CAI INTERNATIONAL, INC.

INDEX


		Page No.
Part I — Financial Information		4
Item 1.	Financial Statements (Unaudited)	4
	Consolidated Balance Sheets at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019	4
	Consolidated Statements of Operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~	6
	Consolidated Statements of Comprehensive (Loss) Income for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~	7
	Consolidated Statements of Stockholders’ Equity for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~	8
	Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~	109
	Notes to Unaudited Consolidated Financial Statements	1211
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2722
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3729
Item 4.	Controls and Procedures	3730
Part II — Other Information		3830
Item 1.	Legal Proceedings	3830
Item 1A.	Risk Factors	3830
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3831
Item 3.	Defaults Upon Senior Securities	3831
Item 4.	Mine Safety Disclosures	3831
Item 5.	Other Information	3932
Item 6.	Exhibits	4033
Signatures		4134

Table of Contents

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains certain forward-looking statements, including, without limitation, statements concerning the conditions in our industry, our operations, our economic performance and financial condition, including, in particular, statements relating to our business, operations, growth strategy 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, ~~2018~~2019 filed with the Securities and Exchange Commission (SEC) on March 5, ~~2019~~2020, this Quarterly Report on Form 10-Q and our other reports filed with the SEC. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law. Reference is also made to such risks and uncertainties detailed from time to time in our other filings with the SEC.

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,		March 31,		December 31,
	2019		2018		2020		2019
Assets
Current assets
Cash	$	21,503	$	20,104	$	87,727	$	19,870
Cash held by variable interest entities		26,772		25,211		21,016		26,594
Accounts receivable, net of allowance for doubtful accounts of $3,626 and
$2,042 at September 30, 2019 and December 31, 2018, respectively		93,142		95,942
Current portion of net investment in sales-type and direct finance leases		66,977		75,975
Assets held for sale		284,791		449,730
Accounts receivable, net of allowance for doubtful accounts of $6,877 and
$8,171 at March 31, 2020 and December 31, 2019, respectively						86,177		88,452
Current portion of net investment in finance leases						75,730		71,274
Prepaid expenses and other current assets		6,394		1,525		9,638		10,228
Total current assets		499,579		668,487		280,288		216,418
Restricted cash		27,755		30,668		25,799		26,775
Rental equipment, net of accumulated depreciation of $598,545 and
$557,559 at September 30, 2019 and December 31, 2018, respectively		1,889,266		1,816,794
Net investment in sales-type and direct finance leases		472,790		473,792
Rental equipment, net of accumulated depreciation of $640,118 and
$620,990 at March 31, 2020 and December 31, 2019, respectively						2,035,342		2,102,839
Net investment in finance leases						479,276		496,094
Financing receivable		31,661		-		29,739		30,693
Goodwill		15,794		15,794		15,794		15,794
Intangible assets, net of accumulated amortization of $6,605 and
$5,397 at September 30, 2019 and December 31, 2018, respectively		4,525		5,733
Intangible assets, net of accumulated amortization of $5,624 and
$5,221 at March 31, 2020 and December 31, 2019, respectively						3,720		4,123
Other non-current assets		9,364		1,349		8,520		9,029
Total assets (1)	$	2,950,734	$	3,012,617	$	2,878,478	$	2,901,765

Liabilities and Stockholders' Equity
Current liabilities
Accounts payable	$	10,668	$	7,371	$	8,928	$	7,291
Accrued expenses and other current liabilities		25,981		25,069		26,180		30,479
Unearned revenue		6,355		7,573		6,478		6,405
Current portion of debt		309,500		311,381		216,519		218,094
Rental equipment payable		54,202		74,139		4,596		25,137
Total current liabilities		406,706		425,533		262,701		287,406
Debt		1,819,649		1,847,633		1,888,634		1,880,122
Deferred income tax liability		33,054		38,319		31,872		35,376
Other non-current liabilities		5,333		-		5,124		5,621
Total liabilities (2)		2,264,742		2,311,485		2,188,331		2,208,525

Stockholders' equity
Preferred stock, par value $0.0001 per share; authorized 10,000,000
8.50% Series A fixed-to-floating rate cumulative redeemable perpetual preferred stock, issued and
outstanding 2,199,610 shares, at liquidation preference		54,990		54,990		54,990		54,990
8.50% Series B fixed-to-floating rate cumulative redeemable perpetual preferred stock, issued and
outstanding 1,955,000 shares, at liquidation preference		48,875		48,875		48,875		48,875
Common stock, par value $0.0001 per share; authorized 84,000,000 shares; issued and outstanding
17,425,754 and 18,764,459 shares at September 30, 2019 and December 31, 2018, respectively		2		2
17,506,453 and 17,479,127 shares at March 31, 2020 and December 31, 2019, respectively						2		2
Additional paid-in capital		101,317		132,666		103,290		102,709
Accumulated other comprehensive loss		(6,845)		(6,513)		(6,767)		(6,630)
Retained earnings		487,653		471,112		489,757		493,294
Total stockholders' equity		685,992		701,132		690,147		693,240
Total liabilities and stockholders' equity	$	2,950,734	$	3,012,617	$	2,878,478	$	2,901,765



	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2019		2018		2019		2018		2020		2019
Revenue
Container lease revenue	$	77,300	$	75,331	$	228,585	$	208,298	$	69,113	$	75,511
Rail lease revenue										5,803		7,881
Logistics revenue		30,270		31,362		87,788		81,251		30,106		27,716
Total revenue		107,570		106,693		316,373		289,549		105,022		111,108

Operating expenses
Depreciation of rental equipment		28,750		27,735		85,819		79,016		27,048		31,784
Impairment of rental equipment										19,167		-
Storage, handling and other expenses		4,672		2,506		12,631		5,803		5,748		5,120
Logistics transportation costs		27,037		27,541		77,647		70,536		26,815		24,519
Gain on sale of rental equipment		(2,411)		(2,633)		(5,436)		(7,530)		(1,614)		(8,832)
Administrative expenses		12,702		11,895		38,110		33,445		11,826		14,396
Total operating expenses		70,750		67,044		208,771		181,270		88,990		66,987

Operating income		36,820		39,649		107,602		108,279		16,032		44,121

Other expenses
Net interest expense		20,123		15,811		60,049		43,758		20,376		23,850
Other expense		380		116		537		510		246		38
Total other expenses		20,503		15,927		60,586		44,268		20,622		23,888

Income before income taxes		16,317		23,722		47,016		64,011
Income tax expense		1,152		1,403		2,871		3,197
(Loss) income before income taxes										(4,590)		20,233
Income tax (benefit) expense										(3,260)		1,659

Income from continuing operations		15,165		22,319		44,145		60,814
Loss from discontinued operations, net of income taxes		(19,912)		(565)		(20,983)		(1,625)
Net (loss) income		(4,747)		21,754		23,162		59,189		(1,330)		18,574
Preferred stock dividends		2,207		1,748		6,621		2,917		2,207		2,207
Net (loss) income attributable to CAI common stockholders	$	(6,954)	$	20,006	$	16,541	$	56,272	$	(3,537)	$	16,367

Amounts attributable to CAI common stockholders
Net income from continuing operations	$	12,958	$	20,571	$	37,524	$	57,897
Net loss from discontinued operations		(19,912)		(565)		(20,983)		(1,625)
Net (loss) income attributable to CAI common stockholders	$	(6,954)	$	20,006	$	16,541	$	56,272

Net income (loss) per share attributable to CAI common
stockholders
Net (loss) income per share attributable to CAI
common stockholders
Basic									$	(0.20)	$	0.88
Continuing operations	$	0.75	$	1.07	$	2.10	$	2.93
Discontinued operations		(1.15)		(0.03)		(1.17)		(0.08)
Total basic	$	(0.40)	$	1.04	$	0.93	$	2.85
Diluted									$	(0.20)	$	0.87
Continuing operations	$	0.74	$	1.06	$	2.07	$	2.90
Discontinued operations		(1.14)		(0.03)		(1.16)		(0.09)
Total diluted	$	(0.40)	$	1.03	$	0.91	$	2.81

Weighted average shares outstanding
Basic		17,330		19,214		17,850		19,741		17,433		18,555
Diluted		17,525		19,492		18,122		19,997		17,433		18,870

Accumulated

Additional

Other

Preferred Stock

Common Stock

Paid-In

Comprehensive

Retained

Total

Shares

Amount

Shares

Amount

Capital

Loss

Earnings

Equity
Balances as of December 31, 2018

4,155

$
103,865

18,764

$
2

$
132,666

$
(6,513)

$
471,112

$
701,132
Net income

-

-

-

-

-

-

18,574

18,574
Preferred stock dividends, $0.53125/share

-

-

-

-

-

-

(2,207)

(2,207)
Foreign currency translation adjustment

-

-

-

-

-

(81)

-

(81)
Repurchase of common stock

-

-

(595)

-

(13,946)

-

-

(13,946)
Stock-based compensation

-

-

39

-

837

-

-

837
Balances as of March 31, 2019

4,155

$
103,865

18,208

$
2

$
119,557

$
(6,594)

$
487,479

$
704,309
Net income

-

-

-

-

-

-

9,335

9,335
Preferred stock dividends, $0.53125/share

-

-

-

-

-

-

(2,207)

(2,207)
Foreign currency translation adjustment

-

-

-

-

-

5

-

5
Repurchase of common stock

-

-

(863)

-

(20,172)

-

-

(20,172)
Stock-based compensation

-

-

75

-

916

-

-

916
Balances as of June 30, 2019

4,155

$
103,865

17,420

$
2

$
100,301

$
(6,589)

$
494,607

$
692,186
Net loss

-

-

-

-

-

-

(4,747)

(4,747)
Preferred stock dividends, $0.53125/share

-

-

-

-

-

-

(2,207)

(2,207)
Foreign currency translation adjustment

-

-

-

-

-

(256)

-

(256)
Stock-based compensation

-

-

6

-

1,016

-

-

1,016
Balances as of September 30, 2019

4,155

$
103,865

17,426

$
2

$
101,317

$
(6,845)

$
487,653

$
685,992


									Accumulated
							Additional		Other
	Preferred Stock			Common Stock			Paid-In		Comprehensive		Retained		Total
	Shares		Amount	Shares		Amount	Capital		Loss		Earnings		Equity
Balances as of December 31, 2019	4,155	$	103,865	17,479	$	2	$	102,709	$	(6,630)	$	493,294	$	693,240
Net loss	-		-	-		-		-		-		(1,330)		(1,330)
Preferred stock dividends, $0.53125/share	-		-	-		-		-		-		(2,207)		(2,207)
Foreign currency translation adjustment	-		-	-		-		-		(137)		-		(137)
Exercise of stock options	-		-	8		-		113		-		-		113
Stock-based compensation, net of taxes	-		-	19		-		468		-		-		468
Balances as of March 31, 2020	4,155	$	103,865	17,506	$	2	$	103,290	$	(6,767)	$	489,757	$	690,147

Accumulated

Additional

Other

Preferred Stock

Common Stock

Paid-In

Comprehensive

Retained

Total

Shares

Amount

Shares

Amount

Capital

Loss

Earnings

Equity
Balances as of December 31, 2017

-

$
-

20,391

$
2

$
172,325

$
(6,122)

$
397,640

$
563,845
Net income

-

-

-

-

-

-

17,138

17,138
Preferred stock dividends, $0.01181/share

-

-

-

-

-

-

(21)

(21)
Foreign currency translation adjustment

-

-

-

-

-

310

-

310
Issuance of common and preferred stock,

net of offering costs

1,600

40,000

100

-

956

-

-

40,956
Stock-based compensation

-

-

2

-

592

-

-

592
Balances as of March 31, 2018

1,600

$
40,000

20,493

$
2

$
173,873

$
(5,812)

$
414,757

$
622,820
Net income

-

-

-

-

-

-

20,297

20,297
Preferred stock dividends, $0.53125/share

-

-

-

-

-

-

(1,148)

(1,148)
Foreign currency translation adjustment

-

-

-

-

-

(548)

-

(548)
Issuance of common and preferred stock,

net of offering costs

600

14,990

-

-

(370)

-

-

14,620
Repurchase of common stock

-

-

(1,225)

(27,946)

(27,946)
Stock-based compensation

-

-

38

-

653

-

-

653
Balances as of June 30, 2018

2,200

$
54,990

19,306

$
2

$
146,210

$
(6,360)

$
433,906

$
628,748
Net income

-

-

-

-

-

-

21,754

21,754
Preferred stock dividends, $0.53125/share

-

-

-

-

-

-

(1,748)

(1,748)
Foreign currency translation adjustment

-

-

-

-

-

(19)

-

(19)
Issuance of common and preferred stock,

net of offering costs

1,955

48,875

-

-

(1,893)

