Triton International Ltd [TRTN-PA] Filings

10-Q 1 trtn-20230331.htm 10-Q Q1 2023 trtn-20230331

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 March 31, 2023


☐			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)

(441) 294-8033

(Registrant's telephone number including area code)

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common shares, $0.01 par value per share	TRTN	New York Stock Exchange
8.50% Series A Cumulative Redeemable Perpetual Preference Shares	TRTN PRA	New York Stock Exchange
8.00% Series B Cumulative Redeemable Perpetual Preference Shares	TRTN PRB	New York Stock Exchange
7.375% Series C Cumulative Redeemable Perpetual Preference Shares	TRTN PRC	New York Stock Exchange
6.875% Series D Cumulative Redeemable Perpetual Preference Shares	TRTN PRD	New York Stock Exchange
5.75% Series E Cumulative Redeemable Perpetual Preference Shares	TRTN PRE	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 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 filer

☐

Smaller 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 April 25, 2023, there were 55,062,013 common shares at $0.01 par value per share of the Registrant outstanding.

Triton International Limited

Index


		Page No.
Item 1.	Consolidated Financial Statements (U naudited)	5
	Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022	5
	Consolidated Statements of Operations for the three months ended March 31, 2023 and 2022	6
	Consolidated Statements of Comprehensive Income for the three months ended March 31, 2023 and 2022	7
	Consolidated Statements of Shareholders' Equity for the three months ended March 31, 2023 and 2022	8
	Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022	9
	Notes to Consolidated Financial Statements	10
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	34
PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 6.	Exhibits	38
Signature		39

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q of Triton International Limited contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, 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 including any statements relating to the pending transaction with Brookfield Infrastructure Corporation, 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:

•risks relating to the pending acquisition of Triton by Brookfield Infrastructure Corporation (the ”Merger”), including the risk that the proposed Merger may not be completed in a timely manner or at all; the failure to receive, on a timely basis or otherwise, the required approvals of the proposed Merger by Triton’s shareholders; the possibility that any or all of the various conditions to the consummation of the proposed Merger may not be satisfied or waived, including the failure to receive any required regulatory approvals from any applicable governmental entities (or any conditions, limitations or restrictions placed on such approvals); the possibility that competing offers or acquisition proposals for Triton will be made; the occurrence of any event, change or other circumstance that could give rise to the termination of the Merger Agreement relating to the proposed Merger, including in circumstances which would require Triton to pay a termination fee; incurring substantial costs related to the proposed Merger; the effect of the announcement, pendency of the proposed Merger, or any failure to successfully complete the proposed Merger on Triton’s ability to attract, motivate or retain key executives and employees, our ability to maintain relationships with customers, vendors and others with whom Triton does business; risks related to the proposed Merger diverting management’s attention from Triton’s ongoing business operations; and the risk of shareholder litigation in connection with the proposed Merger, including resulting expense or delay;

•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;

•the impact of COVID-19 on our business and financial results;

•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 14, 2023 (the "2022 Annual Report on Form 10-K"), 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.

The foregoing list of important factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included herein and elsewhere. Any forward-looking statements made in this Form 10-Q are qualified in their entirety by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, Triton or its businesses or operations. Forward-looking statements speak only as of the date the statements are made. Except to the extent required by applicable law, we undertake no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

TRITON INTERNATIONAL LIMITED

Consolidated Balance Sheets

(In thousands, except share data)

(Unaudited)


	March 31, 2023		December 31, 2022
ASSETS:
Leasing equipment, net of accumulated depreciation of $4,305,897 and $4,289,259	$	9,290,628	$	9,530,396
Net investment in finance leases	1,621,341		1,639,831
Equipment held for sale	178,327		138,506
Revenue earning assets	11,090,296		11,308,733
Cash and cash equivalents	92,825		83,227
Restricted cash	103,032		103,082
Accounts receivable, net of allowances of $2,240 and $2,075	249,828		226,554
Goodwill	236,665		236,665
Lease intangibles, net of accumulated amortization of $293,184 and $291,837	5,273		6,620
Other assets	30,814		28,383
Fair value of derivative instruments	92,462		115,994
Total assets	$	11,901,195	$	12,109,258
LIABILITIES AND SHAREHOLDERS' EQUITY:
Equipment purchases payable	$	19,610	$	11,817
Fair value of derivative instruments	1,982		2,117
Deferred revenue	315,643		333,260
Accounts payable and other accrued expenses	86,225		71,253
Net deferred income tax liability	412,583		411,628
Debt, net of unamortized costs of $52,068 and $55,863	7,907,392		8,074,820
Total liabilities	8,743,435		8,904,895
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, 81,441,414 and 81,383,024 shares issued, respectively	814		814
Undesignated shares, $0.01 par value, 800,000 shares authorized, no shares issued and outstanding	—		—
Treasury shares, at cost, 26,239,401 and 24,494,785 shares, respectively	(1,194,519)		(1,077,559)
Additional paid-in capital	906,644		909,911
Accumulated earnings	2,629,499		2,531,928
Accumulated other comprehensive income (loss)	85,322		109,269


