Triton International Limited (NYSE:TRTN) ("Triton") today
reported results for the fourth quarter and full year ended
December 31, 2017. Triton was formed on July 12, 2016 through
the merger of Triton Container International Limited ("TCIL") and
TAL International Group, Inc. ("TAL").
Highlights:
- Triton reported Net income attributable
to shareholders of $207.2 million and Income before income taxes of
$86.7 million for the fourth quarter of 2017. Included in Net
income attributable to shareholders is a one-time tax benefit of
$139.4 million recognized as a result of the reduction in the U.S.
statutory corporate tax rate as part of the Tax Cuts and Jobs
Act.
- Triton reported Adjusted pre-tax income
of $84.9 million in the fourth quarter of 2017.
- Utilization averaged 98.3% for the
fourth quarter of 2017 and averaged 96.9% for the full year
2017.
- Triton declared a quarterly dividend of
$0.45 per share payable on March 28, 2018 to shareholders of
record as of March 12, 2018.
Financial Results
The following table depicts Triton’s selected key financial
information for the fourth quarter and full years ended
December 31, 2017 and 2016 and for the three months ended
September 30, 2017. Financial information for the twelve
months ended December 31, 2016 includes the results of operations
of TCIL only for periods prior to July 12, 2016.
(in millions, except per share data) Three
Months Ended, Twelve Months Ended
December 31,2017
September 30,2017
December 31,2016
December 31,2017
December 31,2016
Total leasing revenues $ 313.9 $ 302.1 $ 259.5 $ 1,163.5 $
828.7
Income (loss) before income taxes $ 86.7 $ 70.6 $ 31.1
$ 260.3 $ (5.8 )
Net income (loss) attributable to
shareholders $ 207.2 $ 57.2 $ 22.8 $ 344.6 $ (13.5 )
Adjusted pre-tax income (1)
$ 84.9 $ 73.0 $ 19.0 $ 259.4 $ 49.1
Adjusted net income (1)
$ 68.3 $ 61.1 $ 15.3 $ 211.9 $ 48.9
Net income (loss) per share -
Diluted
$ 2.57 $ 0.75 $ 0.31 $ 4.52 $ (0.24 )
Adjusted pre-tax income
per share - Diluted (1) $ 1.05 $ 0.96 $ 0.26 $ 3.40 $ 0.88
Adjusted net-tax income per share - Diluted (1) $ 0.85 $
0.81 $ 0.21 $ 2.78 $ 0.87
(1) Adjusted pre-tax income, Adjusted pre-tax income per share -
Diluted, Adjusted net income, Adjusted net income 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
“Triton’s strong operating and financial performance in the
fourth quarter of 2017 capped an outstanding year for the company,”
commented Brian Sondey, Chairman and Chief Executive Officer of
Triton International. “We generated $84.9 million in Adjusted
pre-tax income during the fourth quarter, an increase of 16.3% from
the third quarter of 2017, and we achieved improvements across all
of our key operating metrics.”
“Triton’s performance in the fourth quarter continued to benefit
from favorable market conditions and Triton’s unique position in
our market. Container demand remains strong, driven by solid growth
in global containerized trade, and leasing demand has been further
supported by the increasing reliance of many of our shipping line
customers on leased containers. Our container utilization increased
by 0.6% during the fourth quarter to reach 98.6% as of
December 31, 2017, and our utilization currently stands at
98.7%. New dry container prices held firm in the fourth quarter
despite the beginning of the traditional slow season for dry
containers, and used container sale prices increased during the
quarter in response to high leasing company utilization and very
low inventories of containers held for sale.”
“2017 was an outstanding year for container investments at
Triton, and our leasing revenue and margins continued to grow in
the fourth quarter as large numbers of new containers went on-hire.
In 2017, Triton took advantage of the favorable supply / demand
balance for containers and our leading supply capability to capture
an out-sized share of new investments with attractive expected
returns. These investments will lock-in a long tail of enhanced
profitability and cash flow that will benefit us for many years.
Our ability to step in to the supply gap created by the combination
of stronger than expected trade growth and constrained buying by
many of our customers and several other leasing companies
reinforced our position with the world’s largest shipping lines and
enhanced our strong reputation for reliability.”
