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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended September 30, 2022
Or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from                             to   
Commission file number - 001-37827
Triton International Limited
(Exact name of registrant as specified in the charter)
Bermuda
 
98-1276572
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification Number)

Victoria Place, 5th Floor, 31 Victoria Street, Hamilton HM 10, Bermuda
(Address of principal executive office)
(441294-8033
(Registrant's telephone number including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
   Common shares, $0.01 par value per shareTRTNNew York Stock Exchange
8.50% Series A Cumulative Redeemable Perpetual Preference SharesTRTN PRANew York Stock Exchange
8.00% Series B Cumulative Redeemable Perpetual Preference SharesTRTN PRBNew York Stock Exchange
7.375% Series C Cumulative Redeemable Perpetual Preference SharesTRTN PRCNew York Stock Exchange
6.875% Series D Cumulative Redeemable Perpetual Preference SharesTRTN PRDNew York Stock Exchange
5.75% Series E Cumulative Redeemable Perpetual Preference SharesTRTN PRENew 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 requirement for the past 90 days. Yes     No 
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 during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes     No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer Accelerated Filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if 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     No 
As of October 26, 2022, there were 58,818,753 common shares at $0.01 par value per share of the registrant outstanding.


Triton International Limited
Index
Page No.

2


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q of Triton International Limited ("Triton", "we", "our", or the "Company") contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that involve substantial risks and uncertainties. In addition, we, or our executive officers on our behalf, may from time to time make forward-looking statements in reports and other documents we file with the Securities and Exchange Commission (the "SEC"), or in connection with oral statements made to the press, potential investors or others. All statements, other than statements of historical facts, including statements regarding our strategy, future operations, future financial position, future revenues, future costs, prospects, plans and objectives of management are forward-looking statements. The words "expect," "estimate," "anticipate," "predict," "believe," "think," "plan," "will," "should," "intend," "seek," "potential" and similar expressions and variations are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.
All forward-looking statements address matters that involve risks and uncertainties, many of which are beyond Triton's control. Accordingly, there are or will be important factors that could cause actual results to differ materially from those indicated in such statements and, therefore, you should not place undue reliance on any such statements. These factors include, without limitation, economic, business, competitive, market and regulatory conditions and the following:
the impact of COVID-19 on our business and financial results;
decreases in the demand for leased containers;
decreases in market leasing rates for containers;
difficulties in re-leasing containers after their initial fixed-term leases;
our customers' decisions to buy rather than lease containers;
increases in the cost of repairing and storing our off-hire containers;
our dependence on a limited number of customers and suppliers;
customer defaults;
decreases in the selling prices of used containers;
extensive competition in the container leasing industry;
risks stemming from the international nature of our businesses, including global and regional economic conditions, including inflation and attempts to control inflation, and geopolitical risks such as the ongoing war in Ukraine;
decreases in demand for international trade;
risks resulting from the political and economic policies of the United States and other countries, particularly China, including but not limited to, the impact of trade wars, duties and tariffs;
disruption to our operations from failures of, or attacks on, our information technology systems;
disruption to our operations as a result of natural disasters;
compliance with laws and regulations related to economic and trade sanctions, security, anti-terrorism, environmental protection and anti-corruption;
the availability and cost of capital;
restrictions imposed by the terms of our debt agreements;
changes in tax laws in Bermuda, the United States and other countries; and
other risks and uncertainties, including those listed under the caption "Risk Factors" in our Annual Report on Form 10-K, filed with the SEC on February 15, 2022, in this Quarterly Report on Form 10-Q and in the other documents we file with the SEC from time to time, and such risks and uncertainties are specifically incorporated herein by reference.
Forward-looking statements speak only as of the date the statements are made. Except as required under the federal securities laws and rules and regulations of the SEC, we undertake no obligation to update or revise forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information. We caution you not to unduly rely on the forward-looking statements when evaluating the information presented in this report.

