Triton International Ltd (TRTN) 2019 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Triton International Limited 2019 Year-End Earnings Release Conference Call.

(Operator Instructions)

Please note, this event is being recorded. At this time, I would like to turn the conference over to Mr. John Burns, Chief Financial Officer. Please go ahead, sir.

Thank you, Keith. Good morning, and thank you for joining us on today's call.

We are here to discuss Triton's fourth quarter and full year 2019 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 Executive Vice President and 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 with the presentation that can be found in the Investors section of our website under Investor 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 those factors.

In addition, reconciliations of non-GAAP measures to the most directly comparable GAAP financial measures are included in our earnings release and 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 2019 Earnings Conference Call. I'll start with Slide 3 of the presentation. Triton achieved solid results in the fourth quarter of 2019. Triton generated $77.5 million of adjusted net income in the fourth quarter or $1.07 per share. We also achieved an annualized return on equity of 14.6%. Triton's performance held up well in 2019, despite facing challenging market conditions. Triton generated $4.57 of adjusted income per share, and our return on equity was 16% for the full year. And while our purchases of new containers were limited in 2019, we were able to redirect our strong cash flow to other high-value investments.

The resiliency of our financial performance and our ability to create shareholder value in a tough market environment are reflective of our strong and stable cash flow, our well-structured long-term lease portfolio and our industry-leading operating and marketing capabilities. The first quarter typically represents our weakest quarter of the year since it represents the depth of the slow season for dry containers, has the fewest number of days and has extra SG&A expenses.

Our first quarter this year will also be negatively impacted by the decrease in our utilization during the fourth quarter of 2019, a lease extension transaction with a large customer and our issuance of preferred stock ahead of opportunities to deploy the capital. As a result, we expect our adjusted net income will decrease from the fourth quarter of 2019 to the first quarter of this year. During December and January, we saw several positive market developments and the stabilization in our utilization. This suggested to us that the current downcycle was poised to turn, especially as we head towards the traditional summer peak season.

Over the last few weeks, these positive signs have been complicated by the outbreak of coronavirus in China. While the events are still unfolding, our expectation is that work and travel disruptions will lead to reduced factory output and limited export volumes from China for at least the next month, and so delay any rebound in market conditions. Beyond this, the impact of the coronavirus outbreak on us is unclear. Previous trade disruptions have had a mix of positive and negative effects. The balance of effects in this case will likely be driven by how long the disruptions last and whether the economic disruption spread to other countries.

We will be monitoring events closely and believe we are well prepared to deal with any negative surprises or spikes in demand as they arise.

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

Thank you, Brian. Turning to Slide 4. As Brian mentioned, with the economic backdrop of the U.S.-China trade dispute and global trade growth lower than expected, market conditions through 2019 were challenging. There was limited new container transactions through the year. Prices were low due to aggressive competition amongst the manufacturers for the limited volume of orders and in turn, there was aggressive competition for the available deals. Triton participated in some, but generally chose to allocate equity cash flow elsewhere.

Triton's operating performance remained solid through the year despite utilization, rates and disposal prices coming under some pressure. We did a good job of managing our exposure through a weak market. The fleet held up well due to the structure of our portfolio, which helped us to mitigate risk and reduce volatility. Indications pre-Chinese New Year were that we may be coming out of the cycle and conditions could improve in 2020. Utilization was stabilizing, container prices were increasing, all helped by the initial trade agreement between the U.S. and China.

Slide 5 shows Triton's key operating metrics. The metrics illustrate the tough conditions of 2019, but we are pleased with the way we came through it, and things were looking up. The fourth quarter was seasonally slow and is reflected in the drop-off activity. And although negative, our utilization averaged 95.8%, down by only 0.9% over the quarter. You can see that the picks remained low, which is normal for this time of the year. This is also expected and will extend into the first quarter.

Slide 6 looks at the key measures of container supply and demand. The chart in the upper left shows the container trade and economic growth was low in 2019. The bottom 2 charts are measure of supply. Available factory new production inventory decreased to about 800,000 TEU. So in effect, new production orders are not even replacing disposals. So container supply remains well balanced. The bottom-right chart shows Triton's inventory in Asia. We've seen an increase in our depot fleet off-hires in Asia. However, it remains under control, and the equipment is where we need it for when the market picks up. We are active where we can be and choose to be. We are unwilling to renew leases at rates that we think are less than the long-term value of our equipment just because the market is slow. Because of that, we have an additional 150,000 TEU in exactly the right place, ready to go back on-hire as the market improves. We've retained our upside leverage in the business with these runner fleet units, in addition to our new production availability.

