Triton International Reports Third Quarter 2018 Adjusted EPS of $1.17 and Quarterly Dividend of $0.52
Third Quarter Highlights:
- Adjusted net income was
$94.8 million or$1.17 per diluted share, an increase of 46.3% per diluted share from the third quarter of 2017 and an increase of 6.4% per diluted share from the second quarter of 2018. - Net income attributable to shareholders was
$94.2 million or$1.17 per diluted share. - Container pick-up activity remained strong in the third quarter of 2018 and our utilization averaged 98.7%.
- Announced a quarterly dividend of
$0.52 per share payable on December 20, 2018 to shareholders of record as of December 3, 2018.
Financial Results
The following table summarizes Triton’s selected key financial information for the three and nine months ended September 30, 2018 and September 30, 2017 and for the three months ended June 30, 2018.
(in millions, except per share data) | |||||||||||||||||||||
Three Months Ended, | Nine Months Ended, | ||||||||||||||||||||
September 30, |
June 30, |
September 30, |
September 30, |
September 30, |
|||||||||||||||||
Total leasing revenues | $ | 350.1 | $ | 329.8 | $ | 302.1 | $ | 994.9 | $ | 849.7 | |||||||||||
GAAP |
|||||||||||||||||||||
Net income attributable to shareholders | $ | 94.2 | $ |
104.9 |
(3) |
$ | 57.2 | $ | 280.0 | $ | 137.4 | ||||||||||
Net income per share - Diluted | $ | 1.17 | $ | 1.30 | $ | 0.75 | $ | 3.47 | $ | 1.84 | |||||||||||
Non-GAAP(1) |
|||||||||||||||||||||
Adjusted net income | $ | 94.8 | $ | 88.9 | $ | 60.7 | $ | 263.6 | $ | 143.2 | |||||||||||
Adjusted net income per share - Diluted | $ | 1.17 | $ | 1.10 | $ | 0.80 | $ | 3.27 | $ | 1.92 | |||||||||||
Return on equity (2) | 16.9 | % | 16.4 | % | 13.4 | % | 16.3 | % | 10.7 | % |
(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. | |
(3) | Net income attributable to shareholders included a one-time gain of |
|
Operating Performance
“Triton achieved outstanding performance in the third quarter of 2018", commented Brian M. Sondey, Chief Executive Officer of Triton. "We generated
“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 strong throughout the third quarter, reflecting ongoing trade growth and a tight supply / demand balance for 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 98.7% in the third quarter, and currently stands at 98.4%. The start of the fourth quarter typically marks the end of the peak season for dry containers, and net container pick-up activity has slowed from the high volumes we generated in the second and third quarters. New container prices and market lease rates have also decreased as demand has slowed seasonally."
"Triton continues to grow its fleet through value-added investment and we have ordered
Outlook
Mr. Sondey continued, “While we are entering the typical slow season for dry containers, the overall supply / demand balance for containers remains tight and we are starting the fourth quarter with strong financial momentum. As a result, we expect our Adjusted net income in the fourth quarter of 2018 will remain in the same range as our strong third quarter results. Looking forward to 2019, the imposition of increased tariffs on goods traded between
Dividend
Triton’s Board of Directors has approved and declared a
Share Repurchase Update
As of October 31, 2018, we have repurchased approximately 1.0 million common shares for a total of
Investors’ Webcast
Triton will hold a Webcast at 8:30 a.m. (
About Triton International Limited
Triton International Limited is the world’s largest lessor of intermodal freight containers. With a container fleet of 6.2 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 | |||||||||||||||
September 30, 2018 | June 30, 2018 | March 31, 2018 | December 31, 2017 |
September 30, 2017 |
|||||||||||
Average Utilization (1) |
98.7 | % | 98.8 | % | 98.6 | % | 98.3 | % | 97.6 | % | |||||
Ending Utilization (1) | 98.6 | % | 98.7 | % | 98.7 | % | 98.6 | % | 98.0 | % |
(1) | 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 September 30, 2018, December 31, 2017 and September 30, 2017:
Equipment Fleet in Units | Equipment Fleet in TEU | |||||||||||
September 30, |
December 31, |
September 30, |
September 30, |
December 31, |
September 30, |
|||||||
Dry | 3,336,793 | 3,077,144 | 2,997,356 | 5,464,515 | 5,000,043 | 4,873,026 | ||||||
Refrigerated | 228,559 | 218,429 | 217,121 | 440,164 | 419,673 | 417,138 | ||||||
