Triton International Limited (NYSE: TRTN) ("Triton")
Highlights
- Adjusted net income was $99.4 million
in the fourth quarter of 2018, or $1.25 per diluted share, an
increase of 47.1% per diluted share from the fourth quarter of 2017
and an increase of 6.8% per diluted share from the third quarter of
2018.
- Net income attributable to shareholders
was $69.6 million in the fourth quarter of 2018, or $0.87 per
diluted share. Net income attributable to shareholders was reduced
by $24.7 million non-cash income tax expense for intra-entity
transfers of containers.
- Adjusted net income was $363.0 million
for the full year of 2018, or $4.52 per diluted share, an increase
of 62.6% per diluted share from 2017.
- Net income attributable to shareholders
was $349.6 million for the full year of 2018, or $4.35 per diluted
share.
- Utilization averaged 98.2% for the
fourth quarter of 2018 and averaged 98.6% for the full year
2018.
- Triton has purchased 2.1 million shares
under the share repurchase program authorized in August 2018.
- Triton's Board of Directors announced a
quarterly dividend of $0.52 per share payable on March 28,
2019 to shareholders of record as of March 12, 2019.
Financial Results
The following table summarizes Triton’s selected key financial
information for the three and twelve months ended December 31,
2018 and December 31, 2017 and for the three months ended
September 30, 2018.
(in millions, except per share data) Three Months
Ended Twelve Months Ended
December 31, 2018
September 30, 2018
December 31, 2017
December 31, 2018
December 31, 2017
Total leasing revenues $ 355.4 $ 350.1 $ 313.9
$ 1,350.3 $ 1,163.5
GAAP
Net income attributable to
shareholders
$ 69.6 (4) $ 94.2 $ 207.2 (5) $ 349.6 (3)(4) $ 344.6 (5)
Net
income per share - Diluted $ 0.87 $ 1.17 $ 2.57 $ 4.35 $ 4.52
Non-GAAP (1)
Adjusted net income $ 99.4 $ 94.8 $ 68.3 $ 363.0 $ 211.5
Adjusted net income per share -
Diluted
$ 1.25 $ 1.17 $ 0.85 $ 4.52 $ 2.78
Return on equity
(2) 17.7 % 16.9 % 13.6 %
16.7 % 11.8 % (1) Refer
to the "Use of Non-GAAP Financial Measures" and "Non-GAAP
Reconciliations of Adjusted Net Income" set forth below. (2) Refer
to the "Calculation of Return on Equity" set forth below. (3) Net
income attributable to shareholders was increased by a one-time
gain of $21.0 million on the sale of a building. (4) Net income
attributable to shareholders was reduced by $24.7 million tax
expense related to the intra-entity transfer of assets. (5) Net
income attributable to shareholders was increased by 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.
Operating Performance
"Triton’s strong performance in the fourth quarter of 2018
provided an excellent finish to an outstanding year", commented
Brian M. Sondey, Chief Executive Officer of Triton. "We generated
$99.4 million of Adjusted net income in the fourth quarter, or
$1.25 per share, which represents an increase of 6.8% from the
third quarter of 2018 and an increase of 47.1% from the fourth
quarter of 2017. Our Adjusted net income for the full year of 2018
was $363.0 million, or $4.52 per share, which represents an
increase of 62.6% from 2017. We also realized a Return on equity of
16.7% for the full year of 2018 and annualized Return on equity of
17.7% in the fourth quarter."
"Triton’s strong financial results in 2018 were driven by
outstanding operational performance, our unique competitive
advantages and a favorable market environment. Container pick-up
activity remained strong for most of the year, 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."
"The start of the fourth quarter typically marks the end of the
peak season for dry containers, and net container pick-up and
drop-off activity has turned negative. New container prices have
also decreased to the $1,700 range due to a combination of lower
steel prices and aggressive competition among the container
manufacturers for limited slow-season orders. However, our
long-term lease portfolio provides significant insulation from
seasonal variation, and our utilization currently stands at
97.6%."
"Triton continues to use our strong and stable cash flow to
create shareholder value. We ordered $1.5 billion of containers for
delivery in 2018, leading to 8.8% growth in revenue earning assets.
We returned $2.01 per share to investors in 2018 through our
dividend program, and we have so far repurchased 2.1 million shares
under the share repurchase plan authorized in August 2018."
Outlook
Mr. Sondey continued, "We are carrying significant financial
momentum into 2019 and expect that we will have another year of
strong performance, continued value-added growth and a further
extension of our market leadership. While the ongoing trade dispute
between the United States and China has increased trade and
economic uncertainty, our customers and market forecasters
generally expect global containerized trade growth to remain
solidly positive in 2019. The inventory of available used leasing
containers also remains very tight and we expect our shipping line
customers to continue to rely heavily on leasing."
