorporation of CAI International, Inc. (incorporated by reference to Exhibit 3.1 of our Registration Statement on Form S-1, as amended, File No. 333-140496 filed on April 24, 2007).

~~3.2~~		~~Amended and Restated Bylaws of CAI International, Inc. (incorporated by reference to Exhibit 3.1 of our Current Report on Form 8-K filed on March 10, 2009).~~

~~4.1~~		Indenture, dated July 6, 2017, between CAL Funding III Limited and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 4.1 of our Current Report on Form 8-K filed on July 11, 2017.

~~4.2~~		Series 2017-1 Supplement, dated July 6, 2017, to Indenture dated July 6, 2017, between CAL Funding III Limited and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 4.2 of our Current Report on Form 8-K filed on July 11, 2017).

~~10.1~~		Note Purchase Agreement, dated June 29, 2017, among CAL Funding III Limited, Container Applications Limited, CAI International, Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Wells Fargo Securities, LLC, BBVA Securities Inc. and MUFG Securities Americas Inc. (incorporated by reference to Exhibit 99.1 of our Current Report on Form 8-K filed on July 11, 2017).

~~31.1~~		~~Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a)/15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

~~31.2~~		~~Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a)/15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

~~32.1~~		~~Certification of Chief Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~

~~32.2~~		~~Certification of Chief Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~

~~101~~		The following financial statements, formatted in XBRL: (i) Consolidated Balance Sheets as of September 30, 2017 and December 31, 2016, (ii) Consolidated Statements of Income for the three and nine months ended September 30, 2017 and 2016, (iii) Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2017 and 2016, (iv) Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 and 2016, and (v) Notes to Unaudited Consolidated Financial Statements.