Triton International Limited Reports Fourth Quarter and Full Year 2016 Results
Highlights:
- Triton reported Net income attributable to shareholders of
$22.8 million and Income before income taxes of$31.1 million for the fourth quarter of 2016. - Triton reported Adjusted pre-tax income of
$19.0 million in the fourth quarter of 2016. - Utilization averaged 93.6% for the fourth quarter of 2016 and averaged 93.3% for the full year.
- As previously announced, Triton declared a quarterly dividend of
$0.45 per share payable on March 30, 2017 to shareholders of record as of March 20, 2017.
Financial Results
The following table depicts Triton’s selected key financial information for the fourth quarter and full year ended December 31, 2016 and 2015 (dollars in millions, except per share data). Financial information for periods prior to
Three Months Ended December 31, |
Twelve Months Ended December 31, |
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2016 | 2015 | % Change | 2016 | 2015 | % Change | |||||||||||||||||||
Leasing revenues | $ | 259.5 | $ | 173.0 | 50.0 | % | $ | 828.7 | $ | 707.8 | 17.1 | % | ||||||||||||
Income (loss) before income taxes | $ | 31.1 | $ | 18.9 | 64.6 | % | $ | (5.8 | ) | $ | 131.7 | (104.4 | %) | |||||||||||
Net income (loss) attributable to shareholders | $ | 22.8 | $ | 12.8 | 78.1 | % | $ | (13.5 | ) | $ | 111.1 | (112.2 | %) | |||||||||||
Net income (loss) per share - diluted | $ | 0.31 | $ | 0.32 | (3.1 | %) | $ | (0.24 | ) | $ | 2.71 | (108.9 | %) | |||||||||||
Adjusted pre-tax income(1) | $ | 19.0 | $ | 21.2 | (10.4 | %) | $ | 49.1 | $ | 140.7 | (65.1 | %) | ||||||||||||
Adjusted net income(1) | $ | 15.3 | $ | 19.7 | (22.3 | %) | $ | 48.9 | $ | 135.8 | (64.0 | %) | ||||||||||||
(1) Adjusted pre-tax income and Adjusted net income are non-GAAP financial measures that we believe are useful in evaluating our operating performance. Triton's definition and calculation of Adjusted pre-tax income and Adjusted net income, including reconciliation of such non-GAAP financial measures to the most directly comparable GAAP financial measures, are outlined in the attached schedules.
Operating Performance
“Triton finished an eventful year in 2016 with strong momentum,” commented
“The improvement in market conditions has been strongest for our dry container product line. In 2016, modest trade growth combined with reduced new container production volumes to significantly reduce excess container inventories. Leasing demand was further supported by an increased preference for leasing and stronger than expected containerized trade volumes after the end of the traditional summer peak season for dry containers. Triton’s net container pick-ups in the third and fourth quarters of 2016 were close to record levels, and new and used container inventories were historically low at the end of the year. Triton’s utilization increased 2.2% during the fourth quarter to reach 94.8% as of
“New dry container prices increased rapidly in the fourth quarter of 2016 due to a strong rebound in steel prices in
“Triton generated
“The bankruptcy of
“We continue to make excellent progress on our post-merger integration. We expect to complete systems integration during the second quarter of 2017 and we remain on track to achieve our target of
Outlook
Mr. Sondey continued, “Market conditions remain generally favorable at the start of 2017. Leasing company inventories of used dry containers are limited, and inventories of new containers at the container factories are near recent historical lows. New container prices and market leasing rates have started 2017 on a positive trajectory, and the price for a new twenty foot dry container is currently in the range of
“We expect that new container production volumes will remain limited in the first half of 2017 and that the supply of containers will remain constrained despite the improved market fundamentals. We expect that container manufacturers in
“Our outlook for trade growth and leasing demand in 2017 is less clear. Our customers are generally reporting stronger than expected cargo volumes and improved freight rates for the first quarter, but ongoing global economic instability and increased threats of protectionism create meaningful risks to global economic growth, trade growth and leasing demand.”
