Triton International Ltd (TRTN) 2021 Q4 法說會逐字稿

Good morning, and welcome to the Triton International Limited Fourth Quarter and Full Year 2021 Results Conference Call. (Operator Instructions) Please note this event is being recorded. I would now like to turn the conference over to John Burns, Chief Financial Officer. Please go ahead.

Thank you. Good morning, and thank you for joining us on today's call. We are here to discuss Triton's fourth quarter and full year 2021 results, which were reported this morning. Joining me on this morning's call from Triton is Brian Sondey, our CEO; and John O'Callaghan, our Head of Global Marketing and Operations.

Before I turn the call over to Brian, I'd like to note that our prepared remarks will follow along a presentation that can be found in the Investor's section of our website under Presentations. I'd like to direct you to Slide 2 of that presentation and remind you that today's presentation includes forward-looking statements that reflect Triton's current view with respect to future events, financial performance and industry conditions.

These forward-looking statements are subject to various risks and uncertainties. Triton has provided additional information in its reports on file with the SEC concerning factors that could cause actual results to differ materially from those contained in this presentation, and we encourage you to review these factors.

In addition, reconciliations of non-GAAP measures to the most directly comparable GAAP financial measures are included in the earnings release and the presentation.

With these formalities out of the way, I'll now turn the call over to Brian.

Thanks, John, and welcome to Triton International's fourth quarter 2021 earnings conference call. I'll start with Slide 3 of our presentation. Triton achieved record performance again in the fourth quarter of 2021. We generated $2.67 of adjusted net income per share, an increase of 9.9% from the third quarter, and we achieved an annualized return on equity of over 30%.

Our exceptional results in the fourth quarter were driven by growth in our recurring leasing revenue due to continued strong pickups and a further reduction in our average effective interest rate due to successful financing activity.

Triton's performance for the full year 2021 was outstanding. We generated $9.16 of adjusted earnings per share, an increase of nearly 100% from 2020, and we achieved a return on equity of 28.1%. Triton's outstanding performance in 2021 was supported by very strong market conditions.

A surge in consumer spending drove solid growth in trade volumes, and container demand was boosted further by extensive logistical bottlenecks that slowed container turn times. A shortage of vessel capacity drove exceptionally high freight rates, keeping our customers highly focused on container availability. And container manufacturers had a hard time catching up to demand, despite a large increase in production volumes leading to record prices for new and used containers and very high market leasing rates.

In this environment, Triton's deep container supply capacity and a reputation for reliability were key. We invested over $3.6 billion in new containers for delivery in 2021, increasing our revenue earning assets by over 30%. We are very proud to have been the leading supplier of leased containers to most of the world's top shipping lines and in the process, helping them manage through severe supply chain challenges.

Perhaps most importantly for Triton, we've been able to lock-in durable enhancements to our business. The large block of containers added in 2021 were placed in high IRR leases with an average duration of 13 years. We've aggressively refinanced our debt and reduced our average effective interest rate by 140 basis points over the last 2 years, and our high profitability is driving rapid growth in our net book value per share.

Overall, our expected long-term financial performance has shifted meaningfully upwards. It's also important to note that the balance sheets of the major shipping lines have dramatically delevered due to their exceptional current profitability, leading to a significant improvement in the shipping industry's credit profile.

We continue to use our strong cash flow to drive shareholder value in a number of ways. We use most of our cash flow in 2021 to fund the massive value-added investments to our container fleet. As the peak shipping season ended in the fall, we shifted our investment focus to share repurchases.

We also announced an increase in our quarterly dividend to $0.65 per share. And we've done all this massive fleet investment, renewed share repurchases and an increased dividend, while keeping our leverage comfortably in our historical range. We're starting 2022 with significant operational and financial momentum.

Goods consumption remains strong, and our customers expect significant logistical disruptions will last deep into the year. We expect our adjusted net income will hold fairly steady from the record fourth quarter results despite being in the slow season for dry containers and having 2 fewer billing days.

Our trajectory after the first quarter will depend on how market conditions develop, but we have a high level of confidence that 2022 will be another outstanding year for Triton.

