Triton International Limited Reports Third Quarter 2017 Results and Declares $0.45 Quarterly Dividend

HAMILTON, Bermuda--()--Triton International Limited (NYSE: TRTN) ("Triton") today reported results for the third quarter ended September 30, 2017. On July 12, 2016 Triton Container International Limited ("TCIL") and TAL International Group, Inc. ("TAL") completed their previously announced strategic combination and became wholly-owned subsidiaries of Triton. In this press release, Triton has presented its results based on U.S. GAAP as well as non-GAAP selected information for the three and nine months ended September 30, 2017 and September 30, 2016 and for the three months ended June 30, 2017.

Third Quarter and Recent Highlights:

  • Triton reported Net income attributable to shareholders of $57.2 million and Income before income taxes of $70.6 million for the third quarter of 2017.
  • Triton reported Adjusted pre-tax income of $73.0 million in the third quarter of 2017.
  • Average utilization was 97.6% for the third quarter of 2017.
  • Triton raised net proceeds of $192.9 million in September through the issuance of 6.15 million new common shares. The proceeds will be used for general corporate purposes including the purchase of containers.
  • Triton announced a quarterly dividend of $0.45 per share payable on December 22, 2017 to shareholders of record as of December 1, 2017.

Financial Results

The following table summarizes Triton’s selected key financial information for the three and nine months ended September 30, 2017 and September 30, 2016 and for the three months ended June 30, 2017. Financial information for periods prior to July 12, 2016 is for TCIL (the accounting acquirer in the strategic combination of TCIL and TAL) only.

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

September 30,
2017

 

June 30,
2017

 

September 30,
2016

September 30,
2017

 

September 30,
2016

Total leasing revenues $302.1 $281.9 $247.8 $849.7 $569.1
Income (loss) before income taxes $70.6 $59.5 $(56.8) $173.6 $(36.9)
Net income (loss) attributable to shareholders $57.2 $45.7 $(51.2) $137.4 $(36.3)
Adjusted pre-tax income (loss) (1) $73.0 $58.8 $(2.8) $174.5 $30.1
Adjusted net income (loss) (1) $61.1 $47.0 $(0.3) $143.6 $31.5
Net income (loss) per share - Diluted $0.75 $0.62 $(0.74) $1.84 $(0.72)
Adjusted pre-tax income (loss) per share - Diluted (1) $0.96 $0.79 $(0.04) $2.34 $0.60
Adjusted net income (loss) per share - Diluted (1) $0.81   $0.63   $—   $1.92   $0.63

The effective tax rate in the third quarter of 2017 was positively impacted by discrete items for a benefit of approximately 2%.

(1) Adjusted pre-tax income (loss), Adjusted pre-tax income (loss) per share - Diluted, Adjusted net income (loss), Adjusted net income (loss) per share - Diluted are non-GAAP financial measures that we believe are useful in evaluating our operating performance. Triton's definition and calculation of Adjusted pre-tax income and Adjusted net income, including reconciliation of such non-GAAP financial measures to the most directly comparable GAAP financial measures, are outlined in the attached schedules.

Operating Performance

“We are very pleased with Triton’s strong operating and financial performance in the third quarter of 2017,” commented Brian Sondey, Chairman and Chief Executive Officer of Triton. “We generated $73.0 million in Adjusted pre-tax income during the quarter, an increase of 24% from the second quarter of 2017, we achieved improvements across all of our key operating metrics, and we continued to take advantage of large and attractive investment opportunities that Triton is uniquely suited to pursue.”

“Container pick-up volumes and new container lease transaction activity remained near record levels in the third quarter, and container drop-off volumes remained very low. Our container utilization increased by 0.9% during the quarter to reach 98.0% as of September 30, 2017, and our utilization currently stands at 98.2%.

“Our strong operating performance continued to be supported by a favorable supply and demand balance for containers. Container demand was driven by solid trade growth and an increase in the share of leased containers relative to direct ownership of containers by our shipping line customers. The supply of containers has been constrained, and the inventory of available new containers and used leasing containers remains tight. In addition, Triton continued to leverage our operational and financial capabilities to supply an outsized share of new containers in the third quarter, and we estimate our share of new container leasing transactions was in the range of 50%.”

