8-K
Trinity Industries Inc (TRN)
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
| Date of Report (Date of Earliest Event Reported): | February 17, 2022 |
|---|
_______________________________________
(Exact name of registrant as specified in its charter)
| Delaware | 1-6903 | 75-0225040 |
|---|---|---|
| (State or other jurisdiction <br>of incorporation) | (Commission File No.) | (I.R.S. Employer <br>Identification No.) |
14221 N. Dallas Parkway, Suite 1100,
Dallas, Texas 75254-2957
(Address of Principal Executive Offices, and Zip Code)
(214) 631-4420
Registrant's Telephone Number, Including Area Code
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
______________________________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock | TRN | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
Trinity Industries, Inc. ("Trinity") hereby furnishes the information set forth in its News Release, dated February 17, 2022, announcing operating results for the three and twelve month periods ended December 31, 2021, a copy of which is furnished as Exhibit 99.1 and incorporated herein by reference. On February 17, 2022, Trinity held a conference call and webcast with respect to its financial results for the three and twelve month periods ended December 31, 2021. The conference call scripts of Leigh Anne Mann, Vice President of Investor Relations; E. Jean Savage, Chief Executive Officer and President; and Eric R. Marchetto, Executive Vice President and Chief Financial Officer; are furnished as Exhibit 99.2, and incorporated herein by reference.
The conference call, News Release, and Supplemental Materials, described below, included references to Adjusted Operating Results and Adjusted Earnings Per Share, Pre-Tax Return on Equity, Free Cash Flow, EBITDA and Adjusted EBITDA, which are not calculations based on generally accepted accounting principles (“GAAP”). Reconciliations of each of these non-GAAP measures to the most directly comparable GAAP measures have been included in the News Release and/or the Supplemental Materials. When forward-looking non-GAAP measures are provided, Trinity does not provide quantitative reconciliations of forward-looking non-GAAP measures to the most directly comparable GAAP measures because it cannot, without unreasonable effort, predict the timing and amounts of certain items included in the computations of each of these measures. These factors include, but are not limited to: the product mix of expected railcar deliveries; the timing and amount of significant transactions and investments, such as lease portfolio sales, capital expenditures, and returns of capital to shareholders; and the amount and timing of certain other items outside the normal course of our core business operations, such as restructuring activities and the potential financial and operational impacts of the COVID-19 pandemic.
This information and the materials described in Item 7.01 are not "filed" pursuant to the Securities Exchange Act of 1934 and are not incorporated by reference into any Securities Act of 1933 registration statements. Additionally, the submission of the report on Form 8-K is not an admission of the materiality of any information in this report that is required to be disclosed solely by Regulation FD.
Item 7.01 Regulation FD Disclosure.
See "Item 2.02 — Results of Operations and Financial Condition." Additionally, Trinity posted Supplemental Materials to its website to accompany the conference call; a copy of these materials is furnished as Exhibit 99.3 and incorporated herein by reference.
Forward-Looking Statements
Some statements in this release, which are not historical facts, are “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements about Trinity's estimates, expectations, beliefs, intentions or strategies for the future, and the assumptions underlying these forward-looking statements, including, but not limited to, future financial and operating performance, future opportunities and any other statements regarding events or developments that Trinity believes or anticipates will or may occur in the future, including the potential financial and operational impacts of the COVID-19 pandemic. Trinity uses the words “anticipates,” “assumes,” “believes,” “estimates,” “expects,” “intends,” “forecasts,” “may,” “will,” “should,” “guidance,” “projected,” “outlook,” and similar expressions to identify these forward-looking statements. Forward-looking statements speak only as of the date of this release, and Trinity expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in Trinity’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based, except as required by federal securities laws. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations, including but not limited to risks and uncertainties regarding economic, competitive, governmental, and technological factors affecting Trinity’s operations, markets, products, services and prices, and such forward-looking statements are not guarantees of future performance. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see “Risk Factors” and “Forward-Looking Statements” in Trinity’s Annual Report on Form 10-K for the most recent fiscal year, as may be revised and updated by Trinity’s Quarterly Reports on Form 10-Q, and Trinity’s Current Reports on Form 8-K.
Item 9.01 Financial Statements and Exhibits.
(a) - (c) Not applicable.
(d) Exhibits:
| NO. | DESCRIPTION |
|---|---|
| 99.1 | News Release dated February 17, 2022 with respect to the operating results for the three and twelve month periods ended December 31, 2021. |
| 99.2 | Conference call script of February 17, 2022. |
| 99.3 | Q4 2021 Conference Call – Supplemental Materials |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document (filed electronically herewith). |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document (filed electronically herewith). |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document (filed electronically herewith). |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Trinity Industries, Inc. | ||
|---|---|---|
| February 17, 2022 | By: | /s/ Eric R. Marchetto |
| Name: Eric R. Marchetto | ||
| Title: Executive Vice President and Chief Financial Officer |
Document
Exhibit 99.1
| NEWS RELEASE |
|---|
FOR IMMEDIATE RELEASE
Trinity Industries, Inc. Announces Fourth Quarter and Full Year 2021 Results
Completed $375 million sale of highway products business
Reports quarterly GAAP and adjusted earnings from continuing operations of $0.16 and $0.08 per diluted share, respectively
Generates full year operating and total free cash flow of $616 million and $539 million, respectively
Returned $895 million of capital to stockholders during 2021 and raised quarterly dividend to $0.23 per share
DALLAS, Texas – February 17, 2022 – Trinity Industries, Inc. (NYSE:TRN) today announced earnings results for the fourth quarter and year ended December 31, 2021.
Financial and Operational Highlights – Fourth Quarter
•Quarterly total company revenues of $472 million
•Quarterly income from continuing operations per common diluted share ("EPS") of $0.16 and quarterly adjusted EPS of $0.08
•Lease fleet utilization of 95.7% and Future Lease Rate Differential ("FLRD") of positive 2.2% at quarter end
•New railcar orders of 5,360 and railcar deliveries of 2,805
•Repurchases of approximately 13.9 million shares at a cost of $402 million
Financial and Operational Highlights – Full Year
•Full year total company revenues of $1.5 billion
•Reported EPS of $0.38 and adjusted EPS of $0.34
•Full year cash flow from continuing operations and total free cash flow after investments and dividends ("Free Cash Flow") were $616 million and $539 million, respectively
•Repurchases of approximately 28.5 million shares at a cost of $807 million
2022 Guidance
•Industry deliveries of 40,000 to 50,000 railcars
•Net investment in the lease fleet of $450 million to $550 million
•Manufacturing capital expenditures of $35 million to $45 million
•EPS of $0.85 to $1.05
Management Commentary
“Trinity’s strong fourth quarter highlights improving market conditions and reinforces the Company’s commitment to optimize its portfolio and return substantial capital to its shareholders,” stated Trinity’s Chief Executive Officer and President, Jean Savage. “The Company completed the divestiture of its highway products business and immediately returned the $375 million in proceeds through share buybacks. Additionally, Trinity once again raised its quarterly dividend. For the full year, Trinity returned $895 million to shareholders through dividends and share repurchases.”
“In our Railcar Leasing and Management Services Group, we continue to see lease rate improvement and strong utilization. We once again saw the Future Lease Rate Differential sequentially improve this quarter to a positive 2.2% showing strong momentum for replacement rates.”
"In the fourth quarter, Rail Products Group margins were positive, and railcar orders and deliveries were strong,” Ms. Savage continued. “The labor and supply chain challenges that have affected performance continued in the fourth quarter, but the Company is seeing improvement as market conditions start to normalize.”
“Market activity is improving, and this trend should continue into 2022. We expect replacement level demand for railcars, and we continue to utilize our sustainable railcar conversion program to optimize our lease fleet and meet changing demand.” Ms. Savage concluded, “I am proud of the way our Company has navigated the challenges of 2021, and I am optimistic about the year ahead. The Company is on target to reach the goals we have laid out, and Trinity’s integrated platform gives us great positioning to take advantage of the current market.”
Consolidated Financial Summary
| Three Months EndedDecember 31, | ||||||
|---|---|---|---|---|---|---|
| 2021 | 2020 | Year over Year – Comparison | ||||
| ( in millions, except per share amounts) | ||||||
| Revenues | $ | 359.7 | Higher external deliveries in the Rail Products Group | |||
| Selling, engineering, and administrative expenses | $ | 47.5 | Q4 2020 includes costs incurred associated with aligning our operating structure to support our rail-focused strategy | |||
| Operating profit | $ | 30.4 | Q4 2020 includes $27.0 million of non-cash write-downs | |||
| Adjusted Operating profit (1) | $ | 57.9 | Increased lease fleet portfolio sales in the Leasing Group and higher external deliveries in the Rail Products Group, partially offset by lower lease rates in the Leasing Group | |||
| Interest expense, net | $ | 52.4 | Improved overall borrowing costs associated with the Company's debt facilities through debt refinancing activity during 2021, partially offset by higher overall average debt | |||
| Net income (loss) from continuing operations attributable to Trinity Industries, Inc. | $ | (133.8) | Q4 2020 includes non-cash pension plan settlement charge and non-cash asset write-downs | |||
| EBITDA (1) | $ | (58.3) | Q4 2020 includes $151.5 million non-cash pension plan settlement charge and $27.0 million non-cash asset write-downs | |||
| Adjusted EBITDA (1) | $ | 120.7 | ||||
| Effective tax expense (benefit) rate | 23.1 | % | (24.1) | % | 2020 tax benefit primarily related to tax law changes | |
| Diluted EPS – GAAP | $ | (1.19) | Q4 2020 includes the impact of $1.04 in pension plan settlement charge and $0.19 in asset write-downs | |||
| Diluted EPS – Adjusted (1) | $ | (0.02) | ||||
| Year EndedDecember 31, | ||||||
| 2021 | 2020 | Year over Year – Comparison | ||||
| ( in millions, except per share amounts) | ||||||
| Revenues | $ | 1,749.7 | Lower deliveries in the Rail Products Group | |||
| Selling, engineering, and administrative expenses | $ | 189.6 | 2020 includes costs incurred associated with aligning our operating structure to support our rail-focused strategy | |||
| Operating profit (loss) | $ | (154.6) | 2020 includes $396.4 million of non-cash impairment charges | |||
| Adjusted Operating profit (1) | $ | 252.7 | Lower railcar deliveries and reduced profitability in our maintenance services business in the Rail Products Group, partially offset by increased lease fleet portfolio sales in the Leasing Group | |||
| Interest expense, net | $ | 211.0 | Improved overall borrowing costs associated with the Company's debt facilities through debt refinancing activity during 2021, partially offset by higher overall average debt | |||
| Net income (loss) from continuing operations attributable to Trinity Industries, Inc. | $ | (171.6) | 2020 includes non-cash impairment charges, non-cash pension plan settlement charge, and tax benefits related to tax law changes | |||
| EBITDA (1) | $ | (51.9) | 2020 includes $396.4 million non-cash impairment charges and $151.5 million non-cash pension plan settlement charge | |||
| Adjusted EBITDA (1) | $ | 511.9 | ||||
| Effective tax expense (benefit) rate | 28.8 | % | (52.2) | % | 2020 tax benefit primarily related to tax law changes | |
| Diluted EPS – GAAP | $ | (1.48) | 2020 includes the impact of $2.07 in impairment of long-lived assets, $0.99 in pension plan settlement charge, and $1.54 income tax benefit related to tax law changes | |||
| Diluted EPS – Adjusted (1) | $ | 0.16 |
All values are in US Dollars.
| Year EndedDecember 31, | ||||
|---|---|---|---|---|
| 2021 | 2020 | Year over Year – Comparison | ||
| ( in millions) | ||||
| Net cash provided by operating activities – continuing operations | $ | 622.0 | ||
| Free Cash Flow (1) | $ | 89.4 | Increased lease fleet portfolio sales and the timing difference of debt proceeds issued for financing lease fleet equity investment | |
| Capital expenditures – leasing (2) | $ | 602.2 | ||
| Returns of capital to stockholders | $ | 284.8 | Increase in share repurchase activity in 2021, which included privately negotiated repurchase agreements totaling $472.5 million |
All values are in US Dollars.
(1) Non-GAAP financial measure. See the Reconciliations of Non-GAAP Measures section within this Press Release for a reconciliation to the most directly comparable GAAP measure and why management believes this measure is useful to management and investors.
(2) For the year ended December 31, 2020, Capital expenditures – leasing is net of sold lease fleet railcars owned one year or less.
