The following excerpt is from the company's SEC filing.
Hamilton, Bermuda - August 11, 2016 – Triton International Limited (NYSE: TRTN)
, ("Triton") today reported results for the
second
quarter ended
June 30, 2016
. On July 12, 2016 Triton Container International Limited ("TCIL") and TAL International Group, Inc. ("TAL") completed their previously announced strategic combination and became wholly owned subsidiaries of Triton. In this press release, Triton has presented selected combined information for the second quarter ended June 30, 2016 together with individual financial statements for Triton, TCIL and TAL for the three and
six months ended
, and 2015.
Second Quarter and Recent Highlights:
On July 12, 2016, TCIL and TAL completed their combination to form Triton International, the world’s largest, most capable and most efficient lessor of intermodal freight containers.
On August 11, 2016, Triton announced a quarterly dividend of
per share payable on
September 22, 2016
to shareholders of record as of
September 8, 2016
The following reflects selected combined information of TCIL and TAL:
Combined Adjusted pre-tax income for TCIL and TAL was
$18.4 million
quarter of
, a decrease of
Combined leasing revenues for TCIL and TAL were
$299.6 million
Combined equipment utilization averaged
Through August 11, 2016, the combined companies have invested approximately
million in new and sale-leaseback containers for delivery in
The combined results shown in this press release represent the aggregate of TCIL's and TAL's individual results for the three and six months ended June 30, 2016 and 2015 and do not reflect Triton’s pro-forma results on a GAAP basis. These combined results do not reflect all transaction-related expenses since the transaction was completed on July 12, 2016, subsequent to quarter end, nor do they include the effect of any purchase accounting adjustments made in relation to the completion of the transaction. There will be additional transaction-related expenses and other charges that will be expensed in future periods.
As of June 30, 2016, Triton had not yet acquired TCIL and TAL, and, as such, had not commenced operations, had no significant assets or liabilities and had not conducted any material activities through
. For the three and six months ended
, Triton reported a net loss of
$0.02 million
$0.03 million
, respectively, mainly related to incidental costs incurred in Triton's formation and other costs in connection with the completion of the transaction. Therefore, no revenues or operating expenses existed for Triton as of June 30, 2016. Following completion of the transaction on July 12, 2016, Triton's results will reflect TCIL's historical financial information as the accounting acquirer, combined with TAL's financial information from the date of completion of the transaction, inclusive of the effect of purchase accounting adjustments. Such treatment is consistent with the accounting treatment prescribed under the acquisition method of accounting.
Selected Combined Information
The following selected key financial information illustrates the combined performance of TCIL and TAL for the
(dollars in millions):
Three Months Ended
June 30,
Six Months Ended
% Change
Adjusted pre-tax income(1)
(77.4%)
$174.2
(70.9%)
Leasing revenues
$329.8
(9.2%)
$611.9
$658.9
(7.1%)
Adjusted EBITDA(1)
$240.7
$294.0
(18.1%)
$493.2
$592.9
(16.8%)
Adjusted net income(1)
(74.8%)
$142.2
(70.0%)
Net income
(93.3%)
$129.5
(85.0%)
(1) Adjusted pre-tax income, Adjusted EBITDA, and Adjusted net income are non-GAAP financial measures that we believe are useful in evaluating our operating performance. Triton's, TCIL's and TAL's definition and calculation of Adjusted pre-tax income, Adjusted EBITDA, and Adjusted net income, including reconciliation of such non-GAAP financial measures to the most directly comparable GAAP financial measures, are outlined in the attached schedules.
Operating Performance
"We are very excited to have completed this transformative combination and formed Triton International, the world’s largest, most capable and most efficient container leasing company,” commented Brian M. Sondey, Chairman and Chief Executive Officer of Triton International. "With the closing now behind us, operations at the new Triton are off to a running start. We continue to expect our new company to have significant scale, cost, container supply and operating capability advantages compared to our peers, and we are on track to achieve our goal of $40 million of annual cost savings after our systems are fully integrated. The new company has also been well received by our customers, vendors and lenders. I would like to thank our employees and all of our business partners for helping us successfully launch Triton International."
