# EDGAR Filing Document

**Accession Number:** 0001660734
**File Stem:** 0001140361-23-011865
**Filing Date:** 2023-3
**Character Count:** 77911
**Document Hash:** b8433a069b953b7e2d96385a80f9e56b
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001140361-23-011865.hdr.sgml**: 20230315

**ACCESSION NUMBER**: 0001140361-23-011865

**CONFORMED SUBMISSION TYPE**: ARS

**PUBLIC DOCUMENT COUNT**: 1

**CONFORMED PERIOD OF REPORT**: 20221231

**FILED AS OF DATE**: 20230315

**DATE AS OF CHANGE**: 20230315

**EFFECTIVENESS DATE**: 20230315

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Triton International Ltd
- **CENTRAL INDEX KEY:** 0001660734
- **STANDARD INDUSTRIAL CLASSIFICATION:** SERVICES-EQUIPMENT RENTAL & LEASING, NEC [7359]
- **IRS NUMBER:** 981276572
- **STATE OF INCORPORATION:** D0
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** ARS
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-37827
- **FILM NUMBER:** 23735871

**BUSINESS ADDRESS:**
- **STREET 1:** VICTORIA PLACE, 5TH FLOOR
- **STREET 2:** 31 VICTORIA STREET
- **CITY:** HAMILTON
- **STATE:** D0
- **ZIP:** HM 10
- **BUSINESS PHONE:** (914) 697-2900

**MAIL ADDRESS:**
- **STREET 1:** VICTORIA PLACE, 5TH FLOOR
- **STREET 2:** 31 VICTORIA STREET
- **CITY:** HAMILTON
- **STATE:** D0
- **ZIP:** HM 10

### Attached PDF Documents

**Attachment 1:** `brhc10049706_ars.pdf`

![img-0.jpeg](img-0.jpeg)

![img-1.jpeg](img-1.jpeg)

# **2022**  
**Annual Report**  
**Triton International**  
**Limited**

TRITON INTERNATIONAL | ANNUAL REPORT & ACCOUNTS 2022

![img-2.jpeg](img-2.jpeg)

“We continued to use our strong cash flow to drive shareholder value, pivoting from aggressive investment in our container fleet to significant share repurchases.”

Brian M. Sondey

Chairman & Chief Executive Officer

INTRODUCTION

# Letter to shareholders

**BRIAN M. SONDEY**

CHAIRMAN & CHIEF EXECUTIVE OFFICER

![img-3.jpeg](img-3.jpeg)

Dear Shareholders:

Triton International had an outstanding year in 2022. We built on last year’s extraordinary performance, increasing our GAAP earnings per share and Adjusted earnings per share by more than 20% each, and we generated an Adjusted return on equity of 28.4%1. We continued to use our strong cash flow to drive shareholder value, pivoting from aggressive investment in our container fleet to significant share repurchases. Market conditions turned more challenging in 2022 due to a number of macroeconomic headwinds, but our strong performance demonstrates the strength and resilience of our business.

## 2022 Year in Review

Demand for containers softened in 2022 following a pandemic-related surge in trade growth and container demand that began in the second half of 2020.

In 2022, consumers shifted spending from goods back to services, and trade volumes were further impacted by macroeconomic headwinds including inflation, rising interest rates and slowing global GDP growth. In addition, logistical bottlenecks, such as lengthy port waiting times and trucker shortages, eased in 2022, speeding container turn times. As a result, new leasing activity slowed, container drop-off volumes increased and our utilization trended down, particularly in the second half of the year.

Despite these more challenging conditions, Triton’s performance held up very well, reflecting the strength of our lease portfolio and durable benefits of our sizable container fleet investments and attractive debt refinancings completed in 2020 and 2021. Our utilization pulled back from a peak of 99.6%, but it decreased gradually, and remained very high at 98.1% as of December 31. Similarly, our used container sale prices decreased through the year as more older containers became available for sale, but sale prices have remained high and we continued to generate sizable disposal gains throughout the year.

3

TRITON INTERNATIONAL | ANNUAL REPORT & ACCOUNTS 2022

“Triton’s well protected long-term lease portfolio and high investment IRR’s combine to drive strong and stable cash flow.”

Brian M. Sondey

Chairman & Chief Executive Officer

![img-4.jpeg](img-4.jpeg)

8

INTRODUCTION

The resiliency of our operating and financial performance reflects the durable enhancements we have made to our business. We have increased the share of our containers on multi-year finance and long-term leases to 88% of the equipment lease portfolio and increased the average duration of those leases to 76 months$^{2}$. Nearly 60% of our containers are now on lifecycle leases$^{3}$. We also aggressively grew our container fleet in 2021, adding over one million TEU of containers on high IRR, long-duration leases. Finally, we took advantage of low interest rates and the upgrade of our debt ratings to investment grade to refinance most of our long-term debt in 2020 and 2021, locking in low interest rates. The addition of large numbers of containers on high IRR leases combined with a reduction in our borrowing costs to significantly increase our leasing margin. The strength and duration of our lease portfolio and our focus on long-duration fixed-rate debt help lock-in this margin expansion.

### STRONG LEASING MARGIN EXPANSION

![img-5.jpeg](img-5.jpeg)

### SUSTAINED BY EXTENDED LEASE DURATIONS

![img-6.jpeg](img-6.jpeg)

## Powerful Cash Flow = Long-term Value Creation

Triton’s well protected long-term lease portfolio and high investment IRR’s combine to drive strong and stable cash flow.

Triton’s cash flow before capital expenditures (excluding certain items)$^{1,4}$ has increased 65% since 2017 to reach $1.6 billion in 2022. Our cash flow is also stable. We have generated strongly positive cash flows even in very challenging economic environments such as the global financial crisis in 2009 and the industrial and commodities recession in 2015 / 2016. Our strong and stable cash flow underpins our financial stability, and we have demonstrated our ability to use our cash flow to drive shareholder value across a wide range of market environments.

5

TRITON INTERNATIONAL | ANNUAL REPORT & ACCOUNTS 2022

We pivoted our investment focus in 2022, shifting from aggressive container investments that drove 31.5% growth in our revenue earnings assets in 2021, to sizable share repurchases. In 2022, we repurchased 9.1 million shares, representing 13.8% of our shares outstanding at the beginning of the year. This pivot demonstrates our nimble and disciplined approach to capital allocation. We have focused on fleet growth in periods with strong demand, and focused on returning capital to shareholders when demand has been weaker. We have also paid sizable regular dividends throughout this time and increased our dividend in each of the past three consecutive years. The impact on shareholder value is clear. Triton's total shareholder return has consistently outperformed the broader market.

## POWERFUL CASH FLOW

![img-7.jpeg](img-7.jpeg)

## UNDERPINS GROWTH IN CAPITAL RETURNS

### Year End 2016 to Year End 2022

| Fleet Growth | 45% |
| --- | --- |
| Total Capital Return | $2.0B |
| % Reduction in Share Count | -24% |
| Dividends per Share | $13.03 |
| Total Shareholder Return | 504% |
| Annualized Total Shareholder Return | 35% |

![img-8.jpeg](img-8.jpeg)

6

INTRODUCTION

## Outlook

The outlook for our market environment in 2023 appears challenging, but we expect Triton's performance will remain strong.