Total shareholders' equity	3,157,760		3,204,363
Total liabilities and shareholders' equity	$	11,901,195	$	12,109,258

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

TRITON INTERNATIONAL LIMITED

Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)


	Three Months Ended March 31,
	2023		2022
Leasing revenues:
Operating leases	$	370,348	$	388,945
Finance leases	27,375		28,143

Total leasing revenues	397,723		417,088

Equipment trading revenues	19,102		34,120
Equipment trading expenses	(18,033)		(29,979)
Trading margin	1,069		4,141

Net gain on sale of leasing equipment	15,500		28,969


Operating expenses:
Depreciation and amortization	148,435		160,716
Direct operating expenses	23,241		6,220
Administrative expenses	22,864		21,300

Provision (reversal) for doubtful accounts	(1,797)		(27)

Total operating expenses	192,743		188,209
Operating income (loss)	221,549		261,989
Other expenses:
Interest and debt expense	58,824		54,510

Unrealized (gain) loss on derivative instruments, net	(4)		(439)
Debt termination expense	—		36
Other (income) expense, net	(44)		(308)
Total other expenses	58,776		53,799
Income (loss) before income taxes	162,773		208,190
Income tax expense (benefit)	12,960		13,932
Net income (loss)	$	149,813	$	194,258

Less: dividend on preferred shares	13,028		13,028
Net income (loss) attributable to common shareholders	$	136,785	$	181,230
Net income per common share—Basic	$	2.45	$	2.79
Net income per common share—Diluted	$	2.44	$	2.78
Cash dividends paid per common share	$	0.70	$	0.65
Weighted average number of common shares outstanding—Basic	55,885		64,887
Dilutive restricted shares	255		267
Weighted average number of common shares outstanding—Diluted	56,140		65,154

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

TRITON INTERNATIONAL LIMITED

Consolidated Statements of Comprehensive Income

(In thousands)

(Unaudited)


	Three Months Ended March 31,
	2023		2022
Net income (loss)	$	149,813	$	194,258
Other comprehensive income (loss), net of tax:
Change in derivative instruments designated as cash flow hedges	(15,236)		74,017
Reclassification of (gain) loss on derivative instruments designated as cash flow hedges	(8,729)		6,307

Foreign currency translation adjustment	18		(166)
Other comprehensive income (loss), net of tax	(23,947)		80,158
Comprehensive income	125,866		274,416
Less:

Dividend on preferred shares	13,028		13,028
Comprehensive income attributable to common shareholders	$	112,838	$	261,388

Tax (benefit) provision on change in derivative instruments designated as cash flow hedges	$	(505)	$	5,546
Tax (benefit) provision on reclassification of (gain) loss on derivative instruments designated as cash flow hedges	$	(1,059)	$	463

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

TRITON INTERNATIONAL LIMITED

Consolidated Statements of Shareholders' Equity

(In thousands, except share amounts)

(Unaudited)


	Preferred Shares			Common Shares			Treasury Shares			Add'l Paid in Capital		Accumulated Earnings		Accumulated Other Comprehensive Income (Loss)		Total Equity
	Shares	Amount		Shares	Amount		Shares	Amount
Balance as of December 31, 2022	29,200,000	$	730,000	81,383,024	$	814	24,494,785	$	(1,077,559)	$	909,911	$	2,531,928	$	109,269	$	3,204,363

Share-based compensation	—	—		135,716	1		—	—		2,212		—		—		2,213
Treasury shares acquired	—	—		—	—		1,744,616	(116,960)		—		—		—		(116,960)
Share repurchase to settle shareholder tax obligations	—	—		(77,326)	(1)		—	—		(5,479)		—		—		(5,480)
Net income (loss)	—	—		—	—		—	—		—		149,813		—		149,813
Other comprehensive income (loss)	—	—		—	—		—	—		—		—		(23,947)		(23,947)


