July 24, 2020 – Triton International Limited (NYSE: TRTN)
("Triton")
Highlights:
- Net income attributable to common shareholders was $60.1
million or $0.86 per diluted share.
- Adjusted net income was $60.0 million or $0.86 per diluted
share, a decrease of 25.2% per diluted share from the second
quarter of 2019.
- Utilization averaged 95.0% in the second quarter of 2020.
Utilization was 94.8% as of June 30, 2020 and was 95.0% as of July
22, 2020.
- Triton repurchased 2.1 million common shares during the second
quarter, and has repurchased an additional 0.3 million common
shares through July 22, 2020. Triton has purchased over 12.4
million common shares since the inception of the program in August
2018.
- Triton's Board of Directors announced a quarterly dividend of
$0.52 per common share payable on September 24, 2020 to
shareholders of record as of September 10, 2020.
Financial Results
The following table summarizes Triton’s selected key financial
information for the three and six months ended June 30, 2020 and
2019.
(in millions, except per share
data)
Three Months Ended,
Six Months Ended,
June 30, 2020
March 31, 2020
June 30, 2019
June 30, 2020
June 30, 2019
Total leasing revenues
$321.4
$321.5
$338.6
$642.9
$679.4
GAAP
Net income attributable to common
shareholders(1)
$60.1
$67.2
$84.1
$127.3
$176.0
Net income per share - Diluted
$0.86
$0.94
$1.12
$1.80
$2.29
Non-GAAP
(2)
Adjusted net income
$60.0
$67.1
$86.4
$127.1
$179.2
Adjusted net income per share -
Diluted
$0.86
$0.93
$1.15
$1.80
$2.34
Return on equity (3)
12.2
%
13.1
%
16.2
%
12.6
%
16.7
%
(1)
Net of dividends on preferred
shares of $10.5 million and $20.3 million for the three and six
months ended June 30, 2020, respectively, $9.8 million for the
three months ended March 31, 2020, and $2.0 million and $2.3
million for the three and six ended June 30, 2019,
respectively.
(2)
Refer to the "Use of Non-GAAP
Financial Measures" and "Non-GAAP Reconciliations of Adjusted Net
Income" set forth below.
(3)
Refer to the “Calculation of
Return on Equity” set forth below.
Operating Performance
"Triton achieved solid performance in the second quarter of
2020" commented Brian M. Sondey, Chief Executive Officer of Triton.
"We generated $60.0 million of Adjusted net income, or $0.86 per
share, and we realized an annualized Return on equity of 12.2%.
While below our long-term targets, our solid performance
demonstrates the underlying strength of our business given the
numerous market challenges created by the global spread of
COVID-19."
"The COVID-19 pandemic and the resulting widespread economic
shutdowns have led to a significant decrease in global trade. Our
customers estimate container transport volumes decreased 15% or
more in the second quarter of 2020 compared to second quarter of
last year, and our container pick-up and new deal activity were
limited in the first half of the year. However, drop-off volumes
have been moderate and our utilization decreased just 0.5% during
the quarter to reach 94.8% as of June 30, 2020. The resiliency of
our utilization reflects our high quality long-term lease
portfolio, operational challenges for our customers that have
slowed container turn-times and the generally balanced supply of
containers. Used container sale prices and volumes have also held
up well and we continue to generate sizable disposal gains."
"As of July 22, 2020, we have purchased $489.4 million of new
and sale-leaseback containers for delivery in 2020, which is well
below our typical level. However, Triton continues to use its
strong cash flow to drive shareholder value in other ways. Our
regular dividend currently provides an annual yield of
approximately seven percent. We also repurchased 2.1 million common
shares during the second quarter for an average price of $28.70,
and repurchased an additional 0.3 million shares through July 22,
2020. We have purchased over 12.4 million shares since the
inception of the program in August 2018, representing 15.4% of the
shares originally outstanding. We also have continued to pay down
debt and our leverage remains near an all-time low."
"We have been concerned that the sharp decrease in global
container volumes this year would increase the financial challenges
facing our customers. While we are not yet through the pandemic,
container freight rates and the financial performance of our
customers have generally held up better than anticipated. The major
shipping lines have taken aggressive action to reduce their
deployed vessel capacity, decreasing their network expenses and
mitigating rate pressure from reduced freight volumes. The large
decrease in bunker fuel prices has also been very helpful to their
financial performance. We continue to monitor customer credit
closely."
Outlook
Mr. Sondey continued, "There continues to be a high degree of
uncertainty to our outlook due to the unprecedented nature of the
broad economic shutdowns across the globe, and trade volumes and
leasing demand were well below normal for the first half of the
year. However, our customers have indicated volumes have improved
as shutdowns in Europe and the United States have eased, and we
have seen a significant increase in leasing deal activity in July.