We expect container demand will be muted for much of this year due to current excess container capacity and modest expectations for global GDP growth. However, container supply and demand typically rebalance quickly due to the short order cycle for containers and the steady sale of older assets, and our strong lease portfolio ensures the vast majority of our containers stay on-hire through weaker periods.

We will also be well positioned to capitalize on renewed growth opportunities as market conditions improve. We often have our greatest investment success immediately following weaker periods in the market. We make substantial investments in ready inventory to help our customers manage market inflections, and we remain the go-to supplier for most of the world's largest shipping lines. We are also typically able to re-lease off-hire containers quickly when demand recovers.

From an investment standpoint, we expect share repurchases will continue to be an important focus of our capital allocation strategy while leasing demand remains slower, though we will be ready to pivot back to fleet investment when the time is right. Overall, we remain confident in our performance and optimistic about future opportunities for Triton.

I would like to thank all of our employees for their continued excellent performance and dedication, and I would like to thank our shareholders for your ongoing support.

Sincerely,

**Brian Sondey**

Chairman & Chief Executive Officer

(1) Adjusted earnings per share. Adjusted return on equity and Cash flow before capital expenditures (excluding certain items) as used in this letter to shareholders are non-GAAP financial measures. Refer to "Non-GAAP financial measures" set forth below for additional information.
(2) Calculations are based on weighting containers by net book value.
(3) Lifecycle leases structured so that containers will be sale age at lease expiration.
(4) Cash flow before capital expenditures (excluding certain items) is defined as income before income taxes plus unrealized (gain) loss on derivative instruments, net, debt termination expense, transaction and other costs, depreciation and amortization, principal payments on finance leases and NBV of container disposals less gain on sale of building, insurance recovery income, income attributable to non-controlling interest, preferred stock dividends, cash taxes, and other non-recurring adjustments that we believe investors should consider in evaluating our cash flow results.

7

TRITON INTERNATIONAL | ANNUAL REPORT & ACCOUNTS 2022

## Non-GAAP financial measures

This letter to shareholders includes certain non-GAAP financial measures and certain financial measures computed using non-GAAP components, as defined by the Securities and Exchange Commission, including Adjusted earnings per share, Adjusted return on equity and Cash flow before capital expenditures (excluding certain items). These measures are not prepared in accordance with GAAP and should not be considered as a substitute for the directly comparable GAAP measures. Additionally, our non-GAAP financial measures may be different from similar non-GAAP financial measures used by other companies. We have provided a reconciliation of the non-GAAP measures used in this letter to shareholders to the most directly comparable GAAP measures or components below.

![img-9.jpeg](img-9.jpeg)

INTRODUCTION

## Non-GAAP reconciliation of adjusted earnings per share

(In thousands, except per share amounts)

|  | Twelve Months Ended |  |
| --- | --- | --- |
|  | December 31, 2022 | December 31, 2021 |
| Net income attributable to common shareholders | $694,810 | $484,500 |
| Add (subtract): |  |  |
| Unrealized loss (gain) on derivative instruments, net | (303) | - |
| Debt termination expense | 1,589 | 131,818 |
| State and other income tax adjustments | 8,041 | (1,453) |
| Tax benefit from vesting of restricted shares | (1,291) | (683) |
| Adjusted net income | $702,846 | $614,182 |
| Adjusted net income per common share - Diluted | $11.32 | $9.16 |
| Weighted average number of common shares outstanding - Diluted | 62,100 | 67,068 |

## Calculation of adjusted return on equity

(In thousands)

|  | Twelve Months Ended |  |
| --- | --- | --- |
|  | December 31, 2022 | December 31, 2021 |
| Adjusted net income | $702,846 | $614,182 |
| Average Shareholders' equity (1)(2) | $2,473,570 | $2,187,185 |
| Adjusted return on equity | 28.4% | 28.1% |

(1) Average Shareholders' equity was calculated using the ending Shareholder's equity from each quarter in the current year and December 31 of the previous year.

(2) Average Shareholders' equity was adjusted to exclude preferred shares.

3

TRITON INTERNATIONAL | ANNUAL REPORT & ACCOUNTS 2022

## Non-GAAP reconciliation of cash flow before capital expenditures (excluding certain items)

(In thousands)

|  | Twelve Months Ended |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 | 2019 | 2018 | 2017 |
| Income (loss) before income taxes | $817,729 | $580,597 | $368,019 | $380,830 | $427,313 | $260,252 |
| Add/Subtract: |  |  |  |  |  |  |
| Unrealized (gain) loss on derivative instruments, net | (343) | - | 286 | 3,107 | 430 | (1,397) |
| Debt termination expense | 1,933 | 133,853 | 24,734 | 2,543 | 6,090 | 6,973 |
| Transaction and other costs | - | - | - | - | 88 | 9,272 |
| Gain on sale of building | - | - | - | - | (20,953) | - |
| Insurance recovery income | - | - | - | - | - | (6,764) |
| Income attributable to non-controlling interest | - | - | - | (592) | (7,117) | (8,928) |
| Adjusted pre-tax income | $819,319 | $714,450 | $393,039 | $385,888 | $405,851 | $259,408 |
| Add/Subtract: |  |  |  |  |  |  |
| Depreciation and amortization | 634,837 | 626,240 | 542,128 | 536,131 | 545,138 | 500,720 |
| Principal payments on finance leases | 180,075 | 74,117 | 78,333 | 73,429 | 64,372 | 60,673 |
| NBV of container disposals | 181,072 | 110,018 | 217,331 | 190,255 | 127,879 | 154,932 |
| Preferred stock dividends | (52,112) | (45,740) | (41,362) | (13,646) | - | - |
| Cash taxes | (47,010) | (7,933) | (2,191) | 895 | (4,484) | 288 |
| Non-recurring cash flows | (109,201) | - | - | - | - | - |
| Cash flow before capital expenditures (excluding certain items) | $1,606,980 | $1,471,152 | $1,187,278 | $1,172,952 | $1,138,756 | $976,021 |

15

# **TRITON INTERNATIONAL LIMITED**  
**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

Derivative instruments are designated or non-designated for hedge accounting purposes. The fair value of the derivative instruments is measured at each balance sheet date and is reflected on a gross basis on the consolidated balance sheets. The change in fair value of the derivative instruments designated as a cash flow hedge are recorded on the Consolidated Balance Sheets in accumulated other comprehensive income (loss) and are re-classified to interest and debt expense when the hedged interest payments are recognized. The change in fair value of non-designated derivative instruments is recorded in the Consolidated Statements of Operations as unrealized (gain) loss on derivative instruments, net.

# ***Income Taxes***

The Company uses the liability method of accounting for income taxes, which requires recognition of deferred tax assets and liabilities based on the expected future tax consequences of temporary differences that currently exist between the tax basis and financial reporting basis of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Any change in the tax rate which has an effect on deferred tax assets and liabilities is recognized as an increase or decrease to income in the period that includes the enactment date of the law that resulted in the change in tax rate.

The Company recognizes the effect of income tax positions which are more-likely-than-not of being sustained. If a position does not meet the more-likely-than-not criteria, the Company records a reserve against the tax position such that a tax benefit is recognized only in the amount that has a greater than 50% likelihood of being recognized. The full impact of any change in recognition or measurement of an uncertain tax position is reflected in the period in which such change occurs. Potential interest and penalties associated with such uncertain tax positions are recorded as a component of income tax expense.

