SEC Info - CAI International, Inc. - ‘10-Q’ for 3/31/21

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CAI International, Inc. – ‘10-Q’ for 3/31/21

On: Friday, 4/30/21, at 3:06pm ET · For: 3/31/21 · Accession #: 1388430-21-7 · File #: 1-33388

  As Of               Filer                 Filing    For·On·As Docs:Size

 4/30/21  CAI International, Inc.           10-Q        3/31/21   69:14M

Quarterly Report — Form 10-Q
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                    HTML   1.12M 
 2: EX-31.1     Certification -- §302 - SOA'02                      HTML     27K 
 3: EX-32.1     Certification -- §906 - SOA'02                      HTML     24K 
10: R1          Document And Entity Information                     HTML     81K 
11: R2          Consolidated Balance Sheets                         HTML    137K 
12: R3          Consolidated Balance Sheets (Parenthetical)         HTML     66K 
13: R4          Consolidated Statements of Operations               HTML    134K 
14: R5          Consolidated Statements of Comprehensive Income     HTML     50K 
                (Loss)                                                           
15: R6          Consolidated Statements of Stockholders' Equity     HTML     77K 
16: R7          Consolidated Statements of Stockholders' Equity     HTML     23K 
                (Parenthetical)                                                  
17: R8          Consolidated Statements of Cash Flows               HTML    146K 
18: R9          Consolidated Statements of Cash Flows               HTML     27K 
                (Parenthetical)                                                  
19: R10         Description Of Business And Significant Accounting  HTML     33K 
                Policies                                                         
20: R11         Discontinued Operations                             HTML    279K 
21: R12         Consolidation Of Variable Interest Entities         HTML     34K 
22: R13         Rental Equipment                                    HTML     56K 
23: R14         Leases                                              HTML    489K 
24: R15         Debt And Derivative Instruments                     HTML    249K 
25: R16         Stock-Based Compensation Plan                       HTML    189K 
26: R17         Income Taxes                                        HTML     26K 
27: R18         Fair Value Of Financial Instruments                 HTML     36K 
28: R19         Commitments And Contingencies                       HTML     23K 
29: R20         Stockholders? Equity                                HTML     26K 
30: R21         Related Parties                                     HTML     23K 
31: R22         Segment And Geographic Information                  HTML    113K 
32: R23         Earnings Per Share                                  HTML    189K 
33: R24         Description of Business and Significant Accounting  HTML     40K 
                Policies (Policy)                                                
34: R25         Discontinued Operations (Tables)                    HTML    277K 
35: R26         Rental Equipment (Tables)                           HTML     54K 
36: R27         Leases (Tables)                                     HTML    486K 
37: R28         Debt And Derivative Instruments (Tables)            HTML    246K 
38: R29         Stock-Based Compensation Plan (Tables)              HTML    170K 
39: R30         Segment And Geographic Information (Tables)         HTML    105K 
40: R31         Earnings Per Share (Tables)                         HTML    184K 
41: R32         Description Of Business And Significant Accounting  HTML     43K 
                Policies (Details)                                               
42: R33         Discontinued Operations (Narrative) (Details)       HTML     36K 
43: R34         Discontinued Operations (Summary Of Components Of   HTML     63K 
                Loss From Discontinued Operations) (Details)                     
44: R35         Consolidation Of Variable Interest Entities         HTML     44K 
                (Details)                                                        
45: R36         Rental Equipment (Details)                          HTML     31K 
46: R37         Leases (Components Of Lease Revenue) (Details)      HTML     28K 
47: R38         Leases (Components Of Net Investment In Direct      HTML     51K 
                Finance Leases) (Details)                                        
48: R39         Leases (Contractual Maturities Of Gross Finance     HTML     35K 
                Lease Receivables) (Details)                                     
49: R40         Leases (Summary Of Components Of Financing          HTML     32K 
                Receivable) (Details)                                            
50: R41         Leases (Finance Lease Receivables By Risk           HTML     56K 
                Categories) (Details)                                            
51: R42         Debt And Derivative Instruments (Narrative)         HTML     42K 
                (Details)                                                        
52: R43         Debt And Derivative Instruments (Schedule Of Debt)  HTML     80K 
                (Details)                                                        
53: R44         Debt And Derivative Instruments (Summary Impact Of  HTML     25K 
                Derivative Instruments) (Details)                                
54: R45         Debt And Derivative Instruments (Derivative         HTML     30K 
                Instruments Measured At Fair Value On Recurring)                 
                (Details)                                                        
55: R46         Stock-Based Compensation Plan (Narrative)           HTML     71K 
                (Details)                                                        
56: R47         Stock-Based Compensation Plan (Summary Of Stock     HTML     39K 
                Option Activities) (Details)                                     
57: R48         Stock-Based Compensation Plan (Summary Of           HTML     41K 
                Restricted Stock And Performance Stock Activity)                 
                (Details)                                                        
58: R49         Income Taxes (Details)                              HTML     21K 
59: R50         Fair Value Of Financial Instruments (Details)       HTML     43K 
60: R51         Commitments And Contingencies (Details)             HTML     24K 
61: R52         Stockholders? Equity (Details)                      HTML     31K 
62: R53         Related Parties (Details)                           HTML     23K 
63: R54         Segment And Geographic Information (Details)        HTML     41K 
64: R55         Earnings Per Share (Narrative) (Details)            HTML     21K 
65: R56         Earnings Per Share (Reconciliation Of Basic And     HTML     68K 
                Diluted Net Income Per Share) (Details)                          
67: XML         IDEA XML File -- Filing Summary                      XML    127K 
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‘10-Q’ — Quarterly Report
Document Table of Contents

Page	(sequential)	(alphabetic)	↑Top
		Alternative Formats (Word, et al.) Consolidated Balance Sheets at Ma rch 31, 2021 and December 31, 202 0 Consolidated Statements of Cash Flows for the t hree months ended Ma rch 31, 2021 and 2020 Consolidated Statements of Comprehensive Income (Loss) for the three months ended Ma rch 31, 2021 and 2020 Consolidated Statements of O perations for the three months ended Ma rch 31, 2021 and 2020 Consolidated Statements of Stockholders' Equity for the three months ended March 31, 2021 and 2020 Controls and Procedures Defaults Upon Senior Securities Exhibits Financial Information Financial Statements (Unaudited) Legal Proceedings Management's Discussion and Analysis of Financial Condition and Results of Operations Mine Safety Disclosures Notes to Unaudited Consolidated Financial Statements Other Information Part I -- Financial Information Part II -- Other Information Quantitative and Qualitative Disclosures About Market Risk Risk Factors Signatures Table of Contents Unregistered Sales of Equity Securities and Use of Proceeds
1	1st Page – Filing Submission
"	Table of Contents
"	Part I -- Financial Information
"	Financial Statements (Unaudited)
"	Consolidated Balance Sheets at Ma rch 31, 2021 and December 31, 202 0
"	Consolidated Statements of O perations for the three months ended Ma rch 31, 2021 and 2020
"	Consolidated Statements of Comprehensive Income (Loss) for the three months ended Ma rch 31, 2021 and 2020
"	Consolidated Statements of Stockholders' Equity for the three months ended March 31, 2021 and 2020
"	Consolidated Statements of Cash Flows for the t hree months ended Ma rch 31, 2021 and 2020
"	Notes to Unaudited Consolidated Financial Statements
"	Management's Discussion and Analysis of Financial Condition and Results of Operations
"	Quantitative and Qualitative Disclosures About Market Risk
"	Controls and Procedures
"	Part II -- Other Information
"	Legal Proceedings
"	Risk Factors
"	Unregistered Sales of Equity Securities and Use of Proceeds
"	Defaults Upon Senior Securities
"	Mine Safety Disclosures
"	Exhibits
"	Signatures

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM i 10-Q

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

For the quarterly period ended i March 31, 2021

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

For the transition period from to

Commission file number: i 001-33388

i CAI International, Inc.

(Exact name of registrant as specified in its charter)


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

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

i 415- i 788-0100

(Registrant’s telephone number, including area code)

None

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

Securities registered pursuant to Section 12(b) of the Act:

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

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

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

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


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

If an emerging growth company, indicate by check mark of the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

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

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

Common Stock		April 28, 2021
Common Stock, $0.0001 par value per share		i 17, 304,111 shares

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CAI INTERNATIONAL, INC.