I will now hand the call over to John O'Callaghan, our Global Head of Marketing and Operations.

Thank you, Brian. Turning to Page 4. Page 4 explains the goods consumption and logistical bottlenecks continue to drive strong container demand. The charts on the left illustrate the consumption remains very high in the U.S. As the stream of imports continues to flow to try and meet that demand, it compounds the existing logistical problems in the supply chain further impacting the restocking of inventories that remain at relatively low levels.

The charts on the right helps to illustrate why the restocking of inventories onto the shelves is challenging. As global trade volumes remain elevated, you can see on the bottom right chart that the number of container vessels waiting to discharge their cargoes up to U.S. West Coast remains high, but this is only 1 of many issues.

There has been no slowdown in the movement of goods and the supply chain remains challenged by a set of problems, some interconnected and some independent, namely the terminals, trucks, rail, warehouse space and labor shortages. These issues cannot be examined and fixed until the industry gets some breathing space.

Page 5. Page 5 illustrates that freight rates and new and used container prices remained high through the quarter, driven by continued demand for vessel space and containers. The chart on the left illustrates transpacific and East-West spot freight rates relative to bunker costs. Trade rates remain extraordinarily high, reflected in the continued strong demand for cargo and a logistical bottlenecks, keeping capacity short.

You can see in the upper right chart that new container prices have come down and are in the $3,400 range in part due to the high volume produced through 2021, easing some of the shortage, but container availability remains tight, and prices remain well above normal.

The bottom right chart illustrates that the sale price of used containers remained high throughout the fourth quarter due to the continued strong demand and a decreasing availability of sale containers.

Page 6. Page 6 shows that the high container production in 2021 has alleviated some supply constraints. The charts on the left shows annual 2021 container production for leasing companies and shipping lines broken out in percentages. We've seen the shipping lines increase our share towards the end of the year and for the beginning of 2022.

While we do not believe the shipping lines view containers as a strategic investment, it is possible they may continue to buy due to their profitability. On the right, you can see container factory inventory and depo stocks. While there has been some easing of container shortages, as you can see, container factory inventory is up to normal level, but there is still only 2% of the global container fleet available.

And at the bottom right chart illustrates, there are no depot units available, so the overall picture is still quite tight.

Turning to Page 7. Page 7 shows that Triton's key operating metrics remain very strong. This can clearly be seen in the top left chart, showing utilization remaining at near maximum levels. On the upper right chart, you can see the fourth quarter pickups remain very high as customers continue to absorb equipment. Drop-offs have been very low with these almost immediately going out in lease are sold with a high gain on sale.

The lower left bubble chart just shows how extraordinary the market has been in 2021 with the unprecedented demand of new production volume we have put on lease. The leases negotiated have an average duration of 13 years and the size of these investments are impressive. We placed $3.6 billion of orders, leading to over 30% of asset growth in 2021, and we estimate that Triton achieved a 40% share of new leasing transactions.

Page 8 helps illustrate what we've achieved and a long-term value we've created. We put our new containers on very long duration leases, and we're focused on placing our used competitors on lifecycle leases, which has had a significant impact on our average lease durations across the fleet.

Typically, we summarized our lease portfolio by CEU because that weights the container-by-container type, but it's misleading in 2021 because we bought a lot of very expensive dry containers that typically have very low CEU ratings. These were also put on very long-duration leases. So for now, we're also putting net book value in to capture the impact of those expensive dry containers on very long-duration leases.

We're in very good shape and have close to 90% of book value on long-term and finance leases. We are looking forward to continuing to build an even longer-term benefits across the fleet portfolio with a tailwind of 2021 being carried into 2022 with strong market conditions and utilization at near maximum levels.

I'll now hand you over to John Burns, our CFO.

Thank you, John. On Page 9, we've presented our consolidated financial results. Adjusted net income for the fourth quarter was $177.5 million or $2.67 per share, an increase of nearly 10% from the third quarter. And we finished the full year with adjusted net income of $614.2 million or $9.16 per share. These exceptional results represent an annualized return on equity of over 30% for the fourth quarter and 28% for all of 2021.

