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): | July 27, 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 July 27, 2022, announcing operating results for the three month period ended June 30, 2022, a copy of which is furnished as Exhibit 99.1 and incorporated herein by reference. On July 27, 2022, Trinity held a conference call and webcast with respect to its financial results for the three month period ended June 30, 2022. 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 July 27, 2022 with respect to the operating results for the three month period ended June 30, 2022. |
| 99.2 | Conference call script of July 27, 2022. |
| 99.3 | Q2 2022 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, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Trinity Industries, Inc. | ||
|---|---|---|
| July 27, 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 Second Quarter 2022 Results
Reported both quarterly GAAP and adjusted earnings from continuing operations of $0.14 per diluted share
Received orders for 4,335 railcars and delivered 2,510 railcars in the quarter; backlog of $2.2 billion at quarter-end
Returned $90 million of capital to stockholders year-to-date and completed accelerated share repurchase program
DALLAS, Texas – July 27, 2022 – Trinity Industries, Inc. (NYSE:TRN) today announced earnings results for the second quarter ended June 30, 2022.
Financial and Operational Highlights
•Quarterly total company revenues of $417 million
•Quarterly income from continuing operations per common diluted share ("EPS") of $0.14
•Lease fleet utilization of 97.2% and Future Lease Rate Differential ("FLRD") of positive 14.7% at quarter end
•New railcar orders of 4,335 and railcar deliveries of 2,510; book-to-bill ratio of 1.7x
•Year-to-date cash flow from continuing operations was a net use of $61 million, and total free cash flow after investments and dividends ("Free Cash Flow") was $43 million
2022 Guidance
•Industry deliveries of 40,000 to 50,000 railcars
•Net investment in the lease fleet of $425 million to $475 million, down from $450 million to $550 million
•Manufacturing capital expenditures of $35 million to $45 million
•EPS of $0.90 to $1.10, up from $0.85 to $1.05
◦Excludes gains on insurance recoveries and other items outside of our core business operations
Management Commentary
“Trinity’s second quarter results reflect improvement and momentum and reinforce our optimism for the back half of the year,” said Trinity’s Chief Executive Officer and President, Jean Savage. “The strength of our backlog, as well as rising lease rates and fleet utilization, are especially encouraging and provide visibility into our expectations for the full year.”
“In the Railcar Leasing and Management Services Group, our Future Lease Rate Differential improved to 14.7%, which we continue to view as a leading indicator of revenue growth. Furthermore, our lease fleet utilization improved sequentially and year over year to 97.2%.” Ms. Savage continued, “We saw the value of our rail platform this quarter with strong railcar deliveries for our lease fleet while creating additional value through RIV and secondary market transactions. While supply chain and labor issues persist, we completed a successful quarter in a challenging operating environment.”
Ms. Savage concluded, “We continue to feel confident about the second half of the year and expect to see strengthening results across our business.”
Consolidated Financial Summary
| Three Months EndedJune 30, | ||||||
|---|---|---|---|---|---|---|
| 2022 | 2021 | Year over Year – Comparison | ||||
| ( in millions, except per share amounts) | ||||||
| Revenues | $ | 293.3 | Higher external deliveries in the Rail Products Group | |||
| Operating profit | $ | 57.8 | Higher lease portfolio sales activity and improved operating performance in the Leasing Group, partially offset by deliveries of orders taken at the bottom of the cycle in the Rail Products Group | |||
| Net income from continuing operations attributable to Trinity Industries, Inc. | $ | 5.1 | ||||
| EBITDA (1) | $ | 112.6 | ||||
| Effective tax expense (benefit) rate | 26.0 | % | (50.9) | % | Q2 2021 tax benefit was impacted by excess tax benefits associated with equity-based compensation | |
| Diluted EPS – GAAP | $ | 0.05 | ||||
| Diluted EPS – Adjusted (1) | $ | 0.08 | ||||
| Six Months EndedJune 30, | ||||||
| 2022 | 2021 | Year over Year – Comparison | ||||
| ( in millions) | ||||||
| Net cash provided by (used in) operating activities – continuing operations | $ | 324.9 | 2022 impacted by cyclical shifts in anticipation of higher volumes of railcar deliveries in future periods and continued supply chain challenges | |||
| Free Cash Flow (1) | $ | 351.8 | Q2 2021 was impacted by timing difference of debt proceeds issued for financing lease fleet equity investment | |||
| Capital expenditures – leasing | $ | 251.7 | ||||
| Returns of capital to stockholders | $ | 375.0 | Q2 2021 included a privately negotiated repurchase agreement totaling $222.5 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.
Additional Business Items
•Total committed liquidity of $420 million as of June 30, 2022 in anticipation of higher volumes of railcar deliveries in future periods, as well as continued supply chain challenges.
•In April 2022, Trinity Rail Leasing 2022 LLC, a wholly-owned subsidiary of the Company, issued $245 million of Series 2022-1 Green Secured Railcar Equipment Notes (the "TRL-2022 Notes"). The TRL-2022 Notes bear interest at a fixed rate of 4.55% and have a stated final maturity date of 2052. Net proceeds received from the TRL-2022 Notes were used to repay borrowings under TILC's secured warehouse credit facility and for general corporate purposes.
•During the quarter, Trinity repurchased approximately $50 million of shares, which included $25 million as part of the final settlement of our $125 million accelerated share repurchase agreement and $25 million in the open market.
•In May 2022, Tribute Rail LLC, a partially-owned subsidiary of the Company, issued $327 million of its Series 2022-1 Green Secured Railcar Equipment Notes (the "Tribute Rail Notes"). The Tribute Rail Notes bear interest at an all-in interest rate of 4.88% and have a stated final maturity date of 2052. Net proceeds received from the issuance of these notes were used to redeem TRIP Railcar Co. LLC's existing term loan agreement, of which $319 million was outstanding at the redemption date.