3


ITEM 1.    CONSOLIDATED FINANCIAL STATEMENTS

TRITON INTERNATIONAL LIMITED
Consolidated Balance Sheets
(In thousands, except share data)
(Unaudited)
September 30, 2022December 31,
2021
ASSETS:  
Leasing equipment, net of accumulated depreciation of $4,223,166 and $3,919,181
$9,742,929 $10,201,113 
Net investment in finance leases1,704,642 1,558,290 
Equipment held for sale88,221 48,746 
Revenue earning assets11,535,792 11,808,149 
Cash and cash equivalents63,992 106,168 
Restricted cash103,026 124,370 
Accounts receivable, net of allowances of $3,144 and $1,178
283,819 294,792 
Goodwill236,665 236,665 
Lease intangibles, net of accumulated amortization of $289,334 and $281,340
9,123 17,117 
Other assets28,569 50,346 
Fair value of derivative instruments123,357 6,231 
Total assets$12,384,343 $12,643,838 
LIABILITIES AND SHAREHOLDERS' EQUITY:  
Equipment purchases payable$19,450 $429,568 
Fair value of derivative instruments 3,450 48,277 
Deferred revenue320,945 92,198 
Accounts payable and other accrued expenses70,710 70,557 
Net deferred income tax liability405,574 376,009 
Debt, net of unamortized costs of $58,192 and $63,794
8,290,293 8,562,517 
Total liabilities9,110,422 9,579,126 
Shareholders' equity:  
Preferred shares, $0.01 par value, at liquidation preference
730,000 730,000 
Common shares, $0.01 par value, 270,000,000 shares authorized, 81,389,809 and 81,295,366 shares issued, respectively
814 813 
Undesignated shares, $0.01 par value, 800,000 shares authorized, no shares issued and outstanding
  
Treasury shares, at cost, 21,719,453 and 15,429,499 shares, respectively
(902,118)(522,360)
Additional paid-in capital908,008 904,224 
Accumulated earnings2,420,166 2,000,854 
Accumulated other comprehensive income (loss)117,051 (48,819)
Total shareholders' equity3,273,921 3,064,712 
Total liabilities and shareholders' equity$12,384,343 $12,643,838 
The accompanying Notes to the Unaudited Consolidated Financial Statements are an integral part of these statements.

4





TRITON INTERNATIONAL LIMITED
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
 Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Leasing revenues:  
Operating leases$395,400 $385,221 $1,176,436 $1,085,874 
Finance leases29,283 14,970 86,943 30,844 
Total leasing revenues424,683 400,191 1,263,379 1,116,718 
Equipment trading revenues44,786 44,418 127,014 103,546 
Equipment trading expenses(41,106)(35,255)(112,791)(75,516)
Trading margin3,680 9,163 14,223 28,030 
Net gain on sale of leasing equipment26,468 25,606 90,509 78,964 
Operating expenses:
Depreciation and amortization158,538 163,493 480,176 460,856 
Direct operating expenses10,525 5,539 24,143 21,246 
Administrative expenses22,747 21,426 69,015 65,326 
Provision (reversal) for doubtful accounts(123)23 (104)(2,467)
Total operating expenses191,687 190,481 573,230 544,961 
Operating income (loss)263,144 244,479 794,881 678,751 
Other expenses:
Interest and debt expense57,124 54,728 166,293 169,355 
Unrealized (gain) loss on derivative instruments, net19  (320) 
Debt termination expense190 42,660 1,853 132,523 
Other (income) expense, net(644)(453)(1,141)(1,195)
Total other expenses56,689 96,935 166,685 300,683 
Income (loss) before income taxes206,455 147,544 628,196 378,068 
Income tax expense (benefit)16,618 12,812 46,482 38,281 
Net income (loss)$189,837 $134,732 $581,714 $339,787 
Less: dividend on preferred shares13,028 11,687 39,084 32,713 
Net income (loss) attributable to common shareholders$176,809 $123,045 $542,630 $307,074 
Net income per common share—Basic$2.90 $1.84 $8.60 $4.59 
Net income per common share—Diluted$2.88 $1.83 $8.56 $4.57 
Cash dividends paid per common share$0.65 $0.57 $1.95 $1.71 
Weighted average number of common shares outstanding—Basic61,035 66,919 63,112 66,935 
Dilutive restricted shares329 372 295 308 
Weighted average number of common shares outstanding—Diluted61,364 67,291 63,407 67,243 
   
The accompanying Notes to the Unaudited Consolidated Financial Statements are an integral part of these statements.

