Triton International Limited (NYSE: TRTN) ("Triton")
today reported results for the third quarter ended
September 30, 2017. On July 12, 2016 Triton Container
International Limited ("TCIL") and TAL International Group, Inc.
("TAL") completed their previously announced strategic combination
and became wholly-owned subsidiaries of Triton. In this press
release, Triton has presented its results based on U.S. GAAP as
well as non-GAAP selected information for the three and nine months
ended September 30, 2017 and September 30, 2016 and for
the three months ended June 30, 2017.
Third Quarter and Recent
Highlights:
- Triton reported Net income attributable
to shareholders of $57.2 million and Income before income taxes of
$70.6 million for the third quarter of 2017.
- Triton reported Adjusted pre-tax income
of $73.0 million in the third quarter of 2017.
- Average utilization was 97.6% for the
third quarter of 2017.
- Triton raised net proceeds of $192.9
million in September through the issuance of 6.15 million new
common shares. The proceeds will be used for general corporate
purposes including the purchase of containers.
- Triton announced a quarterly dividend
of $0.45 per share payable on December 22, 2017 to shareholders of
record as of December 1, 2017.
Financial Results
The following table summarizes Triton’s selected key financial
information for the three and nine months ended September 30,
2017 and September 30, 2016 and for the three months ended
June 30, 2017. Financial information for periods prior to July 12,
2016 is for TCIL (the accounting acquirer in the strategic
combination of TCIL and TAL) only.
(in millions, except per share data) Three Months
Ended, Nine Months Ended,
September 30, 2017
June 30, 2017
September 30, 2016
September 30, 2017
September 30, 2016
Total leasing revenues $302.1 $281.9 $247.8 $849.7 $569.1
Income (loss) before income taxes $70.6 $59.5 $(56.8) $173.6
$(36.9)
Net income (loss) attributable to shareholders $57.2
$45.7 $(51.2) $137.4 $(36.3)
Adjusted pre-tax income (loss)
(1) $73.0 $58.8 $(2.8) $174.5 $30.1
Adjusted net income
(loss) (1) $61.1 $47.0 $(0.3) $143.6 $31.5
Net income (loss)
per share - Diluted $0.75 $0.62 $(0.74) $1.84 $(0.72)
Adjusted pre-tax income (loss) per share - Diluted (1) $0.96
$0.79 $(0.04) $2.34 $0.60
Adjusted net income (loss) per share -
Diluted (1) $0.81 $0.63 $— $1.92
$0.63
The effective tax rate in the third quarter of 2017 was
positively impacted by discrete items for a benefit of
approximately 2%.
(1) Adjusted pre-tax income (loss), Adjusted pre-tax income
(loss) per share - Diluted, Adjusted net income (loss), Adjusted
net income (loss) per share - Diluted 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
“We are very pleased with Triton’s strong operating and
financial performance in the third quarter of 2017,” commented
Brian Sondey, Chairman and Chief Executive Officer of Triton. “We
generated $73.0 million in Adjusted pre-tax income during the
quarter, an increase of 24% from the second quarter of 2017, we
achieved improvements across all of our key operating metrics, and
we continued to take advantage of large and attractive investment
opportunities that Triton is uniquely suited to pursue.”
“Container pick-up volumes and new container lease transaction
activity remained near record levels in the third quarter, and
container drop-off volumes remained very low. Our container
utilization increased by 0.9% during the quarter to reach 98.0% as
of September 30, 2017, and our utilization currently stands at
98.2%.
“Our strong operating performance continued to be supported by a
favorable supply and demand balance for containers. Container
demand was driven by solid trade growth and an increase in the
share of leased containers relative to direct ownership of
containers by our shipping line customers. The supply of containers
has been constrained, and the inventory of available new containers
and used leasing containers remains tight. In addition, Triton
continued to leverage our operational and financial capabilities to
supply an outsized share of new containers in the third quarter,
and we estimate our share of new container leasing transactions was
in the range of 50%.”