Additional Business Items
•In the fourth quarter of 2021, we completed the sale of Trinity Highway Products, LLC (“THP”), a wholly-owned subsidiary of the Company, and certain direct and indirect subsidiaries of THP, to Rush Hour Intermediate II, LLC ("Rush Hour"), an entity owned by an affiliated investment fund of Monomoy Capital Partners, for an aggregate purchase price of $375 million, subject to certain adjustments. Accordingly, we have presented the operating results and cash flows of THP as discontinued operations for all periods presented herein. Results of prior periods have been recast to reflect these changes and present results on a comparable basis.
◦In connection with the sale of THP, the Company has agreed to indemnify Rush Hour for certain liabilities related to the highway products business; related legal settlement costs and expenses are included in discontinued operations.
•In December 2021, our Board of Directors declared an increase of approximately 10% to our quarterly dividend from $0.21 per share to $0.23 per share.
•During the quarter, Trinity repurchased approximately $402 million of shares, which included 8.8 million shares valued at $250 million from ValueAct Capital Master Fund, L.P. in a privately negotiated transaction; 3.3 million shares valued at approximately $100 million as part of our $125 million accelerated share repurchase agreement; and $52 million in the open market.
•During the quarter, Trinity received a $189 million income tax refund associated with the tax loss carryback for the 2020 tax year as permitted under recent tax legislation. The Company's income tax receivable at the end of the fourth quarter was $5 million.
•Total committed liquidity of $782 million as of December 31, 2021.
THP Litigation Updates
•As previously disclosed, the Company is a party to a class action lawsuit in Missouri related to THP's ET-Plus system. We are currently in discussions regarding a potential settlement in an effort to resolve the matter before incurring significant additional legal fees and costs. Based on the Company's assessment that a settlement is probable, we recorded a pre-tax charge of $24 million ($18 million, net of income taxes) during the fourth quarter of 2021, which is included in income from discontinued operations, net of income taxes, on our Consolidated Statement of Operations. However, there is no assurance that a settlement will be reached or, if a settlement is reached, that the charge will represent the amount of the settlement. If a settlement is unable to be reached, the Company will continue to vigorously defend the action.
Business Group Summary
| Three Months EndedDecember 31, | ||||||
|---|---|---|---|---|---|---|
| 2021 | 2020 | Year over Year – Comparison | ||||
| ( in millions) | ||||||
| Railcar Leasing and Management Services Group | ||||||
| Leasing and management revenues | $ | 189.3 | Lower average lease rates | |||
| Leasing and management operating profit | $ | 88.2 | Lower average lease rates and higher fleet operating costs | |||
| Operating profit on lease portfolio sales | $ | — | Increased lease fleet portfolio sales | |||
| Fleet utilization | 95.7 | % | 94.5 | % | ||
| Future Lease Rate Differential ("FLRD") (1) | +2.2 | % | (13.6) | % | Recovery of current market lease rates compared to the prior year period | |
| Owned lease fleet (in units) (2) | 106,970 | 107,045 | Initial sale to new RIV partner, partially offset by growth in the lease fleet | |||
| Investor-owned lease fleet (in units) | 29,130 | 26,645 | Initial sale to new RIV partner | |||
| Rail Products Group | ||||||
| Revenues | $ | 313.3 | Higher volume of deliveries and competitive pricing | |||
| Operating profit margin | 3.3 | % | 0.0 | % | Favorably impacted by storm-related insurance recoveries and higher deliveries, partially offset by supply chain disruptions and labor shortages | |
| New railcars: | ||||||
| Deliveries (in units) | 2,805 | 2,235 | ||||
| Orders (in units) | 5,360 | 1,170 | Higher orders reflect improving market fundamentals and are driven by freight car orders supporting the agriculture, chemicals, and construction markets | |||
| Order value | $ | 116.7 | Higher number of units and differences in product mix | |||
| Backlog value | $ | 1,014.5 | ||||
| Sustainable railcar conversions(3): | ||||||
| Deliveries (in units) | 290 | — | ||||
| Backlog (in units) | 1,150 | — | ||||
| Backlog value | $ | — | ||||
| December 31, 2021 | December 31, 2020 | |||||
| Loan-to-value ratio | ||||||
| Wholly-owned subsidiaries, including corporate revolving credit facility | 62.3 | % | 58.5 | % | Increased leverage associated with leased assets, partially offset by amortization of debt on encumbered assets |
All values are in US Dollars.
(1) FLRD calculates the weighted average of the most current quarterly lease rates transacted compared to the weighted average lease rates for railcars expiring over the next twelve months.
(2) Includes wholly-owned railcars, partially-owned railcars, and railcars under leased-in arrangements.
(3) During 2021, the Rail Products Group introduced a sustainable railcar conversion program whereby certain tank cars and freight cars are converted or upgraded to better meet changing market demands.
Conference Call
Trinity will hold a conference call at 8:30 a.m. Eastern on February 17, 2022 to discuss its fourth quarter and full year results. To listen to the call, please visit the Investor Relations section of the Company's website at www.trin.net and access the Events & Presentations webpage, or the live call can be accessed at 1-888-317-6003 with the conference passcode "8554816". Please call at least 10 minutes in advance to ensure a timely connection. An audio replay may be accessed through the Company’s website or by dialing 1-877-344-7529 with passcode "5826703" until 11:59 p.m. Eastern on February 24, 2022.
Additionally, the Company will provide Supplemental Materials to accompany the earnings conference call. The materials will be accessible both within the webcast and on Trinity's Investor Relations website under the Events and Presentations portion of the site along with the Fourth Quarter Earnings Call event weblink.
Non-GAAP Financial Measures
We have included financial measures compiled in accordance with generally accepted accounting principles ("GAAP") and certain non-GAAP measures in this earnings press release to provide management and investors with additional information regarding our financial results. Non-GAAP measures should not be considered in isolation or as a substitute for our reporting results prepared in accordance with GAAP and, as calculated, may not be comparable to other similarly titled measures for other companies. For each non-GAAP financial measure, a reconciliation to the most comparable GAAP measure has been included in the accompanying tables. When forward-looking non-GAAP measures are provided, quantitative reconciliations to the most directly comparable GAAP measures are not provided because management cannot, without unreasonable effort, predict the timing and amounts of certain items included in the computations of each of these measures. These factors include, but are not limited to: the product mix of expected railcar deliveries; the timing and amount of significant transactions and investments, such as lease portfolio sales, capital expenditures, and returns of capital to stockholders; and the amount and timing of certain other items outside the normal course of our core business operations, such as restructuring activities and the potential financial and operational impacts of the COVID-19 pandemic.
About Trinity Industries
Trinity Industries, Inc., headquartered in Dallas, Texas, owns businesses that are leading providers of rail transportation products and services in North America. Our businesses market their railcar products and services under the trade name TrinityRail®. The TrinityRail platform provides railcar leasing and management services, as well as railcar manufacturing, maintenance and modifications. Trinity reports its financial results in two reportable segments: the Railcar Leasing and Management Services Group and the Rail Products Group. For more information, visit: www.trin.net.
Some statements in this release, which are not historical facts, are “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements about Trinity's estimates, expectations, beliefs, intentions or strategies for the future, and the assumptions underlying these forward-looking statements, including, but not limited to, future financial and operating performance, future opportunities and any other statements regarding events or developments that Trinity believes or anticipates will or may occur in the future, including the potential financial and operational impacts of the COVID-19 pandemic. Trinity uses the words “anticipates,” “assumes,” “believes,” “estimates,” “expects,” “intends,” “forecasts,” “may,” “will,” “should,” “guidance,” “projected,” “outlook,” and similar expressions to identify these forward-looking statements. Forward-looking statements speak only as of the date of this release, and Trinity expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in Trinity’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based, except as required by federal securities laws. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from historical experience or our present expectations, including but not limited to risks and uncertainties regarding economic, competitive, governmental, and technological factors affecting Trinity’s operations, markets, products, services and prices, and such forward-looking statements are not guarantees of future performance. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see “Risk Factors” and “Forward-Looking Statements” in Trinity’s Annual Report on Form 10-K for the most recent fiscal year, as may be revised and updated by Trinity’s Quarterly Reports on Form 10-Q, and Trinity’s Current Reports on Form 8-K.
| Investor Contact: |
|---|
| Leigh Anne Mann |
| Vice President, Investor Relations |
| Trinity Industries, Inc. |
| (Investors) 214/631-4420 |
| Media Contact: |
| Jack L. Todd |
| Vice President, Public Affairs |
| Trinity Industries, Inc. |
| (Media Line) 214/589-8909 |
- TABLES TO FOLLOW -
Trinity Industries, Inc.
Condensed Consolidated Statements of Operations
(in millions, except per share amounts)
(unaudited)
| Three Months Ended<br>December 31, | Year Ended<br>December 31, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | |||||
| Revenues | $ | 472.2 | $ | 359.7 | $ | 1,516.0 | $ | 1,749.7 |
| Operating costs: | ||||||||
| Cost of revenues | 375.7 | 254.4 | 1,161.5 | 1,327.4 | ||||
| Selling, engineering, and administrative expenses | 42.9 | 47.5 | 179.6 | 189.6 | ||||
| Gains on dispositions of property: | ||||||||
| Lease portfolio sales | 8.4 | — | 54.1 | 17.3 | ||||
| Other | 4.6 | 0.1 | 24.1 | 2.7 | ||||
| Impairment of long-lived assets | — | 27.0 | — | 396.4 | ||||
| Restructuring activities, net | (2.6) | 0.5 | (3.7) | 10.9 | ||||
| 403.0 | 329.3 | 1,259.2 | 1,904.3 | |||||
| Operating profit (loss) | 69.2 | 30.4 | 256.8 | (154.6) | ||||
| Interest expense, net | 43.9 | 52.4 | 191.4 | 211.0 | ||||
| Loss on extinguishment of debt | — | — | 11.7 | 5.0 | ||||
| Pension plan settlement | (2.8) | 151.5 | (0.6) | 151.5 | ||||
| Other, net | — | 2.0 | (0.9) | 2.5 | ||||
| Income (loss) from continuing operations before income taxes | 28.1 | (175.5) | 55.2 | (524.6) | ||||
| Provision (benefit) for income taxes: | ||||||||
| Current | (2.9) | (30.8) | 2.8 | (512.6) | ||||
| Deferred | 9.4 | (11.5) | 13.1 | 238.5 | ||||
| 6.5 | (42.3) | 15.9 | (274.1) | |||||
| Income (loss) from continuing operations | 21.6 | (133.2) | 39.3 | (250.5) | ||||
| Income (loss) from discontinued operations, net of income taxes | (13.2) | 6.6 | 11.1 | 24.3 | ||||
| Gain on sale of discontinued operations, net of income taxes | 131.4 | — | 131.4 | — | ||||
| Net income (loss) | 139.8 | (126.6) | 181.8 | (226.2) | ||||
| Net income (loss) attributable to noncontrolling interest | 5.8 | 0.6 | (0.2) | (78.9) | ||||
| Net income (loss) attributable to Trinity Industries, Inc. | $ | 134.0 | $ | (127.2) | $ | 182.0 | $ | (147.3) |
| Basic earnings per common share: | ||||||||
| Income (loss) from continuing operations | $ | 0.16 | $ | (1.19) | $ | 0.39 | $ | (1.48) |
| Income from discontinued operations | 1.23 | 0.06 | 1.40 | 0.21 | ||||
| Basic net income (loss) attributable to Trinity Industries, Inc. | $ | 1.39 | $ | (1.13) | $ | 1.79 | $ | (1.27) |
| Diluted earnings per common share: | ||||||||
| Income (loss) from continuing operations | $ | 0.16 | $ | (1.19) | $ | 0.38 | $ | (1.48) |
| Income from discontinued operations | 1.21 | 0.06 | 1.37 | 0.21 | ||||
| Diluted net income (loss) attributable to Trinity Industries, Inc. | $ | 1.37 | $ | (1.13) | $ | 1.75 | $ | (1.27) |
| Weighted average number of shares outstanding: | ||||||||
| Basic | 96.0 | 112.2 | 101.5 | 115.9 | ||||
| Diluted | 98.0 | 112.2 | 103.8 | 115.9 |
Trinity has certain unvested restricted stock awards that participate in dividends on a nonforfeitable basis and are therefore considered to be participating securities. Consequently, diluted net income (loss) attributable to Trinity Industries, Inc. per common share is calculated under both the two-class method and the treasury stock method, and the more dilutive of the two calculations is presented. There were no restricted shares and stock options included in the computation of diluted EPS for the three months and year ended December 31, 2020 as we incurred a loss for these periods, and any effect on loss per common share would have been antidilutive.