“In September, Triton raised net proceeds of $192.9 million, net of underwriter and offering costs, by issuing 6.15 million common shares to support our aggressive container investments. As of November 8, 2017, we have ordered $1.6 billion of new and sale leaseback containers for delivery in 2017, and we have already ordered approximately $100 million of new containers for delivery next year. We believe the significant investments we have made in our container fleet will provide strong support for our future profitability and cash flow, while at the same time our unique ability to provide large, critically needed container solutions is strengthening our key customer relationships and building franchise value.”

Outlook

Mr. Sondey concluded, “In general, we expect our market to remain favorable. While we are heading into the seasonally slower period for dry containers, we expect the low inventory of available containers will keep market conditions firm. In addition, the traditional peak season for refrigerated containers is starting, and we have seen the supply / demand balance for refrigerated containers tighten ahead of the peak season over the last few months. We also expect to benefit from a full quarter of revenue in the fourth quarter from the very large number of dry containers picked up in the third quarter, and we expect our utilization will remain near peak levels during the fourth quarter. We expect our gain on sale of used containers will be impacted by a reduced inventory of containers available for sale and a lower benefit from prior period mark-downs, but on balance, we expect our Adjusted pre-tax income will increase from the third quarter of 2017 to the fourth quarter.”

Dividend

Triton’s Board of Directors has approved and declared a $0.45 per share quarterly cash dividend on its issued and outstanding common shares, payable on December 22, 2017 to shareholders of record at the close of business on December 1, 2017.

Investors’ Webcast

Triton will hold a Webcast at 9 a.m. (New York time) on Thursday, November 9, 2017 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 or archive, please visit Triton's website at http://www.trtn.com. An archive of the Webcast will be available one hour after the live call through Friday, December 22, 2017.

About Triton International Limited

Triton International Limited is the parent of Triton Container International Limited and TAL International Group, Inc., each of which merged under Triton on July 12, 2016 to create the world’s largest lessor of intermodal freight containers. With a container fleet of over five 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,
2017
  June 30,
2017
  March 31,
2017
  December 31,
2016
  September 30,
2016
Average Utilization (a) 97.6% 96.5% 95.3% 93.6% 92.4%
         
September 30,
2017
June 30,
2017
March 31,
2017
December 31,
2016
September 30,
2016
Ending Utilization (a) 98.0% 97.1% 95.8% 94.8% 92.6%
 

(a) 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. For the utilization calculation, units on lease to Hanjin were treated as off-lease effective August 1, 2016.

The following table summarizes the equipment fleet as of September 30, 2017, December 31, 2016, and September 30, 2016:

   
Equipment Fleet in Units Equipment Fleet in TEU

September 30,
2017

 

December 31,
2016

 

September 30,
2016

September 30,
2017

 

December 31,
2016

 

September 30,
2016

Dry 2,997,356 2,737,982 2,672,386 4,873,026 4,424,905 4,296,420
Refrigerated 217,121 217,243 213,417 417,138 416,992 409,657
Special 89,219 92,957 93,580 159,243 164,977 165,852
Tank 11,948 11,961 11,962 11,948 11,961 11,962
Chassis 22,522 22,128 22,158 41,062   40,233 40,279
Equipment leasing fleet 3,338,166 3,082,271 3,013,503 5,502,417 5,059,068 4,924,170
Equipment trading fleet 10,998 15,927 15,680 17,993   26,276 26,214
Total 3,349,164 3,098,198 3,029,183 5,520,410   5,085,344 4,950,384
 
 
Equipment in CEU
September 30, 2017 December 31, 2016 September 30, 2016
Operating leases 6,544,960 6,126,320 5,975,852
Finance leases 334,121 368,468 375,109
Equipment trading fleet 55,483 72,646 76,417
Total 6,934,564 6,567,434 6,427,378
   