# ***Foreign Currency Translation and Re-measurement***

The Company uses the U.S. dollar as its reporting currency. The net assets and operations that are denominated in foreign currency and are subject to foreign currency translation included in the consolidated financial statements are attributable primarily to the Company's U.K. subsidiary. The accounts of this subsidiary have been converted at rates of exchange in effect at year end as to balance sheet accounts and at the annual weighted average exchange rates for the statements of operations accounts. The effects of changes in exchange rates in translating foreign subsidiaries' financial statements are included in shareholders' equity as accumulated other comprehensive (loss) income.

The Company also has certain cash accounts, certain finance lease receivables and certain obligations that are denominated in currencies other than the Company's functional currency. These assets and liabilities are generally denominated in euros or British pounds, and are re-measured at each balance sheet date at the exchange rates in effect as of those dates. The impact of changes in exchange rates on the re-measurement of assets and liabilities are included in administrative expenses on the Consolidated Statements of Operations. The Company recorded a loss of $2.0 million, a loss of $1.0 million and a gain of $0.4 million in net foreign currency exchange gains or losses for the years ended December 31, 2022, 2021 and 2020, respectively.

# ***Share-based Compensation***

The Company measures and recognizes share-based awards granted to employees based on the grant date fair value. Share-based awards may be subject to forfeiture if certain employment conditions are not met. The Company has elected to account for forfeitures as they occur. Time based awards are measured at the grant date and are recognized as compensation expense over the employee's requisite service period, generally the vesting period of the equity award, on a straight-line basis. Performance-based awards are recognized as compensation expense over the requisite service period when satisfaction of the performance condition is considered probable. The Company also grants share-based awards to non-employee directors that vest immediately and are recognized as compensation expense based on the grant date fair value.

# ***Earnings Per Share***

Basic earnings per share is computed by dividing net income attributable to common shareholders by the weighted average number of common shares outstanding for the period. Any potential issuance of common shares, including those that are contingent and do not participate in dividends, are excluded from the weighted average number of common shares outstanding. Diluted earnings per share reflect the potential dilution that would occur if securities exercisable or convertible into common shares were exercised or converted into common shares, utilizing the treasury share method.

F-15

# **TRITON INTERNATIONAL LIMITED**  
 **NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

The Company excluded a de minimus amount of anti-dilutive restricted common shares from its calculation of diluted earnings per share for the years ended December 31, 2022, 2021, and 2020.

# ***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 3-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):

|  | Year Ended December 31, |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| Impairment (loss) reversal on equipment held for sale | $(887) | $16 | $(3,532) |
| Gain (loss) on sale of equipment, net of selling costs | 116,552 | 107,044 | 41,305 |
| Net gain on sale of leasing equipment | $115,665 | $107,060 | $37,773 |

# **Note 4-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 December 31, 2022 (in thousands):

| Years ending December 31, | Total Intangible Assets |
| --- | --- |
| 2023 | $4,657 |
| 2024 | 1,963 |
| Total | $6,620 |

Amortization expense related to intangible assets was $10.5 million, $16.5 million, and $22.5 million for the years ended December 31, 2022, 2021, and 2020, respectively.

# **Note 5-Restricted Cash**

The components of restricted cash as of December 31, 2022 and December 31, 2021 were as follows (in thousands):

|  | December 31, 2022 | December 31, 2021 |
| --- | --- | --- |
| Collection accounts | $37,432 | $37,372 |
| Trust accounts | 16,316 | 31,628 |
| Other restricted cash accounts | 49,334 | 55,370 |
| Total restricted cash | $103,082 | $124,370 |

F-16

# **TRITON INTERNATIONAL LIMITED**  
 **NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

# ***Collection accounts***

The Company maintains bank accounts for collections related to its containers that are financed ('the Collection Accounts'). Cash proceeds collected from leasing and disposition are deposited into the Collection Accounts and all expenses related to the operation of the containers are paid from the Collection Accounts. The Company considers the portion of the Collection Accounts which is being held in trust for the benefit of Asset Backed Securitization ('ABS') noteholders as restricted and the portion of the balance attributable to containers that are unsecured as unrestricted.

# ***Trust accounts***

Pursuant to certain debt agreements, cash is transferred from the Collection Accounts to separate accounts (the 'Trust Accounts'). The Trust Accounts are maintained by an indenture trustee on behalf of certain ABS noteholders. The cash in the Trust Accounts is used to pay related ABS debt service and related expenses. After such payments, any remaining cash in these accounts is transferred to certain unrestricted bank accounts of the Company and is included in cash and cash equivalents on the Consolidated Balance Sheets.

# ***Other restricted cash accounts***

Pursuant to certain asset-backed debt agreements, cash is held at separate accounts in order to maintain an amount equal to projected interest expense for a specified number of months.

# **Note 6-Debt**

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

|  | December 31, 2022 |  |  |  | December 31, 2021 |
| --- | --- | --- | --- | --- | --- |
|  | 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 | $2,890,467 | 2.04% | February 2028 | February 2031 | 3,801,777 |
| Asset-backed securitization warehouse | 320,000 | 5.92% | April 2029 | April 2029 | 225,000 |
| Finance lease obligations (2) | - | - | - | - | 15,042 |
| Total secured debt financings | 3,210,467 |  |  |  | 4,041,819 |
| Unsecured Debt Financings |  |  |  |  |  |
| Senior notes | 2,900,000 | 2.11% | August 2023 | March 2032 | 2,300,000 |
| Term loan facilities | 1,080,000 | 5.81% | May 2026 | May 2026 | 1,176,000 |
| Revolving credit facilities | 945,000 | 5.80% | October 2027 | October 2027 | 1,112,000 |
| Total unsecured debt financings | 4,925,000 |  |  |  | 4,588,000 |
| Total debt financings | 8,135,467 |  |  |  | 8,629,819 |
| Unamortized debt costs | (55,863) |  |  |  | (63,794) |
| Unamortized debt premiums & discounts | (4,784) |  |  |  | (3,508) |
| Debt, net of unamortized costs | $8,074,820 |  |  |  | $8,562,517 |

(1) Data as of December 31, 2022.

(2) On February 1, 2022, the Company exercised an early buyout option and paid $14.9 million of its remaining finance lease obligations.

F-17

# **TRITON INTERNATIONAL LIMITED**  
**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

# ***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.

On April 29, 2022, the Company extinguished an ABS term note and paid the outstanding balance of $391.3 million. As a result, the Company wrote off $1.3 million of debt related costs.

On September 20, 2022, the Company extinguished an ABS term loan facility and paid the outstanding balance of $186.1 million. As a result, the Company wrote off $0.2 million of debt related costs.

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 U.S. 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.

On April 27, 2022, the Company amended its existing ABS warehouse facility with $1,125.0 million borrowing capacity to extend the revolving period to April 27, 2025 and change the interest rate to the 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%. As part of this transaction, the Company wrote off $0.3 million of debt related costs.

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 U.S. GAAP. The Company is required to maintain restricted cash balances on deposit in designated bank accounts equal to three months of interest expense.

# ***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.

On January 19, 2022, the Company completed a $600.0 million 3.25% senior notes offering with a maturity date of March 15, 2032.

