Triton International Reports Third Quarter 2018 Adjusted EPS of $1.17 and Quarterly Dividend of $0.52

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

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,
2018

 

June 30,
2018

 

September 30,
2017

 

September 30,
2018

 

September 30,
2017

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 $21.0 million on the sale of a building.
     

Operating Performance

“Triton achieved outstanding performance in the third quarter of 2018", commented Brian M. Sondey, Chief Executive Officer of Triton. "We generated $94.8 million of Adjusted net income in the third quarter, or $1.17 of Adjusted net income per share, which represents an increase of 6.4% from the second quarter of 2018 and an increase of 46.3% from the third quarter of 2017. We also realized an annualized Return on equity of 16.9%.”

“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 $1.5 billion of containers for delivery in 2018. We continue to focus on reducing our exposure to changes in market conditions by extending our lease durations, and the average initial lease duration for new container leases originated this year is approximately seven years.”

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 the United States and China has added uncertainty to global economic and trade forecasts and to our market. However, our customers continue to believe the increased tariffs will not have a significant impact on overall global container trading volumes, and market forecasters are currently projecting trade growth will remain solidly positive in 2019. We also expect the market uncertainty will encourage our customers to continue to rely heavily on leasing.”

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 December 20, 2018 to shareholders of record at the close of business on December 3, 2018.

Share Repurchase Update

As of October 31, 2018, we have repurchased approximately 1.0 million common shares for a total of $30.1 million at an average price per-share of $30.84. Currently, $169.9 million remains available of the $200.0 million share repurchase authorized by the Board in August 2018.

Investors’ Webcast

Triton will hold a Webcast at 8:30 a.m. (New York time) on Friday, November 2, 2018 to discuss its third 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 6.2 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,
2018

 

December 31,
2017

 

September 30,
2017

 

September 30,
2018

 

December 31,
2017

 

September 30,
2017

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 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)
         
   

September 30,
2018

 

December 31,
2017

ASSETS:        
Leasing equipment, net of accumulated depreciation of $2,556,600 and $2,218,897   $ 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 $3,085 and $3,002   220,460     199,876
Goodwill   236,665     236,665
Lease intangibles, net of accumulated amortization of $192,286 and $144,081   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 $43,263 and $40,636   7,472,846     6,911,725
Total liabilities   7,964,347     7,367,799
Shareholders' equity:        

Common shares, $0.01 par value, 294,000,000 shares authorized, 80,851,188 and
80,687,757 shares issued, respectively

  809     807

Undesignated shares, $0.01 par value, 6,000,000 shares authorized, no shares issued
and outstanding

     
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—
Basic

  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—
Diluted

  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 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 nine months ended September 30, 2018 and September 30, 2017 and for the three months ended June 30, 2018.

                                 

 

   

TRITON INTERNATIONAL LIMITED
Non-GAAP Reconciliations of Adjusted Net Income
(In thousands, except per share amounts)

 
                 
      Three Months Ended,       Nine Months Ended,  
     

September 30,
2018

     

June 30,
2018

     

September 30,
2017

     

September 30,
2018

     

September 30,
2017

 
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
outstanding—Basic

    80,064       80,044       75,214       80,026       74,245  

Weighted average number of common shares
outstanding—Diluted

    80,728       80,655       75,707       80,620       74,647  
                                         
                                         

 

                               
     

TRITON INTERNATIONAL LIMITED
Calculation of Return on Equity
(In thousands)

 
      Three Months Ended,     Nine Months Ended,  
     

September 30,
2018

   

June 30,
2018

   

September 30,
2017

   

September 30,
2018

   

September 30,
2017

 
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.

 

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

 

Source: Triton International Limited