“We expect our Adjusted pre-tax income to increase from the fourth quarter of 2016 to the first quarter of 2017. The first quarter typically represents our weakest quarter of the year since demand for dry containers is usually weakest in the post-holiday period and since the quarter has two fewer days than the fourth quarter. However, we expect ongoing improvements in our core operating trends to outweigh the first quarter seasonal weakness. If market conditions remain strong, we expect our financial results will improve sequentially through 2017.”
Dividend
As previously announced, Triton's Board of Directors has approved and declared a
Investors’ Webcast
Triton will hold a Webcast at
About
The following table sets forth the combined equipment fleet utilization(a) as of and for the periods indicated:
Quarter Ended | |||||||||
December 31, | September 30, | June 30, | March 31, | ||||||
Average Utilization | 93.6% | 92.4% | 93.3% | 94.0% | |||||
Ending Utilization | 94.8% | 92.6% | 93.7% | 93.5% | |||||
(a) Utilization is computed by dividing total units on lease (in cost equivalent units, or "CEUs") by the total units in fleet (in CEUs), excluding new units not yet leased and off-hire units designated for sale. For the utilization calculation, units on lease to
The following table provides the composition of our equipment fleet as of December 31, 2016 (in units, TEUs and cost equivalent units, or “CEUs”):
December 31, 2016 | |||||
Equipment Fleet in Units | Equipment Fleet in TEUs | ||||
Dry | 2,747,497 | 4,443,935 | |||
Refrigerated | 217,564 | 417,634 | |||
Special | 84,077 | 147,217 | |||
Tank | 11,961 | 11,961 | |||
Chassis | 21,172 | 38,321 | |||
Equipment leasing fleet | 3,082,271 | 5,059,068 | |||
Equipment trading fleet | 15,927 | 26,276 | |||
Total | 3,098,198 | 5,085,344 | |||
December 31, 2016 | |||||
Equipment Fleet in CEUs | |||||
Operating leases | 6,126,320 | ||||
Finance leases | 368,468 | ||||
Equipment trading fleet | 72,646 | ||||
Total | 6,567,434 | ||||
Important Cautionary Information Regarding Forward-Looking Statements
Certain statements in this release, other than purely historical information, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements that include the words "expect," "intend," "plan," "believe," "project," "anticipate," "will," "may," "would" and similar statements of a future or forward-looking nature may be used to identify forward-looking statements. All forward-looking statements address matters that involve risks and uncertainties, many of which are beyond Triton's control. Accordingly, there are or will be important factors that could cause actual results to differ materially from those indicated in such statements and, therefore, you should not place undue reliance on any such statements.
These factors include, without limitation, economic, business, competitive, market and regulatory conditions and the following: failure to realize the anticipated benefits of the combination of TCIL and TAL, including as a result of a delay or difficulty in integrating the businesses of TCIL and TAL; uncertainty as to the long-term value of Triton's common shares; the expected amount and timing of cost savings and operating synergies resulting from the transaction; decreases in the demand for leased containers; decreases in market leasing rates for containers; difficulties in re-leasing containers after their initial fixed-term leases; their customers' decisions to buy rather than lease containers; their dependence on a limited number of customers for a substantial portion of their revenues; customer defaults; decreases in the selling prices of used containers; extensive competition in the container leasing industry; difficulties stemming from the international nature of their businesses; decreases in the demand for international trade; disruption to their operations resulting from the political and economic policies of foreign countries, particularly
The foregoing list of important factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included herein and elsewhere. Any forward-looking statements made herein are qualified in their entirety by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on Triton or its business or operations. Except to the extent required by applicable law, we undertake no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.