# ***Term Loan Facility***

The Company's term loan facility has a maturity date of May 27, 2026, which amortizes in quarterly installments. On October 26, 2022, the Company amended its term loan facility to change the reference rate from LIBOR to term SOFR. There was no change to the margin over the reference rate as a result of this amendment.

This facility is subject to covenants customary for unsecured financings of this type, primarily financial covenants that require us to maintain a maximum ratio of unencumbered assets to certain financial indebtedness.

F-18

# **TRITON INTERNATIONAL LIMITED**  
 **NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

# ***Revolving Credit Facility***

On October 26, 2022, the Company amended its revolving credit facility to extend the maturity date to October 26, 2027 and change the reference rate from LIBOR to term SOFR. There was no change to the margin over the reference rate as a result of these amendments. As part of this transaction, the Company wrote off $0.1 million of debt related costs.

The revolving credit facility has a maximum borrowing capacity of $2,000.0 million. 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 December 31, 2022:

|  | 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 | $5,790,467 | 2.08% | Aug 2023 | Mar 2032 | 4.5 years |
| Floating-rate debt | $2,345,000 | 5.82% | May 2026 | Apr 2029 | 4.1 years |
| Including impact of derivative instruments: |  |  |  |  |  |
| Fixed-rate debt | $5,790,467 | 2.08% |  |  |  |
| Hedged floating-rate debt | 1,327,750 | 3.71% |  |  |  |
| Total fixed and hedged debt | 7,118,217 | 2.38% |  |  |  |
| Unhedged floating-rate debt | 1,017,250 | 5.82% |  |  |  |
| Total debt outstanding | $8,135,467 | 2.80% |  |  |  |

The fair value of total debt outstanding was $7,264.7 million and $8,572.9 million as of December 31, 2022 and December 31, 2021, respectively, and was measured using Level 2 inputs.

As of December 31, 2022, 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 December 31, 2022 was approximately $1,262.3 million.

The Company is subject to certain financial covenants under its debt financings. As of December 31, 2022, the Company was in compliance with all financial covenants in accordance with the terms of its debt agreements.

# ***Debt Maturities***

At December 31, 2022, the Company's scheduled principal repayments and maturities were as follows (in thousands):

# **Years ending December 31,**

| 2023 | $ | 1,006,636 |
| --- | --- | --- |
| 2024 |  | 906,845 |
| 2025 |  | 429,341 |
| 2026 |  | 1,736,102 |
| 2027 |  | 1,340,992 |
| 2028 and thereafter |  | 2,715,551 |
| Total debt outstanding | $ | 8,135,467 |

F-19

# **TRITON INTERNATIONAL LIMITED**  
 **NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

# **Note 7-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 December 31, 2022, the Company posted cash collateral on derivative instruments of $2.0 million.

During the year ended December 31, 2022, the Company terminated the following derivative instruments (in millions):

| Derivative Instrument | Date Terminated | Notional Amount | Funds Received (Paid) (1) |
| --- | --- | --- | --- |
| Interest rate swap | January 11, 2022 | $150.0 | $6.0 |
| Interest rate swap | January 11, 2022 | $150.0 | $6.1 |
| Interest rate cap | April 27, 2022 | $200.0 | $0.3 |
| Interest rate cap | April 27, 2022 | $200.0 | $0.2 |
| Interest rate swap | April 29, 2022 | $62.5 | $1.4 |
| Interest rate swap | April 29, 2022 | $100.0 | $1.6 |
| Interest rate swap | April 29, 2022 | $100.0 | $0.9 |
| Interest rate swap | September 20, 2022 | $186.1 | $2.5 |

(1) For interest rate swaps that were originally designated as cash flow hedges, the amounts in accumulated other comprehensive income (loss) will be amortized to debt and interest expense in the Consolidated Statements of Operations over the remaining term of the derivative instruments at time of termination.

Within the next twelve months, we expect to reclassify $41.7 million of net unrealized and realized gains related to derivative instruments designated as cash flow hedges from accumulated other comprehensive income (loss) into earnings.

On September 30, 2022, the Company entered into an interest rate swap agreement with a scheduled maturity date of September 30, 2025. This contract is indexed to 1 month term SOFR, has a fixed rate of 3.82%, and has a notional amount of $200.0 million.

F-20

# **TRITON INTERNATIONAL LIMITED**  
 **NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

As of December 31, 2022, 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% | 4.0 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 $350.0 million and increase the weighted average remaining term to 5.3 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):

|  | Financial statement caption | Year Ended December 31, |  |  |
| --- | --- | --- | --- | --- |
|  |  | 2022 | 2021 | 2020 |
| Non-Designated Derivative Instruments |  |  |  |  |
| Realized (gains) losses | Other (income) expense, net | $ - | $ - | $(224) |
| Realized (gains) losses | Debt termination expense | $ - | $883 | $ - |
| Unrealized (gains) losses | Unrealized (gain) loss on derivative instruments, net | $(343) | $ - | $286 |
| Designated Derivative Instruments |  |  |  |  |
| Realized (gains) losses | Interest and debt (income) expense | $260 | $30,638 | $23,071 |
| Unrealized (gains) losses | Comprehensive (income) loss | $(168,156) | $(59,185) | $134,051 |

# **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 8-Leases**

# **Lessee**

The Company's leases are primarily for multiple office facilities which are contracted under various cancelable 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.

The weighted average implicit rate was 3.98% and 3.50% for the years ended December 31, 2022 and 2021, respectively and the weighted average remaining lease term was 1.6 years and 2.1 years for the years ended December 31, 2022 and 2021, respectively.

F-21

# **TRITON INTERNATIONAL LIMITED**  
 **NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

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

| Balance Sheet | Financial statement caption | December 31, 2022 | December 31, 2021 |
| --- | --- | --- | --- |
| Right-of-use asset - operating | Other assets | $3,145 | $5,099 |
| Lease liability - operating | Accounts payable and other accrued expenses | $3,465 | $5,790 |

| Income Statement | Financial statement caption | Year Ended December 31, 2022 | Year Ended December 31, 2021 | Year Ended December 31, 2020 |
| --- | --- | --- | --- | --- |
| Operating lease cost (1) | Administrative expenses | $3,205 | $3,183 | $3,005 |

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

Cash paid for amounts of lease liabilities included in operating cash flows was $3.4 million, $3.3 million, and $3.1 million for the years ended December 31, 2022, 2021, and 2020, respectively.

The following represents our future undiscounted cash flows related to lease liabilities for each of the next five years and thereafter as of December 31, 2022 (in thousands):

# **Years ending December 31,**

| 2023 | $ | 2,509 |
| --- | --- | --- |
| 2024 |  | 743 |
| 2025 |  | 343 |
| 2026 |  | - |
| 2027 |  | - |
| 2028 and thereafter |  | - |
| Total undiscounted future cash flows related to lease payments | $ | 3,595 |
| Less: imputed interest |  | (130) |
| Total present value of lease liability | $ | 3,465 |

The Company entered into an amended agreement in September 2022 with a non-affiliated third party to relocate office space in Purchase, New York (our principal executive offices) ('New Premises'). The lessor and its agents are currently renovating this new office space and the Company does not have control of this office space during renovations. The New Premises lease is expected to commence in mid-2023 when renovations are completed.