Special | 94,038 | 89,066 | 89,219 | 169,870 | 159,172 | 159,243 | ||||||
Tank | 12,284 | 12,124 | 11,948 | 12,284 | 12,124 | 11,948 | ||||||
Chassis | 23,396 | 22,523 | 22,522 | 42,911 | 41,068 | 41,062 | ||||||
Equipment leasing fleet | 3,695,070 | 3,419,286 | 3,338,166 | 6,129,744 | 5,632,080 | 5,502,417 | ||||||
Equipment trading fleet | 14,513 | 10,510 | 10,998 | 23,182 | 16,907 | 17,993 | ||||||
Total | 3,709,583 | 3,429,796 | 3,349,164 | 6,152,926 | 5,648,987 | 5,520,410 | ||||||
Equipment in CEU | ||||||||||||
September 30, 2018 |
December 31, 2017 |
September 30, 2017 |
||||||||||
Operating leases | 7,208,106 |
6,678,282 |
6,544,960 |
|||||||||
Finance leases | 318,607 |
328,024 |
334,121 |
|||||||||
Equipment trading fleet | 53,730 |
51,762 |
55,483 |
|||||||||
Total | 7,580,443 |
7,058,068 |
6,934,564 |
|||||||||
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 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) | |||||||
September 30, |
December 31, |
||||||
ASSETS: | |||||||
Leasing equipment, net of accumulated depreciation of |
$ | 9,208,539 | $ | 8,364,484 | |||
Net investment in finance leases | 255,750 | 295,891 | |||||
Equipment held for sale | 50,976 | 43,195 | |||||
Revenue earning assets | 9,515,265 | 8,703,570 | |||||
Cash and cash equivalents | 75,177 | 132,031 | |||||
Restricted cash | 127,282 | 94,140 | |||||
Accounts receivable, net of allowances of |
220,460 | 199,876 | |||||
Goodwill | 236,665 | 236,665 | |||||
Lease intangibles, net of accumulated amortization of |
106,171 | 154,376 | |||||
Other assets | 32,199 | 49,591 | |||||
Fair value of derivative instruments | 35,278 | 7,376 | |||||
Total assets | $ | 10,348,497 | $ | 9,577,625 | |||
LIABILITIES AND SHAREHOLDERS' EQUITY: | |||||||
Equipment purchases payable | $ | 127,755 | $ | 128,133 | |||
Fair value of derivative instruments | 820 | 2,503 | |||||
Accounts payable and other accrued expenses | 108,277 | 109,999 | |||||
Net deferred income tax liability | 254,649 | 215,439 | |||||
Debt, net of unamortized debt costs of |
7,472,846 | 6,911,725 | |||||
Total liabilities | 7,964,347 | 7,367,799 | |||||
Shareholders' equity: | |||||||
Common shares, |
809 | 807 | |||||
Undesignated shares, |
— | — | |||||
Treasury shares, at cost, 33,700 shares and no shares, respectively | (1,115 | ) | — | ||||
Additional paid-in capital | 895,461 | 889,168 | |||||
Accumulated earnings | 1,321,547 | 1,159,367 | |||||
Accumulated other comprehensive income | 40,781 | 26,942 | |||||
Total shareholders' equity | 2,257,483 | 2,076,284 | |||||
Non-controlling interests | 126,667 | 133,542 | |||||
Total equity | 2,384,150 | 2,209,826 | |||||
Total liabilities and equity | $ | 10,348,497 | $ | 9,577,625 | |||
TRITON INTERNATIONAL LIMITED | ||||||||||||||||
Consolidated Statements of Operations | ||||||||||||||||
(In thousands, except per share amounts) | ||||||||||||||||
(Unaudited) | ||||||||||||||||
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Leasing revenues: | ||||||||||||||||
Operating leases | $ | 346,461 | $ | 296,669 | $ | 981,646 | $ | 832,414 | ||||||||
Finance leases | 3,617 | 5,451 | 13,300 | 17,247 | ||||||||||||
Total leasing revenues | 350,078 | 302,120 | 994,946 | 849,661 | ||||||||||||
Equipment trading revenues | 25,292 | 11,974 | 56,766 | 30,213 | ||||||||||||
Equipment trading expenses | (19,482 | ) | (10,605 | ) | (43,971 | ) |
(27,124 |
) |
||||||||
Trading margin | 5,810 | 1,369 | 12,795 | 3,089 | ||||||||||||
Net gain on sale of leasing equipment | 7,055 | 10,263 | 27,378 | 25,063 | ||||||||||||
Net gain on sale of building | — | — | 20,953 | — | ||||||||||||
Operating expenses: | ||||||||||||||||
Depreciation and amortization | 141,337 | 128,581 | 405,664 | 370,552 | ||||||||||||
Direct operating expenses | 11,489 | 13,833 | 32,732 | 51,396 | ||||||||||||
Administrative expenses | 19,964 | 21,233 | 60,321 | 66,268 | ||||||||||||
Transaction and other (income) costs | 2 | 32 | (28 | ) | 3,340 | |||||||||||
Provision for doubtful accounts | 677 | 783 | 551 | 1,244 | ||||||||||||
Total operating expenses | 173,469 | 164,462 | 499,240 | 492,800 | ||||||||||||
Operating income | 189,474 | 149,290 | 556,832 | 385,013 | ||||||||||||
Other expenses: | ||||||||||||||||
Interest and debt expense | 82,502 | 73,795 | 236,627 | 208,076 | ||||||||||||
Realized (gain) loss on derivative instruments, net | (608 | ) | 20 | (1,348 | ) | 902 | ||||||||||