Common shares dividend declared ($0.70 per share)	—	—		—	—		—	—		—		(39,214)		—		(39,214)
Preferred shares dividend declared	—	—		—	—		—	—		—		(13,028)		—		(13,028)
Balance as of March 31, 2023	29,200,000	$	730,000	81,441,414	$	814	26,239,401	$	(1,194,519)	$	906,644	$	2,629,499	$	85,322	$	3,157,760


`	Preferred Shares			Common Shares			Treasury Shares			Add'l Paid in Capital		Accumulated Earnings		Accumulated Other Comprehensive Income (Loss)		Total Equity
	Shares	Amount		Shares	Amount		Shares	Amount
Balance as of December 31, 2021	29,200,000	$	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, 2022	29,200,000	$	730,000	81,367,045	$	814	16,686,873	$	(602,526)	$	901,150	$	2,139,777	$	31,339	$	3,200,554

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

TRITON INTERNATIONAL LIMITED

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	Three Months Ended March 31,
	2023		2022
Cash flows from operating activities:
Net income (loss)	$	149,813	$	194,258
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	148,435		160,716
Amortization of deferred debt cost and other debt related amortization	1,945		3,526

Lease related amortization	1,455		3,013


Share-based compensation expense	2,213		2,556
Net (gain) loss on sale of leasing equipment	(15,500)		(28,969)

Unrealized (gain) loss on derivative instruments	(4)		(439)
Debt termination expense	—		36
Deferred income taxes	2,519		5,193
Changes in operating assets and liabilities:
Accounts receivable, net	(25,332)		(23,835)
Deferred revenue	(17,617)		35,237
Accounts payable and other accrued expenses	15,120		4,143
Net equipment sold (purchased) for resale activity	8,724		(7,749)
Cash received (paid) for settlement of interest rate swaps	—		12,178
Cash collections on finance lease receivables, net of income earned	29,666		28,745
Other assets	1,380		10,061
Net cash provided by (used in) operating activities	302,817		398,670
Cash flows from investing activities:
Purchases of leasing equipment and investments in finance leases	(35,316)		(511,027)
Proceeds from sale of equipment, net of selling costs	87,585		57,274

Other	(6)		(135)
Net cash provided by (used in) investing activities	52,263		(453,888)
Cash flows from financing activities:

Purchases of treasury shares	(116,655)		(81,720)


Debt issuance costs	—		(5,507)
Borrowings under debt facilities	55,000		932,600
Payments under debt facilities and finance lease obligations	(226,502)		(766,686)
Dividends paid on preferred shares	(13,028)		(13,028)
Dividends paid on common shares	(38,867)		(41,950)


Other	(5,480)		(5,629)
Net cash provided by (used in) financing activities	(345,532)		18,080
Net increase (decrease) in cash, cash equivalents and restricted cash	$	9,548	$	(37,138)
Cash, cash equivalents and restricted cash, beginning of period	186,309		230,538
Cash, cash equivalents and restricted cash, end of period	$	195,857	$	193,400
Supplemental disclosures:
Interest paid	$	54,008	$	39,127
Income taxes paid (refunded)	$	214	$	137

Supplemental non-cash investing activities:
Equipment purchases payable	$	19,610	$	56,804

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

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 include the accounts of the Company and its subsidiaries and 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 March 31, 2023; the Consolidated Statements of Operations, the Consolidated Statements of Comprehensive Income, and the Consolidated Statements of Shareholders' Equity for the three months ended March 31, 2023 and 2022; and the Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022 are unaudited. The Consolidated Balance Sheet as of December 31, 2022, 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 months ended March 31, 2023 are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2023 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, 2022 included in the Company's Annual Report on Form 10-K which was filed with the Securities and Exchange Commission on February 14, 2023. 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 20%, 17%, and 13%, respectively, of the Company's lease billings for the three months ended March 31, 2023.

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.

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 March 31,
	2023		2022
Impairment (loss) reversal on equipment held for sale	$	(1,033)	$	(73)
Gain (loss) on sale of equipment, net of selling costs	16,533		29,042
Net gain on sale of leasing equipment	$	15,500	$	28,969

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 March 31, 2023 (in thousands):


Year ending December 31,	Total Intangible Assets
2023 (Remaining 9 months)	$	3,310
2024	1,963




Total	$	5,273

Amortization expense related to intangible assets was $1.3 million and $2.8 million for the three months ended March 31, 2023, and 2022 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 $2.2 million and $2.6 million for the three months ended March 31, 2023 and 2022, respectively. Share-based compensation expense includes charges for performance-based shares and units that are deemed probable to vest.

As of March 31, 2023, the total unrecognized compensation expense related to non-vested restricted share awards and units was $18.2 million, which is expected to be recognized on a straight-line basis through January 2026.