# **Lessor**

# **Operating Leases**

The following is the minimum future rental income as of December 31, 2022 under non-cancelable operating leases, assuming the minimum contractual lease term (in thousands):

# **Years ending December 31,**

| 2023 | $ | 1,049,676 |
| --- | --- | --- |
| 2024 |  | 897,993 |
| 2025 |  | 762,561 |
| 2026 |  | 602,042 |
| 2027 |  | 474,552 |
| 2028 and thereafter |  | 1,416,675 |
| Total | $ | 5,203,499 |

F-22

# **TRITON INTERNATIONAL LIMITED**  
 **NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

As of December 31, 2022, 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):

# **Years ending December 31,**

| 2023 | $ | 74,003 |
| --- | --- | --- |
| 2024 |  | 76,534 |
| 2025 |  | 65,793 |
| 2026 |  | 42,768 |
| 2027 |  | 16,370 |
| 2028 and thereafter |  | 57,792 |
| Total | $ | 333,260 |

# *Finance Leases*

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

|  | December 31, 2022 | December 31, 2021 |
| --- | --- | --- |
| Future minimum lease payment receivable (1) | $2,161,192 | $2,122,165 |
| Estimated residual receivable (2) | 218,004 | 205,994 |
| Gross finance lease receivables (3) | 2,379,196 | 2,328,159 |
| Unearned income (4) | (739,365) | (769,869) |
| Net investment in finance leases (5) | $1,639,831 | $1,558,290 |

(1) There were no executory costs included in gross finance lease receivables as of December 31, 2022 and December 31, 2021.

(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 December 31, 2022 and December 31, 2021.

(5) One major customer represented 90% and 91% of the Company's finance lease portfolio as of December 31, 2022 and 2021, respectively. No other customer represented more than 10% of the Company's finance lease portfolio in each of those years.

Maturities of the Company's gross finance lease receivables subsequent to December 31, 2022 are as follows (in thousands):

# **Years ending December 31,**

| 2023 | $ | 219,325 |
| --- | --- | --- |
| 2024 |  | 211,258 |
| 2025 |  | 208,939 |
| 2026 |  | 205,053 |
| 2027 |  | 172,778 |
| 2028 and thereafter |  | 1,361,843 |
| Total | $ | 2,379,196 |

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 2022, there was a default on certain finance leases in our portfolio for which the full amount is not expected to be recovered, and the Company recognized a net impairment charge of $5.9 million which is recorded in the provision for doubtful

F-23

# **TRITON INTERNATIONAL LIMITED**  
 **NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

accounts in the Consolidated Statements of Operations. At the time of default, the net investment in finance lease was re-classified to leasing equipment on the Consolidated Balance Sheet.

The Company has reviewed the remaining finance lease portfolio for expected credit losses considering the factors noted above for each lessee, and based on its assessment as of December 31, 2022, further credit losses are not expected in the portfolio. As of December 31, 2022 and December 31, 2021, the Company does not have an allowance on its gross finance lease receivables and does not have any material past due balances.

Also included in the provision for doubtful accounts is a benefit of $9.0 million related to the settlement and recovery of amounts due from customers that had defaulted a number of years ago.

# **Note 9-Share-Based Compensation**

The Company's 2016 Equity Incentive Plan ('2016 Equity Plan') provides for the granting of service-based and performance-based restricted shares and units to executives, employees and directors. The maximum aggregate number of shares and units that may be issued under the 2016 Equity Plan is 5,000,000 common shares and units. Any awards issued under the 2016 Equity Plan that are forfeited by the participant, will become available for future grant under the 2016 Equity Plan.

The following table summarizes the Company's restricted share activity for the year ended December 31, 2022:

|  | Number of Shares | Weighted Average Fair Value |
| --- | --- | --- |
| Non-vested balance at December 31, 2021 | 598,429 | $40.15 |
| Shares/units granted (1) | 216,982 | 62.36 |
| Shares/units vested (2) | (284,483) | 61.55 |
| Non-vested balance at December 31, 2022 | 530,928 | $50.61 |

(1) Additional shares and units may be granted based upon the satisfaction of certain performance criteria.

(2) Plan participants tendered 107,166 common shares to satisfy income tax withholding obligations. These shares were subsequently retired by the Company. Additionally, the Company issued 9,527 shares to employees that vested immediately and canceled 3,543 vested shares to settle payroll taxes.

The share-based compensation expense for the years ended December 31, 2022, 2021 and 2020 included in administrative expenses on the Consolidated Statements of Operations was $12.5 million, $9.4 million, and $9.9 million, respectively. Share based compensation expense includes charges for performance-based shares and units that are deemed probable to vest.

As of December 31, 2022, the total unrecognized compensation expense related to non-vested restricted share awards and units was approximately $10.2 million, which is expected to be recognized over the remaining weighted average vesting period of approximately 1.7 years.

# **Note 10-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 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 year ended December 31, 2022, the Company repurchased a total of 9,065,286 common shares at an average price per-share of $61.22 for a total of $555.2 million. As of December 31, 2022, $355.6 million remains available under the Share Repurchase Program.

F-24

# **TRITON INTERNATIONAL LIMITED**  
 **NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

# ***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) | Underwriting Discounts (in thousands) |
| --- | --- | --- | --- | --- |
| Series A 8.50% Cumulative Redeemable Perpetual Preference Shares ('Series A') | March 2019 | $86,250 | 3,450,000 | $2,717 |
| Series B 8.00% Cumulative Redeemable Perpetual Preference Shares ('Series B') | June 2019 | 143,750 | 5,750,000 | $4,528 |
| Series C 7.375% Cumulative Redeemable Perpetual Preference Shares ('Series C') | November 2019 | 175,000 | 7,000,000 | $5,513 |
| Series D 6.875% Cumulative Redeemable Perpetual Preference Shares ('Series D') | January 2020 | 150,000 | 6,000,000 | $4,725 |
| Series E 5.75% Cumulative Redeemable Perpetual Preference Shares ('Series E') | August 2021 | 175,000 | 7,000,000 | $5,513 |
|  |  | $730,000 | 29,200,000 | $22,996 |

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

As a result of these offerings, the Company received $707.0 million in aggregate net proceeds which were used for general corporate purposes, including the purchase of containers, the repurchase of outstanding common shares, the payment of dividends, and the repayment or repurchase of outstanding indebtedness.

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.

F-25

# **TRITON INTERNATIONAL LIMITED**
**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

The Company paid the following quarterly dividends during the years ended December 31, 2022, 2021, and 2020 on its issued and outstanding Series (in millions except for the per-share amounts):

| Series | Year ended December 31, |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | 2022 |  | 2021 |  | 2020 |  |
|  | Per Share Payment | Aggregate Payment | Per Share Payment | Aggregate Payment | Per Share Payment | Aggregate Payment |
| A (1) | $2.12 | $7.2 | $2.12 | $7.2 | $2.12 | $7.2 |
| B | $2.00 | $11.6 | $2.00 | $11.6 | $2.00 | $11.6 |
| C (1) | $1.84 | $12.8 | $1.84 | $12.8 | $1.84 | $12.8 |
| D (1) | $1.72 | $10.4 | $1.72 | $10.4 | $1.53 | $9.3 |
| E (1) | $1.44 | $10.1 | $0.47 | $3.3 | $- | $ - |
| Total |  | $52.1 |  | $45.3 |  | $40.9 |

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

As of December 31, 2022, the Company had cumulative unpaid preferred dividends of $2.2 million.

