Triton International Limited (NYSE: TRTN) ("Triton")
First Quarter
Highlights:
- Adjusted net income was $92.8 million
or $1.19 per diluted share, an increase of 20.2% per diluted share
from the first quarter of 2018 and a decrease of 4.8% per diluted
share from the fourth quarter of 2018. Triton’s first quarter
results included several non-recurring items which in total
contributed $0.04 per share.
- Net income attributable to common
shareholders was $91.9 million or $1.17 per diluted share.
- Utilization averaged 97.6% in the first
quarter of 2019.
- Triton raised gross proceeds of $86.3
million through an initial perpetual preferred equity offering in
March 2019.
- Triton purchased 2.6 million common
shares during the first quarter. As of April 22, 2019, Triton has
repurchased 5.1 million shares under the share repurchased program
authorized in August 2018.
- Triton announced the Board of Directors
has authorized a new $200.0 million common share repurchase
program.
- Triton announced a quarterly dividend
of $0.52 per common share payable on June 27, 2019 to
shareholders of record as of June 6, 2019.
Financial Results
The following table summarizes Triton’s selected key financial
information for the three months ended March 31, 2019,
December 31, 2018, and March 31, 2018.
(in millions, except per share data) Three
Months Ended, March 31, 2019 December 31,
2018 March 31, 2018 Total leasing revenues
$340.9 $355.4 $315.1
GAAP
Net income attributable to common shareholders $91.9 (4)
$69.6 (3) $80.9
Net income per share - Diluted $1.17 $0.87
$1.00
Non-GAAP (1)
Adjusted net income $92.8 $99.4 $79.8
Adjusted net income
per share - Diluted $1.19 $1.25 $0.99
Return on
equity (2) 17.2 % 17.7 %
15.4 % (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 common shareholders was
reduced by $24.7 million tax expense related to the intra-entity
transfer of assets. (4) Net of dividends on preferred shares of
$0.3 million.
Operating Performance
“Triton achieved excellent results in the first quarter of
2019," commented Brian M. Sondey, Chief Executive Officer of
Triton. “We generated $92.8 million of Adjusted net income in the
first quarter, or $1.19 of Adjusted net income per share, and we
realized an annualized Return on equity of 17.2%.”
“Triton’s strong financial results in the first quarter were
supported by our continued outstanding operating performance, and
key operating metrics such as utilization and used container sale
prices remained at high levels. However, new lease transaction
activity and container pick-up volumes were slow throughout the
first quarter and we have so far limited our purchases of new
containers. The first quarter typically represents the depth of the
slow season for dry containers, and this typical seasonal weakness
has likely been compounded this year by increased uncertainty
related to the ongoing trade dispute between the United States and
China. We recently have seen some increase in lease inquiries, and
new container prices have rebounded toward the $1,900 range for a
20’ dry container, but the overall pace of leasing activity has not
yet shifted to typical pre-peak season levels.”
“Triton has taken a number of actions this year to drive
shareholder value. We repurchased 2.6 million shares of our common
stock during the first quarter at values we believe are compelling,
increasing our total purchases to 5.1 million shares since last
summer. In addition, we repurchased the majority of the third-party
investor interests in a partnership which owns a portfolio of
containers in our fleet. We also completed an inaugural issuance of
perpetual preferred stock. We believe the perpetual preferred stock
provides an attractive combination of risk protection and cost, and
will be a valuable addition to our capital structure. Overall, our
strong cash flow, unrivaled operating capabilities and range of
financing options continue to give us many levers to drive
shareholder value.”
Outlook
“Our customers continue to expect trade growth will be
moderately positive in 2019 and we expect leasing activity will
accelerate as we move deeper into the second quarter, supporting
our utilization and providing more investment opportunities.
However, we do not expect the one-time items benefiting the first
quarter to reoccur, and we transferred a large number of containers
from short-term to long-term lease with one of our major customers,
which will negatively impact our leasing revenue in the near-term
but lead to an attractive and more secure long-term value for the
containers. Overall, we expect our Adjusted net income per share
will decrease slightly from the first quarter of 2019 to the second
quarter, and then increase from the second quarter through the end
of the year.”