The extent to which these recent improvements continue will have a
large impact on the trajectory of our performance through the rest
of the year."
"While our visibility is more limited than usual, we expect our
operating trends will improve in the third quarter as containers
recently booked on lease are picked up, and we expect our Adjusted
net income per share will increase from the second quarter to the
third quarter of 2020."
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 24, 2020 to shareholders of
record at the close of business on September 10, 2020.
The Company's Board of Directors also approved and declared a
cash dividend payable on September 15, 2020 to holders of record at
the close of business on September 8, 2020 on its issued and
outstanding preferred shares as follows:
Preferred Share Series
Dividend Rate
Dividend Per Share
Series A Preferred Shares
(NYSE:TRTNPRA)
8.500%
$0.5312500
Series B Preferred Shares
(NYSE:TRTNPRB)
8.000%
$0.5000000
Series C Preferred Shares
(NYSE:TRTNPRC)
7.375%
$0.4609375
Series D Preferred Shares
(NYSE:TRTNPRD)
6.875%
$0.4296875
Share Repurchase Update
Triton repurchased 2.1 million common shares in the second
quarter of 2020, and repurchased an additional 0.3 million common
shares through July 22, 2020.
Investors’ Webcast
Triton will hold a Webcast at 8:30 a.m. (New York time) on
Friday, July 24, 2020 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.
Utilization and Fleet Information
Effective December 31, 2019, we revised our cost equivalent
units ("CEU") factor to be more in line with the cost of new
containers over the last several years. These new CEU factors are
generally consistent with those published by the International
Institute for Container Lessors ("IICL"). We use the CEU factors to
measure the size and performance of our container fleet.
The following table sets forth the equipment fleet utilization
for the periods indicated:
Quarter Ended
June 30, 2020
March 31, 2020
December 31, 2019
September 30, 2019
June 30, 2019
Average Utilization (1)
95.0
%
95.4
%
95.8
%
96.7
%
97.2
%
Ending Utilization (1)
94.8
%
95.3
%
95.4
%
96.4
%
97.1
%
(1)
Utilization is computed by
dividing total units on lease (in CEU) by the total units in fleet
(in CEU), excluding new units not yet leased and off-hire units
designated for sale.
The following table summarizes the equipment fleet as of June
30, 2020, December 31, 2019 and June 30, 2019:
Equipment Fleet in
Units
Equipment Fleet in TEU
June 30, 2020
December 31, 2019
June 30, 2019
June 30, 2020
December 31, 2019
June 30, 2019
Dry
3,215,482
3,267,624
3,312,750
5,287,639
5,369,377
5,433,686
Refrigerated
227,018
225,520
228,353
438,380
435,148
440,340
Special
93,996
94,453
94,695
170,977
171,437
171,294
Tank
12,439
12,485
12,572
12,439
12,485
12,572
Chassis
24,133
24,515
24,856
44,524
45,154
45,765
Equipment leasing fleet
3,573,068
3,624,597
3,673,226
5,953,959
6,033,601
6,103,657
Equipment trading fleet
79,778
17,906
18,205
123,377
27,121
27,483
Total
3,652,846
3,642,503
3,691,431
6,077,336
6,060,722
6,131,140
Equipment in CEU(1)
June 30, 2020
December 31, 2019
June 30, 2019
Operating leases
6,478,561
6,434,434
6,499,909
Finance leases
317,159
423,638
438,986
Equipment trading fleet
120,654
37,232
41,966
Total
6,916,374
6,895,304
6,980,861
(1)
In the equipment fleet tables
above, we have included total fleet count information based on CEU.
CEU is a ratio used to convert the actual number of containers in
our fleet to a figure based on the relative purchase prices of our
various equipment types to that of a 20-foot dry container. For
example, the CEU ratio for a 40-foot high cube dry container is
1.70, and a 40-foot high cube refrigerated container is 7.50. These
factors may differ slightly from CEU ratios used by others in the
industry.