Trinity Industries, Inc.
Condensed Segment Data
(in millions)
(unaudited)
| Three Months Ended<br>December 31, | Year Ended<br>December 31, | |||||||
|---|---|---|---|---|---|---|---|---|
| Revenues: | 2021 | 2020 | 2021 | 2020 | ||||
| Railcar Leasing and Management Services Group | $ | 181.2 | $ | 189.3 | $ | 735.3 | $ | 802.3 |
| Rail Products Group | 402.1 | 313.3 | 1,264.8 | 1,609.5 | ||||
| Segment Totals | 583.3 | 502.6 | 2,000.1 | 2,411.8 | ||||
| Eliminations – Lease Subsidiary | (110.9) | (140.5) | (478.5) | (652.9) | ||||
| Eliminations – Other | (0.2) | (2.4) | (5.6) | (9.2) | ||||
| Consolidated Total | $ | 472.2 | $ | 359.7 | $ | 1,516.0 | $ | 1,749.7 |
| Three Months Ended<br>December 31, | Year Ended<br>December 31, | |||||||
| Operating profit (loss): | 2021 | 2020 | 2021 | 2020 | ||||
| Railcar Leasing and Management Services Group | $ | 82.2 | $ | 88.2 | $ | 350.9 | $ | 353.7 |
| Rail Products Group | 13.4 | 0.1 | 4.7 | 36.3 | ||||
| Segment Totals | 95.6 | 88.3 | 355.6 | 390.0 | ||||
| Corporate and other | (21.0) | (26.6) | (84.1) | (99.7) | ||||
| Impairment of long-lived assets | — | (27.0) | — | (396.4) | ||||
| Restructuring activities, net | 2.6 | (0.5) | 3.7 | (10.9) | ||||
| Eliminations – Lease Subsidiary | (7.9) | (1.7) | (17.2) | (35.2) | ||||
| Eliminations – Other | (0.1) | (2.1) | (1.2) | (2.4) | ||||
| Consolidated Total | $ | 69.2 | $ | 30.4 | $ | 256.8 | $ | (154.6) |
Trinity Industries, Inc.
Selected Financial Information – Leasing Group
($ in millions)
(unaudited)
| Three Months Ended<br>December 31, | Year Ended<br>December 31, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | |||||||||
| Revenues: | ||||||||||||
| Leasing and management | $ | 181.2 | $ | 189.3 | $ | 735.3 | $ | 747.9 | ||||
| Sales of railcars owned one year or less at the time of sale (1) | — | — | — | 54.4 | ||||||||
| Total revenues | $ | 181.2 | $ | 189.3 | $ | 735.3 | $ | 802.3 | ||||
| Operating profit (2): | ||||||||||||
| Leasing and management | $ | 73.8 | $ | 88.2 | $ | 296.8 | $ | 336.0 | ||||
| Lease portfolio sales (1) | 8.4 | — | 54.1 | 17.7 | ||||||||
| Total operating profit | $ | 82.2 | $ | 88.2 | $ | 350.9 | $ | 353.7 | ||||
| Total operating profit margin | 45.4 | % | 46.6 | % | 47.7 | % | 44.1 | % | ||||
| Leasing and management operating profit margin | 40.7 | % | 46.6 | % | 40.4 | % | 44.9 | % | ||||
| Selected expense information: | ||||||||||||
| Depreciation (3) | $ | 55.5 | $ | 55.6 | $ | 226.0 | $ | 214.7 | ||||
| Maintenance and compliance | $ | 21.3 | $ | 20.7 | $ | 95.0 | $ | 88.1 | ||||
| Rent and ad valorem taxes | $ | 4.1 | $ | 4.6 | $ | 18.4 | $ | 21.1 | ||||
| Selling, engineering, and administrative expenses | $ | 14.5 | $ | 12.3 | $ | 50.6 | $ | 51.3 | ||||
| Interest (4) | $ | 39.0 | $ | 47.0 | $ | 181.6 | $ | 196.2 | ||||
| Three Months Ended<br>December 31, | Year Ended<br>December 31, | |||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 2021 | 2020 | 2021 | 2020 | |||||||||
| Lease portfolio sales | $ | 49.8 | $ | — | $ | 460.7 | $ | 193.1 | ||||
| Operating profit on lease portfolio sales | $ | 8.4 | $ | — | $ | 54.1 | $ | 17.7 | ||||
| Operating profit margin on lease portfolio sales | 16.9 | % | — | % | 11.7 | % | 9.2 | % |
(1) Beginning in the fourth quarter of 2020, we made a prospective change to the presentation of railcar sales and now present all sales of railcars from the lease fleet as a net gain or loss from the disposal of a long-term asset regardless of the age of railcar that is sold. Historically, we presented sales of railcars from the lease fleet on a gross basis in leasing revenues and cost of revenues if the railcars had been owned for one year or less at the time of sale. Sales of railcars from the lease fleet owned for more than one year had historically been presented as a net gain or loss from the disposal of a long-term asset.
(2) Operating profit includes: depreciation; fleet operating costs, which include maintenance, compliance, freight, and storage; rent and ad valorem taxes; and selling, engineering, and administrative expenses. Amortization of deferred profit on railcars sold from the Rail Products Group to the Leasing Group is included in the operating profit of the Leasing Group, resulting in the recognition of depreciation expense based on the Company's original manufacturing cost of the railcars. Interest expense is not a component of operating profit and includes the effect of hedges.
(3) Depreciation expense increased $1.5 million and $8.8 million for the three months and year ended December 31, 2021, respectively, as a result of the disposal of certain railcar components associated with our sustainable railcar conversion program. Additionally, depreciation expense related to our small cube covered hopper railcars decreased by approximately $7.0 million for the year ended December 31, 2021 relative to the year ended December 31, 2020 as a result of the impairment charge recorded in the second quarter of 2020 related to these railcars.
(4) Interest expense for the year ended December 31, 2021 includes $11.7 million of loss on extinguishment of debt associated with the refinancing of our partially-owned subsidiaries' debt. Interest expense for the year ended December 31, 2020 includes $5.0 million of loss on extinguishment of debt associated with the early redemption of debt.
Trinity Industries, Inc.
Condensed Consolidated Balance Sheets
(in millions)
(unaudited)
| December 31, 2021 | December 31, 2020 | |||
|---|---|---|---|---|
| ASSETS | ||||
| Cash and cash equivalents | $ | 167.3 | $ | 132.0 |
| Receivables, net of allowance | 227.6 | 164.4 | ||
| Income tax receivable | 5.4 | 445.8 | ||
| Inventories | 432.9 | 285.2 | ||
| Restricted cash | 135.1 | 96.4 | ||
| Property, plant, and equipment, net | 6,846.9 | 6,968.8 | ||
| Goodwill | 154.2 | 147.2 | ||
| Assets of discontinued operations | — | 178.5 | ||
| Other assets | 266.5 | 283.5 | ||
| Total assets | $ | 8,235.9 | $ | 8,701.8 |
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||
| Accounts payable | $ | 206.4 | $ | 146.1 |
| Accrued liabilities | 307.4 | 310.0 | ||
| Debt | 5,170.6 | 5,017.0 | ||
| Deferred income taxes | 1,106.8 | 1,047.5 | ||
| Liabilities of discontinued operations | — | 18.5 | ||
| Other liabilities | 147.9 | 146.7 | ||
| Stockholders' equity: | ||||
| Trinity Industries, Inc. | 1,029.8 | 1,738.8 | ||
| Noncontrolling interest | 267.0 | 277.2 | ||
| 1,296.8 | 2,016.0 | |||
| Total liabilities and stockholders' equity | $ | 8,235.9 | $ | 8,701.8 |
Trinity Industries, Inc.
Additional Balance Sheet Information
(in millions)
(unaudited)
| December 31, 2021 | December 31, 2020 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Property, Plant, and Equipment | ||||||||||
| Manufacturing/Corporate: | ||||||||||
| Property, plant, and equipment | $ | 828.0 | $ | 873.6 | ||||||
| Accumulated depreciation | (478.7) | (506.7) | ||||||||
| 349.3 | 366.9 | |||||||||
| Leasing: | ||||||||||
| Wholly-owned subsidiaries: | ||||||||||
| Machinery and other | 20.7 | 19.5 | ||||||||
| Equipment on lease | 7,061.3 | 7,010.6 | ||||||||
| Accumulated depreciation | (1,375.9) | (1,234.2) | ||||||||
| 5,706.1 | 5,795.9 | |||||||||
| Partially-owned subsidiaries: | ||||||||||
| Equipment on lease | 2,242.9 | 2,248.2 | ||||||||
| Accumulated depreciation | (672.3) | (621.9) | ||||||||
| 1,570.6 | 1,626.3 | |||||||||
| Deferred profit on railcars sold to the Leasing Group | (1,047.3) | (1,064.7) | ||||||||
| Accumulated amortization | 268.2 | 244.4 | ||||||||
| (779.1) | (820.3) | |||||||||
| $ | 6,846.9 | $ | 6,968.8 | December 31, 2021 | December 31, 2020 | |||||
| --- | --- | --- | --- | --- | ||||||
| Debt | ||||||||||
| Corporate – Recourse: | ||||||||||
| Revolving credit facility | $ | — | $ | 50.0 | ||||||
| Senior notes, net of unamortized discount of $0.1 and $0.2 | 399.9 | 399.8 | ||||||||
| 399.9 | 449.8 | |||||||||
| Less: unamortized debt issuance costs | (1.2) | (1.6) | ||||||||
| Total recourse debt | 398.7 | 448.2 | ||||||||
| Leasing – Non-recourse: | ||||||||||
| Wholly-owned subsidiaries: | ||||||||||
| Secured railcar equipment notes, net of unamortized discount of $0.5 and $0.6 | 2,257.5 | 2,042.4 | ||||||||
| 2017 promissory notes, net of unamortized discount of $7.8 and $10.1 | 760.2 | 802.7 | ||||||||
| TILC warehouse facility | 561.8 | 519.4 | ||||||||
| 3,579.5 | 3,364.5 | |||||||||
| Less: unamortized debt issuance costs | (23.7) | (24.0) | ||||||||
| 3,555.8 | 3,340.5 | |||||||||
| Partially-owned subsidiaries: | ||||||||||
| Secured railcar equipment notes, net of unamortized discount of $0.3 and $— | 903.5 | 1,237.5 | ||||||||
| TRIP Railcar Co. term loan | 323.7 | — | ||||||||
| 1,227.2 | 1,237.5 | |||||||||
| Less: unamortized debt issuance costs | (11.1) | (9.2) | ||||||||
| 1,216.1 | 1,228.3 | |||||||||
| Total non–recourse debt | 4,771.9 | 4,568.8 | ||||||||
| Total debt | $ | 5,170.6 | $ | 5,017.0 |
Trinity Industries, Inc.
Condensed Consolidated Statements of Cash Flows
(in millions)
(unaudited)
| Year Ended<br>December 31, | ||||
|---|---|---|---|---|
| 2021 | 2020 | |||
| Operating activities: | ||||
| Net cash provided by operating activities – continuing operations | $ | 615.6 | $ | 622.0 |
| Net cash provided by (used in) operating activities – discontinued operations | (3.8) | 29.7 | ||
| Net cash provided by operating activities | 611.8 | 651.7 | ||
| Investing activities: | ||||
| Proceeds from lease portfolio sales | 454.3 | 138.7 | ||
| Proceeds from dispositions of property and other assets | 40.5 | 32.7 | ||
| Capital expenditures – leasing (net of sold lease fleet railcars owned one year or less with a net cost of $54.0 for the year ended December 31, 2020) | (547.2) | (602.2) | ||
| Capital expenditures – manufacturing and other | (23.6) | (95.9) | ||
| Acquisitions, net of cash acquired | (16.6) | — | ||
| Proceeds from insurance recoveries | 9.5 | — | ||
| Other | 0.1 | — | ||
| Net cash used in investing activities – continuing operations | (83.0) | (526.7) | ||
| Proceeds from sale of discontinued operations | 364.7 | — | ||
| Net cash used in investing activities – discontinued operations | (5.4) | (6.2) | ||
| Net cash provided by (used in) investing activities | 276.3 | (532.9) | ||
| Financing activities: | ||||
| Net proceeds from (repayments of) debt | 128.3 | 118.5 | ||
| Shares repurchased | (833.4) | (191.3) | ||
| Dividends paid to common shareholders | (88.5) | (91.7) | ||
| Other | (20.5) | (3.5) | ||
| Net cash used in financing activities | (814.1) | (168.0) | ||
| Net increase (decrease) in cash, cash equivalents, and restricted cash | 74.0 | (49.2) | ||
| Cash, cash equivalents, and restricted cash at beginning of period | 228.4 | 277.6 | ||
| Cash, cash equivalents, and restricted cash at end of period | $ | 302.4 | $ | 228.4 |
Trinity Industries, Inc.