Dividends
Triton’s Board of Directors has approved a cash dividend of
$0.53125 per share on its 8.5% Series A Preferred Shares
(NYSE:TRTN-PA) payable June 17, 2019 to holders on record at
the close of business as of June 10, 2019.
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 June 27, 2019 to shareholders of
record at the close of business on June 6, 2019.
Share Repurchase Update
As of April 22, 2019, we have repurchased approximately 5.1
million common shares under the share repurchase plan authorized in
August 2018 for a total of $162.0 million at an average price
per-share of $31.56. This represents 6.3% of the shares outstanding
at the start of the repurchase plan. On April 25, 2019,
Triton’s Board of Directors authorized a new $200.0 million share
repurchase program replacing the previous authorization.
Mr. Sondey concluded, “We continue to view share repurchases as
a compelling investment for the company and a high value use for
our strong and stable equity cash flow. We believe the embedded
value of our existing contractual lease streams and containers
compare favorably to our current market valuation, even without
considering the value of our best-in-class market leading
franchise.”
Investors’ Webcast
Triton will hold a Webcast at 8:30 a.m. (New York time) on
Tuesday, April 30, 2019 to discuss its first 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 6.1
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, 2019
December 31, 2018 September 30, 2018
June 30, 2018 March 31, 2018 Average
Utilization (1) 97.6% 98.2% 98.7% 98.8% 98.6%
Ending
Utilization (1) 97.4% 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
March 31, 2019, December 31, 2018 and March 31,
2018:
Equipment Fleet in Units Equipment
Fleet in TEU March 31, 2019 December 31,
2018 March 31, 2018 March 31, 2019
December 31, 2018 March 31, 2018 Dry
3,322,723 3,340,946 3,103,671 5,448,267 5,476,406 5,039,302
Refrigerated 229,971 228,778 221,810 443,402 440,781 426,335
Special 93,361 93,900 90,867 168,755 169,614 163,155
Tank 12,600 12,509 12,188 12,600 12,509 12,188
Chassis 24,879 24,832 22,477 45,885 45,787 40,996
Equipment leasing fleet 3,683,534 3,700,965 3,451,013
6,118,909 6,145,097 5,681,976
Equipment trading fleet 17,504
13,138 12,022 27,014 21,361 19,245
Total 3,701,038 3,714,103
3,463,035 6,145,923 6,166,458 5,701,221
Equipment in CEU March 31, 2019 December
31, 2018 March 31, 2018 Operating leases
6,997,855 7,009,605 6,752,636
Finance leases 539,854 538,867
329,659
Equipment trading fleet 50,117 47,476 53,454
Total 7,587,826 7,595,948 7,135,749
Important Cautionary Information Regarding
Forward-Looking Statements
Certain statements in this release, other than statements of
historical information, are "forward-looking statements", including
statements regarding our strategy, future operations, and future
financial positions, 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,"
“estimate”, "anticipate," “predict”, "believe," “plan”, "will,"
"should", “intend”, “seek”, “potential” and similar expressions and
variations are intended to identify forward-looking statements,
although not all forward looking statements contain these
identifying words. 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 but not limited to the impact of
trade wars, tariffs and other trade actions; disruption to our
operations from failures of, or attacks on, our information
technology systems; our compliance or failure to comply with laws
and regulations related to economic and trade sanctions, security,
anti-terrorism, environmental protection and corruption; our
ability to obtain sufficient capital to support our growth;
restrictions 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 Annual Report
on Form 10-K for the year ended December 31, 2018 (the “Form
10-K”) filed with the Securities and Exchange Commission ("SEC"),
on February 19, 2019, 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,
including the risk factors set forth in our Form 10-K.. 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. Certain financial measures are
identified as not being prepared in accordance with U.S. generally
accepted accounting principles (“GAAP”). Please refer to the “Use
of Non-GAAP Financial Measures” and “Non-GAAP Reconciliations of
Adjusted Net Income” set forth below for a reconciliation of such
non-GAAP measures to their most comparable GAAP measures.