Business Group Summary
| Three Months EndedJune 30, | ||||||
|---|---|---|---|---|---|---|
| 2022 | 2021 | Year over Year – Comparison | ||||
| ( in millions) | ||||||
| Railcar Leasing and Management Services Group | ||||||
| Leasing and management revenues | $ | 185.1 | Higher utilization, increased lease fleet size and improved renewal rates, partially offset by the effect of net lease fleet investment activities | |||
| Leasing and management operating profit | $ | 70.0 | Higher utilization, increased lease fleet size, and lower fleet operating costs, partially offset by increased depreciation | |||
| Operating profit on lease portfolio sales | $ | 11.1 | Increased lease fleet portfolio sales | |||
| Fleet utilization (1) | 97.2 | % | 94.3 | % | ||
| Future Lease Rate Differential ("FLRD") (2) | +14.7 | % | (10.0) | % | Improvement in current market lease rates compared to the prior year period | |
| Owned lease fleet (in units) (1) | 110,560 | 108,635 | Growth in the lease fleet, partially offset by initial sale to new RIV partner in Q3 2021 | |||
| Investor-owned lease fleet (in units) | 30,115 | 26,490 | Initial sale to new RIV partner in Q3 2021 | |||
| Rail Products Group | ||||||
| Revenues | $ | 261.8 | Higher volume of deliveries and price escalation | |||
| Revenues eliminations – Lease subsidiary | $ | (151.0) | ||||
| Operating profit | $ | 3.2 | Higher deliveries, partially offset by higher input costs and operational inefficiencies | |||
| Operating profit eliminations – Lease subsidiary | $ | (3.0) | ||||
| Operating profit margin | 3.2 | % | 1.2 | % | ||
| New railcars: | ||||||
| Deliveries (in units) | 2,510 | 1,765 | ||||
| Orders (in units) | 4,335 | 4,570 | ||||
| Order value | $ | 372.6 | Product mix and price escalation | |||
| Backlog value | $ | 1,177.7 | ||||
| Sustainable railcar conversions: | ||||||
| Deliveries (in units) | 485 | 120 | ||||
| Backlog (in units) | 2,350 | 1,385 | ||||
| Backlog value | $ | 118.4 | ||||
| Corporate and other | ||||||
| Selling, engineering, and administrative expenses | $ | 24.5 | ||||
| Gains on dispositions of property | $ | (0.6) | ||||
| June 30, 2022 | December 31, 2021 | |||||
| Loan-to-value ratio | ||||||
| Wholly-owned subsidiaries, including corporate revolving credit facility | 67.3 | % | 62.3 | % | Increased leverage associated with leased assets, partially offset by amortization of debt on encumbered assets |
All values are in US Dollars.
(1) Includes wholly-owned railcars, partially-owned railcars, and railcars under leased-in arrangements.
(2) FLRD calculates the implied change in revenue for railcar leases expiring over the next four quarters, assuming they were renewed at the most recent quarterly transacted lease rates for each railcar type.
Conference Call
Trinity will hold a conference call at 8:30 a.m. Eastern on July 27, 2022 to discuss its second quarter 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 "3880180". 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 "1988387" until 11:59 p.m. Eastern on August 3, 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 Second 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>June 30, | Six Months Ended<br>June 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |||||
| Revenues | $ | 416.8 | $ | 293.3 | $ | 889.5 | $ | 624.0 |
| Operating costs: | ||||||||
| Cost of revenues | 325.6 | 202.1 | 724.1 | 448.4 | ||||
| Selling, engineering, and administrative expenses | 45.0 | 46.2 | 89.7 | 90.9 | ||||
| Gains on dispositions of property: | ||||||||
| Lease portfolio sales | 26.9 | 11.1 | 38.7 | 12.8 | ||||
| Other | 0.9 | 1.0 | 14.4 | 10.8 | ||||
| Restructuring activities, net | 1.0 | (0.7) | 1.0 | (1.0) | ||||
| 343.8 | 235.5 | 761.7 | 514.7 | |||||
| Operating profit | 73.0 | 57.8 | 127.8 | 109.3 | ||||
| Interest expense, net | 49.7 | 51.0 | 93.2 | 102.3 | ||||
| Loss on extinguishment of debt | 1.5 | 11.7 | 1.5 | 11.7 | ||||
| Other, net | (0.5) | 0.8 | (2.1) | 2.0 | ||||
| Income (loss) from continuing operations before income taxes | 22.3 | (5.7) | 35.2 | (6.7) | ||||
| Provision (benefit) for income taxes: | ||||||||
| Current | 2.0 | 0.5 | 3.8 | 5.2 | ||||
| Deferred | 3.8 | (3.4) | 5.0 | (4.1) | ||||
| 5.8 | (2.9) | 8.8 | 1.1 | |||||
| Income (loss) from continuing operations | 16.5 | (2.8) | 26.4 | (7.8) | ||||
| Income (loss) from discontinued operations, net of income taxes | (3.4) | 7.6 | (10.3) | 13.9 | ||||
| Loss on sale of discontinued operations, net of income taxes | (4.6) | — | (5.7) | — | ||||
| Net income | 8.5 | 4.8 | 10.4 | 6.1 | ||||
| Net income (loss) attributable to noncontrolling interest | 4.8 | (7.9) | 7.4 | (9.9) | ||||
| Net income attributable to Trinity Industries, Inc. | $ | 3.7 | $ | 12.7 | $ | 3.0 | $ | 16.0 |
| Basic earnings per common share: | ||||||||
| Income from continuing operations | $ | 0.14 | $ | 0.05 | $ | 0.23 | $ | 0.02 |
| Income (loss) from discontinued operations | (0.10) | 0.07 | (0.19) | 0.13 | ||||
| Basic net income attributable to Trinity Industries, Inc. | $ | 0.04 | $ | 0.12 | $ | 0.04 | $ | 0.15 |
| Diluted earnings per common share: | ||||||||
| Income from continuing operations | $ | 0.14 | $ | 0.05 | $ | 0.23 | $ | 0.02 |
| Income (loss) from discontinued operations | (0.10) | 0.07 | (0.19) | 0.13 | ||||
| Diluted net income attributable to Trinity Industries, Inc. | $ | 0.04 | $ | 0.12 | $ | 0.04 | $ | 0.15 |
| Weighted average number of shares outstanding: | ||||||||
| Basic | 82.4 | 102.8 | 82.7 | 106.4 | ||||
| Diluted | 84.4 | 105.1 | 84.9 | 108.9 |
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 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.
Trinity Industries, Inc.
Condensed Consolidated Balance Sheets
(in millions)
(unaudited)
| June 30, 2022 | December 31, 2021 | |||
|---|---|---|---|---|
| ASSETS | ||||
| Cash and cash equivalents | $ | 49.7 | $ | 167.3 |
| Receivables, net of allowance | 270.2 | 227.6 | ||
| Income tax receivable | 8.5 | 5.4 | ||
| Inventories | 630.7 | 432.9 | ||
| Restricted cash | 256.8 | 135.1 | ||
| Property, plant, and equipment, net: | ||||
| Manufacturing/Corporate | 346.5 | 349.3 | ||
| Leasing: | ||||
| Wholly-owned subsidiaries | 5,844.4 | 5,706.1 | ||
| Partially-owned subsidiaries | 1,534.8 | 1,570.6 | ||
| Deferred profit on railcars sold to the Leasing Group | (781.6) | (779.1) | ||
| 6,944.1 | 6,846.9 | |||
| Goodwill | 159.2 | 154.2 | ||
| Other assets | 305.6 | 266.5 | ||
| Total assets | $ | 8,624.8 | $ | 8,235.9 |
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||
| Accounts payable | $ | 285.4 | $ | 206.4 |
| Accrued liabilities | 283.9 | 307.4 | ||
| Debt: | ||||
| Recourse (1) | 518.9 | 398.7 | ||
| Non-recourse: | ||||
| Wholly-owned subsidiaries | 3,813.6 | 3,555.8 | ||
| Partially-owned subsidiaries | 1,206.6 | 1,216.1 | ||
| 5,539.1 | 5,170.6 | |||
| Deferred income taxes | 1,115.3 | 1,106.8 | ||
| Other liabilities | 144.9 | 147.9 | ||
| Stockholders' equity: | ||||
| Trinity Industries, Inc. | 997.6 | 1,029.8 | ||
| Noncontrolling interest | 258.6 | 267.0 | ||
| 1,256.2 | 1,296.8 | |||
| Total liabilities and stockholders' equity | $ | 8,624.8 | $ | 8,235.9 |
(1) Recourse debt as of June 30, 2022 includes $120.0 million outstanding associated with our corporate revolving credit facility.