-

-

46,982
Stock-based compensation

-

-

-

-

752

-

-

752
Balances as of September 30, 2018

4,155

$
103,865

19,306

$
2

$
145,069

$
(6,379)

$
453,912

$
696,469


									Accumulated
							Additional		Other
	Preferred Stock			Common Stock			Paid-In		Comprehensive		Retained		Total
	Shares		Amount	Shares		Amount	Capital		Loss		Earnings		Equity
Balances as of December 31, 2018	4,155	$	103,865	18,764	$	2	$	132,666	$	(6,513)	$	471,112	$	701,132
Net income	-		-	-		-		-		-		18,574		18,574
Preferred stock dividends, $0.53125/share	-		-	-		-		-		-		(2,207)		(2,207)
Foreign currency translation adjustment	-		-	-		-		-		(81)		-		(81)
Repurchase of common stock	-		-	(595)		-		(13,946)		-		-		(13,946)
Exercise of stock options	-		-	27		-		107		-		-		107
Stock-based compensation, net of taxes	-		-	12		-		730		-		-		730
Balances as of March 31, 2019	4,155	$	103,865	18,208	$	2	$	119,557	$	(6,594)	$	487,479	$	704,309



	Nine Months Ended September 30,				Three Months Ended March 31,
	2019		2018		2020		2019
Cash flows from operating activities
Net income	$	23,162	$	59,189
Loss from discontinued operations, net of income taxes		(20,983)		(1,625)
Income from continuing operations		44,145		60,814
Adjustments to reconcile income from continuing operations to net cash provided by
operating activities:
Net (loss) income					$	(1,330)	$	18,574
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation		85,988		79,128		27,314		31,839
Impairment of rental equipment						19,167		-
Amortization of debt issuance costs		3,005		2,648		988		1,202
Amortization of intangible assets		1,208		1,538		403		403
Stock-based compensation expense		2,142		1,888		874		839
Unrealized loss on foreign exchange		345		317		220		26
Gain on sale of rental equipment		(5,436)		(7,530)		(1,614)		(8,832)
Deferred income taxes		1,260		2,424		(3,504)		630
Bad debt expense (recovery)		1,224		(149)
Bad debt (recovery) expense						(1,076)		738
Changes in other operating assets and liabilities:
Accounts receivable		2,556		(6,889)		4,409		1,158
Prepaid expenses and other assets		398		(1,611)		830		(1,132)
Net investment in sales-type and direct finance leases		45,400		-
Net investment in finance leases						17,113		16,442
Accounts payable, accrued expenses and other liabilities		4,057		(477)		(3,231)		(5,520)
Unearned revenue		(151)		(86)		(438)		(2,038)
Net cash provided by operating activities of continuing operations		186,141		132,015
Net cash provided by operating activities of discontinued operations		2,016		7,572
Net cash provided by operating activities		188,157		139,587		60,125		54,329
Cash flows from investing activities
Purchase of rental equipment		(256,469)		(477,703)		(27,500)		(141,212)
Purchase of financing receivable		(37,139)		-
Proceeds from sale of rental equipment		56,422		43,645		24,576		180,331
Receipt of principal payments from financing receivable						325		-
Purchase of furniture, fixtures and equipment		(1,720)		(393)		(310)		(50)
Receipt of principal payments from financing receivable		1,825		-
Receipt of principal payments from sales-type and direct finance leases		-		26,982
Net cash used in investing activities of continuing operations		(237,081)		(407,469)
Net cash provided by (used in) investing activities of discontinued operations		123,199		(50,800)
Net cash used in investing activities		(113,882)		(458,269)
Net cash (used in) provided by investing activities						(2,909)		39,069
Cash flows from financing activities
Proceeds from debt		500,582		1,227,412		110,000		306,582
Principal payments on debt		(419,908)		(981,465)		(103,742)		(382,847)
Debt issuance costs		(724)		(9,882)		-		(419)
Proceeds from issuance of common and preferred stock		-		103,681
Repurchase of common stock		(34,118)		(27,946)		-		(13,946)
Dividends paid to preferred stockholders		(6,620)		(1,376)		(2,207)		(2,207)
Exercise of stock options		532		24		113		107
Net cash provided by financing activities of continuing operations		39,744		310,448
Net cash (used in) provided by financing activities of discontinued operations		(113,098)		31,011
Net cash (used in) provided by financing activities		(73,354)		341,459
Net cash provided by (used in) financing activities						4,164		(92,730)
Effect on cash of foreign currency translation		(874)		(23)		(77)		238
Net increase in cash and restricted cash		47		22,754		61,303		906
Cash and restricted cash at beginning of the period (1)		75,983		47,209		73,239		75,983
Cash and restricted cash at end of the period (2)	$	76,030	$	69,963	$	134,542	$	76,889

Supplemental disclosure of cash flow information
Cash paid during the period for:
Income taxes					$	111	$	91
Interest						19,736		22,544

Supplemental disclosure of non-cash investing and financing activity
Transfer of rental equipment to finance lease					$	5,760	$	8,349
Rental equipment payable						4,596		56,221

1110

Table of Contents

CAI INTERNATIONAL, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(1) ~~The Company~~Description of Business and ~~Nature of Operations~~Significant Accounting Policies

Organization

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.

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

Basis of Presentation

The accompanying unaudited consolidated financial statements include the financial statements of CAI International, Inc. and its wholly-owned 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 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, the Company’s results of operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ and the Company’s cash flows for the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 and ~~2018.~~2019. Certain reclassifications have been made to prior year financial statements to conform to the current presentation. 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 ~~2019~~2020 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, ~~2018,~~2019, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on March 5, ~~2019.~~

~~Discontinued Operations~~2020.

~~In the quarter ended June 30, 2019,~~Due to market conditions, the Company ~~committed~~decided during the three months ended March 31, 2020 to ~~a plan to sell its railcar assets and to reallocate~~terminate the ~~capital invested in~~sale process for its rail ~~business to other investments.~~business. As a result, the railcar assets have been reclassified as held for ~~sale in the accompanying unaudited consolidated balance sheets~~use as of March 31, 2020 and ~~the operations of~~ the rail business ~~have been~~ reclassified as ~~discontinued operations in the accompanying unaudited consolidated statements of operations and cash flows.~~a continuing operation. All prior periods presented in ~~these~~the unaudited consolidated financial statements have been restated to reflect the ~~reclassification of the railcar business as discontinued operations and assets held for sale.~~reclassification. See Note 3 – ~~Discontinued Operations~~ Rental Equipmentfor ~~more information.~~further information over the reclassification of the railcar assets as held for use.

Concentration of Credit Risk

~~(2)~~ The Company’s equipment leases and trade receivables subject it to potential credit risk. The Company extends credit to its customers based upon an evaluation of each customer’s financial condition and credit history. Evaluations of the financial condition and associated credit risk of customers are performed an on ongoing basis. The Company’s largest customer accounted for 13% of the Company’s total billings during the three months ended March 31, 2020.

Accounting ~~Policies and Recent Accounting Pronouncements~~Policy Updates

~~Recent~~Recently Adopted Accounting Pronouncements

In ~~February~~June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. ~~2016-02,~~2016-13, ~~Leases~~Financial Instruments – Credit Losses (Topic ~~842)~~326) (ASU ~~2016-02),~~2016-13) and subsequently issued ~~amendments thereto,~~amendments. The guidance affects the Company’s net investment in finance leases, financing receivable and accounts receivable for sales of rental equipment and logistics operations. Topic 326 requires the measurement of expected credit losses to be based on relevant information from past events, including historical experiences, current conditions and reasonable and supportable forecasts that replaced existing lease accounting guidance. The new standard requires lessors to classify leases as a sales-type, direct financing, or operating lease. A lease is a sales-type lease if any of five criteria are met, each of which indicate that the lease, in effect, transfers control of the underlying asset to the lessee. If none of those five criteria are met, but two additional criteria are both met, indicating that the lessor has transferred substantially all of the risks and benefits of the underlying asset to the lessee and a third-party, the lease is a direct financing lease. All leases that are not sales-type or direct financing leases are operating leases. The new standard also established a right-of-use model (ROU) that requires lessees to recognize an ROU asset and lease liability on the balance sheet for all leases with a term longer than twelve months.

affect collectability. The Company adopted ASU ~~2016-02, as amended,~~2016-13 effective January 1, ~~2019,~~2020, using the modified retrospective ~~approach~~method, which did not have a significant impact on the consolidated financial statements as credit losses are not expected to be significant based on historical loss trends, the financial condition of customers, and ~~the effective date as the date~~external market factors.

Allowance for credit losses – Net investment in finance leases and financing receivable

The allowance for credit losses on net investment in finance leases and financing receivable is estimated on a collective basis by internal customer rating (see Note 4 – Net investment in finance leases for descriptions of initial application. Consequently, financial information will not be updated and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2019. In addition, the Company elected the following practical expedients permitted under the transition guidance within the new standard: (1) the “package of practical expedients,” which does not require the Company to reassess under the new standard its prior conclusions about lease identification, lease classification, and initial direct costs, (2) the short-term lease recognition exemption for its office space leases of twelve months or less, which resulted in the Company not recognizing an ROU asset or lease liabilityratings). Expected credit losses for these ~~leases,~~financial assets are estimated using a loss-rate methodology which considers historical credit loss information that is adjusted for current conditions and ~~(3) the practical expedient to not separate lease~~reasonable and ~~non-lease components for leases that qualify for the practical expedient.~~ supportable forecasts.

1211

Table of Contents

CAI INTERNATIONAL, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Adoption of the new standard resulted in the recognition of operating lease ROU assets of $3.7 million and operating lease liabilities of $4.1 million as of January 1, 2019. Adoption did not have an impact on the Company’s consolidated statements of operations or cash flows.

Except as described above, there were no changes to the Company’s accounting policies during the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020. 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, ~~2018,~~2019, filed with the SEC on March 5, ~~2019,~~2020, for a description of the Company’s significant accounting policies.

~~Accounting Policies~~

~~(a) Container and Rail Lease Revenue~~

The Company recognizes revenue from operating leases of its 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. Sales-type and finance lease income, and interest earned on financing receivables are recognized using the effective interest method, which generates a constant rate of interest over the term of the arrangement.

~~Certain leases include one or more options to renew or purchase the leased rental equipment. The exercise of lease renewal or equipment purchase options is at the sole discretion of the customer.~~

Included in lease revenue is revenue consisting primarily of fees charged to the lessee for handling, delivery, and repairs. These activities are considered non-lease components of the contract, which are generally accounted for separately from the lease component, and revenue is recognized as earned in accordance with Accounting Standards Codification (ASC) Topic 606, ~~Revenue Recognition~~. For certain leases of railcar equipment, the Company is responsible for the repair and maintenance of the railcars throughout the lease term. For such leases, the lease and non-lease component are combined as a single lease component, and revenue is recognized as earned in accordance with ASC Topic 842, ~~Leases~~.

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.

~~(b) Leases~~

The Company leases office space under operating leases with expiration dates through 2025. The Company determines whether an arrangement constitutes a lease and records lease liabilities and ROU assets on its consolidated balance sheets at lease commencement. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The operating lease ROU assets also include any lease pre-payments made and exclude lease incentives. Certain of the Company’s leases include one or more options to renew, which are included in the lease term only when it is reasonably certain that the Company will exercise that option. The Company’s office space leases often include lease and non-lease components, which are combined and accounted for as a single lease component.

~~For short-term leases, the Company records rent expense in its consolidated statements of operations on a straight-line basis over the lease term and records variable lease payments as incurred.~~

~~(3) Discontinued Operations~~

As discussed in Note 1, railcar assets of $284.8 million and $449.7 million were reclassified as held for sale as of September 30, 2019 and December 31, 2018, respectively, and the related operations of the rail business as discontinued operations in the accompanying unaudited consolidated statements of operations and cash flows.

~~The Company’s held for sale railcar assets as of the dates indicated are made up as follows (in thousands):~~

September 30,

December 31,

2019

2018
Rental equipment

$
315,868

$
448,466
Other assets

1,878

1,264
Loss on classification as held for sale

(7,323)

-
Impairment of rental equipment

(25,632)

-
Assets held for sale

$
284,791

$
449,730

~~Table of Contents~~

~~CAI INTERNATIONAL, INC.~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)~~

Other assets and liabilities of the rail business, including accounts receivable, accrued expenses and other liabilities, deferred tax liabilities and debt, have not been classified as held for sale in the consolidated balance sheets as of September 30, 2019 and December 31, 2018 as they will not be sold by the Company. The rail debt will be repaid upon the sale of the railcar assets.

During the three months ended June 30, 2019, a loss of $7.3 million was recorded when the assets of the railcar business were reclassified as held for sale. During the three months ended September 30, 2019, the Company incurred an additional impairment charge of $25.6 million to reduce the book value of its railcar portfolio to its estimated fair value. To assist the Company in its assessment of fair value, a third-party desk top appraisal was carried out on the railcar fleet using the market value approach. The railcars were classified within Level 3 of the fair value hierarchy.

