Triton International Reports First Quarter 2019 Results: Adjusted EPS of $1.19, Quarterly Dividend of $0.52, and New $200 Million Share Repurchase Authorization

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    HAMILTON, Bermuda–(BUSINESS WIRE)–Triton International Limited (NYSE: TRTN) (“Triton”)

    First Quarter Highlights:

    • Adjusted net income was $92.8 million or $1.19 per diluted share, an
      increase of 20.2% per diluted share from the first quarter of 2018 and
      a decrease of 4.8% per diluted share from the fourth quarter of 2018.
      Triton’s first quarter results included several non-recurring items
      which in total contributed $0.04 per share.
    • Net income attributable to common shareholders was $91.9 million or
      $1.17 per diluted share.
    • Utilization averaged 97.6% in the first quarter of 2019.
    • Triton raised gross proceeds of $86.3 million through an initial
      perpetual preferred equity offering in March 2019.
    • Triton purchased 2.6 million common shares during the first quarter.
      As of April 22, 2019, Triton has repurchased 5.1 million shares under
      the share repurchased program authorized in August 2018.
    • Triton announced the Board of Directors has authorized a new $200.0
      million common share repurchase program.
    • Triton announced a quarterly dividend of $0.52 per common share
      payable on June 27, 2019 to shareholders of record as of June 6, 2019.

    Financial Results

    The following table summarizes Triton’s selected key financial
    information for the three months ended March 31, 2019, December 31,
    2018, and March 31, 2018.

       
    (in millions, except per share data)
    Three Months Ended,
    March 31, 2019   December 31, 2018   March 31, 2018
    Total leasing revenues $340.9 $355.4 $315.1
     

    GAAP

    Net income attributable to common shareholders $91.9 (4) $69.6 (3) $80.9
    Net income per share – Diluted $1.17 $0.87 $1.00
     

    Non-GAAP (1)

    Adjusted net income $92.8 $99.4 $79.8
    Adjusted net income per share – Diluted $1.19 $1.25 $0.99
     
    Return on equity (2) 17.2 %     17.7 %     15.4 %
    (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 common shareholders was reduced by $24.7
    million tax expense related to the intra-entity transfer of assets.
    (4) Net of dividends on preferred shares of $0.3 million.
     

    Operating Performance

    “Triton achieved excellent results in the first quarter of 2019,”
    commented Brian M. Sondey, Chief Executive Officer of Triton. “We
    generated $92.8 million of Adjusted net income in the first quarter, or
    $1.19 of Adjusted net income per share, and we realized an annualized
    Return on equity of 17.2%.”

    “Triton’s strong financial results in the first quarter were supported
    by our continued outstanding operating performance, and key operating
    metrics such as utilization and used container sale prices remained at
    high levels. However, new lease transaction activity and container
    pick-up volumes were slow throughout the first quarter and we have so
    far limited our purchases of new containers. The first quarter typically
    represents the depth of the slow season for dry containers, and this
    typical seasonal weakness has likely been compounded this year by
    increased uncertainty related to the ongoing trade dispute between the
    United States and China. We recently have seen some increase in lease
    inquiries, and new container prices have rebounded toward the $1,900
    range for a 20’ dry container, but the overall pace of leasing activity
    has not yet shifted to typical pre-peak season levels.”

    “Triton has taken a number of actions this year to drive shareholder
    value. We repurchased 2.6 million shares of our common stock during the
    first quarter at values we believe are compelling, increasing our total
    purchases to 5.1 million shares since last summer. In addition, we
    repurchased the majority of the third-party investor interests in a
    partnership which owns a portfolio of containers in our fleet. We also
    completed an inaugural issuance of perpetual preferred stock. We believe
    the perpetual preferred stock provides an attractive combination of risk
    protection and cost, and will be a valuable addition to our capital
    structure. Overall, our strong cash flow, unrivaled operating
    capabilities and range of financing options continue to give us many
    levers to drive shareholder value.”

    Outlook

    “Our customers continue to expect trade growth will be moderately
    positive in 2019 and we expect leasing activity will accelerate as we
    move deeper into the second quarter, supporting our utilization and
    providing more investment opportunities. However, we do not expect the
    one-time items benefiting the first quarter to reoccur, and we
    transferred a large number of containers from short-term to long-term
    lease with one of our major customers, which will negatively impact our
    leasing revenue in the near-term but lead to an attractive and more
    secure long-term value for the containers. Overall, we expect our
    Adjusted net income per share will decrease slightly from the first
    quarter of 2019 to the second quarter, and then increase from the second
    quarter through the end of the year.”

