trn-20221025October 25, 2022October 25, 2022TRINITY INDUSTRIES INC0000099780false00000997802022-10-252022-10-25
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
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| Date of Report (Date of Earliest Event Reported): | | October 25, 2022 |
_______________________________________
(Exact name of registrant as specified in its charter)
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| Delaware | | 1-6903 | | 75-0225040 |
(State or other jurisdiction
of incorporation) | | (Commission File No.) | | (I.R.S. Employer
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:
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| 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 October 25, 2022, announcing operating results for the three month period ended September 30, 2022, a copy of which is furnished as Exhibit 99.1 and incorporated herein by reference. On October 25, 2022, Trinity held a conference call and webcast with respect to its financial results for the three month period ended September 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:
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| NO. | | DESCRIPTION |
| 99.1 | | | |
| 99.2 | | | |
| 99.3 | | | |
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| 101.SCH | | Inline XBRL Taxonomy Extension Schema Document (filed electronically herewith). |
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| 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.
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| Trinity Industries, Inc. |
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| October 25, 2022 | By: | /s/ Eric R. Marchetto |
| | Name: Eric R. Marchetto |
| | Title: Executive Vice President and Chief Financial Officer |
Exhibit 99.1
FOR IMMEDIATE RELEASE
Trinity Industries, Inc. Announces Third Quarter 2022 Results
Reports quarterly GAAP and adjusted earnings from continuing operations of $0.35 and $0.34 per diluted share, respectively
Received orders for 19,500 railcars, including multi-year 15,000 railcar order; backlog of $4.1 billion at quarter-end
Delivered 3,935 railcars in the quarter, driving book-to-bill ratio of 5.0x
Returned $123 million of capital to stockholders year-to-date
DALLAS, Texas – October 25, 2022 – Trinity Industries, Inc. (NYSE:TRN) today announced earnings results for the third quarter ended September 30, 2022.
Financial and Operational Highlights
•Lease fleet utilization of 97.9% and Future Lease Rate Differential ("FLRD") of positive 11.0% at quarter end
•New railcar orders of 19,500 and railcar deliveries of 3,935; book-to-bill ratio of 5.0x
•Quarterly total company revenues of $497 million; quarterly income from continuing operations per common diluted share ("EPS") of $0.35
•Completed $254 million railcar sale to Wafra Inc. ("Wafra") in the quarter, recorded a gain of $25 million
2022 Guidance
•Industry deliveries of 40,000 to 50,000 railcars
•Net investment in the lease fleet of $250 million to $300 million
•Manufacturing capital expenditures of $35 million to $45 million
•EPS of $0.90 to $1.10
◦Excludes gains on insurance recoveries and other items outside of our core business operations
Management Commentary
“Our third quarter results once again show progress and improvement in our business,” said Trinity’s Chief Executive Officer and President, Jean Savage. “We continue to believe we will perform well in the coming years given our robust backlog and the favorable re-pricing environment for lease rates.”
“In the Railcar Leasing and Management Services Group, our Future Lease Rate Differential remained strong at 11.0% and utilization improved to 97.9%, setting up revenue growth in coming quarters.” Ms. Savage continued, “We completed our second portfolio sale to Wafra in the quarter, and this transaction reinforced our view of railcar investment vehicles as a dynamic platform to originate leases that are attractive to the market while moderating our fleet investment.”
“In the Rail Products Group, we have increasing conviction in strong railcar demand persisting in 2023 based on tighter industry supply and our impressive backlog of $4.1 billion bolstered by the 15,000 multi-year railcar order received in the quarter. Furthermore, along with increased deliveries, we reported revenue and margin growth again this quarter, indicating our momentum in an improving market and pricing environment for railcars.”
Ms. Savage concluded, “We continue to be enthusiastic about our business, and expect a solid fourth quarter to close the year with strong momentum and visibility for 2023.”