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:
the impact of COVID-19 on our business and financial results;
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 14, 2020, 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)
(Unaudited)
June 30, 2020
December 31, 2019
ASSETS:
Leasing equipment, net of accumulated
depreciation of $3,135,646 and $2,933,886
$
8,313,379
$
8,392,547
Net investment in finance leases
306,879
413,342
Equipment held for sale
144,956
114,504
Revenue earning assets
8,765,214
8,920,393
Cash and cash equivalents
252,380
62,295
Restricted cash
98,503
106,677
Accounts receivable, net of allowances of
$2,483 and $1,276
219,625
210,697
Goodwill
236,665
236,665
Lease intangibles, net of accumulated
amortization of $254,207 and $242,301
44,250
56,156
Other assets
65,093
38,902
Fair value of derivative instruments
24
10,848
Total assets
$
9,681,754
$
9,642,633
LIABILITIES AND SHAREHOLDERS'
EQUITY:
Equipment purchases payable
$
46,569
$
24,685
Fair value of derivative instruments
163,932
36,087
Accounts payable and other accrued
expenses
90,646
116,782
Net deferred income tax liability
302,551
301,317
Debt, net of unamortized costs of $34,088
and $39,781
6,569,106
6,631,525
Total liabilities
7,172,804
7,110,396
Shareholders' equity:
Preferred shares, $0.01 par value, at
liquidation preference
555,000
405,000
Common shares, $0.01 par value,
270,000,000 shares authorized, 81,149,460 and 80,979,833 shares
issued, respectively
811
810
Undesignated shares, $0.01 par value,
7,800,000 and 13,800,000 shares authorized, respectively, no shares
issued and outstanding
—
—
Treasury shares, at cost, 12,187,889 and
8,771,345 shares, respectively
(374,904
)
(278,510
)
Additional paid-in capital
901,289
902,725
Accumulated earnings
1,587,751
1,533,845
Accumulated other comprehensive income
(loss)
(160,997
)
(31,633
)
Total shareholders' equity
2,508,950
2,532,237
Total liabilities and shareholders'
equity
$
9,681,754
$
9,642,633
TRITON INTERNATIONAL
LIMITED
Consolidated Statements of
Operations
(In thousands, except per
share amounts)
(Unaudited)
Three Months Ended June
30,
Six months ended June
30,
2020
2019
2020
2019
Leasing revenues:
Operating leases
$
313,423
$
328,370
$
626,227
$
658,792
Finance leases
7,974
10,196
16,638
20,633
Total leasing revenues
321,397
338,566
642,865
679,425
Equipment trading revenues
16,903
23,209
32,283
41,037
Equipment trading expenses
(14,883
)
(18,713
)
(28,330
)
(32,954
)
Trading margin
2,020
4,496
3,953
8,083
Net gain on sale of leasing equipment
4,537
7,519
8,614
15,988
Operating expenses:
Depreciation and amortization
133,292
135,348
265,987
269,957
Direct operating expenses
29,619
18,097
52,867
34,899
Administrative expenses
20,472
19,988
39,697
38,175
Provision (reversal) for doubtful
accounts
374
521
4,653
379
Total operating expenses
183,757
173,954
363,204
343,410
Operating income (loss)
144,197
176,627
292,228
360,086
Other expenses:
Interest and debt expense
66,874
82,260
135,876
165,780
Realized (gain) loss on derivative
instruments, net
11
(669
)
(224
)
(1,373
)
Unrealized (gain) loss on derivative
instruments, net
(11
)
1,267
286
2,253
Debt termination expense
—
558
31
558
Other (income) expense, net
36
(927
)
(3,610
)
(1,931
)
Total other expenses
66,910
82,489
132,359
165,287
Income (loss) before income taxes
77,287
94,138
159,869
194,799
Income tax expense (benefit)
6,699
8,042
12,245
15,892
Net income (loss)
$
70,588
$
86,096
$
147,624
$
178,907
Less: income (loss) attributable to
noncontrolling interest
—
—
—
592
Less: dividend on preferred shares
10,513
2,025
20,338
2,330
Net income (loss) attributable to
common shareholders
$
60,075
$
84,071
$
127,286
$
175,985
Net income per common share—Basic
$
0.87
$
1.13
$
1.81
$
2.31
Net income per common share—Diluted
$
0.86
$
1.12
$
1.80
$
2.29
Cash dividends paid per common share
$
0.52
$
0.52
$
1.04
$
1.04
Weighted average number of common shares
outstanding—Basic
69,275
74,598
70,436
76,151
Dilutive restricted shares
261
617
262
583
Weighted average number of common shares
outstanding—Diluted
69,536
75,215
70,698
76,734
TRITON INTERNATIONAL
LIMITED
Consolidated Statements of
Cash Flows
(In thousands)
(Unaudited)
Six Months Ended June
30,
2020
2019
Cash flows from operating
activities:
Net income (loss)
$
147,624
$
178,907
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization
265,987
269,957
Amortization of deferred debt cost and
other debt related amortization
7,187
6,849
Lease related amortization
15,788
23,835
Share-based compensation expense
5,861
5,471
Net (gain) loss on sale of leasing
equipment
(8,614
)
(15,988
)
Unrealized (gain) loss on derivative
instruments
286
2,253
Debt termination expense
31
558
Deferred income taxes
12,037
13,910
Changes in operating assets and
liabilities:
Accounts receivable
(20,778
)
12,545
Accounts payable and other accrued
expenses.
(25,752
)
(8,860
)
Net equipment sold (purchased) for resale
activity.