Reconciliations of Non-GAAP Measures
(in millions, except per share amounts)
(unaudited)
Adjusted Operating Results
We have supplemented the presentation of our reported GAAP operating profit (loss), income (loss) from continuing operations before income taxes, provision (benefit) for income taxes, income (loss) from continuing operations, net income (loss) from continuing operations attributable to Trinity Industries, Inc., and diluted income (loss) from continuing operations per common share attributable to Trinity Industries, Inc. with non-GAAP measures that adjust the GAAP measures to exclude the impact of gains on dispositions of other property, impairment of long-lived assets, restructuring activities, loss on extinguishment of debt, pension plan settlement, the income tax effects of the CARES Act, and certain other transactions or events (as applicable). These non-GAAP measures are derived from amounts included in our GAAP financial statements and are reconciled to the most directly comparable GAAP financial measures in the tables below. Management believes that these measures are useful to both management and investors for analyzing the performance of our business without the impact of certain items that are not indicative of our normal business operations. Non-GAAP measures should not be considered in isolation or as a substitute for our reporting results prepared in accordance with GAAP and, as calculated, may not be comparable to other similarly titled measures for other companies.
| Three Months Ended December 31, 2021 | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| GAAP | Pension plan settlement (1) | Gains on dispositions of property – other (1)(2) | Restructuring activities, net (1) | Income tax effect of CARES Act | Adjusted | |||||||||||
| Operating profit (loss) | $ | 69.2 | $ | — | $ | (3.1) | $ | (2.6) | $ | — | $ | 63.5 | ||||
| Income (loss) from continuing operations before income taxes | $ | 28.1 | $ | (2.8) | $ | (3.1) | $ | (2.6) | $ | — | $ | 19.6 | ||||
| Provision (benefit) for income taxes | $ | 6.5 | $ | 0.2 | $ | (0.8) | $ | (0.6) | $ | 0.7 | $ | 6.0 | ||||
| Income (loss) from continuing operations | $ | 21.6 | $ | (3.0) | $ | (2.3) | $ | (2.0) | $ | (0.7) | $ | 13.6 | ||||
| Net income (loss) from continuing operations attributable to Trinity Industries, Inc. | $ | 15.8 | $ | (3.0) | $ | (2.3) | $ | (2.0) | $ | (0.7) | $ | 7.8 | ||||
| Diluted weighted average shares outstanding | 98.0 | 98.0 | ||||||||||||||
| Diluted income (loss) from continuing operations per common share attributable to Trinity Industries, Inc. | $ | 0.16 | $ | 0.08 | ||||||||||||
| Three Months Ended December 31, 2020 | ||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||
| GAAP | Impairment of long-lived assets – Controlling Interest (1) | Pension plan settlement (1) | Restructuring activities, net (1) | Income tax effect of CARES Act | Adjusted | |||||||||||
| Operating profit (loss) | $ | 30.4 | $ | 27.0 | $ | — | $ | 0.5 | $ | — | $ | 57.9 | ||||
| Income (loss) from continuing operations before income taxes | $ | (175.5) | $ | 27.0 | $ | 151.5 | $ | 0.5 | $ | — | $ | 3.5 | ||||
| Provision (benefit) for income taxes | $ | (42.3) | $ | 6.2 | $ | 34.9 | $ | 0.1 | $ | 5.8 | $ | 4.7 | ||||
| Income (loss) from continuing operations | $ | (133.2) | $ | 20.8 | $ | 116.6 | $ | 0.4 | $ | (5.8) | $ | (1.2) | ||||
| Net income (loss) from continuing operations attributable to Trinity Industries, Inc. | $ | (133.8) | $ | 20.8 | $ | 116.6 | $ | 0.4 | $ | (5.8) | $ | (1.8) | ||||
| Diluted weighted average shares outstanding (6) | 112.2 | 112.2 | ||||||||||||||
| Diluted income (loss) from continuing operations per common share attributable to Trinity Industries, Inc. | $ | (1.19) | $ | (0.02) | ||||||||||||
| Year Ended December 31, 2021 | ||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| GAAP | Gains on dispositions of property – other (1)(2) | Restructuring activities, net (1) | Loss on extinguishment of debt – Controlling Interest (1)(3) | Loss on extinguishment of debt – Noncontrolling Interest (4) | Pension plan settlement (1) | Income tax effect of CARES Act | Adjusted | |||||||||
| Operating profit (loss) | $ | 256.8 | $ | (7.8) | $ | (3.7) | $ | — | $ | — | $ | — | $ | — | $ | 245.3 |
| Income (loss) from continuing operations before income taxes | $ | 55.2 | $ | (7.8) | $ | (3.7) | $ | 4.6 | $ | 7.1 | $ | (0.6) | $ | — | $ | 54.8 |
| Provision (benefit) for income taxes | $ | 15.9 | $ | (2.0) | $ | (0.8) | $ | 1.1 | $ | — | $ | 0.7 | $ | (2.5) | $ | 12.4 |
| Income (loss) from continuing operations | $ | 39.3 | $ | (5.8) | $ | (2.9) | $ | 3.5 | $ | 7.1 | $ | (1.3) | $ | 2.5 | $ | 42.4 |
| Net income (loss) from continuing operations attributable to Trinity Industries, Inc. | $ | 39.5 | $ | (5.8) | $ | (2.9) | $ | 3.5 | $ | — | $ | (1.3) | $ | 2.5 | $ | 35.5 |
| Diluted weighted average shares outstanding | 103.8 | 103.8 | ||||||||||||||
| Diluted income (loss) from continuing operations per common share attributable to Trinity Industries, Inc. | $ | 0.38 | $ | 0.34 | ||||||||||||
| Year Ended December 31, 2020 | ||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| GAAP | Impairment of long-lived assets – Controlling Interest (1)(5) | Impairment of long-lived assets – Noncontrolling Interest (4) | Pension plan settlement (1) | Restructuring activities, net (1) | Loss on extinguishment of debt (1) | Income tax effect of CARES Act | Adjusted | |||||||||
| Operating profit (loss) | $ | (154.6) | $ | 315.1 | $ | 81.3 | $ | — | $ | 10.9 | $ | — | $ | — | $ | 252.7 |
| Income (loss) from continuing operations before income taxes | $ | (524.6) | $ | 315.1 | $ | 81.3 | $ | 151.5 | $ | 10.9 | $ | 5.0 | $ | — | $ | 39.2 |
| Provision (benefit) for income taxes | $ | (274.1) | $ | 73.0 | $ | — | $ | 34.9 | $ | 2.6 | $ | 1.2 | $ | 180.4 | $ | 18.0 |
| Income (loss) from continuing operations | $ | (250.5) | $ | 242.1 | $ | 81.3 | $ | 116.6 | $ | 8.3 | $ | 3.8 | $ | (180.4) | $ | 21.2 |
| Net income (loss) from continuing operations attributable to Trinity Industries, Inc. | $ | (171.6) | $ | 242.1 | $ | — | $ | 116.6 | $ | 8.3 | $ | 3.8 | $ | (180.4) | $ | 18.8 |
| Diluted weighted average shares outstanding (7) | 115.9 | 117.2 | ||||||||||||||
| Diluted income (loss) from continuing operations per common share attributable to Trinity Industries, Inc. | $ | (1.48) | $ | 0.16 |
(1) The effective tax rate for gains on dispositions of other property, impairment of long-lived assets, restructuring activities, the loss on extinguishment of debt, and pension plan settlement is before consideration of the CARES Act.
(2) Represents insurance recoveries in excess of net book value received for assets damaged by a tornado at the Company’s rail maintenance facility in Cartersville, Georgia in the first quarter of 2021.
(3) Excludes $7.1 million of loss on extinguishment of debt associated with the noncontrolling interest recorded in the second quarter of 2021.
(4) Represents the portion of the non-cash impairment of long-lived asset charge and the loss on extinguishment of debt attributable to the noncontrolling interest, for which Trinity does not provide income taxes.
(5) Excludes $81.3 million of non-cash impairment of long-lived asset charges associated with the noncontrolling interest recorded in the second quarter of 2020.
(6) GAAP diluted weighted average shares outstanding excludes 1.0 million shares for the three months ended December 31, 2020, since the Company was in a net loss position for the period. When adjusting for the items above, these shares remain antidilutive since the Company was in a net loss position on an adjusted basis for the period.
(7) GAAP diluted weighted average shares outstanding excludes 1.3 million shares for the year ended December 31, 2020, since the Company was in a net loss position for the period. When adjusting for the items above, these shares become dilutive.
Pre-Tax Return on Equity
Pre-Tax Return on Equity (“Pre-Tax ROE”) is defined as a ratio for which (i) the numerator is calculated as income or loss from continuing operations, adjusted to exclude the effects of the provision or benefit for income taxes, net income or loss attributable to noncontrolling interest, and certain other adjustments, which include gains on dispositions of other property, the controlling interest portion of impairment of long-lived assets and loss on extinguishment of debt, restructuring activities, and pension plan settlement; and (ii) the denominator is calculated as average stockholders’ equity (which excludes noncontrolling interest), adjusted to exclude accumulated other comprehensive income or loss. In the following table, the numerator and denominator of our Pre-Tax ROE calculation are reconciled to income from continuing operations and stockholders’ equity, respectively, which are the most directly comparable GAAP financial measures. Management believes that Pre-Tax ROE is a useful measure to both management and investors as it provides an indication of the economic return on the Company’s investments over time. Pre-Tax ROE is used in consideration of the Company’s expected tax position in the near-term.
| December 31, 2021 | December 31, 2020 | December 31, 2019 | |||||
|---|---|---|---|---|---|---|---|
| ( in millions) | |||||||
| Numerator: | |||||||
| Income (loss) from continuing operations | $ | (250.5) | |||||
| Provision (benefit) for income taxes | 15.9 | (274.1) | |||||
| Income (loss) from continuing operations before income taxes | 55.2 | (524.6) | |||||
| Net loss attributable to noncontrolling interest | 0.2 | 78.9 | |||||
| Adjustments: | |||||||
| Gains on dispositions of property – other (1) | (7.8) | — | |||||
| Restructuring activities, net | (3.7) | 10.9 | |||||
| Impairment of long-lived assets – controlling interest (2) | — | 315.1 | |||||
| Loss on extinguishment of debt – controlling interest (3) | 4.6 | 5.0 | |||||
| Pension plan settlement | (0.6) | 151.5 | |||||
| Adjusted Profit Before Tax | $ | 36.8 | |||||
| Denominator: | |||||||
| Total stockholders' equity | $ | 2,016.0 | $ | 2,378.9 | |||
| Noncontrolling interest | (267.0) | (277.2) | (348.8) | ||||
| Accumulated other comprehensive loss | 17.0 | 30.9 | 153.1 | ||||
| Adjusted Stockholders' Equity | $ | 1,769.7 | $ | 2,183.2 | |||
| Average total stockholders' equity | $ | 2,197.5 | |||||
| Return on Equity (4) | 2.4 | % | (11.4) | % | |||
| Average Adjusted Stockholders' Equity | $ | 1,976.5 | |||||
| Pre-Tax Return on Equity (5) | 3.4 | % | 1.9 | % |
All values are in US Dollars.
(1) Represents insurance recoveries in excess of net book value received for assets damaged by a tornado at the Company’s rail maintenance facility in Cartersville, Georgia in the first quarter of 2021.
(2) Excludes $81.3 million of non-cash impairment of long-lived asset charges associated with the noncontrolling interest recorded in the second quarter of 2020.
(3) Excludes $7.1 million of loss on extinguishment of debt associated with the noncontrolling interest recorded in the second quarter of 2021.
(4) Return on Equity is calculated as income (loss) from continuing operations divided by average total stockholders' equity.
