Triton International Reports Fourth Quarter and Full Year 2018 Results and Declares Quarterly Dividend of $0.52

Business Wire 14-Feb-2019 6:30 AM

Triton International Limited (NYSE:TRTN) ("Triton")

Highlights

  • Adjusted net income was $99.4 million in the fourth quarter of 2018, or $1.25 per diluted share, an increase of 47.1% per diluted share from the fourth quarter of 2017 and an increase of 6.8% per diluted share from the third quarter of 2018.
  • Net income attributable to shareholders was $69.6 million in the fourth quarter of 2018, or $0.87 per diluted share. Net income attributable to shareholders was reduced by $24.7 million non-cash income tax expense for intra-entity transfers of containers.
  • Adjusted net income was $363.0 million for the full year of 2018, or $4.52 per diluted share, an increase of 62.6% per diluted share from 2017.
  • Net income attributable to shareholders was $349.6 million for the full year of 2018, or $4.35 per diluted share.
  • Utilization averaged 98.2% for the fourth quarter of 2018 and averaged 98.6% for the full year 2018.
  • Triton has purchased 2.1 million shares under the share repurchase program authorized in August 2018.
  • Triton's Board of Directors announced a quarterly dividend of $0.52 per share payable on March 28, 2019 to shareholders of record as of March 12, 2019.

Financial Results

The following table summarizes Triton's selected key financial information for the three and twelve months ended December 31, 2018 and December 31, 2017 and for the three months ended September 30, 2018.

 
(in millions, except per share data)
Three Months Ended   Twelve Months Ended

December 31, 2018

 

September 30, 2018

 

December 31, 2017

December 31, 2018

 

December 31, 2017

Total leasing revenues $ 355.4   $ 350.1   $ 313.9   $ 1,350.3   $ 1,163.5  
 

GAAP

Net income attributable to shareholders

$ 69.6 (4) $ 94.2 $ 207.2 (5) $ 349.6 (3)(4) $ 344.6 (5)
Net income per share - Diluted $ 0.87 $ 1.17 $ 2.57 $ 4.35 $ 4.52
 

Non-GAAP (1)

Adjusted net income $ 99.4 $ 94.8 $ 68.3 $ 363.0 $ 211.5

Adjusted net income per share - Diluted

$ 1.25 $ 1.17 $ 0.85 $ 4.52 $ 2.78
 
Return on equity (2) 17.7   %   16.9   %   13.6   %   16.7   %   11.8   %
 
(1)   Refer to the "Use of Non-GAAP Financial Measures" and "Non-GAAP Reconciliations of Adjusted Net Income" set forth below.
(2) Refer to the "Calculation of Return on Equity" set forth below.
(3) Net income attributable to shareholders was increased by a one-time gain of $21.0 million on the sale of a building.
(4) Net income attributable to shareholders was reduced by $24.7 million tax expense related to the intra-entity transfer of assets.
(5) Net income attributable to shareholders was increased by a one-time tax benefit of $139.4 million recognized as a result of the reduction in the U.S. statutory corporate tax rate as part of the Tax Cuts and Jobs Act.
 

Operating Performance

"Triton's strong performance in the fourth quarter of 2018 provided an excellent finish to an outstanding year", commented Brian M. Sondey, Chief Executive Officer of Triton. "We generated $99.4 million of Adjusted net income in the fourth quarter, or $1.25 per share, which represents an increase of 6.8% from the third quarter of 2018 and an increase of 47.1% from the fourth quarter of 2017. Our Adjusted net income for the full year of 2018 was $363.0 million, or $4.52 per share, which represents an increase of 62.6% from 2017. We also realized a Return on equity of 16.7% for the full year of 2018 and annualized Return on equity of 17.7% in the fourth quarter."

"Triton's strong financial results in 2018 were driven by outstanding operational performance, our unique competitive advantages and a favorable market environment. Container pick-up activity remained strong for most of the year, reflecting ongoing trade growth and a tight supply / demand balance for containers. We also continued to benefit from an increase in the share for leasing relative to direct container purchases by our customers, and a continued high leasing deal share for Triton."