The following table summarizes the components of net loss from discontinued operations in the accompanying unaudited consolidated statements of operations for the three and nine months ended September 30, 2019 and 2018 (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

2019

2018

2019

2018
Revenue

Rail lease revenue
$
5,871

$
8,759

$
20,214

$
26,982

Operating expenses

Depreciation of rental equipment

-

3,537

5,248

10,505
Storage, handling and other expenses

3,453

1,008

5,813

4,424
(Gain) loss on sale of rental equipment

(757)

8

(9,418)

(9)
Administrative expenses

620

974

2,977

2,825
Total operating expenses

3,316

5,527

4,620

17,745

Operating income

2,555

3,232

15,594

9,237

Interest expense

2,975

3,972

10,104

11,364
(Loss) income before income taxes

(420)

(740)

5,490

(2,127)

Loss on classification as held for sale and subsequent impairment

25,632

-

32,955

-
Loss from discontinued operations before income taxes

(26,052)

(740)

(27,465)

(2,127)
Income tax benefit

(6,140)

(175)

(6,482)

(502)
Net loss from discontinued operations
$
(19,912)

$
(565)

$
(20,983)

$
(1,625)

~~(4)~~(2) Consolidation of Variable Interest Entities

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, Consolidation:

it has power to direct the activities of a VIE that most significantly impact the VIE’s economic performance; and

it has the obligation to absorb losses of the VIE that could be potentially significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE.

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.

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

~~Table of Contents~~

~~CAI INTERNATIONAL, INC.~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)~~

Managed Container Funds

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 the arrangements include only terms and conditions that are customarily present in arrangements for similar services. As such, the Company does not have a variable interest in the managed containers funds, and does not consolidate those funds. No container portfolios were sold to the funds during the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018.~~2019.

Collateralized Financing Obligations

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. 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 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, and the results of the VIEs’ operations and cash flows for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ in the Company’s consolidated financial statements.

The containers that were transferred to the Japanese investor funds had a net book value of ~~$114.4~~$103.4 million as of ~~September 30, 2019.~~March 31, 2020. The container equipment, together with ~~$26.8~~$21.0 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 ~~$99.4~~$82.2 million and term loans held by VIE of ~~$37.8~~$35.2 million. No gain or loss was recognized by the Company on the initial consolidation of the VIEs. No containers were sold to the Japanese investor during the three months ended March 31, 2020. Containers sold to the Japanese investor funds during ~~both~~ the three ~~and nine~~ months ended ~~September 30,~~March 31, 2019 had a net book value of $65.0 million. ~~Containers sold to the Japanese investor during the three and nine months ended September 30, 2018 had a net book value of $14.6 million and $29.8 million, respectively.~~

~~(5)~~

Table of Contents

CAI INTERNATIONAL, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(3) Rental Equipment

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


	September 30,		December 31,		March 31,		December 31,
	2019		2018		2020		2019
Dry containers	$	1,966,688	$	1,840,304	$	1,881,637	$	1,902,471
Refrigerated containers		298,202		341,983		277,013		282,155
Other specialized equipment		222,921		192,066		221,935		224,924
Railcars						294,875		314,279
		2,487,811		2,374,353		2,675,460		2,723,829
Accumulated depreciation		(598,545)		(557,559)		(640,118)		(620,990)
Rental equipment, net of accumulated depreciation	$	1,889,266	$	1,816,794	$	2,035,342	$	2,102,839

During the three months ended March 31, 2020, an impairment charge of $19.2 million was recognized to reduce the book value of the railcar portfolio, on an individual basis, to the lower of its net book value had the assets not been classified as held for sale, or its estimated fair value at the date when the decision was made not to sell the assets of the railcar business. To assist in the Company’s assessment of fair value, a third-party appraisal was carried out on the railcar fleet using a combination of cost and market approaches. The cost approach utilizes the current replacement cost for a particular car type and calculates an estimated depreciation based on a railcar having a 40-year life and residual value being 10% of the estimated purchase price. The market approach estimates value based on recent market transactions involving similar railcars. The railcars were classified within Level 3 of the fair value hierarchy.

The Company leases its rental equipment on either short-term operating leases through master lease agreements, long-term non-cancelable operating leases, or finance leases. The following table summarizes the components of lease revenue (in thousands):

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

(1)At the inception of the lease, the Company records the total minimum lease payments, executory costs, if any, and unguaranteed residual value as gross ~~sales-type and~~ finance lease receivables. The gross ~~sales-type and~~ finance lease receivables are reduced as customer payments are received. There was $74.3 million ~~and $74.4 million~~ of unguaranteed residual value at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, respectively, included in gross ~~sales-type and~~ finance lease receivables. There were no executory costs included in gross ~~sales-type and~~ finance lease receivables as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018.~~2019.

(2)The difference between the gross ~~sales-type and~~ finance lease receivables and the cost of the equipment or carrying amount at the lease inception is recorded as unearned income. Unearned income, together with initial direct costs, are amortized to income over the lease term so as to produce a constant periodic rate of return. There were no unamortized initial direct costs as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018.~~2019.

(3)One major customer represented 65% of the Company’s finance lease portfolio as of March 31, 2020 and December 31, 2019. No other customer represented more than 10% of the Company’s finance lease portfolio in each of those periods.

Contractual maturities of the Company's gross finance lease receivables subsequent to March 31, 2020 for the years ending March 31 are as follows (in thousands):

During 2019, the Company purchased containers and leased back the containers to the seller-lessees through finance leaseback arrangements. As control of the equipment was retained by the customers, the Company concluded that sale-leaseback accounting was not applicable and treated the arrangements as financing transactions. The Company recorded a financing receivable in the amount paid for the containers. Payments made by the seller-lessee are recorded as a reduction to the financing receivable and as interest income, calculated using the effective interest method.

The following table summarizes the components of the Company’s financing receivable (in thousands):

(1)Included in prepaid expenses and other current assets in the consolidated balance sheets.

In order to estimate the allowance for losses contained in ~~gross sales-type~~net investment in finance leases and ~~finance lease receivables,~~financing receivable, 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~~historical credit loss activity, current market and ~~general~~ economic ~~conditions.~~conditions, and reasonable and supportable forecasts.

The ~~categories of gross finance lease receivables based on~~Company uses the ~~Company's internal customer credit ratings can be described as follows:~~following definitions for risk ratings:

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 sales-type and finance lease receivables were as follows (in thousands):~~

~~Contractual maturities of the Company's gross sales-type and finance lease receivables subsequent to September 30, 2019 for the years ending September 30 are as follows (in thousands):~~

The Company has entered into agreements with customers to purchase rental equipment and to lease the equipment back to the customers on a finance lease. As control of the equipment has been retained by the customers, the Company concluded that sale-leaseback accounting was not applicable and has treated the arrangements as financing transactions. The amount paid by the Company has been recorded as a financing receivable. Payments made by the customers are recorded as a reduction to the financing receivable and as interest income, calculated using the effective interest method.

~~The following table summarizes the components of the Company’s financing receivable (in thousands):~~

~~In order to estimate an allowance for losses from financing receivables, the Company reviews the credit worthiness of its customers on an ongoing basis. As of~~ ~~September~~ 30, 2019, $34.6 million and $0.7 million of the Company’s financing receivable would be categorized as Tier 1 and Tier 2, respectively, based on the internal customer credit ratings as described in Note 6.

~~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 30, 2019 and December 31, 2018 were as follows (in thousands):~~

Amortization expense was $0.4 million and $0.5 million for the three months ended September 30, 2019 and 2018, respectively, and $1.2 million and $1.5 million for the nine months ended September 30, 2019 and 2018, respectively, and was included in administrative expenses in the consolidated statements of operations.

~~As of September 30, 2019, estimated future amortization expenses are as follows (in thousands):~~

~~The Company~~As of March 31, 2020 and December 31, 2019, based on the most recent analysis performed, the risk category of the Company’s net investment in finance leases ~~its rental equipment~~and financing receivable, based on ~~either short-term operating leases through master lease agreements, long-term non-cancelable operating leases, or finance leases. The following table summarizes the components~~year of ~~lease revenue~~origination is as follows (in thousands):

Three months

Nine months

ended

ended

September 30,

September 30,

2019

2019
Lease revenue - sales-type and direct finance leases

Profit at lease commencement

$
-

$
-
Interest income on lease receivable

11,112

33,436

11,112

33,436
Lease revenue - operating leases

62,002

184,464
Other revenue

3,499

9,404
Interest income on financing receivable

687

1,281
Total lease revenue

$
77,300

$
228,585


March 31, 2020	2020		2019		2018		2017		2016		Prior		Total
Net investment in finance leases
Tier 1	$	2,880	$	59,580	$	248,821	$	171,092	$	7,200	$	1,654	$	491,227
Tier 2		2,012		31,521		14,473		7,092		2,320		6,406		63,824
Tier 3		-		-		-		-		-		-		-
Total net investment in finance leases	$	4,892	$	91,101	$	263,294	$	178,184	$	9,520	$	8,060	$	555,051

Financing receivable
Tier 1	$	-	$	32,830	$	-	$	-	$	-	$	-	$	32,830
Tier 2		-		693		-		-		-		-		693
Tier 3		-		-		-		-		-		-		-
Total financing receivable	$	-	$	33,523	$	-	$	-	$	-	$	-	$	33,523

The Company’s intangible assets as of March 31, 2020 and December 31, 2019 consist of customer relationships. The following ~~represents~~table summarizes the estimated future ~~minimum rents receivable under long-term non-cancelable operating leases~~amortization expense as of March 31, 2020 (in thousands):

~~See Note 6~~Amortization expense related to intangible assets was $0.4 million for ~~contractual maturities of~~both the ~~Company’s gross sales-type~~three months ended March 31, 2020 and ~~finance lease receivables.~~

~~The Company has entered into various non-cancelable office space leases with original lease periods expiring between~~ 2019 and 2025. As of September 30, 2019, operating lease ROU assets of $6.8 million were reported in other non-current assets in the consolidated balance sheets. As of September 30, 2019, total operating lease liabilities were $7.7 million, of which $2.4 million are due within one year and $5.3 million are due beyond one year and were recorded in accrued expenses and other current liabilities and other non-current liabilities, respectively, in the consolidated balance sheets.

Certain leases provide for increases in future minimum annual rental payments as defined in the lease agreements. Lease expense for lease payments is recognized on a straight-line basis over the lease term and is reportedwas included in administrative expenses in the consolidated statements of operations.

~~The following table summarizes the components of lease expense (in thousands):~~

The weighted-average remaining term of the Company’s operating leases was 3.2 years and the weighted-average discount rate used to measure the present value of the Company’s operating lease liabilities was 3.7% as of September 30, 2019.

~~Maturities of the Company’s operating lease liabilities, which do not include short-term leases, as of September 30, 2019 were as follows (in thousands):~~

~~Cash paid for operating leases was $1.8 million during the nine months ended September 30, 2019.~~

Details of the Company’s debt as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 were as follows (dollars in thousands):