"While overall business conditions remained challenging, we did see some improvement during the second quarter, with leasing demand returning after a long period of slow activity. Modest trade growth, combined with limited production of new containers, has resulted in many of our customers experiencing spot container shortages and has led to increased demand for our containers. Net pick-up activity for the combined operations of TCIL and TAL was meaningfully positive during the second quarter of 2016 for the first time since the third quarter of 2014, and our combined utilization has started to recover, increasing by 0.2% during the second quarter to reach
as of June 30, 2016. Utilization of the Triton container fleet currently stands at
"While leasing demand and net pick-up activity improved during the second quarter, market leasing rates and used container sale prices remained very low due to aggressive competition. Low market leasing rates continued to compress our leasing margins, as containers were returned from high-rate leases and subsequently leased out at lower market rates, and as existing leases were renegotiated and extended at lower rate levels. Used container sale prices also continued to decrease in the second quarter, leading to significant losses on the sale of containers. The loss on sale was particularly large for the TAL fleet during the second quarter due to mark-to-market adjustments related to TAL’s much larger inventory of containers for sale."
"Business conditions are also challenging for our shipping line customers, and several of our customers are in active financial restructuring negotiations. While our collections performance generally has been strong, credit risks will remain elevated until freight rates and the financial performance of the container shipping lines improve."
"The combined Adjusted pre-tax income for TCIL and TAL was
during the second quarter of 2016, down
from the second quarter of 2015 and down
from the first quarter of 2016. This decrease primarily reflects ongoing lease rate pressure and the further decrease of used container selling prices in the second quarter. The improved leasing demand that we began to experience in the second quarter will mainly benefit future periods."
Outlook
Mr. Sondey continued, "Leasing demand remains solid as we start the third quarter, and we have recently seen some limited improvements in pricing trends. We expect dry container net pick-up activity to be strong for the third quarter, and our utilization should continue to increase. Prevailing lease rates remain far below historical levels and well below our portfolio average, but we have seen some improvement in market leasing rates as depot and factory container inventories shrink. Used container sale prices have so far stabilized during the third quarter, benefiting from a reduced volume of off-hires and improved lease-out opportunities for our older depot containers. If current demand levels and pricing trends continue through the third quarter, we expect our Adjusted pre-tax income to increase sequentially in the third quarter, excluding the impacts of purchase accounting."
Dividend
Triton’s Board of Directors has approved and declared a
per share quarterly cash dividend on its issued and outstanding common stock, payable on
to shareholders of record at the close of business on
Investors’ Webcast
Triton will hold a Webcast at 9 a.m. (New York time) on Friday, August 12, 2016 to discuss its
quarter results. To participate by phone, please dial 1-877-418-5277 (domestic) or 1-412-717-9592 (international) approximately 15 minutes prior to the start time and reference the Triton International Limited conference call. To access the live Webcast or archive, please visit Triton's website at http://www.trtn.com. An archive of the Webcast will be available one hour after the live call through Friday, September 23, 2016.
About Triton International Limited
Triton International Limited is the parent of Triton Container International Limited and TAL International Group, Inc., each of which merged under Triton on July 12, 2016 to create the world’s largest lessor of intermodal freight containers and chassis. With a container fleet of nearly five million twenty-foot equivalent units ("TEU"), Triton’s global operations include acquisition, leasing, re-leasing and subsequent sale of multiple types of intermodal containers and chassis.
Contact
John Burns
Senior Vice President and Chief Financial Officer
Investor Relations
(914) 697-2900
The following table sets forth the combined equipment fleet utilization(2) for TCIL and TAL as of and for the periods indicated:
Quarter Ended
March 31,
December 31,
September 30,
Average Utilization
Ending Utilization
(2) 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 provides the composition of the combined equipment fleet as of
, December 31, 2015, and June 30, 2015 (in units, TEUs and CEUs):
Equipment Fleet in Units
Equipment Fleet in TEU
2,586,100
2,632,257
2,593,791
4,154,335
4,217,703
4,163,511
Refrigerated
200,943
198,292
194,857
384,600
379,134
372,271
Special
88,148
88,227
150,603
154,137
155,008
11,715
11,243
Chassis
21,784
21,216
20,293
39,355
38,210
36,325
Equipment leasing fleet
2,906,642
2,951,156
2,907,020
4,740,608
4,800,427
4,736,967
Equipment trading fleet
18,344
21,135
28,256
30,402
35,989
46,614
2,924,986
2,972,291
2,935,276
4,771,010
4,836,416
4,783,581
Equipment Fleet in CEU
Operating leases
5,848,136
5,855,833
5,750,341
Finance leases
235,806
252,229
246,907
84,832
107,080
119,226
6,168,774
6,215,142
6,116,474
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, TCIL's and TAL's control. Accordingly, there are or will be important factors that could cause actual results to differ materially from those indicated in such statements and, therefore, you should not place undue reliance on any such statements.
