Triton International Limited (NYSE: TRTN) ("Triton")
Second Quarter
Highlights:
- Adjusted net income was $86.4 million or $1.15 per diluted
share, an increase of 4.5% per diluted share from the second
quarter of 2018.
- Net income attributable to common shareholders was $84.1
million or $1.12 per diluted share.
- Utilization averaged 97.2% in the second quarter of 2019.
- Triton raised gross proceeds of $143.8 million through a
perpetual preferred equity offering in June 2019.
- Triton repurchased 2.3 million common shares during the second
quarter. As of July 19, 2019, over 7.1 million shares have been
repurchased since the inception of the program.
- Triton announced a quarterly dividend of $0.52 per common share
payable on September 26, 2019 to shareholders of record as of
September 5, 2019.
Financial Results
The following table summarizes Triton’s selected key financial
information for the three and six months ended June 30, 2019 and
2018.
(in millions, except per share
data)
Three Months Ended,
Six Months Ended,
June 30, 2019
June 30, 2018
June 30, 2019
June 30, 2018
Total leasing revenues
$338.6
$329.8
$679.4
$644.9
GAAP
Net income attributable to common
shareholders
$84.1
(3)
$104.9
(4)
$176.0
(3)
$185.8
(4)
Net income per share - Diluted
$1.12
$1.30
$2.29
$2.30
Non-GAAP
(1)
Adjusted net income
$86.4
$88.9
$179.2
$168.7
Adjusted net income per share -
Diluted
$1.15
$1.10
$2.34
$2.09
Return on equity (2)
16.2
%
16.4
%
16.7
%
15.9
%
(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 of dividends on preferred shares of $2.0 million and $2.3
million for the three and six months ended June 30, 2019.
(4)
Net income attributable to common shareholders included a one-time
gain of $21.0 million on the sale of a building.
Operating Performance
“Triton achieved solid results in the second quarter of 2019,"
commented Brian M. Sondey, Chief Executive Officer of Triton. “We
generated $86.4 million of Adjusted net income in the second
quarter, or $1.15 of Adjusted net income per share, and we realized
an annualized Return on equity of 16.2%.”
“Triton faced mixed market conditions in the second quarter.
While container supply and demand were generally well balanced,
lease transaction and container pick-up activity remained slow
despite the start of the traditional summer peak season. Global
economic conditions have softened this year, and the ongoing trade
dispute between the United States and China continues to create
uncertainty and impact shipping activity. Our utilization continued
to gradually trend down during the second quarter, though it
remains strong at 96.8% as of July 19, 2019.”
“Triton’s investment level has been limited so far this year. As
of July 19, 2019, we have purchased $146.7 million of containers
for delivery in 2019. We have also repurchased the third-party
partnership interests in one of our container-owning subsidiaries
for $103.0 million. New container purchase prices have been
impacted by the slow start to the peak season, and new container
prices are in the mid-$1,700 range for a 20’ dry container.”
“Triton continues to use its strong cash flow to drive
shareholder value despite the current limited availability of new
container investment opportunities. Our regular dividend currently
provides over a six percent annual yield, and we also continue to
actively repurchase shares of our common stock. We repurchased 2.3
million common shares during the second quarter, and have purchased
over 7.1 million shares since last August, leading to an 8.8%
reduction in our diluted share count. In addition, we believe the
repurchase of the third-party investor interests was an attractive
investment in our existing container fleet. 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 expect trade growth will be modestly positive
this year, and we expect container demand will improve somewhat as
we move deeper into the summer. However, we expect third quarter
leasing activity will be less than usual due to the slow start for
the peak season and the lack of resolution for the trade dispute
between the United States and China. As a result, we expect our
Adjusted net income per share will hold relatively steady from the
second to the third quarter of 2019.”
Dividends
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 September 26, 2019 to shareholders of
record at the close of business on September 5, 2019.