TRITON INTERNATIONAL LIMITED |
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December 31, |
December 31, |
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ASSETS: | |||||||||
Leasing equipment, net of accumulated depreciation of $1,787,505 and $1,566,963 | $ | 7,370,519 | $ | 4,362,043 | |||||
Net investment in finance leases, net of allowances of $527 and $526 | 346,810 | 66,656 | |||||||
Equipment held for sale | 99,863 | — | |||||||
Revenue earning assets | 7,817,192 | 4,428,699 | |||||||
Cash and cash equivalents | 113,198 | 56,689 | |||||||
Restricted cash | 50,294 | 22,575 | |||||||
Accounts receivable, net of allowances of $28,082 and $8,297 | 173,585 | 110,970 | |||||||
Goodwill | 236,665 | — | |||||||
Lease intangibles, net of accumulated amortization of $56,159 | 246,598 | — | |||||||
Insurance receivable | 17,170 | — | |||||||
Other assets | 53,126 | 37,911 | |||||||
Fair value of derivative instruments | 5,743 | 2,153 | |||||||
Total assets | $ | 8,713,571 | $ | 4,658,997 | |||||
LIABILITIES AND SHAREHOLDERS' EQUITY: | |||||||||
Equipment purchases payable | $ | 83,567 | $ | 12,128 | |||||
Fair value of derivative instruments | 9,404 | 257 | |||||||
Accounts payable and other accrued expenses | 143,098 | 81,306 | |||||||
Net deferred income tax liability | 317,316 | 20,570 | |||||||
Debt, net of unamortized deferred financing costs of $19,999 and $19,024 | 6,353,449 | 3,166,903 | |||||||
Total liabilities | 6,906,834 | 3,281,164 | |||||||
Shareholders' equity: | |||||||||
Class A common shares, $0.01 par value; 235,200,000 authorized, none and 35,628,585 issued and outstanding respectively | — | 445 | |||||||
Class B common shares, $0.01 par value; 4,800,000 authorized; none and 4,800,000 issued and outstanding respectively | — | 60 | |||||||
Common shares, $0.01 par value, 294,000,000 shares authorized, 74,376,025 and no shares issued and outstanding respectively | 744 | — | |||||||
Undesignated shares $0.01 par value, 6,000,000 shares authorized, no shares issued and outstanding | — | — | |||||||
Additional paid-in capital | 690,418 | 176,088 | |||||||
Accumulated earnings | 945,313 | 1,044,402 | |||||||
Accumulated other comprehensive income (loss) | 26,758 | (3,666 | ) | ||||||
Total shareholders' equity | 1,663,233 | 1,217,329 | |||||||
Non-controlling interests | 143,504 | 160,504 | |||||||
Total equity | $ | 1,806,737 | $ | 1,377,833 | |||||
Total liabilities and shareholders' equity | $ | 8,713,571 | $ | 4,658,997 | |||||
TRITON INTERNATIONAL LIMITED |
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Three Months Ended December 31, |
Twelve Months Ended December 31, |
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2016 | 2015 | 2016 | 2015 | ||||||||||||||||||
Leasing revenues: | |||||||||||||||||||||
Operating leases | $ | 253,095 | $ | 170,988 | $ | 813,357 | $ | 699,810 | |||||||||||||
Finance leases | 6,452 | 2,012 | 15,337 | 8,029 | |||||||||||||||||
Total leasing revenues | 259,547 | 173,000 | 828,694 | 707,839 | |||||||||||||||||
Equipment trading revenues | 6,597 | — | 16,418 | — | |||||||||||||||||
Equipment trading expenses | (6,211 | ) | — | (15,800 | ) | — | |||||||||||||||
Trading margin | 386 | — | 618 | — | |||||||||||||||||
Net (loss) gain on sale of leasing equipment | (4,261 | ) | (1,058 | ) | (20,347 | ) | 2,013 | ||||||||||||||
Operating expenses: | |||||||||||||||||||||
Depreciation and amortization | 120,006 | 83,174 | 392,592 | 300,470 | |||||||||||||||||