"The start of the fourth quarter typically marks the end of the peak season for dry containers, and net container pick-up and drop-off activity has turned negative. New container prices have also decreased to the $1,700 range due to a combination of lower steel prices and aggressive competition among the container manufacturers for limited slow-season orders. However, our long-term lease portfolio provides significant insulation from seasonal variation, and our utilization currently stands at 97.6%."

"Triton continues to use our strong and stable cash flow to create shareholder value. We ordered $1.5 billion of containers for delivery in 2018, leading to 8.8% growth in revenue earning assets. We returned $2.01 per share to investors in 2018 through our dividend program, and we have so far repurchased 2.1 million shares under the share repurchase plan authorized in August 2018."

Outlook

Mr. Sondey continued, "We are carrying significant financial momentum into 2019 and expect that we will have another year of strong performance, continued value-added growth and a further extension of our market leadership. While the ongoing trade dispute between the United States and China has increased trade and economic uncertainty, our customers and market forecasters generally expect global containerized trade growth to remain solidly positive in 2019. The inventory of available used leasing containers also remains very tight and we expect our shipping line customers to continue to rely heavily on leasing."

"The first quarter is typically our weakest quarter of the year since it represents the depth of the slow season for dry containers and has the fewest number of billing days. As a result, we expect our Adjusted net income will decrease from the fourth quarter of 2018 to the first quarter of 2019. After the first quarter, we expect our adjusted income to increase moderately throughout the year as leasing demand improves seasonally."

Dividend

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 March 28, 2019 to shareholders of record at the close of business on March 12, 2019.

Share Repurchase Update

As of February 8, 2019, we have repurchased 2.1 million common shares for a total of $65.1 million at an average price per-share of $31.44. Currently, $134.9 million remains available of the $200.0 million share repurchase authorized by the Board in August 2018.

Investors' Webcast

Triton will hold a Webcast at 8:30 a.m. (New York time) on Thursday, February 14, 2019 to discuss its fourth 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 6.2 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 summarizes the equipment fleet utilization for the periods indicated:

 
Quarter Ended

December 31, 2018

 

September 30, 2018

 

June 30, 2018

 

March 31, 2018

Average Utilization (1) 98.2% 98.7% 98.8% 98.6%
Ending Utilization (1) 97.8% 98.6% 98.7% 98.7%
       
(1)   Utilization is computed by dividing total units on lease (in cost equivalent units, or "CEUs") by the total units in fleet (in CEUs), excluding new units not yet leased and off-hire units designated for sale.
 

The following table summarizes the equipment fleet as of December 31, 2018 (in units, TEUs and cost equivalent units, or "CEUs"):

       
Equipment Fleet in Units   Equipment Fleet in TEU

December 31, 2018

 

December 31, 2017

December 31, 2018

   

December 31, 2017

Dry 3,340,946 3,077,144 5,476,406   5,000,043
Refrigerated 228,778 218,429 440,781 419,673
Special 93,900 89,066 169,614 159,172
Tank 12,509 12,124 12,509 12,124
Chassis 24,832   22,523     45,787     41,068
Equipment leasing fleet 3,700,965 3,419,286 6,145,097 5,632,080
Equipment trading fleet 13,138   10,510   21,361   16,907
Total 3,714,103   3,429,796   6,166,458   5,648,987
 

 

Equipment Fleet in CEU

 

December 31, 2018

   

December 31, 2017

Operating leases

 

7,009,605

6,678,282

Finance leases

 

538,867

328,024

Equipment trading fleet

 

47,476

 

51,762

Total

 

7,595,948

 

7,058,068

 

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: 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 27, 2018, 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)
   