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: failure to realize the anticipated benefits of the combination of TCIL and TAL, including as a result of a delay or difficulty in integrating the businesses of TCIL and TAL; uncertainty as to the long-term value of Triton's common shares; the expected amount and timing of cost savings and operating synergies resulting from the transaction; 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; their customers' decisions to buy rather than lease containers; their dependence on a limited number of customers for a substantial portion of their 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 their businesses; decreases in the demand for international trade; disruption to their operations resulting from the political and economic policies of foreign countries, particularly China; disruption to their operations from failures of or attacks on their information technology systems; their compliance with laws and regulations related to security, anti-terrorism, environmental protection and corruption; their ability to obtain sufficient capital to support their growth; restrictions on their businesses imposed by the terms of their debt agreements; and other risks and uncertainties, including those risk factors set forth in the section entitled "Risk Factors" contained in our Annual Report on Form 10-K filed with the SEC, on March 17, 2017.

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.

   
TRITON INTERNATIONAL LIMITED
Consolidated Balance Sheets
(In thousands, except share data)
(Unaudited)
 
September 30,
2017
December 31,
2016
ASSETS:
Leasing equipment, net of accumulated depreciation of $2,110,332 and $1,787,505 $ 8,124,963 $ 7,370,519
Net investment in finance leases 309,704 346,810
Equipment held for sale 52,287   99,863  
Revenue earning assets 8,486,954 7,817,192
Cash and cash equivalents 146,262 113,198
Restricted cash 84,209 50,294
Accounts receivable, net of allowances of $28,097 and $28,609 197,225 173,585
Goodwill 236,665 236,665
Lease intangibles, net of accumulated amortization of $125,528 and $56,159 177,229 246,598
Insurance receivables 767 17,170
Other assets 49,064 53,126
Fair value of derivative instruments 3,839   5,743  
Total assets $ 9,382,214   $ 8,713,571  
LIABILITIES AND SHAREHOLDERS' EQUITY:
Equipment purchases payable $ 94,052 $ 83,567
Fair value of derivative instruments 9,078 9,404
Accounts payable and other accrued expenses 116,849 143,098
Net deferred income tax liability 336,387 317,316
Debt, net of unamortized deferred financing costs of $42,691 and $19,999 6,790,164   6,353,449  
Total liabilities 7,346,530 6,906,834
Shareholders' equity:

Common shares, $0.01 par value, 294,000,000 shares authorized, 80,686,940 and
74,376,025 shares issued and outstanding, respectively

807 744
Undesignated shares $0.01 par value, 6,000,000 shares authorized, no shares issued and outstanding
Additional paid-in capital 887,778 690,418
Accumulated earnings 988,566 945,313
Accumulated other comprehensive income 22,877   26,758  
Total shareholders' equity 1,900,028 1,663,233
Non-controlling interests 135,656   143,504  
Total equity 2,035,684   1,806,737  
Total liabilities and shareholders' equity $ 9,382,214   $ 8,713,571  
 
   
TRITON INTERNATIONAL LIMITED
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
 
Three Months Ended September 30, Nine Months Ended September 30,
2017   2016 2017   2016
Leasing revenues:
Operating leases $ 296,669 $ 242,899 $ 832,414 $ 560,262
Finance leases 5,451   4,890   17,247   8,886  
Total leasing revenues 302,120   247,789   849,661   569,148  
 
Equipment trading revenues 11,974 9,820 30,213 9,820
Equipment trading expenses (10,605 ) (9,588 ) (27,124 ) (9,588 )
Trading margin 1,369   232   3,089   232  
 
Net gain (loss) on sale of leasing equipment 10,263 (12,319 ) 25,063 (16,086 )
 