Consolidated Financial Summary
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| Three Months Ended
September 30, | | |
| 2022 | | 2021 | | Year over Year – Comparison |
| ($ in millions, except per share amounts) | | |
| Revenues | $ | 496.6 | | $ | 419.8 | | Higher volume of external deliveries and improved pricing in the Rail Products Group |
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Operating profit | $ | 92.7 | | $ | 78.3 | | Higher deliveries and improved pricing in the Rail Products Group, partially offset by higher fleet operating costs and increased depreciation in the Leasing Group |
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| Net income from continuing operations attributable to Trinity Industries, Inc. | $ | 29.2 | | $ | 21.6 | | |
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EBITDA (1) | $ | 164.3 | | $ | 147.7 | | |
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| Effective tax expense rate | 22.5 | % | | 24.6 | % | | |
| Diluted EPS – GAAP | $ | 0.35 | | $ | 0.22 | | Primarily improved operating results and the impact of lower diluted weighted average shares outstanding |
Diluted EPS – Adjusted (1) | $ | 0.34 | | $ | 0.18 | | |
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| Nine Months Ended
September 30, | | |
| 2022 | | 2021 | | Year over Year – Comparison |
| (in millions) | | |
Net cash provided by (used in) operating activities – continuing operations | $ | (52.6) | | $ | 418.8 | | 2022 impacted by cyclical shifts in anticipation of higher volumes of railcar deliveries in future periods and continued supply chain challenges. 2021 benefited from the collection of $248 million in income tax refunds. |
Free Cash Flow (1) | $ | 0.1 | | $ | 510.9 | |
| Capital expenditures – leasing | $ | 691.1 | | $ | 363.9 | | |
| Returns of capital to stockholders | $ | 122.7 | | $ | 473.2 | | 2021 included a privately negotiated repurchase agreement totaling $222.5 million |
(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
•In the third quarter of 2022, we entered into a new long-term railcar supply agreement with GATX Corporation (“GATX”) to deliver a mix of 15,000 newly built tank and freight railcars over a six-year period. Our ending backlog at September 30, 2022 includes 15,000 railcars valued at approximately $1.8 billion associated with this agreement.
•In August 2022, Trinity Industries Leasing Company ("TILC") and certain of its subsidiaries sold to Signal Rail Holdings LLC (“Signal Rail”) a second portfolio comprised of 2,678 railcars and related leases for an aggregate sales price of approximately $254 million. TILC recognized a gain of approximately $25 million on the sale. Signal Rail is a joint venture between TILC and certain funds managed by Wafra.
•Total committed liquidity of $465 million as of September 30, 2022.
•During the quarter, Trinity repurchased approximately $14 million of shares in the open market, with a remaining authorization of $34 million as of quarter-end.
Business Group Summary
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| Three Months Ended
September 30, | | |
| 2022 | | 2021 | | Year over Year – Comparison |
| ($ in millions) | | |
| Railcar Leasing and Management Services Group | | |
| Leasing and management revenues | $ | 194.8 | | $ | 185.5 | | Higher utilization, improved renewal rates, and the effect of net lease fleet investment activities |
| Leasing and management operating profit | $ | 73.6 | | $ | 76.4 | | Higher fleet operating costs and increased depreciation, partially offset by higher utilization on a larger lease fleet |
| Operating profit on lease portfolio sales | $ | 34.3 | | $ | 32.9 | | |
Fleet utilization (1) | 97.9 | % | | 95.0 | % | | |
Future Lease Rate Differential ("FLRD") (2) | +11.0 | % | | +1.5 | % | | Improvement in current market lease rates compared to the prior year period |
Owned lease fleet (in units) (1) | 109,195 | | 105,915 | | Growth in the lease fleet |
| Investor-owned lease fleet (in units) | 33,245 | | 30,060 | | Additional sale to Wafra in Q3 2022 |
| Rail Products Group | | | | | |
| Revenues | $ | 597.3 | | $ | 339.9 | | Higher volume of deliveries, favorable pricing, and price escalation |
| Revenues eliminations – Lease subsidiary | $ | (295.3) | | $ | (105.3) | | |
| Operating profit (loss) | $ | 26.0 | | $ | (3.1) | | Higher deliveries, improved pricing and storm-related insurance recoveries, partially offset by disruptions in the transportation network used to deliver our products |
| Operating profit eliminations – Lease subsidiary | $ | (19.6) | | $ | (4.5) | | |
| Operating profit (loss) margin | 4.4 | % | | (0.9) | % | | |
| New railcars: | | | | | |
| Deliveries (in units) | 3,935 | | 2,410 | | |
| Orders (in units) | 19,500 | | 2,530 | | 2022 includes long-term supply agreement of 15,000 railcars |
| Order value | $ | 2,405.5 | | $ | 218.6 | | 2022 includes $1.8B from long-term supply agreement |
| Backlog value | $ | 4,090.9 | | $ | 1,228.4 | |
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| Sustainable railcar conversions: | | | | | |
| Deliveries (in units) | 300 | | 242 | | |
| Backlog (in units) | 2,420 | | 1,127 | | |
| Backlog value | $ | 201.4 | | $ | 98.3 | | |
| Corporate and other | | | | | |
| Selling, engineering, and administrative expenses | $ | 25.1 | | $ | 25.9 | | |
| Gains on dispositions of property | $ | (3.7) | | $ | (2.8) | | |
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| September 30, 2022 | | December 31, 2021 | | |
| Loan-to-value ratio | | | | | |
| Wholly-owned subsidiaries, including corporate revolving credit facility | 67.4 | % | | 62.3 | % | | Increased leverage associated with leased assets, partially offset by amortization of debt on encumbered assets |
(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 8:00 a.m. Eastern on October 25, 2022 to discuss its third 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 "6191522". 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 "2349723" until 11:59 p.m. Eastern on November 1, 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 Third 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.