Trinity Industries, Inc.
Condensed Consolidated Statements of Cash Flows
(in millions)
(unaudited)
| Six Months Ended<br>June 30, | ||||
|---|---|---|---|---|
| 2022 | 2021 | |||
| Operating activities: | ||||
| Net cash provided by (used in) operating activities – continuing operations | $ | (61.3) | $ | 324.9 |
| Net cash provided by (used in) operating activities – discontinued operations | (12.0) | 9.8 | ||
| Net cash provided by (used in) operating activities | (73.3) | 334.7 | ||
| Investing activities: | ||||
| Proceeds from lease portfolio sales | 215.2 | 88.8 | ||
| Proceeds from dispositions of property and other assets | 23.8 | 24.0 | ||
| Capital expenditures – leasing | (414.1) | (251.7) | ||
| Capital expenditures – manufacturing and other | (18.8) | (14.3) | ||
| Acquisitions, net of cash acquired | (9.4) | (16.6) | ||
| Proceeds from insurance recoveries | 4.8 | — | ||
| Other | — | (0.1) | ||
| Net cash used in investing activities – continuing operations | (198.5) | (169.9) | ||
| Payments related to sale of discontinued operations | (2.7) | — | ||
| Net cash used in investing activities – discontinued operations | — | (3.1) | ||
| Net cash used in investing activities | (201.2) | (173.0) | ||
| Financing activities: | ||||
| Net proceeds from (repayments of) debt | 360.8 | 251.5 | ||
| Shares repurchased | (22.4) | (329.4) | ||
| Dividends paid to common shareholders | (39.3) | (47.4) | ||
| Other | (20.5) | (9.1) | ||
| Net cash provided by (used in) financing activities | 278.6 | (134.4) | ||
| Net increase in cash, cash equivalents, and restricted cash | 4.1 | 27.3 | ||
| Cash, cash equivalents, and restricted cash at beginning of period | 302.4 | 228.4 | ||
| Cash, cash equivalents, and restricted cash at end of period | $ | 306.5 | $ | 255.7 |
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, income (loss) from continuing operations before income taxes, provision (benefit) for income taxes, income (loss) from continuing operations, net income from continuing operations attributable to Trinity Industries, Inc., and diluted income 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, interest expense, net, 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 June 30, 2022 | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| GAAP | Restructuring activities, net | Interest expense, net (1) | Adjusted | |||||||||||||||
| Operating profit | $ | 73.0 | $ | 1.0 | $ | — | $ | 74.0 | ||||||||||
| Income (loss) from continuing operations before income taxes | $ | 22.3 | $ | 1.0 | $ | (0.4) | $ | 22.9 | ||||||||||
| Provision (benefit) for income taxes | $ | 5.8 | $ | 0.3 | $ | (0.1) | $ | 6.0 | ||||||||||
| Income (loss) from continuing operations | $ | 16.5 | $ | 0.7 | $ | (0.3) | $ | 16.9 | ||||||||||
| Net income from continuing operations attributable to Trinity Industries, Inc. | $ | 11.7 | $ | 0.7 | $ | (0.3) | $ | 12.1 | ||||||||||
| Diluted weighted average shares outstanding | 84.4 | 84.4 | ||||||||||||||||
| Diluted income from continuing operations per common share attributable to Trinity Industries, Inc. | $ | 0.14 | $ | 0.14 | Six Months Ended June 30, 2022 | |||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||
| GAAP | Gains on dispositions of property – other (2) | Restructuring activities, net | Interest expense, net (1) | Adjusted | ||||||||||||||
| Operating profit | $ | 127.8 | $ | (6.4) | $ | 1.0 | $ | — | $ | 122.4 | ||||||||
| Income (loss) from continuing operations before income taxes | $ | 35.2 | $ | (6.4) | $ | 1.0 | $ | (0.7) | $ | 29.1 | ||||||||
| Provision (benefit) for income taxes | $ | 8.8 | $ | (1.6) | $ | 0.3 | $ | (0.2) | $ | 7.3 | ||||||||
| Income (loss) from continuing operations | $ | 26.4 | $ | (4.8) | $ | 0.7 | $ | (0.5) | $ | 21.8 | ||||||||
| Net income from continuing operations attributable to Trinity Industries, Inc. | $ | 19.0 | $ | (4.8) | $ | 0.7 | $ | (0.5) | $ | 14.4 | ||||||||
| Diluted weighted average shares outstanding | 84.9 | 84.9 | ||||||||||||||||
| Diluted income from continuing operations per common share attributable to Trinity Industries, Inc. | $ | 0.23 | $ | 0.17 | ||||||||||||||
| Three Months Ended June 30, 2021 | ||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||
| GAAP | Restructuring activities, net (3) | Loss on extinguishment of debt – Controlling Interest (3)(4) | Loss on extinguishment of debt – Noncontrolling Interest (5) | Pension plan settlement (3) | Income tax effect of CARES Act | Adjusted | ||||||||||||
| Operating profit | $ | 57.8 | $ | (0.7) | $ | — | $ | — | $ | — | $ | — | $ | 57.1 | ||||
| Income (loss) from continuing operations before income taxes | $ | (5.7) | $ | (0.7) | $ | 4.6 | $ | 7.1 | $ | 1.0 | $ | — | $ | 6.3 | ||||
| Provision (benefit) for income taxes | $ | (2.9) | $ | (0.2) | $ | 1.0 | $ | — | $ | 0.2 | $ | 0.4 | $ | (1.5) | ||||
| Income (loss) from continuing operations | $ | (2.8) | $ | (0.5) | $ | 3.6 | $ | 7.1 | $ | 0.8 | $ | (0.4) | $ | 7.8 | ||||
| Net income from continuing operations attributable to Trinity Industries, Inc. | $ | 5.1 | $ | (0.5) | $ | 3.6 | $ | — | $ | 0.8 | $ | (0.4) | $ | 8.6 | ||||
| Diluted weighted average shares outstanding | 105.1 | 105.1 | ||||||||||||||||
| Diluted income from continuing operations per common share attributable to Trinity Industries, Inc. | $ | 0.05 | $ | 0.08 | ||||||||||||||
| Six Months Ended June 30, 2021 | ||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||
| GAAP | Restructuring activities, net (3) | Loss on extinguishment of debt – Controlling Interest (3)(4) | Loss on extinguishment of debt – Noncontrolling Interest (5) | Pension plan settlement (3) | Income tax effect of CARES Act | Adjusted | ||||||||||||
| Operating profit | $ | 109.3 | $ | (1.0) | $ | — | $ | — | $ | — | $ | — | $ | 108.3 | ||||
| Income (loss) from continuing operations before income taxes | $ | (6.7) | $ | (1.0) | $ | 4.6 | $ | 7.1 | $ | 2.2 | $ | — | $ | 6.2 | ||||
| Provision (benefit) for income taxes | $ | 1.1 | $ | (0.3) | $ | 1.0 | $ | — | $ | 0.5 | $ | (3.4) | $ | (1.1) | ||||
| Income (loss) from continuing operations | $ | (7.8) | $ | (0.7) | $ | 3.6 | $ | 7.1 | $ | 1.7 | $ | 3.4 | $ | 7.3 | ||||
| Net income from continuing operations attributable to Trinity Industries, Inc. | $ | 2.1 | $ | (0.7) | $ | 3.6 | $ | — | $ | 1.7 | $ | 3.4 | $ | 10.1 | ||||
| Diluted weighted average shares outstanding | 108.9 | 108.9 | ||||||||||||||||
| Diluted income from continuing operations per common share attributable to Trinity Industries, Inc. | $ | 0.02 | $ | 0.09 |
(1) Represents interest income accretion related to a seller-financing agreement associated with the sale of certain non-operating assets.