-Financial Tables Follow-
TRITON INTERNATIONAL
LIMITEDConsolidated Balance Sheets(In thousands,
except share data)(Unaudited)
March 31, 2019
December 31,2018
ASSETS: Leasing equipment, net of accumulated depreciation
of $2,634,305 and $2,533,446 $ 8,796,491 $ 8,923,451 Net investment
in finance leases 465,480 478,065 Equipment held for sale 86,211
66,453
Revenue earning assets 9,348,182
9,467,969 Cash and cash equivalents 60,768 48,950 Restricted cash
116,551 110,589 Accounts receivable, net of allowances of $1,097
and $1,240 222,567 264,382 Goodwill 236,665 236,665 Lease
intangibles, net of accumulated amortization of $216,340 and
$205,532 82,117 92,925 Other assets 38,692 34,610 Fair value of
derivative instruments 4,580 13,923
Total
assets $ 10,110,122 $ 10,270,013
LIABILITIES
AND SHAREHOLDERS' EQUITY: Equipment purchases payable $ 38,463
$ 22,392 Fair value of derivative instruments 19,487 10,966
Accounts payable and other accrued expenses 112,357 99,885 Net
deferred income tax liability 286,495 282,129 Debt, net of
unamortized debt costs of $43,684 and $44,889 7,364,725
7,529,432
Total liabilities 7,821,527 7,944,804
Shareholders' equity: Preferred shares, $0.01 par
value, 3,450,000 authorized, 3,450,000 and no shares issued and
outstanding, respectively; at liquidation preference 86,250 —
Common shares, $0.01 par value, 270,000,000 shares authorized,
80,982,197 and 80,843,472 shares issued, respectively 811 809
Undesignated shares, $0.01 par value, 26,550,000 and 30,000,000
shares authorized, respectively, no shares issued and outstanding —
— Treasury shares, at cost, 4,489,682 and 1,853,148 shares,
respectively (141,407 ) (58,114 ) Additional paid-in capital
906,164 896,811 Accumulated earnings 1,400,491 1,349,627
Accumulated other comprehensive income (loss) (1,034 ) 14,563
Total shareholders' equity 2,251,275 2,203,696
Noncontrolling interests 37,320 121,513
Total
equity 2,288,595 2,325,209
Total liabilities
and equity $ 10,110,122 $ 10,270,013
TRITON INTERNATIONAL
LIMITEDConsolidated Statements of Operations(In
thousands, except per share amounts)(Unaudited)
Three Months EndedMarch 31, 2019
2018 Leasing revenues: Operating leases $ 330,422 $
310,231 Finance leases 10,437 4,866
Total leasing
revenues 340,859 315,097 Equipment trading
revenues 17,828 13,375 Equipment trading expenses (14,241 ) (10,384
)
Trading margin 3,587 2,991 Net gain
on sale of leasing equipment 8,469 9,218
Operating
expenses: Depreciation and amortization 134,609 130,433 Direct
operating expenses 16,802 11,048 Administrative expenses 18,187
19,582 Transaction and other (income) costs — (29 ) Provision
(reversal) for doubtful accounts (142 ) (101 ) Total operating
expenses 169,456 160,933 Operating income (loss)
183,459 166,373
Other expenses: Interest and debt expense
83,520 75,098 Realized (gain) loss on derivative instruments, net
(704 ) (248 ) Unrealized (gain) loss on derivative instruments, net
986 (1,186 ) Other (income) expense, net (1,004 ) (659 )
Total
other expenses 82,798 73,005 Income (loss) before
income taxes 100,661 93,368 Income tax expense (benefit) 7,850
10,503 Net income $ 92,811 $ 82,865 Less: income
(loss) attributable to noncontrolling interest 592 1,973 Less:
dividend on preferred shares 305 —
Net income
(loss) attributable to common shareholders $ 91,914 $
80,892 Net income per common share—Basic $ 1.18 $ 1.01 Net
income per common share—Diluted $ 1.17 $ 1.00 Cash dividends paid
per common share $ 0.52 $ 0.45 Weighted average number of common
shares outstanding—Basic 77,721 79,968 Dilutive restricted shares
549 604 Weighted average number of common shares
outstanding—Diluted 78,270 80,572
TRITON INTERNATIONAL
LIMITEDConsolidated Statements of Cash Flows(In
thousands)(Unaudited)
Three months endedMarch 31, 2019
2018 Cash flows from operating activities: Net