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| 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)
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| Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| Revenues | $ | 496.6 | | | $ | 419.8 | | | $ | 1,386.1 | | | $ | 1,043.8 | |
| Operating costs: | | | | | | | |
| Cost of revenues | 395.3 | | | 337.4 | | | 1,119.4 | | | 785.8 | |
| Selling, engineering, and administrative expenses | 48.0 | | | 45.8 | | | 137.7 | | | 136.7 | |
| Gains on dispositions of property: | | | | | | | |
| Lease portfolio sales | 34.3 | | | 32.9 | | | 73.0 | | | 45.7 | |
| Other | 5.1 | | | 8.7 | | | 19.5 | | | 19.5 | |
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| Restructuring activities, net | — | | | (0.1) | | | 1.0 | | | (1.1) | |
| 403.9 | | | 341.5 | | | 1,165.6 | | | 856.2 | |
| Operating profit | 92.7 | | | 78.3 | | | 220.5 | | | 187.6 | |
| Interest expense, net | 55.0 | | | 45.2 | | | 148.2 | | | 147.5 | |
| Loss on extinguishment of debt | — | | | — | | | 1.5 | | | 11.7 | |
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| Other, net | (0.6) | | | (0.7) | | | (2.7) | | | 1.3 | |
| Income from continuing operations before income taxes | 38.3 | | | 33.8 | | | 73.5 | | | 27.1 | |
| Provision (benefit) for income taxes: | | | | | | | |
| Current | (2.6) | | | 0.5 | | | 1.2 | | | 5.7 | |
| Deferred | 11.2 | | | 7.8 | | | 16.2 | | | 3.7 | |
| 8.6 | | | 8.3 | | | 17.4 | | | 9.4 | |
| Income from continuing operations | 29.7 | | | 25.5 | | | 56.1 | | | 17.7 | |
| Income (loss) from discontinued operations, net of income taxes | (3.4) | | | 10.4 | | | (13.7) | | | 24.3 | |
| Loss on sale of discontinued operations, net of income taxes | — | | | — | | | (5.7) | | | — | |
| Net income | 26.3 | | | 35.9 | | | 36.7 | | | 42.0 | |
| Net income (loss) attributable to noncontrolling interest | 0.5 | | | 3.9 | | | 7.9 | | | (6.0) | |
| Net income attributable to Trinity Industries, Inc. | $ | 25.8 | | | $ | 32.0 | | | $ | 28.8 | | | $ | 48.0 | |
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| Basic earnings per common share: | | | | | | | |
| Income from continuing operations | $ | 0.36 | | | $ | 0.22 | | | $ | 0.59 | | | $ | 0.23 | |
| Income (loss) from discontinued operations | (0.04) | | | 0.11 | | | (0.24) | | | 0.23 | |
| Basic net income attributable to Trinity Industries, Inc. | $ | 0.32 | | | $ | 0.33 | | | $ | 0.35 | | | $ | 0.46 | |
| Diluted earnings per common share: | | | | | | | |
| Income from continuing operations | $ | 0.35 | | | $ | 0.22 | | | $ | 0.57 | | | $ | 0.22 | |
| Income (loss) from discontinued operations | (0.04) | | | 0.11 | | | (0.23) | | | 0.23 | |
| Diluted net income attributable to Trinity Industries, Inc. | $ | 0.31 | | | $ | 0.33 | | | $ | 0.34 | | | $ | 0.45 | |
| Weighted average number of shares outstanding: | | | | | | | |
| Basic | 81.7 | | | 97.7 | | | 82.3 | | | 103.4 | |
| Diluted | 83.3 | | | 99.5 | | | 84.4 | | | 105.7 | |
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)
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| September 30, 2022 | | December 31, 2021 |
| ASSETS | | | |
| Cash and cash equivalents | $ | 58.5 | | | $ | 167.3 | |
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| Receivables, net of allowance | 280.2 | | | 227.6 | |
| Income tax receivable | 11.0 | | | 5.4 | |
| Inventories | 686.5 | | | 432.9 | |
| Restricted cash | 180.2 | | | 135.1 | |