(2) Represents insurance recoveries in excess of net book value for assets damaged by a tornado at the Company’s rail maintenance facility in Cartersville, Georgia in the first quarter of 2021.
(3) The effective tax rate for restructuring activities, the loss on extinguishment of debt, and pension plan settlement is before consideration of the CARES Act.
(4) Excludes $7.1 million of loss on extinguishment of debt associated with the noncontrolling interest recorded in the second quarter of 2021.
(5) Represents the portion of loss on extinguishment of debt attributable to the noncontrolling interest, for which Trinity does not provide income taxes.
Free Cash Flow
Total Free Cash Flow After Investments and Dividends ("Free Cash Flow") is a non-GAAP financial measure. 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 (used in) operating activities from continuing operations, the most directly comparable GAAP financial measure, in the following table. Free Cash Flow is defined as net cash provided by (used in) 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. 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.
| Six Months Ended<br>June 30, | ||||
|---|---|---|---|---|
| 2022 | 2021 | |||
| Net cash provided by (used in) operating activities – continuing operations | $ | (61.3) | $ | 324.9 |
| Proceeds from lease portfolio sales | 215.2 | 88.8 | ||
| Adjusted Net Cash Provided by Operating Activities | 153.9 | 413.7 | ||
| Capital expenditures – manufacturing and other | (18.8) | (14.3) | ||
| Dividends paid to common stockholders | (39.3) | (47.4) | ||
| Free Cash Flow (before Capital expenditures – leasing) | 95.8 | 352.0 | ||
| Equity CapEx for leased railcars | (53.3) | (0.2) | ||
| Total Free Cash Flow After Investments and Dividends | $ | 42.5 | $ | 351.8 |
| Capital expenditures – leasing | $ | 414.1 | $ | 251.7 |
| Less: | ||||
| Payments to retire debt | (833.3) | (1,925.2) | ||
| Proceeds from issuance of debt | 1,194.1 | 2,176.7 | ||
| Net proceeds from (repayments of) debt | 360.8 | 251.5 | ||
| Equity CapEx for leased railcars | $ | 53.3 | $ | 0.2 |
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, restructuring activities, interest income, 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, 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>June 30, | Six Months Ended<br>June 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |||||
| Net income | $ | 8.5 | $ | 4.8 | $ | 10.4 | $ | 6.1 |
| Less: Income (loss) from discontinued operations, net of income taxes | (3.4) | 7.6 | (10.3) | 13.9 | ||||
| Less: Loss on sale of discontinued operations, net of income taxes | (4.6) | — | (5.7) | — | ||||
| Income (loss) from continuing operations | $ | 16.5 | $ | (2.8) | $ | 26.4 | $ | (7.8) |
| Interest expense | 52.0 | 51.1 | 96.1 | 102.5 | ||||
| Provision (benefit) for income taxes | 5.8 | (2.9) | 8.8 | 1.1 | ||||
| Depreciation and amortization expense | 69.3 | 67.2 | 136.2 | 131.8 | ||||
| EBITDA | $ | 143.6 | $ | 112.6 | $ | 267.5 | $ | 227.6 |
| Gains on dispositions of property – other | — | — | (6.4) | — | ||||
| Restructuring activities, net | 1.0 | (0.7) | 1.0 | (1.0) | ||||
| Interest income | (0.4) | — | (0.7) | — | ||||
| Loss on extinguishment of debt | — | 11.7 | — | 11.7 | ||||
| Pension plan settlement | — | 1.0 | — | 2.2 | ||||
| Adjusted EBITDA | $ | 144.2 | $ | 124.6 | $ | 261.4 | $ | 240.5 |
12
Document
Exhibit 99.2
Trinity Industries, Inc.
Earnings Release Conference Call – Q2 2022
July 27, 2022
Leigh Anne Mann
Vice President, Investor Relations
Thank you, operator. Good morning everyone. We appreciate you joining us for the Company’s second quarter 2022 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, which are accessible on our investor relations website at www.trin.net. These slides can be found under the Events and Presentations portion of the website, along with the Second 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 August 3, 2022. Replay information is 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.
As you will hear in our remarks this morning, we think that today’s results are proof that our hard work is paying off, and we are seeing improvement around our business. In leasing, utilization, renewal rates, and the FLRD are all up sequentially; margins have improved; and our lease fleet continues to be optimized to meet changing demand in the markets we serve. In Rail Products, though supply chain and labor issues persist, we saw sequential improvement in both revenue and margins, and are on track to reach our goal of a mid to high single digit operating profit margin before the end of the year. In short, we are proud of our team and feel increasingly confident about what we can accomplish in 2022.
Before I get to the results, I wanted to share with our investment community that on June 28th, Trinity celebrated 50 years of being listed on the New York Stock Exchange and had the unique opportunity to ring the closing bell. I was there with my executive team, as well as some of the leaders of our Employee Resource Groups, and it was a really exciting experience.
And now turn with me to Slide 3 to talk about our key messages from today’s call.