(5) Pre-Tax Return on Equity is calculated as adjusted profit before tax divided by average adjusted stockholders' equity, each as defined and reconciled above.
Free Cash Flow
Total Free Cash Flow After Investments and Dividends ("Free Cash Flow") is a non-GAAP financial measure. The change in presentation of sales of railcars from the lease fleet, which was effected on a prospective basis beginning in the fourth quarter of 2020, had no effect on our previously reported Free Cash Flow.
We believe Free Cash Flow is useful to both management and investors as it provides a relevant measure of liquidity and a useful basis for assessing our ability to fund our operations and repay our debt. Free Cash Flow is reconciled to net cash provided by operating activities from continuing operations, the most directly comparable GAAP financial measure, in the following tables.
For the year ended December 31, 2021, Free Cash Flow is defined as net cash provided by operating activities from continuing operations as computed in accordance with GAAP, plus cash proceeds from lease portfolio sales, less capital expenditures for manufacturing, dividends paid, and Equity CapEx for leased railcars. Equity CapEx for leased railcars is defined as leasing capital expenditures, adjusted to exclude net proceeds from (repayments of) debt.
| Year Ended December 31, 2021 | ||
|---|---|---|
| (in millions) | ||
| Net cash provided by operating activities – continuing operations | $ | 615.6 |
| Proceeds from lease portfolio sales | 454.3 | |
| Adjusted Net Cash Provided by Operating Activities | 1,069.9 | |
| Capital expenditures – manufacturing and other | (23.6) | |
| Dividends paid to common stockholders | (88.5) | |
| Free Cash Flow (before Capital expenditures – leasing) | 957.8 | |
| Equity CapEx for leased railcars | (418.9) | |
| Total Free Cash Flow After Investments and Dividends | $ | 538.9 |
| Capital expenditures – leasing | $ | 547.2 |
| Less: | ||
| Payments to retire debt | (2,315.8) | |
| Proceeds from issuance of debt | 2,444.1 | |
| Net proceeds from (repayments of) debt | 128.3 | |
| Equity CapEx for leased railcars | $ | 418.9 |
For the year ended December 31, 2020, Free Cash Flow is defined as net cash provided by operating activities from continuing operations as computed in accordance with GAAP, plus cash proceeds from sales of leased railcars owned more than one year at the time of sale, less capital expenditures for manufacturing, dividends paid, and Equity CapEx for leased railcars. Equity CapEx for leased railcars is defined as leasing capital expenditures, net of sold lease fleet railcars owned one year or less, adjusted to exclude net proceeds from (repayments of) debt.
| Year Ended December 31, 2020 | ||
|---|---|---|
| (in millions) | ||
| Net cash provided by operating activities – continuing operations | $ | 622.0 |
| Proceeds from railcar lease fleet sales owned more than one year at the time of sale | 138.7 | |
| Adjusted Net Cash Provided by Operating Activities | 760.7 | |
| Capital expenditures – manufacturing and other | (95.9) | |
| Dividends paid to common stockholders | (91.7) | |
| Free Cash Flow (before Capital expenditures – leasing) | 573.1 | |
| Equity CapEx for leased railcars | (483.7) | |
| Total Free Cash Flow After Investments and Dividends | $ | 89.4 |
| Capital expenditures – leasing, net of sold lease fleet railcars owned one year or less of $54.0 | $ | 602.2 |
| Less: | ||
| Payments to retire debt | (1,442.9) | |
| Proceeds from issuance of debt | 1,561.4 | |
| Net proceeds from (repayments of) debt | 118.5 | |
| Equity CapEx for leased railcars | $ | 483.7 |
EBITDA and Adjusted EBITDA
“EBITDA” is defined as income (loss) from continuing operations plus interest expense, income taxes, and depreciation and amortization expense. Adjusted EBITDA is defined as EBITDA plus gains on dispositions of other property, non-cash impairment of long-lived assets, restructuring activities, loss on extinguishment of debt, and pension plan settlement. EBITDA and Adjusted EBITDA are non-GAAP financial measures; however, the amounts included in these calculations are derived from amounts included in our GAAP financial statements. EBITDA and Adjusted EBITDA are reconciled to net income (loss), the most directly comparable GAAP financial measure, in the following table. This information is provided to assist management and investors in making meaningful comparisons of our operating performance between periods. We believe EBITDA is a useful measure for analyzing the performance of our business. We also believe that EBITDA is commonly reported and widely used by investors and other interested parties as a measure of a company’s operating performance and debt servicing ability because it assists in comparing performance on a consistent basis without regard to capital structure, depreciation or amortization (which can vary significantly depending on many factors). EBITDA and Adjusted EBITDA should not be considered as alternatives to net income as indicators of our operating performance, or as alternatives to operating cash flows as measures of liquidity. Non-GAAP measures should not be considered in isolation or as a substitute for our reporting results prepared in accordance with GAAP and, as calculated, may not be comparable to other similarly titled measures for other companies.
| Three Months Ended<br>December 31, | Year Ended<br>December 31, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | |||||
| Net income (loss) | $ | 139.8 | $ | (126.6) | $ | 181.8 | $ | (226.2) |
| Less: Income (loss) from discontinued operations, net of income taxes | (13.2) | 6.6 | 11.1 | 24.3 | ||||
| Less: Gain on sale of discontinued operations, net of income taxes | 131.4 | — | 131.4 | — | ||||
| Income (loss) from continuing operations | $ | 21.6 | $ | (133.2) | $ | 39.3 | $ | (250.5) |
| Interest expense | 44.3 | 52.6 | 192.0 | 214.2 | ||||
| Provision (benefit) for income taxes | 6.5 | (42.3) | 15.9 | (274.1) | ||||
| Depreciation and amortization expense | 65.2 | 64.6 | 265.7 | 258.5 | ||||
| EBITDA | $ | 137.6 | $ | (58.3) | $ | 512.9 | $ | (51.9) |
| Gains on dispositions of property – other | (3.1) | — | (7.8) | — | ||||
| Impairment of long-lived assets | — | 27.0 | — | 396.4 | ||||
| Restructuring activities, net | (2.6) | 0.5 | (3.7) | 10.9 | ||||
| Loss on extinguishment of debt | — | — | 11.7 | 5.0 | ||||
| Pension plan settlement | (2.8) | 151.5 | (0.6) | 151.5 | ||||
| Adjusted EBITDA | $ | 129.1 | $ | 120.7 | $ | 512.5 | $ | 511.9 |
19
Document
Exhibit 99.2
Trinity Industries, Inc.
Earnings Release Conference Call – Q4 2021
February 17, 2022
Leigh Anne Mann
Vice President, Investor Relations
Thank you, operator. Good morning everyone. We appreciate you joining us for the Company’s fourth quarter and full year 2021 financial results conference call.
Our prepared remarks will include comments from Jean Savage, Trinity’s Chief Executive Officer and President, and Eric Marchetto, the Company’s Chief Financial Officer. We will hold a Q&A session following the prepared remarks from our leaders.
During the call today, we will reference slides highlighting key points of discussion, as well as certain non-GAAP financial metrics. The reconciliations of the non-GAAP metrics to comparable GAAP measures are provided in the appendix of the supplemental slides. The supplemental materials are accessible on our IR website at www.trin.net. These slides can be found under the Events and Presentations portion of the website, along with the Fourth Quarter Earnings Conference Call event link.
A replay of today’s call will be available after 10:30 a.m. Eastern time through midnight on February 24, 2022. The replay number is (877) 344-7529 with an access code of 5826703. A replay of the webcast will also be available under the Events and Presentations page on our Investor Relations website.
It is now my pleasure to turn the call over to Jean.
E. Jean Savage
Chief Executive Officer and President
Thank you, Leigh Anne, and good morning everyone.
I hope 2022 is off to a safe and healthy start for all of you. We had a busy and successful end of the year, highlighted by the divestiture of our highway products business on December 31st, and we are excited about the year ahead. Our optimization efforts continued despite the supply chain and labor headwinds across the industrial economy, and our commercial team actively pursued new opportunities for our existing products and services while exploring ways to expand our offerings. We believe we are through the worst of the cycle, with strong metrics to support growth in both our Rail Products and Railcar Leasing and Management segments. Furthermore, considering both the
supportive industry environment and our internal business optimization work, our management team and Board firmly believe we enter 2022 poised for meaningful growth. We are entering the second year of our three year plan we introduced at our Investor Day in late 2020, and we are on track to meet the goals we presented then. Needless to say, we are excited to sustain this momentum into 2022 as we seek to accelerate our growth. The timing for this acceleration appears opportune. In short, we think 2022 is going to be a good year.
Let me summarize some key themes from our fourth quarter and the full year. Please turn to Slide 3.
We remain encouraged by the improving macro conditions that affect our business, and we expect the North American economy to continue its post-pandemic recovery in 2022. One of the unique aspects of this recovery has been the accelerated rate of inflation for both consumers and producers. Our business is resilient in an inflationary environment, as we have the ability to re-price our lease assets and keep up with inflation. Inflation can also make existing railcars more attractive to our end users as the price for new equipment tends to grow more quickly. Higher steel prices also make older assets more valuable to scrap, and significant retirement levels over the last few years, especially in key freight car markets like box cars, gondolas, and grain covered hoppers, support increased demand for new railcars.
We expect 2022 rail traffic to be driven by agriculture, chemicals, and construction materials and therefore be a freight-car led recovery. This cycle is differentiated from prior cycles as there is no single railcar driving increased rail traffic, which gives more opportunities for lease fleet utilization as well as increased deliveries. Consistent with our peers and the industry, we think 2022 will see railcar production at or slightly above replacement levels, and we are forecasting industry deliveries of 40,000 to 50,000 annually.
Some highlights from our consolidated results for the quarter and the full year are highlighted on Slides 4 and 5. As a quick note, our highway products business has been retroactively included as part of discontinued operations and therefore not in our continuing operations. In the fourth quarter, Trinity generated revenue of $472 million, up 31% from the fourth quarter of 2020. Our GAAP EPS from continuing operations for the quarter was $0.16, and our adjusted EPS was $0.08. For the full year, our GAAP EPS was $0.38, and our adjusted EPS of $0.34 was up $0.18 over full year 2020. Eric will discuss the impact of the highway products business in a few minutes.
Cash flow from continuing operations in the quarter was $197 million and $616 million for the full year. Free cash flow for the full year after investments and dividends was $539 million. This is evidence of
our successful optimization efforts. We have proven that our business has the ability to generate substantial and stable cash, which gives us flexibility to further optimize our balance sheet and drive shareholder value through accretive capital allocation.
Let’s turn to Slide 6, and we can review the railcar market as a whole and where we are today as a business. Rail traffic in 2021 was a marked improvement over the lows of 2020. However, in the start of this year, we have seen rail traffic decline relative to 2021, largely due to the omicron wave of the pandemic driving labor disruptions in the United States, as well as winter weather in Canada. We expect to see this improve as these near term disruptions are resolved. Railcars in storage continue to decline, with the storage rate falling below 20% in December for the first time since the summer of 2019. Storage rates are currently 7.4% down sequentially quarter over quarter.
These supportive market conditions are translating into improved business fundamentals for Trinity as well. Fleet utilization is at 95.7%, which is back to pre-pandemic levels from two years ago. Additionally, after inflecting positively last quarter for the first time since we introduced the metric, our FLRD improved again in the fourth quarter to a positive 2.2%, which means current lease rates are higher than the expiring rates Trinity will encounter in the next twelve months. We like this metric because it is forward-looking and specific to the leases that are expiring. It’s also worth noting that the FLRD is positive even after accounting for some tough comps on select car types, like pressure cars and general service tank cars. Supporting the upward trends in rates, in the fourth quarter renewal rates increased by 12.8%.
In Rail Products, I noted our optimism for orders and deliveries improving in 2022 and beyond. In the fourth quarter, we received orders of 5,360 railcars, which was 358% higher than a year ago, and deliveries of 2,805 railcars were 26% higher. Another testament to our optimization efforts has been the commercial team’s ability to sustain traditional levels of market share while implementing a more aggressive pricing strategy. Although this is a freight car driven recovery, the lower margin on freight cars will be more than offset by the improvement in volume. Supply chain delays are impacting the timing of some near term deliveries, but there are lasting demand dynamics driving 2022 optimism and likely beyond as well. It is also worth noting that in 2022 we have experienced labor shortages in North America due to absenteeism from COVID. While this has been a headwind of 10 to 15 percent of the workforce in some of our facilities, declining case rates from the latest wave of COVID-19 have us optimistic that our workforce can return to regular levels of productivity in the coming weeks.