“In September, Triton raised net proceeds of $192.9 million, net
of underwriter and offering costs, by issuing 6.15 million common
shares to support our aggressive container investments. As of
November 8, 2017, we have ordered $1.6 billion of new and sale
leaseback containers for delivery in 2017, and we have already
ordered approximately $100 million of new containers for delivery
next year. We believe the significant investments we have made in
our container fleet will provide strong support for our future
profitability and cash flow, while at the same time our unique
ability to provide large, critically needed container solutions is
strengthening our key customer relationships and building franchise
value.”
Outlook
Mr. Sondey concluded, “In general, we expect our market to
remain favorable. While we are heading into the seasonally slower
period for dry containers, we expect the low inventory of available
containers will keep market conditions firm. In addition, the
traditional peak season for refrigerated containers is starting,
and we have seen the supply / demand balance for refrigerated
containers tighten ahead of the peak season over the last few
months. We also expect to benefit from a full quarter of revenue in
the fourth quarter from the very large number of dry containers
picked up in the third quarter, and we expect our utilization will
remain near peak levels during the fourth quarter. We expect our
gain on sale of used containers will be impacted by a reduced
inventory of containers available for sale and a lower benefit from
prior period mark-downs, but on balance, we expect our Adjusted
pre-tax income will increase from the third quarter of 2017 to the
fourth quarter.”
Dividend
Triton’s Board of Directors has approved and declared a $0.45
per share quarterly cash dividend on its issued and outstanding
common shares, payable on December 22, 2017 to shareholders of
record at the close of business on December 1, 2017.
Investors’ Webcast
Triton will hold a Webcast at 9 a.m. (New York time) on
Thursday, November 9, 2017 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 or archive, please
visit Triton's website at http://www.trtn.com. An archive of the
Webcast will be available one hour after the live call through
Friday, December 22, 2017.
About Triton International
Limited
Triton International Limited is the parent of Triton Container
International Limited and TAL International Group, Inc., each of
which merged under Triton on July 12, 2016 to create the world’s
largest lessor of intermodal freight containers. With a container
fleet of over five 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, 2017
June 30, 2017 March 31, 2017
December 31, 2016 September 30,
2016 Average Utilization (a) 97.6% 96.5% 95.3% 93.6%
92.4%
September 30,
2017 June 30, 2017 March 31,
2017 December 31, 2016 September 30,
2016 Ending Utilization (a) 98.0% 97.1% 95.8% 94.8%
92.6%
(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 Hanjin were treated as off-lease effective August 1,
2016.
The following table summarizes the equipment fleet as of
September 30, 2017, December 31, 2016, and
September 30, 2016:
Equipment Fleet in Units Equipment Fleet in
TEU
September 30, 2017
December 31, 2016
September 30, 2016
September 30, 2017
December 31, 2016
September 30, 2016
Dry 2,997,356 2,737,982 2,672,386 4,873,026 4,424,905
4,296,420
Refrigerated 217,121 217,243 213,417 417,138
416,992 409,657
Special 89,219 92,957 93,580 159,243 164,977
165,852
Tank 11,948 11,961 11,962 11,948 11,961 11,962
Chassis 22,522 22,128 22,158 41,062 40,233 40,279
Equipment leasing fleet 3,338,166 3,082,271 3,013,503
5,502,417 5,059,068 4,924,170
Equipment trading fleet 10,998
15,927 15,680 17,993 26,276 26,214
Total 3,349,164
3,098,198 3,029,183 5,520,410 5,085,344 4,950,384
Equipment in CEU September 30, 2017
December 31, 2016 September 30, 2016 Operating
leases 6,544,960 6,126,320 5,975,852
Finance leases
334,121 368,468 375,109
Equipment trading fleet 55,483
72,646 76,417
Total 6,934,564 6,567,434 6,427,378
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 China; disruption to their operations from failures of
or attacks on their information technology systems; their
compliance with laws and regulations related to security,
anti-terrorism, environmental protection and corruption; their
ability to obtain sufficient capital to support their growth;
restrictions on their businesses imposed by the terms of their debt
agreements; and other risks and uncertainties, including those risk
factors set forth in the section entitled "Risk Factors" contained
in our Annual Report on Form 10-K filed with the SEC, on
March 17, 2017.
