TRTN Triton International Ltd

Triton International Limited (NYSE: TRTN) ("Triton")

First Quarter Highlights:

• Triton reported Net income attributable to shareholders of $80.9 million.
• Triton reported Adjusted net income of $79.8 million or $0.99 per diluted share.
• Container pick-up activity was solid and drop-offs were exceptionally low leading to average utilization of 98.6% for the first quarter of 2018.
• Triton announced a quarterly dividend of $0.52 per share payable on June 22, 2018 to shareholders of record as of June 1, 2018.

Financial ResultsThe following table summarizes Triton’s selected key financial information for the three months ended March 31, 2018, December 31, 2017 and March 31, 2017.

      (in millions, except per share data) Three Months Ended, March 31, 2018     December 31, 2017     March 31, 2017 Total leasing revenues $315.1     $313.9     $265.6   Net income attributable to shareholders (1) $80.9 $207.2 $34.6 Net income per share - Diluted $1.00 $2.57 $0.47   Adjusted net income (2) $79.8 $68.3 $35.4 Adjusted net income per share - Diluted (2) $0.99 $0.85 $0.48   Return on equity (3) 15.4%     13.6%     8.6% (1) Included in Net income attributable to shareholders for the three months ended December 31, 2017 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. (2) Refer to the "Use of Non-GAAP Financial Measures" and "Non-GAAP Reconciliations of Adjusted Net Income" set forth below. (3) Triton's definition and calculation of Return on equity is annualized Adjusted net income divided by average shareholders' equity for the period.  

Operating Performance“Triton’s strong results in the first quarter of 2018 were supported by favorable market conditions and outstanding operational performance,” commented Brian Sondey, Chief Executive Officer of Triton. “We generated $79.8 million in Adjusted net income for the quarter, a sequential increase of 16.8%, which is particularly impressive given our first quarter typically represents a seasonally slow quarter and has the fewest number of revenue days. We are off to a great start to the year, and look forward to carrying the momentum forward as we head toward the peak shipping season.”

“Our key operating metrics remain strong. Container pick-up and deal activity was solid in the first quarter despite the seasonality, while container drop-offs remained exceptionally low. Our utilization increased 10 basis points during the quarter to reach 98.7% as of March 31, 2018, and our utilization currently stands at 98.8%. New container prices held firm in the quarter, while used container sale prices increased, reflecting very low inventories of sale containers. We also benefited from a reduction in our average tax rate during the quarter as a result of corporate tax legislation enacted at the end of last year. We expect our average tax rate will remain in the 10-12% range for the full year of 2018. We have purchased over $850 million of containers for delivery in 2018, which puts us on track for another year of successful investment and growth.”

OutlookMr. Sondey continued, “We expect market conditions to remain favorable. Trade growth is anticipated to remain positive, and many of our customers continue to rely heavily on leasing for new container additions to their fleets. The inventory of new containers has increased in the run up to the peak shipping season, but the availability of used leasing containers is exceptionally low, which has kept the overall supply and demand balance for containers favorable. Overall, we expect Adjusted net income to increase gradually throughout 2018.”

DividendTriton’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 June 22, 2018 to shareholders of record at the close of business on June 1, 2018.

Mr. Sondey concluded, “Our $0.52 per share quarterly dividend represents a 15% increase from our previous dividend level. The increase reflects the strength of our cash flow as well as our optimistic outlook for continued strong performance.”

Investors’ WebcastTriton will hold a Webcast at 8:30 a.m. (New York time) on Friday, May 4, 2018 to discuss its first quarter results. To listen by phone, please dial 1-866-524-3159 (domestic) or 1-412-317-6759 (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 LimitedTriton International Limited is the world’s largest lessor of intermodal freight containers. With a container fleet of 5.7 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 March 31, 2018     December 31, 2017     September 30, 2017     June 30, 2017     March 31, 2017 Average Utilization (a) 98.6% 98.3% 97.6% 96.5% 95.3% Ending Utilization (a) 98.7% 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.