	September 30, 2019						December 31, 2018						March 31, 2020					December 31, 2019
	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	$	-		$	480,000	3.5%	$	4,200	$	301,000	4.2%	June 2023	$	-	$	682,000	2.4%	$	-	$	624,000	3.3%	June 2023
Revolving credit facility - Rail (1) (2)		-			162,500	3.5%		-		272,500	4.2%	October 2023
Revolving credit facility - Rail														-		137,500	2.4%		-		137,500	3.3%	October 2023
Revolving credit facility - Euro		18,559	��		-	2.0%		-		19,457	2.0%	September 2020		21,122		-	2.0%		21,537		-	2.0%	September 2020
Term loan		1,800			25,950	4.3%		1,800		27,300	4.5%	April 2023		1,800		25,050	3.9%		1,800		25,500	3.9%	April 2023
Term loan (3)		107,250			-	3.6%		111,750		-	3.8%	October 2019
Term loan		7,000			70,250	3.8%		7,000		75,500	4.0%	June 2021		7,000		66,750	2.7%		7,000		68,500	3.5%	June 2021
Term loan (1)		1,273			14,325	3.4%		1,240		15,284	3.4%	December 2020
Term loan (1)		2,989			38,399	3.6%		2,909		40,651	3.6%	August 2021
Term loan														14,967		-	3.4%		15,284		-	3.4%	December 2020
Term loan														3,043		36,864	3.6%		3,016		37,635	3.6%	August 2021
Term loan		6,000			88,000	4.6%		6,000		92,500	4.6%	October 2023		6,000		85,000	4.6%		6,000		86,500	4.6%	October 2023
Senior secured notes		6,110			46,665	4.9%		6,110		52,775	4.9%	September 2022		6,110		43,610	4.9%		6,110		46,665	4.9%	September 2022
Asset-backed notes 2012-1		17,100			35,625	3.5%		17,100		48,450	3.5%	October 2027		17,100		27,075	3.5%		17,100		31,350	3.5%	October 2027
Asset-backed notes 2013-1		22,900			57,250	3.4%		22,900		74,425	3.4%	March 2028		22,900		45,800	3.4%		22,900		51,525	3.4%	March 2028
Asset-backed notes 2017-1		25,307			170,822	3.7%		25,307		189,802	3.7%	June 2042		25,307		158,169	3.7%		25,307		164,496	3.7%	June 2042
Asset-backed notes 2018-1		34,890			258,767	4.0%		34,890		284,935	4.0%	February 2043		34,890		241,323	4.0%		34,890		250,045	4.0%	February 2043
Asset-backed notes 2018-2		34,350			274,800	4.4%		34,350		300,563	4.4%	September 2043		34,350		257,625	4.4%		34,350		266,213	4.4%	September 2043
Collateralized financing obligations		23,455			75,917	1.5%		39,610		67,615	1.2%	December 2021		20,595		61,617	1.6%		21,681		69,615	1.5%	February 2026
Term loans held by VIE		5,195			32,570	4.2%		1,456		-	3.3%	June 2019		5,311		29,884	4.2%		5,250		31,234	4.2%	February 2026
		314,178			1,831,840			316,622		1,862,757				220,495		1,898,267			222,225		1,890,778
Debt issuance costs		(4,678)			(12,191)			(5,241)		(15,124)				(3,976)		(9,633)			(4,131)		(10,656)
Total Debt	$	309,500		$	1,819,649		$	311,381	$	1,847,633			$	216,519	$	1,888,634		$	218,094	$	1,880,122

~~(2) The maximum credit commitment under the Rail revolving credit facility was decreased on October 1, 2019 from $550 million to $250 million.~~

The Company maintains its revolving credit facilities to finance the acquisition of rental equipment and for general working capital purposes. As of ~~September 30, 2019,~~March 31, 2020, the Company had ~~$1,016.1~~$536.8 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 ~~September 30, 2019,~~March 31, 2020, the borrowing availability under the Company’s revolving credit facilities was ~~$88.4~~$41.0 million, assuming no additional contributions of assets.

On March 29, 2019, one of the Japanese investor funds that is consolidated by the Company as a VIE (see Note 4) entered into a term loan agreement with a bank. Under the terms of the term loan agreement, the Japanese investor fund entered into a seven-year, amortizing term loan of $40.8 million at a fixed interest rate of 4.2%. The term loan is secured by assets of the Japanese investor fund, and is subject to certain borrowing conditions set out in the term loan agreement.

The agreements relating to all of the Company’s debt contain various financial and other covenants. As of ~~September 30, 2019,~~March 31, 2020, the Company was in compliance with all of its financial and other covenants.

For further information on the Company’s debt instruments, see Note 810 to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2018,~~2019, filed with the SEC on March 5, ~~2019.~~2020.

To provide additional liquidity and enhance its financial flexibility in response to recent global economic uncertainty and financial market volatility caused by the COVID-19 pandemic, the Company drew down $70 million from its revolving credit facility as a precautionary measure in March 2020.

On April 27, 2020, the Company repaid in full the outstanding debt associated with the asset-backed notes 2012-1 and 2013-1.

In June 2019, the Company’s stockholders approved the CAI International, Inc. 2019 Incentive Plan (2019 Plan), which ~~replaces~~replaced the CAI International, Inc. Amended and Restated 2007 Equity Incentive Plan (2007 Plan). No further awards will be made under the 2007 Plan. Under the 2019 Plan, a maximum of 2,577,075 share awards may be granted. Under the 2019 Plan, the Company may grant incentive and nonqualified stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance awards and other stock or cash-based awards.

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 months ended September 30, 2019 and 2018:~~

The aggregate intrinsic value of stock options exercised during the nine months ended September 30, 2019 and 2018 was $1.4 million and $0.1 million, respectively. The aggregate intrinsic value of all options outstanding as of September 30, 2019 was $3.7 million based on the closing price of the Company’s common stock of $21.77 per share on September 30, 2019, the last trading day of the quarter.

The following table summarizes the Company’s stock option activities for the three months ended March 31, 2020 and 2019:

The aggregate intrinsic value of stock options exercised during the three months ended March 31, 2020 and 2019 was $0.1 million and $0.5 million, respectively. The aggregate intrinsic value of all options outstanding as of March 31, 2020 was $1.0 million based on the closing price of the Company’s common stock of $14.14 per share on March 31, 2020, the last trading day of the quarter.

The Company recognized stock-based compensation expense relating to stock options of $0.2 million for both the three months ended ~~September 30, 2019~~March 31, 2020 and ~~2018, and $0.6 million and $1.0 million for the nine months ended September 30, 2019 and 2018, respectively.~~2019. As of ~~September 30, 2019,~~March 31, 2020, the remaining unamortized stock-based compensation cost relating to stock options granted to the Company’s employees and independent directors was approximately ~~$0.7~~$0.4 million, which is to be recognized over the remaining weighted average vesting period of approximately ~~1.1~~0.7 years.

The Company did not grant any stock options during the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 and ~~2018.~~2019.

The Company grants restricted stock units to certain employees and restricted stock awards to independent directors from time to time ~~to certain employees and independent directors~~ pursuant to the 2019 Plan. Restricted stock granted to employees has a vesting period of four years; 25% vesting on each anniversary of the grant date. Restricted stock granted to independent directors vests in one year. The Company recognizes the compensation cost associated with restricted stock over the vesting period based on the closing price of the Company’s common stock on the date of grant.

The Company grants performance stock units to certain executives and other key employees. The performance stock vests at the end of a 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 when it is considered probable that performance targets will be 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 2019 Plan:

Weighted

Average

Number of

Grant Date

Shares

Fair Value
Outstanding at December 31, 2018

204,730

$
20.45
Granted

166,939

$
25.37
Vested

(81,259)

$
20.89
Forfeited

(8,674)

$
22.42
Outstanding at September 30, 2019

281,736

$
23.18



		Weighted
		Average
	Number of	Grant Date
	Shares	Fair Value
Outstanding at December 31, 2019	281,736	$	23.18
Granted	94,497	$	28.63
Vested	(44,046)	$	22.59
Outstanding at March 31, 2020	332,187	$	24.81

The Company recognized stock-based compensation expense relating to restricted stock and performance stock ~~awards~~ of $0.7 million and ~~$0.5~~$0.6 million for the three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018, respectively, and $1.8 million and $1.1 million for the nine months ended September 30, 2019 and 2018,~~ respectively. As of ~~September 30, 2019,~~March 31, 2020, unamortized stock-based compensation expense relating to restricted stock and performance stock was ~~$4.8~~$5.8 million, which will be recognized over the remaining average vesting period of ~~2.2~~2.1 years.

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

In June 2019, the Company’s stockholders approved the CAI International, Inc. 2019 Employee Stock Purchase Plan (ESPP). The ESPP provides a means by which eligible employees may be given an opportunity to purchase shares of the Company’s common stock at a discount using payroll deductions. The ESPP authorizes the issuance of up to 250,000 shares of the Company’s common stock. The first offering period under the ESPP ~~has not yet been implemented and no~~commenced in December 2019. No shares were issued under the ESPP during the three months ended ~~September 30, 2019.~~March 31, 2020. The Company recognized stock-based compensation expense relating to the ESPP of less than $0.1 million for the three months ended March 31, 2020.

The consolidated income tax expense for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ was determined based upon estimates of the Company’s consolidated annual effective income tax rate for the years ending December 31, ~~2019~~2020 and ~~2018,~~2019, 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 before discrete items was ~~6.1%~~9.1% at ~~September 30, 2019,~~March 31, 2020, compared to ~~5.0%~~an effective tax rate of 8.2% at ~~September 30, 2018.~~

railcar assets (Note 3) charge of $19.2 million, which resulted in a tax benefit of $4.5 million.

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 30, 2019,~~March 31, 2020, the Company had unrecognized tax benefits of $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 30, 2019.~~March 31, 2020. The Company does not believe the total amount of unrecognized tax benefits as of ~~September 30, 2019~~March 31, 2020 will change for the remainder of ~~2019.~~2020.

Fair value represents the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company uses the following fair value hierarchy when selecting inputs for its valuation techniques, with highest priority given to Level 1:

The carrying amounts of cash, restricted cash, accounts receivable and accounts payable reflected in the balance sheets as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, approximate their fair value due to the short-term nature of these financial assets and liabilities. The carrying value of ~~variable rate~~variable-rate debt in the balance sheets as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 approximates fair value as the changes in their associated interest rates reflect the current market and credit risk is similar to when the loans were originally obtained.

The principal balance of the Company’s ~~fixed-rate term loans,~~ asset-backed notes and collateralized financing obligations was ~~$151.0 million, $931.8~~$864.5 million and ~~$99.4~~$82.2 million as of ~~September 30, 2019,~~March 31, 2020, with a fair value of approximately ~~$153.7 million, $945.3~~ $836.8million and ~~$100.8~~ $83.3million, 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. The principal balance of the Company’s fixed-rate term loans, asset-backed notes and collateralized financing obligations was ~~$1,032.7~~$148.4 million, $898.2 million and ~~$107.2~~$91.3 million as of December 31, ~~2018,~~2019, with a fair value of approximately ~~$1,024.7~~$151.0 million, $911.0 million and ~~$108.9~~$93.0 million, respectively. Management believes that the balances of the Company’s senior secured notes of $49.7 million and $52.8 million, ~~and $58.9 million and~~ term loans held by VIE of ~~$37.8~~$35.2 million and ~~$1.5~~$36.5 million, and financing receivable of $33.5 million and $34.4 million as of ~~September~~ ~~30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, respectively, and the fixed-rate term loans of ~~$158.6~~$145.9 million as of ~~December~~March 31, ~~2018, and financing receivable of $35.3 million as of September 30, 2019,~~2020, approximate their fair values. 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 96 above, the Company had commitments to purchase approximately ~~$32.8~~$3.8 million of containers as of ~~September 30, 2019,~~March 31, 2020, all in the twelve months ending ~~September 30, 2020.~~March 31, 2021.

In October 2018, the Company announced that the Board of Directors approved the repurchase of up to three million shares of its outstanding common stock. The number, price, structure and timing of the repurchases, if any, will be at the Company’s sole discretion and will be evaluated by the Company depending on prevailing market conditions, corporate needs, and other factors. The stock repurchases may be made in the open market, block trades or privately negotiated transactions. This stock repurchase program replaces any available prior share repurchase authorization and may be discontinued at any time. ~~During the nine months ended September 30, 2019, the Company repurchased 1.5 million shares of its common stock under this repurchase plan, at a cost of approximately $34.1 million.~~ The Company did not repurchase any shares under this repurchase plan during the three months ended ~~September 30, 2019.~~March 31, 2020. As of ~~September 30, 2019,~~March 31, 2020, approximately 1.0 million shares remained available for repurchase under this share repurchase program.

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. The Company did not issue any shares under this ATM offering program during the nine months ended September 30, 2019. The Company has remaining capacity to issue and sell 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. 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. The net proceeds were used for repayment of debt and general corporate purposes.

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. The Company did not issue any shares under this ATM offering program during the nine months ended September 30, 2019. The Company has remaining capacity to issue and sell up to approximately 1.8 million of additional shares of Series A Preferred Stock under this ATM offering program.

In August 2018, the Company completed an underwritten public offering of 1,700,000 shares of its 8.5% Series B Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Stock, par value $0.0001 per share and liquidation preference $25.00 per share (Series B Preferred Stock), resulting in net proceeds to the Company of approximately $41.2 million, after deducting the underwriting discount. The Company sold an additional 255,000 shares of Series B Preferred Stock upon the exercise by the underwriters of their option to purchase additional Series B Preferred Stock, resulting in net proceeds to the Company of approximately $6.2 million, after deducting the underwriting discount of $0.2 million. The net proceeds were used for repayment of debt and general corporate purposes.

For further information on the Company’s shareholders’ equity, see Note 1416 to the consolidated financial statements in the Company’ Annual Report on Form 10-K for the year ended December 31, ~~2018,~~2019, filed with the SEC on March 5, ~~2019.~~2020.

~~In May 2018,~~The Company is responsible for settling income tax liabilities of certain employees related to stock-based compensation. The Company is then reimbursed for those amounts by the employees. At March 31, 2020 and December 31, 2019, the Company ~~purchased, and subsequently cancelled, 1,225,214 shares~~had a liability of ~~its common stock, from~~$1.2 million representing tax due to the UK tax authorities in respect of an ~~affiliate of Andrew S. Ogawa in a privately-negotiated transactions. Mr. Ogawa is a member~~officer of the ~~Company’s Board~~Company. The Company also included in its balance sheets at March 31, 2020 and December 31, 2019 a current asset of ~~Directors. The stock was purchase at a price of $22.81 per share, which represented a 2% discount~~$1.2 million, representing the amount that will be reimbursed to the ~~closing price on the date of purchase.~~Company by that officer.