# *Accumulated Other Comprehensive Income*

The following table summarizes the components of accumulated other comprehensive income (loss), net of tax, for the years ended December 31, 2022, 2021, and 2020 (in thousands):

|  | Cash Flow Hedges | Foreign Currency Translation | Accumulated Other Comprehensive (Loss) Income |
| --- | --- | --- | --- |
| Balance at January 1, 2020 | $(27,096) | $(4,537) | $(31,633) |
| Change in derivative instruments designated as cash flow hedges (1) | (123,357) | - | (123,357) |
| Reclassification of (gain) loss on derivative instruments designated as cash flow hedges (1) | 21,927 | - | 21,927 |
| Foreign currency translation adjustment | - | 28 | 28 |
| Balance at December 31, 2020 | $(128,526) | $(4,509) | $(133,035) |
| Change in derivative instruments designated as cash flow hedges (1) | 55,599 | - | 55,599 |
| Reclassification of (gain) loss on derivative instruments designated as cash flow hedges (1) | 28,722 | - | 28,722 |
| Foreign currency translation adjustment | - | (105) | (105) |
| Balance at December 31, 2021 | $(44,205) | $(4,614) | $(48,819) |
| Change in derivative instruments designated as cash flow hedges (1) | 157,647 | - | 157,647 |
| Reclassification of (gain) loss on derivative instruments designated as cash flow hedges (1) | 1,168 | - | 1,168 |
| Foreign currency translation adjustment | - | (727) | (727) |
| Balance at December 31, 2022 | $114,610 | $(5,341) | $109,269 |

(1) Refer to Note 7 - "Derivative Instruments" for reclassification impact on the Consolidated Statements of Operations.

# **Note 11-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.

F-26

# **TRITON INTERNATIONAL LIMITED**
**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

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):

| As of and for the Year Ended December 31, 2022 | Equipment Leasing | Equipment Trading | Totals |
| --- | --- | --- | --- |
| Total leasing revenues | $1,665,880 | $13,806 | $1,679,686 |
| Trading margin | - | 16,004 | 16,004 |
| Net gain on sale of leasing equipment | 115,665 | - | 115,665 |
| Depreciation and amortization expense | 634,090 | 747 | 634,837 |
| Interest and debt expense | 224,470 | 1,621 | 226,091 |
| Segment income (loss) before income taxes (1) | 794,280 | 25,039 | 819,319 |
| Equipment held for sale | 97,463 | 41,043 | 138,506 |
| Goodwill | 220,864 | 15,801 | 236,665 |
| Total assets | 12,010,654 | 98,604 | 12,109,258 |
| Purchases of leasing equipment and investments in finance leases (2) | $943,062 | $ - | $943,062 |
| As of and for the Year Ended December 31, 2021 | Equipment Leasing | Equipment Trading | Totals |
| Total leasing revenues | $1,519,434 | $14,446 | $1,533,880 |
| Trading margin | - | 34,099 | 34,099 |
| Net gain on sale of leasing equipment | 107,060 | - | 107,060 |
| Depreciation and amortization expense | 625,519 | 721 | 626,240 |
| Interest and debt expense | 220,292 | 1,732 | 222,024 |
| Segment income (loss) before income taxes (1) | 673,477 | 40,973 | 714,450 |
| Equipment held for sale | 16,936 | 31,810 | 48,746 |
| Goodwill | 220,864 | 15,801 | 236,665 |
| Total assets | 12,543,270 | 100,568 | 12,643,838 |
| Purchases of leasing equipment and investments in finance leases (2) | $3,434,394 | $ - | $3,434,394 |
| As of and for the Year Ended December 31, 2020 | Equipment Leasing | Equipment Trading | Totals |
| Total leasing revenues | $1,300,346 | $7,561 | $1,307,907 |
| Trading margin | - | 14,799 | 14,799 |
| Net gain on sale of leasing equipment | 37,773 | - | 37,773 |
| Depreciation and amortization expense | 541,406 | 722 | 542,128 |
| Interest and debt expense | 251,145 | 1,834 | 252,979 |
| Segment income (loss) before income taxes (1) | 375,957 | 17,082 | 393,039 |
| Equipment held for sale | 43,275 | 24,036 | 67,311 |
| Goodwill | 220,864 | 15,801 | 236,665 |
| Total assets | 9,612,251 | 100,282 | 9,712,533 |
| Purchases of leasing equipment and investments in finance leases (2) | $744,129 | $ - | $744,129 |

(1) Segment income before income taxes excludes unrealized gains or losses on derivative instruments and debt termination expense. The Company recorded debt termination expense of $1.9 million, $133.9 million, and $24.7 million for the years ended December 31, 2022, 2021, and 2020, respectively and an unrealized gain of $0.3 million, nil, and an unrealized loss of $0.3 million for the years ended December 31, 2022, 2021, and 2020, respectively.

(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.

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

F-27

# **TRITON INTERNATIONAL LIMITED**  
 **NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

# ***Geographic Segment Information***

The Company generates the majority of its leasing revenues from international containers which are deployed by its customers in a wide variety of global trade routes. The majority of the Company's leasing related revenue is denominated in U.S. dollars.

The following table summarizes the geographic allocation of total leasing revenues for the years ended December 31, 2022, 2021, and 2020 based on customers' primary domicile (in thousands):

|  | Year Ended December 31, |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| Total leasing revenues: |  |  |  |
| Asia | $602,985 | $556,837 | $471,820 |
| Europe | 876,691 | 807,735 | 685,906 |
| Americas | 142,822 | 118,430 | 105,643 |
| Bermuda | 3,135 | 2,424 | 1,820 |
| Other International | 54,053 | 48,454 | 42,718 |
| Total | $1,679,686 | $1,533,880 | $1,307,907 |

Since the majority of the Company's containers are used internationally, where no one container is domiciled in one particular place for a prolonged period of time, all of the Company's long-lived assets are considered to be international.

The following table summarizes the geographic allocation of equipment trading revenues for the years ended December 31, 2022, 2021 and 2020 based on the location of the sale (in thousands):

|  | Year Ended December 31, |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| Total equipment trading revenues: |  |  |  |
| Asia | $71,739 | $64,588 | $22,748 |
| Europe | 27,620 | 22,167 | 22,031 |
| Americas | 43,120 | 47,644 | 30,681 |
| Bermuda | - | - | - |
| Other International | 5,395 | 8,570 | 10,320 |
| Total | $147,874 | $142,969 | $85,780 |

# **Note 12-Income Taxes**

The Company is a Bermuda exempted company. Bermuda does not impose a corporate income tax. The Company is subject to taxation in certain foreign jurisdictions on a portion of its income attributable to such jurisdictions. The two main subsidiaries of Triton are TCIL and TAL. TCIL is a Bermuda exempted company and therefore no income tax is imposed. However, a portion of TCIL's income is subject to taxation in the U.S. TAL is a U.S. company and therefore is subject to taxation in the U.S.