 

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

      Equipment Fleet in Units     Equipment Fleet in TEU March 31, 2018     December 31, 2017     March 31, 2017 March 31, 2018     December 31, 2017     March 31, 2017 Dry 3,103,671 3,077,144 2,825,562 5,039,302 5,000,043 4,585,569 Refrigerated 221,810 218,429 219,837 426,335 419,673 422,280 Special 90,867 89,066 91,702 163,155 159,172 163,080 Tank 12,188 12,124 11,958 12,188 12,124 11,958 Chassis 22,477 22,523 22,115 40,996 41,068 40,218 Equipment leasing fleet 3,451,013 3,419,286 3,171,174 5,681,976 5,632,080 5,223,105 Equipment trading fleet 12,022 10,510 20,280 19,245 16,907 31,290 Total 3,463,035 3,429,796 3,191,454 5,701,221 5,648,987 5,254,395     Equipment in CEU March 31, 2018 December 31, 2017 March 31, 2017 Operating leases 6,752,636 6,678,282 6,295,201 Finance leases 329,659 328,024 360,869 Equipment trading fleet 53,454 51,762 74,638 Total 7,135,749 7,058,068 6,730,708  

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 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 SEC, on February 27, 2018.

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)

  March 31, 2018 December 31, 2017 ASSETS: Leasing equipment, net of accumulated depreciation of $2,329,870 and $2,218,897 $ 8,439,971 $ 8,364,484 Net investment in finance leases 286,358 295,891 Equipment held for sale 42,690 43,195 Revenue earning assets 8,769,019 8,703,570 Cash and cash equivalents 118,272 132,031 Restricted cash 128,720 94,140 Accounts receivable, net of allowances of $2,873 and $3,002 199,297 199,876 Goodwill 236,665 236,665 Lease intangibles, net of accumulated amortization of $161,641 and $144,081 136,816 154,376 Other assets 69,495 49,591 Fair value of derivative instruments 22,662 7,376 Total assets $ 9,680,946 $ 9,577,625 LIABILITIES AND SHAREHOLDERS' EQUITY: Equipment purchases payable $ 125,978 $ 128,133 Fair value of derivative instruments — 2,503 Accounts payable and other accrued expenses 109,657 109,999 Net deferred income tax liability 227,727 215,439 Debt, net of unamortized debt costs of $42,982 and $40,636 6,952,815 6,911,725 Total liabilities 7,416,177 7,367,799 Shareholders' equity: Common shares, $0.01 par value, 294,000,000 shares authorized, 80,815,752 and 80,687,757 shares issued and outstanding, respectively 808 807 Undesignated shares, $0.01 par value, 6,000,000 shares authorized, no shares issued and outstanding — — Additional paid-in capital 890,857 889,168 Accumulated earnings 1,206,848 1,159,367 Accumulated other comprehensive income 34,992 26,942 Total shareholders' equity 2,133,505 2,076,284 Non-controlling interests 131,264 133,542 Total equity 2,264,769 2,209,826 Total liabilities and equity $ 9,680,946 $ 9,577,625        

TRITON INTERNATIONAL LIMITED

Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)

  Three Months Ended March 31, 2018     2017 Leasing revenues: Operating leases $ 310,231 $ 259,585 Finance leases 4,866   6,017   Total leasing revenues 315,097   265,602     Equipment trading revenues 13,375 5,484 Equipment trading expenses (10,384 ) (5,092 ) Trading margin 2,991   392     Net gain on sale of leasing equipment 9,218 5,161   Operating expenses: Depreciation and amortization 130,433 117,880 Direct operating expenses 11,048 21,954 Administrative expenses 19,582 22,967 Transaction and other (income) costs (29 ) 2,472 (Benefit) provision for doubtful accounts (101 ) 574   Total operating expenses 160,933   165,847   Operating income 166,373 105,308 Other expenses: Interest and debt expense 75,098 63,504 Realized (gain) loss on derivative instruments, net (248 ) 599 Unrealized gain on derivative instruments, net (1,186 ) (1,498 ) Other income, net (659 ) (742 ) Total other expenses 73,005   61,863   Income before income taxes 93,368 43,445 Income tax expense 10,503   7,142   Net income $ 82,865 $ 36,303 Less: income attributable to noncontrolling interest 1,973   1,692   Net income attributable to shareholders $ 80,892   $ 34,611   Net income per common share—Basic $ 1.01 $ 0.47 Net income per common share—Diluted $ 1.00 $ 0.47 Cash dividends paid per common share $ 0.45 $ 0.45 Weighted average number of common shares outstanding—Basic 79,968 73,741 Dilutive restricted shares and share options 604 292 Weighted average number of common shares outstanding—Diluted 80,572 74,033        