On Page 10, I'll discuss the drivers of our strong profitability. In the fourth quarter, we benefited from continued strong on-hire activity during the quarter along with a full quarter's benefit from the high volume of new containers on-hire in the third quarter. This drove a 4.2% sequential increase in leasing revenue on a 5.3% increase in average revenue earning assets.

Revenue growth was less than asset growth, largely due to the growth in the finance lease portion of our fleet and the way finance lease revenue is recognized. We expect average on-hires to increase in the first quarter, reflecting a full quarter of the significant fourth quarter on-hire activity. Though we expect leasing revenue to be down slightly due to 2 fewer days in the quarter.

Average utilization in the fourth quarter remained effectively maxed out at 99.6%, supporting our high level of revenue and keeping direct operating expenses very low. And we expect utilization to hold steady at these levels in the first quarter.

Our active refinancing over the last 2 years, along with our recent upgrade to an investment-grade credit rating, enabled us to drive down our effective interest rate to 2.48% for the fourth quarter, and we expect it to remain near this level in the first quarter.

We continue to generate exceptional levels of trading and disposal gains, totaling $34.2 million for the fourth quarter, down only slightly from the third quarter, and we expect gains to remain high in the first quarter.

As the peak season ended, we shifted a portion of our strong cash flows to share repurchases. During the fourth quarter, we repurchased 1.1 million shares, and we have repurchased an additional 700,000 shares through last week.

On Page 11, we highlight our strong and stable cash flows which drives long-term value. The graph on the top left shows our cash flows before capital spending. And you can see how this year's exceptional operating performance, together with the $3.6 billion in new container investment, has generated a step function change in our cash flows, and we expect this higher level of cash flows will be durable supported by long-duration high-value leases.

The graph on the bottom left shows how strong and resilient cash flows, together with the short order cycle for containers, enables us to maintain our leverage in a steady range over the long term.

Our leverage has increased back into the normal range over the last several quarters, reflecting our aggressive investment in new containers, partially offset by our third quarter preferred share issuance.

The graph on the right demonstrates how these strong cash flows and our financial stability have enabled us to create significant shareholder value by steadily growing the book value of the business while paying a substantial dividend.

Page 12 highlights why we are confident that our high level of earnings are durable. On the left, we show how we have leveraged the strong market conditions to rapidly expand our leasing margin. On the right, we show why this higher level of performance is durable.

The top right graph shows the increase in the average remaining lease duration for containers on long-term and finance lease. You can see that the remaining lease duration increased over 60 months on a CEU basis by year-end. And when we calculate this on a net book value basis, which captures the high cost of our 2021 container purchases, the remaining lease duration jumps to 78 months.

And if we include the typical time it takes customers to return or build-down containers once the lease expires, this adds roughly 12 months to both figures. On the bottom right, we show that we've funded this long-term lease portfolio with long-duration fixed rate or hedged-to-fixed debt at very attractive interest rates as a result of our financing activity over the last 2 years.

We expect this combination of attractive long-term lease and debt portfolios will lock in a high level of leasing margin for years to come.

I will now return you to Brian for some additional comments.

Thanks, John. Slide 13 summarize what we think about our equity cash flow and illustrates how this cash flow gives us a variety of powerful levers to drive shareholder value. The top grouping of numbers summarizes the cash flow power of our business. We're currently generating over $1.6 billion of cash flow before capital spending on an annualized basis.

And remember, the duration of these cash flows is substantial, due to the strength of our long-term lease portfolio. We need to allocate a little more than half of this cash flow for replacement capital spending in order to maintain our fleet size as containers age out of service. This leaves us with a little more than $700 million of steady-state cash flow.

We currently pay a quarterly dividend of $0.65 per share, which represents about $170 million in annual dividends. As a result, we have about $550 million of steady-state cash flow after our substantial regular dividend.

The next set of numbers illustrate a few of the things we can do with this $550 million. If we focused on capital investment, we could self-fund the equity needed for nearly 20% asset growth, while keeping our leverage ratio constant. Alternatively, if we focused on share repurchases, we could repurchase about 13% of our shares at their current trading range.