Slide 7 looks at recent developments. Initial indications were that we may be coming out of a cycle, reflected in our business metrics, and that conditions could improve. We saw a slowdown in off-hires and increased pickups from December through to January. Utilization inflected in December and started to improve. In response to the expectation of some trade growth and manufacturers trying to adjust capacity to better balance supply, container prices start to move from under $1,700 to $2,000 over the last few months. Available factory new production decreased, and the total inventory is about 2% of the global fleet. So in effect, not even replacing container disposals. And as such, the fleet remains well balanced.

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

Thank you, John. Turning to Page 8. On this page, we have presented our consolidated financial results. We generated adjusted net income of $77.5 million or $1.07 per share in the fourth quarter. And we finished the full year of 2019 with adjusted net income of $341.7 million or $4.57 per share. These results represent a return on equity of 14.6% for the fourth quarter and 16% for all of 2019. This solid performance in a challenging market was supported by our strong lease portfolio and industry-leading operating capabilities.

Our earnings per share also benefited from our share repurchase program, which has reduced our outstanding shares by 8.8% over the last year.

Turning to Page 9. Our results for the fourth quarter and the full year of 2019 were driven by several factors. We limited our investment in new containers to $242.5 million in 2019, due to the weak market conditions. This was well below our replacement level and resulted in a 5.8% decrease in the net book value of our revenue earning assets over the course of the year. However, the average book value of our revenue earning assets was up roughly 2.5% over the prior year due to our significant investment in 2018.

Overall, our leasing revenue held up well in 2019, supported by our investment momentum from 2018 and our strong lease portfolio. Our utilization declined gradually throughout the year but averaged a solid 96.9% for all of 2019. In the fourth quarter, which is typically the slow season for dry containers, lease demand moderated further and average utilization declined 90 basis points from the third quarter to 95.8%, resulting in a 1.6% decline in leasing revenue and higher storage costs compared to the third quarter.

We continue to generate strong gains on container disposals in the fourth quarter, with the combined trading margin and gain on sale of $7.5 million. This was down $3.2 million from the third quarter, reflecting the continued moderation in sale prices and a seasonal decline in sales volumes. In the fourth quarter, our adjusted net income also benefited from 2 noncash items. First, the runoff of the purchase accounting adjustments related to our merger in 2016 provided a $13.6 million net benefit, and we expect this benefit to grow over the next several years.

Second, our adjusted tax rate declined to 7.6% for the quarter and 7.9% for all of 2019. We expect our effective tax rate to be in the 8.5% range in 2020.

Although 2019 was a challenging market, we took advantage of the weak conditions and used our strong cash flows to repurchase 6.9 million of our common shares, reducing our outstanding shares by 8.8% during the year.

Turning to Page 10. This page highlights how we've been able to use our strong cash flow to create significant long-term value for our shareholders. The graph on the top left shows our cash flow before capital spending. And you can see the steady growth in our cash flow over time as we have grown our fleet. And you can also see the resiliency of our cash flow across market cycles.

The stability of these cash flows, together with the short order cycle for containers also enables us to maintain our leverage in a steady range over the long term, as shown in the graph on the bottom left. In fact, we typically delever during challenging years due to reduced container investment as was the case in 2019. 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.

Over the last year, we have increased our adjusted tangible book value by nearly 7% or $2.25 per share to over $36 a share and paid a $2.08 dividend.

I'll now return you to Brian for some additional comments.

Thanks, John. I'll continue the presentation with Slide 11. We believe Triton has created significant value for shareholders by managing our capital effectively. We are highly focused on maximizing the value of our strong cash flow. During 2017 and 2018, we took advantage of strong demand and our unrivaled supply capability to drive strong value-added growth in our container fleet. We estimate our leasing share was over 40% during that time, and we believe we will achieve excellent lifetime returns on these investments.

In 2019, we pulled back on container investments and aggressively repurchased shares as market conditions softened. We have now repurchased over 11% of our outstanding shares for an average price well below our adjusted tangible book value per share. We believe the investment returns on these share repurchases will also be excellent. We have recently slowed our repurchases as our share price has increased.

