July 27, 2021 – Triton International Limited (NYSE: TRTN)
("Triton")
Highlights:
- Net income attributable to common shareholders for the three
months ended June 30, 2021 was $54.7 million or $0.81 per diluted
share, which includes $89.9 million of make-whole and other debt
termination costs primarily related to the prepayment of $821.0
million of senior secured institutional notes.
- Adjusted net income was $144.2 million or $2.14 per diluted
share, an increase of 148.8% from the second quarter of 2020 and
12.0% from the first quarter of 2021.
- Trade volumes and container demand continued to be
exceptionally strong in the second quarter. We placed over 400,000
TEU of new containers on-hire during the quarter and utilization
increased to 99.5% as of June 30, 2021.
- As of July 23, 2021, Triton has purchased over $3.4 billion of
new containers for delivery in 2021, most of which have already
been committed to high value, long duration leases.
- Triton issued $1.7 billion of senior secured investment grade
bonds during the quarter at an average effective interest rate of
2.2%.
- Triton's Board of Directors announced a quarterly dividend of
$0.57 per common share payable on September 23, 2021 to
shareholders of record as of September 9, 2021.
Financial Results
The following table summarizes Triton’s selected key financial
information for the three and six months ended June 30, 2021 and
2020 and the three months ended March 31, 2021.
(in millions, except per share
data)
Three Months Ended,
Six Months Ended,
June 30, 2021
March 31, 2021
June 30, 2020
June 30, 2021
June 30, 2020
Total leasing revenues
$369.8
$346.7
$321.4
$716.5
$642.9
GAAP
Net income attributable to common
shareholders
$54.7
$129.3
$60.1
$184.0
$127.3
Net income per share - Diluted
$0.81
$1.92
$0.86
$2.74
$1.80
Non-GAAP
(1)
Adjusted net income
$144.2
$128.7
$60.0
$272.9
$127.1
Adjusted net income per share -
Diluted
$2.14
$1.91
$0.86
$4.06
$1.80
Return on equity (2)
26.6
%
25.0
%
12.2
%
26.0
%
12.6
%
1)
Refer to the "Use of Non-GAAP Financial
Items" and "Non-GAAP Reconciliations of Adjusted Net Income" set
forth below.
2)
Refer to the “Calculation of Return on
Equity” set forth below.
Operating Performance
"Triton achieved record performance again in the second quarter
of 2021," commented Brian M. Sondey, Chief Executive Officer of
Triton. "We generated $2.14 of Adjusted earnings per share in the
second quarter, an increase of 12.0% from the first quarter. We
also achieved an annualized Return on equity of 26.6%."
"Triton's outstanding results in the second quarter reflect our
success in capturing the many opportunities presented by the
current very strong market conditions. Trade volumes remain strong
and we continue to see incremental demand for containers due to
operational disruptions that are slowing our customers' container
turn-times. Our utilization increased to 99.5% as of June 30, 2021
and currently stands at 99.6%. New container prices and market
lease rates increased further in the second quarter. Container
factories are currently quoting over $3,800 for a new 20' dry
container, and market lease rates for new containers are
significantly higher than the average rates in our lease portfolio.
Our average selling prices for used dry containers continued to
increase as well, allowing us to generate significantly higher than
expected disposal gains in the second quarter despite low disposal
volumes."
"Triton is investing heavily in new containers to support our
customers. Shipping lines continue to rely on the leasing market to
fulfill a large portion of their container requirements, and Triton
has secured a meaningful share of leasing transactions due to our
industry-leading supply capability and our strong reputation for
reliability. Triton has purchased over $3.4 billion of containers
for delivery in 2021. Over $1.8 billion of these containers were
delivered through the end of the second quarter. Most of the
containers not yet delivered are pre-committed to attractive
long-term leases. We estimate that our existing orders would
translate to over 25% asset growth for Triton in 2021."
"Triton is highly focused on locking-in durable improvements to
our business. The average lease duration for containers ordered in
2021 is 13 years. The overall average remaining duration of our
long-term lease portfolio has extended to 55 months, and we expect
it to extend further as the substantial amount of new containers we
have ordered and pre-committed to lease are produced and go
on-hire. The very large block of new containers on attractively
priced long-term leases and extended lease durations for our
container fleet will provide strong foundations to our
profitability and cash flow for years to come."