IN DEX


		Page No.
Part I — Financial Information		4
Item 1.	Financial Statements (Unaudited)	4
	Consolidated Balance Sheets at March 31, 2021 and December 31, 2020	4
	Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020	6
	Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2021 and 2020	7
	Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2021 and 2020	8
	Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020	9
	Notes to Unaudited Consolidated Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	27
Part II — Other Information		28
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 3.	Defaults Upon Senior Securities	28
Item 4.	Mine Safety Disclosures	28
Item 5.	Other Information	28
Item 6.	Exhibits	29
Signatures		30

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains certain forward-looking statements, including, without limitation, statements concerning the conditions in our industry, our operations, our economic performance and financial condition, including, but not limited to, statements relating to our business, operations, growth strategy, service development efforts and the impact of the novel coronavirus (COVID-19) on our business, financial condition, liquidity and results of operations. The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for certain forward-looking statements so long as such information is identified as forward-looking and is accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those projected in the information. When used in this Quarterly Report on Form 10-Q, the words “may,” “might,” “should,” “estimate,” “project,” “plan,” “anticipate,” “expect,” “intend,” “outlook,” “believe” and other similar expressions are intended to identify forward-looking statements and information. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. These forward-looking statements are based on estimates and assumptions by our management that, although we believe to be reasonable, are inherently uncertain and subject to a number of risks and uncertainties. These risks and uncertainties include, without limitation, those in our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission (SEC) on March 1, 2021, our Quarterly Reports on Form 10-Q and our other reports filed with the SEC. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law. Reference is also made to such risks and uncertainties detailed from time to time in our other filings with the SEC.

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PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CAI INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share information)

(UNAUDITED)



	March 31,		December 31,
	2021		2020
Assets
Current assets
Cash	$	i 23,971	$	i 26,691
Cash held by variable interest entities		i 23,942		i 26,856
Current portion of restricted cash		i 600		i 600
Accounts receivable, net of allowance for doubtful accounts of $ i 400 and
$ i 393 at March 31, 2021 and December 31, 2020, respectively		i 61,843		i 65,310
Current portion of net investment in finance leases		i 80,308		i 78,992
Current portion of financing receivable		i 10,615		i 9,550
Prepaid expenses and other current assets		i 5,788		i 6,663
Total current assets		i 207,067		i 214,662
Restricted cash		i 12,087		i 12,355
Rental equipment, net of accumulated depreciation of $ i 691,842 and
$ i 669,360 at March 31, 2021 and December 31, 2020, respectively		i 1,808,001		i 1,781,321
Net investment in finance leases		i 585,016		i 550,573
Financing receivable		i 50,568		i 48,888
Derivative instruments		i 9,586		-
Other non-current assets		i 4,280		i 4,833
Total assets (1)	$	i 2,676,605	$	i 2,612,632

Liabilities and Stockholders' Equity
Current liabilities
Accounts payable	$	i 3,231	$	i 3,666
Accrued expenses and other current liabilities		i 26,569		i 29,598
Unearned revenue		i 3,260		i 3,029
Current portion of debt		i 183,878		i 183,448
Rental equipment payable		i 61,582		i 100,509
Total current liabilities		i 278,520		i 320,250
Debt		i 1,642,879		i 1,562,283
Derivative instruments		-		i 80
Net deferred income tax liability		i 25,532		i 24,442
Other non-current liabilities		i 3,467		i 3,337
Total liabilities (2)		i 1,950,398		i 1,910,392

Stockholders' equity
Preferred stock, par value $ i i 0.0001 / per share; authorized i i 10,000,000 /
i i 8.50 / % Series A fixed-to-floating rate cumulative redeemable perpetual preferred stock, issued and
outstanding i i i i 2,199,610 / / / shares, at liquidation preference		i 54,990		i 54,990
i i 8.50 / % Series B fixed-to-floating rate cumulative redeemable perpetual preferred stock, issued and
outstanding i i i i 1,955,000 / / / shares, at liquidation preference		i 48,875		i 48,875
Common stock, par value $ i i 0.0001 / per share; authorized i i 84,000,000 / shares; issued and outstanding
i i 17,304,111 / and i i 17,562,779 / shares at March 31, 2021 and December 31, 2020, respectively		i 2		i 2
Additional paid-in capital		i 89,308		i 100,795
Accumulated other comprehensive loss		i 1,370		( i 5,743)
Retained earnings		i 531,662		i 503,321
Total stockholders' equity		i 726,207		i 702,240
Total liabilities and stockholders' equity	$	i 2,676,605	$	i 2,612,632

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(1)Total assets at March 31, 2021 and December 31, 2020 include the following assets of certain variable interest entities (VIEs) that can only be used to settle the liabilities of those VIEs: Cash, $ i 23,942 and $ i 26,856; Net investment in finance leases, $ i 2,150 and $ i 2,683; and Rental equipment, net of accumulated depreciation, $ i 73,212, and $ i 77,907, respectively.

(2)Total liabilities at March 31, 2021 and December 31, 2020 include the following VIE liabilities for which the VIE creditors do not have recourse to CAI International, Inc.: Current portion of debt, $ i 43,392 and $ i 41,344; Debt, $ i 48,120 and $ i 59,519, respectively.

See accompanying notes to unaudited consolidated financial statements.

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CAI INTERN ATIONAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(UNAUDITED)



	Three Months Ended March 31,
	2021		2020
Leasing revenue
Operating leases	$	i 63,867	$	i 54,629
Finance leases		i 13,245		i 11,590
Other		i 3,688		i 2,894
Total leasing revenue		i 80,800		i 69,113

Operating expenses
Depreciation of rental equipment		i 28,551		i 27,048
Storage, handling and other expenses		i 2,489		i 4,429
Gain on sale of rental equipment		( i 6,743)		( i 1,647)
Administrative expenses		i 7,740		i 6,895
Total operating expenses		i 32,037		i 36,725

Operating income		i 48,763		i 32,388

Other expenses
Net interest expense		i 11,172		i 18,274
Other expense		i 410		i 246
Total other expenses		i 11,582		i 18,520

Income before income taxes		i 37,181		i 13,868
Income tax expense		i 2,504		i 1,199

Income from continuing operations		i 34,677		i 12,669
Income (loss) from discontinued operations, net of income taxes		i 1,063		( i 13,999)
Net income (loss)		i 35,740		( i 1,330)
Preferred stock dividends		i 2,207		i 2,207
Net income (loss) attributable to CAI common stockholders	$	i 33,533	$	( i 3,537)

Amounts attributable to CAI common stockholders
Net income from continuing operations	$	i 32,470	$	i 10,462
Net income (loss) from discontinued operations		i 1,063		( i 13,999)
Net income (loss) attributable to CAI common stockholders	$	i 33,533	$	( i 3,537)

Net income (loss) per share attributable to CAI
common stockholders
Basic
Continuing operations	$	i 1.88	$	i 0.60
Discontinued operations		i 0.06		( i 0.80)
Total basic	$	i 1.94	$	( i 0.20)
Diluted
Continuing operations	$	i 1.85	$	i 0.59
Discontinued operations		i 0.06		( i 0.79)
Total diluted	$	i 1.91	$	( i 0.20)

Weighted average shares outstanding
Basic		i 17,271		i 17,433
Diluted		i 17,518		i 17,715

See accompanying notes to unaudited consolidated financial statements.

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CAI INTERN ATIONAL, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(UNAUDITED)



	Three Months Ended March 31,
	2021		2020

Net income (loss)	$	i 35,740	$	( i 1,330)
Other comprehensive income (loss), net of tax:
Change in fair value of derivative instruments designated as cash flow hedges		i 9,509		-
Reclassification of realized loss on derivative instruments designated as cash flow hedges		i 157		-
Foreign currency translation adjustments		( i 522)		( i 137)
Comprehensive income (loss) before tax		i 44,884		( i 1,467)
Income tax expense related to items of other comprehensive income (loss)		( i 2,031)		-
Comprehensive income (loss) before preferred stock dividends, net of tax		i 42,853		( i 1,467)
Dividends on preferred stock		( i 2,207)		( i 2,207)
Comprehensive income (loss) available to CAI common stockholders	$	i 40,646	$	( i 3,674)

See accompanying notes to unaudited consolidated financial statements.

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CAI INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(UNAUDITED)

Accumulated

Additional

Other

Preferred Stock

Common Stock

Paid-In

Comprehensive

Retained

Total

Amount

Capital

Loss

Earnings

Equity

Balances as of December 31, 2020

i 4,155

i 103,865

i 17,563

i 2

i 100,795

( i 5,743)

i 503,321

i 702,240

Net income

i 35,740

Common stock dividend declared, $ i 0.30/share

( i 5,192)

Preferred stock dividends, $ i 0.53125/share

( i 2,207)

Change in fair value of derivative instrument designated

as cash flow hedges

i 9,509

Reclassification of realized loss on derivative

instruments designated as cash flow hedges

i 157

Foreign currency translation adjustment

( i 522)

Income tax expense related to items of other

comprehensive income

( i 2,031)

Repurchase of common stock

( i 390)

( i 12,788)

Exercise of stock options

i 107

i 1,499

Stock-based compensation, net of taxes

i 24

( i 198)

Balances as of March 31, 2021

i 4,155

i 103,865

i 17,304

i 2

i 89,308

i 1,370

i 531,662

i 726,207

Accumulated

Additional

Other

Preferred Stock

Common Stock

Paid-In

Comprehensive

Retained

Total

Amount

Capital

Loss

Earnings

Equity

Balances as of December 31, 2019

i 4,155

i 103,865

i 17,479

i 2

i 102,709

( i 6,630)

i 493,294

i 693,240

Net loss

( i 1,330)

Preferred stock dividends, $ i 0.53125/share

( i 2,207)

Foreign currency translation adjustment

( i 137)

Exercise of stock options

i 8

i 113

Stock-based compensation, net of taxes

i 19

i 468

Balances as of March 31, 2020

i 4,155

i 103,865

i 17,506

i 2

i 103,290

( i 6,767)

i 489,757

i 690,147

See accompanying notes to unaudited consolidated financial statements.

