Market Overview

Triton International Reports Third Quarter 2020 Results and Increases Quarterly Dividend

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October 23, 2020 – Triton International Limited (NYSE:TRTN) ("Triton")

Highlights:

  • Net income attributable to common shareholders for the three months ended September 30, 2020 was $45.9 million or $0.67 per diluted share, which includes a $24.3 million write off of unamortized debt and other costs related to the prepayment of ABS notes and other facilities and $8.6 million non-cash tax expense related to an intra-entity transfer of assets.
  • Adjusted net income was $78.1 million or $1.14 per diluted share, an increase of 32.6% from the second quarter of 2020.
  • Trade volumes and container demand jumped in the third quarter. Utilization increased 2.6% during the quarter to reach 97.4% as of September 30, 2020. Utilization was 97.6% as of October 16, 2020.
  • Triton issued $2.3 billion of ABS notes during the third quarter at an average interest rate of 2.2%. Most of the proceeds were used to prepay $1.8 billion of higher cost notes, which is expected to reduce interest expense by more than $25 million over the next year.
  • Triton's Board of Directors announced a nearly 10% increase in its quarterly common share dividend to $0.57 per share payable on December 23, 2020 to shareholders of record as of December 10, 2020.

Financial Results

The following table summarizes Triton’s selected key financial information for the three and nine months ended September 30, 2020 and 2019, and the three months ended June 30, 2020.

 

(in millions, except per share data)

 

Three Months Ended,

 

Nine Months Ended,

 

September 30, 2020

 

June 30, 2020

 

September 30, 2019

 

September 30, 2020

 

September 30, 2019

Total leasing revenues

$327.8

 

 

 

$321.4

 

 

 

$336.7

 

 

 

$970.6

 

 

 

$1,016.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to common shareholders(1)

$45.9

 

 

 

$60.1

 

 

 

$85.9

 

 

 

$173.2

 

 

 

$261.9

 

 

Net income per share - Diluted

$0.67

 

 

 

$0.86

 

 

 

$1.17

 

 

 

$2.48

 

 

 

$3.47

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted net income

$78.1

 

 

 

$60.0

 

 

 

$85.0

 

 

 

$205.2

 

 

 

$264.1

 

 

Adjusted net income per share - Diluted

$1.14

 

 

 

$0.86

 

 

 

$1.16

 

 

 

$2.93

 

 

 

$3.50

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on equity (3)

15.8

%

 

 

12.2

%

 

 

16.1

%

 

 

13.6

%

 

 

16.5

%

 

  1. Net income attributable to common shareholders for the three and nine months ended September 30, 2020 includes a $24.3 million write off of unamortized debt and other costs related to the prepayment of ABS notes and other facilities and $8.6 million of non-cash tax expense related to an intra-entity transfer of assets. These two items are excluded in arriving at Adjusted net income.
  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 took advantage of a strong upward inflection in container demand during the third quarter to drive a significant increase in our performance," commented Brian Sondey, Chief Executive Officer of Triton. "We generated $1.14 of Adjusted earnings per share in the third quarter of 2020, an increase of 32.6% from the second quarter, and we realized an annualized Return on equity of 15.8%."

"Global containerized trade volumes rebounded sharply in the third quarter as lockdowns in Europe and the United States eased, and container export volumes from key ports in China currently exceed pre-pandemic levels. The pace and magnitude of the trade recovery have generally exceeded our customers’ expectations, and virtually all of the major shipping lines have needed to add significant container capacity. We leveraged our market leading container supply capability to provide rapid and sizable container solutions for our customers, and we generated a record number of container bookings in the third quarter. Our team demonstrated remarkable agility in quickly responding to this surge in activity, and we are very proud to be playing an important role helping our customers keep the global supply chain functioning at this critical time. Our utilization increased 2.6% during the quarter to reach 97.4% as of September 30, 2020, and we have committed over 500,000 TEU of new containers onto attractive long-term leases. The strong demand has also led to increased container prices. As of October 16, 2020, container factories are quoting roughly $2,500 for a 20' dry container. We are also benefiting from increased sale prices for used container disposals and higher disposal gains."