Direct operating expenses | 29,959 | 15,432 | 84,256 | 54,440 | |||||||||||||||||
Administrative expenses | 20,481 | 11,539 | 65,618 | 53,435 | |||||||||||||||||
Transaction and other costsA | 399 | 9,800 | 66,916 | 22,185 | |||||||||||||||||
Provision (reversal) for doubtful accounts | 1,103 | (35 | ) | 23,304 | (2,156 | ) | |||||||||||||||
Total operating expenses | 171,948 | 119,910 | 632,686 | 428,374 | |||||||||||||||||
Operating income | 83,724 | 52,032 | 176,279 | 281,478 | |||||||||||||||||
Other expenses: | |||||||||||||||||||||
Interest and debt expense | 61,389 | 34,752 | 184,014 | 140,644 | |||||||||||||||||
Realized loss on derivative instruments, net | 1,171 | 1,097 | 3,438 | 5,496 | |||||||||||||||||
Unrealized (gain) loss on derivative instruments, net | (9,648 | ) | (3,593 | ) | (4,405 | ) | 2,240 | ||||||||||||||
Write-off of deferred financing costs | — | 1,170 | 141 | 1,170 | |||||||||||||||||
Other (income) expense | (301 | ) | (258 | ) | (1,076 | ) | 211 | ||||||||||||||
Total other expenses | 52,611 | 33,168 | 182,112 | 149,761 | |||||||||||||||||
Income (loss) before income taxes | 31,113 | 18,864 | (5,833 | ) | 131,717 | ||||||||||||||||
Income tax expense (benefit) | 5,489 | 992 | (48 | ) | 4,048 | ||||||||||||||||
Net income (loss) | $ | 25,624 | $ | 17,872 | $ | (5,785 | ) | $ | 127,669 | ||||||||||||
Less: income attributable to non-controlling interest | 2,846 | 5,052 | 7,732 | 16,580 | |||||||||||||||||
Net income (loss) attributable to shareholders | $ | 22,778 | $ | 12,820 | $ | (13,517 | ) | $ | 111,089 | ||||||||||||
Net income (loss) per common share—Basic | $ | 0.31 | $ | 0.32 | $ | (0.24 | ) | $ | 2.75 | ||||||||||||
Net income (loss) per common share—Diluted | $ | 0.31 | $ | 0.32 | $ | (0.24 | ) | $ | 2.71 | ||||||||||||
Cash dividends paid per common share | $ | 0.45 | $ | — | $ | 1.35 | $ | — | |||||||||||||
Weighted average number of common shares and non-voting common shares outstanding—Basic | 73,735 | 40,429 | 56,032 | 40,429 | |||||||||||||||||
Dilutive stock options and restricted stock | 112 | — | — | 503 | |||||||||||||||||
Weighted average number of common shares and non-voting common shares outstanding—Diluted | 73,847 | 40,429 | 56,032 | 40,932 | |||||||||||||||||
TRITON INTERNATIONAL LIMITED |
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Year Ended |
Year Ended |
Year Ended |
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Cash flows from operating activities: | |||||||||||||
Net (loss) income | $ | (5,785 | ) | $ | 127,669 | $ | 171,304 | ||||||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | |||||||||||||
Depreciation and amortization | 392,592 | 300,470 | 258,489 | ||||||||||
Amortization and write-off of deferred financing costs and other debt related amortization | 6,075 | 6,844 | 13,938 | ||||||||||
Amortization of lease intangible | 55,484 | — | — | ||||||||||
Net loss (gain) on sale of leasing equipment | 20,347 | (2,013 | ) | (31,616 | ) | ||||||||
Net (gain) loss on interest rate swaps | (4,405 | ) | 2,240 | 3,798 | |||||||||
Deferred income taxes | (809 | ) | 3,353 | 4,134 | |||||||||
Share compensation charge | 5,399 | 12,048 | 18,686 | ||||||||||
Changes in operating assets and liabilities, net of acquired assets and liabilities: | |||||||||||||
Net equipment sold for resale activity | 4,031 | — | — | ||||||||||
Accounts receivable | 10,111 | 5,494 | 131 | ||||||||||
Accounts payable and other accrued expenses | 10,694 | (2,768 | ) | (2,885 | ) | ||||||||