Triton’s Board of Directors has approved a cash dividend of
$0.53125 per share on its 8.50% Series A Preferred Shares
(NYSE:TRTNpA) and an initial cash dividend of $0.45 per share on
its 8.00% Series B Preferred Shares (NYSE:TRTNpB), each payable on
September 16, 2019 to holders of record at the close of business on
September 9, 2019.
Share Repurchase Update
As of July 19, 2019, we have repurchased approximately 7.1
million common shares since the initial Board of Director
authorization of share repurchases in August 2018 for a total of
$225.3 million at an average price per-share of $31.51.
Investors’ Webcast
Triton will hold a Webcast at 8:30 a.m. (New York time) on
Thursday, July 25, 2019 to discuss its second 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
June 30, 2019
March 31, 2019
December 31, 2018
September 30, 2018
June 30, 2018
Average Utilization (1)
97.2
%
97.6
%
98.2
%
98.7
%
98.8
%
Ending Utilization (1)
97.0
%
97.4
%
97.8
%
98.6
%
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 June
30, 2019, December 31, 2018 and June 30, 2018:
Equipment Fleet in
Units
Equipment Fleet in TEU
June 30, 2019
December 31, 2018
June 30, 2018
June 30, 2019
December 31, 2018
June 30, 2018
Dry
3,312,750
3,340,946
3,243,032
5,433,686
5,476,406
5,307,306
Refrigerated
228,353
228,778
227,040
440,340
440,781
437,038
Special
94,695
93,900
91,688
171,294
169,614
165,002
Tank
12,572
12,509
12,201
12,572
12,509
12,201
Chassis
24,856
24,832
23,405
45,765
45,787
42,884
Equipment leasing fleet
3,673,226
3,700,965
3,597,366
6,103,657
6,145,097
5,964,431
Equipment trading fleet
18,205
13,138
15,406
27,483
21,361
23,622
Total
3,691,431
3,714,103
3,612,772
6,131,140
6,166,458
5,988,053
Equipment in CEU
June 30, 2019
December 31, 2018
June 30, 2018
Operating leases
6,977,613
7,009,605
7,047,168
Finance leases
536,011
538,867
320,763
Equipment trading fleet
48,979
47,476
56,048
Total
7,562,603
7,595,948
7,423,979
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 LIMITED
Consolidated Balance Sheets (In thousands, except share data)
(Unaudited)
June 30, 2019
December 31, 2018
ASSETS:
Leasing equipment, net of accumulated
depreciation of $2,737,072 and $2,533,446
$
8,684,103
$
8,923,451
Net investment in finance leases
449,385
478,065
Equipment held for sale
91,768
66,453
Revenue earning assets
9,225,256
9,467,969
Cash and cash equivalents
45,622
48,950
Restricted cash
114,763
110,589
Accounts receivable, net of allowances of
$1,279 and $1,240
250,673
264,382
Goodwill
236,665
236,665
Lease intangibles, net of accumulated
amortization of $226,243 and $205,532
72,214
92,925
Other assets
48,958
34,610
Fair value of derivative instruments
1,682
13,923
Total assets
$
9,995,833
$
10,270,013
LIABILITIES AND SHAREHOLDERS'
EQUITY:
Equipment purchases payable
$
11,015
$
22,392
Fair value of derivative instruments
53,550
10,966
Accounts payable and other accrued
expenses
100,221
99,885
Net deferred income tax liability
289,023
282,129
Debt, net of unamortized debt costs of
$43,465 and $44,889
7,205,416
7,529,432
Total liabilities
7,659,225
7,944,804
Shareholders' equity:
Series A Preferred shares, $0.01 par
value, 3,450,000 authorized, 3,450,000 and 0 shares issued and
outstanding, respectively; at liquidation preference
86,250
—
Series B Preferred shares, $0.01 par
value, 5,750,000 authorized, 5,750,000 and 0 shares issued and
outstanding, respectively; at liquidation preference
143,750
—
Common shares, $0.01 par value,
270,000,000 shares authorized, 81,023,732 and 80,843,472 shares
issued, respectively
811
809
Undesignated shares, $0.01 par value,
