John Burns - SVP & CFO Brian Sondey - CEO Simon Vernon - President.

Mike Webber - Wells Fargo Securities Helane Becker - Cowen & Co Doug Mewhirter - SunTrust.

Good day and welcome to the Triton International Limited Third Quarter 2017 Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to John Burns, Senior Vice President and CFO. Please go ahead..

Thank you. Good morning and thank you for joining us on today's call. We are here to discuss Triton's third quarter 2017 results, which were reported yesterday evening. Joining me on this morning's call from Triton are Brian Sondey, CEO; and Simon Vernon, President.

Before turning the call over to Brian, I would like to note that our prepared remarks will follow along with the presentation that can be found on the Company's presentation section of our website.

I would also like to point out that this conference call may contain forward-looking statements as the term is defined under the Private Securities Litigation Reform Act of 1995. It is possible that the Company's future financial performance may differ from expectations due to a variety of factors.

Any forward-looking statements made on this call are based on certain assumptions and analysis made by the Company that it believes are appropriate and any such statements are not a guarantee of future performance and actual results may vary materially from those projected.

Finally, the Company's views, estimates, plans and outlook as described in this call may change subsequent to this discussion. The Company is under no obligation to modify or update any or all of the statements that are made herein, despite any subsequent changes.

These statements involve risks and uncertainties, are only predictions and may differ materially from the actual future events or results. For a discussion of such risks and uncertainties, please see the risk factors located in the Company's Annual Report filed on Form 10-K with the SEC on March 17, 2017.

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

Thanks John and welcome to Triton International's third quarter 2017 earnings conference call. We have included a presentation to go along with this call. And I will start with Slide 3. Triton achieved excellent operating and financial performance this quarter.

We generated $73 million of adjusted pre-tax income in the third quarter, an increase of 24% from the second quarter. The increase on our profitability was driven by strong growth in our leasing revenue due to increased utilization and our large share of new leasing transactions. Market fundamentals remain favorable.

Trade growth in 2017 has been higher-than-expected, meeting strong demand for containers. We've also benefited from an increased share for leasing.

At the same time, container supply is been tight due to low production last year, reduced purchasing this year by many shipping lines and other leasing companies and production disruption mainly driven by tighter environmental regulations in China.

As a result, the container supply and demand balance has been strongly in our favor and many of our operating metrics are historically high. Prices for new dry containers have also increased recently due to high fuel prices in China. Triton continued to in a large share of new leasing transaction in the third quarter.

We've now invested $1.6 billion in containers for delivery in 2017 and we've already ordered over $100 million of container for delivery next year. We've been placing these containers on leases with attractive investment returns. The leases are also well protected.

The average duration for our new container leases this year is in the range of 7 years and our containers are very well protected from logistical risk With virtually all the dry containers leases we've done this year, requiring all containers to be returned to agent demand locations but the leases are not extended at exploration.

This high-level of very profitable and well protected investment is building a long tail of enhanced cash flow and profitability, and at the same time it's strengthening our key customer relationships as we helped our customers access the containers they needed to take advantage of the high level of trade growth.

Triton raised a $193 million by issuing 6.2 million shares in September. We’ve already invested $300 million since the offering and expect that we will continue to have sizable, attractive investment opportunities. We expect the capital raise will be accretive to earnings and equity cash flow when it's fully deployed.

Triton declared a dividend of $0.45 per share this quarter, as we continue to share our strong cash flow with investors. I'll now hand the call over to Simon Vernon, who is joining the call from London..

Thanks Brian. We will now look at the current market environments and our performance over the third quarter. The positive momentum the Brian has just talked about can be seen when looking at the next few slides. Beginning with Slide 4, you can see containerized trade growth has continued to strengthen in 2017.

This is providing support both for our customers in terms of better cargo growth and for us as more demand is created for both our depot stocks and new production inventories. Many of our customers are now reporting growth in the 6% range with prospects remaining encouraging looking forward to 2018.

Steel cost increased during the third quarter and this is kept pricing for 24 containers delivered in the third and early part of the fourth quarter in the $2,250 range, with the prospect of pricing for December and January delivery could increase slightly.

All container factories in China have now converted to waterborne paint application and as expected, we've seen productivity impacted during this process.

We're also expecting to see a period of closure for some factories in the lead up to Chinese New Year as paint booths to convert it to withstand the impact of the colder season especially in North China.

As you can see from the bottom left hand growth, dry container new production inventory at factory yards, during the third quarter and the early part of the fourth, has increased slightly. Both competitors and some shipping lines have recently become more in placing new production orders again and we expect this trend to continue into the New Year.