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.

As disclosed in Note 3, the Company’s railcar assets have been reclassified as held for sale in the accompanying unaudited consolidated balance sheets and the operations of the rail business have been reclassified as discontinued operations in the accompanying unaudited consolidated statements of operations. As a result, the Company will no longer report Rail leasing as a segment. The Company revised prior period information to conform to current period presentation.

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 material inter-segment ~~revenues and~~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 the segments based upon relative asset values or revenue.

The following tables show condensed segment information for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ reconciled to the Company’s income before income taxes as shown in its consolidated statements of operations 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 summary below presents total assets for the Company's segments as of the dates indicated (in thousands):~~

~~(2) Includes goodwill of $15.8 million as of September 30, 2019 and December 31, 2018.~~

~~(3) Represents total assets related to discontinued operations, including assets held for sale of $284.8 million and $449.7 million as of September 30, 2019 and December 31, 2018, respectively.~~

The summary below presents total assets for the Company's segments as of the dates indicated (in thousands):

(2) Includes goodwill of $15.8 million as of March 31, 2020 and December 31, 2019.

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

Basic ~~earnings~~net (loss) income per share is computed ~~by dividing income available to common stockholders by~~based on the weighted average number of shares of common ~~shares~~stock outstanding ~~for the~~during each 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 months ended September 30, 2019 and 2018 (in thousands, except per share data):~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

2019

2018

2019

2018
Numerator

Net income from continuing operations

$
12,958

$
20,571

$
37,524

$
57,897
Net loss from discontinued operations

(19,912)

(565)

(20,983)

(1,625)
Net (loss) income attributable to CAI common stockholders

$
(6,954)

$
20,006

$
16,541

$
56,272
Denominator

Weighted-average shares used in per share computation - basic

17,330

19,214

17,850

19,741
Effect of dilutive securities:

Stock options and restricted stock

195

278

272

256
Weighted-average shares used in per share computation - diluted

17,525

19,492

18,122

19,997

Net income (loss) per share attributable to CAI common

stockholders:

Basic

Continuing operations

$
0.75

$
1.07

$
2.10

$
2.93
Discontinued operations

$
(1.15)

$
(0.03)

$
(1.17)

$
(0.08)
Total basic

$
(0.40)

$
1.04

$
0.93

$
2.85
Diluted

Continuing operations

$
0.74

$
1.06

$
2.07

$
2.90
Discontinued operations

$
(1.14)

$
(0.03)

$
(1.16)

$
(0.09)
Total diluted

$
(0.40)

$
1.03

$
0.91

$
2.81

The ~~calculation~~following table sets forth the reconciliation of basic and diluted ~~earnings~~net income per share for the three months ended ~~September 30,~~March 31, 2020 and 2019 (in thousands, except per share data):




	Three Months Ended March 31,
	2020		2019
Numerator
Net (loss) income attributable to CAI common stockholders	$	(3,537)	$	16,367
Denominator
Weighted-average shares used in per share computation - basic		17,433		18,555
Effect of dilutive securities:
Stock options and restricted stock		-		315
Weighted-average shares used in per share computation - diluted		17,433		18,870

Net (loss) income per share attributable to CAI
common stockholders:
Basic	$	(0.20)	$	0.88
Diluted	$	(0.20)	$	0.87

Certain options, restricted stock and ~~2018,~~restricted stock units issued under employee benefits plans are excluded from the ~~denominator 246,750and 86,055 shares, respectively, of common stock options because their effect would have been anti-dilutive. The calculation~~computation of diluted earnings per share ~~for the nine months ended September 30,~~because they were anti-dilutive. At March 31, 2020, all outstanding options, restricted stock and restricted stock units were excluded. At March 31, 2019, ~~and 2018, excluded from the denominator 127,135and 158,495~~128,969 shares ~~respectively,~~ of ~~common~~ stock options, ~~because their effect would have been anti-dilutive.~~ restricted stock and restricted stock units were excluded.

2621

Table of Contents

ITEM 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, ~~2018~~2019 filed with the SEC on March 5, ~~2019.~~2020. 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 Quarterly Report on Form 10-Q.

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.

The following tables show the composition of our fleet as of ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ and our average utilization for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 and ~~2018:~~2019:



	As of September 30,				As of March 31,
	2019		2018		2020		2019
Owned container fleet in TEUs		1,623,588		1,435,516		1,590,880		1,522,907
Managed container fleet in TEUs		72,462		75,872		66,721		72,363
Total container fleet in TEUs		1,696,050		1,511,388		1,657,601		1,595,270

Owned container fleet in CEUs		1,649,465		1,475,142		1,622,354		1,551,465
Managed container fleet in CEUs		88,493		69,134		82,705		65,872
Total container fleet in CEUs		1,737,958		1,544,276		1,705,059		1,617,337

Owned railcar fleet in units		5,504		7,489		5,459		5,609

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 ~~95.9% and 96.4%~~95.8% for both the total ~~container fleet, 95.9%~~ and ~~96.4% for the~~ owned container fleet, and 82.1% ~~and 84.6%~~ for the railcar fleet, for the three ~~and nine~~ months ended ~~September 30, 2019, respectively~~March 31, 2020.

On March 11, 2020, the World Health Organization (WHO) declared the outbreak of a novel coronavirus (COVID-19) as a global pandemic, which continues to spread throughout the United States and around the world. There are many uncertainties regarding the COVID-19 pandemic, including the anticipated duration of the pandemic, and the extent of local and worldwide social, political, and economic disruption it may cause.

In late January 2020, China implemented extensive work restrictions to control the ~~quarter ended June 30, 2019, we committed~~outbreak, which led to a ~~plan~~steep drop in exports from China. Work restrictions in China started to ease in March 2020, and export volumes from China have continued to increase since that time. However, the spread of COVID-19 to other parts of the world and the strong actions taken by many countries to reduce exposures have led to a sharp decrease in global economic activity during the beginning of the second quarter of 2020, which we expect to continue during 2020. While the COVID-19 pandemic and the related global economic effects have not materially impacted our business, operations, or financial results to date, we do expect that the global economic impact will result in a decline in overall incremental demand for our services over the remainder of the year and elevates the risk of delayed payment or default by our customers. Moreover, it may have far-reaching impacts on many aspects of our operations, both directly through our ability to obtain cost effective financing and maintain equipment utilization, and indirectly through its impact on customers, equipment manufacturers, shippers, carriers, our employees, and the market generally, and the scope, severity and nature of these impacts continue to evolve.

Distress in the global economy, including trade volumes and a slowdown in global demand, could generally lead to lower per diem lease rates for our container and rail equipment, the overall value of our equipment, or our ability to continue to sell used containers. In addition, adverse effects on the economy as a whole could potentially reduce demand for our ~~railcar assets as we believe it is~~leased equipment and logistics services, and a prolonged slowdown in trade volumes due to the pandemic could also significantly increase the financial challenges facing our customers, which may lead to delays in payments of leases, defaults on obligations owed to us, and overall credit risk of our customers.

Worldwide financial markets have recently experienced periods of extraordinary disruption and volatility, which has been exacerbated by the COVID-19 pandemic. Any sustained disruption in the ~~best interest~~capital markets from the COVID-19 pandemic could negatively impact our ability to raise capital to fund additional container purchases or service our outstanding debt. We have implemented remote work arrangements and have restricted business travel effective mid-March 2020, and to date, these arrangements have not materially affected our ability to maintain our business operations, including the operation of financial reporting systems, internal control over financial reporting, and disclosure controls and procedures.

The extent to which the COVID-19 outbreak impacts our ~~shareholders~~business and operations will depend on future developments that are highly uncertain and cannot be predicted. For additional information regarding the risk and uncertainties that we could encounter as a result of the COVID-19 pandemic and related global conditions, see “The continued spread of the COVID-19 pandemic may have a material adverse impact on our business, financial condition and results of operations” in Item 1A. “Risk Factors” in this Quarterly Reports on Form 10-Q.

Due to ~~reallocate~~market conditions, we decided during the ~~capital invested in~~three months ended March 31, 2020 to terminate the sale process for our rail ~~business to other investments.~~business. As a result, the railcar assets have been classified as held for sale and the operations of the rail business have been classified as discontinued operations in the unaudited consolidated financial statements in this Quarterly Report on Form 10-Q. All prior periods presented in the unaudited consolidated financial statements have been restated to reflect the reclassification.

~~During the three months ended June 30, 2019, a loss of $7.3 million was recorded when the assets of the railcar business were~~ reclassified as held for ~~sale. During~~use as of March 31, 2020 and the three months ended September 30, 2019, we incurred an additional impairment charge of $25.6 million to reduce the book value of our railcar portfolio to its estimated fair value. To assist us in our assessment of fair value,rail business reclassified as a ~~third-party desk top appraisal was carried out on the railcar fleet using the market value approach.~~continuing operation. See Note 3 – ~~Discontinued Operations~~ Rental Equipmentto the consolidated financial statements in this Quarterly Report on Form 10-Q for ~~more information.~~ further information over the reclassification of the railcar assets as held for use.

Results of Operations - Three Months Ended ~~September 30, 2019~~March 31, 2020 Compared to Three Months Ended ~~September 30, 2018~~March 31, 2019

The following table summarizes our results of operations for the three months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ (dollars in thousands):

The ~~increase~~decrease in total revenue for the three months ended ~~September 30, 2019~~March 31, 2020 compared to the three months ended ~~September 30, 2018,~~March 31, 2019, was attributable to a ~~$2.0~~$6.4 million, or 3%8%, ~~increase~~decrease in container lease revenue and a $2.1 million, or 26%, decrease in rail lease revenue, partially offset by a ~~$1.1~~$2.4 million, or 3%9%, ~~decrease~~increase in logistics revenue. The increase in operating expenses for the three months ended ~~September 30, 2019~~March 31, 2020 compared to the three months ended ~~September 30, 2018,~~March 31, 2019, was ~~as a~~primarily the result of a ~~$2.2~~$19.2 million impairment charge recorded in the current year related to our rail assets, a $7.2 million, or ~~86%~~82% decrease in gain on sale of rental equipment, a $2.3 million, or 9%, increase in logistics transportation costs, and a $0.6 million, or 12% increase in storage, handling and other expenses, ~~a $1.0 million, or 4%, increase in depreciation expense, a $0.8 million, or 7%, increase in administrative expenses, and a $0.2 million, or 8%, decrease in gain on sale of used rental equipment,~~ partially offset by a ~~$0.5~~$4.7 million, or 2%15%, decrease in ~~logistics transportation costs.~~depreciation expense and a $2.6 million, or 18% decrease in administrative expenses. Total other expenses for the three months ended ~~September 30, 2019 increased~~March 31, 2020 decreased compared with the three months ended ~~September 30, 2018,~~March 31, 2019, primarily due to a ~~$4.3~~$3.5 million, or ~~27%~~15%, ~~increase~~decrease in net interest expense. Total dividends of $2.2 million on our preferred stock were recorded in both the three months ended ~~September 30, 2019, compared to total dividends of $1.7 million for the three months ended September 30, 2018.~~March 31, 2020 and 2019. The ~~increase~~decrease in revenue ~~offset by the~~and increase in operating expenses, partially offset by the decrease in total other expenses ~~preferred stock dividends, and the loss from discontinued operations~~ resulted in a decrease in net income attributable to CAI common stockholders for the three months ended ~~September 30, 2019~~March 31, 2020 compared to the three months ended ~~September 30, 2018,~~March 31, 2019, of ~~$27.0~~$19.9 million.

The ~~increase~~decrease in container lease revenue for the three months ended ~~September 30, 2019~~March 31, 2020 compared to the three months ended ~~September 30, 2018~~March 31, 2019 was mainly attributable to ~~an $8.9~~a $6.2 million ~~increase~~decrease in rental revenue ~~primarily due to a 15% increase in the average number of CEUs of on-lease owned containers, partially offset by a $7.0 million decrease~~ resulting from a 10% reduction in average owned container per diem rental ~~rates.~~rates and a $3.3 million decrease in rental revenue arising from a change to cash-based revenue recognition for a certain customer due to collectability issues, partially offset by a $3.5 million increase in rental revenue resulting from a 6% increase in the average number of CEUs of on-lease owned containers.

The decrease in rail lease revenue for the three months ended March 31, 2020 compared to the three months ended March 31, 2019 was mainly attributable to a 23% decrease in the average size of the railcar fleet as a result of the sale of 1,946 cars in February 2019.