December 31, 2018

December 31, 2017

ASSETS:
Leasing equipment, net of accumulated depreciation of $2,533,446 and $2,218,897 $ 8,923,451 $ 8,364,484
Net investment in finance leases 478,065 295,891
Equipment held for sale 66,453   43,195
Revenue earning assets 9,467,969 8,703,570
Cash and cash equivalents 48,950 132,031
Restricted cash 110,589 94,140
Accounts receivable, net of allowances of $1,240 and $3,002 264,382 199,876
Goodwill 236,665 236,665
Lease intangibles, net of accumulated amortization of $205,532 and $144,081 92,925 154,376
Other assets 34,610 49,591
Fair value of derivative instruments 13,923   7,376
Total assets $ 10,270,013   $ 9,577,625
LIABILITIES AND SHAREHOLDERS' EQUITY:
Equipment purchases payable $ 22,392 $ 128,133
Fair value of derivative instruments 10,966 2,503
Accounts payable and other accrued expenses 99,885 109,999
Net deferred income tax liability 282,129 215,439
Debt, net of unamortized debt costs of $44,889 and $40,636 7,529,432   6,911,725
Total liabilities 7,944,804 7,367,799
Shareholders' equity:

Common shares, $0.01 par value, 270,000,000 and 294,000,000 shares authorized,80,843,472 and 80,687,757 shares issued, respectively

809 807

Undesignated shares, $0.01 par value, 30,000,000 and 6,000,000 shares authorized, noshares issued and outstanding

Treasury shares, at cost, 1,853,148 shares and no shares, respectively (58,114 )
Additional paid-in capital 896,811 889,168
Accumulated earnings 1,349,627 1,159,367
Accumulated other comprehensive income 14,563   26,942
Total shareholders' equity 2,203,696 2,076,284
Non-controlling interests 121,513   133,542
Total equity $ 2,325,209   $ 2,209,826
Total liabilities and equity $ 10,270,013   $ 9,577,625
 
 
TRITON INTERNATIONAL LIMITED
Consolidated Statements of Operations
(In thousands, except per share data)
   

Three Months Ended December 31,

Twelve Months ended December 31,

2018   2017 2018   2017
Leasing revenues:
Operating leases $ 347,110 $ 308,751 $ 1,328,756 $ 1,141,165
Finance leases 8,247   5,105   21,547   22,352  
Total leasing revenues 355,357   313,856   1,350,303   1,163,517  
 
Equipment trading revenues 26,273 7,206 83,039 37,419
Equipment trading expenses (20,147 ) (6,111 ) (64,118 ) (33,235 )
Trading margin 6,126   1,095   18,921   4,184  
 
Net gain (loss) on sale of leasing equipment 7,999 10,749 35,377 35,812
Net gain (loss) on sale of building 20,953
 
Operating expenses:
Depreciation and amortization 139,474 130,168 545,138 500,720
Direct operating expenses 15,594 11,495 48,326 62,891
Administrative expenses 19,712 21,341 80,033 87,609
Transaction and other costs (income) 116 5,932 88 9,272
Provision (reversal) for doubtful accounts (782 ) 2,103 (231 ) 3,347
Insurance recovery income   (6,764 )  

 

(6,764 )
Total operating expenses 174,114   164,275   673,354   657,075  
Operating income 195,368 161,425 752,200 546,438
Other expenses:
Interest and debt expense 86,104 74,271 322,731 282,347
Realized (gain) loss on derivative instruments, net (724 ) (2 ) (2,072 ) 900
Unrealized (gain) loss on derivative instruments, net 1,405 (1,317 ) 430 (1,397 )
Debt termination expense 4,239 2,857 6,090 6,973
Other (income) expense, net (1,540 ) (1,085 ) (2,292 ) (2,637 )
Total other expenses 89,484   74,724   324,887   286,186  
Income (loss) before income taxes 105,884 86,701 427,313 260,252
Income tax expense (benefit) 34,459   (122,962 ) 70,641   (93,274 )
Net income (loss) $ 71,425 $ 209,663 $ 356,672 $ 353,526
Less: income (loss) attributable to non-controlling interest 1,868   2,503   7,117   8,928  
Net income (loss) attributable to shareholders $ 69,557   $ 207,160   $ 349,555   $ 344,598  
Net income per common share—Basic $ 0.88 $ 2.59 $ 4.38 $ 4.55
Net income per common share—Diluted $ 0.87 $ 2.57 $ 4.35 $ 4.52
Cash dividends paid per common share $ 0.52 $ 0.45 $ 2.01 $ 1.80
Weighted average number of common shares outstanding—Basic 79,056 79,936 79,782 75,679
Dilutive restricted shares 685   620   582   509  