Unrealized (gain) loss on derivative instruments, net | 322 | 629 | (975 | ) |
(80 |
) |
||||||||||
Write-off of debt costs | 1,348 | 4,073 | 1,851 | 4,116 | ||||||||||||
Other expense (income), net | 492 | 164 | (752 | ) |
(1,552 |
) |
||||||||||
Total other expenses | 84,056 | 78,681 | 235,403 | 211,462 | ||||||||||||
Income before income taxes | 105,418 | 70,609 | 321,429 | 173,551 | ||||||||||||
Income tax expense | 9,789 | 11,063 | 36,182 | 29,688 | ||||||||||||
Net income | $ | 95,629 | $ | 59,546 | $ | 285,247 | $ | 143,863 | ||||||||
Less: income attributable to noncontrolling interest | 1,393 | 2,390 | 5,249 | 6,425 | ||||||||||||
Net income attributable to shareholders | $ | 94,236 | $ | 57,156 | $ | 279,998 | $ | 137,438 | ||||||||
Net income per common share—Basic | $ | 1.18 | $ | 0.76 | $ | 3.50 | $ | 1.85 | ||||||||
Net income per common share—Diluted | $ | 1.17 | $ | 0.75 | $ | 3.47 | $ | 1.84 | ||||||||
Cash dividends paid per common share | $ | 0.52 | $ | 0.45 | $ | 1.49 | $ | 1.35 | ||||||||
Weighted average number of common shares outstanding— |
80,064 | 75,214 | 80,026 | 74,245 | ||||||||||||
Dilutive restricted shares and share options | 664 | 493 | 594 | 402 | ||||||||||||
Weighted average number of common shares outstanding— |
80,728 | 75,707 | 80,620 | 74,647 | ||||||||||||
TRITON INTERNATIONAL LIMITED | ||||||||
Consolidated Statements of Cash Flows | ||||||||
(In thousands) | ||||||||
(Unaudited) | ||||||||
Nine Months Ended September 30, | ||||||||
2018 | 2017 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 285,247 | $ | 143,863 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 405,664 | 370,552 | ||||||
Amortization of deferred financing cost and other debt related amortization | 10,070 | 10,185 | ||||||
Lease related amortization | 54,965 | 70,423 | ||||||
Share-based compensation expense | 7,412 | 4,491 | ||||||
Net (gain) on sale of leasing equipment | (27,378 | ) | (25,063 | ) | ||||
Net (gain) on sale of building | (20,953 | ) | — | |||||
Unrealized (gain) on derivative instruments | (975 | ) | (80 | ) | ||||
Write-off of debt cost | 1,851 | 4,116 | ||||||
Deferred income taxes | 34,636 | 28,372 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (21,440 | ) | (3,928 | ) | ||||
Accounts payable and other accrued expenses | (3,469 | ) | (36,198 | ) | ||||
Net equipment sold for resale activity | (6,031 | ) | 5,292 | |||||
Cash received for settlement of interest rate swaps | — | 2,117 | ||||||
Other assets | (578 | ) | 648 | |||||
Net cash provided by operating activities | 719,021 | 574,790 | ||||||
Cash flows from investing activities: | ||||||||
Purchases of leasing equipment and investments in finance leases | (1,347,202 | ) | (1,185,481 | ) | ||||
Proceeds from sale of equipment, net of selling costs | 122,100 | 136,647 | ||||||
Proceeds from the sale of building | 27,630 | — | ||||||
Cash collections on finance lease receivables, net of income earned | 45,164 | 45,146 | ||||||
Other | (103 | ) | 67 | |||||
Net cash (used in) investing activities | (1,152,411 | ) | (1,003,621 | ) | ||||
Cash flows from financing activities: | ||||||||
Issuance of common shares, net of underwriter expenses | — | 192,932 | ||||||
Redemption of common shares for withholding taxes | (1,117 | ) | (71 | ) | ||||
Debt issuance costs | (12,492 | ) | (32,738 | ) | ||||
Borrowings under debt facilities | 2,118,637 | 2,782,825 | ||||||
Payments under debt facilities and capital lease obligations | (1,563,947 | ) | (2,334,409 | ) | ||||
Dividends paid | (119,280 | ) | (99,586 | ) | ||||
Distributions to noncontrolling interests | (12,123 | ) | (14,273 | ) | ||||
Other | — | 1,130 | ||||||
Net cash provided by financing activities | 409,678 | 495,810 | ||||||
Net (decrease) increase in cash, cash equivalents and restricted cash | $ | (23,712 | ) | $ | 66,979 | |||
Cash, cash equivalents and restricted cash, beginning of period | 226,171 | 163,492 | ||||||
Cash, cash equivalents and restricted cash, end of period | $ | 202,459 | $ | 230,471 | ||||
Supplemental disclosures: | ||||||||
Interest paid | $ | 213,577 | $ | 184,081 | ||||
Supplemental non-cash investing activities: | ||||||||
Equipment purchases payable | $ | 127,755 | $ | 94,052 | ||||
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, certain non-recurring transactions net of tax, and foreign income tax adjustments.