The ~~decrease~~increase in logistics revenue for the three months ended ~~September 30, 2019~~March 31, 2020 compared to the three months ended ~~September 30, 2018~~March 31, 2019 was primarily due to an increase in volume, partially offset by a decrease in rates ~~partially offset by an increase in volume~~ in our intermodal and truck brokerage operations. The gross margin percentage fell from ~~12.2%~~11.5% for the three months ended ~~September 30, 2018~~March 31, 2019 to ~~10.7%~~10.9% for the three months ended ~~September 30, 2019~~March 31, 2020, due primarily to lower margins being achieved in our intermodal and truck brokerage operations.

Depreciation expense for the three months ended ~~September 30, 2019 increased~~March 31, 2020 decreased compared to the three months ended ~~September 30, 2018.~~March 31, 2019. While there was a ~~14%~~6% increase in the average size of our owned container fleet during the last twelve months, ~~32%~~18% of containers purchased during the ~~current year~~same period were used, which depreciate at a lower rate or are already fully depreciated.

There was no depreciation expense during the three months ended March 31, 2020 due to held for sale accounting for the railcar assets, which were classified as held for use during the three months ended March 31, 2019. See impairment of rental equipment below for further information.

An impairment charge of $19.2 million was recognized during the three months ended March 31, 2020 to reduce the book value of the railcar portfolio, on an individual basis, to the lower of its net book value had the assets not been classified as held for sale, or its estimated fair value at the date when the decision was made not to sell the assets of the railcar business. For additional information on the impairment, see Note 3 to our consolidated financial statements in this Quarterly Report on Form 10-Q.

The increase in storage, handling and other expenses for the three months ended ~~September 30, 2019~~March 31, 2020 compared to the three months ended ~~September 30, 2018~~March 31, 2019 was primarily attributable to a ~~$1.3~~$0.7 million increase in storage, handling and repair expenses due to an increase in the average size of the off-lease fleet, partially offset by a ~~$0.4~~$0.1 million ~~credit recorded in recovery costs in the prior year as a result of insurance proceeds received relating to the bankruptcy of Hanjin Shipping Co. Ltd. (Hanjin), and a $0.2 million increase~~decrease in container liability insurance.

Storage, handling and other expenses for the three months ended March 31, 2020 remained relatively consistent with the three months ended March 31, 2019.

Gain on sale of ~~containers during~~rental equipment for the three months ended ~~September 30, 2019~~March 31, 2020 remained relatively consistent with the three months ended March 31, 2019.

The decrease in gain on sale of rental equipment for the three months ended March 31, 2020 compared to the three months ended ~~September 30, 2018, there~~March 31, 2019 was mainly attributable to the sale of 1,946 railcars in February 2019 for a ~~decrease~~total gain of ~~13% in the average sale price per unit, resulting in a decrease in gain on sale.~~$7.0 million.

The ~~increase~~decrease in administrative expenses for the three months ended ~~September 30, 2019~~March 31, 2020 compared to the three months ended ~~September 30, 2018~~March 31, 2019 was primarily attributable to a ~~$1.3~~$0.6 million ~~increase~~decrease in ~~bad debt expense resulting from non-payment from certain customers called into default and a $0.5 million increase~~incentive-based compensation.

The decrease in ~~legal and professional fees, partially offset by~~administrative expenses for the three months ended March 31, 2020 compared to the three months ended March 31, 2019 was primarily attributable to a $0.3 million decrease in payroll-related costs, largely due to decreased incentive-based ~~compensation.~~and stock-based compensation expenses and a decrease in allocated overhead costs resulting from the decrease in size of the railcar fleet between the two periods.

The decrease in administrative expenses for the three months ended ~~September 30, 2019~~March 31, 2020 compared to the three months ended ~~September 30, 2018~~March 31, 2019 was primarily attributable to a ~~$0.4~~$1.0 million decrease in payroll-related costs between the two periods due to a reduction in headcount.

The ~~increase~~decrease in net interest expense for the three months ended ~~September 30, 2019~~March 31, 2020 compared to the three months ended ~~September 30, 2018~~March 31, 2019 was due primarily to ~~an increase~~a slight decrease in our average loan principal balance between the two periods, as we ~~continue to increase borrowings to finance the~~decreased acquisition ~~of additional~~activity for rental equipment, ~~partially offset by~~as well as a decrease in the average interest rate on our outstanding debt from approximately 3.9% as of March 31, 2019 to 3.3% as of March 31, 2020, caused primarily by a ~~slight~~ decrease in ~~LIBOR, from approximately 3.8% as of September 30, 2018 to 3.7% as of September 30, 2019.~~LIBOR.

Other expense, representing a loss on foreign exchange of ~~$0.4~~$0.2 million for the three months ended ~~September 30, 2019,~~March 31, 2020, increased from a loss of less than $0.1 million for the three months ended ~~September 30, 2018,~~March 31, 2019, primarily as a result of movements in the U.S. Dollar exchange rate against the Euro.

~~Income~~The decrease in income tax expense for the three months ended ~~September 30, 2019 remained relatively consistent with the~~March 31, 2020 compared to three months ended ~~September 30, 2018. While income before~~March 31, 2019 was mainly attributable to a decrease in the estimated effective tax ~~decreased between the two periods, the~~rate. The full-year estimated effective tax rate ~~increased from 5.0%~~before discrete items was 9.1% at ~~September 30, 2018~~March 31, 2020, compared to ~~6.1%~~an effective tax rate of 8.2% at ~~September 30,~~March 31, 2019. Discrete items during the three months ended March 31, 2020 primarily related to the impairment of railcar assets charge of $19.2 million, which resulted in a tax benefit of $4.5 million. The increase in the estimated full-year effective tax rate before discrete items was primarily ~~caused by~~due to 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~~Preferred stock dividends of $2.2 million was recorded in the three months ended September 30, 2019 attributable to the shares of preferred stock that were issued in 2018 and outstanding as of September 30, 2019. The Series B Preferred Stock was issued in August 2018 and as a result, the accrual for preferred stock dividends was $1.7 million for the three months ended ~~September 30, 2018.~~

The decrease in rail lease revenue for the three months ended September 30, 2019 compared to the three months ended September 30, 2018, was primarily attributable to a decrease in the size of the on-lease railcar fleet between the two periods. The decrease in operating expenses for the three months ended September 30, 2019 compared to the three months ended September 30, 2018, was as a result of a $3.5 million, or 100%, decrease in depreciation expense, a $0.8 million increase in gain on sale of rental equipment and a $0.4 million, or 36% decrease in administrative expenses, partially offset by a $2.4 million, or 243%, increase in storage, handing and other expenses. The decrease in interest expense for the three months ended September 30, 2019 comparedMarch 31, 2020 remained consistent with the three months ended September 30, 2018, was primarily attributable to a decrease in our average loan principal balance between the two periods. The decrease in revenue and the $25.6 million impairment of rental equipment, partially offset by the decrease in operating expenses and interest expense resulted in an increase in net loss from discontinued operations for the three months ended September 30, 2019 compared to the three months ended September 30, 2018, of $19.3 million.

~~Results of Operations - Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018~~

~~The following table summarizes our results from operations for the nine months ended September 30, 2019 and 2018 (dollars in thousands):~~

The increase in total revenue for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018, was attributable to a $20.3 million, or 10%, increase in container lease revenue and a $6.5 million, or 8%, increase in logistics revenue. The increase in operating expenses for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018, was as a result of a $7.1 million, or 10%, increase in logistics transportation costs, a $6.8 million, or 9%, increase in depreciation expense, a $6.8 million, or 118%, increase in storage, handling and other expenses, a $4.7 million, or 14%, increase in administrative expenses, and a $2.1 million, or 28%, decrease in gain on sale of used rental equipment. Total other expenses for the nine months ended September 30, 2019 increased compared with the nine months ended September 30, 2018, primarily due to a $16.3 million, or 37%, increase in net interest expense. Total dividends of $6.6 million on our preferred stock was recorded in the nine months ended September 30, 2019, compared to total dividends of $2.9 million for the nine months ended September 30, 2018. The increase in revenue, offset by the increase in operating expenses, total other expenses, preferred stock dividend, and the increase in loss from discontinued operations, resulted in a decrease in net income attributable to CAI common stockholders for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018, of $39.7 million.

The increase in container lease revenue for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018 was mainly attributable to a $32.9 million increase in rental revenue, primarily due to a 19% increase in the average number of CEUs of on-lease owned containers, partially offset by a $12.7 million decrease resulting from a 7% reduction in average owned container per diem rental rates.

The increase in logistics revenue for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018 was due to an increase in freight rates, partially offset by a decrease in volume in our intermodal and truck brokerage operations. Transportation costs increased at a slightly higher rate than revenue due primarily to increased volume in our lower margin intermodal business and resulted in a decrease in the gross margin percentage from 13.2% for the nine months ended September 30, 2018 to 11.6% for the nine months ended September 30,March 31, 2019.

Depreciation expense for the nine months ended September 30, 2019 increased compared to the nine months ended September 30, 2018. While there was a 19% increase in the average size of our owned container fleet during the twelve months, 32% of containers purchased during the current year were used, which depreciate at a lower rate or are already fully depreciated.

The increase in storage, handling and other expenses for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018 was primarily attributable to a $1.8 million credit recorded in recovery costs in the prior year as a result of insurance proceeds received relating to the bankruptcy of Hanjin, a $2.9 million increase in storage, handling and repair expenses due to an increase in the average size of the off-lease fleet and a $0.6 million increase in container liability insurance.

While we sold approximately 41% more CEUs of containers during the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018, there was a decrease of 7% in the average sale price per unit, resulting in a decrease in gain on sale.

The increase in administrative expenses for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018 was primarily attributable to a $1.3 increase in bad debt expense resulting from non-payment from certain customers called into default, a $0.8 million increase in payroll-related costs, largely due to increased incentive compensation and increased stock-based compensation expense, and a $0.8 million increase in legal and professional fees.

The increase in administrative expenses for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018 was primarily attributable to a $1.5 million increase in payroll-related costs between the two periods due to an increase in average headcount.

The increase in net interest expense for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018 was due primarily to an increase in our average loan principal balance between the two periods, as we continue to increase borrowings to finance the acquisition of additional rental equipment, partially offset by a decrease in the average interest rate on our outstanding debt, caused by a decrease in LIBOR, from approximately 3.8% as of September 30, 2018 to 3.7% as of September 30, 2019.

~~Other expense, representing a loss on foreign exchange of $0.5 million for the nine months ended September 30, 2019, remained relatively consistent with the nine months ended September 30, 2018.~~

Income tax expense for the nine months ended September 30, 2019 remained relatively consistent compared to the nine months ended September 30, 2018. While income before tax decreased between the two periods, the full-year estimated effective tax rate increased from 5.0% at September 30, 2018 to 6.1% at September 30, 2019. The increase in full-year estimated effective tax rate 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 $6.6 million was recorded in the nine months ended September 30, 2019 attributable to the shares of preferred stock that were issued in 2018 and outstanding as of September 30, 2019. The Series B Preferred Stock being was issued in August 2018 and as a result, the accrual for preferred stock dividends was $2.9 million for the nine months ended September 30, 2018.

~~The following table summarizes our results of discontinued operations for the nine months ended September 30, 2019 and 2018 (in thousands):~~

The decrease in rail lease revenue for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018, was primarily attributable to a decrease in the size of the on-lease railcar fleet between the two periods. The decrease in operating expenses for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018, was as a result of an $9.4 million increase in gain on sale of rental equipment and a $5.3 million, or 50%, decrease in depreciation expense, partially offset by a $1.4 million, or 31%, increase in storage, handing and other expenses. The decrease in interest expense for the nine months ended September 30, 2019 compared with the nine months ended September 30, 2018, was primarily attributable to a decrease in our average loan principal balance between the two periods. The decrease in revenue and the $33.0 million loss on classification as held for sale and subsequent impairment, partially offset by the decrease in operating expenses and interest expense resulted in an increase in net loss from discontinued operations for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018, of $19.4 million.

As of ~~September 30, 2019,~~March 31, 2020, we had cash and cash equivalents of ~~$48.3~~$134.5 million, including ~~$26.8~~$21.0 million of cash held by variable interest entities (VIEs). and $25.8 million of restricted cash. 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 30, 2019,~~March 31, 2020, our outstanding indebtedness and current maximum borrowing level was as follows (in thousands):

As of ~~September 30, 2019,~~March 31, 2020, we had ~~$1,016.1~~$536.8 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 30, 2019,~~March 31, 2020, the borrowing availability under our revolving credit facilities was ~~$88.4~~$41.0 million, assuming no additional contributions of assets.

~~The maximum credit commitment under~~To provide additional liquidity and enhance our financial flexibility in response to recent global economic uncertainty and financial market volatility caused by the ~~Rail~~COVID-19 pandemic, we drew down $70 million from our revolving credit facility ~~was decreased on October 1, 2019 from $550~~as a precautionary measure in March 2020.