These factors include, without limitation, economic, business, competitive, market and regulatory conditions and the following: failure to realize the anticipated benefits of the transaction, including as a result of a delay or difficulty in integrating the businesses of TCIL and TAL; uncertainty as to the long-term value of Triton's common shares; the expected amount and timing of cost savings and operating synergies resulting from the transaction; decreases in the demand for leased containers; decreases in market leasing rates for containers; difficulties in re-leasing containers after their initial fixed-term leases; their customers' decisions to buy rather than lease containers; their dependence on a limited number of customers for a substantial portion of their revenues; customer defaults; decreases in the selling prices of used containers; extensive competition in the container leasing industry; difficulties stemming from the international nature of their businesses; decreases in the demand for international trade; disruption to their operations resulting from the political and economic policies of foreign countries, particularly China; disruption to their operations from failures of or attacks on their information technology systems; their compliance with laws and regulations related to security, anti-terrorism, environmental protection and corruption; their ability to obtain sufficient capital to support their growth; restrictions on their businesses imposed by the terms of their debt agreements; and other risks and uncertainties, including those risk factors set forth in the section entitled "Risk Factors" beginning on page 34 of the proxy statement/prospectus included in Triton’s Registration Statement on Form S-4, as amended.
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 AND ITS SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands)
(Unaudited)
ASSETS:
Prepaid assets
Total current assets
Total assets
LIABILITIES AND SHAREHOLDER'S EQUITY:
Accounts payable
Total current liabilities
Total liabilities
Shareholder's equity:
Common shares, $0.01 par value, 100 shares authorized, and 100 shares issued respectively
Receivable from TCIL common shares
Additional paid-in capital
Accumulated (deficit)
Total shareholder's equity
Total liabilities and shareholder's equity
Consolidated Statements of Operations
(Dollars in thousands, except share data)
Three Months Ended June 30, 2016
Six Months Ended June 30, 2016
Revenues:
Revenues
Total revenues
Operating expenses:
Administrative expenses
Transaction and other non-recurring costs
Total operating expenses
Operating (loss)
Other expenses:
Total other expenses
(Loss) before income taxes
(Loss) tax expense
Net (loss)
Net (loss) per common share—Basic
Net (loss) per common share—Diluted
Cash dividends paid per common share
Weighted average number of common shares outstanding—Basic
Dilutive share options and restricted shares
Weighted average number of common shares outstanding—Diluted
Consolidated Statements of Cash Flows
Cash flows from operating activities:
Net loss
Adjustments to reconcile net loss:
Expenses paid by TCIL on behalf of Triton
Changes in assets and liabilities:
Increase in prepaid assets
Decrease in accounts payable
Net cash provided by operating activities
Cash flows from investing activities:
Net cash provided by investing activities
Cash flows from financing activities:
Net cash provided by financing activities
Net increase in unrestricted cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Supplemental non-cash activities:
Capital contribution from TCIL in the form of expenses paid on behalf of Triton
TRITON CONTAINER INTERNATIONAL LIMITED
December 31,
Leasing equipment, net of accumulated depreciation and allowances of $1,651,513 and $1,566,963
4,189,723
4,362,043
Net investment in finance leases
64,664
68,107
Revenue earning assets
4,254,387
4,430,150
Unrestricted cash and cash equivalents
89,788
56,689
Restricted cash
20,918
22,575
Accounts receivable, net of allowances of $7,143 and $8,297
127,346
127,676
Other assets
36,126
37,911
Fair value of derivative instruments
4,528,565
4,677,154
LIABILITIES AND EQUITY:
Equipment purchases payable
12,128
Accounts payable and other accrued expenses
115,934
120,033
Debt, net of unamortized deferred financing costs of $21,279 and $19,024
3,021,044
3,166,903
3,145,043
3,299,321
Equity:
Class A common shares, $0.01 par value; 294,000,000 authorized, 44,537,630 and 44,535,732 issued and outstanding
Class B common shares, $0.01 par value; 6,000,000 authorized, issued and outstanding
177,054
176,088
Accumulated earnings
1,059,318
1,044,402
Accumulated other comprehensive (loss)
(3,810
(3,666
Noncontrolling interests
150,455
160,504
Total equity
1,383,522
