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Triton International Reports Second Quarter 2020 Results and Declares Quarterly Dividends

·20 mins read

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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20200724005043/en/

Contacts

Andrew Greenberg
Senior Vice President
Business Development & Investor Relations
(914) 697-2900