Operating expenses:
Depreciation and amortization 128,581 112,309 370,552 272,585
Direct operating expenses 13,833 27,815 51,396 54,298
Administrative expenses 21,233 17,456 66,268 45,136
Transaction and other costsA 32 59,570 3,340 66,517
Provision for doubtful accounts 783   22,372   1,244   22,201  
Total operating expenses 164,462   239,522   492,800   460,737  
Operating income (loss) 149,290 (3,820 ) 385,013 92,557
Other expenses:
Interest and debt expense 73,795 55,437 208,076 122,626
Realized loss on derivative instruments, net 20 864 902 2,268
Unrealized loss (gain) on derivative instruments, net 629 (3,487 ) (80 ) 5,243
Write-off of deferred financing costs 4,073 4,116 141
Other expense (income), net 164   214   (1,552 ) (775 )
Total other expenses 78,681   53,028   211,462   129,503  
Income (loss) before income taxes 70,609 (56,848 ) 173,551 (36,946 )
Income tax expense (benefit) 11,063   (7,719 ) 29,688   (5,536 )
Net income (loss) $ 59,546 $ (49,129 ) $ 143,863 $ (31,410 )
Less: income attributable to noncontrolling interest 2,390   2,082   6,425   4,886  
Net income (loss) attributable to shareholders $ 57,156   $ (51,211 ) $ 137,438   $ (36,296 )
Net income (loss) per common share—Basic $ 0.76 $ (0.74 ) $ 1.85 $ (0.72 )
Net income (loss) per common share—Diluted $ 0.75 $ (0.74 ) $ 1.84 $ (0.72 )
Cash dividends paid per common share $ 0.45 $ 0.90 $ 1.35 $ 0.90
Weighted average number of common shares outstanding—Basic 75,214 69,336 74,245 50,090
Dilutive restricted shares and share options 493 402
Weighted average number of common shares outstanding—Diluted 75,707 69,336 74,647 50,090
 

(A) See definitions

 
TRITON INTERNATIONAL LIMITED
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
Nine Months Ended September 30,
2017   2016
Cash flows from operating activities:
Net income (loss) $ 143,863 $ (31,410 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 370,552 272,585
Amortization of deferred financing costs and other debt related amortization 10,185 3,374
Amortization of leasing revenue adjustments 67,592 25,726
Share compensation expense 4,491 4,334
Net (gain) loss on sale of leasing equipment (25,063 ) 16,086
Unrealized (gain) loss on derivative instruments (80 ) 5,243
Write-off of deferred financing costs 4,116 141
Deferred income taxes 28,372 (6,773 )
Changes in operating assets and liabilities:
Accounts receivable (1,097 ) 15,928
Accounts payable and other accrued expenses (36,198 ) 26,679
Net equipment sold for resale activity 5,292 2,595
Cash received for settlement of interest rate swaps 2,117
Other assets 648   2,974  
Net cash provided by operating activities 574,790   337,482  
Cash flows from investing activities:
Purchases of leasing equipment and investments in finance leases (1,185,481 ) (384,739 )
Proceeds from sale of equipment, net of selling costs 136,647 102,376
Cash collections on finance lease receivables, net of income earned 45,146 22,315
Cash and cash equivalents acquired 50,349
Other 67   (366 )
Net cash used in by investing activities (1,003,621 ) (210,065 )
Cash flows from financing activities:
Issuance (redemption) of common shares, net of underwriter expenses 192,932 (3,527 )
Debt issuance costs (32,738 ) (5,718 )
Borrowings under debt facilities 2,782,825 367,700
Payments under debt facilities and capital lease obligations (2,334,409 ) (365,697 )
(Increase) decrease in restricted cash (33,915 ) 23,736
Dividends paid (99,586 ) (51,620 )
Cash paid for settlement of employee taxes related to equity vesting (71 ) (672 )
Distributions to noncontrolling interest (14,273 ) (19,185 )
Other 1,130    
Net cash provided by (used in) financing activities 461,895   (54,983 )
Net increase in cash and cash equivalents $ 33,064 $ 72,434
Cash and cash equivalents, beginning of period 113,198   56,689  
Cash and cash equivalents, end of period $ 146,262   $ 129,123  
Supplemental non-cash investing activities:
Equipment purchases payable $ 94,052 $ 62,638
 

A Transaction costs associated with the merger of TCIL and TAL and other costs for the three and nine months ended September 30, 2017 and 2016 were as follows:

       
Three Months Ended September 30, Nine Months Ended September 30,
2017   2016 2017   2016
Employee compensation costs $       32 $ 42,773 $ 3,340 $ 47,028
Professional fees 12,615 13,818
Legal expenses 1,810 9 3,290
Other   2,372   (9 ) 2,381  
Total $       32   $ 59,570   $ 3,340   $ 66,517  
 

Employee compensation costs include costs to maintain and retain key employees, severance expenses, and certain stock compensation expenses, including retention and stock compensation expense pursuant to plans established in 2011. Professional fees and legal expenses include costs paid for services directly related to the closing of the merger and include legal fees, accounting fees and transaction and advisory fees.