We also believe we have improved the safety and efficiency of our capital structure. We've issued $555 million of perpetual preferred stock over the last year with an average fixed-for-life yield of 7.6%. We believe the perpetual nature and dividend structure of the preferred stock provide risk protection quite close to that of our common stock and believe that it allows us to target yield-oriented investors and improve the cost efficiency of our equity. We are well positioned to take advantage of any opportunities that arise. We have significant dry powder to fund even very large investments. We have a large inventory of new and depot containers in prime locations, and we are uniquely situated to quickly deliver large and creative solutions for our customers.

I'll now wrap up the presentation with a few summary comments on Slide 12. Triton achieved solid performance in 2019, despite facing difficult market conditions. We had limited new container purchases in 2019, when we directed our strong cash flow to other high-value investments, and we also improved the safety and efficiency of our capital structure.

We expect our net income to decrease from the fourth quarter of 2019 to the first quarter of 2020, due to typical first quarter weakness and several additional headwinds this year. We had recently seen several positive developments, indicating that market conditions were poised to rebound as we move towards the peak season in 2020. The coronavirus outbreak will likely delay this rebound. And it adds uncertainty to our outlook. But we're in strong shape to manage through the current environment and very well positioned to take advantage of any improvement in market conditions. We remain the clear scale, cost and capability leader in our industry. Our well-structured lease portfolio continues to deliver strong and stable cash flow. Our balance sheet is in great shape, and we have significant dry powder for investments. We stand ready to quickly provide large and creative container solutions for our customers. And we believe we are prepared to address any unexpected challenges and quickly capitalize on any opportunities as they arise. We'll now open up the call for questions.

(Operator Instructions)

And the first question comes from Larry Solow with CJS Securities.

You guys mentioned it certainly sounds a little bit like a mixed bag. I'm a little new to the name. So do you normally -- in Q1, would you normally start seeing some signs of improvement? And I realize it's seasonally the slowest quarter of the year, right? So I guess, I'm trying to take away, it looks like some optimism in your container prices have bounced pretty nicely, utilization actually started to shift in December, January. I don't know what happens with coronavirus. But are these kind of things seem to be a little bit against the normal seasonal slowdown and maybe suggest that we can get by the coronavirus issues, maybe things will start to rebound?

Yes, that was certainly our view. We were pleased with what we saw in December, both the market developments, I think, was encouraging for the industry overall when the U.S. and China signed their interim agreements. I think that gave our customers a little more confidence that trade growth in 2020 would be okay.

We're also very pleased to see container prices strengthen, that typically has very good implications for the value of our existing container fleet. And there, we saw prices go up from just over $1,600 at the start of the fourth quarter to approaching $2,000 for 20-foot dry container. And that has a corresponding effect on market leasing rates as well. And then we saw our pickups accelerate in end of December into January, ahead of Chinese New Year and some slowdown in drop-off volumes, too. And so because of those things, we saw our utilization inflect in January, which is a positive sign and something that we actually don't always see in January. And those combination of factors had us thinking that, yes, it looked like the market was ready to turn in 2020, assuming that the economic backdrop remained okay. As we tried to say in our prepared comments, the outbreak of the coronavirus, at a minimum, probably delays any rebound by just limiting factory output for the next month or so, at least, and limiting exports. But longer term, we don't have a great sense of how it plays out.

In the past, we've seen trade disruptions being maybe generally positive for the industry as typically the unusually slow period is followed by some period of doubling up. And typically, for us, what matters is peak demand rather than average demand. But in this case, there's so much uncertainty surrounding it that we're very hesitant to say how it plays out. And maybe just in terms of your first question of when we typically start to see seasonal improvements. Usually, that's during the second quarter.

Okay. How about spending? I know you guys didn't spend a lot in '19. It sounds like you're in a holding pattern until you see what happens. Are competitors -- or is anybody buying containers or are your competitors buying containers? Which would of -- or is the slowdown by the manufacturing -- on the manufacturing side that nobody's buying, not having as much effect. I'm just trying to get the supply and demand in the near term.

Sure, sure. So we bought some containers in 2019. I think our purchases were just under $250 million, but that, given the size of our business, still leads to overall reduction in our fleet size. We have spent container -- we have purchased containers for delivery in 2020. I believe our purchases to date are just over $100 million for containers for delivery this year. Really just getting ready for the peak season. And we also have a well-priced inventory, given that a lot of the containers we have in the factory were purchased in 2019 when prices were lower.

In terms of the overall market in 2019, it wasn't that robust. And so overall, container buying was fairly low for the leasing industry, especially starting in the second quarter in 2019 and continuing for the year. And the factory inventory of equipment, it's in a pretty reasonable shape. There's about 800,000 TEU in the factory for shipping line and leasing company containers, which represents about 2% of the operated fleet. So it's probably kind of a normal level of inventory for this time of year.