| Property, plant, and equipment, net: | | | |
| Manufacturing/Corporate | 341.6 | | | 349.3 | |
| Leasing: | | | |
| Wholly-owned subsidiaries | 5,793.1 | | | 5,706.1 | |
| Partially-owned subsidiaries | 1,533.5 | | | 1,570.6 | |
| Deferred profit on railcars sold to the Leasing Group | (774.4) | | | (779.1) | |
| 6,893.8 | | | 6,846.9 | |
| Goodwill | 159.5 | | | 154.2 | |
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| Other assets | 329.4 | | | 266.5 | |
| Total assets | $ | 8,599.1 | | | $ | 8,235.9 | |
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| LIABILITIES AND STOCKHOLDERS' EQUITY | | | |
| Accounts payable | $ | 286.6 | | | $ | 206.4 | |
| Accrued liabilities | 288.9 | | | 307.4 | |
| Debt: | | | |
Recourse (1) | 459.0 | | | 398.7 | |
| Non-recourse: | | | |
| Wholly-owned subsidiaries | 3,844.5 | | | 3,555.8 | |
| Partially-owned subsidiaries | 1,190.2 | | | 1,216.1 | |
| 5,493.7 | | | 5,170.6 | |
| Deferred income taxes | 1,128.5 | | | 1,106.8 | |
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| Other liabilities | 140.3 | | | 147.9 | |
| Stockholders' equity: | | | |
| Trinity Industries, Inc. | 1,005.9 | | | 1,029.8 | |
| Noncontrolling interest | 255.2 | | | 267.0 | |
| 1,261.1 | | | 1,296.8 | |
| Total liabilities and stockholders' equity | $ | 8,599.1 | | | $ | 8,235.9 | |
(1) Recourse debt as of September 30, 2022 includes $60.0 million outstanding associated with our corporate revolving credit facility.
Trinity Industries, Inc.
Condensed Consolidated Statements of Cash Flows
(in millions)
(unaudited)
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| Nine Months Ended
September 30, |
| 2022 | | 2021 |
| Operating activities: | | | |
| Net cash provided by (used in) operating activities – continuing operations | $ | (52.6) | | | $ | 418.8 | |
| Net cash provided by (used in) operating activities – discontinued operations | (15.4) | | | 8.4 | |
| Net cash provided by (used in) operating activities | (68.0) | | | 427.2 | |
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| Investing activities: | | | |
| Proceeds from lease portfolio sales | 514.8 | | | 404.5 | |
| Proceeds from dispositions of property and other assets | 33.2 | | | 34.3 | |
| Capital expenditures – leasing | (691.1) | | | (363.9) | |
| Capital expenditures – manufacturing and other | (25.7) | | | (16.9) | |
| Acquisitions, net of cash acquired | (9.4) | | | (16.5) | |
| Proceeds from insurance recoveries | 7.6 | | | 6.5 | |
| Equity investments | (15.5) | | | (0.2) | |
| Net cash provided by (used in) investing activities – continuing operations | (186.1) | | | 47.8 | |
| Payments related to sale of discontinued operations | (2.7) | | | — | |
| Net cash used in investing activities – discontinued operations | — | | | (4.2) | |
| Net cash provided by (used in) investing activities | (188.8) | | | 43.6 | |
| | | |
| Financing activities: | | | |
| Net proceeds from (repayments of) debt | 313.0 | | | 136.9 | |
| Shares repurchased | (36.8) | | | (406.5) | |
| Dividends paid to common shareholders | (58.3) | | | (68.5) | |
| Other | (24.8) | | | (16.0) | |
| | | |
| | | |
| Net cash provided by (used in) financing activities | 193.1 | | | (354.1) | |
| Net increase (decrease) in cash, cash equivalents, and restricted cash | (63.7) | | | 116.7 | |
| Cash, cash equivalents, and restricted cash at beginning of period | 302.4 | | | 228.4 | |