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 Consolidated
Balance Sheets (In thousands, except share data)
(Unaudited) September 30, 2017
December 31, 2016 ASSETS: Leasing equipment,
net of accumulated depreciation of $2,110,332 and $1,787,505 $
8,124,963 $ 7,370,519 Net investment in finance leases 309,704
346,810 Equipment held for sale 52,287 99,863
Revenue earning assets 8,486,954 7,817,192 Cash and cash
equivalents 146,262 113,198 Restricted cash 84,209 50,294 Accounts
receivable, net of allowances of $28,097 and $28,609 197,225
173,585 Goodwill 236,665 236,665 Lease intangibles, net of
accumulated amortization of $125,528 and $56,159 177,229 246,598
Insurance receivables 767 17,170 Other assets 49,064 53,126 Fair
value of derivative instruments 3,839 5,743
Total
assets $ 9,382,214 $ 8,713,571
LIABILITIES AND
SHAREHOLDERS' EQUITY: Equipment purchases payable $ 94,052 $
83,567 Fair value of derivative instruments 9,078 9,404 Accounts
payable and other accrued expenses 116,849 143,098 Net deferred
income tax liability 336,387 317,316 Debt, net of unamortized
deferred financing costs of $42,691 and $19,999 6,790,164
6,353,449
Total liabilities 7,346,530 6,906,834
Shareholders' equity:
Common shares, $0.01 par value,
294,000,000 shares authorized, 80,686,940 and74,376,025 shares
issued and outstanding, respectively
807 744 Undesignated shares $0.01 par value, 6,000,000 shares
authorized, no shares issued and outstanding — — Additional paid-in
capital 887,778 690,418 Accumulated earnings 988,566 945,313
Accumulated other comprehensive income 22,877 26,758
Total shareholders' equity 1,900,028 1,663,233
Non-controlling interests 135,656 143,504
Total
equity 2,035,684 1,806,737
Total liabilities
and shareholders' equity $ 9,382,214 $ 8,713,571
TRITON INTERNATIONAL LIMITED
Consolidated Statements of Operations (In thousands,
except per share amounts) (Unaudited) Three
Months Ended September 30, Nine Months Ended September
30, 2017 2016 2017
2016 Leasing revenues: Operating leases $ 296,669 $ 242,899
$ 832,414 $ 560,262 Finance leases 5,451 4,890 17,247
8,886
Total leasing revenues 302,120
247,789 849,661 569,148 Equipment
trading revenues 11,974 9,820 30,213 9,820 Equipment trading
expenses (10,605 ) (9,588 ) (27,124 ) (9,588 )
Trading
margin 1,369 232 3,089 232
Net gain (loss) on sale of leasing equipment 10,263 (12,319 )
25,063 (16,086 )
Operating expenses: Depreciation and
amortization 128,581 112,309 370,552 272,585 Direct operating
expenses 13,833 27,815 51,396 54,298 Administrative expenses 21,233
17,456 66,268 45,136 Transaction and other costsA 32 59,570 3,340
66,517 Provision for doubtful accounts 783 22,372
1,244 22,201 Total operating expenses 164,462
239,522 492,800 460,737 Operating income
(loss) 149,290 (3,820 ) 385,013 92,557
Other expenses:
Interest and debt expense 73,795 55,437 208,076 122,626 Realized
loss on derivative instruments, net 20 864 902 2,268 Unrealized
loss (gain) on derivative instruments, net 629 (3,487 ) (80 ) 5,243
Write-off of deferred financing costs 4,073 — 4,116 141 Other
expense (income), net 164 214 (1,552 ) (775 )
Total other expenses 78,681 53,028 211,462
129,503 Income (loss) before income taxes 70,609
(56,848 ) 173,551 (36,946 ) Income tax expense (benefit) 11,063
(7,719 ) 29,688 (5,536 ) Net income (loss) $ 59,546 $
(49,129 ) $ 143,863 $ (31,410 ) Less: income attributable to
noncontrolling interest 2,390 2,082 6,425
4,886
Net income (loss) attributable to shareholders
$ 57,156 $ (51,211 ) $ 137,438 $ (36,296 ) Net income
(loss) per common share—Basic $ 0.76 $ (0.74 ) $ 1.85 $ (0.72 ) Net