However, the 400,000 TEU plus that are currently in inventory still represents a small shelf of overall availability, as we move into what we believe will be a cargo rush period from China and lead up to calendar year-end and then Chinese New Year.

It is worth pointing out that this inventory of 400,000 TEU represents only just over 1% of the global fleet. A good percentage of the leasing companies stock shown, are already committed to customers.

The third quarter saw a very strong absorption of new dry containers onto lease and we will continue to see more activity in the fourth quarter albeit to the lower velocity.

Just as importantly, as you can see in the bottom right hand chart, we have also seen depot inventories in Asia for both us and our competition remained at some of the lowest levels we have ever seen, with many of the stocks already booked by our customers.

Ongoing demand currently remains very strong and we expect to see 2018 begin with little or no surface containers supply in the market. Moving to Slide 5, we expect the positive momentum seen during the last few quarters to be maintained as we move deeper into the fourth quarter.

Dry container pick-up activity from the depot remained at near record levels for the third quarter and just as importantly turnings continue to slow as you can see in the bottom left hand chart. This shortage of containers in the market relative to demand has translated into a much higher levels of utilization.

Our overall fleet utilization is now approaching 98.25% and is still climbing, as you can see from the top left hand chart.

We are also seeing improvements in refrigerated container performance driven by the fact that there has been limited investment in new equipment in the sector over the last 18 months, and we are now well into what promises to be a strong season for reefers that usually last through May.

Our average lease rates in the fleet have been on a downward trend for five years now, but the very powerful turnaround in both market dynamics and market lease rate levels has helped to stabilize this trend over the last three quarters. As we moved into the fourth quarter, we have seen a meaningful rebound and average rates beginning to climb again.

More positives signs should be seen as we get into 2018. As we've discussed during the recent earnings calls, one of the main beneficiaries of this combination of this stronger of demand in leasing side of our business, overall reduced supply and higher container prices has been our resell business.

Average used dry container sell prices in the third quarter increased 8% from the second quarter of 2017 and 51% from the third quarter of 2016. We expect average dry containers selling prices to increase further in the fourth quarter of 2017.

Slide 6 clearly shows the role that the Triton has played in supplying and servicing our key shipping line customers during the last 15 months since our merger in July of last year. Despite stronger than expected trade growth, overall investment in new containers remains modest for 2017 especially for the first six months of the year.

New container orders have been limited by production constraints related to the conversion of container factories to waterborne paint application and the financial constraints to the number of our customers and competitors that have restricted their orders despite the acceleration of container demand.

Triton has still the resulting supply gap by leveraging our unrivaled financial and operating resources to deploy over 750,000 TEU of new dry containers to our customers. During the third quarter alone over 250,000 TEU of new dry containers were on hard by our core customers.

We calculate that this represents over 50% of leasing share of the overall dry container new production market and over 30% of the overall market including shipping line orders. As of today, we still have over a 130,000 TEU of dry van new production committed to customers with the factories and waiting to pick up.

During this time, all of the main shipping lines have had significant requirements for new containers and our customers have come to rely on Triton to provide valuable and unique service and supply. We estimate the life time equity returns for our dry van new production will be in the high-teens to over 20%.

These investments returns are well protected by least terms ranging from 5 to 11 years and lease provisions that restrict future redeliveries to demand locations centered on China. Slide 7 highlights some of the unique capability advantages that Triton International enjoys.

We have 24 of our own dedicated offices in 15 different countries ensuring extensive local marketing presence that both maintains very close relationships with all of our core customer base, but also enables us to generate business with small alliance who often more restricted requirements.

We have leased all the containers stocks from our depot network this year to a total of 244 customers across over 50 countries. Another key advantage of our global footprint is our ability to work with many independent logistics providers who all have their own unique strengths and value propositions.

By accessing these customers, we can leverage off their unique business models to efficiently and cost effectively move both our leasing stocks of containers to better demand markets and our sell units to locations where we can obtain better pricing.

We have business relationships with over 130 different logistics providers and today this year have concluded 47,000 containers on one-way moves.

Our global operations' team centrally and through our 24 officers provide very close coverage of our extensive depot network to ensure that we provide the highest level of service and cost management to both ourselves and to our customers.

Equally, our dedicated in-house technical team, provide onsite 24 hour day coverage of quality control from new container production. The key is making sure that containers have built to our strict design specifications. We have a leading team of container resell experts around the world again operating in all of our key locations.