| Cash, cash equivalents, and restricted cash at end of period | $ | 238.7 | | | $ | 345.1 | |
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 from continuing operations before income taxes, provision (benefit) for income taxes, income 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 September 30, 2022 |
| GAAP | | | | Gains on dispositions of property – other (1) | | | | Interest expense, net (2) | | | | Adjusted |
| Operating profit | $ | 92.7 | | | | | $ | (1.1) | | | | | $ | — | | | | | $ | 91.6 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Income from continuing operations before income taxes | $ | 38.3 | | | | | $ | (1.1) | | | | | $ | (0.3) | | | | | $ | 36.9 | |
| | | | | | | | | | | | | |
| Provision (benefit) for income taxes | $ | 8.6 | | | | | $ | (0.3) | | | | | $ | (0.1) | | | | | $ | 8.2 | |
| | | | | | | | | | | | | |
| Income from continuing operations | $ | 29.7 | | | | | $ | (0.8) | | | | | $ | (0.2) | | | | | $ | 28.7 | |
| | | | | | | | | | | | | |
| Net income from continuing operations attributable to Trinity Industries, Inc. | $ | 29.2 | | | | | $ | (0.8) | | | | | $ | (0.2) | | | | | $ | 28.2 | |
| | | | | | | | | | | | | |
| Diluted weighted average shares outstanding | 83.3 | | | | | | | | | | | | 83.3 |
| | | | | | | | | | | | | |
| Diluted income from continuing operations per common share attributable to Trinity Industries, Inc. | $ | 0.35 | | | | | | | | | | | | | $ | 0.34 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2022 |
| GAAP | | Gains on dispositions of property – other (1) | | Restructuring activities, net | | | | Interest expense, net (2) | | | | | | Adjusted |
| Operating profit | $ | 220.5 | | | $ | (7.5) | | | $ | 1.0 | | | | | $ | — | | | | | | | $ | 214.0 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Income from continuing operations before income taxes | $ | 73.5 | | | $ | (7.5) | | | $ | 1.0 | | | | | $ | (1.0) | | | | | | | $ | 66.0 | |
| | | | | | | | | | | | | | | |
| Provision (benefit) for income taxes | $ | 17.4 | | | $ | (1.9) | | | $ | 0.3 | | | | | $ | (0.3) | | | | | | | $ | 15.5 | |
| | | | | | | | | | | | | | | |
| Income from continuing operations | $ | 56.1 | | | $ | (5.6) | | | $ | 0.7 | | | | | $ | (0.7) | | | | | | | $ | 50.5 | |
| | | | | | | | | | | | | | | |
| Net income from continuing operations attributable to Trinity Industries, Inc. | $ | 48.2 | | | $ | (5.6) | | | $ | 0.7 | | | | | $ | (0.7) | | | | | | | $ | 42.6 | |
| | | | | | | | | | | | | | | |
| Diluted weighted average shares outstanding | 84.4 | | | | | | | | | | | | | | 84.4 |
| | | | | | | | | | | | | | | |
| Diluted income from continuing operations per common share attributable to Trinity Industries, Inc. | $ | 0.57 | | | | | | | | | | | | | | | $ | 0.50 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2021 |
| GAAP | | Gains on dispositions of property – other (1)(3) | | Restructuring activities, net (3) | | | | | | | | Income tax effect of CARES Act | | Adjusted |
| Operating profit | $ | 78.3 | | | $ | (4.7) | | | $ | (0.1) | | | | | | | | | $ | — | | | $ | 73.5 | |
| | | | | | | | | | | | | | | |
| Income from continuing operations before income taxes | $ | 33.8 | | | $ | (4.7) | | | $ | (0.1) | | | | | | | | | $ | — | | | $ | 29.0 | |
| | | | | | | | | | | | | | | |
| Provision (benefit) for income taxes | $ | 8.3 | | | $ | (1.2) | | | $ | — | | | | | | | | | $ | 0.2 | | | $ | 7.3 | |
| | | | | | | | | | | | | | | |