F-28

# **TRITON INTERNATIONAL LIMITED**  
 **NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

The following table sets forth the income tax expense (benefit) for the periods indicated (in thousands):

|  | December 31, 2022 | December 31, 2021 | December 31, 2020 |
| --- | --- | --- | --- |
| Current taxes: |  |  |  |
| Bermuda | $ - | $ - | $ - |
| U.S. | 46,380 | 6,528 | 2,518 |
| Foreign | 952 | 230 | 60 |
|  | $47,332 | $6,758 | $2,578 |
| Deferred taxes: |  |  |  |
| Bermuda | $ - | $ - | $ - |
| U.S. | 23,522 | 43,604 | 35,628 |
| Foreign | (47) | (5) | 34 |
|  | 23,475 | 43,599 | 35,662 |
| Total income tax expense (benefit) | $70,807 | $50,357 | $38,240 |

The following table sets forth the components of income (loss) before income taxes (in thousands):

|  | December 31, 2022 | December 31, 2021 | December 31, 2020 |
| --- | --- | --- | --- |
| Bermuda sources | $532,391 | $346,023 | $200,453 |
| U.S. sources | 284,468 | 233,518 | 166,031 |
| Foreign sources | 870 | 1,056 | 1,535 |
| Income (loss) before income taxes | $817,729 | $580,597 | $368,019 |

The following table sets forth the difference between the Bermuda statutory income tax rate and the effective tax rate on the Consolidated Statements of Operations for the periods indicated below:

|  | December 31, 2022 | December 31, 2021 | December 31, 2020 |
| --- | --- | --- | --- |
| Bermuda tax rate | - % | - % | - % |
| Change in enacted tax act | 0.66% | - % | 0.65% |
| U.S. income taxed at other than the statutory rate | 7.58% | 8.75% | 9.80% |
| Effect of uncertain tax positions | (0.06)% | (0.09)% | (0.12)% |
| Foreign income taxed at other than the statutory rate | 0.16% | 0.11% | 0.14% |
| Effect of permanent differences | 0.10% | 0.21% | 0.19% |
| Other discrete items | 0.22% | (0.31)% | (0.27)% |
| Effective income tax rate | 8.66% | 8.67% | 10.39% |

F-29

# **TRITON INTERNATIONAL LIMITED**  
 **NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

The following table sets forth the components of deferred income tax assets and liabilities (in thousands):

|  | December 31, 2022 | December 31, 2021 |
| --- | --- | --- |
| Deferred income tax assets: |  |  |
| Net operating loss and interest expense limitation carryforwards | $3,669 | $1,237 |
| Allowance for losses | - | 13 |
| Derivative instruments | - | 4,810 |
| Deferred income | 2,444 | 366 |
| Accrued liabilities and other payables | 3,076 | 5,138 |
| Total gross deferred tax assets | 9,189 | 11,564 |
| Less: Valuation allowance | (200) | (200) |
| Net deferred tax assets | $8,989 | $11,364 |
| Deferred income tax liabilities: |  |  |
| Accelerated depreciation | $337,375 | $333,610 |
| Goodwill and other intangible amortization | 3,974 | 3,879 |
| Derivative instruments | 5,383 | 121 |
| Deferred income | 302 | 2,613 |
| Deferred partnership income (loss) | 73,583 | 47,150 |
| Total gross deferred tax liability | 420,617 | 387,373 |
| Net deferred income tax liability | $411,628 | $376,009 |

At December 31, 2022, the Company had U.S. state net operating loss carryforwards of $13.5 million that expire at various times beginning in 2024 and net interest expense limitation carryforwards of $13.5 million that have an indefinite carryforward period. The Company maintained a valuation allowance of $0.2 million at December 31, 2022 related to U.S. state net operating losses, as it is more likely than not that the Company will be unable to utilize these losses. There has been no change in the Company's valuation allowance from December 31, 2021.

In assessing the potential future realization of deferred tax assets, management considers whether it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods during which the deferred tax assets are deductible, the Company believes it is more-likely-than-not that the Company will realize the benefits of these deductible differences at December 31, 2022.

Certain income taxes on unremitted earnings have not been reflected on the consolidated financial statements because such earnings are intended to be permanently reinvested in those jurisdictions. Such earnings and related income taxes are estimated to be approximately $236.6 million and $70.7 million, respectively, at December 31, 2022.

The following table sets forth the unrecognized tax benefit amounts (in thousands):

|  | December 31, 2022 | December 31, 2021 |
| --- | --- | --- |
| Beginning balance at January 1 | $327 | $650 |
| Lapse of statute of limitations | (327) | (337) |
| Foreign exchange adjustment | - | 14 |
| Ending balance at December 31 | $ - | $327 |

The Company files income tax returns in several jurisdictions including the U.S. and certain U.S. states. The tax years 2019 through 2022 remain subject to examination by major tax jurisdictions.

F-30

# **TRITON INTERNATIONAL LIMITED**  
 **NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

The Company accrues interest and penalties related to income taxes in the provision for income taxes. The following table summarizes interest and penalty expense (in thousands):

|  | December 31, 2022 | December 31, 2021 | December 31, 2020 |
| --- | --- | --- | --- |
| Interest expense (benefit) | $(86) | $(78) | $(51) |
| Penalty expense (benefit) | $(98) | $(97) | $(93) |

The following table summarizes the components of income taxes payable included in Accounts payable and other accrued expenses on the Consolidated Balance Sheets (in thousands):

|  | December 31, 2022 | December 31, 2021 |
| --- | --- | --- |
| Corporate income taxes payable | $ - | $108 |
| Unrecognized tax benefits | - | 327 |
| Interest accrued | - | 86 |
| Penalties | - | 98 |
| Income taxes payable | $ - | $619 |

# **Note 13-Other Postemployment Benefits**

The Company's U.S. employees participate in a defined contribution plan. Under the provisions of the plan, an employee is fully vested with respect to Company contributions after four years of service. The Company matches employee contributions of 100% up to a maximum of $6,000 of qualified compensation and may, at its discretion, make voluntary contributions. The Company's contributions were $0.8 million for the year ended December 31, 2022, and $0.7 million for the years ended December 31, 2021, and 2020, respectively.

# **Note 14-Commitments and Contingencies**

# ***Container Equipment Purchase Commitments***

As of December 31, 2022, the Company had commitments to purchase equipment in the amount of $29.1 million to be paid in 2023.

# ***Lease Commitment***

In September 2022, the Company entered into an amended lease agreement for New Premises and therefore, has a commitment to pay base rent of approximately $15 million over the lease term of 12 years. The lease is expected to commence in mid-2023 when renovations are completed.

# ***Contingencies***

The Company is party to various pending or threatened legal or regulatory proceedings arising in the ordinary course of its business. Based upon information presently available, the Company does not expect any liabilities arising from these matters to have a material effect on the consolidated financial position, results of operations or cash flows of the Company.

# **Note 15-Related Party Transactions**

The Company holds a 50% interest in TriStar Container Services (Asia) Private Limited ('TriStar'), which is primarily engaged in the selling and leasing of container equipment in the domestic and short sea markets in India. The Company's equity investment in TriStar is included in Other assets on the Consolidated Balance Sheets. The Company received payments on finance leases with TriStar of $2.0 million for both years ended December 31, 2022 and 2021. The Company has a direct finance lease balance with TriStar of $7.4 million and $8.9 million as of the years ended December 31, 2022 and December 31, 2021.

F-31

# **TRITON INTERNATIONAL LIMITED**  
 **NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

# **Note 16-Subsequent Events**

On February 8, 2023, the Company's Board of Directors approved and declared a quarterly cash dividend of $0.70 per share on its issued and outstanding common shares, payable on March 24, 2023 to shareholders of record at the close of business on March 10, 2023.

