Market Overview

Triton International Reports Second Quarter 2018 Adjusted EPS of $1.10, Quarterly Dividend of $0.52 and $200 Million Share Repurchase Authorization

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

Second Quarter Highlights:

  • Triton reported net income attributable to shareholders of $104.9
    million or $1.30 per diluted share, an increase of 30.0% per diluted
    share from the first quarter of 2018. Net income attributable to
    shareholders included a one-time gain of $21.0 million on the sale of
    a building. The gain on the building sale also led to an increase in
    our effective tax rate to 13% in the second quarter.
  • Triton reported Adjusted net income of $88.9 million or $1.10 per
    diluted share, an increase of 11.1% per diluted share from the first
    quarter of 2018.
  • Container pick-up activity increased strongly in the second quarter,
    reflecting the start of the traditional peak season for dry
    containers. Our utilization averaged 98.8% during the second quarter
    of 2018.
  • Triton announced a quarterly dividend of $0.52 per share payable on
    September 25, 2018 to shareholders of record as of September 4, 2018.
  • Triton announced the Board of Directors has authorized the repurchase
    of up to $200 million of its common shares.

Financial Results

The following table summarizes Triton's selected key financial
information for the three and six months ended June 30, 2018 and
June 30, 2017 and for the three months ended March 31, 2018.

      (in millions, except per share data)
Three Months Ended,     Six Months Ended,
June 30, 2018     March 31, 2018     June 30, 2017 June 30, 2018     June 30, 2017
Total leasing revenues $329.8     $315.1     $281.9 $644.9     $547.5
 
Net income attributable to shareholders $104.9 $80.9 $45.7 $185.8 $80.3
Net income per share - Diluted $1.30 $1.00 $0.62 $2.30 $1.08
 
Adjusted net income (1) $88.9 $79.8 $47.0 $168.7 $82.4
Adjusted net income per share - Diluted (1) $1.10 $0.99 $0.63 $2.09 $1.11
 
Return on equity (2) 16.4%     15.4%     11.2%     15.9%     9.9%
(1)   Refer to the "Use of Non-GAAP Financial Measures" and "Non-GAAP
Reconciliations of Adjusted Net Income" set forth below.
(2) Triton's definition and calculation of Return on equity is
annualized Adjusted net income divided by average shareholders'
equity for the period.
 

Operating Performance

"Triton achieved outstanding performance in the second quarter of 2018",
commented Brian M. Sondey, Chief Executive Officer of Triton. "We
generated $88.9 million of Adjusted net income, or $1.10 of Adjusted net
income per share, which represents an increase of 11.1% per diluted
share from the first quarter of 2018. We also generated an annualized
return on equity of 16.4%."

"Triton's strong financial results continue to be driven by outstanding
operational performance, our unique competitive advantages and a
favorable market environment. Container pick-up activity was near record
levels in May and June, reflecting ongoing trade growth and the start of
the peak season for dry 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.
Our utilization averaged 98.8% in the second quarter, and currently
stands at 98.8%. Our average used container sale prices increased in the
second quarter, driving an increase in gains on disposal."

"Trade growth and container demand have not been materially impacted by
the threat of trade actions or the initial round of new tariffs
implemented between the United States and China. However, the United
States has disclosed an expanded list of products that will likely
become subject to increased tariffs later in the third quarter. The
potential for expanded tariffs is adding uncertainty to our market,
though our customers and market forecasters are still expecting global
container volumes to increase in 2018."

"Triton continues to grow its fleet through value-added investment. We
have so far ordered $1.4 billion of containers for delivery in 2018, and
expect our revenue earning assets will grow in the range of 10% this
year. We estimate the lease transactions we are concluding for our new
container investments will generate equity IRRs in the mid-teens over
the lifetime of the containers, and the average initial lease duration
for our new container leases is approximately seven years."

Outlook

Mr. Sondey continued, "We are starting the second half of 2018 with
strong operating and financial momentum. Container pick-up activity and
lease deal activity remain strong, and our key operating metrics remain
at high levels. Based on the continued growth in our container fleet,
continued high utilization and the currently limited impacts from the
tariffs, we expect our Adjusted net income to increase sequentially
throughout the balance of the year."