“Our reported GAAP net income in the fourth quarter included
several unusual items which we have excluded from our Adjusted
profitability. These items include $6.8 million in insurance
receipts related to lost leasing revenue due to the default of
Hanjin Shipping in 2016, and an income tax benefit of $139.4
million related to the revaluation of our deferred tax liability as
a result of the reduction in the U.S. statutory corporate tax rate.
We do not expect further meaningful financial impacts from recovery
expenses or insurance collections related to the Hanjin bankruptcy.
We expect the primary future impact from the reduction in the U.S.
statutory corporate tax rate will be a reduction in our GAAP tax
accrual rate beginning in the first quarter of 2018.”
Outlook
Mr. Sondey continued, “We expect market conditions will remain
favorable in 2018. Our customers are indicating they expect trade
growth will remain solidly positive, and the supply of containers
remains well controlled, with a moderate amount of new container
inventory and very limited inventories of available used
containers. Container prices remain in the range of $2,150 -
$2,200, and we expect many of our shipping line customers will
continue to rely heavily on leased containers for new additions to
their fleets. Some of our competitors who did not invest in large
numbers of containers in 2017 have started to invest more actively,
and market lease rates for new dry container leasing transactions
have moderated from where they were during the peak season of 2017.
While competition has normalized, we have many advantages in our
market and we continue to win a substantial portion of new
container leasing opportunities with attractive expected returns.
Dry container market leasing rates remain above our portfolio
average, mitigating the risk from lease expirations. We are also
well protected from the risk of rising interest rates since over
86% of our debt is either fixed rate or hedged to fixed rates with
interest rate swaps, and the weighted average life of our fixed
interest rate debt and swaps was 48 months as of December 31,
2017.”
“The first quarter is usually our weakest quarter of the year
since it represents the slow season for dry containers and since it
has the fewest number of days. We usually experience a sequential
decrease in profitability from the fourth to the first quarter.
However, our level of container drop-offs has remained very low so
far this year, and new container deal and pick-up activity have
been solid. Used container sale prices have continued to trend
upwards, and we will benefit from reduced administrative expense in
the first quarter as incentive compensation accruals return to
their normal level after being elevated in 2017 due to performance
well above our financial plan. As a result, we expect our Adjusted
pre-tax income will increase slightly from the fourth quarter of
2017 to the first quarter of 2018 despite the impacts of
seasonality and two fewer revenue days. Starting in the first
quarter of 2018, we will also benefit from a lower GAAP tax accrual
rate, and we expect a larger sequential increase in our Adjusted
net income. Looking forward in 2018, we expect our Adjusted pre-tax
income and Adjusted net income will increase sequentially
throughout the year if market conditions remain favorable.”
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 March 28, 2018 to shareholders of
record at the close of business on March 12, 2018.
Investors’ Webcast
Triton will hold a Webcast at 9 a.m. (New York time) on Friday,
February 23, 2018 to discuss its fourth quarter and full year
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. An archive of the Webcast will be available one
hour after the live call through Friday, April 6, 2018. To
access the live Webcast or archive, please visit Triton’s website
at http://www.trtn.com.
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 and chassis. Triton
operates a container fleet over five million twenty-foot equivalent
units ("TEU"), and our global operations include acquisition,
leasing, re-leasing and subsequent sale of multiple types of
intermodal containers and chassis.
The following table sets forth the combined equipment fleet
utilization(a) as of and for the periods indicated:
Quarter Ended
December 31, 2017
September 30, 2017
June 30, 2017
March 31, 2017
Average Utilization 98.3% 97.6% 96.5% 95.3%
Ending
Utilization 98.6% 98.0% 97.1% 95.8%
(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 provides the composition of our equipment
fleet as of December 31, 2017 (in units, TEUs and cost
equivalent units, or “CEUs”):
December 31, 2017 Equipment Fleet in
Units Equipment Fleet in TEUs Dry
3,077,144 5,000,043
Refrigerated 218,429 419,673
Special 89,066 159,172
Tank 12,124 12,124
Chassis 22,523 41,068
Equipment leasing fleet
3,419,286 5,632,080
Equipment trading fleet 10,510
16,907
Total 3,429,796 5,648,987
December
31, 2017 Equipment Fleet in CEUs Operating leases
6,678,282
Finance leases 328,024
Equipment trading
fleet 51,762
Total 7,058,068
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; 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 the 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 our
Form 10-K, 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.