"While we are very pleased with the improvement in market conditions and our performance in the third quarter, it is important to note that Triton's performance remained solid throughout 2019 and the first half of 2020 despite macro headwinds from the U.S./China trade dispute and COVID-19 lockdowns. Our annualized Return on equity averaged 14.0% for the four quarters ended June 30, 2020, and our utilization averaged 95.8%. The resilience of our business through difficult conditions reflects the strength of our long-term lease portfolio, the rapid adjustment of container supply and demand due to the short order cycle for containers, and the many advantages Triton enjoys as the scale, cost and capability leader in our industry. In addition, our customers' financial performance held up much better than expected in the first half of the year through the start of the COVID-19 pandemic and lockdowns, and our customers generally expect strong profitability in the second half of the year due to the sharp rebound in trade volumes that has led to a significant increase in freight rates."

"We have purchased approximately $800 million of new and sale-leaseback containers for delivery in 2020, which is below our target level. We accelerated container purchases during the third quarter, but our ability to quickly order large numbers of containers was constrained by tight container manufacturing capacity. We have also ordered approximately $350 million of containers for delivery in the first few months of 2021."

"We continue to strengthen our balance sheet. We issued $2.3 billion of ABS notes during the third quarter with an average fixed interest rate of 2.2%, and used most of the proceeds to prepay $1.8 billion of existing ABS notes with an average fixed interest rate of 3.8%. We closed the prepayment of the existing ABS notes on September 21, 2020, and we expect over $25 million of interest expense savings over the next year. In addition, our leverage remains near an all-time low and our liquidity position is excellent. The combination of our strong balance sheet and stable cash flows provides great protection for Triton and gives us many levers to drive shareholder value through a full range of market conditions."

Outlook

Mr. Sondey continued, "Container demand remains exceptionally strong as we start the fourth quarter. Our customers expect trade volumes to remain solid despite the end of the traditional summer peak season for dry containers. Customers are projecting meaningful container shortages into at least early next year, and they continue to rely heavily on leasing. We will benefit from a full quarter of revenue on the large number of containers picked up in the third quarter, and new containers produced in the fourth quarter should be picked up quickly. We will also benefit from a full period of reduced interest expense from our ABS refinancing. Overall, we expect our Adjusted earnings per share to increase in the range of 25% from the third to the fourth quarter of 2020."

"Looking forward to next year, the ongoing COVID-19 pandemic continues to create a high level of macro uncertainty for the global economy and trade. However, the vast majority of the containers leased-out over the last few months have been placed on multi-year leases, and the very low inventory of new and used containers available in the market should further support our utilization. In addition, the interest expense reduction from our ABS refinancing will benefit us into 2021 and beyond. As a result, we expect to achieve strong profitability and an attractive Return on equity in 2021."

Dividends

Triton’s Board of Directors has approved and declared a $0.57 per share quarterly cash dividend on its issued and outstanding common shares, payable on December 23, 2020 to shareholders of record at the close of business on December 10, 2020.

Mr. Sondey concluded, "The increase in our dividend reflects our confidence in the continued strength of our profitability and robust cash flows generated by our business, and our ongoing commitment to returning value to shareholders."

The Company's Board of Directors also approved and declared a cash dividend payable on December 15, 2020 to holders of record at the close of business on December 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 0.4 million common shares in the third quarter of 2020, and has repurchased over 12.5 million common shares since the inception of the program in August 2018.

Investors’ Webcast

Triton will hold a Webcast at 8:30 a.m. (New York time) on Friday, October 23, 2020 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 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

 

September 30, 2020

 

June 30, 2020

 

March 31, 2020

 

December 31, 2019

 

September 30, 2019

Average Utilization (1)

96.1

%

 

95.0

%

 

95.4

%

 

95.8

%

 

96.7

%

Ending Utilization (1)

97.4

%

 

94.8

%

 

95.3

%

 

95.4

%

 

96.4

%

  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 September 30, 2020, December 31, 2019 and September 30, 2019:

 

Equipment Fleet in Units

 

Equipment Fleet in TEU

 

September 30, 2020

 

December 31, 2019

 

September 30, 2019

 

September 30, 2020

 

December 31, 2019

 

September 30, 2019

Dry

3,220,631

 

 

3,267,624

 

 

3,287,025

 

 

5,306,071

 

 

5,369,377

 

 

5,393,705

 

Refrigerated

226,627

 

 

225,520

 

 

226,114

 

 

437,886

 

 

435,148

 

 

436,129

 

Special

93,639

 

 

94,453

 

 

94,678

 

 

170,471

 