income (loss) per common share—Diluted $ 0.75 $ (0.74 ) $ 1.84 $
(0.72 ) Cash dividends paid per common share $ 0.45 $ 0.90 $ 1.35 $
0.90 Weighted average number of common shares outstanding—Basic
75,214 69,336 74,245 50,090 Dilutive restricted shares and share
options 493 — 402 — Weighted average number of common shares
outstanding—Diluted 75,707 69,336 74,647 50,090
(A) See definitions
TRITON INTERNATIONAL LIMITED Consolidated
Statements of Cash Flows (In thousands)
(Unaudited) Nine Months Ended September 30,
2017 2016 Cash flows from operating
activities: Net income (loss) $ 143,863 $ (31,410 ) Adjustments
to reconcile net income (loss) to net cash provided by operating
activities: Depreciation and amortization 370,552 272,585
Amortization of deferred financing costs and other debt related
amortization 10,185 3,374 Amortization of leasing revenue
adjustments 67,592 25,726 Share compensation expense 4,491 4,334
Net (gain) loss on sale of leasing equipment (25,063 ) 16,086
Unrealized (gain) loss on derivative instruments (80 ) 5,243
Write-off of deferred financing costs 4,116 141 Deferred income
taxes 28,372 (6,773 ) Changes in operating assets and liabilities:
Accounts receivable (1,097 ) 15,928 Accounts payable and other
accrued expenses (36,198 ) 26,679 Net equipment sold for resale
activity 5,292 2,595 Cash received for settlement of interest rate
swaps 2,117 — Other assets 648 2,974
Net cash
provided by operating activities 574,790 337,482
Cash flows from investing activities: Purchases of leasing
equipment and investments in finance leases (1,185,481 ) (384,739 )
Proceeds from sale of equipment, net of selling costs 136,647
102,376 Cash collections on finance lease receivables, net of
income earned 45,146 22,315 Cash and cash equivalents acquired —
50,349 Other 67 (366 )
Net cash used in by investing
activities (1,003,621 ) (210,065 )
Cash flows from financing
activities: Issuance (redemption) of common shares, net of
underwriter expenses 192,932 (3,527 ) Debt issuance costs (32,738 )
(5,718 ) Borrowings under debt facilities 2,782,825 367,700
Payments under debt facilities and capital lease obligations
(2,334,409 ) (365,697 ) (Increase) decrease in restricted cash
(33,915 ) 23,736 Dividends paid (99,586 ) (51,620 ) Cash paid for
settlement of employee taxes related to equity vesting (71 ) (672 )
Distributions to noncontrolling interest (14,273 ) (19,185 ) Other
1,130 —
Net cash provided by (used in) financing
activities 461,895 (54,983 )
Net increase in cash and
cash equivalents $ 33,064 $ 72,434 Cash and cash equivalents,
beginning of period 113,198 56,689
Cash and cash
equivalents, end of period $ 146,262 $ 129,123
Supplemental non-cash investing activities: Equipment
purchases payable $ 94,052 $ 62,638
A Transaction costs associated with the merger of TCIL and TAL
and other costs for the three and nine months ended
September 30, 2017 and 2016 were as follows:
Three Months Ended September 30,
Nine Months Ended September 30, 2017
2016 2017 2016 Employee compensation
costs $ 32 $ 42,773 $ 3,340 $ 47,028
Professional fees — 12,615 — 13,818 Legal expenses — 1,810 9 3,290
Other — 2,372 (9 ) 2,381 Total $
32 $ 59,570 $ 3,340 $ 66,517
Employee compensation costs include costs to maintain and retain
key employees, severance expenses, and certain stock compensation
expenses, including retention and stock compensation expense
pursuant to plans established in 2011. 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 (loss)" and "Adjusted
net income (loss)" throughout this press release.