-Financial Tables Follow-
TRITON INTERNATIONAL LIMITED
Consolidated Balance Sheets
(In thousands, except share
data)
December 31,2017
December 31,2016
ASSETS: Leasing equipment, net of accumulated depreciation
of $2,218,897 and $1,787,505 $ 8,364,484 $ 7,370,519
Net investment in finance leases, net of
allowances of $0 and $527
295,891 346,810 Equipment held for sale 43,195 99,863
Revenue earning assets 8,703,570 7,817,192 Cash and cash
equivalents 132,031 113,198 Restricted cash 94,140 50,294 Accounts
receivable, net of allowances of $3,002 and $28,082 199,876 173,585
Goodwill 236,665 236,665
Lease intangibles, net of accumulated
amortization of $144,081 and $55,484
154,376
242,973
Insurance receivable
—
17,170 Other assets
49,591
56,751
Fair value of derivative instruments 7,376 5,743
Total
assets $ 9,577,625 $ 8,713,571
LIABILITIES AND
SHAREHOLDERS' EQUITY: Equipment purchases payable $ 128,133 $
83,567 Fair value of derivative instruments 2,503 9,404 Accounts
payable and other accrued expenses 109,999 143,098 Net deferred
income tax liability 215,439 317,316 Debt, net of unamortized debt
costs of $40,636 and $19,999 6,911,725 6,353,449
Total
liabilities 7,367,799 6,906,834
Shareholders' equity:
Common shares, $0.01 par value, 294,000,000 shares authorized,
80,687,757 and 74,376,025 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 889,168 690,418 Accumulated earnings 1,159,367
945,313
Accumulated other comprehensive income
26,942 26,758
Total shareholders' equity 2,076,284
1,663,233 Non-controlling interests 133,542 143,504
Total
equity $ 2,209,826 $ 1,806,737
Total liabilities and
shareholders' equity $ 9,577,625 $ 8,713,571
TRITON INTERNATIONAL LIMITED
Consolidated Statements of
Operations
(In thousands, except per share
amounts)
Three MonthsEnded December
31,
Twelve MonthsEnded December
31,
2017 2016 2017
2016 Leasing revenues: Operating leases $ 308,751 $ 253,095
$ 1,141,165 $ 813,357 Finance leases 5,105 6,452
22,352 15,337
Total leasing revenues 313,856
259,547 1,163,517 828,694
Equipment trading revenues 7,206 6,597 37,419 16,418 Equipment
trading expenses (6,111 ) (6,211 ) (33,235 ) (15,800 )
Trading
margin 1,095 386 4,184 618
Net gain (loss) on sale of leasing equipment 10,749 (4,261 ) 35,812
(20,347 )
Operating expenses: Depreciation and
amortization 130,168 120,006 500,720 392,592 Direct operating
expenses 11,495 29,959 62,891 84,256 Administrative expenses 21,341
20,481 87,609 65,618 Transaction and other costsA 5,932 399 9,272
66,916 Provision for doubtful accounts 2,103 1,103 3,347 23,304
Insurance recovery income (6,764 ) — (6,764 ) — Total
operating expenses 164,275 171,948 657,075
632,686 Operating income 161,425 83,724 546,438 176,279
Other expenses: Interest and debt expense 74,271 61,389
282,347 184,014 Realized (gain) loss on derivative instruments, net
(2 ) 1,171 900 3,438 Unrealized (gain) on derivative instruments,
net (1,317 ) (9,648 ) (1,397 ) (4,405 ) Write-off of debt costs
2,857
—
6,973 141 Other (income), net (1,085 ) (301 ) (2,637 ) (1,076 )
Total other expenses 74,724 52,611 286,186
182,112 Income (loss) before income taxes 86,701
31,113 260,252 (5,833 ) Income tax (benefit) expense (122,962 )
5,489 (93,274 ) (48 )
Net income (loss) $ 209,663 $
25,624 $ 353,526 $ (5,785 ) Less: income attributable to
non-controlling interest 2,503 2,846 8,928
7,732 Net income (loss) attributable to shareholders $
207,160 $ 22,778 $ 344,598 $ (13,517 ) Net
income (loss) per common share—Basic $ 2.59 $ 0.31 $ 4.55 $ (0.24 )
Net income (loss) per common share—Diluted $ 2.57 $ 0.31 $ 4.52 $
(0.24 ) Cash dividends paid per common share $ 0.45 $ 0.45 $ 1.80 $
1.35 Weighted average number of common shares and non-voting common
shares outstanding—Basic 79,936 73,735 75,679 56,032 Dilutive stock
options and restricted stock 620 112 509