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CAI INTERN ATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(UNAUDITED)



	Three Months Ended March 31,
	2021		2020
Cash flows from operating activities
Net income (loss)	$	i 35,740	$	( i 1,330)
Income (loss) from discontinued operations, net of income taxes		i 1,063		( i 13,999)
Income from continuing operations		i 34,677		i 12,669
Adjustments to reconcile income from continuing operations to net cash provided by operating activities:
Depreciation		i 28,766		i 27,259
Amortization of debt issuance costs		i 815		i 893
Stock-based compensation expense		i 540		i 725
Unrealized loss on foreign exchange		i 400		i 220
Gain on sale of rental equipment		( i 6,743)		( i 1,647)
Deferred income taxes		( i 940)		( i 3,504)
Bad debt recovery		( i 30)		( i 1,287)
Changes in other operating assets and liabilities:
Accounts receivable		i 488		i 3,849
Prepaid expenses and other assets		i 1,218		i 723
Net investment in finance leases		i 21,605		i 17,102
Accounts payable, accrued expenses and other liabilities		( i 2,823)		i 130
Unearned revenue		( i 7)		( i 591)
Net cash provided by operating activities of continuing operations		i 77,966		i 56,541
Net cash (used in) provided by operating activities of discontinued operations		( i 2,177)		i 3,584
Net cash provided by operating activities		i 75,789		i 60,125
Cash flows from investing activities
Purchase of rental equipment		( i 171,625)		( i 27,500)
Purchase of financing receivable		( i 5,174)		-
Proceeds from sale of rental equipment		i 28,783		i 24,534
Receipt of principal payments from financing receivable		i 2,645		i 325
Purchase of furniture, fixtures and equipment		( i 22)		( i 310)
Net cash used in investing activities of continuing operations		( i 145,393)		( i 2,951)
Net cash provided by investing activities of discontinued operations		i 1,285		i 42
Net cash used in investing activities		( i 144,108)		( i 2,909)
Cash flows from financing activities
Proceeds from debt		i 141,000		i 110,000
Principal payments on debt		( i 59,887)		( i 102,681)
Repurchase of common stock		( i 12,788)		-
Dividends paid to common stockholders		( i 5,192)		-
Dividends paid to preferred stockholders		( i 2,207)		( i 2,207)
Exercise of stock options		i 1,499		i 113
Net cash provided by financing activities of continuing operations		i 62,425		i 5,225
Net cash used in financing activities of discontinued operations		-		( i 1,061)
Net cash provided by financing activities		i 62,425		i 4,164
Effect on cash of foreign currency translation		( i 8)		( i 77)
Net (decrease) increase in cash and restricted cash		( i 5,902)		i 61,303
Cash and restricted cash at beginning of the period (1)		i 66,502		i 73,239
Cash and restricted cash at end of the period (2)	$	i 60,600	$	i 134,542

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	Three Months Ended March 31,
	2021		2020
Supplemental disclosure of cash flow information
Cash paid during the period for:
Income taxes	$	-	$	i 111
Interest		i 10,242		i 19,736

Supplemental disclosure of non-cash investing and financing activity
Transfer of rental equipment to finance lease	$	i 56,227	$	i 5,760
Rental equipment payable		i 61,582		i 4,596

(1)Includes cash of $ i 26,691 and $ i 19,870, cash held by variable interest entities of $ i 26,856 and $ i 26,594, and restricted cash of $ i 12,955 and $ i 26,775 at December 31, 2020 and 2019, respectively.

(2)Includes cash of $ i 23,971 and $ i 87,727, cash held by variable interest entities of $ i 23,942 and $ i 21,016, and restricted cash of $ i 12,687 and $ i 25,799 at March 31, 2021 and 2020, respectively.

See accompanying notes to unaudited consolidated financial statements.

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CAI INTERNATIONAL, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

i (1) Description of Business and Significant Accounting Policies

i Organization

CAI International, Inc., together with its subsidiaries (collectively, CAI or the Company), is a transportation finance company. The Company purchases equipment, primarily intermodal shipping containers, 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’s common stock, i 8.50% Series A Fixed-to-Floating Rate Cumulative Redeemable Perpetual Stock and i 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.

i 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 March 31, 2021 and December 31, 2020, the Company’s results of operations for the three months ended March 31, 2021 and 2020, and the Company’s cash flows for the three months ended March 31, 2021 and 2020. 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 2021 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, 2020, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on March 1, 2021.

i Discontinued Operations

On August 14, 2020, the Company sold substantially all of the assets and liabilities of its logistics business to NFI, a North American logistics provider, for cash proceeds of $ i 6.2 million. On December 29, 2020, the Company sold its remaining railcar fleet to affiliates of Infinity Transportation for cash proceeds of $ i 228.1 million. As a result, the operating results of the logistics and rail businesses have been classified as discontinued operations in the accompanying unaudited consolidated statements of income and cash flows. All prior periods presented in these consolidated financial statements have been restated to reflect the classification of the logistics and rail leasing businesses as discontinued operations. See Note 2 – Discontinued Operations for more information.

i Concentration of Credit Risk

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 and second largest customer accounted for i 18% and i 10%, respectively, of the Company’s total billings during the three months ended March 31, 2021.

i Accounting Policy Updates

There were no changes to the Company’s accounting policies during the three months ended March 31, 2021. 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, 2020, filed with the SEC on March 1, 2021, for a description of the Company’s significant accounting policies.

i (2) Discontinued Operations

As discussed in Note 1, the Company sold substantially all of the assets of its logistics business for proceeds of $ i 6.2 million and its remaining railcar assets for proceeds of $ i 228.1 million during the quarters ended September 30, 2020 and December 31, 2020, respectively. The logistics and rail leasing businesses have been classified as discontinued operations in the accompanying unaudited consolidated statements of income and cash flows for the three months ended March 31, 2021 and 2020.

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CAI INTERNATIONAL, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The Company recognized an impairment charge of $ i 19.2 million during the three months ended March 31, 2020 to reduce the book value of its railcar portfolio, on an individual basis, to its estimated fair value, or to its net book value had the assets not been classified as held for sale. 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 utilized the current replacement cost for a particular car type and calculated an estimated depreciation based on a railcar having a i 40-year life and residual value being i 10% of the estimated purchase price. The market approach estimated value based on recent market transactions involving similar railcars. The railcars were classified within Level 3 of the fair value hierarchy.

The following tables summarize the components of net income (loss) from discontinued operations in the accompanying unaudited consolidated statements of income for the three months ended March 31, 2021 and 2020 (in thousands). Revenue and operating expenses for the three months ended March 31, 2021 were a result of immaterial differences in the actual transactions from the amounts accrued prior to the sale of the logistics and railcar businesses in 2020.


	Three Months Ended March 31, 2021
	Rail		Logistics		Total
Revenue
Rail lease revenue	$	i 293	$	-	$	i 293
Total revenue		i 293		-		i 293

Operating expenses
Storage, handling and other expenses		( i 142)		-		( i 142)
Gain on sale of rental equipment		( i 33)		-		( i 33)
Administrative expenses		i 91		( i 240)		( i 149)
Total operating expenses		( i 84)		( i 240)		( i 324)

Operating income		i 377		i 240		i 617

Income before income taxes		i 377		i 240		i 617
Income tax (benefit) expense		( i 496)		i 50		( i 446)
Net income from discontinued operations	$	i 873	$	i 190	$	i 1,063


	Three Months Ended March 31, 2020
	Rail		Logistics		Total
Revenue
Rail lease revenue	$	i 5,803	$	-	$	i 5,803
Logistics revenue		-		i 30,106		i 30,106
Total revenue		i 5,803		i 30,106		i 35,909

Operating expenses
Impairment of rental equipment		i 19,167		-		i 19,167
Storage, handling and other expenses		i 1,319		-		i 1,319
Logistics transportation costs		-		i 26,815		i 26,815
Loss on sale of rental equipment		i 33		-		i 33
Administrative expenses		i 769		i 4,162		i 4,931
Total operating expenses		i 21,288		i 30,977		i 52,265

Operating loss		( i 15,485)		( i 871)		( i 16,356)

Interest expense (income)		i 2,105		( i 3)		i 2,102
Loss before income taxes		( i 17,590)		( i 868)		( i 18,458)
Income tax benefit		( i 4,255)		( i 204)		( i 4,459)
Net loss from discontinued operations	$	( i 13,335)	$	( i 664)	$	( i 13,999)

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CAI INTERNATIONAL, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

i (3) 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 i 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.

