Triton International Reports Second Quarter 2018 Adjusted EPS of $1.10, Quarterly Dividend of $0.52 and $200 Million Share Repurchase Authorization

HAMILTON, Bermuda--()--Triton International Limited (NYSE: TRTN) ("Triton")

Second Quarter Highlights:

  • Triton reported net income attributable to shareholders of $104.9 million or $1.30 per diluted share, an increase of 30.0% per diluted share from the first quarter of 2018. Net income attributable to shareholders included a one-time gain of $21.0 million on the sale of a building. The gain on the building sale also led to an increase in our effective tax rate to 13% in the second quarter.
  • Triton reported Adjusted net income of $88.9 million or $1.10 per diluted share, an increase of 11.1% per diluted share from the first quarter of 2018.
  • Container pick-up activity increased strongly in the second quarter, reflecting the start of the traditional peak season for dry containers. Our utilization averaged 98.8% during the second quarter of 2018.
  • Triton announced a quarterly dividend of $0.52 per share payable on September 25, 2018 to shareholders of record as of September 4, 2018.
  • Triton announced the Board of Directors has authorized the repurchase of up to $200 million of its common shares.

Financial Results

The following table summarizes Triton’s selected key financial information for the three and six months ended June 30, 2018 and June 30, 2017 and for the three months ended March 31, 2018.

        (in millions, except per share data)
        Three Months Ended,     Six Months Ended,
        June 30, 2018     March 31, 2018     June 30, 2017     June 30, 2018     June 30, 2017
Total leasing revenues       $329.8     $315.1     $281.9     $644.9     $547.5
Net income attributable to shareholders       $104.9     $80.9     $45.7     $185.8     $80.3
Net income per share - Diluted       $1.30     $1.00     $0.62     $2.30     $1.08
Adjusted net income (1)       $88.9     $79.8     $47.0     $168.7     $82.4
Adjusted net income per share - Diluted (1)       $1.10     $0.99     $0.63     $2.09     $1.11
Return on equity (2)       16.4%     15.4%     11.2%     15.9%     9.9%
(1)   Refer to the "Use of Non-GAAP Financial Measures" and "Non-GAAP Reconciliations of Adjusted Net Income" set forth below.
(2)   Triton's definition and calculation of Return on equity is annualized Adjusted net income divided by average shareholders' equity for the period.
     

Operating Performance

“Triton achieved outstanding performance in the second quarter of 2018", commented Brian M. Sondey, Chief Executive Officer of Triton. "We generated $88.9 million of Adjusted net income, or $1.10 of Adjusted net income per share, which represents an increase of 11.1% per diluted share from the first quarter of 2018. We also generated an annualized return on equity of 16.4%.”

“Triton’s strong financial results continue to be driven by outstanding operational performance, our unique competitive advantages and a favorable market environment. Container pick-up activity was near record levels in May and June, reflecting ongoing trade growth and the start of the peak season for dry containers. We also continued to benefit from an increase in the share for leasing relative to direct container purchases by our customers, and a continued high leasing deal share for Triton. Our utilization averaged 98.8% in the second quarter, and currently stands at 98.8%. Our average used container sale prices increased in the second quarter, driving an increase in gains on disposal."

"Trade growth and container demand have not been materially impacted by the threat of trade actions or the initial round of new tariffs implemented between the United States and China. However, the United States has disclosed an expanded list of products that will likely become subject to increased tariffs later in the third quarter. The potential for expanded tariffs is adding uncertainty to our market, though our customers and market forecasters are still expecting global container volumes to increase in 2018."

"Triton continues to grow its fleet through value-added investment. We have so far ordered $1.4 billion of containers for delivery in 2018, and expect our revenue earning assets will grow in the range of 10% this year. We estimate the lease transactions we are concluding for our new container investments will generate equity IRRs in the mid-teens over the lifetime of the containers, and the average initial lease duration for our new container leases is approximately seven years.”

Outlook

Mr. Sondey continued, “We are starting the second half of 2018 with strong operating and financial momentum. Container pick-up activity and lease deal activity remain strong, and our key operating metrics remain at high levels. Based on the continued growth in our container fleet, continued high utilization and the currently limited impacts from the tariffs, we expect our Adjusted net income to increase sequentially throughout the balance of the year.”

Dividend

Triton’s Board of Directors has approved and declared a $0.52 per share quarterly cash dividend on its issued and outstanding common shares, payable on September 25, 2018 to shareholders of record at the close of business on September 4, 2018.

Share Repurchase Authorization

Triton’s Board of Directors has authorized the repurchase of up to $200 million of its common shares. Under the plan, shares may be purchased on the open market or in privately negotiated transactions. The extent to which the company repurchases its shares and the timing of such repurchases will depend upon market conditions and other corporate considerations.