On February 8, 2023, the Company's Board of Directors also approved and declared a cash dividend on its issued and outstanding preferred shares, payable on March 15, 2023 to holders of record as the close of business on March 8, 2023 as follows:

| Preferred Share Offering | Dividend Rate | Dividend Per Share |
| --- | --- | --- |
| Series A | 8.500% | $0.5312500 |
| Series B | 8.000% | $0.5000000 |
| Series C | 7.375% | $0.4609375 |
| Series D | 6.875% | $0.4296875 |
| Series E | 5.750% | $0.3593750 |

F-32

# **SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT**

# **TRITON INTERNATIONAL LIMITED**

# **Parent Company Condensed Balance Sheets  
(In thousands, except share data)**

|  | December 31, 2022 | December 31, 2021 |
| --- | --- | --- |
| ASSETS: |  |  |
| Cash and cash equivalents | $8 | $13 |
| Investment in subsidiaries | 3,212,600 | 3,071,654 |
| Other assets | 37 | 35 |
| Total assets | $3,212,645 | $3,071,702 |
| LIABILITIES AND SHAREHOLDERS' EQUITY: |  |  |
| Accounts payable and other accrued expenses | $7,126 | $5,936 |
| Payables with affiliates, net | 1,156 | 1,054 |
| Total liabilities | 8,282 | 6,990 |
| 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, 81,383,024 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, 24,494,785 and 15,429,499 shares, respectively | (1,077,559) | (522,360) |
| Additional paid-in capital | 909,911 | 904,224 |
| Accumulated earnings | 2,531,928 | 2,000,854 |
| Accumulated other comprehensive income | 109,269 | (48,819) |
| Total shareholders' equity | 3,204,363 | 3,064,712 |
| Total liabilities and shareholders' equity | $3,212,645 | $3,071,702 |

S-1

# **TRITON INTERNATIONAL LIMITED**

# **Parent Company Condensed Statements of Operations  
(In thousands)**

|  | Year Ended December 31, |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| Revenues: |  |  |  |
| Revenues | $ - | $ - | $ - |
| Total revenues | - | - | - |
| Operating expenses: |  |  |  |
| Administrative expenses | 9,986 | 8,061 | 7,298 |
| Operating income (loss) | (9,986) | (8,061) | (7,298) |
| Other income (expenses): |  |  |  |
| Interest and debt expense | - | - | - |
| Net income from subsidiaries | 756,908 | 538,301 | 337,077 |
| Total other income (expenses) | 756,908 | 538,301 | 337,077 |
| Income (loss) before income taxes | 746,922 | 530,240 | 329,779 |
| Income tax expense (benefit) | - | - | - |
| Net income (loss) | $746,922 | $530,240 | $329,779 |

S-2

# **TRITON INTERNATIONAL LIMITED**

# **Parent Company Condensed Statements of Cash Flows  
(In thousands)**

|  | Year Ended December 31, |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| Cash flows from operating activities: |  |  |  |
| Net income (loss) | $746,922 | $530,240 | $329,779 |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |  |  |
| Net (income) loss from subsidiaries | (756,908) | (538,301) | (337,077) |
| Dividends received from subsidiaries | 778,388 | 293,866 | 352,903 |
| Share-based compensation expense | 1,348 | 1,268 | 1,177 |
| Changes in operating assets and liabilities: |  |  |  |
| Other | (1,374) | (1,236) | (589) |
| Net cash provided by (used in) operating activities | 768,376 | 285,837 | 346,193 |
| Cash flows from investing activities: |  |  |  |
| Investment in subsidiary | - | (169,488) | (145,157) |
| Net cash provided by (used in) investing activities | - | (169,488) | (145,157) |
| Cash flows from financing activities: |  |  |  |
| Issuance of preferred shares, net of underwriting discount | - | 169,488 | 145,275 |
| Purchases of treasury shares | (554,095) | (82,528) | (158,312) |
| Dividends paid on preferred shares | (52,112) | (45,321) | (40,933) |
| Dividends paid on common shares | (162,174) | (157,312) | (146,476) |
| Other | - | (664) | (590) |
| Net cash provided by (used in) financing activities | (768,381) | (116,337) | (201,036) |
| Net increase (decrease) in cash and cash equivalents | $(5) | $12 | $ - |
| Cash, cash equivalents and restricted cash, beginning of period | 13 | 1 | 1 |
| Cash, cash equivalents and restricted cash, end of period | $8 | $13 | $1 |

S-3

# **SCHEDULE II**

# **TRITON INTERNATIONAL LIMITED**  
**Valuation and Qualifying Accounts**  
**(In thousands)**

| Accounts Receivable-Allowance for doubtful accounts: | For the year ended December 31, |  |  |
| --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 |
| Beginning Balance | $1,178 | $2,192 | $1,276 |
| Additions / (Reversals) | 910 | (910) | 1,082 |
| Write-offs | (13) | (104) | (166) |
| Ending Balance | $2,075 | $1,178 | $2,192 |

S-4

# Corporate information

## Board of Directors

Robert W. Alspaugh
Malcolm P. Baker
Annabelle Bexiga
Claude Germain
Kenneth Hanau
John S. Hextall
Niharika Ramdev
Robert L. Rosner (Lead Independent Director)
Brian M. Sondey (Chairman)
Simon R. Vernon

## Audit Committee

Robert W. Alspaugh (Chair)
Malcolm P. Baker
Annabelle Bexiga
Kenneth Hanau
Niharika Ramdev

## Compensation and Talent Management Committee

Claude Germain (Chair)
John S. Hextall
Robert L. Rosner

## Nominating and Corporate Governance Committee

Robert L. Rosner (Chair)
Claude Germain
John S. Hextall

## Executive Officers

### Brian M. Sondey

Chairman of the Board, Director
& Chief Executive Officer

### Michael S. Pearl

Senior Vice President, Chief Financial Officer

### John O'Callaghan

Executive Vice President, Global Head of Field
Marketing & Operations

### Kevin Valentine

Senior Vice President, Triton Container Sales

### Carla Heiss

Senior Vice President, General Counsel &
Secretary

## Annual Meeting

The Annual General Meeting of Shareholders will
be held online via live webcast on Thursday, April
27, 2023 at 12:00 PM EDT at:

www.virtualshareholdermeeting.com/
TRTN2023

## Transfer Agent & Registrar

Computershare Investor Services
P.O. Box 43078
Providence, RI 02940-3078

### Investor Center

www.computershare.com/investor

### Quick Access Hub

www.computershare.com/qahub

## Investor Relations

All inquiries should be directed to:

Investor Relations, Triton International Limited
Email: TIL.Investors@trtn.com

## Triton International Limited Common Shares

Triton International Limited's common shares are
listed on the New York Stock Exchange under the
symbol "TRTN"

## Independent Registered Public Accounting Firm

KPMG LLP, 345 Park Avenue, New York, NY 10154

CORPORATE INFORMATION

![img-0.jpeg](img-0.jpeg)

Registered Office

Triton International Limited
Victoria Place, 5th Floor
31 Victoria Street
Hamilton HM 10. Bermuda
E TIL.Investors@trtn.com
T (+1) 441 294-8000

www.tritoninternational.com