This enables us to access the full portfolio of potential customers from largest to smallest. This year-to-date we have maximized sales values by selling containers to over 1,350 customers in 77 different counties.

Our scale, infrastructure and operating capabilities enable us to deliver our services at the lowest unit level SG&A cost whilst maintaining high levels of utilization for the entire life of a container, maximizing per diem levels and extending the leasing life of our assets, all of which provide for higher lifetime investment returns across our entire fleet.

With that, I will hand the call over to John..

Thank you, Simon. Turning to Page 8. On this page, we have presented the consolidated results for the third quarter compared to the second quarter.

As noted earlier, our adjusted pre-tax income of $73 million is up sharply from the $58.8 million in the second quarter as the strong market conditions led to improvements in nearly all financial line items.

We generated strong top line revenue growth with leasing revenue increasing over 7% driven largely by the pick-up of over 250,000 TEU of new dry containers during the quarter and our four quarters benefit from similar pick-up volumes in the second quarter.

In addition, ongoing depot unit activity pushed average utilization of 1.1% to an average of 97.6% for the third quarter. We also experienced continued increases in our average portfolio lease rate reflecting the solid current price environment for dry containers.

This improvement in on-hires and lease rates was partially offset by a drop in fee and ancillary revenue as the strong market conditions resulted in a much reduced level of container redeliveries and related fees. Gain on sale increased to $10.3 million in the third quarter from 9.6 in the second.

This increase was driven by roughly 8% increase in disposal prices, which was partially offset by a 20% drop in disposal volumes as the strong lease demand resulted in lower levels of container redeliveries.

Direct operating expenses declined a strong lease and disposal demand further reduced the number of ideal units resulting in lower storage costs. And the lower level of redeliveries reduced repair and handling costs.

Administrative costs decreased by $800,000 though they continue to be elevated relative to our long-term expectations, as we continue to incur higher levels of professional fees driven by the ongoing integration of our back-office operation and legal entity restructuring.

In addition, our current strong financial results have led to above target levels of incentive compensation. We expect to reach our targeted $40 million of cost synergies in early 2018. Our GAAP effective income tax rate for the quarter was 15.7% that was lower than anticipated as we benefited from several discrete items. Turning to Page 9.

Here, we have presented the September 30th balance sheet with the operating balance sheet on the left than the purchase accounting adjustments which we recorded as the holding company to arrive at the consolidated balance sheet in the right.

At the bottom of the page, we show our leverage the way we think about it, which is net debt to revenue earnings assets, at 73.7% or slightly less than 3 to 1 for the combined or operating entities. We look at leverage at the operating level, before the impact of purchase accounting because this is the way our debt facilities are structured.

Also as a reminder, this purchase accounting adjustments were recorded with the closing of the merger last July, using the very low container values and market leased rates at that time. These entries were to be made in a current market environment. The overall impact would be close to zero or potentially positive. Turning to Page 10.

In mid-September, we completed the issuance of 6.2 million common shares raising nearly a 193 million in equity.

Considering the 3 to 1 leveraging I mentioned earlier, this equity rates will allow us to invest roughly $800 million in incremental containers enabling us to continue to aggressively invest in the attractive lease transactions that we see as a market.

Since the offering, we have already invested over 300 million in new containers to support several large lease transactions and to renew our investment focus in the refrigerated and specialized container product lines.

This offering also adds to the strength of our capital structure, we enforces our market leadership and provide us with increased strategic flexibility. Turning to Page 11, looking forward, we expect the favorable market conditions to continue to provide positive earnings momentum in the fourth quarter.

For leasing revenue, we expect to benefit from a full quarter of revenue from the large volume of dry container pick-ups during the third quarter and we expect utilization to remain new peak levels. We continue to expect any impact from lease repricing to be minimal at market lease rates remain near current levels.

On the expense side, we anticipate ongoing improvements in direct operating expenses due to lower storage expenses. Administrative expenses should trend down slightly as we realize a full quarter synergies associated with the completion of our systems and back-office integration.

We expect the gain on sale to benefit from further increases in sales prices though this benefited expected to be offset by further declines in disposal volumes, as the inventory of sale units is already quite low and redeliveries remain exceptionally low.

As I noted earlier, the third quarter GAAP tax rate of 15.7% was lower than our trend rate due to the several discrete items. We currently expect the fourth quarter GAAP tax rate to be above our trend rate and likely in the 19% to 20% range as certain additional discrete items flow through.