On Slide 7, let’s turn to Trinity’s segment results for the quarter.
In our leasing business, revenue and operating profit were slightly down from the last quarter. As already mentioned, renewal rates and the FLRD were both improved in the quarter, which is a leading indicator for revenue and margin growth in 2022. Our ability to renew expiring contracts improved through the year with a 2021 renewal rate of 79% – the best rate we have seen since 2014.
Now looking at the Rail Products Group, revenue and margin were both improved from last quarter, and book-to-bill in the quarter was 1.9x. As I mentioned earlier, although the supply chain disruptions and labor issues we discussed in the last quarter still persist, we have made significant progress, especially in terms of supply chain, toward improved results. Operating margins in the Rail Products Group were 3.3%, up from negative 0.9% the prior quarter. Compared to last year, new railcar deliveries for the full year were down 23%. This is largely due to an order that needed to deliver at the first of this year, a supply chain issue that pushed some deliveries into 2022, and weakness in tank car demand.
I’ll move to Slide 8 with an update on our returns optimization initiatives. The highlight of the quarter, from an enterprise optimization perspective, was the divestiture of our highway products business, so I’d like to take a minute to talk about that transaction with you.
In the quarter, Trinity completed the sale of Trinity Highway Products to a private equity fund, Monomoy Capital Partners, for an aggregate purchase price of $375 million, and we recorded a net gain of $131 million on the sale, which is reflected in discontinued operations. We had said previously that we were not the appropriate long-term owner, and this business was not core to Trinity. Therefore, completing this transaction represented the completion of our Company’s desire to be fully focused on rail-related industries. We were pleased with the terms of the sale and immediately deployed the $375 million of proceeds back to our shareholders with a two-pronged strategy.
First, we directly purchased $250 million worth of stock, or 8.8 million shares, from Value Act in a privately negotiated transaction. Second, we used the remaining $125 million of proceeds to enter into an accelerated share repurchase, or ASR, agreement. The ASR is part of our existing authorization, so including shares previously repurchased, after completing the ASR we will have approximately $73 million left in the authorization that we expect to repurchase before it expires at the end of the year.
All in all, our team did a phenomenal job getting this transaction completed and getting the proceeds immediately and effectively deployed.
Looking at 2021 as a whole, we made substantial progress toward our strategic initiatives. Our Trinsight development was awarded Innovation of the Year by the Canadian Association of Rail Suppliers, and we are on target as far as cars on-line with Trinsight. Our sustainable railcar conversion program continues to grow, with 1,150 cars in our backlog and 650 delivered in the full year. In the fourth quarter, we re-tanked approximately 80 cars and completed a heavy rebody on 210 cars. As a point of reference, for our conversions, we are able to reuse varying levels of components depending on the donor railcar, but generally, we can reuse anywhere from 10,000 to 25,000 pounds of material per railcar, which is a meaningful source of waste minimization.
Additionally, we view the Wafra transaction we completed in the third quarter as a major step toward lease fleet optimization, and the partnership is off to a great start. And, for the full year, we returned $895 million to our shareholders, including $807 million in share repurchases.
Before I hand the call over to Eric, I’d like to reinforce our purpose statement, which is “Delivering Goods for the Good of All.” The challenges of the past few years have taught us all many lessons, and here at Trinity, we see the supply chain disruptions and the subsequent ripple effects around the world as a good opportunity to re-visit increased use of rail as part of an integrated supply chain. We continue to partner with railroads and shippers, through programs like RailPulse, to look for ways to improve rail for the greater good of the broader supply chains and overall North American economy. We are better positioned with our pricing and have made great strides in reducing costs, and we are focused on strong returns.
We think the sustainability of rail as compared to other modes of transport provides a unique opportunity as our customers think about de-carbonization. We are also committed to improving the efficiency of rail and are deliberate in our new product development process. On average, we spend about $10 million a year on new product development and plan to do so again in 2022.
In 2021, our new products included a horizontal side seam large covered hopper for the agriculture market, which optimizes the clearance envelope of the railcar through corrugated sides for strength and efficiency. The result is a railcar with more capacity and 5 feet shorter than a traditional covered hopper. This means more railcars per train and less fuel per unit of commodity. We also developed a new composite floor for the refrigerated box car market, which allows for an easy transition from fresh food to frozen food service and improves the versatility and utilization of this car type.
We believe the rail industry is poised for growth, and there are opportunities up and down the supply chain to increase efficiency and remove friction. We continue to look for opportunities to grow Trinity’s
presence in the supply chain, both organically and through acquisitions. We know rail has room for improvement in terms of predictability and efficiency, but Trinity is committed to being part of the solution.
With that, let me hand the call over to Eric for more detail on our results.
Eric R. Marchetto,
Executive Vice President and Chief Financial Officer
Thank you, Jean – and good morning everyone.
Though the operating environment over the last two years has been challenging, we made significant progress at Trinity in 2021. We completed financing activity of approximately $1.6 billion, which conformed to our Green Financing Framework and took advantage of historically low interest rates, lowering our aggregate borrowing costs by approximately 100 basis points. We launched a joint venture program with Wafra targeting up to $1 billion in railcar lease investments, we divested our highway business, we raised our quarterly dividend, and we returned $895 million to our shareholders through repurchases and dividends. In short, we have made a lot of progress on our strategic initiatives and are poised to take advantage of the operating leverage of our business.
Jean spoke about the market improving. This is certainly evident in key industry metrics – orders are up, backlog is up, scrapping remains strong, lease rates are rising, and we anticipate easing of the headwinds coming from supply chain and labor disruptions in the quarters to come. These market metrics are positive, but I also want to reinforce my optimism about Trinity specifically being well-positioned to capitalize on these market dynamics. With the fourth quarter sale of our highway products business and the work we have done to optimize our balance sheet, we are focused on optimizing returns in our business.
I will begin on Slide 9 with a summary of the quarter. Starting with the income statement, fourth quarter consolidated revenue from continuing operations totaled $472 million. For the quarter, GAAP earnings per share were $0.16. Adjusted earnings per share of $0.08 declined sequentially, due mainly to the gain from the Wafra sale in the third quarter, but improved from a negative $0.02 year over year. Full year adjusted earnings per share from continuing operations of $0.34 were compared to full year 2020 adjusted EPS of $0.16.
Turning to the cash flow statement, full year cash flow from continuing operations totaled $616 million, with $197 million in the fourth quarter. We collected $189 million of our income tax receivable in the fourth quarter related to the CARES Act, which was excluded from our guidance of $450 to $475
million. Our cash flow was slightly down from our expectations because we made the decision to increase our working capital. The increased working capital positions us to mitigate some of the impacts of supply chain disruptions.
In the quarter, we invested $183 million in our lease fleet, bringing us to a full year total of $547 million. After proceeds from car sales, our net lease fleet investment for the year was $93 million.
Manufacturing capex for the quarter was $7 million, which brings our full year manufacturing capex to $24 million.
Total Free Cash Flow after Investments and Dividends was $28 million in the fourth quarter, which brings the full year total to $539 million. As Jean noted, we returned $895 million to shareholders this year through share repurchases and dividends and increased our quarterly dividend by $0.02, or approximately 10%, in the fourth quarter.
We finalized the divestiture of Trinity Highway Products on the last day of the year, and we have moved its financial results, which was the bulk of what we previously called the “All Other” segment, to discontinued operations and now report our operating results in two reportable segments: the Railcar Leasing and Management Services Group and the Rail Products Group. Highway results are now excluded from continuing operations in both the current and prior periods. Any results I discuss today, as well as any forward-looking statements, will exclude highway products unless otherwise noted. Historical financials recast in our reportable segments are available in the 10-K that we will file today. Our 10-K also details an accrual we booked in the fourth quarter in regards to the Highway Missouri class action lawsuit. We are focused on avoiding the uncertainty and further expense of this lawsuit and putting the highway litigation behind us.
For clarity and to help you compare today’s numbers with what we have previously reported, Slide 10 provides the view of 2021 results including Highway Products. Highway Products’ earnings per share, excluding the gain on sale and the Missouri class action litigation charge, were $0.05 in the fourth quarter and $0.28 for the full year. Therefore, adding Trinity Highway Products adjusted EPS to our adjusted EPS from continuing operations yields 2021 EPS of $0.13 in the fourth quarter and $0.62 for the full year, which is the comparison to past results. Future results, including the 2022 guidance we are providing today, will compare to the $0.34, which is 2021 adjusted EPS from continuing operations.
Turning to Slide 11, let’s review our capitalization. We ended the year with liquidity of $782 million. Going forward, we plan to continue prioritizing returns but are also pursuing disciplined investment in
our business, whether through lease fleet investment or acquisitions. Our cash flow gives us the flexibility and the ability to make investments in the business. We believe the work we have done to optimize our capital structure gives us the right to grow, and we are excited by the opportunities we see.
I wanted to provide some high level guidance for 2022 on Slide 12.
As Jean mentioned, we are forecasting industry deliveries of 40,000 to 50,000 railcars in 2022, and we expect Trinity to maintain a similar market share of railcar orders and deliveries as we have historically. We are not including sustainable railcar conversions in our industry delivery projections.
We expect net lease fleet investment for the year of $450 million to $550 million, which is significantly higher than 2021. This includes sales from our lease fleet into our RIV Program and the secondary market. Fleet investments and proceeds from these transactions will be expected through the year as we actively optimize our fleet. We expect Trinity’s manufacturing capex to be $35 to $45 million, which consists of investments in safety, efficiency, and automation.
Given better visibility into our business and a more predictable operating environment, we are providing EPS guidance of $0.85 to $1.05 for continuing operations, which represents growth of approximately 179% at the midpoint over 2021 adjusted EPS of $0.34. We expect our earnings to improve throughout the year. Most of the year over year improvement should come in Rail Products due to strong orders and deliveries along with recovery from labor and supply chain disruptions. In Leasing, a rising FLRD forecasts increasing revenue through the year with remarketing rates above expiring rates. Additionally, we continue to proactively manage our lease fleet to optimize returns.
We are optimistic about the year ahead as we see positive momentum around the industry but also acknowledge lingering uncertainty around COVID-19, supply chain disruption, and labor impacts. Furthermore, we are now delivering orders that were taken at the bottom of the cycle, which we anticipate will create an overhang on our margins in the first half of the year.
Despite the unprecedented challenges of the last few years, Trinity has been able to leverage its platform to deliver returns even at the bottom of the cycle. With market conditions improving, we look forward to continuing to demonstrate the power of our platform and our ability to create and sustain value over the long term. As always, we thank you for your support.
Operator, you may now take us to questions from our participants.
E. Jean Savage
Chief Executive Officer and President
Thank you for joining us this morning. We are now in the second year of our three year strategic plan and are on track to meet the goals presented at our Analyst Day in late 2020. 2021 was a year of optimization at Trinity – optimization of our balance sheet, our lease fleet, and our overall enterprise. We are confident that our execution to date and through the remaining strategic plan position Trinity to drive significant growth in the years ahead, especially in an improving railcar market.
Thank you again, and we look forward to updating you on our progress on our next conference call.
9
exh993q42021earningssupp
DELIVERING GOODS for THE GOOD of ALL TRINITY INDUSTRIES, INC. Investor Contact: TrinityInvestorRelations@trin.net Website: www.trin.net Q4 2021 – Earnings Conference Call Supplemental Material February 17, 2022 – based on financial results as of December 31, 2021 Exhibit 99.3
DELIVERING GOODS for THE GOOD of ALL /// 2 Forward Looking Statements Some statements in this presentation, which are not historical facts, are “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements about Trinity's estimates, expectations, beliefs, intentions or strategies for the future, and the assumptions underlying these forward-looking statements, including, but not limited to, future financial and operating performance, future opportunities and any other statements regarding events or developments that Trinity believes or anticipates will or may occur in the future, including the potential financial and operational impacts of the COVID-19 pandemic. Trinity uses the words “anticipates,” “assumes,” “believes,” “estimates,” “expects,” “intends,” “forecasts,” “may,” “will,” “should,” “guidance,” “projected,” “outlook,” and similar expressions to identify these forward-looking statements. Forward-looking statements speak only as of the date of this release, and Trinity expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in Trinity’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based, except as required by federal securities laws. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from historical experience or our present expectations, including but not limited to risks and uncertainties regarding economic, competitive, governmental, and technological factors affecting Trinity’s operations, markets, products, services and prices, and such forward-looking statements are not guarantees of future performance. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see “Risk Factors” and “Forward-Looking Statements” in Trinity’s Annual Report on Form 10-K for the most recent fiscal year, as may be revised and updated by Trinity’s Quarterly Reports on Form 10-Q, and Trinity’s Current Reports on Form 8-K. Sale of Highway Products Business In the fourth quarter of 2021, the Company completed the sale of Trinity Highway Products, LLC (“THP”), a wholly- owned subsidiary of the Company, and certain direct and indirect subsidiaries of THP, to Rush Hour Intermediate II, LLC, an entity owned by an affiliated investment fund of Monomoy Capital Partners. Accordingly, we have presented the operating results and cash flows of THP as discontinued operations for all periods presented herein. Results of prior periods have been recast to reflect these changes and present results on a comparable basis.