If we wanted instead to focus on dividends, we could pay over $8 per share on top of our regular dividend bringing the total annual dividend to almost $11 per share. We have typically pursued a mix of these options.

I'll finish the presentation on Slide 14. Overall, we are carrying significant operational and financial momentum into 2022, and we expect to have another outstanding year. We expect our market environment will remain favorable. Container demand should remain strong. Goods consumption remains elevated, especially in the United States, and our customers expect logistical disruptions will continue.

The extreme shortage of containers has eased due to high production volumes of new containers, but we expect the overall container fleet will stay tight, while global logistics are challenging. We expect Triton's operating performance will remain very strong in 2022.

Our utilization is holding near maximum through the dry container slow season, and we expect utilization will stay very high through the year. Market leasing rates for dry containers remain well above average lease rates in our portfolio, mitigating exploration risk and providing potential for repricing upside.

We expect our disposal gains will eventually start to moderate, but we are not yet seeing used container sale prices to off-peak levels. Fleet investment will likely be down from a very aggressive level in 2021. Though as always, we stand ready to support our customers and overall container demand remains solid.

Triton's financial performance should remain very strong in 2022 and into the longer term. We have locked in a large expansion to our leasing margin and cash flow. We expect our adjusted net income in the first quarter will hold fairly steady from our record results in the fourth quarter, despite being in the slow season for dry containers and having 2 fewer billing days.

The trajectory of our performance after the first quarter will depend on market conditions and investment opportunities. So we are very confident Triton will deliver another outstanding year.

I'd like to thank the Triton team for their dedication, professionalism and outstanding results in 2021. And I would like to thank our customers for your support for Triton and your trust in relying on us during this extraordinary time.

We will now open up the call for questions.

(Operator Instructions) The first question comes from Michael Brown with KBW.

Okay. Great. I wanted to start on the leasing portfolio. One element that I've observed here is that you've been -- you're seeing a lot of growth in the finance leasing portion of the book here. Can you just give us a little bit of color there? What is driving this mix shift towards more finance leases than operating leases? And do you expect that trend to continue?

And just to maybe add 1 more follow-up on that. What are the pros and cons of growing this piece of the business? And how should we think about modeling that out because, of course, it impacts your leasing revenue line and also your depreciation line a bit differently than the operating [leases]?

Yes. Thanks for the question, Michael. So there's a few things that are driving the trend of the increase in finance lease for us this year. The first is just the very high cost of containers. And I think we've talked several times about the fact that container prices are so high really makes it very useful for us and safer for us to lock-in very long-duration leases.

And our customers, in fact, they are preferred it as well because it mitigates our need to charge really exceptionally high rates in the early years to cover our risk that container prices might be below this current level when the leases expire.

And so as you've seen in the portfolio, we've been pushing the average duration, including for the operating leases, even to like 12, 13 years. And so I think when the operating leases when we're asking customers for that kind of duration, it's a much smaller step to go from a 12- or 13-year operating lease to a finance lease than it is from, say, a 5-year operating lease to a financial lease.

And so I think, in general, some customers have preferred that if they -- we're going to have to lock-in leases of this duration anyway that we might as well do it in the form of a finance lease. And so I think that's probably the most important driver.

Another driver is just specific to our customer portfolio, who we're driving business with? And we've done a substantial amount of business with some customers that just have a general preference for finance leases. And that preference probably has strengthened over the last few years.

And so that also contributed to the increase in the finance lease portfolio. Maybe I'll turn it over to John to talk about the differences of how the finance leases show up in our balance sheet and income statement, maybe I'll sort of wrap up with some -- after that, some thoughts on the pros and cons.

Yes. Thanks, Brian. So Mike, you probably know this, but just for everybody's benefit, finance lease, the billings to a customer is -- includes both principal and interest, but we recognize just the interest portion on finance lease. While an operating lease, again, includes the full billing to a customer, but that -- and that full amount of billing is recognized as revenue with depreciation as the duction or the, I'll say, the equivalent as principal on a finance lease.

So that's why you get when you -- when you have the growth in the balance sheet, the actual portion that's hitting revenue for finance lease is different than operating lease and smaller.