| Income from continuing operations | $ | 25.5 | | | $ | (3.5) | | | $ | (0.1) | | | | | | | | | $ | (0.2) | | | $ | 21.7 | |
| | | | | | | | | | | | | | | |
| Net income from continuing operations attributable to Trinity Industries, Inc. | $ | 21.6 | | | $ | (3.5) | | | $ | (0.1) | | | | | | | | | $ | (0.2) | | | $ | 17.8 | |
| | | | | | | | | | | | | | | |
| Diluted weighted average shares outstanding | 99.5 | | | | | | | | | | | | | | 99.5 |
| | | | | | | | | | | | | | | |
| Diluted income from continuing operations per common share attributable to Trinity Industries, Inc. | $ | 0.22 | | | | | | | | | | | | | | | $ | 0.18 | |
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| Nine Months Ended September 30, 2021 |
| GAAP | | | | Gains on dispositions of property – other (1)(3) | | 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 | $ | 187.6 | | | | | $ | (4.7) | | | $ | (1.1) | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 181.8 | |
| | | | | | | | | | | | | | | | | |
| Income from continuing operations before income taxes | $ | 27.1 | | | | | $ | (4.7) | | | $ | (1.1) | | | $ | 4.6 | | | $ | 7.1 | | | $ | 2.2 | | | $ | — | | | $ | 35.2 | |
| | | | | | | | | | | | | | | | | |
| Provision (benefit) for income taxes | $ | 9.4 | | | | | $ | (1.2) | | | $ | (0.3) | | | $ | 1.0 | | | $ | — | | | $ | 0.5 | | | $ | (3.2) | | | $ | 6.2 | |
| | | | | | | | | | | | | | | | | |
| Income from continuing operations | $ | 17.7 | | | | | $ | (3.5) | | | $ | (0.8) | | | $ | 3.6 | | | $ | 7.1 | | | $ | 1.7 | | | $ | 3.2 | | | $ | 29.0 | |
| | | | | | | | | | | | | | | | | |
| Net income from continuing operations attributable to Trinity Industries, Inc. | $ | 23.7 | | | | | $ | (3.5) | | | $ | (0.8) | | | $ | 3.6 | | | $ | — | | | $ | 1.7 | | | $ | 3.2 | | | $ | 27.9 | |
| | | | | | | | | | | | | | | | | |
| Diluted weighted average shares outstanding | 105.7 | | | | | | | | | | | | | | | | 105.7 |
| | | | | | | | | | | | | | | | | |
| Diluted income from continuing operations per common share attributable to Trinity Industries, Inc. | $ | 0.22 | | | | | | | | | | | | | | | | | $ | 0.26 | |
(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.
(3) The effective tax rate for gain on dispositions of other property, 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.
| | | | | | | | | | | |
| Nine Months Ended
September 30, |
| 2022 | | 2021 |
| Net cash provided by (used in) operating activities – continuing operations | $ | (52.6) | | | $ | 418.8 | |
| Proceeds from lease portfolio sales | 514.8 | | | 404.5 | |
| Adjusted Net Cash Provided by Operating Activities | 462.2 | | | 823.3 | |
| Capital expenditures – manufacturing and other | (25.7) | | | (16.9) | |
| Dividends paid to common stockholders | (58.3) | | | (68.5) | |
Free Cash Flow (before Capital expenditures – leasing) | 378.2 | | | 737.9 | |
| Equity CapEx for leased railcars | (378.1) | | | (227.0) | |
| Total Free Cash Flow After Investments and Dividends | $ | 0.1 | | | $ | 510.9 | |
| | | |
| Capital expenditures – leasing | $ | 691.1 | | | $ | 363.9 | |
| Less: | | | |
| Payments to retire debt | (1,351.5) | | | (2,256.8) | |
| Proceeds from issuance of debt | 1,664.5 | | | 2,393.7 | |
| Net proceeds from (repayments of) debt | 313.0 | | | 136.9 | |
| Equity CapEx for leased railcars | $ | 378.1 | | | $ | 227.0 | |
EBITDA and Adjusted EBITDA
“EBITDA” is defined as income 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.
