Triton International Limited (NYSE: TRTN) ("Triton")
Third Quarter
Highlights:
- Adjusted net income was $85.0 million or $1.16 per diluted
share, a decrease of 0.9% per diluted share from the third quarter
of 2018.
- Net income attributable to common shareholders was $85.9
million or $1.17 per diluted share.
- Utilization averaged 96.7% in the third quarter of 2019.
- Triton repurchased 1.6 million common shares during the third
quarter. As of October 18, 2019, over 8.7 million shares have been
repurchased since the inception of the program.
- Triton announced a quarterly dividend of $0.52 per common share
payable on December 20, 2019 to shareholders of record as of
December 3, 2019.
Financial Results
The following table summarizes Triton’s selected key financial
information for the three and nine months ended September 30, 2019
and 2018.
(in millions, except per share
data)
Three Months Ended,
Nine Months Ended,
September 30, 2019
September 30, 2018
September 30, 2019
September 30, 2018
Total leasing revenues
$336.7
$350.1
$1,016.1
$994.9
GAAP
Net income attributable to common
shareholders
$85.9
(3)
$94.2
$261.9
(3)
$280.0
(4)
Net income per share - Diluted
$1.17
$1.17
$3.47
$3.47
Non-GAAP
(1)
Adjusted net income
$85.0
$94.8
$264.1
$263.6
Adjusted net income per share -
Diluted
$1.16
$1.17
$3.50
$3.27
Return on equity (2)
16.1
%
16.9
%
16.5
%
16.3
%
(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 $4.7 million and $7.0
million for the three and nine months ended September 30, 2019,
respectively. (4) Net income attributable to common shareholders in
2018 included a one-time gain of $21.0 million on the sale of a
building.
Operating Performance
“Triton achieved solid results in the third quarter of 2019,"
commented Brian M. Sondey, Chief Executive Officer of Triton. “We
generated $85.0 million of Adjusted net income in the third
quarter, or $1.16 of Adjusted net income per share, and we realized
an annualized Return on equity of 16.1%.”
“Triton's financial performance has remained solid despite
facing weak leasing demand since last fall, and leasing activity
remained slow throughout the traditional peak third quarter. 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. Fortunately, the supply
of containers remains generally well balanced due to reduced
production of new containers, and while our utilization continued
to gradually trend down during the third quarter, it remains strong
at 96.1% as of October 18, 2019. Triton's financial performance has
also been supported by our industry-leading cost structure and
operating capabilities, our well-protected long-term lease
portfolio, and disciplined use of our strong cash flow.”
“Triton’s investment level has been limited so far this year. As
of October 18, 2019, we have purchased $247.7 million of containers
for delivery in 2019. However, Triton continues to use its strong
cash flow to drive shareholder value. Our regular dividend
currently provides almost a six percent annual yield, and we also
continue to actively repurchase shares of our common stock. We
repurchased 1.6 million common shares during the third quarter, and
have purchased over 8.7 million shares since last August, leading
to a 10.8% reduction in our diluted share count. In addition, we
believe the repurchase of the third-party investor interests
earlier this year was an attractive investment in our existing
container fleet. Overall, our strong cash flow, unrivaled operating
capabilities and range of financing options give us many levers to
drive shareholder value.”
Outlook
“Our customers and market forecasters have reduced their
expectations for containerized trade growth this year following the
weak summer peak season, and most are currently projecting growth
will be just slightly positive in 2019. We are also heading into
the seasonally-slower time of year. As a result, we expect our key
operating metrics will continue to gradually decrease over the next
several quarters. However, the short ordering cycle for containers
and multiple drivers for container leasing demand typically limit
the duration of soft market conditions, and we continue to benefit
from numerous advantages and strong, stable cash flow. Overall, we
expect our Adjusted net income per share will decrease from the
third quarter to the fourth quarter, though we also expect our
financial performance will remain solid.”