"We also continue to significantly improve the profile of our
capital structure. In March 2021, our corporate credit rating was
upgraded to BBB- by S&P Global Ratings, reflecting our strong
market and financial position. In the second quarter, we issued
$1.7 billion of investment grade senior secured notes and prepaid
$821.0 million of senior secured institutional notes with
substantially higher interest rates. We incurred $89.9 million of
make-whole fees and other debt termination costs primarily related
to these prepayments, but we will recapture the vast majority of
these fees through lower interest expense over the next several
years. These prepayments will also facilitate a faster transition
of our capital structure toward investment grade unsecured bonds,
which should provide further cost and flexibility benefits and
extend the advantages we have in our market."
Outlook
Mr. Sondey continued, "Market conditions remain very favorable
as we head into the second half of the year. Trade volumes remain
strong, operational disruptions continue to drive incremental
demand for containers, and we typically experience peak dry
container demand in the third quarter as retailers stock up for the
back-to-school and holiday seasons. While we anticipate some shift
in consumption patterns back to services and experiences as
COVID-19 vaccinations are rolled out globally, economists are
generally projecting a strong bounce to global GDP which typically
supports growth in trade. We also have significant operational
momentum with approximately 400,000 TEU of new containers
pre-booked for pick-up in the third and fourth quarters."
"We expect our Adjusted EPS will increase from the second to the
third quarter of 2021. We expect our leasing margin will increase
significantly in the third quarter due to strong ongoing pick up
activity and as we benefit from a full quarter of revenue from the
large number of containers picked-up during the second quarter. We
will also benefit from a lower average effective interest rate
resulting from the prepayment of institutional notes. We expect our
disposal volumes will decrease further due to very low container
drop-off volumes, and we continue to anticipate this will lead to a
decrease in our disposal gains from the current extraordinary
levels, although it is also possible that further increases in used
container selling prices could continue to offset the impact of
decreasing volumes. Overall, we expect our profitability and cash
flows will remain at very high levels for the foreseeable future
due to the durable benefits from our strong leasing activity this
year and we expect our net book value per share will increase
rapidly due to our strong Return on equity."
Dividends
Triton’s Board of Directors has approved and declared a $0.57
per share quarterly cash dividend on its issued and outstanding
common shares, payable on September 23, 2021 to shareholders of
record at the close of business on September 9, 2021.
The Company's Board of Directors also approved and declared a
cash dividend payable on September 14, 2021 to holders of record at
the close of business on September 7, 2021 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
Investors’ Webcast
Triton will hold a Webcast at 8:30 a.m. (New York time) on
Tuesday, July 27, 2021 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 6.9
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, Fleet, and Leasing Revenue
Information
The following table summarizes the equipment fleet utilization
for the periods indicated:
June 30, 2021
March 31, 2021
December 31, 2020
September 30, 2020
June 30, 2020
Average Utilization (1)
99.4
%
99.1
%
98.1
%
96.1
%
95.0
Ending Utilization (1)
99.5
%
99.3
%
98.9
%
97.4
%
94.8
(1)
Utilization is computed by dividing total
units on lease (in CEU) by the total units in our 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, 2021, December 31, 2020 and June 30, 2020 (in units, TEUs and
CEUs):
Equipment Fleet in
Units
Equipment Fleet in TEU
June 30, 2021
December 31, 2020
June 30, 2020
June 30, 2021
December 31, 2020
June 30, 2020
Dry
3,604,794
3,295,908
3,215,482
6,084,381
5,466,421
5,287,639
Refrigerated
236,978
227,519
227,018
459,389
439,956
438,380
Special
93,238
93,885
93,996
170,259
170,792
170,977
Tank
11,513
11,312
12,439
11,513
11,312
12,439
Chassis
24,275
24,781
24,133
44,391
45,188
44,524
Equipment leasing fleet
3,970,798
3,653,405
3,573,068
6,769,933
6,133,669
5,953,959
Equipment trading fleet
53,802
64,243
79,778
84,455
98,991
123,377
Total
4,024,600
3,717,648
3,652,846
6,854,388
6,232,660
6,077,336
Equipment in CEU(1)
June 30, 2021
December 31, 2020
June 30, 2020
Operating leases
7,171,845
6,649,350
6,478,561
Finance leases
369,130
295,784
317,159
Equipment trading fleet
82,980
98,420
120,654
Total
7,623,955
7,043,554
6,916,374
(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.