Weighted average number of common shares outstanding—Diluted

79,741   80,556   80,364   76,188  
 
 
TRITON INTERNATIONAL LIMITED
Consolidated Statements of Cash Flows
(In thousands)
   

Year Ended December 31, 2018

Year Ended December 31, 2017

Cash flows from operating activities:
Net income (loss) $ 356,672 $ 353,526
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 545,138 500,720
Amortization of deferred financing costs 15,005 13,401
Lease related amortization 70,275 92,787
Share-based compensation expense 9,030 5,641
Net (gain) loss on sale of leasing equipment (35,377 ) (35,812 )
Net (gain) loss on sale of building (20,953 )
Unrealized (gain) loss on derivative instruments 430 (1,397 )
Debt termination expense 6,090 6,973
Deferred income taxes 66,467 (94,678 )
Changes in operating assets and liabilities:
Accounts receivable (65,385 ) (5,967 )
Accounts payable and accrued expenses (14,449 ) (42,402 )
Net equipment sold for resale activity (2,341 ) 8,821
Cash received for settlement of interest rate swaps 187 2,117
Other assets (939 ) 3,065  
Net cash provided by (used in) operating activities 929,850   806,795  
Cash flows from investing activities:
Purchases of leasing equipment and investments in finance leases (1,603,507 ) (1,562,863 )
Proceeds from sale of equipment, net of selling costs 163,256 190,744
Proceeds from the sale of building 27,630
Cash collections on finance lease receivables, net of income earned 64,372 60,673
Other (160 ) 55  
Net cash provided by (used in) investing activities (1,348,409 ) (1,311,391 )
Cash flows from financing activities:
Issuance of common shares, net of underwriter expenses 192,931
Purchases of treasury shares (56,274 )
Redemption of common shares for withholding taxes (1,385 ) (70 )
Debt issuance costs (19,575 ) (34,494 )
Borrowings under debt facilities 4,043,637 3,102,825
Payments under debt facilities and capital lease obligations (3,435,041 ) (2,539,711 )
Dividends paid (160,289 ) (135,557 )
Distributions to noncontrolling interests (19,146 ) (18,890 )
Other   241  
Net cash provided by (used in) financing activities 351,927   567,275  
Net (decrease) increase in cash, cash equivalents and restricted cash $ (66,632 ) $ 62,679
Cash, cash equivalents and restricted cash, beginning of period 226,171   163,492  
Cash, cash equivalents and restricted cash, end of period $ 159,539   $ 226,171  
Supplemental disclosures:
Interest paid $ 308,827 $ 269,601
Income taxes paid (refunded) $ 4,484 $ (288 )
Supplemental non-cash investing activities:
Equipment purchases payable $ 22,392 $ 128,133
 

Use of Non-GAAP Financial Measures

We use the term "Adjusted net income" throughout this press release.

Adjusted net income is adjusted for certain items management believes are not representative of our operating performance. Adjusted net income is defined as net income attributable to shareholders excluding debt termination costs net of tax, gains and losses on interest rate swaps net of tax, transaction and other costs net of tax, certain non-recurring transactions net of tax, foreign income tax adjustments, and taxes adjustments related to the intra-entity transfer.

Adjusted net income is not a presentation made in accordance with U.S. GAAP. Adjusted net income should not be considered as an alternative to, or more meaningful than, amounts determined in accordance with U.S. GAAP, including net income.