"The first quarter is typically our weakest quarter of the year
since it represents the depth of the slow season for dry containers
and has the fewest number of billing days. As a result, we expect
our Adjusted net income will decrease from the fourth quarter of
2018 to the first quarter of 2019. After the first quarter, we
expect our adjusted income to increase moderately throughout the
year as leasing demand improves seasonally."
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 March 28, 2019 to shareholders of
record at the close of business on March 12, 2019.
Share Repurchase Update
As of February 8, 2019, we have repurchased 2.1 million
common shares for a total of $65.1 million at an average price
per-share of $31.44. Currently, $134.9 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
Thursday, February 14, 2019 to discuss its fourth 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 summarizes the equipment fleet utilization
for the periods indicated:
Quarter Ended
December 31, 2018
September 30, 2018
June 30, 2018
March 31, 2018
Average Utilization (1) 98.2% 98.7% 98.8% 98.6%
Ending Utilization (1) 97.8% 98.6% 98.7% 98.7%
(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
December 31, 2018 (in units, TEUs and cost equivalent units,
or \"CEUs"):
Equipment Fleet in Units
Equipment Fleet in TEU
December 31, 2018
December 31, 2017
December 31, 2018
December 31, 2017
Dry 3,340,946 3,077,144 5,476,406 5,000,043
Refrigerated 228,778 218,429 440,781 419,673
Special
93,900 89,066 169,614 159,172
Tank 12,509 12,124 12,509
12,124
Chassis 24,832 22,523 45,787
41,068
Equipment leasing fleet 3,700,965
3,419,286 6,145,097 5,632,080
Equipment trading fleet 13,138
10,510 21,361 16,907
Total 3,714,103
3,429,796 6,166,458 5,648,987
Equipment Fleet in CEU
December 31, 2018
December 31, 2017
Operating leases
7,009,605
6,678,282
Finance leases
538,867
328,024
Equipment trading fleet
47,476
51,762
Total
7,595,948
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:
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 but not limited to the impact of
trade wars and tariffs; disruption to our operations from failures
of, or attacks on, our information technology systems; disruption
to our operations as a result of natural disasters; 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 imposed by the terms of our
debt agreements; changes in tax laws in, Bermuda, the United States
and other countries and other risks and uncertainties, including
those risk factors set forth in the section entitled "Risk Factors"
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)
December 31, 2018
December 31, 2017
ASSETS: Leasing equipment, net of accumulated depreciation
of $2,533,446 and $2,218,897 $ 8,923,451 $ 8,364,484 Net investment
in finance leases 478,065 295,891 Equipment held for sale 66,453
43,195
Revenue earning assets 9,467,969 8,703,570
Cash and cash equivalents 48,950 132,031 Restricted cash 110,589
94,140 Accounts receivable, net of allowances of $1,240 and $3,002
264,382 199,876 Goodwill 236,665 236,665 Lease intangibles, net of
accumulated amortization of $205,532 and $144,081 92,925 154,376
Other assets 34,610 49,591 Fair value of derivative instruments
13,923 7,376
Total assets $ 10,270,013 $
9,577,625
LIABILITIES AND SHAREHOLDERS' EQUITY: Equipment
purchases payable $ 22,392 $ 128,133 Fair value of derivative
instruments 10,966 2,503 Accounts payable and other accrued
expenses 99,885 109,999 Net deferred income tax liability 282,129
215,439 Debt, net of unamortized debt costs of $44,889 and $40,636
7,529,432 6,911,725
Total liabilities 7,944,804
7,367,799
Shareholders' equity:
Common shares, $0.01 par value,
270,000,000 and 294,000,000 shares authorized,80,843,472 and
80,687,757 shares issued, respectively
809 807
Undesignated shares, $0.01 par value,
30,000,000 and 6,000,000 shares authorized, noshares issued and
outstanding
— — Treasury shares, at cost, 1,853,148 shares and no shares,
respectively (58,114 ) — Additional paid-in capital 896,811 889,168
Accumulated earnings 1,349,627 1,159,367 Accumulated other
comprehensive income 14,563 26,942
Total shareholders'
equity 2,203,696 2,076,284 Non-controlling interests 121,513
133,542
Total equity $ 2,325,209 $ 2,209,826
Total liabilities and equity $ 10,270,013 $ 9,577,625
TRITON INTERNATIONAL LIMITED Consolidated
Statements of Operations (In thousands, except per share
data)
Three Months Ended December
31,
Twelve Months ended December
31,
2018 2017 2018 2017
Leasing revenues: Operating leases $ 347,110 $ 308,751 $ 1,328,756
$ 1,141,165 Finance leases 8,247 5,105 21,547
22,352
Total leasing revenues 355,357 313,856