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. i i No / container portfolios were sold to the funds during the three months ended March 31, 2021 and 2020.

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 March 31, 2021 and December 31, 2020, and the results of the VIEs’ operations and cash flows for the three months ended March 31, 2021 and 2020, in the Company’s consolidated financial statements.

The containers that were transferred to the Japanese investor funds had a net book value of $ i 75.4 million as of March 31, 2021. The container equipment, together with $ i 23.9 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 $ i 61.6 million and term loans held by VIE of $ i 29.9 million. i No gain or loss was recognized by the Company on the initial consolidation of the VIEs. i i No / containers were sold to the Japanese investor funds during the three months ended March 31, 2021 and 2020.

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CAI INTERNATIONAL, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

i (4) Rental Equipment

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


	March 31,		December 31,
	2021		2020
Dry containers	$	i 1,977,997	$	i 1,940,572
Refrigerated containers		i 306,714		i 315,641
Other specialized equipment		i 215,132		i 194,468
		i 2,499,843		i 2,450,681
Accumulated depreciation		( i 691,842)		( i 669,360)
Rental equipment, net of accumulated depreciation	$	i 1,808,001	$	i 1,781,321

i (5) Leases

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):

Three Months Ended March 31,

2021

2020

Leasing revenue - operating leases

i 63,867

i 54,629

Interest income on finance leases

i 13,245

i 11,590

Other revenue

i 2,536

i 2,217

Interest income on financing receivable

i 1,152

i 677

Total leasing revenue

i 80,800

i 69,113

Net investment in finance leases

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



	March 31,		December 31,
	2021		2020
Gross finance lease receivables (1)	$	i 968,525	$	i 909,727
Unearned income (2)		( i 303,155)		( i 280,116)
Net investment in finance leases		i 665,370		i 629,611
Allowance for credit losses		( i 46)		( i 46)
Net investment in finance leases, net of allowance for credit losses	$	i 665,324	$	i 629,565

(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 finance lease receivables. The gross finance lease receivables are reduced as customer payments are received. There was $ i 109.3 million and $ i 98.2 million of unguaranteed residual value at March 31, 2021 and December 31, 2020, respectively, included in gross finance lease receivables. There were i i no / executory costs included in gross finance lease receivables as of March 31, 2021 and December 31, 2020.

(2)The difference between the gross 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 i i no / unamortized initial direct costs as of March 31, 2021 and December 31, 2020.

(3) i i One / major customer represented i 74% and i 75% of the Company’s finance lease portfolio as of March 31, 2021 and December 31, 2020, respectively. 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, 2021 for the years ending March 31 are as follows (in thousands):


2022	$	i 126,315
2023		i 126,565
2024		i 107,958
2025		i 80,339
2026		i 70,315
2027 and thereafter		i 457,033
	$	i 968,525

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CAI INTERNATIONAL, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Financing receivable

The Company has 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):


	March 31,		December 31,
	2021		2020
Gross financing receivable	$	i 74,447	$	i 71,761
Unearned income		( i 13,260)		( i 13,320)
		i 61,187		i 58,441
Allowance for credit losses		( i 4)		( i 3)
Total financing receivable	$	i 61,183	$	i 58,438

Credit quality information

In order to estimate the allowance for losses contained in net investment in finance leases and financing receivable, the Company reviews the credit worthiness of its customers on an ongoing basis. The review includes monitoring credit quality indicators, historical credit loss activity, current market and economic conditions, and reasonable and supportable forecasts.

The Company uses the 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.

As of March 31, 2021 and December 31, 2020, based on the most recent analysis performed, the risk category of the Company’s net investment in finance leases and financing receivable, based on year of origination is as follows (in thousands):


March 31, 2021	2021		2020		2019		2018		2017		Prior		Total
Net investment in finance leases
Tier 1	$	i 55,876	$	i 125,988	$	i 46,760	$	i 220,813	$	i 156,780	$	i 6,171	$	i 612,388
Tier 2		i 1,432		i 7,990		i 24,012		i 11,622		i 4,120		i 3,806		i 52,982
Tier 3		-		-		-		-		-		-		-
Total net investment in finance leases	$	i 57,308	$	i 133,978	$	i 70,772	$	i 232,435	$	i 160,900	$	i 9,977	$	i 665,370

Financing receivable
Tier 1	$	-	$	i 26,439	$	i 29,159	$	-	$	-	$	-	$	i 55,598
Tier 2		i 5,028		-		i 561		-		-		-		i 5,589
Tier 3		-		-		-		-		-		-		-
Total financing receivable	$	i 5,028	$	i 26,439	$	i 29,720	$	-	$	-	$	-	$	i 61,187

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CAI INTERNATIONAL, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


December 31, 2020	2020		2019		2018		2017		2016		Prior		Total
Net investment in finance leases
Tier 1	$	i 127,215	$	i 49,986	$	i 228,802	$	i 160,197	$	i 5,945	$	i 875	$	i 573,020
Tier 2		i 8,425		i 25,726		i 12,576		i 4,272		i 1,136		i 4,456		i 56,591
Tier 3		-		-		-		-		-		-		-
Total net investment in finance leases	$	i 135,640	$	i 75,712	$	i 241,378	$	i 164,469	$	i 7,081	$	i 5,331	$	i 629,611

Financing receivable
Tier 1	$	i 27,762	$	i 30,083	$	-	$	-	$	-	$	-	$	i 57,845
Tier 2		-		i 596		-		-		-		-		i 596
Tier 3		-		-		-		-		-		-		-
Total financing receivable	$	i 27,762	$	i 30,679	$	-	$	-	$	-	$	-	$	i 58,441

i (6) Debt and Derivative Instruments

Debt

Details of the Company’s debt as of March 31, 2021 and December 31, 2020 were as follows (dollars in thousands):

March 31, 2021

December 31, 2020

Outstanding

Average

Outstanding

Average

Current

Long-term

Interest

Current

Long-term

Interest

Maturity

Revolving credit (1)

i 793,000

i 1.4%

i 680,000

i 1.6%

i June 2023

Revolving credit facility - Euro

i 22,519

i 2.4%

i 23,550

i 2.5%

i September 2023

Term loan

i 1,800

i 23,250

i 2.2%

i 1,800

i 23,700

i 2.2%

i April 2023

Term loan

i 66,750

i 1.9%

i 68,500

i 1.9%

i June 2021

Term loan

i 6,000

i 79,000

i 4.6%

i 6,000

i 80,500

i 4.6%

i October 2023

Senior secured notes

i 6,110

i 37,500

i 4.9%

i 6,110

i 40,555

i 4.9%

i September 2022

Asset-backed notes 2020-1

i 63,130

i 648,006

i 2.3%

i 63,130

i 663,788

i 2.3%

i September 2045

Collateralized financing obligations

i 37,852

i 23,776

i 1.8%

i 35,862

i 33,767

i 1.7%

i February 2026

Term loans held by VIE

i 5,540

i 24,344

i 4.2%

i 5,482

i 25,752

i 4.2%

i February 2026

i 187,182

i 1,651,395

i 186,884

i 1,571,612

Debt discount and debt issuance costs

( i 3,304)

( i 8,516)

( i 3,436)

( i 9,329)

Total Debt

i 183,878

i 1,642,879

i 183,448

i 1,562,283

(1) $ i 500 million of this outstanding debt is subject to an interest rate swap at a cost of i 0.29% as described below in Derivative Instruments.

The Company maintains its revolving credit facilities to finance the acquisition of rental equipment and for general working capital purposes. As of March 31, 2021, the Company had $ i 388.7 million in total availability under its revolving credit facilities (net of $ i 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 March 31, 2021, the borrowing availability under the Company’s revolving credit facilities was $ i 248.8 million, assuming no additional contributions of assets.

The agreements relating to all of the Company’s debt contain various financial and other covenants. As of March 31, 2021, the Company was in compliance with all of its financial and other covenants.

For further information on the Company’s debt instruments, see Note 7 to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 1, 2021.

Derivative Instruments

In July 2020, the Company entered into an interest rate swap agreement with an effective date of July 31, 2020 and scheduled maturity date of i June 30, 2025. This contract is indexed to 1-month LIBOR, has a fixed leg interest rate of i 0.29%, and a notional amount of $ i 500.0 million.

As of March 31, 2021, the Company has designated interest rate swap agreements for a total notional amount of $ i 500.0 million as cash flow hedges for accounting purposes. The change in fair value of cash flow hedging instruments during the three months ended March 31, 2021 was recorded on the consolidated balance sheets in ‘Accumulated other comprehensive loss’ and reclassified to ‘Net interest expense’ when realized. The Company had i no derivative instruments as of March 31, 2020.