But one of the other effects of the outbreak is that container production, along with lots of other factory production in China, is right now constrained. And that likely will add, as we get into the second quarter, some additional constraints on supply.

Right. And could you just speak to a little detail on this lease extension transaction? Any more color on that, the size of it or anything?

Yes. So it's something we often do is when containers are expiring off of lease, we look to keep them on with the same customer. Usually, that's a win-win for the customer. It allows them to avoid the frictional cost of returning containers. And for us, it continues to lock in stable revenue and cash flow. In this case, we did a fairly sizable transaction with one of our bigger customers to basically keep containers on hire through what we considered that might be the balance of the remaining slow period. So it was sort of a temporary extension for the next couple of quarters while we kind of waited for the market to recover. It's not necessarily sizable in the overall scheme of our business but in terms of quarter-to-quarter comparisons, it has some impact on our revenue.

And the next question comes from Michael Brown with KBW.

So I just wanted to start on the steel prices. So is it positively -- on the new container prices, so as -- also surprised to hear that new container prices have increased, given we have seen a decline in the steel prices recently. So is that -- what kind of changed the dynamics there? Has it been driven by some of the consolidation of the factories? Has there been upward pressure on the labor cost in China? I guess, what are kind of the key drivers that we should be thinking about?

So I think the key thing to point out is just that container prices were exceptionally low in 2019. And that's true both for the absolute price of containers where probably only less than, I don't know, 7 or 8 quarters in the last 12 or 13 years, where container prices were in the range where they were last year. And then it's also even more true when it comes to the margin over steel prices. And so we actually have some materials that we usually put out there in our investor decks, looking at both the absolute price of containers, but also what's the cost relative to the 2 tons of steel that go into a 20-foot dry container. And those were close to historic lows in 2019. And I think meant for manufacturers that they were losing a significant amount of money operating at the margins where they were. And so to some extent, we actually just look at that -- where the container price now is probably the appropriate level, given where steel prices are.

So a lot of it, again, is just this elimination of these unusually low margins in 2019 returning to some level of normalcy. I think the reasons for it were twofold. One is that as we headed into 2020, with, I think, the signing of the agreement between the U.S. and China and just the general expectations that downturns in our business typically don't last much more than 18 months. I think there was a little bit more optimism among the shipping lines about the year, and we saw some orders in the fourth quarter from them and there's some other orders in the market, which created some demand in the -- what typically is a slow season for containers.

And then secondly, the manufacturers have taken some steps to control factory capacity and sort of better align it with the level of current production volume. And I think that's allowed them to take a different view on pricing. I'm not trying to price right down to materials and marginal cost, but trying to return to some normal level of margin in their business.

Okay, great. And so it sounds like you kind of slowed down the buyback activity due to valuation this quarter. I guess, what kind of levels -- how do you think through what's the right valuation point where you would say it doesn't make sense for us to doing buybacks, and we should be looking to deploy that excess capital elsewhere? And then obviously, we've seen the pickup in preferred issuances in recent months. So you mentioned that you're kind of looking to deploy that capital. So is that looking to be deployed into CapEx? Or how should we be thinking about that? Or is it just to maybe further delever. So I'd appreciate any color on that.

Sure. So for the share repurchases, we look at a variety of measures to just get a sense of how we think the current share price at any time compares to sort of the valuation that we see in the business. And I'd say for share repurchases, we like to be highly confident that we think, of course, you never know, but we'd like to be highly confident that the repurchases are really good investments for us. And in 2019, we were trading well below tangible book value, well below our estimated lease runoff value for most of the year. And so we were purchasing at aggressive volumes relative to our own trading volume. As the price increased, again, we certainly still think it's a good investment. But just the -- we've set up our plan so that as price rises and we get away from kind of deep discounts versus some of those metrics, we slow down the purchasing volumes.

And it's something we look at regularly. So as we head into 2020, and we constantly evaluate the relative attractiveness of different investments and adjust accordingly. In terms of our preferred stock offerings, we mentioned that we have raised or -- have issued the preferred stock and raised the additional equity capital ahead of having the investment opportunities to deploy that capital. We did so, mainly just because we think the preferred stock is a really nice addition to the capital structure and provides a pretty interesting mix of risk protection in terms of equity capital as well as cost by allowing us to target these kind of yield-oriented investors at a time when investors are looking for yield.