DELIVERING GOODS for THE GOOD of ALL /// Key Messages from Q4-21 Conference Call 3 Continued economic recovery expected in 2022 Fleet utilization returned to pre-pandemic levels Returned $895M to shareholders in 2021 Divestiture of highway products business complete
DELIVERING GOODS for THE GOOD of ALL /// Q4-21 Financial Results Summary – Year over Year 4 Q4-21 Revenue $472M Q4-21 Cash Flow, Continuing Ops $197M Q4-21 EPS, Adjusted* $0.08 Q4-21 Free Cash Flow* $28M * See appendix for reconciliation of non-GAAP measures $+0.10 +31%
DELIVERING GOODS for THE GOOD of ALL /// FY21 Financial Results Summary – Year over Year 5 FY21 Revenue $1.5B FY21 Cash Flow, Continuing Ops $616M FY21 EPS, Adjusted* $0.34 FY21 Free Cash Flow* $539M * See appendix for reconciliation of non-GAAP measures -13% -1% $+450M$+0.18
DELIVERING GOODS for THE GOOD of ALL /// Rail Market Update and Commercial Overview 6 Rail Traffic is Continuing to Improve (1) Railcars are Coming out of Storage (2) Fleet Utilization and Rates are Improving Rail Products Orders Improve Year-over-Year Fl ee t U ti liz at io n FLR D Fleet Utilization FLRD (3) Q4-20 Q1-21 Q2-21 Q3-21 Q4-21 90% 95% 100% (15)% (10)% (5)% —% 5% Orders Deliveries Q4-20 Q1-21 Q2-21 Q3-21 Q4-21 0 2,000 4,000 6,000 See appendix for footnotes 2019 2020 2021 2022 Five-Year Average 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 500,000 625,000 750,000 Storage Rate Five-Year Average Jan- 20 Apr- 20 Jul- 20 Oct- 20 Jan- 21 Apr- 21 Jul- 21 Oct- 21 Jan- 22 15% 20% 25% 30% 35%
DELIVERING GOODS for THE GOOD of ALL /// Trinity Business Segment Performance Trends 7 Rail Products Segment Revenue Drivers ◦ Quarterly revenue increased sequentially on 16% higher railcar deliveries and competitive pricing Rail Products Margin Performance Drivers ◦ Q4 operating margin of 3.3% up from (0.9%) last quarter due to improved supply chain and labor dynamics ▪ Segment margin includes gains from insurance recoveries in both Q3 and Q4 2021 Leasing Operations Revenue and Operating Profit Margin (1) Rail Products Segment Revenue and Operating Profit Margin See appendix for footnotes (i n m ill io n s) Leasing Operations Revenue OP Margin Q4-20 Q1-21 Q2-21 Q3-21 Q4-21 $— $50 $100 $150 $200 —% 20% 40% 60% (i n m ill io n s) Rail Products Revenue Maintenance Services Revenue OP Margin Q4-20 Q1-21 Q2-21 Q3-21 Q4-21 $— $150 $300 $450 (4)% (2)% —% 2% 4% Leasing Segment Revenue Drivers ◦ Revenue slightly down quarter over quarter ◦ Renewal rate of 79% highest since 2014 ◦ FLRD improved to 2.2% Leasing Margin Performance Drivers ◦ Operating margin holds firm as market recovers
DELIVERING GOODS for THE GOOD of ALL /// Executing on Strategic Initiatives to Improve Pre-Tax ROE 8 Repurchased 13.9M shares in the fourth quarter LTV(1) of 62.3% Balance Sheet Optimization TrinsightTM awarded Innovation of the year by the Canadian Association of Rail Suppliers 1,150 sustainable railcar conversion cars in backlog; 650 delivered in 2021 New Products & Services Initiatives Continue focus on lower breakeven points Enhance value of outsourced fabrication activities Manufacturing Cost Improvement Divestiture of Trinity Highway Products for $375M Business Optimization 2021 full year renewal rate of 79% is best rate since 2014 Fleet utilization of 95.7% at pre-pandemic levels Lease Fleet Optimization *See appendix for footnotes and reconciliation of non-GAAP measures Lower Cost of Capital | Reduce Cyclicality | Improve Rail Supply Chain 2021* LT Goal 9.6% 3.4% Mid-Teen Pre-Tax ROE Goal
DELIVERING GOODS for THE GOOD of ALL /// Revenue Reflects Improving Market Dynamics Q4 2021 Financial Summary: Income Statement: • Total revenues of $472M reflect higher external railcar deliveries • Earnings from continuing operations of $0.16 ◦ Adjusted EPS of $0.08* • Sequential earnings decline driven by lease portfolio sales in the third quarter Full Year Cash Flow: • Cash flow from continuing operations of $616M • Investment of $547M in leasing capex • Investment of $24M in manufacturing and general capex • Free cash flow after investments and dividends of $539M* • Shareholder returns of $895M ◦ Total share repurchases of $807M in 2021 ◦ Total dividends of $88M paid in 2021 Strong Performance Trends and Key Highlights 9 Management Focus on Maximizing Cash Flow Generation * See appendix for reconciliation of non-GAAP measures (i n m ill io n s) Leasing Rail Products Adj EPS, Cont Ops (Diluted) * Q4- 20 Q1- 21 Q2- 21 Q3- 21 Q4- 21 $— $250 $500 $(0.10) $— $0.10 $0.20 (i n m ill io n s) Cash Flow from Cont Ops Free Cash Flow * FY19 FY20 FY21 $— $250 $500 $750
DELIVERING GOODS for THE GOOD of ALL /// Reconciliation of Consolidated and Highway Products Results 10 Q1 2021 Q2 2021 Q3 2021 Q4 2021 FY 2021 (in millions, except per share data) Income (loss) from discontinued operations (1) $ 6.3 $ 7.6 $ 10.4 $ (13.2) $ 11.1 Gain on sale of discontinued operations (1) — — — 131.4 131.4 Net income from discontinued operations 6.3 7.6 10.4 118.2 142.5 Less: Gain on sale of discontinued operations (1) — — — (131.4) (131.4) Add: Missouri class action litigation charge (1)(2) — — — 18.3 18.3 Adjusted net income from discontinued operations $ 6.3 $ 7.6 $ 10.4 $ 5.1 $ 29.4 Diluted weighted average shares outstanding (3) 112.6 105.1 99.5 98.0 103.8 Adjusted diluted income from discontinued operations per common share attributable to Trinity Industries, Inc. (4) $ 0.06 $ 0.07 $ 0.11 $ 0.05 $ 0.28 Adjusted diluted income from continuing operations per common share attributable to Trinity Industries, Inc. (4) 0.01 0.08 0.18 0.08 0.34 Adjusted diluted income per common share attributable to Trinity Industries, Inc. (4) $ 0.07 $ 0.15 $ 0.29 $ 0.13 $ 0.62 (1) Net of income taxes (2) Based on the Company's assessment that a settlement in an ongoing litigation matter is probable, we recorded a pre-tax charge of $24 million ($18 million, net of income taxes) during the fourth quarter of 2021. This charge is included in income from discontinued operations, net of income taxes, in our Consolidated Statement of Operations. (3) GAAP diluted weighted average shares outstanding excludes 2.4 million shares for the first quarter of 2021 because the Company was in a net loss position for continuing operations for the period. When adjusting for income from discontinued operations, these shares become dilutive. (4) The sum of the quarters may not necessarily be equal to the full year net income per common share amount. The unaudited table below is provided for informational purposes to illustrate the 2021 financial results to include THP, excluding the gain on sale and litigation charge
DELIVERING GOODS for THE GOOD of ALL /// 11 Unencumbered Railcars $876M • Pledge to warehouse • Additional assets can be sold or financed • LTV of 62.3% for the wholly-owned lease portfolio as of Q4-21(2) CAPITAL LEVERS Recourse Debt $399M @ 4.6%(1) Non-recourse Debt $4.8B @ ~2.9%(1) • Low-cost funds • Flexible term structures • No maturities until 2023 DEBT STRUCTURE Cash & Equivalents $167M Revolver Availability $177M Warehouse Availability $438M LIQUIDITY Solid Liquidity of $782M(1) Attractive Debt Structures Conservative Capitalization See appendix for footnotes Healthy Balance Sheet Strategically Positioned for Opportunistic Deployment and Value Creation
DELIVERING GOODS for THE GOOD of ALL /// Management Outlook for Business Performance 12 C ap it al A llo ca ti on FY 2022 Summary Detail Industry Deliveries 40K – 50K railcars Does not include sustainable railcar conversions; expect Trinity to maintain historic market share Net Fleet Investment $450M — $550M Assumes sales in our RIV program consistent with 2021 Manufacturing and General Capital Expenditures $35M – $45M Investments in safety, efficiency, and automation Earnings from continuing operations per diluted share $0.85 – $1.05 Expect results to improve throughout the year Any forward-looking statements made by the Company speak only as of the date on which they are made. Except as required by federal securities law, the Company is under no obligation to update or alter its forward-looking statements, whether as a result of new information, subsequent events or otherwise.
DELIVERING GOODS for THE GOOD of ALL /// Key Messages from Q4-21 Conference Call 13 Continued economic recovery expected in 2022 Fleet utilization returned to pre-pandemic levels Returned $895M to shareholders in 2021 Divestiture of highway products business complete
DELIVERING GOODS for THE GOOD of ALL /// Trinity Q4-21 Earnings Conference Call 14 Q&A
DELIVERING GOODS for THE GOOD of ALL /// Reconciliation: Adjusted Operating Results 15 Three Months Ended December 31, 2021 (in millions, except per share amounts) GAAP Pension plan settlement (1) Gains on dispositions of property – other (1)(2) Restructuring activities, net (1) Income tax effect of CARES Act Adjusted Operating profit (loss) $ 69.2 $ — $ (3.1) $ (2.6) $ — $ 63.5 Income (loss) from continuing operations before income taxes $ 28.1 $ (2.8) $ (3.1) $ (2.6) $ — $ 19.6 Provision (benefit) for income taxes $ 6.5 $ 0.2 $ (0.8) $ (0.6) $ 0.7 $ 6.0 Income (loss) from continuing operations $ 21.6 $ (3.0) $ (2.3) $ (2.0) $ (0.7) $ 13.6 Net income (loss) from continuing operations attributable to Trinity Industries, Inc. $ 15.8 $ (3.0) $ (2.3) $ (2.0) $ (0.7) $ 7.8 Diluted weighted average shares outstanding 98.0 98.0 Diluted income (loss) from continuing operations per common share attributable to Trinity Industries, Inc. $ 0.16 $ 0.08 (1) The effective tax rate for pension plan settlement, gains on dispositions of other property, and restructuring activities is before consideration of the CARES Act. (2) Represents insurance recoveries in excess of net book value received during the fourth quarter of 2021 for assets damaged by a tornado at the Company’s rail maintenance facility in Cartersville, Georgia in the first quarter of 2021. We have supplemented the presentation of our reported GAAP operating profit (loss), income (loss) from continuing operations before income taxes, provision (benefit) for income taxes, income (loss) from continuing operations, net income (loss) from continuing operations attributable to Trinity Industries, Inc., and diluted income (loss) from continuing operations per common share attributable to Trinity Industries, Inc. with non-GAAP measures that adjust the GAAP measures to exclude the impact of pension plan settlement, gains on dispositions of other property, restructuring activities, the income tax effects of the CARES Act, and certain other transactions or events (as applicable). These non-GAAP measures are derived from amounts included in our GAAP financial statements and are reconciled to the most directly comparable GAAP financial measures in the table above. Management believes that these measures are useful to both management and investors for analyzing the performance of our business without the impact of certain items that are not indicative of our normal business operations. Non-GAAP measures should not be considered in isolation or as a substitute for our reporting results prepared in accordance with GAAP and, as calculated, may not be comparable to other similarly titled measures for other companies.