Mr. Sondey concluded, “Given the strong market environment and sizable attractive investment opportunities, we will continue to prioritize organic investment and growth as the primary use for our capital. However, we believe that an opportunistic share repurchase program could complement our dividend as another avenue for providing returns to shareholders.”

Investors’ Webcast

Triton will hold a Webcast at 8:30 a.m. (New York time) on Friday, August 3, 2018 to discuss its second quarter results. To listen by phone, please dial 1-877-418-5277 (domestic) or 1-412-717-9592 (international) approximately 15 minutes prior to the start time and reference the Triton International Limited conference call. To access the live Webcast please visit Triton's website at http://www.trtn.com. An archive of the Webcast will be available one hour after the live call.

About Triton International Limited

Triton International Limited is the world’s largest lessor of intermodal freight containers. With a container fleet of 6.0 million twenty-foot equivalent units ("TEU"), Triton’s global operations include acquisition, leasing, re-leasing and subsequent sale of multiple types of intermodal containers and chassis.

The following table sets forth the equipment fleet utilization for the periods indicated:

         
        Quarter Ended
        June 30, 2018     March 31, 2018     December 31, 2017     September 30, 2017     June 30, 2017
Average Utilization (a)       98.8 %     98.6 %     98.3 %     97.6 %     96.5 %
Ending Utilization (a)       98.7 %     98.7 %     98.6 %     98.0 %     97.1 %
(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.
     

The following table summarizes the equipment fleet as of June 30, 2018, December 31, 2017 and June 30, 2017:

        Equipment Fleet in Units     Equipment Fleet in TEU
        June 30, 2018     December 31, 2017     June 30, 2017     June 30, 2018     December 31, 2017     June 30, 2017
Dry       3,243,032       3,077,144       2,903,880       5,307,306       5,000,043       4,721,780
Refrigerated       227,040       218,429       218,238       437,038       419,673       419,170
Special       91,688       89,066       81,884       165,002       159,172       143,954
Tank       12,201       12,124       11,956       12,201       12,124       11,956
Chassis       23,405       22,523       21,468       42,884       41,068       38,933
Equipment leasing fleet       3,597,366       3,419,286       3,237,426       5,964,431       5,632,080       5,335,793
Equipment trading fleet       15,406       10,510       14,991       23,622       16,907       23,580
Total       3,612,772       3,429,796       3,252,417       5,988,053       5,648,987       5,359,373
                                                 

 

        Equipment in CEU
        June 30, 2018     December 31, 2017     June 30, 2017
Operating leases       7,047,168       6,678,282       6,384,590
Finance leases       320,763       328,024       354,727
Equipment trading fleet       56,048       51,762       62,969
Total       7,423,979       7,058,068       6,802,286

 

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: uncertainty as to the long-term value of Triton's common shares; 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; our customers' decisions to buy rather than lease containers; our dependence on a limited number of customers for a substantial portion of our 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 our business; decreases in the demand for international trade; disruption to our operations resulting from the political and economic policies of the United States and other countries, particularly China, including increased tariffs and other trade actions; disruption to our operations from failures of, or attacks on, our information technology systems; our compliance or failure to comply with laws and regulations related to economic and trade sanctions, security, anti-terrorism, environmental protection and corruption; our ability to obtain sufficient capital to support our growth; restrictions on our businesses imposed by the terms of our debt agreements; changes in tax laws in the United States and other countries and other risks and uncertainties, including those risk factors set forth in the section entitled "Risk Factors" to in our Form 10-K filed with the Securities and Exchange Commission ("SEC"), on February 27, 2018, in any Form 10-Q filed or to be filed by Triton, and in other documents we file with the SEC from time to time.

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.

 

-Financial Tables Follow-

TRITON INTERNATIONAL LIMITED

Consolidated Balance Sheets

(In thousands, except share data)

(Unaudited)