Yes. And then maybe from our side, a few pros and cons from the pro side of it, obviously, the finance leases have less future market risk. They're structured so that the customers have a significant economic incentive to purchase the container at the end.

And so we don't have remarketing cycles for the containers, or we don't sell the container and subject ourselves to price variability. In addition, I think most of our lenders, certainly the agencies look at the finance leases favorably. I think because of that lower risk. And so give us higher ratings for whatever we might look like because of the finance leases.

The downside is that we don't get the upside, and we typically find, especially for dry containers, that the upside outweighs the downside that we typically get lots of stick factor for dry containers that they have very high remarketability through their life and our releasing cycles typically go better than we planned for at least and similar for resale.

There's very high resale value for dry containers as a share of the new container price. And again, we typically outperform our assumptions with resale. And so there's some pros, especially in locking in lower cyclicality, but you do give up some upside.

Okay. Great. (inaudible) comprehensive answer. Yes, I just have a follow-up. It's a bit longer-term question here, Brian, but I was thinking about 2023 and beyond. And so I think the kind of 2 things that I'm trying to process here is the fact that we've got more ships that are set to be delivered starting in '23 and '24 and '25.

And there's also some emission standards that I believe are going to also impact some of the shipping trends out there could result in slower shipping. So when I think about those 2 things and the fact that there has been very high production levels and trying to figure out how that ultimately balances out over time with the fact that there's more ships coming online and potentially be seeing slower shipping overall.

What -- how does that like impact your business? How should we think about the size of the global fleet for containers? And how do you process each of those moving pieces?

Yes, sure. So I'd say the first thing is we typically don't find that the supply and demand balance for vessels impacts us significantly. It's a major driver of freight rates, of course, and we're seeing freight rates right now being exceptionally high because cargo, volumes and operational disruptions have basically overwhelmed vessel capacity.

And that's been -- it has been beneficial for us in 2021, as it had kept customers very focused on container availability. And if they were going to err, they erred on the side of extra containers, which for us was -- is the right way we want customers to think.

But generally speaking, it's not a major driver for us, that balance. And I think as we see more vessels come in and as we see capacity get freed as bottlenecks ease, I'd say, obviously, it's going to have a very quick impact on freight rates, but we don't see it having a large direct impact on us or our utilization or the container market.

We watch much more closely the supply and demand balance for containers. And I think we showed some charts that looked at container production volumes being very high in 2021. Some of that, I think we talked on a few calls, was catch-up for low production in 2019 and 2020. But then some of it also was just helping our customers deal with these logistical bottlenecks and especially when they were super motivated to make sure they didn't miss bookings because of a shortage of containers.

Our general view over time is that container supply and demand stays pretty tightly balanced because of the ability for the manufacturers to flex their production up and down. It's going to be interesting to see how -- what happens as the bottleneck ease this year and some container capacity becomes available. Certainly, it's something that we're going to be focused on.

But that said, I think overall, we see a pretty good picture for the next couple of years for container supply and demand with some of the same factors we've been talking about: goods consumption being elevated and staying high and just logistics remaining very challenging.

The next question comes from Ken Hoexter with Bank of America Merrill Lynch.

What a great environment to keep pricing the boxes. Can you -- John, I think you just clarified you kind of talked this time in terms of your duration overall. Did you mention the duration of leases signed in this quarter versus last quarter? I don't know if I missed that number, but my question then would be, Brian, just reading into the big picture commentary, it sounds like you're seeing some of the tightness start to loosen, is that how we should read into this in terms of shrinking box prices, liners starting to buy boxes because of their profitability? Again, I want to understand your messaging here in terms of the big picture commentary.

Sure. So in terms of the duration, I mean, frankly, I'm not sure the average ratio we did in the first quarter, but it's going to be well over 10 years. And so quite consistent with what we were doing last year. And just, again, really the vagaries of what customers were doing what, but still the same thing. Markets tight, container prices are still very high, leasing rates are still very high and so the same drivers that are encouraging us and our customers to go for longer leases.