For the second quarter, we are reporting GAAP and adjusted EPS from continuing operations of $0.14, which, on an adjusted basis, is up $0.11 sequentially and $0.06 year over year. These results reflect improving operations and Trinity’s ability to execute despite high inflation and high interest rates. We are working diligently to re-price our assets to reflect the current market dynamic. As a result, our Future Lease Rate Differential, which is calculated by attributing current lease rates to all railcar leases expiring in the next twelve months, improved to 14.7%. This is now the fourth consecutive quarter of a positive FLRD. We continue to see tightness in the North American fleet drive utilization of our fleet. We ended the quarter with fleet utilization of 97.2%, in line with pre-pandemic levels. Based on our results to date, we have confidence to raise our guidance range to between $0.90 and $1.10 adjusted earnings per share.
Turning to Slide 4, I want to spend a little bit of time talking about what we see in the market. As you are all aware, labor issues have been an impediment for the railroads, and you can see the impact of these challenges in the top left chart, which shows rail traffic down from last year, but still well above 2020 levels. Additionally, on the top right chart, you can see that after almost 2 years of reductions in the storage rate for railcars, that number ticked up slightly in June and again in July.
In regards to the service levels, several Class 1 railroads are actively seeking to curtail the number of railcars on their lines to begin normalizing their performance. While these actions may drive some railcars out of service in the very near-term, we believe improved railroad service is imperative. We are hearing from our shipper customers there are more originations available than industry data would suggest, but railroads have not been able to meet all of that demand this year. We need the North American freight rail network to normalize to support the current flow of goods presently and make rail a compelling mode of transportation in the future.
Moving to the bottom half of the slide, as I already mentioned our fleet utilization and FLRD are both up sequentially and compared to last year. Lease rate improvement and utilization improvement continue to be led by the freight car market, and this quarter we saw delivery of a higher volume of high margin freight cars. We expect this trend to continue through the year.
Railcar orders in the quarter were 4,335 and deliveries were 2,510, an increase of 42% year over year. We expect to deliver about twice as many railcars in the second half of the year as we did in the first half. One thing to note is that a larger portion of our railcars were delivered into our lease fleet this quarter, and we continue to believe giving our customers this option is one of the many strengths of our platform. Along with the sale of new railcars to meet customer demand, additionally, we took advantage of an active secondary market and bought and sold in the quarter to further optimize our fleet. Eric will talk more about this in a moment, but it is important for investors to recognize that our ability to build for lease is a significant lever at our disposal to drive optimal returns and meet the needs of the current market.
Please turn to Slide 5.
Our revenue in the quarter was $417 million, up 42% year over year. Our earnings per share for the quarter was $0.14, also an improvement year over year. On the cash side, our cash flow from continuing operations was a negative $90 million, and free cash flow was a negative $5 million. Our cash flow is being impacted by higher volumes of railcar deliveries in future periods, as well as continued supply chain challenges, both of which require higher inventory balances.
Moving to Slide 6, let’s talk about our segments, starting with leasing.
In leasing, improved utilization, renewal rates up 13.2% over expiring rates, and a renewal success rate of 82% all increased our revenue to $195 million. We also increased our leasing and management operating profit margin to just over 40% in the quarter, with lower fleet operating costs, mainly driven by lower maintenance expenses, than last quarter. It’s worth noting that our margin is negatively impacted by over 200 basis points from the accelerated depreciation related to sustainable railcar conversions. We also recorded a gain of $27 million for lease portfolio sales in the segment this quarter.
In Rail Products, we saw sequential and year over year improvement in both revenue and margins. Our revenue for the quarter improved on higher deliveries, as well as more HM-251 modifications. As input costs remained elevated, we also booked more revenue from escalation provisions in our contracts. While our escalation provisions protect margin dollars, escalation will pull down margin percentages as the revenue and costs both go up by the same amount. However, our cash on cash returns remain unchanged.
On the margin side, we saw great improvement, with a segment operating profit margin of 3.2%, up from breakeven last quarter. This margin gain represents improved performance in the business, as
we are beginning to deliver higher priced orders and realizing efficiencies in our manufacturing process. We have stated we expect to end the year with an operating profit margin in mid to high single digits, and we are proud to show the progress we are making especially since we were delivering on some fixed priced deliveries in the quarter that negatively impacted the margin. As we deliver almost double the first half production in the second half of the year, we expect to see continued improvement in the margins.
Please turn to Slide 7 where we review some of the initiatives we are pursuing around our business to enhance ROE.
In the quarter, we closed two ABS transactions, including TRL-2022 in April and Tribute Rail in May. Both are secured with existing railcar assets.
Now turn with me to Slide 8 to talk about our digital product portfolio and an exciting acquisition we made in the second quarter. We regularly talk about Trinsight, our next gen digital platform that monitors sensor-equipped cars and their freight in real time. It uses data and analytics to provide insights into the health, performance, and status of the fleet.
This quarter, we acquired the Quasar Platform to enhance our offering with yard management capabilities and access to new customers. The product monitors each railcar, noting when it arrives, is inspected, cleaned, repaired, loaded, and departed. Trinsight and Quasar will work in tandem to give Trinity and our shipper customers more visibility and predictability of supply chains.
These services will be further benefited by the RailPulse initiative. As a refresher, the coalition is made up of forward-thinking railcar owners who are working together to enhance rail’s safety, efficiency, and sustainability advantages for shippers through the adoption of GPS and other telematics technology. We were proud to be a founding member of this coalition, and were also excited to welcome to the group this quarter Union Pacific, the second Class I railroad to participate. The collective coalition now comprises approximately 30% of North American railcars.
To put it all together, we see a future where digital logistics platforms, like Trinsight and Quasar, RailPulse's standardized infrastructure, and emerging sensor and GPS technologies work together to deliver rail shippers a clear view of their supply chains enabling them to make better, faster decisions in this changing global economy. We are believers in the railroads as an important part of the North American supply chain, and we believe these developments will help drive modal share and improve visibility, safety, and efficiency of the rail network.
While the financial impact of our digital product portfolio is still small, we are on target with our internal goals and expect continued growth as our industry and our customers recognize the benefits of a digitized rail network.
Before I hand the call to Eric, I want to again reinforce my enthusiasm about the second half of 2022. As we have said on the last two calls, our backlog gives us visibility into future revenue, and the work we did at the bottom of the cycle to improve our business will allow us to realize higher margins as our revenue grows. We believe in the strength of our platform, and we think our business, though not immune, is better able to weather the impacts of high inflation and interest rates than most. I look forward to talking with you in October about our continued growth. And now I’ll turn the call to Eric to go through some of our financial results. Eric?
Eric R. Marchetto
Executive Vice President and Chief Financial Officer
Thank you, Jean – and good morning everyone.
I’ll start my comments on Slide 9. As Jean mentioned, our GAAP and adjusted earnings per share from continued operations were $0.14 per share. We had better operating performance in each of our segments, and we benefited in the quarter from $144 million in lease portfolio sales with a gain of $27 million. Lease portfolio sales are a normal part of our business, and we remain active in the secondary market as both buyers and sellers.