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 September 25, 2018 to shareholders of record at the close of
business on September 4, 2018.

Share Repurchase Authorization

Triton's Board of Directors has authorized the repurchase of up to $200
million of its common shares. Under the plan, shares may be purchased on
the open market or in privately negotiated transactions. The extent to
which the company repurchases its shares and the timing of such
repurchases will depend upon market conditions and other corporate
considerations.

Mr. Sondey concluded, "Given the strong market environment and sizable
attractive investment opportunities, we will continue to prioritize
organic investment and growth as the primary use for our capital.
However, we believe that an opportunistic share repurchase program could
complement our dividend as another avenue for providing returns to
shareholders."

Investors' Webcast

Triton will hold a Webcast at 8:30 a.m. (New York time) on Friday,
August 3, 2018 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 6.0 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
June 30, 2018     March 31, 2018     December 31, 2017     September 30, 2017     June 30, 2017
Average Utilization (a) 98.8 % 98.6 % 98.3 % 97.6 % 96.5 %
Ending Utilization (a) 98.7 % 98.7 % 98.6 % 98.0 % 97.1 %
(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.
 

The following table summarizes the equipment fleet as of June 30, 2018,
December 31, 2017 and June 30, 2017:

      Equipment Fleet in Units     Equipment Fleet in TEU
June 30, 2018     December 31, 2017     June 30, 2017 June 30, 2018     December 31, 2017     June 30, 2017
Dry 3,243,032 3,077,144 2,903,880 5,307,306 5,000,043 4,721,780
Refrigerated 227,040 218,429 218,238 437,038 419,673 419,170
Special 91,688 89,066 81,884 165,002 159,172 143,954
Tank 12,201 12,124 11,956 12,201 12,124 11,956
Chassis 23,405   22,523   21,468   42,884   41,068   38,933
Equipment leasing fleet 3,597,366 3,419,286 3,237,426 5,964,431 5,632,080 5,335,793
Equipment trading fleet 15,406   10,510   14,991   23,622   16,907   23,580
Total 3,612,772   3,429,796   3,252,417   5,988,053   5,648,987   5,359,373
 
      Equipment in CEU
June 30, 2018     December 31, 2017     June 30, 2017
Operating leases 7,047,168 6,678,282 6,384,590
Finance leases 320,763 328,024 354,727
Equipment trading fleet 56,048   51,762   62,969
Total 7,423,979   7,058,068   6,802,286
 

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:
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 increased 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 on our businesses imposed by the terms of our debt
agreements; changes in tax laws in the United States and other countries
and other risks and uncertainties, including those risk factors set
forth in the section entitled "Risk Factors" to 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)

(Unaudited)

 
June 30,
2018
December 31,
2017
ASSETS:
Leasing equipment, net of accumulated depreciation of $2,441,745 and
$2,218,897
$ 8,956,091 $ 8,364,484
Net investment in finance leases 270,746 295,891
Equipment held for sale 50,068 43,195
Revenue earning assets 9,276,905 8,703,570
Cash and cash equivalents 48,145 132,031
Restricted cash 132,433 94,140
Accounts receivable, net of allowances of $2,861 and $3,002 229,697 199,876
Goodwill 236,665 236,665
Lease intangibles, net of accumulated amortization of $177,187 and
$144,081
121,270 154,376
Other assets 35,534 49,591
Fair value of derivative instruments 29,467 7,376
Total assets $ 10,110,116 $ 9,577,625
LIABILITIES AND SHAREHOLDERS' EQUITY:
Equipment purchases payable $ 159,454 $ 128,133
Fair value of derivative instruments 2,503
Accounts payable and other accrued expenses 93,008 109,999
Net deferred income tax liability 243,342 215,439
Debt, net of unamortized debt costs of $44,603 and $40,636 7,282,056 6,911,725
Total liabilities 7,777,860 7,367,799
Shareholders' equity:
Common shares, $0.01 par value, 294,000,000 shares authorized,
80,855,072 and 80,687,757 shares issued and outstanding, respectively
809 807
Undesignated shares, $0.01 par value, 6,000,000 shares authorized,
no shares issued and outstanding
Additional paid-in capital 894,005 889,168
Accumulated earnings 1,269,429 1,159,367
Accumulated other comprehensive income 38,358 26,942
Total shareholders' equity 2,202,601 2,076,284
Non-controlling interests 129,655 133,542
Total equity 2,332,256 2,209,826
Total liabilities and equity $ 10,110,116 $ 9,577,625
 