5





TRITON INTERNATIONAL LIMITED
Consolidated Statements of Comprehensive Income
(In thousands)
(Unaudited)
 Three Months Ended September 30,Nine Months Ended September 30,
 2022202120222021
Net income (loss)$189,837 $134,732 $581,714 $339,787 
Other comprehensive income (loss), net of tax:  
Change in derivative instruments designated as cash flow hedges51,160 8,148 159,335 47,268 
Reclassification of (gain) loss on derivative instruments designated as cash flow hedges(1,837)7,096 7,451 21,156 
Foreign currency translation adjustment(408)(87)(916)(24)
Other comprehensive income (loss), net of tax48,915 15,157 165,870 68,400 
Comprehensive income238,752 149,889 747,584 408,187 
Less:
Dividend on preferred shares13,028 11,687 39,084 32,713 
Comprehensive income attributable to common shareholders$225,724 $138,202 $708,500 $375,474 
Tax (benefit) provision on change in derivative instruments designated as cash flow hedges$2,706 $28 $9,980 $2,030 
Tax (benefit) provision on reclassification of (gain) loss on derivative instruments designated as cash flow hedges$(476)$487 $(48)$1,436 
   

The accompanying Notes to the Unaudited Consolidated Financial Statements are an integral part of these statements.

6





TRITON INTERNATIONAL LIMITED
Consolidated Statements of Shareholders' Equity
(In thousands, except share amounts)
(Unaudited)
Preferred SharesCommon SharesTreasury SharesAdd'l Paid in CapitalAccumulated EarningsAccumulated Other Comprehensive IncomeTotal Equity
SharesAmountSharesAmountSharesAmount
Balance as of December 31, 202129,200,000 $730,000 81,295,366 $813 15,429,499 $(522,360)$904,224 $2,000,854 $(48,819)$3,064,712 
Share-based compensation— — 164,932 2 — — 2,554 — — 2,556 
Treasury shares acquired— — — — 1,257,374 (80,166)— — — (80,166)
Share repurchase to settle shareholder tax obligations— — (93,253)(1)— — (5,628)— — (5,629)
Net income (loss)— — — — — — — 194,258 — 194,258 
Other comprehensive income (loss)— — — — — — — — 80,158 80,158 
Common shares dividend declared ($0.65 per share)— — — — — — — (42,307)— (42,307)
Preferred shares dividend declared— — — — — — — (13,028)— (13,028)
Balance as of March 31, 202229,200,000 $730,000 81,367,045 $814 16,686,873 $(602,526)$901,150 $2,139,777 $31,339 $3,200,554 
Share-based compensation— — 22,764 — — — 3,691 — — 3,691 
Treasury shares acquired— — — — 1,832,240 (110,049)— — — (110,049)
Net income (loss)— — — — — — — 197,619 — 197,619 
Other comprehensive income (loss)— — — — — — — — 36,797 36,797 
Common shares dividend declared ($0.65 per share)— — — — — — — (41,284)— (41,284)
Preferred shares dividend declared— — — — — — — (13,028)— (13,028)
Balance as of June 30, 202229,200,000 $730,000 81,389,809 $814 18,519,113 $(712,575)$904,841 $2,283,084 $68,136 $3,274,300 
Share-based compensation— —   — — 3,167 — — 3,167 
Treasury shares acquired— — — — 3,200,340 (189,543)— — — (189,543)
Net income (loss)— — — — — — — 189,837 — 189,837 
Other comprehensive income (loss)— — — — — — — — 48,915 48,915 
Common shares dividend declared ($0.65 per share)— — — — — — — (39,727)— (39,727)
Preferred shares dividend declared— — — — — — — (13,028)— (13,028)
Balance as of September 30, 202229,200,000 $730,000 81,389,809 $814 21,719,453 $(902,118)$908,008 $2,420,166 $117,051 $3,273,921 




























The accompanying Notes to the Unaudited Consolidated Financial Statements are an integral part of these statements.