    Dividends

    Triton’s Board of Directors has approved a cash dividend of $0.53125 per
    share on its 8.5% Series A Preferred Shares (NYSE:TRTN-PA) payable
    June 17, 2019 to holders on record at the close of business as of
    June 10, 2019.

    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 June 27, 2019 to shareholders of record at the close of
    business on June 6, 2019.

    Share Repurchase Update

    As of April 22, 2019, we have repurchased approximately 5.1 million
    common shares under the share repurchase plan authorized in August 2018
    for a total of $162.0 million at an average price per-share of $31.56.
    This represents 6.3% of the shares outstanding at the start of the
    repurchase plan. On April 25, 2019, Triton’s Board of Directors
    authorized a new $200.0 million share repurchase program replacing the
    previous authorization.

    Mr. Sondey concluded, “We continue to view share repurchases as a
    compelling investment for the company and a high value use for our
    strong and stable equity cash flow. We believe the embedded value of our
    existing contractual lease streams and containers compare favorably to
    our current market valuation, even without considering the value of our
    best-in-class market leading franchise.”

    Investors’ Webcast

    Triton will hold a Webcast at 8:30 a.m. (New York time) on Tuesday,
    April 30, 2019 to discuss its first 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.

    The following table sets forth the equipment fleet utilization for the
    periods indicated:

         
    Quarter Ended
    March 31, 2019   December 31, 2018   September 30, 2018   June 30, 2018   March 31, 2018
    Average Utilization (1) 97.6% 98.2% 98.7% 98.8% 98.6%
    Ending Utilization (1) 97.4% 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 March 31, 2019,
    December 31, 2018 and March 31, 2018:

         
    Equipment Fleet in Units Equipment Fleet in TEU
    March 31, 2019   December 31, 2018   March 31, 2018 March 31, 2019   December 31, 2018   March 31, 2018
    Dry 3,322,723 3,340,946 3,103,671 5,448,267 5,476,406 5,039,302
    Refrigerated 229,971 228,778 221,810 443,402 440,781 426,335
    Special 93,361 93,900 90,867 168,755 169,614 163,155
    Tank 12,600 12,509 12,188 12,600 12,509 12,188
    Chassis 24,879 24,832 22,477 45,885 45,787 40,996
    Equipment leasing fleet 3,683,534 3,700,965 3,451,013 6,118,909 6,145,097 5,681,976
    Equipment trading fleet 17,504 13,138 12,022 27,014 21,361 19,245
    Total 3,701,038 3,714,103 3,463,035 6,145,923 6,166,458 5,701,221
     
         
    Equipment in CEU
    March 31, 2019   December 31, 2018   March 31, 2018
    Operating leases 6,997,855 7,009,605 6,752,636
    Finance leases 539,854 538,867 329,659
    Equipment trading fleet 50,117 47,476 53,454
    Total 7,587,826 7,595,948 7,135,749
     

    Important Cautionary Information Regarding Forward-Looking Statements

    Certain statements in this release, other than statements of historical
    information, are “forward-looking statements”, including statements
    regarding our strategy, future operations, and future financial
    positions, 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,” “estimate”,
    “anticipate,” “predict”, “believe,” “plan”, “will,” “should”, “intend”,
    “seek”, “potential” and similar expressions and variations are intended
    to identify forward-looking statements, although not all forward looking
    statements contain these identifying words. 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:
    uncertainty as to the long-term value of Triton’s common shares;
    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, tariffs and other trade actions; disruption to our
    operations from failures of, or attacks on, our information technology
    systems; 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 Annual Report on Form 10-K for the year ended December 31, 2018 (the
    “Form 10-K”) filed with the Securities and Exchange Commission (“SEC”),
    on February 19, 2019, 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, including the risk
    factors set forth in our Form 10-K.. 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. Certain financial measures are
    identified as not being prepared in accordance with U.S. generally
    accepted accounting principles (“GAAP”). Please refer to the “Use of
    Non-GAAP Financial Measures” and “Non-GAAP Reconciliations of Adjusted
    Net Income” set forth below for a reconciliation of such non-GAAP
    measures to their most comparable GAAP measures.