The following table summarizes our leasing revenue for the
periods indicated (in thousands):
Three Months Ended,
June 30, 2021
March 31, 2021
June 30, 2020
Operating leases
Per diem revenues
$
353,277
$
331,252
$
294,748
Fee and ancillary revenues
7,582
8,542
18,675
Total operating lease revenues
360,859
339,794
313,423
Finance leases
8,925
6,949
7,974
Total leasing revenues
$
369,784
$
346,743
$
321,397
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," "seek," "believe,"
"project," "predict," "anticipate," "potential," "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 and suppliers; 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 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, duties 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; compliance 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; the achievement of our capital
structure plans and related timing; 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 16, 2021,
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, 2021
December 31, 2020
ASSETS:
Leasing equipment, net of accumulated
depreciation of $3,637,089 and $3,370,652
$
9,971,257
$
8,630,696
Net investment in finance leases
499,272
282,131
Equipment held for sale
35,814
67,311
Revenue earning assets
10,506,343
8,980,138
Cash and cash equivalents
77,392
61,512
Restricted cash
127,484
90,484
Accounts receivable, net of allowances of
$1,230 and $2,192
280,288
226,090
Goodwill
236,665
236,665
Lease intangibles, net of accumulated
amortization of $273,753 and $264,791
24,704
33,666
Other assets
82,389
83,969
Fair value of derivative instruments
93
9
Total assets
$
11,335,358
$
9,712,533
LIABILITIES AND SHAREHOLDERS'
EQUITY:
Equipment purchases payable
$
411,454
$
191,777
Fair value of derivative instruments
77,141
128,872
Accounts payable and other accrued
expenses
124,444
95,235
Net deferred income tax liability
355,636
327,431
Debt, net of unamortized costs of $63,184
and $42,747
7,639,606
6,403,270
Total liabilities
8,608,281
7,146,585
Shareholders' equity:
Preferred shares, $0.01 par value, at
liquidation preference
555,000
555,000
Common shares, $0.01 par value,
270,000,000 shares authorized, 81,294,902 and 81,151,723 shares
issued, respectively
813
812
Undesignated shares, $0.01 par value,
7,800,000 and 7,800,000 shares authorized, respectively, no shares
issued and outstanding
—
—
Treasury shares, at cost, 13,901,326 and
13,901,326 shares, respectively
(436,822
)
(436,822
)
Additional paid-in capital
906,186
905,323
Accumulated earnings
1,781,692
1,674,670
Accumulated other comprehensive income
(loss)
(79,792
)
(133,035
)
Total shareholders' equity
2,727,077
2,565,948
Total liabilities and shareholders'
equity
$
11,335,358
$
9,712,533
TRITON INTERNATIONAL
LIMITED
Consolidated Statements of
Operations
(In thousands, except per
share amounts)
(Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2021
2020
2021
2020
Leasing revenues:
Operating leases
$
360,859
$
313,423
$
700,653
$
626,227
Finance leases
8,925
7,974
15,874
16,638
Total leasing revenues
369,784
321,397
716,527
642,865
Equipment trading revenues
33,183
16,903
59,128
32,283
Equipment trading expenses
(22,457
)
(14,883
)
(40,261
)
(28,330
)
Trading margin
10,726
2,020
18,867
3,953
Net gain on sale of leasing equipment
31,391
4,537
53,358
8,614
Operating expenses:
Depreciation and amortization
154,056
133,292
297,363
265,987
Direct operating expenses
6,337
29,619
15,707
52,867
Administrative expenses
22,979
20,472
43,900
39,697
Provision (reversal) for doubtful
accounts
(26
)
374
(2,490
)
4,653
Total operating expenses
183,346
183,757
354,480
363,204
Operating income (loss)
228,555
144,197
434,272
292,228
Other expenses:
Interest and debt expense
60,004
66,874
114,627
135,876
Debt termination expense
89,863
—
89,863
31
Other (income) expense, net
(261
)
36
(742
)
(3,548
)
Total other expenses
149,606
66,910
203,748
132,359
Income (loss) before income taxes
78,949
77,287
230,524
159,869
Income tax expense (benefit)
13,732
6,699
25,469
12,245
Net income (loss)
$
65,217
$
70,588
$
205,055
$
147,624
Less: dividend on preferred shares
10,513
10,513
21,026
20,338
Net income (loss) attributable to
common shareholders
$
54,704
$
60,075
$
184,029
$
127,286
Net income per common share—Basic
$
0.82
$
0.87
$
2.75
$
1.81
Net income per common share—Diluted
$
0.81
$
0.86
$
2.74
$
1.80
Cash dividends paid per common share