Non-GAAP Financial Measures

We use the terms "Adjusted pre-tax income (loss)" and "Adjusted net income (loss)" throughout this press release.

Adjusted pre-tax income and Adjusted net income is adjusted for certain items management believes are not representative of our operating performance. Adjusted pre-tax income is defined as Income before income taxes excluding the write-off of deferred financing costs, gains and losses on derivative instruments, transaction and other costs, and noncontrolling interest. Adjusted net income is defined as net income attributable to shareholders excluding the write-off of deferred financing costs net of tax, gains and losses on derivative instruments net of tax, transaction and other costs net of tax, and any foreign income and withholding tax adjustments.

Adjusted pre-tax income (loss) and Adjusted net income (loss) are not presentations made in accordance with U.S. GAAP. Adjusted pre-tax income (loss) and Adjusted net income (loss) should not be considered as alternatives to, or more meaningful than, amounts determined in accordance with U.S. GAAP, including net income.

We believe that Adjusted pre-tax income (loss) and Adjusted net income (loss) are useful to an investor in evaluating our operating performance because these measures:

  • are widely used by securities analysts and investors to measure a company’s operating performance;
  • help 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
  • are 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 reconciliations of Net income before income taxes and Net income attributable to shareholders, the most directly comparable U.S. GAAP measures, to Adjusted pre-tax income (loss) and Adjusted net income (loss) in the tables below for the three and nine months ended September 30, 2017 and September 30, 2016 and for the three months ended June 30, 2017.

 
TRITON INTERNATIONAL LIMITED
Non-GAAP Reconciliations of Adjusted Pre-tax Income and Adjusted Net Income
(In Thousands, except per share amounts)
 
  Three Months Ended,  

Nine Months Ended,

September 30,
2017

 

June 30,
2017

 

September 30,
2016

September 30,
2017

 

September 30,
2016

Income (loss) before income taxes $ 70,609 $       59,497 $ (56,848 ) $ 173,551 $ (36,946 )
Add:
Write-off of deferred financing costs 4,073 43 4,116 141
Unrealized loss (gain) on derivative instruments, net 629 789 (3,487 ) (80 ) 5,243
Transaction and other costs 32 836 59,570 3,340 66,517
Less:
Income attributable to noncontrolling interest 2,390   2,343   2,082   6,425   4,886  
Adjusted pre-tax income (loss) $ 72,953   $       58,822   $ (2,847 ) $ 174,502   $ 30,069  
Adjusted pre-tax income (loss) per share - Diluted $ 0.96 $ 0.79 $ (0.04 ) $ 2.34 $ 0.60
Weighted average number of common shares outstanding - Diluted 75,707 74,177 69,336 74,647 50,090
 
Three Months Ended,

Nine Months Ended,

September 30,
2017

June 30,
2017

September 30,
2016

September 30,
2017

September 30,
2016

Net income (loss) attributable to shareholders $ 57,156 $ 45,671 $ (51,211 ) $ 137,438 $ (36,296 )
Add:
Write-off of deferred financing costs 3,377 35 3,412 137
Unrealized loss (gain) on derivative instruments, net 515 671 (3,138 ) (66 ) 5,175
Transaction and other costs 60 643 50,856 2,769 57,595
Foreign income and withholding tax adjustment     3,222     4,893  
Adjusted net income (loss) $ 61,108   $       47,020   $ (271 ) $ 143,553   $ 31,504  
Adjusted net income (loss) per share - Diluted $ 0.81 $ 0.63 $ $ 1.92 $ 0.63
Weighted average number of common shares outstanding - Diluted 75,707 74,177 69,336 74,647 50,090
 

Contacts

Triton International Limited
Andrew Greenberg, 914-697-2900
Senior Vice President
Finance & Investor Relations

Contacts

Triton International Limited
Andrew Greenberg, 914-697-2900
Senior Vice President
Finance & Investor Relations