20,800,000 and 30,000,000 shares authorized, respectively, no
shares issued and outstanding
—
—
Treasury shares, at cost, 6,837,508 and
1,853,148 shares, respectively
(215,349
)
(58,114
)
Additional paid-in capital
909,942
896,811
Accumulated earnings
1,445,646
1,349,627
Accumulated other comprehensive income
(loss)
(34,442
)
14,563
Total shareholders' equity
2,336,608
2,203,696
Noncontrolling interests
—
121,513
Total equity
2,336,608
2,325,209
Total liabilities and equity
$
9,995,833
$
10,270,013
TRITON INTERNATIONAL LIMITED
Consolidated Statements of Operations (In thousands, except per
share amounts) (Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2019
2018
2019
2018
Leasing revenues:
Operating leases
$
328,370
$
324,954
$
658,792
$
635,185
Finance leases
10,196
4,817
20,633
9,683
Total leasing revenues
338,566
329,771
679,425
644,868
Equipment trading revenues
23,209
18,099
41,037
31,474
Equipment trading expenses
(18,713
)
(14,105
)
(32,954
)
(24,489
)
Trading margin
4,496
3,994
8,083
6,985
Net gain on sale of leasing equipment
7,519
11,105
15,988
20,323
Net gain on sale of building
—
20,953
—
20,953
Operating expenses:
Depreciation and amortization
135,348
133,894
269,957
264,327
Direct operating expenses
18,097
10,195
34,899
21,243
Administrative expenses
19,988
20,774
38,175
40,327
Provision (reversal) for doubtful
accounts
521
(25
)
379
(126
)
Total operating expenses
173,954
164,838
343,410
325,771
Operating income (loss)
176,627
200,985
360,086
367,358
Other expenses:
Interest and debt expense
82,260
79,027
165,780
154,125
Realized (gain) loss on derivative
instruments, net
(669
)
(492
)
(1,373
)
(740
)
Unrealized (gain) loss on derivative
instruments, net
1,267
(111
)
2,253
(1,297
)
Debt termination expense
558
503
558
503
Other (income) expense, net
(927
)
(585
)
(1,931
)
(1,244
)
Total other expenses
82,489
78,342
165,287
151,347
Income (loss) before income taxes
94,138
122,643
194,799
216,011
Income tax expense (benefit)
8,042
15,890
15,892
26,393
Net income
$
86,096
$
106,753
$
178,907
$
189,618
Less: income (loss) attributable to
noncontrolling interest
—
1,883
592
3,856
Less: dividend on preferred shares
2,025
—
2,330
—
Net income (loss) attributable to
common shareholders
$
84,071
$
104,870
$
175,985
$
185,762
Net income per common share—Basic
$
1.13
$
1.31
$
2.31
$
2.32
Net income per common share—Diluted
$
1.12
$
1.30
$
2.29
$
2.30
Cash dividends paid per common share
$
0.52
$
0.52
$
1.04
$
0.97
Weighted average number of common shares
outstanding—Basic
74,598
80,044
76,151
80,007
Dilutive restricted shares
617
611
583
589
Weighted average number of common shares
outstanding—Diluted
75,215
80,655
76,734
80,596
TRITON INTERNATIONAL LIMITED
Consolidated Statements of Cash Flows (In thousands)
(Unaudited)
Six Months Ended June
30,
2019
2018
Cash flows from operating
activities:
Net income (loss)
$
178,907
$
189,618
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization
269,957
264,327
Amortization of deferred debt cost and
other debt related amortization
6,849
6,627
Lease related amortization
23,835
37,722
Share-based compensation expense
5,471
5,661
Net (gain) loss on sale of leasing
equipment
(15,988
)
(20,323
)
Net (gain) loss on sale of building
—
(20,953
)
Unrealized (gain) loss on derivative
instruments
2,253
(1,297
)
Debt termination expense
558
503
Deferred income taxes
13,910
23,946
Changes in operating assets and
liabilities:
Accounts receivable
12,545
(30,551
)
Accounts payable and other accrued
expenses
(8,860
)
(16,788
)
Net equipment sold for resale activity
(8,517
)
(11,686
)
Cash collections on finance lease