During the three months ended March 31, 2023, the Company issued 135,716 restricted shares, and canceled 77,326 vested shares to settle payroll taxes on behalf of employees. Additional shares may be issued based upon the satisfaction of certain performance criteria.

Note 5—Other Equity Matters

Share Repurchase Program

The Company's Board of Directors authorized repurchases of shares up to a specified dollar amount as part of its repurchase program. Purchases under the repurchase program may be made in the open market or privately negotiated transactions, and may include transactions pursuant to a repurchase plan administered in accordance with Rules 10b5-1 and 10b-18 under the Securities Exchange Act of 1934, as amended. Purchases may be made from time to time at the Company's

TRITON INTERNATIONAL LIMITED

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

discretion and the timing and amount of any share repurchases will be determined based on share price, market conditions, legal requirements, and other factors. The repurchase program does not obligate the Company to acquire any particular amount of common shares, and the Company may suspend or discontinue the repurchase program at any time.

During the three months ended March 31, 2023, the Company repurchased a total of 1,744,616 common shares at an average price per-share of $67.02 for a total of $116.9 million. As of March 31, 2023, $241.6 million remains available under the Share Repurchase Program.

Preferred Shares

The following table summarizes the Company's preferred share issuances (each, a "Series"):


Preferred Share Offering	Issuance	Liquidation Preference (in thousands)		# of Shares(1)
Series A 8.50% Cumulative Redeemable Perpetual Preference Shares ("Series A")	March 2019	$	86,250	3,450,000
Series B 8.00% Cumulative Redeemable Perpetual Preference Shares ("Series B")	June 2019	143,750		5,750,000
Series C 7.375% Cumulative Redeemable Perpetual Preference Shares ("Series C")	November 2019	175,000		7,000,000
Series D 6.875% Cumulative Redeemable Perpetual Preference Shares ("Series D")	January 2020	150,000		6,000,000
Series E 5.75% Cumulative Redeemable Perpetual Preference Shares ("Series E")	August 2021	175,000		7,000,000
		$	730,000	29,200,000

(1) Represents number of shares authorized, issued, and outstanding.

Each Series of preferred shares may be redeemed at the Company's option, at any time after approximately five years from original issuance, in whole or in part at a redemption price, plus an amount equal to all accumulated and unpaid dividends, whether or not declared. The Company may also redeem each Series of preferred shares prior to the lapse of the five year period upon the occurrence of certain events as described in each instrument, such as transactions that either transfer ownership of substantially all assets to a single entity or establish a majority voting interest by a single entity, and cause a downgrade or withdrawal of rating by the rating agency within 60 days of the event. If the Company does not elect to redeem each Series upon the occurrence of the preceding events, holders of preferred shares may have the right to convert their preferred shares into common shares. Specifically for Series E only, the Company may redeem the Series E Preference Shares if an applicable rating agency changes the methodology or criteria that were employed in assigning equity credit to securities similar to the Series E Preference Shares when originally issued, which either (a) shortens the period of time during which equity credit pertaining to the Series E Preference Shares would have been in effect had the methodology not been changed or (b) reduces the amount of equity credit as compared with the amount of equity credit that the rating agency had assigned to the Series E Preference Shares when originally issued.

Holders of preferred shares generally have no voting rights. If the Company fails to pay dividends for six or more quarterly periods (whether or not consecutive), holders will be entitled to elect two additional directors to the Board of Directors and the size of the Board of Directors will be increased to accommodate such election. Such right to elect two directors will continue until such time as there are no accumulated and unpaid dividends in arrears.

Dividends

Dividends on shares of each Series are cumulative from the date of original issue and will be payable quarterly in arrears on the 15th day of March, June, September and December of each year, when, as and if declared by the Company's Board of Directors. Dividends will be payable equal to the stated rate per annum of the $25.00 liquidation preference per share. The Series rank senior to the Company's common shares with respect to dividend rights and rights upon the Company's liquidation, dissolution or winding up, whether voluntary or involuntary.

TRITON INTERNATIONAL LIMITED

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company paid the following quarterly dividends on its issued and outstanding Series (in millions except for the per-share amounts):


	Three Months Ended March 31,
	2023		2022
Series	Per Share Payment	Aggregate Payment	Per Share Payment	Aggregate Payment
A(1)	$0.53	$1.8	$0.53	$1.8
B	$0.50	$2.9	$0.50	$2.9
C(1)	$0.46	$3.2	$0.46	$3.2
D(1)	$0.43	$2.6	$0.43	$2.6
E(1)	$0.36	$2.5	$0.36	$2.5
Total		$13.0		$13.0

(1) Per share payments rounded to the nearest whole cent.