TRITON INTERNATIONAL LIMITED

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

  Three Months Ended March 31, 2018     2017 Cash flows from operating activities: Net income $ 82,865 $ 36,303 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 130,433 117,880 Amortization of deferred financing costs and other debt related amortization 3,113 2,490 Lease related amortization 18,166 24,138 Share-based compensation expense 2,512 1,057 Net (gain) on sale of leasing equipment (9,218 ) (5,161 ) Unrealized (gain) on derivative instruments (1,186 ) (1,498 ) Deferred income taxes 9,301 6,593 Changes in operating assets and liabilities: Accounts receivable (1,071 ) (6,269 ) Accounts payable and other accrued expenses 844 (3,978 ) Net equipment sold for resale activity (5,185 ) (8,893 ) Other assets 890   279   Net cash provided by operating activities 231,464   162,941   Cash flows from investing activities: Purchases of leasing equipment and investments in finance leases (258,668 ) (265,706 ) Proceeds from sale of equipment, net of selling costs 38,885 34,988 Cash collections on finance lease receivables, net of income earned 14,771 15,580 Other 55   (405 ) Net cash used in by investing activities (204,957 ) (215,543 ) Cash flows from financing activities: Redemption of common shares for withholding taxes (822 ) — Debt issuance costs (4,976 ) (7,517 ) Borrowings under debt facilities 510,210 388,253 Payments under debt facilities and capital lease obligations (469,841 ) (260,475 ) Dividends paid (36,008 ) (33,183 ) Distributions to noncontrolling interest (4,249 ) (4,898 ) Net cash (used in) provided by financing activities (5,686 ) 82,180   Net increase in cash, cash equivalents and restricted cash $ 20,821 $ 29,578 Cash, cash equivalents and restricted cash, beginning of period 226,171   163,492   Cash, cash equivalents and restricted cash, end of period $ 246,992   $ 193,070   Supplemental disclosures: Interest paid $ 56,571 $ 49,043 Supplemental non-cash investing activities: Equipment purchases payable $ 125,978 $ 200,728  

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 deferred financing costs net of tax, gains and losses on interest rate swaps net of tax, transaction and other costs net of tax, and any foreign income and withholding 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 months ended March 31, 2018, December 31, 2017 and March 31, 2017.

TRITON INTERNATIONAL LIMITEDNon-GAAP Reconciliations of Adjusted Net Income(In Thousands, except per share amounts)

      Three Months Ended, March 31, 2018     December 31, 2017     March 31, 2017 Net income attributable to shareholders $ 80,892 $ 207,160 $ 34,611 Add: Unrealized gain on derivative instruments, net (1,052 ) (1,084 ) (1,252 ) Transaction and other (income) costs (26 ) 4,862 2,066 Write-off of deferred financing costs — 2,327 — One-time tax benefit related to U.S. statutory rate reduction (139,359 ) Insurance recovery income —   (5,567 ) —   Adjusted net income $ 79,814   $ 68,339   $ 35,425   Adjusted net income per share - Basic $ 1.00 $ 0.85 $ 0.48 Adjusted net income per share - Diluted $ 0.99 $ 0.85 $ 0.48 Weighted average number of common shares outstanding - Basic 79,968 79,936 73,741 Weighted average number of common shares outstanding - Diluted 80,572 80,556 74,033  

TRITON INTERNATIONAL LIMITEDCalculation of Return on Equity(In Thousands)

      Three Months Ended, March 31, 2018     December 31, 2017     March 31, 2017 Adjusted net income $ 79,814 $ 68,339 $ 35,425 Annualized Adjusted net income (1) 323,690 271,128 143,668   Beginning Shareholders' equity 2,076,284 1,900,028 1,663,233 Ending Shareholders' equity 2,133,505   2,076,284   1,672,925   Average Shareholders' equity $ 2,104,895   $ 1,988,156   $ 1,668,079     Return on equity 15.4 % 13.6 % 8.6 %

(1) Annualized Adjusted net income was calculated based on calendar days per quarter.

 

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