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CAI INTERNATIONAL, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Over the next twelve months, the Company expects to reclassify an estimated net loss of $ i 0.6 million related to the designated interest rate swap agreements from ‘Accumulated other comprehensive loss’ in the consolidated statements of comprehensive income to ‘Net interest expense’ in the consolidated statements of operations.

The following table summarizes the impact of derivative instruments designated in cash flow hedging relationships on the consolidated statements of operations and the consolidated statements of comprehensive income (loss) on a pretax basis (in thousands):


		Three Months Ended March 31,
Derivative Instrument	Financial Statement Caption	2021		2020
Interest rate swap	Comprehensive income	$	i 9,509	$	-
Interest rate swap	Net interest expense	$	i 157	$	-

The fair value of derivative instruments on the Company’s consolidated balance sheets of March 31, 2021 and December 31, 2020 was as follows (in thousands):


	Total
	Fair Value		Level 2
March 31, 2021
Derivative assets - interest rate swaps	$	i 9,586	$	i 9,586
December 31, 2020
Derivative liabilities - interest rate swaps	$	i 80	$	i 80

i (7) Stock–Based Compensation Plan

Restricted Stock Awards, Time-Based Restricted Stock Units and Performance-Based Restricted Stock Units

The Company grants time-based restricted stock units to certain employees and restricted stock awards to independent directors from time to time pursuant to its 2019 Incentive Plan (2019 Plan). Time-based restricted stock units granted to employees have a vesting period of i four years, subject to continued employment with the Company; i 25% vesting on each anniversary of the grant date. Restricted stock awards granted to independent directors vest in i one year. The Company recognizes the compensation cost associated with restricted stock awards and time-based restricted stock units over the vesting period based on the closing price of the Company’s common stock on the date of grant.

The Company grants performance-based restricted stock units to certain executives and other key employees. The performance-based restricted stock units vest at the end of a i 3-year performance cycle if certain financial performance targets are met. The Company recognizes compensation cost associated with the performance-based restricted stock units ratably over the i 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 awards, time-based restricted stock units and performance-based restricted stock units under the 2019 Plan:

Weighted

Average

Number of

Grant Date

Fair Value

Outstanding at December 31, 2020

i 186,471

i 23.91

Granted

i 58,725

i 36.07

Vested

( i 46,703)

i 23.24

Forfeited

( i 5,071)

i 21.90

Outstanding at March 31, 2021

i 193,422

i 27.82

The Company recognized stock-based compensation expense relating to restricted stock and performance stock in continuing operations of $ i 0.5 million and $ i 0.6 million for the three months ended March 31, 2021 and 2020, respectively. As of March 31, 2021, unamortized stock-based compensation expense relating to restricted stock and performance stock was $ i 3.8 million, which will be recognized over the remaining average vesting period of i 1.9 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.

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CAI INTERNATIONAL, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Stock Options

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

The following table summarizes the Company’s stock option activities for the three months ended March 31, 2021 and 2020:

Three Months Ended March 31,

2021

2020

Weighted

Average

Number of

Exercise

Number of

Exercise

Price

Options outstanding at January 1

i 301,176

i 16.39

i 646,946

i 16.96

Options exercised

( i 107,000)

i 14.01

( i 7,750)

i 14.54

Options outstanding at March 31

i 194,176

i 17.70

i 639,196

i 16.98

Options exercisable

i 194,176

i 17.70

i 584,652

i 17.25

Weighted average remaining term

i 4.3 years

i 5.2 years

The aggregate intrinsic value of stock options exercised during the three months ended March 31, 2021 and 2020 was $ i 2.9 million and $ i 0.1 million, respectively. The aggregate intrinsic value of all options outstanding as of March 31, 2021 was $ i 5.4 million based on the closing price of the Company’s common stock of $ i 45.52 per share on March 31, 2021, the last trading day of the quarter.

The Company recognized stock-based compensation expense relating to stock options in continuing operations of less than $ i 0.1 million and $ i 0.1 million for the three months ended March 31, 2021 and 2020, respectively. As of March 31, 2021, there was i no remaining unamortized stock-based compensation cost relating to stock options granted to the Company’s employees and independent directors.

The Company did i i no / t grant any stock options during the three months ended March 31, 2021 and 2020.

Employee Stock Purchase Plan

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 i 250,000 shares of the Company’s common stock. The Company did not issue any shares under the ESPP during the three months ended March 31, 2021 and 2020. The Company recognized stock-based compensation expense relating to the ESPP of less than $ i i 0.1 / million for both the three months ended March 31, 2021 and 2020.

i (8) Income Taxes

The consolidated income tax expense for the three months ended March 31, 2021 and 2020, was determined based upon estimates of the Company’s consolidated annual effective income tax rate for the years ending December 31, 2021 and 2020, 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 i 7.1% at March 31, 2021, compared to an effective tax rate of i 8.6% at March 31, 2020.

i (9) Fair Value of Financial Instruments

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:

·Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities;

·Level 2 – inputs other than quoted prices included within Level 1 that are either directly or indirectly observable; and

·Level 3 – unobservable inputs in which little or no market activity exists, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing.

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CAI INTERNATIONAL, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The carrying amounts of cash, restricted cash, accounts receivable and accounts payable reflected in the balance sheets as of March 31, 2021 and December 31, 2020, approximate their fair value due to the short-term nature of these financial assets and liabilities. The carrying value of variable-rate debt in the balance sheets as of March 31, 2021 and December 31, 2020 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 $ i 85.5 million, $ i 711.1 million, and $ i 61.6 million as of March 31, 2021, with a fair value of approximately $ i 89.2 million, $ i 710.0 million, and $ i 58.8 million, respectively, based on the fair value of estimated future payments calculated using prevailing interest rates. The fair value of these financial instruments would be categorized as Level 2 in the fair value hierarchy. The principal balance of the Company’s fixed-rate term loans, asset-backed notes and collateralized financing obligations was $ i 86.5 million, $ i 726.9 million and $ i 69.6 million as of December 31, 2020, with a fair value of approximately $ i 91.1 million, $ i 725.8 million and $ i 71.6 million, respectively. Management believes that the balances of the Company’s senior secured notes of $ i 43.6 million and $ i 46.7 million, term loans held by VIE of $ i 29.9 million and $ i 31.2 million, and financing receivable of $ i 61.2 million and $ i 58.4 million as of March 31, 2021 and December 31, 2020, respectively, approximate their fair values. The fair value of these financial instruments would be categorized as Level 2 in the fair value hierarchy.

i (10) Commitments and Contingencies

In addition to its debt obligations described in Note 6 above, the Company had commitments to purchase approximately $ i 312.7 million of containers as of March 31, 2021, all in the twelve months ending March 31, 2022.

i (11) Stockholders’ Equity

Stock Repurchase Plan

In October 2018, the Company announced that the Board of Directors approved the repurchase of up to i three million shares of its outstanding common stock. In February 2021, the Board of Directors increased the share repurchase plan by an additional i 2.0 million shares. 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 three months ended March 31, 2021, the Company repurchased i 0.4 million shares of its common stock under this repurchase plan, at a cost of approximately $ i 12.8 million. As of March 31, 2021, approximately i 2.4 million shares remained available for repurchase under this share repurchase program.

For further information on the Company’s shareholders’ equity, see Note 13 to the consolidated financial statements in the Company’ Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 1, 2021.

i (12) Related Parties

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 December 31, 2020, the Company had a liability of $ i 1.2 million representing tax due to the UK tax authorities in respect of an officer of the Company. The Company also included in its balance sheets at March 31, 2021 and December 31, 2020 a current asset of $ i i 1.2 / million, representing the amount that will be reimbursed to the Company by that officer.

i (13) Segment and Geographic Information

The Company operates under one reportable segment, container leasing, which 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.

As disclosed in Note 2, the Company sold substantially all of the assets of its logistics business and all its railcar assets during the year ended December 31, 2020, and the operations of the logistics and rail businesses have been reclassified as discontinued operations in the accompanying unaudited consolidated statements of operations. As a result, the Company will no longer report Logistics or Rail Leasing as segments.

Geographic Data

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.