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TRITON INTERNATIONAL LIMITED
Consolidated Statements of Shareholders' Equity
(In thousands, except share amounts)
(Unaudited)
`Preferred SharesCommon SharesTreasury SharesAdd'l Paid in CapitalAccumulated EarningsAccumulated Other Comprehensive IncomeTotal Equity
SharesAmountSharesAmountSharesAmount
Balance as of December 31, 202022,200,000 $555,000 81,151,723 $812 13,901,326 $(436,822)$905,323 $1,674,670 $(133,035)$2,565,948 
Share-based compensation— — 207,077 2 — — 1,713 — — 1,715 
Share repurchase to settle shareholder tax obligations— — (85,466)(1)— — (4,145)— — (4,146)
Net income (loss)— — — — — — — 139,838 — 139,838 
Other comprehensive income (loss)— — — — — — — — 69,973 69,973 
Common shares dividend declared ($0.57 per share)— — — — — — — (38,497)— (38,497)
Preferred shares dividend declared— — — — — — — (10,513)— (10,513)
Balance as of March 31, 202122,200,000 $555,000 81,273,334 $813 13,901,326 $(436,822)$902,891 $1,765,498 $(63,062)$2,724,318 
Share-based compensation— — 21,568  — — 3,295 — — 3,295 
Net income (loss)— — — — — — — 65,217 — 65,217 
Other comprehensive income (loss)— — — — — — — — (16,730)(16,730)
Common shares dividend declared ($0.57 per share)— — — — — — — (38,510)— (38,510)
Preferred shares dividend declared— — — — — — — (10,513)— (10,513)
Balance as of June 30, 202122,200,000 $555,000 81,294,902 $813 13,901,326 $(436,822)$906,186 $1,781,692 $(79,792)$2,727,077 
Issuance of preferred shares, net of offering expenses7,000,000 175,000 — — — — (6,170)— — 168,830 
Share-based compensation— — 1,457  — — 2,249 — — 2,249 
Treasury shares acquired— — — — 378,765 (19,396)— — — (19,396)
Net income (loss)— — — — — — — 134,732 — 134,732 
Other comprehensive income (loss)— — — — — — — — 15,157 15,157 
Common shares dividend declared ($0.57 per share)— — — — — — — (38,512)— (38,512)
Preferred shares dividend declared— — — — — — — (11,267)— (11,267)
Balance as of September 30, 202129,200,000 $730,000 81,296,359 $813 14,280,091 $(456,218)$902,265 $1,866,645 $(64,635)$2,978,870 
The accompanying Notes to the Unaudited Consolidated Financial Statements are an integral part of these statements.

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TRITON INTERNATIONAL LIMITED
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 Nine Months Ended September 30,
 20222021
Cash flows from operating activities:  
Net income (loss)$581,714 $339,787 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:  
Depreciation and amortization480,176 460,856 
Amortization of deferred debt cost and other debt related amortization9,181 7,872 
Lease related amortization8,674 13,703 
Share-based compensation expense9,414 7,259 
Net (gain) loss on sale of leasing equipment(90,509)(78,964)
Unrealized (gain) loss on derivative instruments(320) 
Debt termination expense1,853 132,523 
Deferred income taxes19,633 36,073 
Changes in operating assets and liabilities:
Accounts receivable(11,542)(63,919)
Deferred revenue274,981 63,944 
Accounts payable and other accrued expenses812 (9,098)
Net equipment sold (purchased) for resale activity7,297 4,938 
Cash received (paid) for settlement of interest rate swaps19,026 5,481 
Cash collections on finance lease receivables, net of income earned107,633 49,170 
Other assets20,239 17,294 
Net cash provided by (used in) operating activities1,438,262 986,919 
Cash flows from investing activities:  
Purchases of leasing equipment and investments in finance leases(889,811)(2,791,943)
Proceeds from sale of equipment, net of selling costs217,832 165,066 
Other(716) 
Net cash provided by (used in) investing activities(672,695)(2,626,877)
Cash flows from financing activities:  
Issuance of preferred shares, net of underwriting discount 169,488 
Purchases of treasury shares(375,026)(16,757)
Debt issuance costs(8,523)(35,996)
Borrowings under debt facilities1,802,600 7,713,006 
Payments under debt facilities and finance lease obligations(2,081,274)(5,981,155)
Dividends paid on preferred shares(39,084)(32,293)
Dividends paid on common shares(122,151)(114,484)
Other (5,629)(4,478)
Net cash provided by (used in) financing activities(829,087)1,697,331 
Net increase (decrease) in cash, cash equivalents and restricted cash$(63,520)$57,373 
Cash, cash equivalents and restricted cash, beginning of period230,538 151,996 
Cash, cash equivalents and restricted cash, end of period$167,018 $209,369 
Supplemental disclosures:
Interest paid$148,568 $153,812 
Income taxes paid (refunded)$27,579 $4,639 
Right-of-use asset for leased property$210 $1,598 
Supplemental non-cash investing activities:  
Equipment purchases payable$19,450 $406,510 
The accompanying Notes to the Unaudited Consolidated Financial Statements are an integral part of these statements.

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TRITON INTERNATIONAL LIMITED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1—Description of the Business, Basis of Presentation and Accounting Policy Updates

Description of the Business

Triton International Limited ("Triton" or the "Company"), through its subsidiaries, leases intermodal transportation equipment, primarily maritime containers, and provides maritime container management services through a worldwide network of service subsidiaries, third-party depots and other facilities. The majority of the Company's business is derived from leasing its containers to shipping line customers through a variety of long-term and short-term contractual lease arrangements. The Company also sells containers from its equipment leasing fleet as well as containers specifically acquired for resale from third parties. The Company's registered office is located in Bermuda.