We believe that Adjusted net income is useful to an investor in evaluating our operating performance because this measure:

  • is widely used by securities analysts and investors to measure a company's operating performance;
  • helps investors to more meaningfully evaluate and compare the results of our operations from period to period by removing the impact of our capital structure, our asset base and certain non-routine events which we do not expect to occur in the future; and
  • is used by our management for various purposes, including as measures of operating performance and liquidity, to assist in comparing performance from period to period on a consistent basis, in presentations to our board of directors concerning our financial performance and as a basis for strategic planning and forecasting.

We have provided a reconciliation of net income attributable to shareholders, the most directly comparable U.S. GAAP measure, to Adjusted net income in the table below for the three and twelve months ended December 31, 2018 and December 31, 2017 and for the three months ended September 30, 2018.

 
TRITON INTERNATIONAL LIMITED
Non-GAAP Reconciliations of Adjusted Net Income
(In thousands, except per share amounts)
 
  Three Months Ended,   Twelve Months Ended,

December 31, 2018

 

September 30, 2018

 

December 31, 2017

December 31, 2018

 

December 31, 2017

Net income (loss) attributable toshareholders

$ 69,557   $ 94,236   $ 207,160 $ 349,555   $ 344,598
Add (subtract):

Unrealized (gain) loss on derivativeinstruments, net

1,250 286 (1,084 ) 384 (1,150 )
Insurance recovery income (5,567 )

 

(5,567 )
Debt termination expense 3,800 1,197 2,327 5,444 5,739
Transaction and other costs (income) 104 2 4,862 79 7,631

One-time tax benefit related to U.S.statutory rate reduction

(139,359 ) (139,359 )

Foreign income tax adjustments

(881 )

 

(881 ) (393 )
Gain of Sale of Building (16,316 )

Tax adjustments related to intra-entityasset transfer

24,728           24,728      
Adjusted net income $ 99,439     $ 94,840     $ 68,339   $ 362,993     $ 211,499  
Adjusted net income per share - Diluted $ 1.25 $ 1.17 $ 0.85 $ 4.52 $ 2.78

Weighted average number of commonshares outstanding—Diluted

79,741 80,728 80,556 80,364 76,188
 

Tax adjustments related to intra-entity asset transfer

The primary driver leading to the difference between net income (loss) attributable to shareholders and Adjusted net income in the fourth quarter of 2018 was a one-time increase in GAAP taxes resulting from internal transfers of approximately $600.0 million of containers. These transfers were structured as taxable sales between Triton entities, and led to an increase in taxable income for Triton's U.S. entities. Triton was able to utilize a portion of its accumulated net operating losses to offset the taxable income generated by the sales, and Triton's U.S. cash taxes remained minimal in the fourth quarter. However, Triton was required to accrue taxes on the sales for GAAP purposes because the containers were sold for a value in excess of their net book value when adjusted for purchase accounting. These taxes were excluded from the calculation of Adjusted net income in the fourth quarter, and we expect the transfer to result in reduced GAAP tax accruals in future periods.

 
TRITON INTERNATIONAL LIMITED
Calculation of Return on Equity
(In thousands)
       
Three Months Ended, Twelve Months Ended,

December 31, 2018

 

September 30, 2018

 

December 31, 2017

December 31, 2018

 

December 31, 2017

Adjusted net income $ 99,439 $ 94,840 $ 68,339 $ 362,993 $ 211,499
Annualized Adjusted net income (1) 394,513 376,267 271,128 362,993 211,499
         
Average Shareholders' equity (2) $ 2,230,590   $ 2,230,042   $ 1,988,156   $ 2,174,714   $ 1,799,188  
 
Return on equity 17.7 % 16.9 % 13.6 % 16.7 % 11.8 %
 
 
(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 twelve-month ended periods.
 

Image for Press Release 765641

Wait, Before You Leave...