Other assets | (9,509 | ) | (2,814 | ) | (2,548 | ) | |||||||
Cash payments on termination of derivative instruments | (37 | ) | (1,219 | ) | (1,057 | ) | |||||||
Net cash provided by operating activities | 484,188 | 449,304 | 432,374 | ||||||||||
Cash flows from investing activities: | |||||||||||||
Purchases of leasing equipment and investments in finance leases | (629,332 | ) | (398,799 | ) | (809,446 | ) | |||||||
Proceeds from sale of equipment, net of selling costs | 145,572 | 171,719 | 195,282 | ||||||||||
Cash collections on finance lease receivables, net of income earned | 38,650 | 14,178 | 14,660 | ||||||||||
Cash and cash equivalents acquired | 50,349 | — | — | ||||||||||
Other | (685 | ) | (2,819 | ) | (3,182 | ) | |||||||
Net cash (used in) investing activities | (395,446 | ) | (215,721 | ) | (602,686 | ) | |||||||
Cash flows from financing activities: | |||||||||||||
Redemption of common shares | (7,410 | ) | — | — | |||||||||
Financing fees paid under debt facilities | (6,554 | ) | (2,972 | ) | (4,845 | ) | |||||||
Borrowings under debt facilities and proceeds under capital lease obligations | 661,971 | 685,500 | 1,622,075 | ||||||||||
Payments under debt facilities and capital lease obligations | (602,152 | ) | (886,979 | ) | (1,209,377 | ) | |||||||
Decrease in restricted cash | 31,396 | 8,877 | 17,268 | ||||||||||
Purchase of non-controlling interests | — | — | (70 | ) | |||||||||
Distributions to non-controlling interest | (24,732 | ) | (46,927 | ) | (38,225 | ) | |||||||
Common stock dividends paid | (84,752 | ) | — | (215,000 | ) | ||||||||
Net cash (used in) provided by financing activities | (32,233 | ) | (242,501 | ) | 171,826 | ||||||||
Net increase (decrease) in unrestricted cash and cash equivalents | $ | 56,509 | $ | (8,918 | ) | $ | 1,514 | ||||||
Cash and cash equivalents, beginning of period | 56,689 | 65,607 | 64,093 | ||||||||||
Cash and cash equivalents, end of period | $ | 113,198 | $ | 56,689 | $ | 65,607 | |||||||
Supplemental disclosures: | |||||||||||||
Interest paid | $ | 181,559 | $ | 131,749 | $ | 132,214 | |||||||
Income taxes paid | $ | 309 | $ | 1,477 | $ | 1,552 | |||||||
Supplemental non-cash investing activities: | |||||||||||||
Equipment purchases payable | $ | 83,567 | $ | 12,128 | $ | 109,949 | |||||||
Shares issued to acquire TAL | $ | 510,186 | $ | — | $ | — | |||||||
A Transaction costs associated with the merger of TCIL and TAL and other costs for the fourth quarter and full year ended December 31, 2016 and 2015 were as follows:
Three Months Ended December 31, |
Twelve Months Ended December 31, |
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2016 | 2015 | 2016 | 2015 | ||||||||||
Employee compensation costs | $ | 209 | $ | 3,164 | $ | 46,838 | $ | 15,426 | |||||
Professional fees | 78 | 2,729 | 14,295 | 2,840 | |||||||||
Legal expenses | 81 | 3,907 | 3,371 | 3,919 | |||||||||
Other | 31 | — | 2,412 | — | |||||||||
Total | $ | 399 | $ | 9,800 | $ | 66,916 | $ | 22,185 | |||||
Employee compensation costs include costs to maintain and retain key employees, severance expenses, and certain stock compensation expense, including retention and stock compensation expense pursuant to plans established as part of TCIL's 2011 re-capitalization. Professional fees and legal expenses include costs paid for services directly related to the closing of the merger and include legal fees, accounting fees and transaction and advisory fees.