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 December 20, 2019 to shareholders of
record at the close of business on December 3, 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 a cash dividend of $0.50 per share on its 8.00%
Series B Preferred Shares (NYSE:TRTNpB), each payable on December
16, 2019 to holders of record at the close of business on December
9, 2019.
Share Repurchase Update
As of October 18, 2019, we have repurchased approximately 8.7
million common shares since the initial Board of Director
authorization of share repurchases in August 2018 for a total of
$277.2 million at an average price per-share of $31.70. As of
October 18, 2019, the Company has a total of $84.9 million
remaining under the current authorization.
Investors’ Webcast
Triton will hold a Webcast at 8:30 a.m. (New York time) on
Thursday, October 24, 2019 to discuss its third 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
September 30, 2019
June 30, 2019
March 31, 2019
December 31, 2018
September 30, 2018
Average Utilization
(1)
96.7%
97.2%
97.6%
98.2%
98.7%
Ending Utilization (1)
96.3%
97.0%
97.4%
97.8%
98.6%
(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
September 30, 2019, December 31, 2018 and September 30, 2018:
Equipment Fleet in
Units
Equipment Fleet in TEU
September 30, 2019
December 31, 2018
September 30, 2018
September 30, 2019
December 31, 2018
September 30, 2018
Dry
3,287,025
3,340,946
3,336,793
5,393,705
5,476,406
5,464,515
Refrigerated
226,114
228,778
228,559
436,129
440,781
440,164
Special
94,678
93,900
94,038
171,579
169,614
169,870
Tank
12,539
12,509
12,284
12,539
12,509
12,284
Chassis
24,704
24,832
23,396
45,498
45,787
42,911
Equipment leasing fleet
3,645,060
3,700,965
3,695,070
6,059,450
6,145,097
6,129,744
Equipment trading fleet
17,054
13,138
14,513
25,764
21,361
23,182
Total
3,662,114
3,714,103
3,709,583
6,085,214
6,166,458
6,152,926
Equipment in CEU
September 30, 2019
December 31, 2018
September 30, 2018
Operating leases
6,929,682
7,009,605
7,208,106
Finance leases
526,553
538,867
318,607
Equipment trading fleet
42,739
47,476
53,730
Total
7,498,974
7,595,948
7,580,443
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.
TRITON INTERNATIONAL
LIMITED
Consolidated Balance
Sheets
(In thousands, except share
data)
(Unaudited)
September 30, 2019
December 31, 2018
ASSETS:
Leasing equipment, net of accumulated
depreciation of $2,836,132 and $2,533,446
$
8,519,730
$
8,923,451
Net investment in finance leases
431,619
478,065
Equipment held for sale
98,868
66,453
Revenue earning assets
9,050,217
9,467,969
Cash and cash equivalents
46,840
48,950
Restricted cash
111,276
110,589
Accounts receivable, net of allowances of
$1,212 and $1,240
245,209
264,382
Goodwill
236,665
236,665
Lease intangibles, net of accumulated
amortization of $234,966 and $205,532
63,491
92,925
Other assets
47,303
34,610
Fair value of derivative instruments
882
13,923
Total assets
$
9,801,883
$
10,270,013
LIABILITIES AND SHAREHOLDERS'
EQUITY:
Equipment purchases payable
$
34,922
$
22,392
Fair value of derivative instruments
75,777
10,966
Accounts payable and other accrued
expenses
106,332
99,885
Net deferred income tax liability
291,342
282,129
Debt, net of unamortized debt costs of
$42,790 and $44,889
6,985,531
7,529,432
Total liabilities
7,493,904
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, 80,973,339 and 80,843,472 shares
issued, respectively
810
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, 8,442,311 and
1,853,148 shares, respectively
(267,233
)
(58,114
)
Additional paid-in capital