    -Financial Tables Follow-

     

    TRITON INTERNATIONAL LIMITED
    Consolidated Balance
    Sheets

    (In thousands, except share data)
    (Unaudited)

     
     

    March 31,
    2019

     

    December 31,
    2018

    ASSETS:
    Leasing equipment, net of accumulated depreciation of $2,634,305 and
    $2,533,446
    $ 8,796,491 $ 8,923,451
    Net investment in finance leases 465,480 478,065
    Equipment held for sale 86,211   66,453  
    Revenue earning assets 9,348,182 9,467,969
    Cash and cash equivalents 60,768 48,950
    Restricted cash 116,551 110,589
    Accounts receivable, net of allowances of $1,097 and $1,240 222,567 264,382
    Goodwill 236,665 236,665
    Lease intangibles, net of accumulated amortization of $216,340 and
    $205,532
    82,117 92,925
    Other assets 38,692 34,610
    Fair value of derivative instruments 4,580   13,923  
    Total assets $ 10,110,122   $ 10,270,013  
    LIABILITIES AND SHAREHOLDERS’ EQUITY:
    Equipment purchases payable $ 38,463 $ 22,392
    Fair value of derivative instruments 19,487 10,966
    Accounts payable and other accrued expenses 112,357 99,885
    Net deferred income tax liability 286,495 282,129
    Debt, net of unamortized debt costs of $43,684 and $44,889 7,364,725   7,529,432  
    Total liabilities 7,821,527 7,944,804
     
    Shareholders’ equity:
    Preferred shares, $0.01 par value, 3,450,000 authorized, 3,450,000
    and no shares issued and outstanding, respectively; at liquidation
    preference
    86,250
    Common shares, $0.01 par value, 270,000,000 shares authorized,
    80,982,197 and 80,843,472 shares issued, respectively
    811 809
    Undesignated shares, $0.01 par value, 26,550,000 and 30,000,000
    shares authorized, respectively, no shares issued and outstanding
    Treasury shares, at cost, 4,489,682 and 1,853,148 shares,
    respectively
    (141,407 ) (58,114 )
    Additional paid-in capital 906,164 896,811
    Accumulated earnings 1,400,491 1,349,627
    Accumulated other comprehensive income (loss) (1,034 ) 14,563  
    Total shareholders’ equity 2,251,275 2,203,696
    Noncontrolling interests 37,320   121,513  
    Total equity 2,288,595   2,325,209  
    Total liabilities and equity $ 10,110,122   $ 10,270,013  
     
     

    TRITON INTERNATIONAL LIMITED
    Consolidated
    Statements of Operations

    (In thousands, except per
    share amounts)

    (Unaudited)

     
      Three Months Ended
    March 31,
    2019   2018
    Leasing revenues:
    Operating leases $ 330,422 $ 310,231
    Finance leases 10,437   4,866  
    Total leasing revenues 340,859   315,097  
     
    Equipment trading revenues 17,828 13,375
    Equipment trading expenses (14,241 ) (10,384 )
    Trading margin 3,587   2,991  
     
    Net gain on sale of leasing equipment 8,469 9,218
     
    Operating expenses:
    Depreciation and amortization 134,609 130,433
    Direct operating expenses 16,802 11,048
    Administrative expenses 18,187 19,582
    Transaction and other (income) costs (29 )
    Provision (reversal) for doubtful accounts (142 ) (101 )
    Total operating expenses 169,456   160,933  
    Operating income (loss) 183,459 166,373
    Other expenses:
    Interest and debt expense 83,520 75,098
    Realized (gain) loss on derivative instruments, net (704 ) (248 )
    Unrealized (gain) loss on derivative instruments, net 986 (1,186 )
    Other (income) expense, net (1,004 ) (659 )
    Total other expenses 82,798   73,005  
    Income (loss) before income taxes 100,661 93,368
    Income tax expense (benefit) 7,850   10,503  
    Net income $ 92,811 $ 82,865
    Less: income (loss) attributable to noncontrolling interest 592 1,973
    Less: dividend on preferred shares 305    
    Net income (loss) attributable to common shareholders $ 91,914   $ 80,892  
    Net income per common share—Basic $ 1.18 $ 1.01
    Net income per common share—Diluted $ 1.17 $ 1.00
    Cash dividends paid per common share $ 0.52 $ 0.45
    Weighted average number of common shares outstanding—Basic 77,721 79,968
    Dilutive restricted shares 549   604  
    Weighted average number of common shares outstanding—Diluted 78,270   80,572  
     