Non-GAAP Financial Measures
We use the terms "Adjusted pre-tax income "and "Adjusted net income" throughout this press release.
Adjusted pre-tax income is defined as income before income taxes as further adjusted for certain items which are described in more detail below, which management believes are not representative of our operating performance. Adjusted pre-tax income excludes gains and losses on interest rate swaps, the write-off of deferred financing costs, transaction and other costs, and non-controlling interest. Adjusted net income is defined as net income further adjusted for the items discussed above, net of income tax.
Adjusted pre-tax income and Adjusted net income are not presentations made in accordance with U.S. GAAP. Adjusted pre-tax income and Adjusted net income should not be considered as alternatives to, or more meaningful than, amounts determined in accordance with U.S. GAAP, including net income.
We believe that Adjusted pre-tax income and Adjusted net income are useful to an investor in evaluating our operating performance because these measures:
- are widely used by securities analysts and investors to measure a company’s operating performance;
- help investors to more meaningfully evaluate and compare the results of our operations from period to period by removing the impact of our capital structure, our asset base and certain non-routine events which we do not expect to occur in the future; and
- are used by our management for various purposes, including as measures of operating performance and liquidity, to assist in comparing performance from period to period on a consistent basis, in presentations to our board of directors concerning our financial performance and as a basis for strategic planning and forecasting.
We have provided reconciliations of Net income (loss) before income taxes and Net income (loss) attributable to shareholders, the most directly comparable U.S. GAAP measures, to Adjusted pre-tax income and Adjusted net income in the tables below for the three and twelve months ended
TRITON INTERNATIONAL LIMITED |
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Three Months Ended |
Twelve Months Ended |
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2016 | 2015 | 2016 | 2015 | |||||||||||||
Income (loss) before income taxes | $ | 31,113 | $ | 18,864 | $ | (5,833 | ) | $ | 131,717 | |||||||
Add (subtract): | ||||||||||||||||
Unrealized (gain) loss on derivative instruments, net | (9,648 | ) | (3,593 | ) | (4,405 | ) | 2,240 | |||||||||
Write-off of deferred financing costs | — | 1,170 | 141 | 1,170 | ||||||||||||
Transaction and other costs | 399 | 9,800 | 66,916 | 22,185 | ||||||||||||
Less: | ||||||||||||||||
Income attributable to non-controlling interest | 2,846 | 5,052 | 7,732 | 16,580 | ||||||||||||
Adjusted pre-tax income | $ | 19,018 | $ | 21,189 | $ | 49,087 | $ | 140,732 | ||||||||
Three Months Ended |
Twelve Months Ended |
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2016 | 2015 | 2016 | 2015 | |||||||||||||
Net income (loss) attributable to shareholders | $ | 22,778 | $ | 12,820 | $ | (13,517 | ) | $ | 111,089 | |||||||
Add (subtract): | ||||||||||||||||
Unrealized (gain) loss on derivative instruments, net | (7,775 | ) | (3,335 | ) | (4,389 | ) | 2,161 | |||||||||
Write-off of deferred financing costs | — | 1,086 | 141 | 1,129 | ||||||||||||
Transaction and other costs | 322 | 9,096 | 66,679 | 21,405 | ||||||||||||
Adjusted net income | $ | 15,325 | $ | 19,667 | $ | 48,914 | $ | 135,784 | ||||||||
View source version on businesswire.com: http://www.businesswire.com/news/home/20170314006365/en/
Source:
Triton International Limited
Andrew Greenberg, 914-697-2900
Senior Vice President,
Finance & Investor Relations