And in terms of how we'll deploy it, again, I think we'll look as we move into 2020, at what opportunities we have. And it gives us even more ability to make very big investments into our business if market conditions recover, and we have another opportunity to do what we did in 2017 and '18. Allows us to do many other things in the business, if opportunities come up. And of course, would allow us to buy back even more stock if we saw that to be an attractive opportunity for us, too. And I think we tried to emphasize in the prepared materials that we really try to be quite thoughtful and disciplined on how we deploy our cash flow and capital and certainly expect we'll do that in 2020 as well.

Okay, great. Just one last one for me. So I appreciate the cautious commentary on the outlook. I guess, I'm a little bit unsure about what the base case expectation now is at this point. You mentioned that the improvement that you had expected in December and January could now be delayed. So is your base case expectation still, though, that the second half snapback could come alongside the peak season? Or is it -- and really the wildcard is just the coronavirus and it just remains to be seen how that kind of plays out over time. Is that correct?

Yes. I think that summarizes it well. I think there's a variety of reasons why we thought that 2020 was a very good chance that could be a year where the market would rebound. And that we would see our performance metrics improve and have good opportunities to invest in the business. And we've talked about some of those things. And I'd say, in the absence of the coronavirus outbreak and all of the uncertainty that that creates, I think we would feel pretty good about the year. I think we still feel good about the year. It's just that this obviously is kind of an unprecedented situation, and we're hesitant to try to predict how that all plays out.

(Operator Instructions)

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

Brian, John and John, thanks for the detail on the outlook. Just maybe jumping into the container side, when was the last time you had 150,000 containers sitting at port? Is that normal seasonal? Should we be looking at it as kind of high or low going into the season, if you start seeing a rebound? And maybe talk about that 150,000 number.

It's not unusual. And when you think about where our utilization is, it's still well over 95%. And I think it's somewhat of a factor just how big our fleet is these days. That at 95% utilization, we can have 150,000 containers sitting at the right ports in China. But I think John O'Callaghan referred to it for a few reasons. One is it just that -- I think we -- it reflects the general way we approach 2019 and being disciplined in our investments and disciplined in the deals that we did with our customers. And where we -- when market additions are weak, sometimes there's a temptation for leasing companies to extend containers that are expiring at maybe rates below long-term expectation for leasing rates or to push equipment out on deals that maybe aren't really the kind of deals you want to do. And so while we were active and extending leases and leasing containers in 2019, we also were pretty disciplined on when we said yes and when we said no, and so therefore, we have accumulated some off-hire equipment.

And just given the structure of our lease portfolio, it tends to be in the right locations. And so it's just one more reason why we were levered to benefit from a recovery that we've performed well in 2019, we also preserved the upside potential of remarketing that equipment as market conditions improve. And so frankly, it's something that we feel really good about, both from a financial leverage to the upside, but plus a real ability to serve our customers. And so between the depot inventory we have in China and our factory inventory, we have a significant share of the containers available to give to the shipping lines in China.

And Brian, I guess, maybe when was the last time you saw the $2,000 per container or more importantly, the $400 sequential jump? It seems like such a large move and I guess, does that -- should we be really reading through that directly to lease rates and kind of where we are right now in terms of rates in our -- is the container $2,000 currently? Or has that continued to go up?

Yes. So the container prices, as best you can tell, like you never know, of course, until you're placing an order. But -- and we have been ordering over the last month or so. So container prices are in the $2,000 range is certainly our experience. And $2,000 is actually quite a normal price for containers. If you look back over the last, I don't know, 12, 13, 14 years, the average price for containers over that time was somewhere between $2,000 and $2,100 per 20-foot container. So we're kind of right into that normal place. And in addition, in terms of the margin over steel prices, that given where steel prices are right now, the $2,000 is also kind of right down the middle when it comes to the margin over steel prices. And so again, to us, it feels like this is a much more normal situation where the 2019 prices and margins were pretty unusual.

In terms of market leasing rates, as we've talked many times that the leasing rates adjust very quickly to changes in new container prices and changes in interest rates. Sometimes when container prices do jump quickly, there's some lag, as I think leasing companies might look for the opportunity of the improved prices maybe to push out some equipment that they had purchased; and willing to accept part of the inventory profits of the move, while they wait and see if the -- if this price movement is permanent. But to the extent that container prices remain at this level, yes, there'll be -- there'll certainly be a corresponding increase in market leasing rates.