Beside from these discrete items, we expect our future GAAP tax rate to trend down and we expect to continue to pay minimal cash taxes. On an earnings per share basis, the fourth quarter results will also reflect a full period of the additional 6.2 million shares outstanding. I'll now return you to Brian for some additional comments..

Thanks, John. I'll continue the presentation with Slide 12. In general, we expect market conditions to remain favorable. Container inventories are tight. Most shipping lines continue to rely heavily on leasing.

New container prices have been hedging higher in response to high steel prices in China and our customers and market forecasters are projecting trade growth will remain solidly positive in 2018.

We're now entering the seasonally slower period for dry containers, so we expect dry container activity over the next few months to slow down from the exceptionally strong pace we've seen for the last year, but our customers are operating with very little flat capacity for their containers fleets and we continue to see interesting these opportunities.

Dry container drop off volumes also remain very low which should keep our utilization high in the market firm through the slow season. In addition, the traditional peak season for refrigerated containers just getting started. Leasing demand has been solid, leading up to the peak season and inventories of refrigerated container are limited.

We've recently increased our order for new refrigerated containers and think will have good lease opportunities for this equipment as the peak season gets fully underway. We're starting to see competitors invest in new container more actively, but the overall inventory of containers remain low.

Trade growth expectations for 2018 are solidly positive and we're confident that we will continue to have strong investment opportunities even as more leasing companies return to the market. Slide 13 shows our current expectations for adjusted pre-tax income in the fourth quarter.

We expect our adjusted pre-tax income will increase from the third quarter 2017 to the fourth. As John described, we will benefit from a full quarter of revenue from the very large numbers containers picked up in the third quarter in respect our utilization to remain very high. I'll now wrap up the presentation with a few summary comments on Slide 14.

Triton is taking advantage of strong market conditions to achieve excellent performance. Our adjusted pre-tax income increased 24% from the second quarter to reach $73 million in the third.

Our key operating metrics are very strong and we're building a long tail of enhanced earnings and cash flow by leveraging our unique capabilities to capture a very large deal share in this attractive market.

We expect market conditions will remain favorable and we expect our adjusted pre-tax income will increase from the third to the fourth quarter of 2017. I'll now open up the call for questions..

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Mike Webber of Wells Fargo Securities. Please go ahead..

I guess a lot to get to generally all pretty positive, but I wanted to hone in, Brian I think on your earlier comment on the current shelf sitting at about 400,000 TEU, which is still prehistorically low.

Can you give us a sense of what percentage of that is less or versus kind of liner inventory that is still waiting to be picked up? And then with regards to competition and you guys are grabbing certainly the lion share of incremental business for the lessors, when you kind of -- sounds like you kind of tempering expectations saying look like, it's that such an understandable pace and some of the share gain don’t expected to continue.

But when you are out there placing orders, are you seeing lessors competing with you for those orders? Or are those simply just lines kind of normal business kind of sort of buying more their own containers just to kind of keep their ratios in check?.

Yes, sure. So maybe just the first part in terms of the current factory inventories, first for the 400,000 that we estimates that's in the factories. One thing to keep in mind is that barely over 1% of the operating container fleet globally. So, it's still a very tight number.

Our estimate is that something in the range of two thirds of those containers are leasing company containers, and that's relatively consistent with the overall buying this year, maybe we estimate lease buying something in the range of low 60% of the containers purchase this year by leasing companies and shipping lines.

And in fact a lot of those 400,000 TEU of containers are ours. Simon mentioned that we have something in the range of 130,000 containers that we've ordered that leases with customers and it was waiting for them to be picked up.

So again we look at the inventory that 1% of containers in the factory virtually nothing on the ground and container depots of used equipment and so just I think the container inventories are still really very tight.

In terms of our expectations for next year and just going forward from here, I think in general we've been saying is that we expect our share to be -- if we were going to guess, we think it's going to be higher than our overall fleet share would just in the mid to upper 20% range, and that's just because we think we have a lot of advantages that we bring to our customers, in terms of our supply capability, very high levels of service, significant investment capability off course.

Though, I'd say we don’t expect to maintain a 50% market share. Certainly, that's been elevated by the fact that a number of other companies were effectively absent from the market right towards the end of the third quarter, and so as additional companies come in, certainly it's going to have some effect on our investment share.

And always we say that we focus first on investment quality and investment returns, secondarily investment volumes and asset growth. And so, we’re certainly going to be mindful of making sure we continue to make good investments.

But just given the very tight supply demand balance for containers, the expectations for trade growth next year and the fact that any growth is going to need to be handled by container production, we're pretty optimistic for investment volumes..