1,377,833
Total liabilities and equity
(Dollars and shares in thousands, except earnings per share)
Leasing revenues:
156,367
176,986
317,362
355,137
Total leasing revenues
158,333
178,989
321,358
359,120
(Loss) gain on sale of leasing equipment, net
(1,930
(3,767
Depreciation and amortization
81,132
71,040
160,276
140,120
Direct operating expenses
12,015
13,506
26,482
26,122
13,166
14,367
27,679
29,730
(Reversal of) provision for doubtful accounts
(2,132
109,798
103,170
221,214
203,796
Operating income
46,605
76,896
96,377
161,649
Interest and debt expense
33,491
35,929
67,189
70,466
Realized loss on derivative instruments
Write-off of deferred financing costs
Loss (gain) on interest rate swaps, net
(2,059
Other (income) expense, net
37,758
35,569
76,473
74,888
Income before income taxes
41,327
19,904
86,761
Income tax expense
39,981
17,720
83,817
Less: income attributable to noncontrolling interest
Net income attributable to shareholders
36,241
14,916
77,111
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of deferred financing costs
Loss (gain) on sale of leasing equipment, net
(6,325
Loss on interest rate swaps, net
Stock compensation charge
Changes in operating assets and liabilities:
Other changes in operating assets and liabilities
(6,308
(1,325
189,285
228,914
Purchases of leasing equipment and investments in finance leases
(64,098
(302,853
Proceeds from sale of equipment, net of selling costs
60,820
89,824
Cash collections on finance lease receivables, net of income earned
(1,562
Net cash provided by (used in) investing activities
(208,013
Redemption of common shares
Financing fees paid under debt facilities
(5,068
(2,972
Borrowings under debt facilities
44,700
535,000
Payments under debt facilities and capital lease obligations
(188,304
(535,061
Decrease in restricted cash
Distributions to noncontrolling interests
(12,853
(26,772
Net cash (used in) provided by financing activities
(160,245
(25,932
Net increase (decrease) in unrestricted cash and cash equivalents
33,099
(5,031
Unrestricted cash and cash equivalents, beginning of period
65,607
Unrestricted cash and cash equivalents, end of period
60,576
Supplemental non-cash investing activities:
Amounts incurred, but not yet paid, for container rental equipment purchased
16,889
TAL INTERNATIONAL GROUP, INC.
Leasing equipment, net of accumulated depreciation and allowances of $1,289,204 and $1,218,826
3,813,218
3,908,292
Net investment in finance leases, net of allowances of $671 and $805
159,693
177,737
Equipment held for sale
80,682
74,899
4,053,593
4,160,928
54,331
58,907
28,358
30,302
Accounts receivable, net of allowances of $1,209 and $1,314
91,358
95,709
Goodwill
74,523
15,091
13,620
4,317,254
4,434,076
LIABILITIES AND STOCKHOLDERS' EQUITY:
20,009
67,191
20,348
53,480
56,096
Net deferred income tax liability
447,992
456,123
Debt, net of unamortized deferred financing costs of $23,720 and $25,245
3,146,494
3,216,488
3,723,461
3,769,064
Stockholders' equity:
Preferred stock, $0.001 par value, 500,000 shares authorized, none issued
Common stock, $0.001 par value, 100,000,000 shares authorized, 37,307,134 and 37,167,134 shares issued respectively
Treasury stock, at cost, 3,911,843 shares
(75,310
513,162
511,297
204,568
248,183
(48,664
(19,195
Total stockholders' equity
593,793
665,012
Total liabilities and stockholders' equity
138,137
146,569
283,035
291,137
Other revenues
141,273
150,838
290,496
299,813
Equipment trading revenues
11,463
16,478
22,755
33,323
Equipment trading expenses
(11,471
(14,957
(22,736
(30,388
Trading margin
(Loss) on sale of leasing equipment, net
(15,508
(29,438
(2,109
63,157
60,021
126,383
118,405
19,576
10,011
37,535
18,833
10,855
10,467
21,568
22,249
Provision (reversal) for doubtful accounts
95,961
81,234
189,789
160,399
29,796
70,465
71,288
140,240
28,874
29,602
58,025
58,845
29,182
29,238
59,509
59,197
41,227
11,779
81,043
14,557
28,616
Net (loss) income
(1,970
26,670
52,427
Amortization of net loss on terminated derivative instruments designated as cash flow hedges
Amortization of lease intangibles
Loss on sale of leasing equipment, net
Deferred income taxes
Net equipment sold (purchased) for resale activity
(4,809
(3,759
178,229
203,133
(145,667
(428,963
61,301
66,026
21,325
21,289
Net cash (used in) investing activities
(63,337
(341,574
Purchases of treasury stock
(4,446
Stock options exercised and stock related activity
(2,362
190,001
365,000
(261,555
(182,251
Common stock dividends paid
(47,496
(47,313
(119,468
131,470
Net (decrease) in unrestricted cash and cash equivalents
(4,576
(6,971
79,132
72,161
34,670
Non-GAAP Financial Measures
We use the terms "EBITDA", “Adjusted EBITDA”, "Adjusted pre-tax income", and "Adjusted net income", throughout this press release.