‎

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CAI INTERNATIONAL, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

Three Months Ended March 31,

2021

2020

Switzerland

i 16,314

i 12,516

Korea

i 11,310

i 9,239

Singapore

i 10,606

i 9,850

France

i 8,394

i 7,630

United States

i 1,177

i 1,236

Other Europe

i 18,350

i 15,240

Other Asia

i 13,818

i 12,587

Other International

i 831

i 815

Total leasing revenue

i 80,800

i 69,113

i (14) Earnings Per Share

Basic net income (loss) per share is computed based on the weighted average number of shares of common stock outstanding 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 months ended March 31, 2021 and 2020 (in thousands, except per share data):

Three Months Ended March 31,

2021

2020

Numerator

Net income from continuing operations

i 32,470

i 10,462

Net income (loss) from discontinued operations

i 1,063

( i 13,999)

Net income (loss) attributable to CAI common stockholders

i 33,533

( i 3,537)

Denominator

Weighted-average shares used in per share computation - basic

i 17,271

i 17,433

Effect of dilutive securities:

Stock options and restricted stock

i 247

i 282

Weighted-average shares used in per share computation - diluted

i 17,518

i 17,715

Net (loss) income per share attributable to CAI

common stockholders:

Basic

Continuing operations

i 1.88

i 0.60

Discontinued operations

i 0.06

( i 0.80)

Total basic

i 1.94

( i 0.20)

Diluted

Continuing operations

i 1.85

i 0.59

Discontinued operations

i 0.06

( i 0.79)

Total diluted

i 1.91

( i 0.20)

Certain options, restricted stock awards and time- and performance-based restricted stock units issued under employee benefit plans are excluded from the computation of diluted earnings per share because they were anti-dilutive. For the three months ended March 31, 2021, i 112 shares of stock options, restricted stock awards and time- and performance-based restricted stock units were excluded. For the three months ended March 31, 2020, i 97,606 shares of stock options, restricted stock awards and time- and performance-based restricted stock units were excluded.

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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, 2020 filed with the SEC on March 1, 2021. 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 companies. We lease equipment, primarily intermodal shipping containers, 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.

The following tables show the composition of our fleet as of March 31, 2021 and 2020, and our average utilization for the three months ended March 31, 2021 and 2020:


	As of March 31,
	2021		2020
Owned container fleet in TEUs		1,714,552		1,590,880
Managed container fleet in TEUs		55,226		66,721
Total container fleet in TEUs		1,769,778		1,657,601

Owned container fleet in CEUs		1,767,305		1,622,354
Managed container fleet in CEUs		70,255		82,705
Total container fleet in CEUs		1,837,560		1,705,059


	Three Months Ended March 31,
	2021		2020
Average container fleet utilization in CEUs		99.6%		98.2%
Average owned container fleet utilization in CEUs		99.7%		98.4%

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. The total fleet excludes new units not yet leased and off-hire units designated for sale.

COVID-19 Pandemic

The COVID-19 pandemic continues to have a meaningful impact on global trade and our business. The pandemic and related work, travel, and social restrictions resulted in a sharp decrease in global economic and trade activity during the first half of 2020, resulting in weak container leasing demand. However, we have seen a significant increase in leasing demand since the second half of 2020, which we expect to continue through 2021. However, it is too early to tell whether this rebound in demand will be sustained into 2022 and beyond.

We were initially concerned that the sharp decrease in global container volumes early in 2020 would increase the financial challenges facing our customers and lead to increased credit risk. While we are not yet through the pandemic, container freight rates and the financial performance of our customers have generally held up better than anticipated, with freight rates reaching record levels. As the impact of the pandemic grew, all the major shipping lines have taken aggressive actions to reduce their deployed vessel capacity, decreasing their network expenses and mitigating rate pressure from reduced freight volumes. The large decrease in bunker fuel prices has also been very helpful to their financial performance. We continue to closely monitor our customers’ payment performance and expect the potential for elevated credit risk as along as economic and trade disruptions persist.

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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 “Business Risk – 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 our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 1, 2021.

Disposal of Logistics and Rail Businesses

On August 14, 2020, we sold substantially all the assets of our logistics business to NFI, a North American logistics provider, for cash proceeds of $6.2 million. On December 29, 2020, we sold all our remaining railcar fleet to affiliates of Infinity Transportation for cash proceeds of $228.1 million. As a result, the operating results of the logistics and rail leasing businesses 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 of the logistics and railcar leasing businesses as discontinued operations. See Note 2 – Discontinued Operations to the consolidated financial statements in this Quarterly Report on Form 10-Q for more information.

Results of Operations - Three Months Ended March 31, 2021 Compared to Three Months Ended March 31, 2020

The following table summarizes our results of operations for the three months ended March 31, 2021 and 2020 (dollars in thousands):


	Three Months Ended March 31,				Change
	2021		2020		Amount		Percent
Total leasing revenue	$	80,800	$	69,113	$	11,687	17	%
Operating expenses		32,037		36,725		(4,688)	(13)	%
Total other expenses		11,582		18,520		(6,938)	(37)	%
Net income (loss) attributable to CAI common stockholders		33,533		(3,537)		37,070	(1,048)	%

The increase in total revenue for the three months ended March 31, 2021 compared to the three months ended March 31, 2020, was attributable to a $9.2 million, or 17%, increase in operating lease revenue, a $1.7 million, or 14%, increase in finance lease revenue, and a $0.8 million, or 27%, increase in other lease revenue. The decrease in operating expenses for the three months ended March 31, 2021 compared to the three months ended March 31, 2020, was the result of a $5.1 million, or 309%, increase in gain on sale of rental equipment and a $1.9 million, or 44%, decrease in storage, handling and other expenses, partially offset by a $1.5 million, or 6%, increase in depreciation expense and a $0.8 million, or 12%, increase in administrative expenses.

Total other expenses for the three months ended March 31, 2021 decreased compared with the three months ended March 31, 2020, primarily due to a $7.1 million, or 39%, decrease in net interest expense.

The increase in revenue together with the decrease in operating expenses, total other expense and net loss from discontinued operations resulted in an increase in net income attributable to CAI common stockholders for the three months ended March 31, 2021 of $37.1 million compared to the three months ended March 31, 2020.

Total leasing revenue


	Three Months Ended March 31,				Change
($ in thousand)	2021		2020		Amount		Percent
Total leasing revenue	$	80,800	$	69,113	$	11,687	17	%

The increase in total leasing revenue for the three months ended March 31, 2021 compared to the three months ended March 31, 2020 was mainly attributable to a $6.6 million increase in rental revenue resulting from a 12% increase in the average number of CEUs of on-lease owned containers and a $5.4 million increase in rental revenue arising from payments made by a cash-based customer, partially offset by a $0.3 million decrease in other revenue such as drop-off and repair fees given the current high utilization rate.

Depreciation of rental equipment


	Three Months Ended March 31,				Change
($ in thousand)	2021		2020		Amount		Percent
Depreciation of rental equipment	$	28,551	$	27,048	$	1,503	6	%

The increase in depreciation expense for the three months ended March 31, 2021 compared to the three months ended March 31, 2020 was mainly attributable to a 5% increase in the average size of our owned container fleet subject to depreciation over the last twelve months.

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Storage, handling and other expenses


	Three Months Ended March 31,				Change
($ in thousand)	2021		2020		Amount		Percent
Storage, handling and other expenses	$	2,489	$	4,429	$	(1,940)	(44)	%

The decrease in storage, handling and other expenses for the three months ended March 31, 2021 compared to the three months ended March 31, 2020 was primarily attributable to a $1.1 million decrease in storage costs and a $0.5 million decrease in repair expenses due to a decrease in the average size of the off-lease fleet.

Gain on sale of rental equipment


	Three Months Ended March 31,				Change
($ in thousand)	2021		2020		Amount		Percent
Gain on sale of rental equipment	$	6,743	$	1,647	$	5,096	309	%

While there was a decrease of 19% in the number of CEUs of containers sold during the three months ended March 31, 2021 compared to the three months ended March 31, 2020, there was a 29% increase in the average sale price per CEU, resulting in a 385% increase in gain per CEU, due to an increase in demand for equipment.

Administrative expenses


	Three Months Ended March 31,				Change
($ in thousand)	2021		2020		Amount		Percent
Administrative expenses	$	7,740	$	6,895	$	845	12	%

The increase in administrative expenses for the three months ended March 31, 2021 compared to the three months ended March 31, 2020 was primarily attributable to a $0.7 million increase in payroll-related costs, largely due to increased incentive-based compensation.

Other expense


	Three Months Ended March 31,				Change
($ in thousand)	2021		2020		Amount		Percent
Net interest expense	$	11,172	$	18,274	$	(7,102)	(39)	%
Other expense		410		246		164	(67)	%
	$	11,582	$	18,520	$	(6,938)	(37)	%

Net interest expense

The decrease in net interest expense for the three months ended March 31, 2021 compared to the three months ended March 31, 2020 was due primarily to a decrease in the average interest rate on our outstanding debt from approximately 3.3% as of March 31, 2020 to 2.1% as of March 31, 2021, caused primarily by a decrease in LIBOR, as well as a decrease in our average loan principal balance between the two periods, mainly due to the paydown of debt with proceeds from the sale of our railcar portfolio in 2020.

Other expense

Other expense, representing a loss on foreign exchange of $0.4 million for the three months ended March 31, 2021, increased from a loss of $0.2 million for the three months ended March 31, 2020, primarily as a result of movements in the U.S. Dollar exchange rate against the Euro.