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| Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| Net income | $ | 26.3 | | | $ | 35.9 | | | $ | 36.7 | | | $ | 42.0 | |
| Less: Income (loss) from discontinued operations, net of income taxes | (3.4) | | | 10.4 | | | (13.7) | | | 24.3 | |
| Less: Loss on sale of discontinued operations, net of income taxes | — | | | — | | | (5.7) | | | — | |
| Income from continuing operations | $ | 29.7 | | | $ | 25.5 | | | $ | 56.1 | | | $ | 17.7 | |
| Interest expense | 56.2 | | | 45.3 | | | 152.3 | | | 147.8 | |
| Provision (benefit) for income taxes | 8.6 | | | 8.3 | | | 17.4 | | | 9.4 | |
| Depreciation and amortization expense | 69.8 | | | 68.6 | | | 206.0 | | | 200.4 | |
EBITDA | $ | 164.3 | | | $ | 147.7 | | | $ | 431.8 | | | $ | 375.3 | |
| Gains on dispositions of property – other | (1.1) | | | (4.7) | | | (7.5) | | | (4.7) | |
| | | | | | | |
| Restructuring activities, net | — | | | (0.1) | | | 1.0 | | | (1.1) | |
| Interest income | (0.3) | | | — | | | (1.0) | | | — | |
| Loss on extinguishment of debt | — | | | — | | | — | | | 11.7 | |
| Pension plan settlement | — | | | — | | | — | | | 2.2 | |
| Adjusted EBITDA | $ | 162.9 | | | $ | 142.9 | | | $ | 424.3 | | | $ | 383.4 | |
Exhibit 99.2
Trinity Industries, Inc.
Earnings Release Conference Call – Q3 2022
October 25, 2022
Leigh Anne Mann
Vice President, Investor Relations
Thank you, operator. Good morning everyone. We appreciate you joining us for the Company’s third 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 Third 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 November 1, 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.
When we last spoke in July, I told you that we were expecting significant acceleration in the back half of the year in terms of railcar production, lease rate growth, and better financial results. I am pleased to report today that we are on the path we laid out for you, and we continue to see momentum in the markets we serve. While there is a lot of uncertainty in the economy, we believe our business and the industry are resilient to a minor recession. They are underpinned by the significant improvement in the balance of supply and demand of railcars over the past two years. In short, our view of our business is relatively unchanged in the last quarter.
Turn with me to Slide 3 to talk about our key messages from today’s call, all of which we will expand on later in our prepared remarks.
First, we are reporting GAAP EPS of $0.35 and an adjusted EPS from continuing operations for the third quarter of $0.34, which is up $0.20 from last quarter and up $0.16 year over year. You’ll see in our remarks today that our results show strength across our businesses, as higher external deliveries and gains from another successful Wafra transaction bolstered our results.
Second, our Future Lease Rate Differential, or “FLRD”, was a positive 11.0% this quarter, which we believe is evidence that the market will continue to support solid increases in renewing lease rates. This is due to a higher fleet utilization in the quarter – 97.9% for our lease fleet – showing that demand remains high and available supply remains limited.
Third, this quarter we completed a sale of 2,678 railcars to our joint venture with Wafra as part of our previously announced rail investment vehicle program. This sale generated proceeds of $254 million, and we recorded a gain of $25 million in our Leasing business. In addition to the Wafra car sale, we sold several other small portfolios in the quarter for total proceeds of $300 million and a gain of $34 million.
And finally, earlier this month, we announced a six-year, 15,000 railcar order, which drove our reportable third quarter backlog up to an impressive $4.1 billion, and our book-to-bill ratio for the quarter was 5.0x. This order increased our backlog by $1.8 billion.
Again, each of these sales and orders is a reflection of the visibility we see in demand relative to supply for our industry. We are encouraged to see many of our customers continue to make long-term investment decisions.
And now let’s turn to Slide 4 for a market update.
While rail traffic is still impacted by labor shortages and service issues, we are starting to see some easing. Rail traffic is still below pre-pandemic levels, but we continue to see improvements in railroad headcounts and believe this is a needed step to support better rail service. There is no quick solution, but we are in full support of increased efficiency and service in the rail industry.