TRITON INTERNATIONAL LIMITED

Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)

         
Three Months Ended June 30, Six Months Ended June 30,
2018     2017 2018     2017
Leasing revenues:
Operating leases $ 324,954 $ 276,160 $ 635,185 $ 535,745
Finance leases 4,817   5,779   9,683   11,796  
Total leasing revenues 329,771   281,939   644,868   547,541  
 
Equipment trading revenues 18,099 12,755 31,474 18,239
Equipment trading expenses (14,105 ) (11,427 ) (24,489 ) (16,519 )
Trading margin 3,994   1,328   6,985   1,720  
 
Net gain on sale of leasing equipment 11,105 9,639 20,323 14,800
Net gain on sale of building 20,953 20,953
 
Operating expenses:
Depreciation and amortization 133,894 124,091 264,327 241,971
Direct operating expenses 10,195 15,609 21,243 37,563
Administrative expenses 20,775 22,068 40,357 45,035
Transaction and other (income) costs (1 ) 836 (30 ) 3,308
(Benefit) provision for doubtful accounts (25 ) (113 ) (126 ) 461  
Total operating expenses 164,838   162,491   325,771   328,338  
Operating income 200,985 130,415 367,358 235,723
Other expenses:
Interest and debt expense 79,027 70,777 154,125 134,281
Realized (gain) loss on derivative instruments, net (492 ) 283 (740 ) 882
Unrealized loss (gain) on derivative instruments, net (111 ) 789 (1,297 ) (709 )
Write-off of debt costs 503 43 503 43
Other (income), net (585 ) (974 ) (1,244 ) (1,716 )
Total other expenses 78,342   70,918   151,347   132,781  
Income before income taxes 122,643 59,497 216,011 102,942
Income tax expense 15,890   11,483   26,393   18,625  
Net income $ 106,753 $ 48,014 $ 189,618 $ 84,317
Less: income attributable to noncontrolling interest 1,883   2,343   3,856   4,035  
Net income attributable to shareholders $ 104,870   $ 45,671   $ 185,762   $ 80,282  
Net income per common share—Basic $ 1.31 $ 0.62 $ 2.32 $ 1.09
Net income per common share—Diluted $ 1.30 $ 0.62 $ 2.30 $ 1.08
Cash dividends paid per common share $ 0.52 $ 0.45 $ 0.97 $ 0.90
Weighted average number of common shares outstanding—Basic 80,044 73,763 80,007 73,752
Dilutive restricted shares and share options 611 414 589 356
Weighted average number of common shares outstanding—Diluted 80,655 74,177 80,596 74,108
 