—
Weighted average number of common shares and non-voting
common shares outstanding—Diluted 80,556 73,847
76,188 56,032
TRITON INTERNATIONAL LIMITED
Consolidated Statements of Cash
Flows
(In thousands)
Year EndedDecember
31,2017
Year EndedDecember
31,2016
Year EndedDecember
31,2015
Cash flows from operating activities: Net income (loss) $
353,526 $ (5,785 ) $ 127,669 Adjustments to reconcile net income
(loss) to net cash provided by operating activities: Depreciation
and amortization 500,720 392,592 300,470 Debt related amortization
13,401 5,934 5,674 Amortization of lease intangible 92,053 55,484 —
Net (gain) loss on sale of leasing equipment (35,812 ) 20,347
(2,013 ) Unrealized (gain) loss on derivative instruments, net
(1,397 ) (4,405 ) 2,240 Write-off of debt costs 6,973 141 1,170
Deferred income taxes (94,678 ) (809 ) 3,353 Share-based
compensation 5,641 5,399 12,048 Changes in operating assets and
liabilities, net of acquired assets and liabilities: Net equipment
sold for resale activity 8,821 4,031 —
Accounts receivables
(5,967 ) (1,592 ) 5,494 Accounts payable and other accrued expenses
(42,402 ) 10,694 (2,768 ) Other assets 3,799 2,194 (2,814 ) Cash
received (payments) on termination of derivative instruments 2,117
(37 ) (1,219 )
Net cash provided by operating
activities
806,795 484,188 449,304
Cash flows from
investing activities: Purchases of leasing equipment and
investments in finance leases (1,562,863 ) (629,332 ) (398,799 )
Proceeds from sale of equipment, net of selling costs 190,744
145,572 171,719 Cash collections on finance lease receivables, net
of income earned 60,673 38,650 14,178 Cash and cash equivalents
acquired — 50,349 — Other 55 (685 ) (2,819 )
Net cash
(used in) investing activities (1,311,391 ) (395,446 ) (215,721
)
Cash flows from financing activities: Issuance
(redemption) of common shares 192,861 (7,410 ) — Financing fees
paid under debt facilities (34,494 ) (6,554 ) (2,972 ) Borrowings
under debt facilities and proceeds under capital lease obligations
3,102,825 661,971 685,500 Payments under debt facilities and
capital lease obligations (2,539,711 ) (602,152 ) (886,979 )
(Increase) decrease in restricted cash (43,846 ) 31,396 8,877
Distributions to non-controlling interest (18,890 ) (24,732 )
(46,927 ) Dividends paid (135,557 ) (84,752 ) — Other 241 —
—
Net cash provided by (used in) financing
activities 523,429 (32,233 ) (242,501 )
Net increase
(decrease) in cash and cash equivalents $ 18,833 $ 56,509 $
(8,918 ) Cash and cash equivalents, beginning of period 113,198
56,689 65,607
Cash and cash equivalents,
end of period $ 132,031 $ 113,198 $ 56,689
Supplemental disclosures: Interest paid $ 269,601 $ 181,559
$ 131,749 Income taxes (refunded) paid $ (288 ) $ 309 $ 1,477
Supplemental non-cash investing activities: Equipment
purchases payable $ 128,133 $ 83,567 $ 12,128 Shares issued to
acquire TAL $ — $ 510,186 $ —
A Transaction costs associated with the merger of TCIL and TAL
and other costs for the fourth quarter and full year ended
December 31, 2017 and 2016 were as follows (in thousands):
Three Months EndedDecember
31,
Twelve MonthsEnded December
31,
2017 2016 2017
2016 Employee compensation costs $ 5,931 $ 209 $ 9,271 $
46,838 Professional fees — 78 — 14,295 Legal expenses 1 81 10 3,371
Other — 31 (9 ) 2,412 Total $ 5,932 $ 399
$ 9,272 $ 66,916
Employee compensation costs include costs to maintain and retain
key employees, severance expenses, and certain stock compensation
expense, including retention and stock compensation expense
pursuant to plans established as part of TCIL's 2011
re-capitalization. Professional fees and legal expenses include
costs paid for services directly related to the closing of the
merger and include legal fees, accounting fees and transaction and
advisory fees.