I guess what I'm getting at is that we've been expecting the market to get a little bit more competitive from some your -- some of your competitors coming in for new lease deals for the last couple of quarters, right there are a couple -- there is a large public player and then a handful of large private or PE-owned players that have been absent for several quarters now.

So I am curious, have you seen any modest uptake in activities there kind maybe Q4 to date? And do you think it's materially different in '18 now?.

Yes, so as you know that we definitely have seen the other public company, the other large one return, some of the private companies have sort of buying.

But I think the main thing we've seen is just even the buying that they have done hasn’t really changed the supply and demand balance for containers, given the level of demand the fact that most of our shipping line customers historically with the biggest buyers, still remain pretty reluctant place large orders, always most of them do.

And so, we do see that the leasing companies come in, we see some of them certainly being hungry than we would like to see them, they will get business, but overall we see a market that is still nice mix of supply and demand for us..

One of your competitors have reported earlier and noted that an uptick in demand for lifecycle leases or finance leases with an average tenor that is certainly wider than anything we've really seen.

I'm just curious maybe this is a good question for John, but you know are you seeing that across the broader space or is that just nice way with the cup of wine? And then, you think that's related to changes in lease accounting where you've got guys with thinner balance sheet that really want to bring get us much capacity as they can now off their books? And is that business you guys typically would look at?.

Yes, so maybe I will start and I think Simon could perhaps jump in after me, but for us at Triton we don’t do a lot of finance lease transactions. We like operating leases. We think we manage the value after the first lease very well and want to keep that for ourselves. There are a number of customers that like very long leases now.

And in particular, it's a lot of the larger customers that like to operator. They don’t want to have to necessarily discriminate in their fleets as they operate container between old containers and lease containers. And they like the operating flexibility at the pick-up point for leasing, and for some extent these days like the supplemental capital.

But they don’t want to pay for drop of flexibility and so they grew to longer term leases. It's not a new trend, it's been -- these customers have preferred this type of lease structure. For a long time, I think perhaps the other company that reported maybe new to some other names and we are.

But I said the structure we like even though the rates are lower -- we would estimate that on those longer operating leases, you probably have better -- better than less volatility, but probably also better cycle average returns.

And so, we do mix of that business, we always do and we did this year for sure, and may be little more this year as we use this strength for the market just sort of nudge other customers toward longer leases..

Just one more and I will turn it over on Slide 5. You guys have used dry container sale price index and it looks like the 40 foot is leveling out a little relative to 20.

I'm just curious as whether you're seeing -- are you seeing any marginal shift in demand for different sizes of used containers? Or is that just a function of where the index is calculated?.

No, I wouldn’t say it's the index. We've seen for example the 40-foot high cube market usually is strongest in Asia, and that's because lot of those containers are used for one way shipments and that's where a lot of cargos coming from. And if we look just to Asia, you'd see very strong pricing for 40 foot high cubes.

But we've seen outside of Asia actually is that the 20 foot prices are extraordinarily good in North America and also in Europe. And while the 40 foot high cute pricing is actually we're very pleased with it, in those locations that have twice and really have been strong.

We feel a lot of those containers are used for domestic stores applications in the U.S. and in Europe, and just given the very, very tight slide containers in the lack of drop-offs from our customers just as prices are responding..

The next question comes from Helane Becker of Cowen & Co. Please go ahead..

As you think about some of the events that occurred in the third quarter, the hurricanes, weather events like that.

Do you think any of that had anything to do with increased demand in containers?.

It's a good question. That's obviously centered in the U.S. and typically for leasing at least the big demand comes out of Asia. So activities or events here in the states aren't things typically drives big changes in the overall amount of containers demand there. With that said, usually the U.S.

is a surplus area for dry containers and certain markets in the U.S. are challenged for reefer too. And the hurricanes, both in the states and Puerto Rico helped selected pockets of inventory, as cargo was moved to sort of help our at those locations.

My guess is that it's also and it's hard obviously untangle that what's going on, but my guess is also that one of the reasons why the 20 foot prices that I mentioned for sell containers in the U.S. are very strong..

Okay. And then as you think about 2018 and you put that money that you raised from the equity offering to work.

Should we think about that as another six months, so that it goes through the March quarter or the June quarter? How should we be thinking about you guys putting that money to work?.

So, it's somewhat on predictable for us. Typically, we buy containers. We put them into -- effectively, we think of it is a shelf at the factory and we -- they can take it off to shelf as we do the transactions, and we buy more containers to replace the ones we leased out.