In terms of the changing market dynamics, 2021, I'd say really from maybe July 2020 to just probably July, August, September-ish 2021 were one of those few periods that I've seen over my 23 years-or-so, where container supply was an overall limiter of global trade.

And so there was just an absolute shortage of container capacity. And that shortage drove pricing to very high levels. So we peaked out at close to $4,000 for a 20-foot dry container. Probably the previous record, which was the last time I saw that dynamic in 2010 and early '11 was under $3,000. So -- our push container prices well above previous highs.

What we have seen is over the course of 2021, the container manufacturers dramatically ramped up production probably by 150%, 200% compared to where they had been in 2020. And that has put us in a situation where the container supply is tight. And we still are at effectively almost 100% utilization, but it's no longer the fact that every container that shipping lines can get means 1 more cargo load they can take -- that they do have enough containers in their systems to move the cargo that's there, at least it's not limiting vessel capacity is more of the constraint at this point.

So we see a market that's tight. We see that continuing. But we don't see that absolute shortage where containers are the limiter for global trade. Again, that probably cleared up back in late summer, early fall.

So if I understand that then, you still -- I know you've always refrain from putting a -- you gave the kind of what could we do with the $550 million after the $900 million of box prices. You're not ready to say we're going to be kind of still expanding the fleet or put a half the number versus this year? Is there kind of a range?

And I guess just a follow-up on Mike's question there before, how does this shift as you get into '23 when the vessels start delivered? Does that mean naturally, you have to have more boxes, or the boxes move from, I don't know, some of the vessels that are there now to -- for the newer, I just want to understand your future view on the box needs?

Sure. Yes, so I'd say, you've got a couple of different things. So one, one of the real strengths of this business, as I think and you know, is that we place container orders with short notice. And so while we have expectations for what CapEx is going to be this year, we don't really have to act on them.

At any point in time, we keep $400 million-or-so of containers that we've ordered and haven't yet leased out. And as we do leasing transactions, we backfill with our container orders. And so we're taking a stance for this year that is like the stance we typically take where we've got substantial orders of the factories and some containers on the ground. And as we do deals, we'll rebuild our shelf, and we'll see where we get to by the end of the year.

But I'd say our expectation is that it's going to be a good year that the basic equation that drove the market over the last 2 years almost of strong consumption growth, coupled with logistical challenges, our customers, at least that I speak with, seem to think that's most likely the environment for most 2022, which I think bodes well for the need for containers and for our opportunity to do deals and also the fact that freight rates, they've come down some, but they're still very high.

And so customers, when they need containers, they want to work with companies like us that have a very high degree of reliability, a deep container supply capacity because that's what's most important, making sure when you need the containers, they come.

And so again, our view is actually we could see a pretty good year. But again, fortunately, we don't have to bet on it. We can wait and see what happens. And when it comes to 2023 and beyond, as I was trying to say earlier, we don't focus a lot on what's happening on the vessel side. We typically don't see that container demand is correlated to say, vessel production. I think it's much more correlated with what we're seeing in terms of cargo volumes and logistical challenges.

I think to the extent there's sort of second-level orders, we do see some of that. And so for example, I think Mike may have mentioned this, that because of the emissions rules and if there's an excess vessel capacity, it makes it a lot more attractive for our customers to slow steam the ships, which does create some incremental container demand.

In the past, and I'd say for much of the last 10 years, the fact that it was excess vessel capacity kept our customers having to conserve their capital pretty carefully, and I think contributed to the high share for leasing over the last 10 years.

And although that said, even as they became much more profitable on the shipping lines that is in 2021, they continued to lease at pretty high levels. So again, we look at it and we're mindful of what's happening with the vessels, but it typically has not been a big driver of demand. We're much more focused on what's happening with trade volumes and what's happening with container supply.

I appreciate the insight. It's interesting because it just sounds like you don't know whether we're still keeping this tightness or if it's starting to loosen and it seems like stay at the ready because you're ready to buy, but not certain?

Yes, I'd say that's fair enough. I'd say, in general, we feel a lot better about this year than we might typically feel in February of any given year. It's in the slow season for dry containers. Typically, we get much more visibility as we head into the mid- to late spring. That's when the shipping season starts to build.