As of March 31, 2023, the Company had cumulative unpaid preferred dividends of $2.2 million.

Note 6—Leases

Lessee

The Company's leases are primarily for multiple office facilities which are contracted under various cancellable and non-cancelable operating leases, most of which provide extension or early termination options. The Company's lease agreements do not contain any residual value guarantees or material restrictive covenants.

As of March 31, 2023, the weighted average implicit rate was 4.08% and the weighted average remaining lease term was 1.6 years.

The following table summarizes the impact of the Company's leases in its financial statements (in thousands):


Balance Sheet	Financial statement caption	March 31, 2023		December 31, 2022
Right-of-use asset - operating	Other assets	$	2,461	$	3,145
Lease liability - operating	Accounts payable and other accrued expenses	$	2,682	$	3,465


		Three Months Ended March 31,
Income Statement	Financial statement caption	2023		2022
Operating lease cost(1)	Administrative expenses	$	767	$	824

(1) Includes short-term leases that are immaterial.

Cash paid for amounts of lease liabilities included in operating cash flows was $0.8 million and $0.9 million for the three months ended March 31, 2023 and 2022, respectively.

TRITON INTERNATIONAL LIMITED

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Lessor

Operating Leases

As of March 31, 2023, the Company has deferred revenue balances related to operating leases with uneven payment terms. These amounts will be amortized into revenue as follows (in thousands):


Year ending December 31,
2023 (Remaining 9 months)	$	56,015
2024	76,295
2025	65,177
2026	42,857
2027	16,821
2028 and thereafter	58,478
Total	$	315,643

Finance Leases

The following table summarizes the components of the net investment in finance leases (in thousands):


	March 31, 2023		December 31, 2022
Future minimum lease payment receivable(1)	$	2,117,915	$	2,161,192
Estimated residual receivable(2)	218,411		218,004

Gross finance lease receivables(3)	2,336,326		2,379,196
Unearned income(4)	(714,985)		(739,365)
Net investment in finance leases(5)	$	1,621,341	$	1,639,831

(1) There were no executory costs included in gross finance lease receivables as of March 31, 2023 and December 31, 2022.

(2) The Company's finance leases generally include a purchase option at nominal amounts that is reasonably certain to be exercised, and therefore, the Company has immaterial residual value risk for assets.

(3) The gross finance lease receivable is reduced as billed to customers and reclassified to accounts receivable until paid by customers.

(4) There were no unamortized initial direct costs as of March 31, 2023 and December 31, 2022.

(5) One major customer represented 90% of the Company's finance lease portfolio as of March 31, 2023 and December 31, 2022. No other customer represented more than 10% of the Company's finance lease portfolio in each of those periods.

The Company’s finance lease portfolio lessees are primarily comprised of the largest international shipping lines. In its estimate of expected credit losses, the Company evaluates the overall credit quality of its finance lease portfolio. The Company considers an account past due when a payment has not been received in accordance with the terms of the related lease agreement and maintains allowances, if necessary, for doubtful accounts. These allowances are based on, but not limited to, historical experience which includes stronger and weaker economic cycles, each lessee's payment history, management's current assessment of each lessee's financial condition, consideration of current economic conditions and reasonable market forecasts.

During the first quarter of 2023, we reversed $1.8 million of a reserve established in 2022 on certain finance leases due to better than expected recoveries. As of March 31, 2023 and December 31, 2022, the Company does not have an allowance on its gross finance lease receivables and does not have any material past due balances.

TRITON INTERNATIONAL LIMITED

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 7—Debt

The table below summarizes the Company's key terms and carrying value of debt:


	March 31, 2023					December 31, 2022
	Outstanding Borrowings (in thousands)		Contractual Weighted Avg Interest Rate(1)	Maturity Range(1)		Outstanding Borrowings (in thousands)
				From	To

Secured Debt Financings
Asset-backed securitization term instruments	$	2,812,965	2.04%	February 2028	February 2031	$	2,890,467
Asset-backed securitization warehouse	235,000		6.41%	April 2029	April 2029	320,000

Total secured debt financings	3,047,965					3,210,467
Unsecured Debt Financings
Senior notes	2,900,000		2.11%	August 2023	March 2032	2,900,000
Term loan facilities	1,056,000		6.29%	May 2026	May 2026	1,080,000
Revolving credit facilities	960,000		6.28%	October 2027	October 2027	945,000
Total unsecured debt financings	4,916,000					4,925,000
Total debt financings	7,963,965					8,135,467
Unamortized debt costs	(52,068)					(55,863)
Unamortized debt premiums & discounts	(4,505)					(4,784)

Debt, net of unamortized costs	$	7,907,392				$	8,074,820

(1) Data as of March 31, 2023.