     

    TRITON INTERNATIONAL LIMITED
    Consolidated
    Statements of Cash Flows

    (In thousands)
    (Unaudited)

     
      Three months ended
    March 31,
    2019   2018
    Cash flows from operating activities:
    Net income (loss) $ 92,811 $ 82,865
    Adjustments to reconcile net income (loss) to net cash provided by
    operating activities:
    Depreciation and amortization 134,609 130,433
    Amortization of deferred debt cost and other debt related
    amortization
    3,601 3,113
    Lease related amortization 12,254 20,009
    Share-based compensation expense 1,818 2,512
    Net (gain) loss on sale of leasing equipment (8,469 ) (9,218 )
    Unrealized (gain) loss on derivative instruments 986 (1,186 )
    Deferred income taxes 7,116 9,301
    Changes in operating assets and liabilities:
    Accounts receivable 41,421 (1,071 )
    Accounts payable and other accrued expenses 3,019 844
    Net equipment sold for resale activity (8,803 ) (5,185 )
    Cash collections on finance lease receivables, net of income earned 17,125 14,771
    Other assets (1,757 ) (953 )
    Net cash provided by (used in) operating activities 295,731   246,235  
    Cash flows from investing activities:
    Purchases of leasing equipment and investments in finance leases (43,981 ) (258,668 )
    Proceeds from sale of equipment, net of selling costs 49,947 38,885
    Other 26   55  
    Net cash provided by (used in) investing activities 5,992   (219,728 )
    Cash flows from financing activities:
    Issuance of preferred shares, net of underwriting discount and
    expenses
    83,058
    Purchases of treasury shares (82,266 )
    Redemption of common shares (978 ) (822 )
    Debt issuance costs (1,962 ) (4,976 )
    Borrowings under debt facilities 125,000 510,210
    Payments under debt facilities and capital lease obligations (293,290 ) (469,841 )
    Dividends paid (40,427 ) (36,008 )
    Distributions to noncontrolling interests (2,078 ) (4,249 )
    Purchase of noncontrolling interest (71,000 )  
    Net cash provided by (used in) financing activities (283,943 ) (5,686 )
    Net increase (decrease) in cash, cash equivalents and restricted
    cash
    $ 17,780 $ 20,821
    Cash, cash equivalents and restricted cash, beginning of period 159,539   226,171  
    Cash, cash equivalents and restricted cash, end of period $ 177,319   $ 246,992  
    Supplemental disclosures:
    Interest paid $ 66,106 $ 56,571
    Income taxes paid (refunded) $ 155 $ 244
    Right-of-use asset for leased property $ 8,289 $
    Supplemental non-cash investing activities:
    Equipment purchases payable $ 38,463 $ 125,978
     

    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, 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 months ended
    March 31, 2019, December 31, 2018, and March 31, 2018.

    TRITON INTERNATIONAL LIMITED
    Non-GAAP Reconciliations
    of Adjusted Net Income

    (In thousands, except per share
    amounts)
         
    Three Months Ended,

    March 31,
    2019

     

    December 31,
    2018

     

    March 31,
    2018

    Net income attributable to common shareholders $ 91,914 $ 69,557 $ 80,892
    Adjustments:
    Unrealized loss (gain) on derivative instruments, net 903 1,250 (1,052 )
    Transaction and other (income) costs 104 (26 )
    Debt termination expense 3,800
    Tax adjustments related to intra-entity asset transfer(1)   24,728    
    Adjusted net income $ 92,817   $ 99,439   $ 79,814  
    Adjusted net income per common share—Diluted $ 1.19 $ 1.25 $ 0.99
    Weighted average number of common shares outstanding—Diluted 78,270 79,741 80,572
    (1)   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,

    March 31,
    2019

     

    December 31,
    2018

     

    March 31,
    2018

    Adjusted net income $ 92,817 $ 99,439 $ 79,814
    Annualized Adjusted net income (1) 376,425 394,513 323,690
         
    Average Shareholders’ equity (2)(3) $ 2,184,361   $ 2,230,590   $ 2,104,895  
     
    Return on equity 17.2 % 17.7 % 15.4 %
    (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.
    (3) Shareholders’ equity was adjusted to exclude preferred shares.
     

    Contacts

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