1,350,303 1,163,517 Equipment trading
revenues 26,273 7,206 83,039 37,419 Equipment trading expenses
(20,147 ) (6,111 ) (64,118 ) (33,235 )
Trading margin 6,126
1,095 18,921 4,184 Net gain
(loss) on sale of leasing equipment 7,999 10,749 35,377 35,812 Net
gain (loss) on sale of building — — 20,953 —
Operating
expenses: Depreciation and amortization 139,474 130,168 545,138
500,720 Direct operating expenses 15,594 11,495 48,326 62,891
Administrative expenses 19,712 21,341 80,033 87,609 Transaction and
other costs (income) 116 5,932 88 9,272 Provision (reversal) for
doubtful accounts (782 ) 2,103 (231 ) 3,347 Insurance recovery
income — (6,764 ) —
(6,764 ) Total operating expenses 174,114 164,275
673,354 657,075 Operating income 195,368 161,425
752,200 546,438
Other expenses: Interest and debt expense
86,104 74,271 322,731 282,347 Realized (gain) loss on derivative
instruments, net (724 ) (2 ) (2,072 ) 900 Unrealized (gain) loss on
derivative instruments, net 1,405 (1,317 ) 430 (1,397 ) Debt
termination expense 4,239 2,857 6,090 6,973 Other (income) expense,
net (1,540 ) (1,085 ) (2,292 ) (2,637 )
Total other expenses
89,484 74,724 324,887 286,186 Income
(loss) before income taxes 105,884 86,701 427,313 260,252 Income
tax expense (benefit) 34,459 (122,962 ) 70,641
(93,274 )
Net income (loss) $ 71,425 $ 209,663 $ 356,672 $
353,526 Less: income (loss) attributable to non-controlling
interest 1,868 2,503 7,117 8,928 Net
income (loss) attributable to shareholders $ 69,557 $
207,160 $ 349,555 $ 344,598 Net income per
common share—Basic $ 0.88 $ 2.59 $ 4.38 $ 4.55 Net income per
common share—Diluted $ 0.87 $ 2.57 $ 4.35 $ 4.52 Cash dividends
paid per common share $ 0.52 $ 0.45 $ 2.01 $ 1.80 Weighted average
number of common shares outstanding—Basic 79,056 79,936 79,782
75,679 Dilutive restricted shares 685 620 582
509
Weighted average number of common shares
outstanding—Diluted
79,741 80,556 80,364 76,188
TRITON INTERNATIONAL LIMITED Consolidated
Statements of Cash Flows (In thousands)
Year Ended December 31,
2018
Year Ended December 31,
2017
Cash flows from operating activities: Net income (loss) $
356,672 $ 353,526 Adjustments to reconcile net income (loss) to net
cash provided by operating activities: Depreciation and
amortization 545,138 500,720 Amortization of deferred financing
costs 15,005 13,401 Lease related amortization 70,275 92,787
Share-based compensation expense 9,030 5,641 Net (gain) loss on
sale of leasing equipment (35,377 ) (35,812 ) Net (gain) loss on
sale of building (20,953 ) — Unrealized (gain) loss on derivative
instruments 430 (1,397 ) Debt termination expense 6,090 6,973
Deferred income taxes 66,467 (94,678 ) Changes in operating assets
and liabilities: Accounts receivable (65,385 ) (5,967 ) Accounts
payable and accrued expenses (14,449 ) (42,402 ) Net equipment sold
for resale activity (2,341 ) 8,821 Cash received for settlement of
interest rate swaps 187 2,117 Other assets (939 ) 3,065
Net cash provided by (used in) operating activities 929,850
806,795
Cash flows from investing activities:
Purchases of leasing equipment and investments in finance leases
(1,603,507 ) (1,562,863 ) Proceeds from sale of equipment, net of
selling costs 163,256 190,744 Proceeds from the sale of building
27,630 — Cash collections on finance lease receivables, net of
income earned 64,372 60,673 Other (160 ) 55
Net cash
provided by (used in) investing activities (1,348,409 )
(1,311,391 )
Cash flows from financing activities: Issuance
of common shares, net of underwriter expenses — 192,931 Purchases
of treasury shares (56,274 ) — Redemption of common shares for
withholding taxes (1,385 ) (70 ) Debt issuance costs (19,575 )
(34,494 ) Borrowings under debt facilities 4,043,637 3,102,825
Payments under debt facilities and capital lease obligations
(3,435,041 ) (2,539,711 ) Dividends paid (160,289 ) (135,557 )
Distributions to noncontrolling interests (19,146 ) (18,890 ) Other
— 241
Net cash provided by (used in) financing
activities 351,927 567,275
Net (decrease)
increase in cash, cash equivalents and restricted cash $
(66,632 ) $ 62,679 Cash, cash equivalents and restricted cash,
beginning of period 226,171 163,492
Cash, cash
equivalents and restricted cash, end of period $ 159,539
$ 226,171
Supplemental disclosures: Interest paid $
308,827 $ 269,601 Income taxes paid (refunded) $ 4,484 $ (288 )
Supplemental non-cash investing activities: Equipment
purchases payable $ 22,392 $ 128,133
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 debt termination 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,
foreign income tax adjustments, and taxes adjustments related to
the intra-entity transfer.