Asset-Backed Securitization Term Instruments

Under the Company's ABS facilities, indirect wholly-owned subsidiaries of the Company enter into debt agreements for ABS term instruments, including ABS notes. These subsidiaries are intended to be bankruptcy remote so that such assets are not available to creditors of the Company or its affiliates until and unless the related secured borrowings have been fully discharged. These transactions do not meet accounting requirements for sales treatment and are recorded as secured borrowings.

The Company’s borrowings under the ABS facilities amortize in monthly installments, typically in level payments over five or more years. These facilities provide for an advance rate against the net book values of designated eligible equipment. The net book values for purposes of calculating eligible equipment is determined according to the related debt agreement and may be different than those calculated per GAAP. The Company is required to maintain restricted cash balances on deposit in designated bank accounts equal to three to nine months of interest expense depending on the terms of each facility.

Asset-Backed Securitization Warehouse

Under the Company’s ABS warehouse facility, an indirect wholly-owned subsidiary of the Company issues ABS notes. This subsidiary is intended to be bankruptcy remote so that such assets are not available to creditors of the Company or its affiliates until and unless the related secured borrowings have been fully discharged. These transactions do not meet accounting requirements for sales treatment and are recorded as secured borrowings.

The Company's ABS warehouse facility has a borrowing capacity of $1,125.0 million that is available on a revolving basis to April 27, 2025 paying interest at term SOFR plus 1.60%. After the revolving period, borrowings will convert to term notes with a maturity date of April 27, 2029, paying interest at SOFR plus 2.60%.

During the revolving period, the borrowing capacity under this facility is determined by applying an advance rate against the net book values of designated eligible equipment. The net book values for purposes of calculating eligible equipment are determined according to the related debt agreement and may be different than those calculated per GAAP. The Company is required to maintain restricted cash balances on deposit in designated bank accounts equal to three months of interest expense.

TRITON INTERNATIONAL LIMITED

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Senior Notes

The Company’s senior notes are unsecured and have maturities ranging from 2 - 10 years and interest payments due semi-annually. The senior notes are pre-payable (in whole or in part) at the Company's option at any time prior to the maturity date, subject to certain provisions in the senior note agreements, including the payment of a make-whole premium in respect to such prepayment.

Term Loan Facility

The Company's term loan facility has a maturity date of May 27, 2026, which amortizes in quarterly installments and has a reference rate of term SOFR plus 1.48%. This facility is subject to covenants customary for unsecured financings of this type, primarily financial covenants that require us to maintain a minimum ratio of unencumbered assets to certain financial indebtedness.

Revolving Credit Facility

The revolving credit facility has a maturity date of October 26, 2027, and has a maximum borrowing capacity of $2,000.0 million. The reference rate is term SOFR plus 1.48%. This facility is subject to covenants customary for unsecured financings of this type, primarily financial covenants that require us to maintain a minimum ratio of unencumbered assets to certain financial indebtedness.

The Company hedges the risks associated with fluctuations in interest rates on a portion of its floating-rate debt by entering into interest rate swap agreements that convert a portion of its floating-rate debt to a fixed rate basis, thus reducing the impact of interest rate changes on future interest expense. The following table summarizes the Company's outstanding fixed-rate and floating-rate debt as of March 31, 2023:


	Balance Outstanding (in thousands)	Contractual Weighted Avg Interest Rate	Maturity Range		Weighted Avg Remaining Term
			From	To
Excluding impact of derivative instruments:
Fixed-rate debt	$5,712,965	2.08%	Aug 2023	Mar 2032	4.3 years
Floating-rate debt	$2,251,000	6.30%	May 2026	Apr 2029	3.8 years

Including impact of derivative instruments:
Fixed-rate debt	$5,712,965	2.08%
Hedged floating-rate debt	$1,327,750	3.71%
Total fixed and hedged debt	$7,040,715	2.38%
Unhedged floating-rate debt	$923,250	6.30%
Total debt	$7,963,965	2.84%

The fair value of total debt outstanding was $7,199.3 million and $7,264.7 million as of March 31, 2023 and December 31, 2022, respectively, and was measured using Level 2 inputs.