(4,035
)
(8,517
)
Cash collections on finance lease
receivables, net of income earned
46,650
33,680
Other assets
(25,703
)
(12,786
)
Net cash provided by (used in)
operating activities
416,569
501,814
Cash flows from investing
activities:
Purchases of leasing equipment and
investments in finance leases
(219,788
)
(149,986
)
Proceeds from sale of equipment, net of
selling costs
102,088
106,603
Other
(328
)
(130
)
Net cash provided by (used in)
investing activities
(118,028
)
(43,513
)
Cash flows from financing
activities:
Issuance of preferred shares, net of
underwriting discount
145,275
221,790
Purchases of treasury shares
(95,243
)
(157,075
)
Redemption of common shares for
withholding taxes
(2,156
)
(978
)
Debt issuance costs
—
(5,455
)
Borrowings under debt facilities
730,000
1,143,000
Payments under debt facilities and finance
lease obligations
(801,044
)
(1,472,827
)
Dividends paid on preferred shares
(19,908
)
(1,833
)
Dividends paid on common shares
(72,964
)
(78,960
)
Distributions to noncontrolling
interests
—
(2,078
)
Purchase of noncontrolling interests
—
(103,039
)
Other
(590
)
—
Net cash provided by (used in)
financing activities
(116,630
)
(457,455
)
Net increase (decrease) in cash, cash
equivalents and restricted cash
$
181,911
$
846
Cash, cash equivalents and restricted
cash, beginning of period
168,972
159,539
Cash, cash equivalents and restricted
cash, end of period
$
350,883
$
160,385
Supplemental disclosures:
Interest paid
$
131,457
$
160,211
Income taxes paid (refunded)
$
216
$
2,216
Right-of-use asset for leased property
$
196
$
7,862
Supplemental non-cash investing
activities:
Equipment purchases payable
$
46,569
$
11,015
Use of Non-GAAP Financial Items
We use the terms "Adjusted net income" and return on equity
throughout this press release.
Adjusted net income and return on equity are not items presented
in accordance with U.S. GAAP and should not be considered as
alternatives to, or more meaningful than, amounts determined in
accordance with U.S. GAAP, including net income.
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 common
shareholders excluding debt termination expenses net of tax,
unrealized gains and losses on derivative instruments net of tax,
foreign and other income tax adjustments, and the tax benefit from
vesting of restricted shares.
We believe that Adjusted net income is useful to an investor in
evaluating our operating performance because this item:
- 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
months ended June 30, 2020, March 31, 2020, and June 30, 2019 and
for the six months ended June 30, 2020 and June 30, 2019.
Additionally, the calculation for return on equity is adjusted
annualized earnings divided by average shareholders' equity.
Management utilizes return on equity in evaluating how much profit
the Company generates on the shareholders' equity in the Company
and believes it is useful for comparing the profitability of
companies in the same industry.
TRITON INTERNATIONAL
LIMITED
Non-GAAP Reconciliations of
Adjusted Net Income
(In thousands, except per
share amounts)
Three Months Ended,
Six Months Ended,
June 30, 2020
March 31, 2020
June 30, 2019
June 30, 2020
June 30, 2019
Net income attributable to common
shareholders
$
60,075
$
67,211
$
84,071
$
127,286
$
175,985
Add (subtract):
Unrealized loss (gain) on derivative
instruments, net
12
270
1,321
282
2,224
Debt termination expense
—
24
551
24
551
Foreign income tax adjustments
(85
)
—
414
(85
)
414
Tax benefit from vesting of restricted
shares
—
(390
)
—
(390
)
—
Adjusted net income
$
60,002
$
67,115
$
86,357
$
127,117
$
179,174
Adjusted net income per common
share—Diluted
$
0.86
$
0.93
$
1.15
$
1.80
$
2.34
Weighted average number of common shares
outstanding—Diluted
69,536
71,798
75,215
70,698
76,734
TRITON INTERNATIONAL
LIMITED
Calculation of Return on
Equity
(In thousands)
Three Months Ended,
Six Months Ended,
June 30, 2020
March 31, 2020
June 30, 2019
June 30, 2020
June 30, 2019
Adjusted net income
$
60,002
$
67,115
$
86,357
$
127,117
$
179,174
Annualized Adjusted net income (1)
240,667
269,198
346,377
255,631
361,318
Average Shareholders' equity (2)(3)
$
1,974,600
$
2,061,244
$
2,135,817
$
2,025,479
$
2,158,443
Return on equity
12.2
%
13.1
%
16.2
%
12.6
%
16.7
%
(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)
Average Shareholders' equity was
adjusted to exclude preferred shares.
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version on businesswire.com: https://www.businesswire.com/news/home/20200724005043/en/
Andrew Greenberg Senior Vice President Business Development
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