907,022
896,811
Accumulated earnings
1,493,765
1,349,627
Accumulated other comprehensive income
(loss)
(56,385
)
14,563
Total shareholders' equity
2,307,979
2,203,696
Noncontrolling interests
—
121,513
Total equity
2,307,979
2,325,209
Total liabilities and equity
$
9,801,883
$
10,270,013
TRITON INTERNATIONAL
LIMITED
Consolidated Statements of
Operations
(In thousands, except per
share amounts)
(Unaudited)
Three Months Ended September
30,
Nine Months Ended
September 30,
2019
2018
2019
2018
Leasing revenues:
Operating leases
$
326,800
$
346,461
$
985,592
$
981,646
Finance leases
9,868
3,617
30,501
13,300
Total leasing revenues
336,668
350,078
1,016,093
994,946
Equipment trading revenues
25,796
25,292
66,833
56,766
Equipment trading expenses
(21,646
)
(19,482
)
(54,600
)
(43,971
)
Trading margin
4,150
5,810
12,233
12,795
Net gain on sale of leasing equipment
6,196
7,055
22,184
27,378
Net gain on sale of building
—
—
—
20,953
Operating expenses:
Depreciation and amortization
133,367
141,337
403,324
405,664
Direct operating expenses
20,457
11,489
55,356
32,732
Administrative expenses
18,496
19,966
56,671
60,293
Provision (reversal) for doubtful
accounts
126
677
505
551
Total operating expenses
172,446
173,469
515,856
499,240
Operating income (loss)
174,568
189,474
534,654
556,832
Other expenses:
Interest and debt expense
77,401
82,502
243,181
236,627
Realized (gain) loss on derivative
instruments, net
(539
)
(608
)
(1,912
)
(1,348
)
Unrealized (gain) loss on derivative
instruments, net
504
322
2,757
(975
)
Debt termination expense
1,870
1,348
2,428
1,851
Other (income) expense, net
(116
)
492
(2,047
)
(752
)
Total other expenses
79,120
84,056
244,407
235,403
Income (loss) before income taxes
95,448
105,418
290,247
321,429
Income tax expense (benefit)
4,845
9,789
20,737
36,182
Net income
$
90,603
$
95,629
$
269,510
$
285,247
Less: income (loss) attributable to
noncontrolling interest
—
1,393
592
5,249
Less: dividend on preferred shares
4,708
—
7,038
—
Net income (loss) attributable to
common shareholders
$
85,895
$
94,236
$
261,880
$
279,998
Net income per common share—Basic
$
1.18
$
1.18
$
3.49
$
3.50
Net income per common share—Diluted
$
1.17
$
1.17
$
3.47
$
3.47
Cash dividends paid per common share
$
0.52
$
0.52
$
1.56
$
1.49
Weighted average number of common shares
outstanding—Basic
72,689
80,064
74,984
80,026
Dilutive restricted shares
560
664
573
594
Weighted average number of common shares
outstanding—Diluted
73,249
80,728
75,557
80,620
TRITON INTERNATIONAL
LIMITED
Consolidated Statements of
Cash Flows
(In thousands)
(Unaudited)
Nine Months Ended September
30,
2019
2018
Cash flows from operating
activities:
Net income (loss)
$
269,510
$
285,247
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization
403,324
405,664
Amortization of deferred debt cost and
other debt related amortization
9,718
10,070
Lease related amortization
32,317
54,965
Share-based compensation expense
7,238
7,412
Net (gain) loss on sale of leasing
equipment
(22,184
)
(27,378
)
Net (gain) loss on sale of building
—
(20,953
)
Unrealized (gain) loss on derivative
instruments
2,757
(975
)
Debt termination expense
2,428
1,851
Deferred income taxes
18,885
34,636
Changes in operating assets and
liabilities:
Accounts receivable
22,006
(21,440
)
Accounts payable and other accrued
expenses
(7,202
)
(3,469
)
Net equipment sold for resale activity
(1,798
)
(6,031
)
Cash collections on finance lease
receivables, net of income earned
53,706
45,164
Other assets
(11,198
)
(578
)
Net cash provided by (used in)
operating activities