As of March 31, 2023, the maximum borrowing levels for the ABS warehouse and the revolving credit facilities are $1,125.0 million and $2,000.0 million, respectively. Certain of these facilities are governed by either borrowing bases or an unencumbered asset test that limits borrowing capacity. Based on those limitations, the availability under these credit facilities at March 31, 2023 was approximately $1,334.1 million.

The Company is subject to certain financial covenants under its debt financings. As of March 31, 2023, the Company was in compliance with all financial covenants in accordance with the terms of its debt agreements.

TRITON INTERNATIONAL LIMITED

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 8—Derivative Instruments

Interest Rate Swaps / Caps

The Company enters into derivative agreements to manage interest rate risk exposure. Interest rate swap agreements are utilized to limit the Company's exposure to interest rate risk by converting a portion of its floating-rate debt to a fixed rate basis, thus reducing the impact of interest rate changes on future interest expense. Interest rate swaps involve the receipt of floating-rate amounts in exchange for fixed-rate interest payments over the lives of the agreements without an exchange of the underlying principal amounts. These swaps are designated as cash flow hedges for accounting purposes and accordingly, changes in the fair value are recorded in accumulated other comprehensive income (loss) and reclassified to interest and debt expense when they are realized.

The Company has entered into offsetting $500.0 million notional interest rate cap agreements with substantially similar economic terms related to certain debt facility requirements. These derivatives are not designated as hedging instruments, and because they offset, changes in fair value have an immaterial impact on the financial statements.

The counterparties to these agreements are highly rated financial institutions. In the unlikely event that the counterparties fail to meet the terms of these agreements, the Company's exposure is limited to the interest rate differential on the notional amount at each monthly settlement period over the life of the agreements. The Company does not anticipate any non-performance by the counterparties.

Certain assets of the Company's subsidiaries are pledged as collateral for various ABS facilities and the amounts payable under certain derivative agreements. Additionally, the Company may be required to post cash collateral on certain derivative agreements if the fair value of these contracts represents a liability. Any amounts of cash collateral posted are included in Other assets on the Consolidated Balance Sheets and are presented in operating activities of the Consolidated Statements of Cash Flows. As of March 31, 2023, the Company posted cash collateral on derivative instruments of $1.8 million.

Within the next twelve months, we expect to reclassify $40.0 million of net unrealized and realized gains related to derivative instruments designated as cash flow hedges from accumulated other comprehensive income (loss) into earnings.

In the first quarter of 2023, the Company entered into forward starting interest rate swaps with a notional value of $300.0 million that will commence on August 1, 2023 and have a termination date of March 31, 2025. These swaps were designated as cash flow hedges to fix the interest rates on a portion of our floating rate debt.

As of March 31, 2023, the Company had derivative agreements in place to fix interest rates on a portion of the borrowings under its debt facilities with floating interest rates as summarized below:

Derivatives

Notional Amount (in millions)

Weighted Average
Fixed Leg (Pay) Interest Rate

Weighted Average
Remaining Term

Interest Rate Swap(1)

$1,327.8

2.22%

3.7 years

(1) Excludes certain interest rate swaps with an effective date in a future period ("forward starting swaps"). Including these instruments will increase total notional amount by $650.0 million and increase the weighted average remaining term to 5.4 years.

The following table summarizes the impact of derivative instruments on the Consolidated Statements of Operations and the Consolidated Statements of Comprehensive Income on a pretax basis (in thousands):


		Three Months Ended March 31,
	Financial statement caption	2023		2022
Non-Designated Derivative Instruments




Unrealized (gains) losses	Unrealized (gain) loss on derivative instruments, net	$	(4)	$	(439)

Designated Derivative Instruments
Realized (gains) losses	Interest and debt (income) expense	$	(9,788)	$	6,770
Unrealized (gains) losses	Comprehensive (income) loss	$	15,741	$	(79,563)

TRITON INTERNATIONAL LIMITED

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Fair Value of Derivative Instruments

The Company presents the fair value of derivative financial instruments on a gross basis as a separate line item on the Consolidated Balance Sheet.

The Company has elected to use the income approach to value its interest rate swap and cap agreements, using Level 2 market expectations at the measurement date and standard valuation techniques to convert future values to a single discounted present value. The Level 2 inputs for the interest rate swap and cap valuations are inputs other than quoted prices that are observable for the asset or liability (specifically LIBOR and swap rates and credit risk at commonly quoted intervals). In response to the expected phase out of LIBOR, the Company continues to work with its counterparties to identify an alternative reference rate. Substantially all of the Company's derivative agreements have fallback provisions that would govern their transition to another benchmark, and the Company also adopted various practical expedients which will facilitate the transition.