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 twelve
months ended December 31, 2018 and December 31, 2017 and
for the three months ended September 30, 2018.
TRITON INTERNATIONAL LIMITED Non-GAAP
Reconciliations of Adjusted Net Income (In thousands, except
per share amounts) Three Months Ended,
Twelve Months Ended,
December 31, 2018
September 30, 2018
December 31, 2017
December 31, 2018
December 31, 2017
Net income (loss) attributable
toshareholders
$ 69,557 $ 94,236 $ 207,160 $ 349,555 $
344,598 Add (subtract):
Unrealized (gain) loss on
derivativeinstruments, net
1,250 286 (1,084 ) 384 (1,150 ) Insurance recovery income — —
(5,567 )
— (5,567 ) Debt termination expense 3,800 1,197 2,327 5,444 5,739
Transaction and other costs (income) 104 2 4,862 79 7,631
One-time tax benefit related to
U.S.statutory rate reduction
— — (139,359 ) — (139,359 )
Foreign income tax adjustments
— (881 )
— (881 ) (393 ) Gain of Sale of Building — — — (16,316 ) —
Tax adjustments related to
intra-entityasset transfer
24,728 — — 24,728
— Adjusted net income $ 99,439 $ 94,840
$ 68,339 $ 362,993 $ 211,499
Adjusted net income per share - Diluted $ 1.25 $ 1.17 $ 0.85 $ 4.52
$ 2.78
Weighted average number of commonshares
outstanding—Diluted
79,741 80,728 80,556 80,364 76,188
Tax adjustments related to intra-entity
asset transfer
The primary driver leading to the difference between net income
(loss) attributable to shareholders and Adjusted net income in the
fourth quarter of 2018 was a one-time increase in GAAP taxes
resulting from internal transfers of approximately $600.0 million
of containers. These transfers were structured as taxable sales
between Triton entities, and led to an increase in taxable income
for Triton’s U.S. entities. Triton was able to utilize a portion of
its accumulated net operating losses to offset the taxable income
generated by the sales, and Triton’s U.S. cash taxes remained
minimal in the fourth quarter. However, Triton was required to
accrue taxes on the sales for GAAP purposes because the containers
were sold for a value in excess of their net book value when
adjusted for purchase accounting. These taxes were excluded from
the calculation of Adjusted net income in the fourth quarter, and
we expect the transfer to result in reduced GAAP tax accruals in
future periods.
TRITON INTERNATIONAL LIMITED Calculation of Return
on Equity (In thousands)
Three Months Ended, Twelve Months Ended,
December 31, 2018
September 30, 2018
December 31, 2017
December 31, 2018
December 31, 2017
Adjusted net income $ 99,439 $ 94,840 $ 68,339 $ 362,993 $ 211,499
Annualized Adjusted net income (1) 394,513 376,267 271,128 362,993
211,499 Average Shareholders'
equity (2) $ 2,230,590 $ 2,230,042 $ 1,988,156
$ 2,174,714 $ 1,799,188 Return on equity 17.7
% 16.9 % 13.6 % 16.7 % 11.8 % (1) Annualized Adjusted
net income was calculated based on calendar days per quarter. (2)
Average Shareholders' equity was calculated using the quarter’s
beginning and ending Shareholder’s equity for the three-month ended
periods, and the ending Shareholder’s equity from each quarter in
the current year and December 31 of the previous year for the
twelve-month ended periods.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190214005273/en/
Andrew GreenbergSenior Vice PresidentFinance & Investor
Relations(914) 697-2900
Triton (NYSE:TRTN)
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