income (loss) $ 92,811 $ 82,865 Adjustments to reconcile net income
(loss) to net cash provided by operating activities: Depreciation
and amortization 134,609 130,433 Amortization of deferred debt cost
and other debt related amortization 3,601 3,113 Lease related
amortization 12,254 20,009 Share-based compensation expense 1,818
2,512 Net (gain) loss on sale of leasing equipment (8,469 ) (9,218
) Unrealized (gain) loss on derivative instruments 986 (1,186 )
Deferred income taxes 7,116 9,301 Changes in operating assets and
liabilities: Accounts receivable 41,421 (1,071 ) Accounts payable
and other accrued expenses 3,019 844 Net equipment sold for resale
activity (8,803 ) (5,185 ) Cash collections on finance lease
receivables, net of income earned 17,125 14,771 Other assets (1,757
) (953 )
Net cash provided by (used in) operating activities
295,731 246,235
Cash flows from investing
activities: Purchases of leasing equipment and investments in
finance leases (43,981 ) (258,668 ) Proceeds from sale of
equipment, net of selling costs 49,947 38,885 Other 26 55
Net cash provided by (used in) investing activities
5,992 (219,728 )
Cash flows from financing
activities: Issuance of preferred shares, net of underwriting
discount and expenses 83,058 — Purchases of treasury shares (82,266
) — Redemption of common shares (978 ) (822 ) Debt issuance costs
(1,962 ) (4,976 ) Borrowings under debt facilities 125,000 510,210
Payments under debt facilities and capital lease obligations
(293,290 ) (469,841 ) Dividends paid (40,427 ) (36,008 )
Distributions to noncontrolling interests (2,078 ) (4,249 )
Purchase of noncontrolling interest (71,000 ) —
Net cash
provided by (used in) financing activities (283,943 ) (5,686 )
Net increase (decrease) in cash, cash equivalents and restricted
cash $ 17,780 $ 20,821 Cash, cash equivalents and restricted
cash, beginning of period 159,539 226,171
Cash,
cash equivalents and restricted cash, end of period $ 177,319
$ 246,992
Supplemental disclosures: Interest
paid $ 66,106 $ 56,571 Income taxes paid (refunded) $ 155 $ 244
Right-of-use asset for leased property $ 8,289 $ —
Supplemental
non-cash investing activities: Equipment purchases payable $
38,463 $ 125,978
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, 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 months ended
March 31, 2019, December 31, 2018, and March 31,
2018.
TRITON INTERNATIONAL LIMITEDNon-GAAP Reconciliations of
Adjusted Net Income (In thousands, except per share
amounts) Three Months Ended,
March 31,2019
December 31, 2018
March 31,2018
Net income attributable to common shareholders $ 91,914 $ 69,557 $
80,892 Adjustments: Unrealized loss (gain) on derivative
instruments, net 903 1,250 (1,052 ) Transaction and other (income)
costs — 104 (26 ) Debt termination expense — 3,800 — Tax
adjustments related to intra-entity asset transfer(1) —
24,728 — Adjusted net income $ 92,817 $ 99,439
$ 79,814 Adjusted net income per common share—Diluted
$ 1.19 $ 1.25 $ 0.99 Weighted average number of common shares
outstanding—Diluted 78,270 79,741 80,572 (1) 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
LIMITEDCalculation of Return on Equity (In
thousands)
Three Months Ended,
March 31,2019
December 31, 2018
March 31,2018
Adjusted net income $ 92,817 $ 99,439 $ 79,814 Annualized Adjusted
net income (1) 376,425 394,513 323,690 Average
Shareholders' equity (2)(3) $ 2,184,361 $ 2,230,590 $
2,104,895 Return on equity 17.2 % 17.7 % 15.4 % (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. (3) Shareholders' equity
was adjusted to exclude preferred shares.
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version on businesswire.com: https://www.businesswire.com/news/home/20190430005313/en/
Andrew GreenbergSenior Vice PresidentFinance & Investor
Relations(914) 697-2900
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