Adjusted pre-tax income and Adjusted net income is adjusted for
certain items management believes are not representative of our
operating performance. Adjusted pre-tax income is defined as Income
before income taxes excluding the write-off of deferred financing
costs, gains and losses on derivative instruments, transaction and
other costs, and noncontrolling interest. Adjusted net income is
defined as net income attributable to shareholders excluding the
write-off of deferred financing costs net of tax, gains and losses
on derivative instruments net of tax, transaction and other costs
net of tax, and any foreign income and withholding tax
adjustments.
Adjusted pre-tax income (loss) and Adjusted net income (loss)
are not presentations made in accordance with U.S. GAAP. Adjusted
pre-tax income (loss) and Adjusted net income (loss) 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 (loss) and Adjusted net
income (loss) 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 before income
taxes and Net income attributable to shareholders, the most
directly comparable U.S. GAAP measures, to Adjusted pre-tax income
(loss) and Adjusted net income (loss) in the tables below for the
three and nine months ended September 30, 2017 and
September 30, 2016 and for the three months ended June 30,
2017.
TRITON INTERNATIONAL LIMITED Non-GAAP
Reconciliations of Adjusted Pre-tax Income and Adjusted Net
Income (In Thousands, except per share amounts)
Three Months Ended,
Nine Months Ended,
September 30, 2017
June 30, 2017
September 30, 2016
September 30, 2017
September 30, 2016
Income (loss) before income taxes $ 70,609 $
59,497 $ (56,848 ) $ 173,551 $ (36,946 ) Add: Write-off of deferred
financing costs 4,073 43 — 4,116 141 Unrealized loss (gain) on
derivative instruments, net 629 789 (3,487 ) (80 ) 5,243
Transaction and other costs 32 836 59,570 3,340 66,517 Less: Income
attributable to noncontrolling interest 2,390 2,343
2,082 6,425 4,886 Adjusted pre-tax income
(loss) $ 72,953 $ 58,822 $
(2,847 ) $ 174,502 $ 30,069 Adjusted pre-tax income
(loss) per share - Diluted $ 0.96 $ 0.79 $ (0.04 ) $ 2.34 $ 0.60
Weighted average number of common shares outstanding - Diluted
75,707 74,177 69,336 74,647 50,090
Three Months
Ended,
Nine Months Ended,
September 30, 2017
June 30, 2017
September 30, 2016
September 30, 2017
September 30, 2016
Net income (loss) attributable to shareholders $ 57,156 $ 45,671 $
(51,211 ) $ 137,438 $ (36,296 ) Add: Write-off of deferred
financing costs 3,377 35 — 3,412 137 Unrealized loss (gain) on
derivative instruments, net 515 671 (3,138 ) (66 ) 5,175
Transaction and other costs 60 643 50,856 2,769 57,595 Foreign
income and withholding tax adjustment — — 3,222
— 4,893 Adjusted net income (loss) $ 61,108
$ 47,020 $ (271 ) $ 143,553
$ 31,504 Adjusted net income (loss) per share -
Diluted $ 0.81 $ 0.63 $ — $ 1.92 $ 0.63 Weighted average number of
common shares outstanding - Diluted 75,707 74,177 69,336 74,647
50,090
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171108006629/en/
Triton International LimitedAndrew Greenberg, 914-697-2900Senior
Vice PresidentFinance & Investor Relations
Triton (NYSE:TRTN)
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