And as I said, we always are much more focused on making quality investments than we are ensuring we hit certain number of containers that we purchased. With that said, we continue to be pretty optimistic for the level of investment and growth we are going to see.

And if we have to guess, the big season for dry containers really just going in the sometimes into first quarter, more often or early second quarter, and continues through the third quarter. Reefer containers would be mentioned as it is heading into the peak season now.

So I think if we have to guess, we would say, hey, we'll probably fully deploy it buy sometime in the third quarter, but it's very tough to know..

[Operator Instructions] The next question comes from Doug Mewhirter of SunTrust. Please go ahead..

Reefers, you said that reefers supply is finally getting tighter after maybe a prolonged soft period. If there are also any I guess demand pick-up I know that market is maybe a little less public than the dry container market which is so economically tied.

I was just wondering what are the dynamics are, both the supply and the demand dynamics are with reefer market? And does it concentrate any particular geography or trade line?.

Yes, so I'd say in terms of reefers that you mentioned that demand tends to be more steady just because of things that moving reefers, food mainly doesn’t move around as much, the other consumption levels.

What we've seen generally speaking is more I'd say of a supply adjustment where growth in refrigerated trade was pretty solid, even in '16 it's been solid. Again this year, I think we'd say the market was over supplied in particular by leasing companies in 2015 and the first part of 2016.

One of the things we saw in the reefer market was that leasing companies that hadn’t been in the reefer market before came into the refer market, I'd say between 2012, '13, '14.

And we’re effectively under pricing the reefer leases and I think given that they didn’t have a full appreciation for the different lifecycle dynamics of the reefers, the heavier operating elements required to keep them on-hires as they age and so on.

Our sense is that a lot of companies have been surprised now, by some of the challenges of operating and reefer fleet and some of the specific things that you need to do well in order to keep the reefers utilized.

And so, we saw in 2016 and in the first part of '17, leasing investment really went down, and that I think really what's created the tighter market for us.

And as we look at the expectations for ongoing reefer cargo volumes and we're looking at the investment levels in particular from leasing companies, we felt that the market was kind of rebalancing to some extent, and there was an interesting investment opportunity again.

And then with the equity offering, we had been allocating I'd say before the equity offering, more of our investment to the dry containers because that's where the demand was centered especially early in '17, that’s where the returns were strongest.

But now with the equity offering and the excess -- the extra capital we have as well as just the and mainly because of the improved supply dynamics that we see in the reefers, we started investing in those again..

And just second and final question, Brian or may be Simon.

In terms of the factory production has been slow, some of it's been exogenous imposed upon them by the Chinese government or what have you -- do you also feel that the factory owners are sort of having a little bit of gamesmanship where they're trying to may be stretch the price increases as much as they can by maybe holding a little bit back on the production rates?.

Simon do you want present?.

Yes, I think as you said to us, there was real slow down, really, predominantly in the second and third quarters. I think the change to waterborne paint application is really completed and we're saying most of the factories getting back to normal just in terms of productivity.

I think there are going to be some issues in the North of China particularly when factories start to deal with the much colder weather for the first time, and we may still see some productivity issues there, and we also understand as I mentioned a few factories again have elongated closures up, prior and then during the Chinese New Year to make modifications to their waterborne paint.

But I think just an answer to your second question, just in terms of other factories holding back on production probably not as far as I'm concerned.

I think there's still pretty healthy competition between the main four suppliers, and I think as in previous they're all very keen to feel that production lines, increased market share, and there is still a fair degree of competitiveness amongst some.

I mean I think certainly as we get into 2018, we will probably see productivity returning to where we were just a year and year and half ago. The one thing to add I guess is that there have been a number of factories that haven't gone through the waterborne paint conversion process because of the cost involved.

And those factories have essentially been permanently closed, so some capacity has been taken out to the market in terms of overall production numbers, which we view as reasonably positive..

And just a real quick follow-up.

Do you estimate what the percentage of that capacity got taken out because of the unwillingness to convert the waterborne paint?.

Off the top of my head, no more than 10%, so it's not essentially meaningful number and it was predominantly in locations that ourselves the leasing companies, and the shipping lines don’t have particular demanding.

I think if the locations whether there is very strong demand, I think the factory producers obviously want to, to have availability there because that's where they get their orders and that's where they get their better prices from. So I would say just in terms of the overall capacity, it's something approaching 10%..

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

Just like to thank everyone for participating in the call and for your interest and support for Triton International. Thank you very much..

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