TRITON INTERNATIONAL LIMITED

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

     
Six Months Ended June 30,
2018     2017
Cash flows from operating activities:
Net income $ 189,618 $ 84,317
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 264,327 241,971
Amortization of deferred financing cost and other debt related
amortization
6,627 6,761
Lease related amortization 37,722 47,093
Share-based compensation expense 5,661 3,298
Net (gain) loss on sale of leasing equipment (20,323 ) (14,800 )
Net (gain) on sale of building (20,953 )
Unrealized (gain) loss on derivative instruments (1,297 ) (709 )
Write-off of debt cost 503 43
Deferred income taxes 23,946 17,106
Changes in operating assets and liabilities:
Accounts receivable (30,551 ) (1,823 )
Accounts payable and other accrued expenses (16,788 ) (25,396 )
Net equipment sold for resale activity (11,686 ) 248
Other assets (1,218 ) (656 )
Net cash provided by operating activities 425,588   357,453  
Cash flows from investing activities:
Purchases of leasing equipment and investments in finance leases (884,007 ) (665,473 )
Proceeds from sale of equipment, net of selling costs 83,443 90,139
Proceeds from the sale of building 27,630
Cash collections on finance lease receivables, net of income earned 29,598 29,953
Other (64 ) 55  
Net cash (used in) in investing activities (743,400 ) (545,326 )
Cash flows from financing activities:
Redemption of common shares for withholding taxes (822 )
Debt issuance costs (9,567 ) (19,844 )
Borrowings under debt facilities 1,417,985 1,582,882
Payments under debt facilities and capital lease obligations (1,049,996 ) (1,180,787 )
Dividends paid (77,638 ) (66,384 )
Distributions to noncontrolling interests (7,743 ) (9,709 )
Net cash provided by financing activities 272,219   306,158  
Net (decrease) increase in cash, cash equivalents and restricted
cash
$ (45,593 ) $ 118,285
Cash, cash equivalents and restricted cash, beginning of period 226,171   163,492  
Cash, cash equivalents and restricted cash, end of period $ 180,578   $ 281,777  
Supplemental disclosures:
Interest paid $ 148,007 $ 127,360
Supplemental non-cash investing activities:
Equipment purchases payable $ 159,454 $ 153,594
 

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 the
write-off of debt costs net of tax, gains and losses on interest rate
swaps net of tax, transaction and other costs net of tax, and certain
non-recurring transactions net of tax.

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 six months
ended June 30, 2018 and June 30, 2017 and for the three months ended
March 31, 2018.

 
TRITON INTERNATIONAL LIMITED
Non-GAAP Reconciliations
of Adjusted Net Income

(In thousands, except per share
amounts)
             
Three Months Ended, Six Months Ended,
June 30, 2018     March 31, 2018     June 30, 2017 June 30, 2018     June 30, 2017
Net income attributable to shareholders $ 104,870 $ 80,892 $ 45,671 $ 185,762 $ 80,282
Adjustments:
Unrealized loss (gain) on derivative instruments, net (100 ) (1,052 ) 671 (1,152 ) (581 )
Transaction and other (income) costs (1 ) (26 ) 643 (27 ) 2,709
Write-off of debt costs 447 35 447 35
Gain on sale of building (16,316 )     (16,316 )  
Adjusted net income $ 88,900   $ 79,814   $ 47,020   $ 168,714   $ 82,445  
Adjusted income per common share—Basic $ 1.11 $ 1.00 $ 0.64 $ 2.11 $ 1.12
Adjusted income per common share—Diluted $ 1.10 $ 0.99 $ 0.63 $ 2.09 $ 1.11
Weighted average number of common shares outstanding—Basic 80,044 79,968 73,763 80,007 73,752
Weighted average number of common shares outstanding—Diluted 80,655 80,572 74,177 80,596 74,108
 
TRITON INTERNATIONAL LIMITED
Calculation of Return on
Equity

(In thousands)
             
Three Months Ended, Six Months Ended,
June 30, 2018     March 31, 2018     June 30, 2017 June 30, 2018     June 30, 2017
Adjusted net income $ 88,900 $ 79,814 $ 47,020 $ 168,714     $ 82,445
Annualized Adjusted net income (1) 356,577 323,690 188,597 340,224 166,256
 
Beginning Shareholders' equity 2,133,505 2,076,284 1,672,925 2,076,284 1,663,233
Ending Shareholders' equity 2,202,601   2,133,505   1,683,470   2,202,601       1,683,470  
Average Shareholders' equity $ 2,168,053   $ 2,104,895   $ 1,678,198   $ 2,139,443       $ 1,673,352  
 
Return on equity 16.4 % 15.4 % 11.2 % 15.9 % 9.9 %
(1)   Annualized Adjusted net income was calculated based on calendar days
per quarter.
 

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