 

171,437

 

 

171,579

 

Tank

11,153

 

 

12,485

 

 

12,539

 

 

11,153

 

 

12,485

 

 

12,539

 

Chassis

24,916

 

 

24,515

 

 

24,704

 

 

45,380

 

 

45,154

 

 

45,498

 

Equipment leasing fleet

3,576,966

 

 

3,624,597

 

 

3,645,060

 

 

5,970,961

 

 

6,033,601

 

 

6,059,450

 

Equipment trading fleet

72,444

 

 

17,906

 

 

17,054

 

 

111,369

 

 

27,121

 

 

25,764

 

Total

3,649,410

 

 

3,642,503

 

 

3,662,114

 

 

6,082,330

 

 

6,060,722

 

 

6,085,214

 

 

Equipment in CEU(1)

 

September 30, 2020

 

December 31, 2019

 

September 30, 2019

Operating leases

6,492,628

 

 

6,434,434

 

 

6,455,594

 

Finance leases

308,513

 

 

423,638

 

 

431,043

 

Equipment trading fleet

109,469

 

 

37,232

 

 

36,998

 

Total

6,910,610

 

 

6,895,304

 

 

6,923,635

 

  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)

 

September 30, 2020

 

December 31, 2019

ASSETS:

 

 

 

Leasing equipment, net of accumulated depreciation of $3,247,980 and $2,933,886

$

8,323,667

 

 

$

8,392,547

 

Net investment in finance leases

296,763

 

 

413,342

 

Equipment held for sale

104,923

 

 

114,504

 

Revenue earning assets

8,725,353

 

 

8,920,393

 

Cash and cash equivalents

173,257

 

 

62,295

 

Restricted cash

163,486

 

 

106,677

 

Accounts receivable, net of allowances of $2,155 and $1,276

214,978

 

 

210,697

 

Goodwill

236,665

 

 

236,665

 

Lease intangibles, net of accumulated amortization of $259,565 and $242,301

38,892

 

 

56,156

 

Other assets

72,044

 

 

38,902

 

Fair value of derivative instruments

—

 

 

10,848

 

Total assets

$

9,624,675

 

 

$

9,642,633

 

LIABILITIES AND SHAREHOLDERS' EQUITY:

 

 

 

Equipment purchases payable

$

96,798

 

 

$

24,685

 

Fair value of derivative instruments

154,603

 

 

36,087

 

Accounts payable and other accrued expenses

105,631

 

 

116,782

 

Net deferred income tax liability

319,320

 

 

301,317

 

Debt, net of unamortized costs of $41,741 and $39,781

6,429,434

 

 

6,631,525

 

Total liabilities

7,105,786

 

 

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, 81,151,723 and 80,979,833 shares issued, respectively

812

 

 

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, 12,544,597 and 8,771,345 shares, respectively

(385,696)

 

 

(278,510)

 

Additional paid-in capital

903,346

 

 

902,725

 

Accumulated earnings

1,597,928

 

 

1,533,845

 

Accumulated other comprehensive income (loss)

(152,501)

 

 

(31,633)

 

Total shareholders' equity

2,518,889

 

 

2,532,237

 

Total liabilities and shareholders' equity

$

9,624,675

 

 

$

9,642,633

 

 

TRITON INTERNATIONAL LIMITED

Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)

 

Three Months Ended

September 30,

 

Nine months ended

September 30,

 

September 30, 2020

 

September 30, 2019

 

September 30, 2020

 

September 30, 2019

Leasing revenues:

 

 

 

 

 

 

 

Operating leases

$

320,352

 

 

$

326,800

 

 

$

946,579

 

 

$

985,592

 

Finance leases

7,405

 

 

9,868

 

 

24,043

 

 

30,501

 

Total leasing revenues

327,757

 

 

336,668

 

 

970,622

 

 

1,016,093

 

 

 

 

 

 

 

 

 

Equipment trading revenues

26,094

 

 

25,796

 

 

58,377

 

 

66,833

 

Equipment trading expenses

(22,225)

 

 

(21,646)

 

 

(50,555)

 

 

(54,600)

 

Trading margin

3,869

 

 

4,150

 

 

7,822

 

 

12,233

 

 

 

 

 

 

 

 

 

Net gain on sale of leasing equipment

10,737

 

 

6,196

 

 

19,351

 

 