I think this quarter provides a good example of the power of our platform. We originated new railcar leases, we made investments in our sustainable conversion program, we purchased railcars in the secondary market, and sold railcars into our RIV program as well as in the secondary market. We are able to respond to market demands and create value through our lease portfolio while improving our return profile.
This quarter, 41% of our deliveries went into our lease fleet, and this shift in deliveries toward lease fleet additions is largely the result of more deliveries to industrial shippers who typically make the decision to lease railcars. This dynamic works very well for Trinity, both because of our competitive advantage as a manufacturer and lessor, but also because of our ability to raise lease rates as the railcar fleet tightens and improve yields, even as asset costs rise. Furthermore, this allows us to meet demand as these railcars leased to industrial shippers are attractive investments for our fleet and that of our RIV partners.
As we maintain our goal of disciplined lease fleet growth, we are also selling railcars out of our lease fleet to continue to optimize the size and composition of our investment. These sales create better economics because we realize pricing favorable to railcars without leases. I continue to believe that being active in the secondary market makes us a more informed fleet owner and manager driving better performance.
Our cash flow in the quarter is lower than usual as we increase our production rate, which is the largest use of cash. Also, the impacts of supply chain disruptions have continued to impact our business. We are experiencing shipping delays, which has impacted our inventory management. We have recently experienced temporary shortages of materials used to manufacture or repair certain railcar types, as well as disruptions in the transportation networks used to deliver our products, which have impacted our ability to deliver these railcars to our customers in a timely fashion. You can see this in the high inventory levels on our balance sheet. We are continuing to work through these challenges and expect cash flow to turn positive and be more in line with historical performance as the year progresses.
I also want to note that we completed our Accelerated Share Repurchase program during the second quarter, which allowed us to resume regular share buybacks. We purchased approximately $25 million of shares in the second quarter after settling the $25 million remaining on the ASR, for a total return of capital of $50 million in shares, bringing our diluted weighted average share count down to 84.4 million shares, which represents a 19.7% reduction in share count in the last twelve months. Combined with our regular quarterly dividend payment, we have returned $90 million to shareholders year to date.
Continuing on Slide 10, with the working capital ramp-up, our liquidity was approximately $420 million at the end of the quarter, including cash, revolver availability, and warehouse availability. I also wanted to call attention to the increase in restricted cash on our balance sheet, which is not included in our liquidity. We completed railcar sales at the end of the quarter, and those railcars largely were securitized, meaning the cash received from those sales is restricted until the assets are replaced.
Our loan-to-value is currently 67.3% for the wholly-owned lease portfolio, and is slightly elevated due to the timing of the securitized railcar sales and utilization of the revolver for working capital.
Now turn with me to Slide 11 for some additional updates on our guidance. We are projecting industry railcar deliveries of 40 to 50 thousand railcars in 2022, which does not include sustainable railcar conversions. We think high scrap rates over the last few years and an aging fleet support this number.
Our inquiry and order rate remains strong and supportive of this number as well. As we mentioned on our last call, our rate of production is increasing significantly from where we started the year, and as Jean stated, we expect to deliver about twice as many railcars in the back half of the year as we did in the first half.
With more visibility into our full year plan, we are decreasing our net fleet investment to a range of $425 million to $475 million. Our net fleet investment includes additions to the lease fleet whether through new production, modifications, and conversions, or secondary market purchases; offset by railcar sales from our fleet. Year to date, our net fleet investment is $199 million. While we are increasing our pace of production, we also anticipate a large railcar sale to an RIV partner in the second half of the year to partially offset the fleet additions.
And, as Jean mentioned, we are raising our adjusted EPS guidance. Our full year guidance is now $0.90 to $1.10, up $0.05 from our previous guidance. This implies a significant increase in the second half of the year with earnings at more than four times the level of the first half of the year at the low end of our guidance range. This reflects our confidence in the strength of our backlog and the positive trends we are seeing in our business.
If you turn to Slide 12, I’ll reinforce Jean’s message from the top of the call, and you’ll see why we feel good about the coming quarters. We see improved performance across our business despite an uncertain economic future and high inflation. We are beginning to deliver railcars ordered in a strong pricing environment with escalation provisions in place, and we are delivering more of them as the year progresses. The North American fleet continues to tighten, allowing us to raise lease rates. The secondary market remains active, giving us options as buyers and sellers to optimize our fleet and that of our RIV partners. We expect railcar loadings to improve and to see the North American supply chain benefit from a more efficient rail network. We have a backlog of $2.2 billion, a 2022 order book that is virtually full, and now have had four quarters of a rising FLRD. There’s a lot to be excited about, and we look forward to sharing our progress with you.
And now, operator, we are ready for our first question.
(after Q&A)
E. Jean Savage
Chief Executive Officer and President
Thank you everyone for joining us this morning.
As you can tell, we are very pleased with the progress we continue to make towards our goals to optimize returns in our business.
Additionally, from our perspective, we see the current supply / demand dynamics for railcars to remain strong despite what has been a more volatile year for headlines and financial markets.
With that, we hope you have a great day, and thank you again.