Basis of Presentation

The unaudited consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these financial statements do not include all information and footnotes required by GAAP for complete financial statements.

The interim consolidated balance sheet as of September 30, 2022; the consolidated statements of operations, the consolidated statements of comprehensive income, and the consolidated statements of shareholders' equity for the three and nine months ended September 30, 2022 and 2021; and the consolidated statements of cash flows for the nine months ended September 30, 2022 and 2021 are unaudited. The consolidated balance sheet as of December 31, 2021, included herein, was derived from the audited financial statements as of that date, but does not include all disclosures required by GAAP. The unaudited interim financial statements have been prepared on a basis consistent with the Company's annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments necessary to state fairly the Company's financial position, results of operations, comprehensive income, shareholders' equity, and cash flows for the periods presented. The financial data and the other financial information disclosed in the notes to the financial statements related to these periods are also unaudited. The consolidated results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2022 or for any other future annual or interim period.

These financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2021 included in the Company's Annual Report on Form 10-K which was filed with the Securities and Exchange Commission on February 15, 2022. The unaudited consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Certain changes in presentation have been made to conform the prior period presentation to current period reporting.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities in the financial statements. Such estimates include, but are not limited to, the Company's estimates in connection with leasing equipment, including residual values and depreciable lives, values of assets held for sale and other long lived assets, provision for income tax, allowance for doubtful accounts, share-based compensation, goodwill and intangible assets. Actual results could differ from those estimates.

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 on an ongoing basis. The Company's three largest customers accounted for 22%, 17%, and 11%, respectively, of the Company's lease billings during the nine months ended September 30, 2022.


10


TRITON INTERNATIONAL LIMITED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Fair Value Measurements

For information on the fair value of equipment held for sale, debt, and the fair value of derivative instruments, please refer to Note 2 - "Equipment Held for Sale", Note 7 - "Debt" and Note 8 - "Derivative Instruments", respectively.

New Accounting Pronouncements

Recently Adopted Accounting Standards Updates

Lessors - Certain Leases with Variable Lease Payments

In July 2021, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") 2021-05, Lease (Topic 842): Lessors - Certain Leases with Variable Lease Payments. This guidance amends the lease classification accounting for lessors on certain leases with variable lease payments that do not depend on a reference index or a rate. The Company did not have such leases and therefore the Company's adoption of this standard on January 1, 2022 had no impact on its consolidated financial statements.

Note 2—Equipment Held for Sale

The Company's equipment held for sale is recorded at the lower of fair value less cost to sell, or carrying value at the time identified for sale. Fair value is measured using Level 2 inputs and is based predominantly on recent sales prices. An impairment charge is recorded when the carrying value of the asset exceeds its fair value less cost to sell. The following table summarizes the Company's net impairment charges recorded in Net gain on sale of leasing equipment on the consolidated statements of operations (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Impairment (loss) reversal on equipment held for sale$(239)$76 $(398)$39 
Gain (loss) on sale of equipment, net of selling costs26,707 25,530 90,907 78,925 
Net gain on sale of leasing equipment$26,468 $25,606 $90,509 $78,964 

Note 3—Intangible Assets

Intangible assets consist of lease intangibles for leases acquired with lease rates above market in a business combination. The following table summarizes the amortization of intangible assets as of September 30, 2022 (in thousands):
Year ending December 31,Total Intangible Assets
2022$2,503 
20234,657 
20241,963 
Total$9,123 

Amortization expense related to intangible assets was $2.6 million and $8.0 million for the three and nine months ended September 30, 2022, respectively, and $3.9 million and $12.8 million for the three and nine months ended September 30, 2021, respectively.

Note 4—Share-Based Compensation

The Company recognizes share-based compensation expense for share-based payment transactions based on the grant date fair value. The expense is recognized over the employee's requisite service period, which is generally the vesting period of the equity award. The Company recognized share-based compensation expense in administrative expenses of $3.2 million and $9.4 million for the three and nine months ended September 30, 2022, respectively, and $2.2 million and $7.3 million for the three and nine months ended September 30, 2021, respectively. Share-based compensation expense includes charges for performance-based shares and units that are deemed probable to vest.
11