On April 27, we repaid in full two asset-backed credit facilities which provided additional liquidity of approximately $40 million, increasing our total available liquidity to ~~$250~~approximately $155 million.

For further information on our debt instruments, see Note 109 to the consolidated financial statements in this Quarterly Report on Form 10-Q and Note 810 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, ~~2018,~~2019, filed with the SEC on March 5, ~~2019.~~2020.

We continue to monitor the COVID-19 outbreak and its impact on our overall liquidity position and outlook. The ultimate impact that COVID-19 may have on our operational and financial performance over the next 12 months is currently uncertain and will depend on certain developments, including, among others, the impact of COVID-19 on our customers and the magnitude and duration of the pandemic. Assuming that our customers meet their contractual commitments, 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 indebtedness contain restrictive covenants, including limitations on certain liens, indebtedness and investments. In addition, the agreements governing our indebtedness contain various restrictive financial and other covenants. The financial covenants in the agreements governing our 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 30, 2019,~~March 31, 2020, we were in compliance with all of our financial and other ~~covenants.~~covenants and we expect to remain in compliance for at least the next twelve months.

The following table sets forth certain cash flow information for the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and March 31, 2019 ~~and 2018~~ (in thousands):

Net cash provided by operating activities ~~of continuing operations~~ was ~~$186.1~~$60.1 million for the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, an increase of ~~$54.1~~$5.8 million compared to ~~$132.0~~$54.3 million for the ~~nine~~three months ended ~~September 30, 2018.~~March 31, 2019. The increase was due to a ~~$61.3~~$9.8 million increase in our net working capital adjustments, partially offset by a ~~$7.2~~$4.0 million decrease in net income ~~from continuing operations~~ as adjusted for depreciation, amortization and other non-cash items. The decrease of ~~$7.2~~$4.0 million in net income as adjusted for non-cash items was primarily due to a ~~$16.7~~$19.2 million impairment charge recognized in the current period to reclassify railcar assets as held for use and a $7.2 million decrease in gain on sale of rental equipment due to a large sale of railcars in the prior year, partially offset by a $19.9 million decrease in net income, ~~from continuing operations and~~ a ~~$1.2~~decrease of $4.5 million in depreciation expense, a $4.1 million decrease in deferred income taxes, ~~partially offset by an increase of $6.9 million in depreciation expense,~~and a decrease of ~~$2.1 million in the gain on sale of rental equipment, and an increase of $1.4~~$1.8 million in bad debt ~~expense.~~ expense due to receipt of payments from a previously reserved for customer.

Net working capital provided by operating activities of ~~$52.3~~$18.7 million in the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, was due to a ~~$45.4~~$17.1 million decrease in net investment in ~~sales-type and direct~~ finance leases, primarily due to receipt of principal payments, a ~~$2.6~~$4.4 million decrease in accounts receivable, primarily caused by the timing of cash receipts from customers, and a ~~$4.1~~$0.8 million ~~increase~~decrease in prepaid expenses and other assets, partially offset by a $3.2 million decrease in accounts payable, accrued expenses and other liabilities, primarily caused by the timing of payments. Net working capital ~~used in~~provided by operating activities of ~~$9.1~~$8.9 million in the ~~nine~~three months ended ~~September 30, 2018~~March 31, 2019 was due to a ~~$6.9~~$16.4 million ~~increase~~decrease in net investment in finance leases, primarily due to receipt of principal payments, and a $1.2 million decrease in accounts receivable, primarily caused by ~~an increase in lease and logistics activity,~~the timing of cash receipts from customers, partially offset by a ~~$1.6 million increase in prepaid expenses and other assets, and a $0.5~~$5.5 million decrease in accounts payable, accrued expenses and other liabilities, primarily caused by the timing of payments, a $2.0 million decrease in unearned revenue, and a $1.1 million increase in prepaid expenses and other current assets, primarily as a result of timing of payments.

Net cash used in investing activities ~~of continuing operations~~ was ~~$237.1~~$2.9 million for the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, a decrease of ~~$170.4~~$42.0 million compared to net cash ~~used in~~provided by investing activities of ~~$407.5~~$39.1 million for the ~~nine~~three months ended ~~September 30, 2018.~~March 31, 2019. The decrease in cash was primarily attributable to a ~~$221.2~~$155.8 million decrease ~~in purchase of rental equipment and a $12.8 million increase~~ in proceeds from sale of rental equipment, partially offset by a ~~$37.1 million decrease for the purchase of financing receivables and a $27.0~~$113.7 million decrease in ~~receipt~~purchase of ~~principal payments from sales-type and direct finance leases.~~rental equipment.

Net cash provided by financing activities ~~from continuing operations~~ was ~~$39.7~~$4.2 million for the ~~nine~~three months ended ~~September 30, 2019, a decrease~~March 31, 2020, an increase of ~~$270.7~~$96.9 million compared to net cash ~~provided by~~used in financing activities of ~~$310.4~~$92.7 million for the ~~nine~~three months ended ~~September 30, 2018.~~March 31, 2019. During the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, our net cash inflow from borrowings was ~~$80.7~~$6.3 million compared to net cash ~~inflow~~outflow of ~~$245.9~~$76.3 million for the ~~nine~~three months ended September 30, 2018, which reflected a decrease in net borrowings used for the acquisition of rental equipment during the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018.March 31, 2019. The ~~decrease~~increase was also a result of a ~~$103.7~~$13.9 million decrease ~~in proceeds received from the issuance of common stock and preferred stock, a $6.2 million increase~~ in the repurchase of common stock, and a $5.2 million increase in dividends paid to preferred stockholders during the nine months ended September 30, 2019, partially offset by a $9.2 million decrease in payments made for debt issuance costs.

Net cash provided by discontinued operations was $12.1 million for the nine months ended September 30, 2019, an increase of $24.3 million compared to net cash used by discontinued operations of $12.2 million for the nine months ended September 30, 2018. The increase in cash was primarily attributable to a $174.0 million increase in net cash provided by investing activities of discontinued operations, mainly as a result of proceeds received from the sale of railcar assets, partially offset by a $144.1 million increase in net cash used in financing activities of discontinued operations due to an increase in net cash outflow from borrowings for rail operations, and a $5.6 million decrease in net cash provided by operating activities of discontinued operations.stock.

In October 2018, we announced that our Board of Directors approved the repurchase of up to three 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 will be evaluated by us depending on prevailing market conditions, corporate needs, and other factors. The stock repurchases may be made in the open market, block trades or privately negotiated transactions. This stock repurchase program replaces any available prior share repurchase authorization and may be discontinued at any time. ~~During the nine months ended September 30, 2019, we repurchased 1.5 million shares of our common stock under this repurchase plan, at a cost of approximately $34.1 million.~~ We did not repurchase any shares under this repurchase plan during the three months ended ~~September 30, 2019.~~March 31, 2020. As of ~~September 30, 2019,~~March 31, 2020, approximately 1.0 million shares remained available for repurchase under our share repurchase program.

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. We did not issue any shares under this ATM program during the ~~nine~~three months ended ~~September~~March 31, 2020 ~~30, 2019.~~. We have remaining capacity to issue up to approximately 1.0 million of additional shares of common stock under this ATM offering program.

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. We did not issue any shares under this ATM program during the ~~nine~~three months ended ~~September~~March 31, 2020 ~~30, 2019.~~. We have remaining capacity to issue up to approximately 1.8 million of additional shares of Series A Preferred Stock under this ATM offering program.

The following table sets forth our contractual obligations and commercial commitments by due date as of ~~September 30, 2019~~March 31, 2020 (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 ~~(1)~~	$	661,059	$	18,559	$	-	$	-		480,000	$	162,500	$	-	$	840,622	$	21,122	$	-	$	-	$	819,500	$	-	$	-
Term loans ~~(1)~~		363,236		126,312		130,774		7,800		28,350		70,000		-		246,474		32,810		111,414		7,800		94,450		-		-
Senior secured notes		52,775		6,110		6,110		40,555		-		-		-		49,720		6,110		6,110		37,500		-		-		-
Asset-backed notes		931,811		134,547		134,547		134,547		107,421		94,547		326,202		864,538		134,547		134,547		127,422		94,547		94,547		278,928
Collateralized financing obligations		99,372		23,455		28,468		29,965		-		-		17,484		82,211		20,595		37,842		6,290		-		-		17,484
Term loans held by VIE		37,765		5,195		5,426		5,659		5,906		6,157		9,422		35,195		5,311		5,540		5,780		6,034		6,287		6,243
Interest on debt and capital lease obligations ~~(2)~~(1)		281,060		72,317		64,439		55,100		42,578		16,601		30,025		231,008		64,500		55,786		47,394		25,826		13,924		23,578
Rental equipment payable		54,202		54,202		-		-		-		-		-		5,124		5,124		-		-		-		-		-
Rent, office facilities and equipment		8,366		2,762		2,625		2,221		502		217		39		7,229		2,860		2,672		1,192		395		110		-
Equipment purchase commitments - Containers		32,797		32,797		-		-		-		-		-		3,766		3,766		-		-		-		-		-
Total contractual obligations	$	2,522,443	$	476,256	$	372,389	$	275,847	$	664,757	$	350,022	$	383,172	$	2,365,887	$	296,745	$	353,911	$	233,378	$	1,040,752	$	114,868	$	326,233

As of ~~September 30, 2019,~~March 31, 2020, 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.

There have been no changes to our critical accounting policies during the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020. See Critical Accounting Policies and Estimates in our Annual Report on Form 10-K for the year ended December 31, ~~2018,~~2019, filed with the SEC on March 5, ~~2019.~~

~~In June 2016, the Financial Accounting Standards Board issued Accounts Standards Update (ASU) No. 2016-13,~~ ~~Financial Instruments – Credit Losses (Topic 326)~~ (ASU 2016-13). This guidance affects net investment in sales-type and direct finance leases and the amendments in this update replace the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses. The guidance requires the measurement of expected credit losses to be based on relevant information from past events, current conditions, and reasonable and supportable information that affects collectability. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years and with early adoption permitted for fiscal years beginning after December 15, 2018. Further, ASU 2018-19 was issued in November 2018 to clarify that operating lease receivables should be accounted for under the new lease standard, Topic 842, and are not within the scope of Topic 326. The Company is currently evaluating the potential impact of Topic 326 on its consolidated financial statements and related disclosures.

The most recent adopted accounting pronouncements are described in Note 2 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.

COVID-19 outbreak. The effects of the infectious disease, COVID-19, are rapidly evolving globally and are uncertain. Our business could be adversely affected by this outbreak. Any prolonged restrictive measures in order to control the spread of COVID-19 or other adverse public health developments around the globe may have a material and adverse effect on the demand for our rental equipment, credit risk of our customers, logistics services, operations and financial condition.

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~~three months ended ~~September 30, 2019,~~March 31, 2020, the U.S. Dollar increased in value in relation to other major foreign currencies (such as the Euro and British Pound Sterling). The increase in the relative value of the U.S. Dollar has decreased our revenues and expenses denominated in foreign currencies. The associated decrease in the value of certain foreign currencies as compared to the U.S. Dollar has also caused assets held at some of our foreign subsidiaries to decrease in value when translated to US dollars. For the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, we recognized a loss on foreign exchange of ~~$0.5~~$0.2 million. A 10% change in foreign exchange rates would not have a material impact on our 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 30, 2019,~~March 31, 2020, the principal amount of debt outstanding under the variable-rate arrangements of our revolving credit facilities was ~~$661.1~~$840.6 million. In addition, at ~~September 30, 2019,~~March 31, 2020, we had balances on our variable-rate term loans of ~~$212.2~~$100.6 million. As of ~~September 30, 2019,~~March 31, 2020, our total outstanding variable-rate debt was ~~$873.3~~$941.2 million, which represented ~~41%~~44% of our total debt at that date. The average interest rate on our variable-rate debt was ~~3.6%~~2.4% as of ~~September 30, 2019,~~March 31, 2020, 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 would increase or decrease interest expense by approximately ~~$8.7~~$9.4 million annually assuming debt remains constant at ~~September 30, 2019~~March 31, 2020 levels.

While we actively manage our interest exposure by adjusting the ratio of floating and fixed-rate debt, 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 30, 2019~~March 31, 2020 our disclosure controls and procedures were not effective ~~with respect~~due to ~~controls~~a material weakness in internal control over financial reporting described in management’s annual report on internal control over financial reporting in our Annual Report on Form 10-K for the year ended December 31, 2019.

Remediation 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~~We have taken actions to improve our internal control over financial reporting, including implementing plans as identified in Item 9A of our 2019 Form 10-K, to address our material weakness. The material weakness will not be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. We expect that remediation of this material weakness will be completed in 2020.