receivables, net of income earned
33,680
29,598
Other assets
(12,786
)
(1,218
)
Net cash provided by (used in)
operating activities
501,814
455,186
Cash flows from investing
activities:
Purchases of leasing equipment and
investments in finance leases
(149,986
)
(884,007
)
Proceeds from sale of equipment, net of
selling costs
106,603
83,443
Proceeds from the sale of building
—
27,630
Other
(130
)
(64
)
Net cash provided by (used in)
investing activities
(43,513
)
(772,998
)
Cash flows from financing
activities:
Issuance of preferred shares, net of
underwriting discount and expenses
221,790
—
Purchases of treasury shares
(157,075
)
—
Redemption of common shares for
withholding taxes
(978
)
(822
)
Debt issuance costs
(5,455
)
(9,567
)
Borrowings under debt facilities
1,143,000
1,417,985
Payments under debt facilities and capital
lease obligations
(1,472,827
)
(1,049,996
)
Dividends paid on preferred and common
shares
(80,793
)
(77,638
)
Distributions to noncontrolling
interests
(2,078
)
(7,743
)
Purchase of noncontrolling interests
(103,039
)
—
Net cash provided by (used in)
financing activities
(457,455
)
272,219
Net increase (decrease) in cash, cash
equivalents and restricted cash
$
846
$
(45,593
)
Cash, cash equivalents and restricted
cash, beginning of period
159,539
226,171
Cash, cash equivalents and restricted
cash, end of period
$
160,385
$
180,578
Supplemental disclosures:
Interest paid
$
160,211
$
148,007
Income taxes paid (refunded)
$
2,216
$
541
Right-of-use asset for leased property
$
7,862
$
—
Supplemental non-cash investing
activities:
Equipment purchases payable
$
11,015
$
159,454
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 expenses net of tax, gains
and losses on derivative instruments net of tax, transaction and
other costs net of tax, and foreign income 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
common shareholders, the most directly comparable U.S. GAAP
measure, to Adjusted net income in the table below for the three
and six months ended June 30, 2019 and June 30, 2018.
TRITON INTERNATIONAL LIMITED
Non-GAAP Reconciliations of Adjusted Net Income (In thousands,
except per share amounts)
Three Months Ended,
Six Months Ended,
June 30, 2019
June 30, 2018
June 30, 2019
June 30, 2018
Net income attributable to common
shareholders
$
84,071
$
104,870
$
175,985
$
185,762
Adjustments:
Unrealized loss (gain) on derivative
instruments, net
1,321
(100
)
2,224
(1,152
)
Transaction and other (income) costs
—
(1
)
—
(27
)
Debt termination expense
551
447
551
447
Foreign income tax adjustment
414
—
414
—
Gain on sale of building
—
(16,316
)
—
(16,316
)
Adjusted net income
$
86,357
$
88,900
$
179,174
$
168,714
Adjusted net income per common
share—Diluted
$
1.15
$
1.10
$
2.34
$
2.09
Weighted average number of common shares
outstanding—Diluted
75,215
80,655
76,734
80,596
TRITON INTERNATIONAL LIMITED
Calculation of Return on Equity (In thousands)
Three Months Ended,
Six Months Ended,
June 30, 2019
June 30, 2018
June 30, 2019
June 30, 2018
Adjusted net income
$
86,357
$
88,900
$
179,174
$
168,714
Annualized Adjusted net income (1)
346,377
356,577
361,318
340,224
Average Shareholders' equity (2)(3)
$
2,135,817
$
2,168,053
$
2,158,443
$
2,137,463
Return on equity
16.2
%
16.4
%
16.7
%
15.9
%
(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 six
month ended periods.
(3)
Shareholders' equity was adjusted to exclude preferred
shares.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190725005236/en/
Andrew Greenberg Senior Vice President Finance & Investor
Relations (914) 697-2900
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