Non-GAAP Financial Measures
We use the terms "Adjusted pre-tax income "and "Adjusted net
income" throughout this press release.
Adjusted pre-tax income is defined as income before income taxes
as further adjusted for certain items which are described in more
detail below, which management believes are not representative of
our operating performance. Adjusted pre-tax income excludes gains
and losses on interest rate swaps, the write-off of debt costs,
transaction and other costs, and non-controlling interest. Adjusted
net income is defined as net income further adjusted for the items
discussed above, net of income tax.
Adjusted pre-tax income and Adjusted net income are not
presentations made in accordance with U.S. GAAP. Adjusted pre-tax
income and Adjusted net income should not be considered as
alternatives to, or more meaningful than, amounts determined in
accordance with U.S. GAAP, including net income.
We believe that Adjusted pre-tax income and Adjusted net income
are useful to an investor in evaluating our operating performance
because these measures:
- are widely used by securities analysts
and investors to measure a company’s operating performance;
- help investors to more meaningfully
evaluate and compare the results of our operations from period to
period by removing the impact of our capital structure, our asset
base and certain non-routine events which we do not expect to occur
in the future; and
- are used by our management for various
purposes, including as measures of operating performance and
liquidity, to assist in comparing performance from period to period
on a consistent basis, in presentations to our board of directors
concerning our financial performance and as a basis for strategic
planning and forecasting.
We have provided reconciliations of Net income (loss) before
income taxes and Net income (loss) attributable to shareholders,
the most directly comparable U.S. GAAP measures, to Adjusted
pre-tax income and Adjusted net income in the tables below for the
three and twelve months ended December 31, 2017 and 2016 and for
the three months ended September 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, Twelve
Months Ended,
December 31,2017
September 30,2017
December 31,2016
December 31,2017
December 31,2016
Income (loss) before income taxes $ 86,701 $ 70,609 $ 31,113 $
260,252 $ (5,833 ) Add (subtract): Unrealized (gain) loss on
derivative instruments, net (1,317 ) 629 (9,648 ) (1,397 ) (4,405 )
Insurance recovery income (6,764 ) — — (6,764 ) — Write-off of debt
costs 2,857 4,073 — 6,973 141 Transaction and other costs 5,932 32
399 9,272 66,916 Less: Income attributable to non-controlling
interest 2,503 2,390 2,846
8,928 7,732 Adjusted pre-tax income $
84,906 $ 72,953 $ 19,018 $ 259,408 $ 49,087
Adjusted pre-tax income per share - Diluted $ 1.05 $ 0.96 $
0.26 $ 3.40 $ 0.88 Weighted average number of common shares
outstanding - Diluted 80,556 75,707 73,847 76,188 56,032
Three Months Ended, Twelve Months Ended,
December 31,2017
September 30,2017
December 31,2016
December 31,2017
December 31,2016
Net income (loss) attributable to shareholders $ 207,160 $ 57,156 $
22,778 $ 344,598 $ (13,517 ) Add (subtract): Unrealized (gain) loss
on derivative instruments, net (1,084 ) 515 (7,775 ) (1,150 )
(4,389 ) Insurance recovery income (5,567 ) — — (5,567 ) —
Write-off of debt costs 2,327 3,377 — 5,739 141 Transaction and
other costs 4,862 60 322 7,631 66,679 One-time tax benefit related
to U.S. statutory rate reduction (139,359 ) —
— (139,359 ) — Adjusted net income $
68,339 $ 61,108 $ 15,325 $ 211,892 $ 48,914
Adjusted net income per share - Diluted $ 0.85 $ 0.81 $ 0.21
$ 2.78 $ 0.87 Weighted average number of common shares outstanding
- Diluted 80,556 75,707 73,847 76,188 56,032
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180222006634/en/
Triton International LimitedAndrew Greenberg,
914-697-2900Senior Vice President,Finance & Investor
Relations
Triton (NYSE:TRTN)
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