22,184

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

Depreciation and amortization

136,248

 

 

133,367

 

 

402,235

 

 

403,324

 

Direct operating expenses

25,992

 

 

20,457

 

 

78,859

 

 

55,356

 

Administrative expenses

21,395

 

 

18,496

 

 

61,092

 

 

56,671

 

Provision (reversal) for doubtful accounts

(45)

 

 

126

 

 

4,608

 

 

505

 

Total operating expenses

183,590

 

 

172,446

 

 

546,794

 

 

515,856

 

Operating income (loss)

158,773

 

 

174,568

 

 

451,001

 

 

534,654

 

Other expenses:

 

 

 

 

 

 

 

Interest and debt expense

62,776

 

 

77,401

 

 

198,652

 

 

243,181

 

Realized (gain) loss on derivative instruments, net

—

 

 

(539)

 

 

(224)

 

 

(1,912)

 

Unrealized (gain) loss on derivative instruments, net

—

 

 

504

 

 

286

 

 

2,757

 

Debt termination expense

24,345

 

 

1,870

 

 

24,376

 

 

2,428

 

Other (income) expense, net

(631)

 

 

(116)

 

 

(4,241)

 

 

(2,047)

 

Total other expenses

86,490

 

 

79,120

 

 

218,849

 

 

244,407

 

Income (loss) before income taxes

72,283

 

 

95,448

 

 

232,152

 

 

290,247

 

Income tax expense (benefit)

15,825

 

 

4,845

 

 

28,070

 

 

20,737

 

Net income (loss)

$

56,458

 

 

$

90,603

 

 

$

204,082

 

 

$

269,510

 

Less: income (loss) attributable to noncontrolling interest

—

 

 

—

 

 

—

 

 

592

 

Less: dividend on preferred shares

10,512

 

 

4,708

 

 

30,850

 

 

7,038

 

Net income (loss) attributable to common shareholders

$

45,946

 

 

$

85,895

 

 

$

173,232

 

 

$

261,880

 

Net income per common share—Basic

$

0.67

 

 

$

1.18

 

 

$

2.49

 

 

$

3.49

 

Net income per common share—Diluted

$

0.67

 

 

$

1.17

 

 

$

2.48

 

 

$

3.47

 

Cash dividends paid per common share

$

0.52

 

 

$

0.52

 

 

$

1.56

 

 

$

1.56

 

Weighted average number of common shares outstanding—Basic

68,223

 

 

72,689

 

 

69,693

 

 

74,984

 

Dilutive restricted shares

359

 

 

560

 

 

289

 

 

573

 

Weighted average number of common shares outstanding—Diluted

68,582

 

 

73,249

 

 

69,982

 

 

75,557

 

 

TRITON INTERNATIONAL LIMITED

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

Nine Months Ended September 30,

 

September 30, 2020

 

September 30, 2019

Cash flows from operating activities:

 

 

 

Net income (loss)

$

204,082

 

 

$

269,510

 

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

Depreciation and amortization

402,235

 

 

403,324

 

Amortization of deferred debt cost and other debt related amortization

10,789

 

 

9,718

 

Lease related amortization

18,358

 

 

32,317

 

Share-based compensation expense

7,919

 

 

7,238

 

Net (gain) loss on sale of leasing equipment

(19,351)

 

 

(22,184)

 

Unrealized (gain) loss on derivative instruments

286

 

 

2,757

 

Debt termination expense

24,376

 

 

2,428

 

Deferred income taxes

28,441

 

 

18,885

 

Changes in operating assets and liabilities:

 

 

 

Accounts receivable

(7,325)

 

 

22,006

 

Accounts payable and other accrued expenses

(8,832)

 

 

(7,202)

 

Net equipment sold (purchased) for resale activity

5,185

 

 

(1,798)

 

Cash collections on finance lease receivables, net of income earned

60,913

 

 

53,706

 

Other assets

(44,735)

 

 

(11,198)

 

Net cash provided by (used in) operating activities

682,341

 

 

779,507

 

Cash flows from investing activities:

 

 

 

Purchases of leasing equipment and investments in finance leases

(354,425)

 

 

(160,518)

 

Proceeds from sale of equipment, net of selling costs

182,819

 

 

163,033

 

Other

(183)

 

 

(245)

 

Net cash provided by (used in) investing activities

(171,789)

 

 

2,270

 

Cash flows from financing activities:

 

 

 

Issuance of preferred shares, net of underwriting discount

145,275

 

 

221,790

 

Purchases of treasury shares

(107,186)

 

 

(209,592)

 

Redemption of common shares for withholding taxes

(2,156)

 

 

(5,666)

 

Debt issuance costs

(22,588)

 

 

(8,709)

 

Borrowings under debt facilities

3,297,445

 

 

1,417,200

 

Payments under debt facilities and finance lease obligations

(3,514,140)

 

 

(1,970,334)

 

Dividends paid on preferred shares

(30,420)

 

 

(6,253)

 

Dividends paid on common shares

(108,421)

 

 

(116,519)

 

Distributions to noncontrolling interests

—

 

 

(2,078)

 

Purchase of noncontrolling interests

—

 

 

(103,039)

 

Other

(590)

 

 

—

 

Net cash provided by (used in) financing activities

(342,781)

 

 

(783,200)

 

Net increase (decrease) in cash, cash equivalents and restricted cash

$

167,771

 

 

$

(1,423)

 

Cash, cash equivalents and restricted cash, beginning of period........................................................................................................................................................................

168,972

 

 

159,539

 

Cash, cash equivalents and restricted cash, end of period

$

336,743

 

 

$

158,116

 

Supplemental disclosures:

 

 

 

Interest paid

$

181,576

 

 

$

224,033

 

Income taxes paid (refunded)

$

440

 

 

$

2,504

 

Right-of-use asset for leased property

$

196

 

 

$

7,206

 

Supplemental non-cash investing activities:

 

 

 

Equipment purchases payable

$

96,798

 

 

$

34,922

 

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, and foreign and other income tax adjustments.

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 September 30, 2020, June 30, 2020, and September 30, 2019 and for the nine months ended September 30, 2020 and September 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,

 

Nine Months Ended,

 

September 30, 2020

 

June 30, 2020

 

September 30, 2019

 

September 30, 2020

 

September 30, 2019

Net income attributable to common shareholders

$

45,946

 

 

$

60,075

 

 

$

85,895

 

 

$

173,232

 

 

$

261,880

 

Add (subtract):

 

 

 

 

 

 

 

 

 

Unrealized loss (gain) on derivative instruments, net

—

 

 

12

 

 

497

 

 

282

 

 

2,721

 

Debt termination expense

21,140

 

 

—

 

 

1,461

 

 

21,164

 

 

2,012

 

State and other income tax adjustments

2,341

 

 

(85)

 

 

(931)

 

 

2,256

 

 

(517)

 

Tax benefit from vesting of restricted shares

—

 

 

—

 

 

(1,972)

 

 

(390)

 

 

(1,972)

 

Tax adjustments related to intra-entity asset transfer

8,629

 

 

—

 

 

—

 

 

8,629

 

 

—

 

Adjusted net income

$

78,056

 

 

$

60,002

 

 

$

84,950

 

 

$

205,173

 

 

$

264,124

 

Adjusted net income per common share—Diluted

$

1.14

 

 

$

0.86

 

 

$

1.16

 

 

$

2.93

 

 

$

3.50

 

Weighted average number of common shares outstanding—Diluted

68,582

 

 

69,536

 

 

73,249

 

 

69,982

 

 

75,557

 

TRITON INTERNATIONAL LIMITED

Calculation of Return on Equity

(In thousands)

 

 

 

 

 

Three Months Ended,

 

Nine Months Ended,

 

September 30, 2020

 

June 30, 2020

 

September 30, 2019

 

September 30, 2020

 

September 30, 2019

Adjusted net income

$

78,056

 

 

$

60,002

 

 

$

84,950

 

 

$

205,173

 

 

$

264,124

 

Annualized Adjusted net income (1)

309,679

 

 

240,667

 

 

337,030

 

 

274,063

 

 

353,133

 

 

 

 

 

 

 

 

 

 

 

Average Shareholders' equity (2)(3)

$

1,958,920

 

 

$

1,974,600

 

 

$

2,092,294

 

 

$

2,010,082

 

 

$

2,138,327

 

 

 

 

 

 

 

 

 

 

 

Return on equity

15.8

%

 

12.2

%

 

16.1

%

 

13.6

%

 

16.5

%

  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 nine month ended periods.
  3. Average Shareholders' equity was adjusted to exclude preferred shares.

 

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