        June 30,
2018
    December 31,
2017
ASSETS:              
Leasing equipment, net of accumulated depreciation of $2,441,745 and $2,218,897       $ 8,956,091       $ 8,364,484
Net investment in finance leases       270,746       295,891
Equipment held for sale       50,068       43,195
Revenue earning assets       9,276,905       8,703,570
Cash and cash equivalents       48,145       132,031
Restricted cash       132,433       94,140
Accounts receivable, net of allowances of $2,861 and $3,002       229,697       199,876
Goodwill       236,665       236,665
Lease intangibles, net of accumulated amortization of $177,187 and $144,081       121,270       154,376
Other assets       35,534       49,591
Fair value of derivative instruments       29,467       7,376
Total assets       $ 10,110,116       $ 9,577,625
LIABILITIES AND SHAREHOLDERS' EQUITY:              
Equipment purchases payable       $ 159,454       $ 128,133
Fair value of derivative instruments             2,503
Accounts payable and other accrued expenses       93,008       109,999
Net deferred income tax liability       243,342       215,439
Debt, net of unamortized debt costs of $44,603 and $40,636       7,282,056       6,911,725
Total liabilities       7,777,860       7,367,799
Shareholders' equity:              
Common shares, $0.01 par value, 294,000,000 shares authorized, 80,855,072 and 80,687,757 shares issued and outstanding, respectively       809       807
Undesignated shares, $0.01 par value, 6,000,000 shares authorized, no shares issued and outstanding            
Additional paid-in capital       894,005       889,168
Accumulated earnings       1,269,429       1,159,367
Accumulated other comprehensive income       38,358       26,942
Total shareholders' equity       2,202,601       2,076,284
Non-controlling interests       129,655       133,542
Total equity       2,332,256       2,209,826
Total liabilities and equity       $ 10,110,116       $ 9,577,625

 

TRITON INTERNATIONAL LIMITED

Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)

        Three Months Ended June 30,     Six Months Ended June 30,
        2018     2017     2018     2017
Leasing revenues:                          
Operating leases       $ 324,954       $ 276,160       $ 635,185       $ 535,745  
Finance leases       4,817       5,779       9,683       11,796  
Total leasing revenues       329,771       281,939       644,868       547,541  
                           
Equipment trading revenues       18,099       12,755       31,474       18,239  
Equipment trading expenses       (14,105)     (11,427)     (24,489)     (16,519)
Trading margin       3,994       1,328       6,985       1,720  
                           
Net gain on sale of leasing equipment       11,105       9,639       20,323       14,800  
Net gain on sale of building       20,953             20,953        
                           
Operating expenses:                          
Depreciation and amortization       133,894       124,091       264,327       241,971  
Direct operating expenses       10,195       15,609       21,243       37,563  
Administrative expenses       20,775       22,068       40,357       45,035  
Transaction and other (income) costs       (1)     836       (30)     3,308  
(Benefit) provision for doubtful accounts       (25)     (113)     (126)     461  
Total operating expenses       164,838       162,491       325,771       328,338  
Operating income       200,985       130,415       367,358       235,723  
Other expenses:                          
Interest and debt expense       79,027       70,777       154,125       134,281  
Realized (gain) loss on derivative instruments, net       (492)     283       (740)     882  
Unrealized loss (gain) on derivative instruments, net       (111)     789       (1,297)     (709)
Write-off of debt costs       503       43       503       43  
Other (income), net       (585)     (974)     (1,244)     (1,716)
Total other expenses       78,342       70,918       151,347       132,781  
Income before income taxes       122,643       59,497       216,011       102,942  
Income tax expense       15,890       11,483       26,393       18,625  
Net income       $ 106,753       $ 48,014       $ 189,618       $ 84,317  
Less: income attributable to noncontrolling interest       1,883       2,343       3,856       4,035  
Net income attributable to shareholders       $ 104,870       $ 45,671       $ 185,762       $ 80,282  
Net income per common share—Basic       $ 1.31       $ 0.62       $ 2.32       $ 1.09  
Net income per common share—Diluted       $ 1.30       $ 0.62       $ 2.30       $ 1.08  
Cash dividends paid per common share       $ 0.52       $ 0.45       $ 0.97       $ 0.90  
Weighted average number of common shares outstanding—Basic       80,044       73,763       80,007       73,752  
Dilutive restricted shares and share options       611       414       589       356  
Weighted average number of common shares outstanding—Diluted       80,655       74,177       80,596       74,108  
                                   

 