Except as noted above, 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 30, 2019,~~March 31, 2020, 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, ~~2018~~2019 filed with the SEC on March 5, ~~2019.~~2020. 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 and preferred 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. Except as set forth 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, ~~2018.~~2019.

The continued spread of the COVID-19 pandemic may have ana material adverse ~~effect~~impact on our business, financial condition orand results of operations.

~~Due~~The ongoing COVID-19 pandemic has resulted in a significant impact to businesses and supply chains globally. The imposition of work and travel restrictions, as well as other actions by government authorities to contain the outbreak, have led to extended shutdowns of certain businesses, lower factory production, reduced volumes of global imports and exports and disruptions both of global and domestic transportation. The supply chain disruptions and government actions to counter the pandemic further exacerbated financial challenges faced by our shipping line and other customers. Additionally, the economic uncertainty created by the pandemic is affecting demand in several manufacturing sectors and is expected to result in a slowdown in the global economy, the extend or duration of which are uncertain. Further, in response to the ~~reclassification~~pandemic, many businesses, including ourselves, have implemented remote working arrangements for their employees during the first quarter of 2020 that may continue, in whole or in part, for an extended period. Risks associated with the COVID-19 pandemic on our ~~railcar~~ business as “assets held for sale”, we recorded an asset impairment charge of $7.3 million for the quarter ending June 30, 2019 and an additional impairment charge of $25.6 million for the quarter ending September 30, 2019, reducing the value of our railcar assets to their estimated fair value. include, but are not limited to:

The fair value was estimated based on the latest information available at June 30, 2019 and September 30, 2019. There are a limited number of purchasers of rail assets and the price that we can receive, net of sale-related expenses, is dependent on many factors, including: market conditions, such as the statemagnitude of the ~~economy and~~COVID-19 pandemic, including the ~~number~~extent of comparable new and used railcars available for purchase; demand for railcars in the particular configurations of the railcars in our fleet; and whether particular railcars are currently subject to leases, and if so, the terms of such leases. As a result, although the impairment charges reflect our best estimate of the value of our rail assets as of the dates specified, no assurance can be provided that we will not incur additional impairment charges or losses on sale. Any additional impairment charges could have a material adverse effectany impact on our business, financial ~~condition or~~position, results of ~~operations.~~

~~In addition, no assurance can~~operations or liquidity, which could be ~~given that our railcar business can~~material, cannot be ~~sold for a price that in our opinion reflects its intrinsic value. If a sale~~reasonably determined at this time due to the rapid development and fluidity of the ~~railcar~~situation. The effects of the pandemic on our business ~~at what we consider to be a reasonable price is not available, we may decide to cease efforts to sell~~will depend on its duration and severity, whether business disruptions will continue and the ~~rail assets and resume operating~~overall impact on the ~~railcar assets as an ongoing business.~~global economy.

See 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.


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

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


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

Common Stock		~~October 31, 2019~~April 24, 2020
Common Stock, $0.0001 par value per share		~~17,425,754~~17,506,453 shares


Supplemental disclosure of cash flow information
Cash paid during the period for:
Income taxes	$	559	$	378
Interest		65,330		51,168

Supplemental disclosure of non-cash operating activity
Lease liabilities arising from obtaining right-of-use assets	$	5,306	$	-

Supplemental disclosure of non-cash investing and financing activity
Transfer of rental equipment to sales-type and direct finance lease	$	52,895	$	271,938
Transfer of sales-type and direct finance lease to rental equipment		14,432		-
Rental equipment payable		54,202		257,947


	Three Months Ended March 31,
	2020		2019
Lease revenue - operating leases	$	60,399	$	69,197
Interest income on finance leases		11,623		11,390
Other revenue		2,217		2,805
Interest income on financing receivable		677		-
Total lease revenue	$	74,916	$	83,392

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


2021	$	116,727
2022		109,491
2023		105,485
2024		85,857
2025		60,034
2026 and thereafter		305,877
	$	783,471


2020	$	109,400
2021		98,955
2022		91,883
2023		91,211
2024		61,405
2025 and thereafter		328,770
	$	781,624


		~~September 30,~~
	~~Financial statement caption~~	~~2019~~
~~Current~~	~~Prepaid expenses and other current assets~~	$	~~3,653~~
~~Non-current~~	~~Financing receivable~~		~~31,661~~
~~Total financing receivable~~		$	~~35,314~~


~~Trademarks and tradenames~~	~~2-3 years~~
~~Customer relationships~~	~~5-8 years~~



	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
September 30, 2019
Trademarks and tradenames	$	1,786	$	(1,786)	$	-
Customer relationships		9,344		(4,819)		4,525
	$	11,130	$	(6,605)	$	4,525
December 31, 2018
Trademarks and tradenames	$	1,786	$	(1,786)	$	-
Customer relationships		9,344		(3,611)		5,733
	$	11,130	$	(5,397)	$	5,733


	Three months		Nine months
	ended		ended
	September 30,		September 30,
	2019		2019
Lease revenue - sales-type and direct finance leases
Profit at lease commencement	$	-	$	-
Interest income on lease receivable		11,112		33,436
		11,112		33,436
Lease revenue - operating leases		62,002		184,464
Other revenue		3,499		9,404
Interest income on financing receivable		687		1,281
Total lease revenue	$	77,300	$	228,585



	Net investment in		Financing
December 31, 2019	finance leases		receivable
Tier 1	$	502,265	$	33,694
Tier 2		65,103		725
Tier 3		-		-
	$	567,368	$	34,419


	As of
	September 30,
	2019
2020	$	159,590
2021		138,980	$	1,609
2022		118,278		1,231
2023		84,772		474
2024		48,966		406
2025 and thereafter		85,945
Total	$	636,531
Total intangible assets			$	3,720



2020	$	2,628
2021		2,612
2022		2,219
2023		499
2024		216
2025 and thereafter		39
Total lease payments		8,213
Less imputed interest		(467)
Total operating lease liabilities	$	7,746


	Three Months Ended September 30, 2019
	Container Leasing		Logistics		Total
Total revenue	$	77,300	$	30,270	$	107,570
Operating expenses		39,668		30,679		70,347
Amortization of intangible assets		-		403		403
Total operating expenses		39,668		31,082		70,750
Operating income (loss)		37,632		(812)		36,820
Net interest and other expenses (income)		20,507		(4)		20,503
Income (loss) before income taxes	$	17,125	$	(808)	$	16,317
Purchase of rental equipment (1)	$	89,027	$	-	$	89,027


	Three Months Ended September 30, 2018						Three Months Ended March 31, 2020
	Container Leasing		Logistics		Total		Container Leasing		Rail Leasing		Logistics		Total
Total revenue	$	75,331	$	31,362	$	106,693	$	69,113	$	5,803	$	30,106	$	105,022
Operating expenses		32,985		33,608		66,593
Amortization of intangible assets		-		451		451
Total operating expenses		32,985		34,059		67,044		36,639		21,374		30,977		88,990
Operating income (loss)		42,346		(2,697)		39,649		32,474		(15,571)		(871)		16,032
Net interest and other expenses (income)		15,932		(5)		15,927		18,520		2,105		(3)		20,622
Income (loss) before income taxes	$	26,414	$	(2,692)	$	23,722	$	13,954	$	(17,676)	$	(868)	$	(4,590)
Purchase of rental equipment (1)	$	251,670	$	-	$	251,670	$	27,500	$	-	$	-	$	27,500


	Nine Months Ended September 30, 2019
	Container Leasing		Logistics		Total
Total revenue	$	228,585	$	87,788	$	316,373
Operating expenses		116,538		91,025		207,563
Amortization of intangible assets		-		1,208		1,208
Total operating expenses		116,538		92,233		208,771
Operating income (loss)		112,047		(4,445)		107,602
Net interest and other expenses (income)		60,598		(12)		60,586
Income (loss) before income taxes	$	51,449	$	(4,433)	$	47,016
Purchase of rental equipment (1)	$	256,469	$	-	$	256,469


	Nine Months Ended September 30, 2018						Three Months Ended March 31, 2019
	Container Leasing		Logistics		Total		Container Leasing		Rail Leasing		Logistics		Total
Total revenue	$	208,298	$	81,251	$	289,549	$	75,511	$	7,881	$	27,716	$	111,108
Operating expenses		96,129		83,603		179,732
Amortization of intangible assets		-		1,538		1,538
Total operating expenses		96,129		85,141		181,270
Total operating expenses (income)								38,409		(1,212)		29,790		66,987
Operating income (loss)		112,169		(3,890)		108,279		37,102		9,093		(2,074)		44,121
Net interest and other expenses (income)		44,284		(16)		44,268		19,947		3,945		(4)		23,888
Income (loss) before income taxes	$	67,885	$	(3,874)	$	64,011	$	17,155	$	5,148	$	(2,070)	$	20,233
Purchase of rental equipment (1)	$	477,703	$	-	$	477,703	$	108,090	$	33,122	$	-	$	141,212



	Three Months Ended				Nine Months Ended
	September 30,				September 30,				Three Months Ended March 31,
	2019		2018		2019		2018		2020		2019
United States	$	31,887	$	33,162	$	92,840	$	86,706	$	37,145	$	37,366
Switzerland		13,837		13,929		41,712		36,246		12,516		14,048
Singapore										9,850		10,034
Korea		10,807		8,707		31,361		21,927		9,239		9,870
Singapore		10,655		5,987		31,005		16,725
France		8,768		9,295		26,582		27,435		7,630		8,933
Other Europe										15,240		15,199
Other Asia		14,638		18,828		44,613		52,608		12,587		15,308
Other Europe		16,529		14,636		47,052		40,794
Other International		449		2,149		1,208		7,108		815		350
Total revenue	$	107,570	$	106,693	$	316,373	$	289,549	$	105,022	$	111,108


	Three Months Ended September 30,				Increase/(Decrease)				Three Months Ended March 31,				Change
	2019		2018		Amount		Percent		2020		2019		Amount		Percent
Total revenue	$	107,570	$	106,693	$	877	1	%	$	105,022	$	111,108	$	(6,086)	(5)	%
Operating expenses		70,750		67,044		3,706	6	%		88,990		66,987		22,003	33	%
Total other expenses		20,503		15,927		4,576	29	%		20,622		23,888		(3,266)	(14)	%
Net income from continuing operations		12,958		20,571		(7,613)	(37)	%
Net loss from discontinued operations		(19,912)		(565)		(19,347)	3,424	%
Net (loss) income attributable to CAI common stockholders		(6,954)		20,006		(26,960)	(135)	%		(3,537)		16,367		(19,904)	(122)	%


	Three Months Ended September 30,				Increase				Three Months Ended March 31,				Change
($ in thousand)	2019		2018		Amount		Percent		2020		2019		Amount		Percent
Container lease revenue	$	77,300	$	75,331	$	1,969	3	%	$	69,113	$	75,511	$	(6,398)	(8)	%


	Three Months Ended September 30,				Decrease				Three Months Ended March 31,				Change
($ in thousand)	2019		2018		Amount		Percent		2020		2019		Amount		Percent
Logistics revenue	$	30,270	$	31,362	$	(1,092)	(3)	%	$	30,106	$	27,716	$	2,390	9	%
Logistics transportation costs		27,037		27,541		(504)	(2)	%		26,815		24,519		2,296	9	%
Logistics gross margin	$	3,233	$	3,821	$	(588)	(15)	%	$	3,291	$	3,197	$	94	3	%



Period	Total Number of Shares (or Units) Purchased (1)		Average Price Paid per Share (or Unit) (1)	Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (1)	Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs (1)
July 1, 2019 – July 31, 2019	-	$	-	-	1,000,000
August 1, 2019 – August 31, 2019(2)	175		24.30	-	1,000,000
September 1, 2019 – September 30, 2019	-		-	-	1,000,000
Total	175	$	24.30	-	1,000,000


Exhibit No.		Description
3.1		Amended and Restated Certificate of Incorporation of CAI International, Inc. (incorporated by reference to Exhibit 3.1 to 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		Certificate of Designations of Rights and Preferences of 8.50% Series B Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Stock, dated August 10, 2018 (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed on August 10, 2018).
3.5		Amended and Restated Bylaws of CAI International, Inc. (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed on March 10, 2009).
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, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, (ii) Consolidated Statements of Operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ (iii) Consolidated Statements of Comprehensive Income for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ (iv) Consolidated Statements of Stockholders’ Equity for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ (v) Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ and (vi) Notes to Unaudited Consolidated Financial Statements.


	CAI International, Inc.
	(Registrant)

~~November 1, 2019~~May 5, 2020	/s/ VICTOR M. GARCIA
	Victor M. Garcia
	President and Chief Executive Officer
	(Principal Executive Officer)

~~November 1, 2019~~May 5, 2020	/s/ TIMOTHY B. PAGE
	Timothy B. Page
	Chief Financial Officer
	(Principal Financial and Accounting Officer)