DELIVERING GOODS for THE GOOD of ALL /// Reconciliation: Adjusted Operating Results 16 (1) The effective tax rate for gains on dispositions of other property, restructuring activities, the loss on extinguishment of debt, and pension plan settlement is before consideration of the CARES Act. (2) Represents insurance recoveries in excess of net book value received for assets damaged by a tornado at the Company’s rail maintenance facility in Cartersville, Georgia in the first quarter of 2021. (3) Excludes $7.1 million of loss on extinguishment of debt associated with the noncontrolling interest recorded in the second quarter of 2021. (4) Represents the portion of the loss on extinguishment of debt attributable to the noncontrolling interest, for which Trinity does not provide income taxes. We have supplemented the presentation of our reported GAAP operating profit (loss), income (loss) from continuing operations before income taxes, provision (benefit) for income taxes, income (loss) from continuing operations, net income (loss) attributable to Trinity Industries, Inc., and diluted income (loss) from continuing operations per common share attributable to Trinity Industries, Inc. with non-GAAP measures that adjust the GAAP measures to exclude the impact of gains on dispositions of other property, restructuring activities, loss on extinguishment of debt, pension plan settlement, the income tax effects of the CARES Act, and certain other transactions or events (as applicable).These non-GAAP measures are derived from amounts included in our GAAP financial statements and are reconciled to the most directly comparable GAAP financial measures in the table above. Management believes that these measures are useful to both management and investors for analyzing the performance of our business without the impact of certain items that are not indicative of our normal business operations. Non-GAAP measures should not be considered in isolation or as a substitute for our reporting results prepared in accordance with GAAP and, as calculated, may not be comparable to other similarly titled measures for other companies. Year Ended December 31, 2021 (in millions, except per share amounts) GAAP Gains on dispositions of property – other (1)(2) Restructuring activities, net (1) Loss on extinguishment of debt – Controlling Interest (1)(3) Loss on extinguishment of debt – Noncontrolling Interest (4) Pension plan settlement (1) Income tax effect of CARES Act Adjusted Operating profit (loss) $ 256.8 $ (7.8) $ (3.7) $ — $ — $ — $ — $ 245.3 Income (loss) from continuing operations before income taxes $ 55.2 $ (7.8) $ (3.7) $ 4.6 $ 7.1 $ (0.6) $ — $ 54.8 Provision (benefit) for income taxes $ 15.9 $ (2.0) $ (0.8) $ 1.1 $ — $ 0.7 $ (2.5) $ 12.4 Income (loss) from continuing operations $ 39.3 $ (5.8) $ (2.9) $ 3.5 $ 7.1 $ (1.3) $ 2.5 $ 42.4 Net income (loss) from continuing operations attributable to Trinity Industries, Inc. $ 39.5 $ (5.8) $ (2.9) $ 3.5 $ — $ (1.3) $ 2.5 $ 35.5 Diluted weighted average shares outstanding 103.8 103.8 Diluted income (loss) from continuing operations per common share attributable to Trinity Industries, Inc. $ 0.38 $ 0.34
DELIVERING GOODS for THE GOOD of ALL /// FY 2019 FY 2020 Q4-21 FY 2021 (in millions) Net cash provided by operating activities – continuing operations $ 365.4 $ 622.0 $ 196.8 $ 615.6 Proceeds from lease portfolio sales * 205.7 138.7 49.8 454.3 Adjusted Net Cash Provided by Operating Activities 571.1 760.7 246.6 1,069.9 Capital expenditures – manufacturing and other (88.0) (95.9) (6.7) (23.6) Dividends paid to common shareholders (82.1) (91.7) (20.0) (88.5) Free Cash Flow (before Capital expenditures – leasing) 401.0 573.1 219.9 957.8 Equity CapEx for leased railcars (from table below) (278.5) (483.7) (191.9) (418.9) Total Free Cash Flow After Investments and Dividends $ 122.5 $ 89.4 $ 28.0 $ 538.9 Capital expenditures – leasing * $ 1,122.2 $ 602.2 $ 183.3 $ 547.2 Less: Payments to retire debt (1,724.1) (1,442.9) (59.0) (2,315.8) Proceeds from issuance of debt 2,567.8 1,561.4 50.4 2,444.1 Net proceeds from (repayments of) debt 843.7 118.5 (8.6) 128.3 Equity CapEx for leased railcars $ 278.5 $ 483.7 $ 191.9 $ 418.9 Reconciliation: Walking FCF Beyond Lease Investment 17 Total Free Cash Flow After Investments and Dividends (“Free Cash Flow”) is a non-GAAP financial measure. The change in presentation of sales of railcars from the lease fleet, which was effected on a prospective basis beginning in the fourth quarter of 2020, had no effect on our previously reported Free Cash Flow. Beginning in the fourth quarter of 2020, Free Cash Flow is defined as net cash provided by operating activities from continuing operations as computed in accordance with GAAP, plus cash proceeds from lease portfolio sales, less capital expenditures for manufacturing, dividends paid, and Equity CapEx for leased railcars. Equity CapEx for leased railcars is defined as leasing capital expenditures, adjusted to exclude net proceeds from (repayments of) debt. * For periods prior to the fourth quarter of 2020, Free Cash Flow is defined as net cash provided by operating activities from continuing operations as computed in accordance with GAAP, plus cash proceeds from sales of leased railcars owned more than one year at the time of sale, less capital expenditures for manufacturing, dividends paid, and Equity CapEx for leased railcars. Equity CapEx for leased railcars is defined as leasing capital expenditures, net of sold lease fleet railcars owned one year or less, adjusted to exclude net proceeds from (repayments of) debt. We believe Free Cash Flow is useful to both management and investors as it provides a relevant measure of liquidity and a useful basis for assessing our ability to fund our operations and repay our debt. Free Cash Flow is reconciled to net cash provided by operating activities from continuing operations, the most directly comparable GAAP financial measure, in the table above. Non-GAAP measures should not be considered in isolation or as a substitute for our reporting results prepared in accordance with GAAP and, as calculated, may not be comparable to other similarly titled measures for other companies.
DELIVERING GOODS for THE GOOD of ALL /// Reconciliation: Total Company Pre-Tax ROE 18 (1) Represents insurance recoveries in excess of net book value received for assets damaged by a tornado at the Company’s rail maintenance facility in Cartersville, Georgia in the first quarter of 2021. (2) Excludes $81.3 million of non-cash impairment of long-lived asset charges associated with the noncontrolling interest recorded in the second quarter of 2020. (3) Excludes $7.1 million of loss on extinguishment of debt associated with the noncontrolling interest recorded in the second quarter of 2021. (4) Return on Equity is calculated as income (loss) from continuing operations divided by average total stockholders' equity. (5) Pre-Tax Return on Equity is calculated as adjusted profit before tax divided by average adjusted stockholders' equity, each as defined and reconciled above. Pre-Tax Return on Equity (“Pre-Tax ROE”) is a non-GAAP measure that is derived from amounts included in our GAAP financial statements. We define Pre-Tax ROE as a ratio for which (i) the numerator is calculated as income or loss from continuing operations, adjusted to exclude the effects of the provision or benefit for income taxes, net income or loss attributable to noncontrolling interest, and certain other adjustments, which include gains on dispositions of other property, the controlling interest portion of impairment of long-lived assets and loss on extinguishment of debt, restructuring activities, and pension plan settlement; and (ii) the denominator is calculated as average stockholders’ equity (which excludes noncontrolling interest), adjusted to exclude accumulated other comprehensive income or loss. In the table above, the numerator and denominator of our Pre-Tax ROE calculation are reconciled to income from continuing operations and total stockholders’ equity, respectively, which are the GAAP financial measures used in the computation of ROE. Management believes that Pre-Tax ROE is a useful measure to both management and investors as it provides an indication of the economic return on the Company’s investments over time. Pre-Tax ROE is used in consideration of the Company’s expected tax position in the near-term. Non-GAAP measures should not be considered in isolation or as a substitute for our reporting results prepared in accordance with GAAP and, as calculated, may not be comparable to other similarly titled measures for other companies. December 31, 2021 December 31, 2020 December 31, 2019 ($ in millions) Numerator: Income (loss) from continuing operations $ 39.3 $ (250.5) $ 122.4 Provision (benefit) for income taxes 15.9 (274.1) 58.8 Income (loss) from continuing operations before income taxes 55.2 (524.6) 181.2 Net loss attributable to noncontrolling interest 0.2 78.9 1.5 Adjustments: Gains on dispositions of property – other (1) (7.8) — — Impairment of long-lived assets – controlling interest (2) — 315.1 — Restructuring activities, net (3.7) 10.9 14.6 Loss on extinguishment of debt – controlling interest (3) 4.6 5.0 — Pension plan settlement (0.6) 151.5 — Adjusted Profit Before Tax $ 47.9 $ 36.8 $ 197.3 Denominator: Total stockholders' equity $ 1,296.8 $ 2,016.0 $ 2,378.9 Noncontrolling interest (267.0) (277.2) (348.8) Accumulated other comprehensive loss 17.0 30.9 153.1 Adjusted Stockholders' Equity $ 1,046.8 $ 1,769.7 $ 2,183.2 Average total stockholders' equity $ 1,656.4 $ 2,197.5 $ 2,470.5 Return on Equity (4) 2.4 % (11.4) % 5.0 % Average Adjusted Stockholders' Equity $ 1,408.3 $ 1,976.5 $ 2,255.4 Pre-Tax Return on Equity (5) 3.4 % 1.9 % 8.7 %
DELIVERING GOODS for THE GOOD of ALL /// Footnotes and Reconciliations 19 Slide 6 - Rail Market Update and Commercial Overview (1) Association of American Railroads (AAR) Weekly Railcar Loadings (2) AAR Rail Time Indicators – February 1, 2022 (3) Future Lease Rate Differential (FLRD) calculates the weighted average of the most current quarterly lease rates transacted compared to the weighted average lease rates for railcars expiring over the next twelve months. Slide 7 - Trinity Business Segment Performance Trends (1) Leasing Operations Profit Margin calculated using only revenues and operating profit from Leasing Operations including partially- owned subsidiaries and excluding lease portfolio sales. Leasing Operations is specific to revenue and operating profit reported under “Leasing and management” within the Railcar Leasing and Management Services Group. Slide 8 - Executing on Strategic Initiatives to Improve Pre-Tax ROE (1) Includes corporate revolving credit facility as part of the short-term financing structure Slide 9 - Strong Performance Trends and Key Highlights Adjusted EPS includes the following adjustments reported by the Company (each per common diluted share): ◦ Reported Q4-20 GAAP EPS was $(1.19); Adjusted EPS excludes $1.04 related to the pension plan settlement, $0.19 related to the non-cash impairment of long-lived assets, and an additional income tax benefit of $0.05 related to carryback claims as permitted under recent tax legislation. ◦ Reported Q1-21 GAAP EPS was $(0.03); Adjusted EPS excludes an income tax expense adjustment of $0.03 related to prior year carryback claims as permitted under recent tax legislation and $0.01 related to the pension plan settlement. ◦ Reported Q2-21 GAAP EPS was $0.05; Adjusted EPS excludes $0.03 related to the loss on extinguishment of high coupon debt. ◦ Reported Q3-21 GAAP EPS was $0.22; Adjusted EPS excludes $0.04 related to the insurance recoveries in excess of net book value received during the third quarter of 2021 for assets damaged by a tornado at the Company’s rail maintenance facility in Cartersville, Georgia in the first quarter of 2021. ◦ Reported Q4-21 GAAP EPS was $0.16; Adjusted EPS excludes $0.03 related to the pension plan settlement refund, $0.02 related to the insurance recoveries in excess of net book value received during the fourth quarter of 2021 for assets damaged by a tornado at the Company’s rail maintenance facility in Cartersville, Georgia in the first quarter of 2021, $0.02 related to restructuring activities, and $0.01 related to prior year carryback claims as permitted under recent tax legislation. Slide 11 - Healthy Balance Sheet Strategically Positioned for Opportunistic Deployment and Value Creation (1) Balances and blended average interest rate as of December 31, 2021 (2) Includes corporate revolving credit facility as part of the short-term financing structure