8
q22022earningssupplement
DELIVERING GOODS for THE GOOD of ALL TRINITY INDUSTRIES, INC. Investor Contact: TrinityInvestorRelations@trin.net Website: www.trin.net Q2 2022 – Earnings Conference Call Supplemental Materials July 27, 2022 – based on financial results as of June 30, 2022 Exhibit 99.3
DELIVERING GOODS for THE GOOD of ALL /// 2 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. Forward Looking Statements
DELIVERING GOODS for THE GOOD of ALL /// Key Messages from Q2-22 Conference Call 3 EPS from continuing operations of $0.14, up $0.11 sequentially and $0.06 year over year on an adjusted basis FLRD improves to a positive 14.7%; utilization up to 97.2% Results reflect our ability to execute in a challenging operating environment Raising adjusted full year EPS guidance to a range of $0.90 to $1.10
DELIVERING GOODS for THE GOOD of ALL /// Rail Market Update and Commercial Overview 4 Rail Traffic Impacted by Labor Shortages (1) Railcar Storage Levels Remain Low (2) FLRD and Utilization are Improving Railcar Orders Slightly Down Year over Year Fl ee t U ti liz at io n FLR D Fleet Utilization FLRD (3) Q2-21 Q3-21 Q4-21 Q1-22 Q2-22 90% 95% 100% (10)% —% 10% 20% Orders Deliveries Q2-21 Q3-21 Q4-21 Q1-22 Q2-22 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 Jul-20 Jan-21 Jul-21 Jan-22 Jul-22 15% 20% 25% 30% 35%
DELIVERING GOODS for THE GOOD of ALL /// Q2-22 Financial Results Summary – Year over Year 5 Q2-22 Revenue $417M Q2-22 Cash Flow, Continuing Ops $(90)M Q2-22 EPS, Adjusted* $0.14 Q2-22 Free Cash Flow* $(5)M * See appendix for reconciliation of non-GAAP measures $+0.06 +42% -135% -102%
DELIVERING GOODS for THE GOOD of ALL /// Trinity Business Segment Performance Trends 6 Rail Products Segment Revenue Drivers ◦ Quarterly revenue improved sequentially on slightly higher deliveries, price escalation provisions, and HM-251 modifications driving up Maintenance Services revenues Rail Products Margin Performance Drivers ◦ Margins improved on better pricing but are negatively impacted by delivery of orders taken at the bottom of the cycle ▪ Operating margin of 3.2% in the quarter ▪ Segment margin includes gains from insurance recoveries in Q3 2021, Q4 2021, and Q1 2022 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 Q2-21 Q3-21 Q4-21 Q1-22 Q2-22 $— $50 $100 $150 $200 —% 20% 40% 60% (i n m ill io n s) Rail Products Revenue Maintenance Services Revenue OP Margin Q2-21 Q3-21 Q4-21 Q1-22 Q2-22 $— $150 $300 $450 (2)% —% 2% 4% Leasing Segment Revenue Drivers ◦ Improved utilization, renewal rates +13.2% over expiring rates ◦ Renewal success rate of 82% ◦ FLRD improved to positive 14.7% Leasing Margin Performance Drivers ◦ Margin improved sequentially on lower fleet operating costs ◦ Accelerated depreciation for sustainable railcar conversions
DELIVERING GOODS for THE GOOD of ALL /// Executing on Strategic Initiatives to Improve Pre-Tax ROE 7 Closed 2 ABS transactions: TRL-2022 ($245 million) and Tribute Rail ($327 million) both collateralized with existing railcar assets LTV(1) of 67.3% Balance Sheet Optimization 2,350 sustainable railcar conversions in backlog Acquired Quasar Platform in Q2 to enhance digital product portfolio New Products & Services Initiatives Continued focus on lower breakeven points Enhance value of outsourced fabrication activities Manufacturing Cost Improvement Completed ASR with $25.0M share repurchase Open market repurchases in the quarter of $25.3M Capital Allocation Execution YTD net investment in lease fleet of $199M including significant railcar purchases and sales in Q2 Fleet utilization of 97.2% 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 LTM Q2-22* LT Goal 9.6% 5.9% Mid-Teen Pre-Tax ROE Goal
DELIVERING GOODS for THE GOOD of ALL /// Trinity is Leading the Rail Industry Digital Transformation with Quasar Acquisition as it Helps Expand RailPulse’s reach Expanding and Enhancing Trinsight™ Our Trinsight™ product is a next-gen digital platform that monitors railcars and their freight in real time, from origin to destination providing fleet protection, fleet optimization, and a more reliable supply chain for our customers Growing our Digital Services with Quasar In the second quarter, we acquired Quasar Platform to enhance our digital logistics services with new capabilities, like yard management, and access new customers RailPulse adds Union Pacific in Q2 We played a key role in onboarding Union Pacific to RailPulse. RailPulse is a coalition of railcar owners formed to establish the technological infrastructure and standards that will accelerate the adoption of GPS and other telematics technology in rail to increase visibility, safety, and efficiency. 8
DELIVERING GOODS for THE GOOD of ALL /// EPS Growth Reflects Improving Operations Q2 2022 Financial Summary: Income Statement: • Total revenues of $417M reflect higher railcar deliveries year-over-year • Earnings from continuing operations of $0.14 ◦ Adjusted EPS of $0.14* • Benefited from $144M in lease portfolio sales Year-to-date Cash Flow: • Cash flow from continuing operations of $(61)M • Investment of $414M in leasing capex • Investment of $19M in manufacturing and general capex • Free cash flow after investments and dividends of $43M* • Shareholder returns of $90M through share repurchases and dividends paid Strong Performance Trends and Key Highlights 9 Cash Flow Reflects Supply Chain Challenges and Timing * See appendix for reconciliation of non-GAAP measures (i n m ill io n s) Leasing Rail Products Adj EPS, Cont Ops (Diluted) * Q2-21 Q3-21 Q4-21 Q1-22 Q2-22 $— $250 $500 $— $0.10 $0.20 (i n m ill io n s) Cash Flow from Cont Ops Free Cash Flow * Q2-21 Q3-21 Q4-21 Q1-22 Q2-22 $(100) $— $100 $200 $300
DELIVERING GOODS for THE GOOD of ALL /// 10 Unencumbered Railcars $579M • Pledge to warehouse • Additional assets can be sold or financed • LTV of 67.3% for the wholly-owned lease portfolio as of Q2-22(2) CAPITAL LEVERS Recourse Debt $519M @ 4.0%(1) Non-recourse Debt $5.0B @ ~3.3%(1) • Low-cost funds • Flexible term structures • No maturities until 2024 DEBT STRUCTURE Cash & Equivalents $50M Revolver Availability $124M Warehouse Availability $246M LIQUIDITY Solid Liquidity of $420M(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 11 C ap it al A llo ca ti on FY 2022 Summary Detail Industry Deliveries 40K – 50K railcars Does not include sustainable railcar conversions Net Fleet Investment $425M — $475M Assumes meaningful secondary market purchases Manufacturing and General Capital Expenditures $35M – $45M Investments in safety, efficiency, and automation EPS from Continuing Operations $0.90 - $1.10 Excludes gains on insurance recoveries and other items outside of our normal business operations Expect results to improve in the second half of 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 Q2-22 Conference Call 12 EPS from continuing operations of $0.14, up $0.11 sequentially and $0.06 year over year on an adjusted basis FLRD improves to a positive 14.7%; utilization up to 97.2% Results reflect our ability to execute in a challenging operating environment Raising adjusted full year EPS guidance to a range of $0.90 to $1.10
DELIVERING GOODS for THE GOOD of ALL /// Trinity Q2-22 Earnings Conference Call 13 Q&A