But again, I think we feel very fortunate to be in a market where there's some real key drivers underpinning container demand, including this very high consumption activity in the U.S. in particular.

And again, it's not just that people talk about the Port of LA, but really, there's a whole bunch of things that are challenging for the shipping lines right now, including port productivity issues in many places around the world, warehouse staffing issues again in the U.S. and Europe. And we've also the trucker capacity challenges. So it doesn't seem to us and certainly, our customers aren't talking about that clearing up anytime soon.

The next question comes from Larry Solow with CJS Securities.

Great. Just a couple of follow-ups on that. So I know you -- obviously, you don't guide on the pace of fleet investment, but it does sound like you expect probably a good year, not what you did last year, but certainly, at least it sounds like at least that maintenance CapEx of somewhere in that vicinity or higher for a starting point. Is that a fair assessment? Or again, I don't want to pin you down on that, but.

Yes, sure. So again, I think we feel pretty good about the investment here. I've been running this company now or one of his predecessors since 1999 and 2021 in investment levels was far and away the best year I've ever seen. And so it's hard to assume you're going to get 2 years in a row like that.

That's what we've been talking about that we see a fairly attractive market for ourselves in 2022, and that's coupled with the fact that we've done so many things to derisk the business with the lease portfolio has us feeling quite optimistic overall.

In terms of the replacement CapEx number, I think we talked at our press release that we've already spent a little bit over $400 million on CapEx this year and -- so again, I never say never, but it certainly feels like we ought to have some growth for [2022].

Right. Absolutely. And really encouraging by the -- and I know you guys have shared this before the 40% share on sort of the leasing in 2021. It's a pretty big number. I know considering I think your market share was somewhere or probably more around 30% at least. And maybe it's not much more than that today. But going forward, do you feel like this capture rate is sustainable? Anything unusual in that? Obviously, we're in unusual times, but anything you could speak to on that.

Yes. So we think one of the nice things about our business is that our customers are mainly focused on container availability and reliability than more so than cost. And obviously, we're very cost-efficient, too. But what we really offer our customers is far and away the world's deepest container supply capacity on short notice.

And so when the markets are strong like they are in 2021, also like they were in 2017 and 2018, we've been able to get disproportionate share and doing so without leading with price. Again, we're very price-competitive and our scale lets us be that way.

But we also know that our customers really want access to our deep supply capacity and just the comfort of knowing that if you book containers with Triton, they're going to come and they're going to come on time. And so I think across those -- the last 5 years has been 3 particularly strong markets and our share in all of those years was between 40% and 50%.

And again, we worked very hard to get business with our customers and try to give them great service. But I think there's a very natural kind of win-win with us and the customer of working with Triton in years where it really matters for our customers.

And we've seen our market share has gone up steadily over the last 5 years. I think at the time of our merger in 2016, the combined shares was 25%. I think by the end, when the stats are written for 2021, we'll hopefully be getting closer to 30%. But I do think we have an opportunity to outperform, especially when the market is strong. And the great thing with that is we're doing most of our business when the market is in -- it's a seller's market. And so that tends to build a very high-value portfolio, too.

Right. Okay. How about pricing in the quarter? I know that will be in the K, I'm sure, but I know the last couple of quarters, we've started to see some benefits from these higher-priced contracts. I think last quarter, I think you had a 5% benefit in pricing. Do you guys have -- what the benefit was in this quarter?

So we always put in the quarter, what's the trajectory with the leasing rates on average across our major product lines. And the dry container average lease rate continues to go up, and that's, I think, at this point, close to 80% of our -- or 75% of our book value. The repo rates on average have been coming down. I think we talked about it in the K, some of the remarketing challenges we see with repos.

But overall, it's an upward moving rate environment across our portfolio. And that's something that has continued in the first quarter and something that will continue as long as container prices and market leasing rates are a lot higher than our portfolio average.