TRITON INTERNATIONAL LIMITED

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

        Six Months Ended June 30,
        2018     2017
Cash flows from operating activities:              
Net income       $ 189,618       $ 84,317  
Adjustments to reconcile net income to net cash provided by operating activities:              
Depreciation and amortization       264,327       241,971  
Amortization of deferred financing cost and other debt related amortization       6,627       6,761  
Lease related amortization       37,722       47,093  
Share-based compensation expense       5,661       3,298  
Net (gain) loss on sale of leasing equipment       (20,323)     (14,800)
Net (gain) on sale of building       (20,953)      
Unrealized (gain) loss on derivative instruments       (1,297)     (709)
Write-off of debt cost       503       43  
Deferred income taxes       23,946       17,106  
Changes in operating assets and liabilities:              
Accounts receivable       (30,551)     (1,823)
Accounts payable and other accrued expenses       (16,788)     (25,396)
Net equipment sold for resale activity       (11,686)     248  
Other assets       (1,218)     (656)
Net cash provided by operating activities       425,588       357,453  
Cash flows from investing activities:              
Purchases of leasing equipment and investments in finance leases       (884,007)     (665,473)
Proceeds from sale of equipment, net of selling costs       83,443       90,139  
Proceeds from the sale of building       27,630        
Cash collections on finance lease receivables, net of income earned       29,598       29,953  
Other       (64)     55  
Net cash (used in) in investing activities       (743,400)     (545,326)
Cash flows from financing activities:              
Redemption of common shares for withholding taxes       (822)      
Debt issuance costs       (9,567)     (19,844)
Borrowings under debt facilities       1,417,985       1,582,882  
Payments under debt facilities and capital lease obligations       (1,049,996)     (1,180,787)
Dividends paid       (77,638)     (66,384)
Distributions to noncontrolling interests       (7,743)     (9,709)
Net cash provided by financing activities       272,219       306,158  
Net (decrease) increase in cash, cash equivalents and restricted cash       $ (45,593)     $ 118,285  
Cash, cash equivalents and restricted cash, beginning of period       226,171       163,492  
Cash, cash equivalents and restricted cash, end of period       $ 180,578       $ 281,777  
Supplemental disclosures:              
Interest paid       $ 148,007       $ 127,360  
Supplemental non-cash investing activities:              
Equipment purchases payable       $ 159,454       $ 153,594  

 

Use of Non-GAAP Financial Measures

We use the term "Adjusted net income" throughout this press release.

Adjusted net income is adjusted for certain items management believes are not representative of our operating performance. Adjusted net income is defined as net income attributable to shareholders excluding the write-off of debt costs net of tax, gains and losses on interest rate swaps net of tax, transaction and other costs net of tax, and certain non-recurring transactions net of tax.

Adjusted net income is not a presentation made in accordance with U.S. GAAP. Adjusted net income should not be considered as an alternative to, or more meaningful than, amounts determined in accordance with U.S. GAAP, including net income.

We believe that Adjusted net income is useful to an investor in evaluating our operating performance because this measure:

  • is widely used by securities analysts and investors to measure a company’s operating performance;
  • helps 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
  • is 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 a reconciliation of net income attributable to shareholders, the most directly comparable U.S. GAAP measure, to Adjusted net income in the table below for the three and six months ended June 30, 2018 and June 30, 2017 and for the three months ended March 31, 2018.

 

TRITON INTERNATIONAL LIMITED

Non-GAAP Reconciliations of Adjusted Net Income

(In thousands, except per share amounts)

        Three Months Ended,     Six Months Ended,
        June 30, 2018     March 31, 2018     June 30, 2017     June 30, 2018     June 30, 2017
Net income attributable to shareholders       $ 104,870       $ 80,892       $ 45,671       $ 185,762       $ 80,282  
Adjustments:                                
Unrealized loss (gain) on derivative instruments, net       (100)     (1,052)     671       (1,152)     (581)
Transaction and other (income) costs       (1)     (26)     643       (27)     2,709  
Write-off of debt costs       447             35       447       35  
Gain on sale of building       (16,316)                 (16,316)      
Adjusted net income       $ 88,900       $ 79,814       $ 47,020       $ 168,714       $ 82,445  
Adjusted income per common share—Basic       $ 1.11       $ 1.00       $ 0.64       $ 2.11       $ 1.12  
Adjusted income per common share—Diluted       $ 1.10       $ 0.99       $ 0.63       $ 2.09       $ 1.11  
Weighted average number of common shares outstanding—Basic       80,044       79,968       73,763       80,007       73,752  
Weighted average number of common shares outstanding—Diluted       80,655       80,572       74,177       80,596       74,108  
                                           

 

TRITON INTERNATIONAL LIMITED

Calculation of Return on Equity

(In thousands)

        Three Months Ended,     Six Months Ended,
        June 30, 2018     March 31, 2018     June 30, 2017     June 30, 2018     June 30, 2017
Adjusted net income       $ 88,900       $ 79,814       $ 47,020       $ 168,714       $ 82,445  
Annualized Adjusted net income (1)       356,577       323,690       188,597       340,224       166,256  
                                 
Beginning Shareholders' equity       2,133,505       2,076,284       1,672,925       2,076,284       1,663,233  
Ending Shareholders' equity       2,202,601       2,133,505       1,683,470       2,202,601       1,683,470  
Average Shareholders' equity       $ 2,168,053       $ 2,104,895       $ 1,678,198       $ 2,139,443       $ 1,673,352  
                                 
Return on equity       16.4 %     15.4 %     11.2 %     15.9 %     9.9 %
(1)   Annualized Adjusted net income was calculated based on calendar days per quarter.

 

Contacts

Triton International Limited
Andrew Greenberg, 914-697-2900
Senior Vice President, Finance & Investor Relations