Income tax expense


	Three Months Ended March 31,				Change
($ in thousand)	2021		2020		Amount		Percent
Income tax expense	$	2,504	$	1,199	$	1,305	109	%

The increase in income tax expense for the three months ended March 31, 2021 compared to three months ended March 31, 2020 was mainly attributable to an increase in income before tax, partially offset by a decrease in the estimated effective tax rate. The full-year estimated effective tax rate before discrete items was 7.1% at March 31, 2021, compared to an effective tax rate of 8.6% at March 31, 2020. The decrease in the estimated full-year effective tax rate was primarily due to an increase in the proportion of pretax income generated in lower tax jurisdictions.

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Preferred stock dividends


	Three Months Ended March 31,				Change
($ in thousand)	2021		2020		Amount		Percent
Preferred stock dividends	$	2,207	$	2,207	$	-	-	%

Preferred stock dividends for the three months ended March 31, 2021 remained consistent with the three months ended March 31, 2020.

Income (loss) from discontinued operations


	Three Months Ended March 31,				Change
	2021		2020		Amount		Percent
($ in thousand)
Total revenue	$	293	$	35,909	$	(35,616)	(99)	%
Operating expenses		(324)		52,265		(52,589)	(101)	%
Interest expense		-		2,102		(2,102)	(100)	%
Income tax benefit		(446)		(4,459)		4,013	(90)	%
Net income (loss) from discontinued operations		1,063		(13,999)		15,062	(108)	%

Total revenue and operating expenses from discontinued operations for the three months ended March 31, 2021 were a result of immaterial differences in the actual transactions from the amounts accrued prior to the sale of the logistics and railcar businesses in 2020.

Liquidity and Capital Resources

As of March 31, 2021, we had cash and cash equivalents of $60.6 million, including $12.7 million of restricted cash, and $23.9 million of cash held by variable interest entities (VIEs). Our principal sources of liquidity are cash in-flows provided by operating activities, proceeds from the sale of rental equipment, borrowings from financial institutions, and equity and debt offerings. Our cash in-flows are used to finance capital expenditures and meet debt service requirements.

As of March 31, 2021, our outstanding indebtedness and current maximum borrowing level was as follows (in thousands):


	Current		Current
	Amount		Maximum
	Outstanding		Borrowing Level
Revolving credit facilities	$	815,519	$	1,204,322
Term loans		176,800		176,800
Senior secured notes		43,610		43,610
Asset-backed notes		711,136		711,136
Collateralized financing obligations		61,628		61,628
Term loans held by VIE		29,884		29,884
		1,838,577		2,227,380
Debt discount and debt issuance costs		(11,820)		-
Total	$	1,826,757	$	2,227,380

As of March 31, 2021, we had $388.7 million in availability under our revolving credit facilities (net of $0.1 million in letters of credit), subject to our ability to meet the collateral requirements under the agreements governing the facilities. Based on the borrowing base and collateral requirements at March 31, 2021, the borrowing availability under our revolving credit facilities was $248.8 million, assuming no additional contributions of assets.

As of March 31, 2021, we had a total of $1,431.3 million of debt in facilities with fixed interest rates or floating interest rates that have been synthetically fixed through interest rate swap agreements, which accounts for 78% of our total outstanding debt.

For further information on our debt instruments, see Note 6 to the consolidated financial statements in this Quarterly Report on Form 10-Q and Note 7 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 1, 2021.

We continue to monitor the COVID-19 pandemic 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, the magnitude and duration of the pandemic, and the rollout and efficacy of vaccines. Assuming that our customers continue to 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.

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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) a consolidated funded debt to consolidated tangible net worth ratio, in the case of our debt facilities, 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) a fixed charge coverage ratio, in the case of our debt facilities, of at least 1.20:1.00, and in the case of our asset-backed notes, of at least 2.50:1.00. As of March 31, 2021, we were in compliance with all of our financial and other covenants and we expect to remain in compliance for at least the next twelve months.

Cash Flows

The following table sets forth certain cash flow information for the three months ended March 31, 2021 and 2020 (in thousands):



	Three Months Ended March 31,
	2021		2020
Net income	$	35,740	$	(1,330)

Net income from continuing operations adjusted for non-cash items		57,485		35,328
Changes in working capital		20,481		21,213
Net cash provided by operating activities of continuing operations		77,966		56,541
Net cash used in investing activities of continuing operations		(145,393)		(2,951)
Net cash provided by financing activities of continuing operations		62,425		5,225
Net cash used in (provided by) discontinued operations		(892)		2,565
Effect on cash of foreign currency translation		(8)		(77)
Net (decrease) increase in cash and restricted cash		(5,902)		61,303
Cash and restricted cash at beginning of period		66,502		73,239
Cash and restricted cash at end of period	$	60,600	$	134,542

Cash Flows from Continuing Operations

Operating Activities

Net cash provided by operating activities of continuing operations was $78.0 million for the three months ended March 31, 2021, an increase of $21.4 million compared to $56.5 million for the three months ended March 31, 2020. The increase was due to a $22.2 million increase in income from continuing operations as adjusted for depreciation, impairment and other non-cash items, partially offset by a $0.7 million decrease in our net working capital adjustments. The increase of $22.2 million in income from continuing operations as adjusted for non-cash items was primarily attributable to an increase of $22.0 million in income from continuing operations, an increase of $2.6 million in deferred tax liabilities due to discrete tax benefits recognized in the prior year, an increase of $1.5 million in depreciation expense, and a decrease of $1.3 million in bad debt recovery due to cash receipts from a cash-based customer in the prior year, partially offset by an increase of $5.1 million in gain on sale of rental equipment, mainly due to an increase in container prices as a result of high demand.

Net working capital provided by operating activities of $20.5 million in the three months ended March 31, 2021, was due to a $21.6 million decrease in net investment in finance leases, representing the receipt of principal payments and a $1.2 million decrease in prepaid expenses and other assets, partially offset by a $2.8 million decrease in accounts payable, accrued expenses and other liabilities, primarily caused by the timing of cash receipts. Net working capital provided by operating activities of $21.2 million in the three months ended March 31, 2020 was due to a $17.1 million decrease in net investment in finance leases, representing the receipt of principal payments and a $3.8 million decrease in accounts receivable, primarily caused by the timing of cash receipts from customers.

Investing Activities

Net cash used in investing activities of continuing operations was $145.4 million for the three months ended March 31, 2021, an increase of $142.4 million compared to net cash used in investing activities of $3.0 million for the three months ended March 31, 2020. The increase in cash used was attributable to a $144.1 million increase in purchase of rental equipment and a $5.2 million increase in purchase of financing receivable, partially offset by $4.2 million increase in proceeds from sale of rental equipment and a $2.3 million increase in receipt of principal payments from financing receivables.
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Financing Activities

Net cash provided by financing activities of continuing operations was $62.4 million for the three months ended March 31, 2021, an increase of $57.2 million compared to net cash provided by financing activities of $5.2 million for the three months ended March 31, 2020. During the three months ended March 31, 2021, our net cash inflow from borrowings was $81.1 million compared to $7.3 million for the three months ended March 31, 2020. The increase in net cash inflow from borrowings was partially offset by an increase of $12.8 million for the repurchase of common stock and an increase of $5.2 million in dividends paid to common stockholders.

Cash Flows from Discontinued Operations

Net cash used in discontinued operations was $0.9 million for the three months ended March 31, 2021, a decrease of $3.5 million compared to net cash provided by discontinued operations of $2.6 million for the three months ended March 31, 2020. The change between the two periods was due to revenue and expenses resulting from immaterial differences in the actual transactions from the amounts accrued prior to the sale of the logistics and railcar business in 2020.

Equity Transactions

Stock Repurchase Plan

In October 2018, we announced that our Board of Directors approved the repurchase of up to three million shares of our outstanding common stock. In February 2021, our Board of Directors increased the share repurchase plan by an additional 2.0 million shares. 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 three months ended March 31, 2021, we repurchased 0.4 million shares of our common stock under this repurchase plan, at a cost of approximately $12.8 million. As of March 31, 2021, approximately 2.4 million shares remained available for repurchase under our share repurchase program.