Okay. I appreciate that. And just lastly, on the share repurchases. Obviously, you guys have -- I think you mentioned 20% since 2018 and a little bit of a reacceleration in Q4. It sounds like maybe that's just -- maybe that's a temporary acceleration? Or are you not sure, I guess, obviously, you can always pivot towards that more. But any thoughts on that? And can you just remind us, is there -- is there a particular authorization out there? And has -- is there any limitation on share repurchases or the covenants change at all with your refinancing?

Yes. So maybe I'll start with that technical question first. And so we typically have asked our Board occasionally to reauthorize our share repurchases. And then typically, we've done it, I believe, in like chunks of $200 million. But we always say that's much more an administrative item than it is something that's trying to guide investors sort of expect to spend.

One thing we really like about the business is how nimble we can be with redirecting our equity cash flow. And so we talked a lot about how in 2021 for most of the year, we were putting all of our cash into building our container fleet because the returns were very nice, and our customers needed to support.

And then as we saw the peak shipping season ended and deal activity slowed, we had plenty of cash flow and our balance sheet was in great shape still. And so we were able to quickly pivot and take that cash flow from container purchases to buying back stock.

And again, we didn't turn off the container purchases either. We're still buying containers. And I think we'll continue to do this. We'll continue to look at what we expect for container purchases and in fact, probably even more than that, just what we actually purchased.

And we'll continue to make judgment calls on what seems to be the highest value use for our cash flow, although again, we have enough cash flow, it doesn't have to be either/or, and often like it has been, it's been both. But again, I think we'll just have to see what the year provides in terms of container investment opportunities. But again, regardless of that, we see -- we get very interesting opportunities in buying our shares.

The next question comes from Liam Burke with B. Riley.

On the incremental returns on equity that you had in the fourth quarter as you picked up from 29% to 30%, how much of that benefit was coming from resale? And do you expect to be able to reinvest at that type of incremental return?

Yes. So certainly, 30% return is pretty extraordinary. And that does reflect a number of things that I'd say are above what you might expect to see going forward, certainly from a container gain standpoint, where gains are probably the highest, they've been in my 20 years on a quarterly basis, both are selling our own containers as well as the profitability we're getting for selling our customers' containers and then just buying and trading containers in the marketplace.

That's been very supportive this year. I think in addition, we were successful in refinancing our debt portfolio. And in some cases, having the leases had longer duration than the debt because a number of our debts that are several billion dollars' worth are callable and that allowed us also to expand the leasing margins on sort of a one-sided basis.

And so when we look at our -- at the deals we're doing, we've talked a number of times about how we think the deals we're doing in 2020 and '21 were very attractive, and we were modeling investment returns in the high-teens into low-20s. Typically, we talk about modeling investment returns into the low to mid-teens and then trying to outperform our assumptions to get to the kind of upper teens, which is kind of our long-run average return on equity.

So maybe that's a long-winded way of saying we expect return on equity to stay very high, probably above trend for some period of time here because of all the work we've done with the lease portfolio and our debt portfolio and just because strong conditions continue. But no, we think we're doing very attractive deals, but not at the 30% level.

Okay. That's fair. And I know you touched on this earlier in the discussion, but the availability of containers, either used or new, won't hinder your resale income for 2022?

Well, again, we don't like to forecast line items for two reasons, I think what we've said is that we see gains staying very high for the first quarter, and we have not yet seen sale prices come off peak levels, at least not by much.

But it is hard to say when we might see that start to normalize. Sale prices are still extraordinary high -- extraordinarily high historically. And we do expect sale prices to eventually start coming down, although we've been saying this now for 4 quarters, and it hasn't happened yet.

On the other hand, sale volumes have been very low just because we haven't had any containers to sell. Customers have been holding on to them. And one thing that will offset the impact of falling prices is that would likely be driven by increasing availability.

And so we do expect volume to come up as sale prices come down, mitigating the impact on gains. But overall, we would be very happy if sale prices, or sale gains would stay at this level forever. We've been saying they're going to come down, eventually they will, but it hasn't happened yet.

This concludes our question-and-answer session. I would like to turn the conference back over to Brian Sondey for any closing remarks.

Well, I'd like to thank everyone for your interest and support of Triton International. Thank you. We look forward to talking with you soon.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.