$
0.57
$
0.52
$
1.14
$
1.04
Weighted average number of common shares
outstanding—Basic
66,951
69,275
66,943
70,436
Dilutive restricted shares
331
261
295
262
Weighted average number of common shares
outstanding—Diluted
67,282
69,536
67,238
70,698
TRITON INTERNATIONAL
LIMITED
Consolidated Statements of
Cash Flows
(In thousands)
(Unaudited)
Six Months Ended June
30,
June 30, 2021
June 30, 2020
Cash flows from operating
activities:
Net income (loss)
$
205,055
$
147,624
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization
297,363
265,987
Amortization of deferred debt cost and
other debt related amortization
4,255
7,187
Lease related amortization
9,549
15,788
Share-based compensation expense
5,010
5,861
Net (gain) loss on sale of leasing
equipment
(53,358
)
(8,614
)
Unrealized (gain) loss on derivative
instruments
—
286
Debt termination expense
89,863
31
Deferred income taxes
25,228
12,037
Changes in operating assets and
liabilities:
Accounts receivable
(12,707
)
(20,778
)
Accounts payable and other accrued
expenses
(7,753
)
(25,752
)
Net equipment sold (purchased) for resale
activity
8,787
(4,035
)
Cash received (paid) for settlement of
interest rate swaps
5,481
—
Cash collections on finance lease
receivables, net of income earned
27,124
46,650
Other assets
9,422
(25,703
)
Net cash provided by (used in)
operating activities
613,319
416,569
Cash flows from investing
activities:
Purchases of leasing equipment and
investments in finance leases
(1,717,843
)
(219,788
)
Proceeds from sale of equipment, net of
selling costs
117,688
102,088
Other
63
(328
)
Net cash provided by (used in)
investing activities
(1,600,092
)
(118,028
)
Cash flows from financing
activities:
Issuance of preferred shares, net of
underwriting discount
—
145,275
Purchases of treasury shares
—
(95,243
)
Redemption of common shares for
withholding taxes
(4,146
)
(2,156
)
Debt issuance costs
(31,502
)
—
Borrowings under debt facilities
5,663,432
730,000
Payments under debt facilities and finance
lease obligations
(4,490,788
)
(801,044
)
Dividends paid on preferred shares
(21,026
)
(19,908
)
Dividends paid on common shares
(76,317
)
(72,964
)
Other
—
(590
)
Net cash provided by (used in)
financing activities
1,039,653
(116,630
)
Net increase (decrease) in cash, cash
equivalents and restricted cash
$
52,880
$
181,911
Cash, cash equivalents and restricted
cash, beginning of period
151,996
168,972
Cash, cash equivalents and restricted
cash, end of period
$
204,876
$
350,883
Supplemental disclosures:
Interest paid
$
106,182
$
131,457
Income taxes paid (refunded)
$
3,445
$
216
Right-of-use asset for leased property
$
1,453
$
196
Supplemental non-cash investing
activities:
Equipment purchases payable
$
411,454
$
46,569
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,
and foreign and other income tax adjustments.
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, 2021, March 31, 2021, and June 30, 2020 and
for the six months ended June 30, 2021 and June 30, 2020.
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, 2021
March 31, 2021
June 30, 2020
June 30, 2021
June 30, 2020
Net income attributable to common
shareholders
$
54,704
$
129,325
$
60,075
$
184,029
$
127,286
Add (subtract):
Unrealized loss (gain) on derivative
instruments, net
—
—
12
—
282
Debt termination expense
89,485
—
—
89,485
24
State and other income tax adjustments
—
—
(85
)
—
(85
)
Tax benefit from vesting of restricted
shares
—
(643
)
—
(643
)
(390
)
Adjusted net income
$
144,189
$
128,682
$
60,002
$
272,871
$
127,117
Adjusted net income per common
share—Diluted
$
2.14
$
1.91
$
0.86
4.06
1.80
Weighted average number of common shares
outstanding—Diluted
67,282
67,217
69,536
67,238
70,698
TRITON INTERNATIONAL
LIMITED
Calculation of Return on
Equity
(In thousands)
Three Months Ended,
Six Months Ended,
June 30, 2021
March 31, 2021
June 30, 2020
June 30, 2021
June 30, 2020
Adjusted net income
$
144,189
$
128,682
$
60,002
$
272,871
$
127,117
Annualized Adjusted net income (1)
578,340
521,877
240,667
550,265
255,631
Average Shareholders' equity (2)(3)
$
2,170,698
$
2,090,133
$
1,974,600
$
2,117,448
$
2,025,479
Return on equity
26.6%
25.0%
12.2%
26.0%
12.6%
(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/20210727005196/en/
Andrew Greenberg Senior Vice President Business Development
& Investor Relations (914) 697-2900
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