Contractual Obligations and Commercial Commitments

The following table sets forth our contractual obligations and commercial commitments by due date as of March 31, 2021 (in thousands):



	Payments Due by Period
			Less than		1-2		2-3		3-4		4-5		More than
	Total		1 year		years		years		years		years		5 years
Total debt obligations:
Revolving credit facilities	$	815,519	$	-	$	-	$	815,519	$	-	$	-	$	-
Term loans		176,800		74,550		7,800		94,450		-		-		-
Senior secured notes		43,610		6,110		37,500		-		-		-		-
Asset-backed notes		711,136		63,130		63,130		63,130		64,058		64,986		392,702
Collateralized financing obligations		61,628		37,852		6,292		-		-		17,484		-
Term loans held by VIE		29,884		5,540		5,780		6,034		6,287		6,243		-
Interest on debt and capital lease obligations (1)		128,608		36,142		32,196		18,375		11,602		15,316		14,977
Rental equipment payable		61,582		61,582		-		-		-		-		-
Rent, office facilities and equipment		3,793		2,402		993		288		110		-		-
Equipment purchase commitments		312,668		312,668		-		-		-		-		-
Total contractual obligations	$	2,345,228	$	599,976	$	153,691	$	997,796	$	82,057	$	104,029	$	407,679

(1)Our estimate of interest expense commitment includes $10.2 million relating to our revolving credit facilities subject to variable interest rates, $17.2 million relating to our revolving credit facilities subject to fixed interest rates, $10.7 million relating to our term loans, $3.0 million relating to our senior secured notes, $77.9 million relating to our asset-back notes, $6.1 million relating to our collateralized financing obligations, and $3.4 million relating to our term loans held by VIE. The calculation of interest commitment related to our debt assumes the following weighted-average interest rates as of March 31, 2021: variable-rate revolving credit facilities, 1.4%; fixed-rate revolving credit facilities, 1.5%; term loans, 3.2%; senior secured notes, 4.9%; asset-backed notes, 2.3%; collateralized financing obligations, 1.8%; and term loans held by VIE, 4.2%. These calculations assume that weighted-average interest rates will remain at the same level over the next five years. We expect that interest rates will vary over time based upon fluctuations in the underlying indexes upon which these rates are based, including the potential discontinuation of LIBOR after 2021.

Off-Balance Sheet Arrangements

As of March 31, 2021, 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.

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Critical Accounting Policies and Estimates

There have been no changes to our critical accounting policies during the three months ended March 31, 2021. See Critical Accounting Policies and Estimates in our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 1, 2021.

Recent Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2020-04 (ASU 2020-04), which adds ASC Topic 848, Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 provides temporary optional expedients and exceptions to ease financial reporting burdens related to applying current GAAP to modifications of contracts, hedging relationships and other transactions in connection with the transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. In January 2021, the FASB issued ASU 2021-01 to clarify that certain optional expedients and exceptions apply to modifications of derivative contracts and certain hedging relationships affected by changes in the interest rates used for discounting cash flows, computing variation margin settlements, and for calculating price alignment interest. ASU 2020-04 is effective beginning on March 12, 2020 and may be applied prospectively to such transactions through December 31, 2022 and ASU 2021-01 is effective beginning on January 7, 2021 and may be applied retrospectively or prospectively to such transactions through December 31, 2022. We will apply ASU 2020-04 and 2021-01 prospectively as and when we enter into transactions to which these updates apply.

Except as described above, there are no other recent accounting pronouncement that are relevant to our business.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

Foreign Exchange Rate Risk. Although we have significant foreign-based operations, the U.S. Dollar is our primary operating currency. Thus, most of our revenue and expenses are denominated in U.S. Dollars. We have equipment sales in British Pound Sterling, Euros and Japanese Yen and incur overhead costs in foreign currencies, primarily in British Pound Sterling and Euros. During the three months ended March 31, 2021, the U.S. Dollar increased in value in relation to other major foreign currencies (such as the Euro). 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. We recognized a loss on foreign exchange of $0.4 million for the three months ended March 31, 2021. 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. In July 2020, we entered into a five-year interest rate swap agreement to hedge against changes in future cash flows resulting from changes in interest rates on $500.0 million of variable-rate borrowings. Under the terms of the interest rate swap agreement, we receive from the counterparty interest on the notional amount based on one-month LIBOR and pay to the counterparty a fixed rate of 0.29%. Any changes in the fair value of the derivative instrument are recognized in accumulated other comprehensive loss and reclassified to net interest expense as they are realized.

As of March 31, 2021, approximately 78% of our debt was either fixed or hedged using derivative instruments, which helps mitigate any negative impact of changes in short-term interest rates. However, a 1.0% increase or decrease in the interest rates on our unhedged debt would result in an increase or decrease of approximately $4.1 million in interest expense over the next 12 months.

ITEM 4. CONTROLS AND PROCEDURES

Management Evaluation of Disclosure Controls and Procedures

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 principal executive and 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 principal executive and financial officer concluded that as of March 31, 2021 our disclosure controls and procedures were effective with respect to controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and are accumulated and communicated to the Company’s management, including the Company’s principal executive and financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

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Changes in Internal Control Over Financial Reporting

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 March 31, 2021, which has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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.

ITEM 1A. RISK FACTORS

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, 2020 filed with the SEC on March 1, 2021. 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. 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, 2020.

ITEM 2. UNREGISTERED SALES OF EQU ITY SECURITIES AND USE OF PROCEEDS

Purchases of Equity Securities by the Issuer



Period	Total Number of Shares (or Units) Purchased		Average Price Paid per Share (or Unit)	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⁾
January 1, 2021 – January 31, 2021	310,098	$	32.57	310,098	2,751,431
February 1, 2021 – February 28, 2021	80,374		33.34	80,374	2,441,333
March 1, 2021 – March 31, 2021⁽²⁾	1,629		43.35	-	2,360,959
Total	392,101	$	32.77	390,472	2,360,959

⁽¹⁾On October 8, 2018, we announced that our Board of Directors had approved the repurchase of up to 3.0 million shares of outstanding common stock. On February 11, 2021, the Board of Directors increased the share repurchase plan by an additional 2.0 million shares. The repurchase plan does not have an expiration date and does not oblige us to acquire any particular amount of our common stock. As of March 31, 2021, 2.4 million shares remained available for repurchase under our share repurchase plan.

⁽²⁾Represents shares withheld by the Company to satisfy the tax obligations of certain of its employees upon the vesting of restricted stock awards.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

See below for a list of exhibits filed or furnished with this report, which are incorporated by reference herein.


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 principal executive officer and principal 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 principal executive officer and principal 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 March 31, 2021 and December 31, 2020, (ii) Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020, (iii) Consolidated Statements of Comprehensive Income for the three months ended March 31, 2021 and 2020, (iv) Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2021 and 2020, (v) Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020, and (vi) Notes to Unaudited Consolidated Financial Statements.
104		Cover Page Interactive Data File (embedded within the Inline XBRL document).

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Table of Contents

SI GNATURES

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.


	CAI International, Inc.
	(Registrant)

April 30, 2021	/s/ *TIMOTHY B. PAGE*
	Timothy B. Page
	Executive Vice President, Interim President and Chief Executive Officer
	(Principal Executive and Financial Officer)

Dates Referenced Herein and Documents Incorporated by Reference

This ‘10-Q’ Filing	Date	Other Filings

	6/30/25
	12/31/22
	3/31/22
	12/31/21
Filed on:	4/30/21	SC 13D/A
	4/28/21
For Period end:	3/31/21
	3/1/21	10-K, 4
	2/28/21
	2/11/21	3, 4, 8-K
	2/1/21
	1/31/21
	1/7/21
	1/1/21
	12/31/20	10-K, 8-K
	12/29/20	8-K, SC 13D/A
	9/30/20	10-Q
	8/14/20	8-K
	7/31/20
	3/31/20	10-Q
	3/12/20
	12/31/19	10-K, 10-K/A
	10/8/18
		List all Filings

2 Subsequent Filings that Reference this Filing

  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 8/04/21  CAI International, Inc.           DEFM14A                1:3.2M                                   Broadridge Fin’l So… Inc
 7/12/21  CAI International, Inc.           PREM14A     7/12/21    1:3.2M                                   Broadridge Fin’l So… Inc

5 Previous Filings that this Filing References

  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 8/10/18  CAI International, Inc.           8-K:1,3,5,9 8/06/18    4:297K                                   Donnelley … Solutions/FA
 6/05/18  CAI International, Inc.           8-K:5,9     6/01/18    2:40K                                    Broadridge Fin’l So… Inc
 3/28/18  CAI International, Inc.           8-K:1,3,5,9 3/22/18    4:259K                                   Donnelley … Solutions/FA
 3/10/09  CAI International, Inc.           8-K:2,5,9   3/10/09    3:247K                                   Donnelley … Solutions/FA
 4/24/07  CAI International, Inc.           S-1/A¶                15:4.6M                                   Donnelley … Solutions/FA

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Filing Submission 0001388430-21-000007 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

CAI International, Inc. – ‘10-Q’ for 3/31/21

On: Friday, 4/30/21, at 3:06pm ET · For: 3/31/21 · Accession #: 1388430-21-7 · File #: 1-33388

Quarterly Report — Form 10-QFiling Table of Contents

‘10-Q’ — Quarterly ReportDocument Table of Contents

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Dates Referenced Herein and Documents Incorporated by Reference

2 Subsequent Filings that Reference this Filing

5 Previous Filings that this Filing References

Quarterly Report — Form 10-Q
Filing Table of Contents

‘10-Q’ — Quarterly Report
Document Table of Contents