Note 9—Segment and Geographic Information

Segment Information

The Company operates its business in one industry, intermodal transportation equipment, and has two operating segments which also represent its reporting segments:

•Equipment leasing - the Company owns, leases and ultimately disposes of containers and chassis from its lease fleet.

•Equipment trading - the Company purchases containers from shipping line customers, and other sellers of containers, and resells these containers to container retailers and users of containers for storage or one-way shipment. Included in the equipment trading segment revenues are leasing revenues from equipment purchased for resale that is currently on lease until the containers are dropped off.

These operating segments were determined based on the chief operating decision maker's review and resource allocation of the products and services offered.

The following tables summarizes our segment information and the consolidated totals reported (in thousands):


	Three Months Ended March 31,
	2023						2022
	Equipment Leasing		Equipment Trading		Totals		Equipment Leasing		Equipment Trading		Totals
Total leasing revenues	$	395,851	$	1,872	$	397,723	$	413,691	$	3,397	$	417,088
Trading margin	—		1,069		1,069		—		4,141		4,141
Net gain on sale of leasing equipment	15,500		—		15,500		28,969		—		28,969
Depreciation and amortization expense	148,250		185		148,435		160,532		184		160,716
Interest and debt expense	58,568		256		58,824		54,251		259		54,510

Segment income (loss) before income taxes(1)	160,270		2,499		162,769		201,141		6,646		207,787
Purchases of leasing equipment and investments in finance leases(2)	$	35,316	$	—	$	35,316	$	511,027	$	—	$	511,027

(1) Segment income before income taxes excludes unrealized gains or losses on derivative instruments and debt termination expense. For the three months ended March 31, 2023, the Company recorded an immaterial amount of unrealized losses and did not record any debt termination expense. For the three months ended March 31, 2022, the Company recorded an unrealized gain of $0.4 million and an immaterial amount of debt termination expense.

(2) Represents cash disbursements for purchases of leasing equipment and investments in finance lease as reflected in the Consolidated Statements of Cash Flows for the periods indicated, but excludes cash flows associated with the purchase of equipment held for resale.


	March 31, 2023						December 31, 2022
	Equipment Leasing		Equipment Trading		Totals		Equipment Leasing		Equipment Trading		Totals
Equipment held for sale	$	142,869	$	35,458	$	178,327	$	97,463	$	41,043	$	138,506
Goodwill	220,864		15,801		236,665		220,864		15,801		236,665
Total assets	$	11,811,055	$	90,140	$	11,901,195	$	12,010,654	$	98,604	$	12,109,258

There are no intercompany revenues or expenses between segments. Certain administrative expenses have been allocated between segments based on an estimate of services provided to each segment. A portion of the Company's equipment purchased for resale in the equipment trading segment may be leased for a period of time and is reflected as leasing equipment as opposed to equipment held for sale and the cash flows associated with these transactions are reflected as purchases of leasing

TRITON INTERNATIONAL LIMITED

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

equipment and proceeds from the sale of equipment in investing activities in the Company's Consolidated Statements of Cash Flows.

Geographic Segment Information

Triton International Ltd [TRTN-PA] Filings
Triton International Ltd [TRTN] Filings
Triton International Ltd [TRTN-PE] Filings
Triton International Ltd [TRTN-PB] Filings
10-Q	[2023-05-02]
10-K	[2023-02-14]
10-Q	[2022-11-01]
10-Q	[2022-07-28]
10-Q	[2022-05-03]
10-K	[2022-02-15]
10-Q	[2021-10-26]
10-Q	[2021-07-27]
10-Q	[2021-04-29]
10-K	[2021-02-16]
10-Q	[2020-10-23]
10-Q	[2020-07-24]
10-Q	[2020-04-24]
10-K	[2020-02-14]
10-Q	[2019-10-25]
10-Q	[2019-07-25]
10-Q	[2019-04-30]
10-K	[2019-02-19]
10-Q	[2018-11-06]
10-Q	[2018-08-07]
10-Q	[2018-05-08]
10-K	[2018-02-27]
10-Q	[2017-11-13]
10-Q	[2017-08-11]
10-Q	[2017-05-15]
10-K	[2017-03-20]
10-Q	[2016-11-14]
10-Q	[2016-08-15]
10-Q	[2016-06-23]

Triton International Ltd [TRTN-PA] Filings

Triton International Ltd [TRTN] Filings

Triton International Ltd [TRTN-PE] Filings

Triton International Ltd [TRTN-PB] Filings