Yes, that's a great move on the box rates. Yes, I agree with you, $2,000 to $2,100 over a long period of time, but I -- it's been a while since we have seen it jump that much in a quick way.

Well, actually the -- well, certainly, the jump has been big, but the -- I mean container prices were, in fact, $2,100 to $2,200 for -- right up until the end of 2018.

Yes, fair point. And it did come down kind of oddly into that really low level. The coronavirus, let me just hit on this to end because I guess, it really does have an impact. So maybe just your thoughts on -- let's bring it in near-term, on utilization in the near term. You've got some ships that are -- liners that are moving empty boxes, maybe leaving stuff at the shore because they're moving some empties. Maybe just talk about what does that mean from your perspective as the supplier to the industry in terms of disrupting that normal sailing cycle, what does that impact on demand? And I guess, I'm trying to figure out let's just say the new cases continue to decline, how long does it take to get the cycle back into where you start absorbing some of the stuff you have sitting on the sideline?

Right. So certainly, the ships -- the exports from China have been quite low since Chinese New Year. And to some extent, what we're just seeing is an extension of the Chinese New Year holiday beyond its typical duration. And so as you mentioned, you're right, the loaded containers are getting taken off ships in China ports and to some extent, staying there. And so there must be an accumulation of shipping line operated containers in China at this point.

In terms of what we're seeing in our activity is we haven't seen any real spike in drop-off volumes. We certainly have seen very little on-hire volumes because, again, there's not many exports coming out of China right now. But we haven't seen an acceleration of off-hires. And our take on it is, one, just our lease portfolio is well structured, it doesn't allow any kind of real big jump in off-hire volumes. But secondly, our sense is that our customers also are trying to figure out what's happened and also are getting ready in case we see, which we typically do, a spike when the disruptions end as everyone tries to catch up for the shipments that were missed. And so we think our customers probably are happy to have the inventory in China, anticipating that move.

I think the -- we do expect it to be a delay in terms of when we'll see a pickup in export activity translate to lease outs for us as the shipping lines kind of reabsorb the boxes that they've dropped into China. But in general, as we've talked many times, the inventory of containers is a very small number relative to the flow of containers. And so we don't think it would take too long for kind of a renewed activity to translate into demand for us.

And the next question comes from Bob Napoli with William Blair.

Your company has -- Triton has done a really good job on the consolidation of the industry in the past. I guess -- wondered what your thoughts are on consolidation in the industry. Obviously, one of your significant competitors is looking at alternatives. Is Triton ready to take -- or interested in partaking in industry consolidation?

Yes, I can, of course, respond generally. I can't talk anything about any particular situation. But I think we've talked before that we are believers in consolidation. We certainly got significant benefits in the merger of TAL and Triton in 2016. Cost efficiency, clearly, also some benefits from pooling capabilities. And frankly, we find our customers liked the consolidation so that they had a supplier that could deliver very quick and large solutions for them.

So overall, we remain -- we think consolidation makes sense for us, it makes sense for the industry, and we think it will continue to happen. I'd say also, as we said a few times, we approach situations like that with a lot of discipline, wanting to make sure that we preserve value for our own shareholders and those kinds of things. But again, I don't really want to talk specifically about anything that's going on at the moment.

Are there just globally more opportunities for consolidation that you're seeing or...

Yes, so in general, I'd say the leasing industry remains fairly fragmented, certainly compared to our suppliers and even our customers. And I think there is also a realization that scale matters, of course, in both from a cost efficiency standpoint and a supply capability standpoint. And I think a recognition by a lot of our competitors, frankly, that to keep pace with us in this business that they probably have to grow, and it's awfully difficult to try to catch us with organic investment. So for all those reasons, and again, our own interest, I do think we'll see consolidation more in our industry.

Do you have any concerns that your market share is -- would become too high, that it would not be permitted regulatory wise?

Well, I certainly wouldn't want to speculate on how regulators would view it. I'd say the one thing, though, is that -- recall that while we have (inaudible) leasing industry, it's not extraordinarily high. And also, the leasing industry represents only about half the containers in the world. So it's -- we think it's a long way to go from where we are in the business, any kind of market power, and we would be the first to admit, we have none. And we do these things -- we do the consolidations not for any kind of market power effects, but really for just the basic industrial logic of cost efficiency and supply capability.

And this concludes our question-and-answer session. I'd like to turn the floor to Brian Sondey, Chairman and CEO, for any closing comments.

Yes, thank you. I just want to thank everyone for their continued interest and support for Triton International, and we look forward to speaking with you soon. Thank you.

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