779,507
764,185
Cash flows from investing
activities:
Purchases of leasing equipment and
investments in finance leases
(160,518
)
(1,347,202
)
Proceeds from sale of equipment, net of
selling costs
163,033
122,100
Proceeds from the sale of building
—
27,630
Other
(245
)
(103
)
Net cash provided by (used in)
investing activities
2,270
(1,197,575
)
Cash flows from financing
activities:
Issuance of preferred shares, net of
underwriting discount and expenses
221,790
—
Purchases of treasury shares
(209,592
)
—
Redemption of common shares for
withholding taxes
(5,666
)
(1,117
)
Debt issuance costs
(8,709
)
(12,492
)
Borrowings under debt facilities
1,417,200
2,118,637
Payments under debt facilities and capital
lease obligations
(1,970,334
)
(1,563,947
)
Dividends paid on preferred and common
shares
(122,772
)
(119,280
)
Distributions to noncontrolling
interests
(2,078
)
(12,123
)
Purchase of noncontrolling interests
(103,039
)
—
Net cash provided by (used in)
financing activities
(783,200
)
409,678
Net increase (decrease) in cash, cash
equivalents and restricted cash
$
(1,423
)
$
(23,712
)
Cash, cash equivalents and restricted
cash, beginning of period
159,539
226,171
Cash, cash equivalents and restricted
cash, end of period
$
158,116
$
202,459
Supplemental disclosures:
Interest paid
$
224,033
$
213,577
Income taxes paid (refunded)
$
2,504
$
1,837
Right-of-use asset for leased property
$
7,206
$
—
Supplemental non-cash investing
activities:
Equipment purchases payable
$
34,922
$
127,755
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,
unrealized gains and losses on derivative instruments net of tax,
transaction and other costs net of tax, gain on sale of building,
net of tax, tax benefit from vesting of restricted shares, 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 nine months ended September 30, 2019 and September 30,
2018.
TRITON INTERNATIONAL LIMITED
Non-GAAP Reconciliations of Adjusted Net Income (In thousands,
except per share amounts)
Three Months Ended,
Nine Months Ended,
September 30, 2019
September 30, 2018
September 30, 2019
September 30, 2018
Net income attributable to common
shareholders
$
85,895
$
94,236
$
261,880
$
279,998
Adjustments:
Unrealized loss (gain) on derivative
instruments, net
497
286
2,721
(866
)
Transaction and other (income) costs
2
—
(25
)
Debt termination expense
1,461
1,197
2,012
1,644
Foreign income tax adjustment
(931
)
(881
)
(517
)
(881
)
Gain on sale of building
—
—
(16,316
)
Tax benefit from vesting of restricted
shares
(1,972
)
—
(1,972
)
—
Adjusted net income
$
84,950
$
94,840
$
264,124
$
263,554
Adjusted net income per common
share—Diluted
$
1.16
$
1.17
$
3.50
$
3.27
Weighted average number of common shares
outstanding—Diluted
73,249
80,728
75,557
80,620
TRITON INTERNATIONAL LIMITED
Calculation of Return on Equity (In thousands)
Three Months Ended,
Nine Months Ended,
September 30, 2019
September 30, 2018
September 30, 2019
September 30, 2018
Adjusted net income
$
84,950
$
94,840
$
264,124
$
263,554
Annualized Adjusted net income (1)
337,030
376,267
353,133
352,371
Average Shareholders' equity (2)(3)
$
2,092,294
$
2,230,042
$
2,138,327
$
2,167,468
Return on equity
16.1
%
16.9
%
16.5
%
16.3
%
(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 nine month ended periods.
(3) Shareholders' equity was adjusted to exclude preferred
shares.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191024005167/en/
Andrew Greenberg Senior Vice President Finance & Investor
Relations (914) 697-2900
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