Adjusted net income is not a presentation made in accordance with
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
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TRITON INTERNATIONAL LIMITED |
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Three Months Ended, | Nine Months Ended, | ||||||||||||||||||||||||
September 30, |
June 30, |
September 30, |
September 30, |
September 30, |
|||||||||||||||||||||
Net income attributable to shareholders | $ | 94,236 | $ | 104,870 | $ | 57,156 | $ | 279,998 | $ | 137,438 | |||||||||||||||
Adjustments: | |||||||||||||||||||||||||
Unrealized loss (gain) on derivative instruments, net | 286 | (100 |
) |
515 | (866 |
) |
(66 |
) |
|||||||||||||||||
Transaction and other (income) costs | 2 | (1 |
) |
60 | (25 |
) |
2,769 | ||||||||||||||||||
Write-off of debt costs | 1,197 | 447 | 3,377 | 1,644 | 3,412 | ||||||||||||||||||||
Foreign income tax adjustment | (881 |
) |
— | (393 |
) |
|
(881 |
) |
(393 |
) |
|||||||||||||||
Gain on sale of building | — | (16,316 |
) |
— | (16,316 |
) |
|
— | |||||||||||||||||
Adjusted net income | $ | 94,840 | $ | 88,900 | $ | 60,715 | $ | 263,554 | $ | 143,160 | |||||||||||||||
Adjusted net income per common share—Basic |
$ | 1.18 | $ | 1.11 | $ | 0.81 | $ | 3.29 | $ | 1.93 | |||||||||||||||
Adjusted net income per common share—Diluted | $ | 1.17 | $ | 1.10 | $ | 0.80 | $ | 3.27 | $ | 1.92 | |||||||||||||||
Weighted average number of common shares |
80,064 | 80,044 | 75,214 | 80,026 | 74,245 | ||||||||||||||||||||
Weighted average number of common shares |
80,728 | 80,655 | 75,707 | 80,620 | 74,647 | ||||||||||||||||||||
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TRITON INTERNATIONAL LIMITED |
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Three Months Ended, | Nine Months Ended, | ||||||||||||||||||||||||
September 30, |
June 30, |
September 30, |
September 30, |
September 30, |
|||||||||||||||||||||
Adjusted net income | $ | 94,840 | $ | 88,900 | $ | 60,715 | $ | 263,554 | $ | 143,160 | |||||||||||||||
Annualized Adjusted net income (1) | 376,267 | 356,577 | 240,880 | 352,371 | 191,404 | ||||||||||||||||||||
Beginning Shareholders' equity | 2,202,601 | 2,133,505 | 1,683,470 | 2,076,284 | 1,663,233 | ||||||||||||||||||||
Ending Shareholders' equity | 2,257,483 | 2,202,601 | 1,900,028 | 2,257,483 | 1,900,028 | ||||||||||||||||||||
Average Shareholders' equity | $ | 2,230,042 | $ | 2,168,053 | $ | 1,791,749 | $ | 2,166,884 | $ | 1,781,631 | |||||||||||||||
Return on equity | 16.9 | % | 16.4 | % | 13.4 | % | 16.3 | % | 10.7 | % |
(1) | Annualized Adjusted net income was calculated based on calendar days per quarter. |
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Triton International Limited
Andrew Greenberg, 914-697-2900
Senior Vice President
Finance & Investor Relations
Source: Triton International Limited