DELIVERING GOODS for THE GOOD of ALL /// Reconciliation: Adjusted Operating Results 14 Three Months Ended June 30, 2022 (in millions, except per share amounts) GAAP Restructuring activities, net Interest expense, net (1) Adjusted Operating profit $ 73.0 $ 1.0 $ — $ 74.0 Income (loss) from continuing operations before income taxes $ 22.3 $ 1.0 $ (0.4) $ 22.9 Provision (benefit) for income taxes $ 5.8 $ 0.3 $ (0.1) $ 6.0 Income (loss) from continuing operations $ 16.5 $ 0.7 $ (0.3) $ 16.9 Net income from continuing operations attributable to Trinity Industries, Inc. $ 11.7 $ 0.7 $ (0.3) $ 12.1 Diluted weighted average shares outstanding 84.4 84.4 Diluted income from continuing operations per common share attributable to Trinity Industries, Inc. $ 0.14 $ 0.14 (1) Represents interest income accretion related to a seller-financing agreement associated with the sale of certain non-operating assets. We have supplemented the presentation of our reported GAAP operating profit, income (loss) from continuing operations before income taxes, provision (benefit) for income taxes, income (loss) from continuing operations, net income from continuing operations attributable to Trinity Industries, Inc., and diluted income 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 restructuring activities, interest expense, net, 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 15 (1) Represents insurance recoveries in excess of net book value for assets damaged by a tornado at the Company’s rail maintenance facility in Cartersville, Georgia in the first quarter of 2021. (2) Represents interest income accretion related to a seller-financing agreement associated with the sale of certain non-operating assets. We have supplemented the presentation of our reported GAAP operating profit, income (loss) from continuing operations before income taxes, provision (benefit) for income taxes, income (loss) from continuing operations, net income from continuing operations attributable to Trinity Industries, Inc., and diluted income 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, interest expense, net, 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. Six Months Ended June 30, 2022 (in millions, except per share amounts) GAAP Gains on dispositions of property – other (1) Restructuring activities, net Interest expense, net (2) Adjusted Operating profit $ 127.8 $ (6.4) $ 1.0 $ — $ 122.4 Income (loss) from continuing operations before income taxes $ 35.2 $ (6.4) $ 1.0 $ (0.7) $ 29.1 Provision (benefit) for income taxes $ 8.8 $ (1.6) $ 0.3 $ (0.2) $ 7.3 Income (loss) from continuing operations $ 26.4 $ (4.8) $ 0.7 $ (0.5) $ 21.8 Net income from continuing operations attributable to Trinity Industries, Inc. $ 19.0 $ (4.8) $ 0.7 $ (0.5) $ 14.4 Diluted weighted average shares outstanding 84.9 84.9 Diluted income from continuing operations per common share attributable to Trinity Industries, Inc. $ 0.23 $ 0.17
DELIVERING GOODS for THE GOOD of ALL /// Q2-21 Q3-21 Q4-21 Q1-22 Q2-22 (in millions) Net cash provided by (used in) operating activities – continuing operations $ 255.6 $ 93.9 $ 196.8 $ 28.5 $ (89.8) Proceeds from lease portfolio sales 71.5 315.7 49.8 71.1 144.1 Adjusted Net Cash Provided by Operating Activities 327.1 409.6 246.6 99.6 54.3 Capital expenditures – manufacturing and other (6.9) (2.6) (6.7) (2.3) (16.5) Dividends paid to common shareholders (24.2) (21.1) (20.0) (19.1) (20.2) Free Cash Flow (before Capital expenditures – leasing) 296.0 385.9 219.9 78.2 17.6 Equity CapEx for leased railcars (from table below) (34.7) (226.8) (191.9) (30.4) (22.9) Total Free Cash Flow After Investments and Dividends $ 261.3 $ 159.1 $ 28.0 $ 47.8 $ (5.3) Capital expenditures – leasing $ 143.8 $ 112.2 $ 183.3 $ 84.6 $ 329.5 Less: Payments to retire debt (1,739.9) (331.6) (59.0) (73.0) (760.3) Proceeds from issuance of debt 1,849.0 217.0 50.4 127.2 1,066.9 Net proceeds from (repayments of) debt 109.1 (114.6) (8.6) 54.2 306.6 Equity CapEx for leased railcars $ 34.7 $ 226.8 $ 191.9 $ 30.4 $ 22.9 Reconciliation: Walking FCF Beyond Lease Investment 16 Total Free Cash Flow After Investments and Dividends (“Free Cash Flow”) is a non-GAAP financial measure. Free Cash Flow is defined as net cash provided by (used in) 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. 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 (used in) 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 17 (1) Represents insurance recoveries in excess of net book value 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) Represents interest income accretion related to a seller-financing agreement associated with the sale of certain non-operating assets. (5) Return on Equity is calculated as income (loss) from continuing operations divided by average total stockholders' equity. (6) 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, interest expense, net, 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. LTM June 30, 2022 December 31, 2021 December 31, 2020 ($ in millions) Numerator: Income (loss) from continuing operations $ 73.5 $ 39.3 $ (250.5) Provision (benefit) for income taxes 23.6 15.9 (274.1) Income (loss) from continuing operations before income taxes 97.1 55.2 (524.6) Net (income) loss attributable to noncontrolling interest (17.1) 0.2 78.9 Adjustments: Gains on dispositions of property – other (1) (14.2) (7.8) — Impairment of long-lived assets – controlling interest (2) — — 315.1 Restructuring activities, net (1.7) (3.7) 10.9 Loss on extinguishment of debt – controlling interest (3) — 4.6 5.0 Interest expense, net (4) (0.7) — — Pension plan settlement (2.8) (0.6) 151.5 Adjusted Profit Before Tax $ 60.6 $ 47.9 $ 36.8 Denominator: Total stockholders' equity $ 1,256.2 $ 1,296.8 $ 2,016.0 Noncontrolling interest (258.6) (267.0) (277.2) Accumulated other comprehensive (income) loss (6.4) 17.0 30.9 Adjusted Stockholders' Equity $ 991.2 $ 1,046.8 $ 1,769.7 Average total stockholders' equity $ 1,276.5 $ 1,656.4 $ 2,197.5 Return on Equity (5) 5.8 % 2.4 % (11.4) % Average Adjusted Stockholders' Equity $ 1,019.0 $ 1,408.3 $ 1,976.5 Pre-Tax Return on Equity (6) 5.9 % 3.4 % 1.9 %
DELIVERING GOODS for THE GOOD of ALL /// Footnotes and Reconciliations 18 Slide 4 - Rail Market Update and Commercial Overview (1) Association of American Railroads (AAR) Weekly Railcar Loadings (2) AAR Rail Time Indicators – July 1, 2022 (3) Future Lease Rate Differential (FLRD) calculates the implied change in revenue for railcar leases expiring over the next four quarters, assuming they were renewed at the most recent quarterly transacted lease rates for each railcar type. (New Lease Rates — Expiring Lease Rates) x Expiring Railcar Leases (Expiring Lease Rates x Expiring Railcar Leases) Slide 6 - 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 7 - 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 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 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 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. ◦ Reported Q1-22 GAAP EPS was $0.09; Adjusted EPS excludes $0.06 related to the insurance recoveries in excess of net book value for assets damaged by a tornado at the Company’s rail maintenance facility in Cartersville, Georgia in the first quarter of 2021. ◦ Reported Q2-22 GAAP EPS and Adjusted EPS was $0.14. Slide 10 - Healthy Balance Sheet Strategically Positioned for Opportunistic Deployment and Value Creation (1) Balances and blended average interest rate as of June 30, 2022 (2) Includes corporate revolving credit facility as part of the short-term financing structure