EBITDA is defined as net income before interest and debt expense, income tax expense, depreciation and amortization, and the write-off of deferred financing costs. Adjusted EBITDA is defined as EBITDA excluding gains and losses on interest rate swaps, plus principal payments on finance leases, plus transaction and other non-recurring costs.
Adjusted pre-tax income is defined as income before income taxes as further adjusted for certain items which are described in more detail below, which management believes are not representative of our operating performance. Adjusted pre-tax income excludes gains and losses on interest rate swaps, the write-off of deferred financing costs, and transaction and other non-recurring costs. Adjusted net income is defined as net income further adjusted for the items discussed above, net of income tax.
EBITDA, Adjusted EBITDA, Adjusted pre-tax income, Adjusted net income, and Adjusted pre-tax return on tangible equity are not presentations made in accordance with U.S. GAAP. EBITDA, Adjusted EBITDA, Adjusted pre-tax income, and Adjusted net income should not be considered as alternatives to, or more meaningful than, amounts determined in accordance with U.S. GAAP, including net income, or net cash from operating activities.
We believe that EBITDA, Adjusted EBITDA, Adjusted pre-tax income, Adjusted net income, and Adjusted pre-tax return on tangible equity are useful to an investor in evaluating our operating performance because these measures:
are widely used by securities analysts and investors to measure a company’s operating performance and available liquidity to service debt and fund investments without regard to debt or capital structure, income tax rates and depreciation policy estimates, which can vary substantially from company to company;
help investors to more meaningfully evaluate and compare the results of our operations from period to period by removing the impact of our capital structure, our asset base and certain non-routine events which we do not expect to occur in the future; and
are used by our management for various purposes, including as measures of operating performance and liquidity, to assist in comparing performance from period to period on a consistent basis, in presentations to our board of directors concerning our financial performance and as a basis for strategic planning and forecasting.
We have provided a reconciliation of net income, the most directly comparable U.S. GAAP measure, to EBITDA in the tables below for the
. We have also provided reconciliations of income before income taxes and net income, the most directly comparable U.S. GAAP measures, to Adjusted pre-tax income and Adjusted net income in the tables below for the
We have also provided reconciliations of operating cash flows to Adjusted EBITDA in the tables below for the current quarter.
Non-GAAP Reconciliations of Adjusted Pre-tax Income and Adjusted Net Income
(Dollars in Thousands)
Net loss (gain) on interest rate swaps
Transaction and other non-recurring costs
Adjusted pre-tax income
15,177
39,701
32,918
91,685
Write-off of deferred financing costs, net of tax
Net loss (gain) on interest rate swaps, net of tax
(1,997
Transaction and other non-recurring costs, net of tax
Foreign income and withholding tax adjustments
Adjusted net income
14,504
38,460
31,473
88,839
Non-GAAP Reconciliations of Operating Cash Flows to Adjusted EBITDA
Non-cash expenses
(5,580
(14,715
(Loss) gain on sale of equipment, net
Changes in operating assets & liabilities
Interest expense
Principal payments on finance leases
269,697
311,862
TAL INTERNATIONAL GROUP, INC.
41,763
17,797
82,495
Stock compensation tax adjustment
Tax adjustment related to non-deductibility of certain transaction and other non-recurring costs
27,016
11,130
53,366
(10,252
(9,792
(Loss) on sale of equipment, net
223,530
281,034
The above information was disclosed in a filing to the SEC. To see the filing, click here.
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