After 23 months of declines in railcars in storage, the storage number ticked up slightly over the summer, largely driven by seasonal grain cars going back into storage before the fall harvest and tank cars in storage to make preparations for the winter heating season. However, that trend reversed in
October when the AAR reported 16.9% of inactive cars as compared to almost 21% a year ago. This is the lowest percentage of inactive cars in October since 2018 and the lowest absolute number of idle railcars since 2015.
Moving to the Trinity specific data on the bottom half of the slide, as I mentioned at the top of the call, our FLRD and fleet utilization are, once again, favorable in the quarter, and we believe will drive up leasing revenues in coming quarters. Our FLRD is down slightly from last quarter, but this is more of a function of the mix of cars expiring, as opposed to a decline in remarketing rates. The strength we are seeing in lease rates is broad-based.
We delivered 3,935 railcars in the quarter, a 57% increase over the second quarter despite continued challenges with railroad service and supply chain disruption.
Last quarter, we stated we plan to approximately double deliveries in the second half of the year as compared to the first half of the year. Our pace of production has continued to accelerate, and we still have line of sight to achieve this target in 2022.
Moving to orders, in addition to the 15,000 railcar multi-year order with GATX, we received orders for an additional 4,500 railcars in the third quarter, demonstrating the continued momentum of the market. We believe the market demand is driven by attrition of aging assets, and so, we would expect order volumes to remain steady in the short term despite macroeconomic uncertainty. Lessors seem to be less speculative than during previous cycles, which is keeping demand more consistent and rationalized. With the continued growth in our backlog, Trinity is beginning to take orders for production space in 2024.
We continue to believe that our ability to provide railcars for shippers, railroads, and other leasing companies give us the broadest view into trends and dynamics in the industry and, ultimately, drives strong returns for our shareholders. The GATX multi-year order demonstrates the strength and the long-tenured relationships we maintain in the industry. With this renewed supply agreement, we expect to deliver a mix of 15,000 newly built tank and freight railcars over a six-year period. We look forward to continuing this partnership, which provides a base load of orders over the next six years.
Moving to Slide 5, our revenue for the quarter was $497 million, up 18% year over year, and our adjusted earnings per share of $0.34 was up $0.16 year over year. Our cash flow in the quarter was $9 million, and free cash flow was a negative $42 million. Eric will cover our cash flow in more depth,
but in short, this is what we expected for the quarter as we continue to grow our working capital to prepare for the increased pace of deliveries and mitigate as much supply chain risk as we can.
Please turn with me to Slide 6 for segment results.
Our leasing segment revenue of $195 million remained consistent compared to last quarter, and we ended with a slightly smaller fleet. We saw renewal rates up over the expiring rates in the quarter and a renewal success rate of 82%. This is our fifth quarter with a positive FLRD, and as we continue to re-price our fleet, we expect to see revenue growth in the segment, which flows straight to the bottom line. Revenue is also impacted by the change in fleet composition as a result of net lease fleet investment activities.
Excluding car sales, operating profit margins in our leasing and management segment slightly declined sequentially due to higher fleet operating costs, as well as higher depreciation levels in support of our sustainable railcar conversion program. Total operating profit margin for the segment benefited from the $25 million gain on the railcar sale to Wafra. We continue to view gains on railcar sales as a normal and recurring part of our business. Fleet optimization is an ongoing process. Having the dual levers of production and owning a fleet gives us several options to decide how best to allocate our capital.
Looking at Rail Products, our revenue of $597 million was up 39% sequentially and 76% year over year, driven by a large increase in deliveries in the quarter as well as better pricing dynamics. Our operating margin of 4.4% also improved sequentially, up 120 basis points, due to better pricing dynamics in railcars delivered. In the quarter, we booked a gain of $1.1 million due to insurance recoveries. This is excluded from our adjusted consolidated results but included in the Rail Products Group. Removing this gain, our Rail Products operating profit margin would be 4.2% in the quarter.
While supply chain issues have been improving across the network, our production and deliveries in the quarter were negatively impacted by rail service issues and congestion at the U.S. / Mexico border. I am proud of the way our operations team has adapted to this changing environment to meet the needs of our customers. This flexibility has come at a cost, affecting operating margins by 300 basis points in the quarter.
Finally, moving to Slide 7, I’d like to highlight a few additional activities we undertook during the quarter in support of our longer term strategic initiatives. We amended and renewed our revolver for a new five-year term and amended both our warehouse and revolver facilities to be indexed to SOFR in
anticipation of the upcoming phase-out of LIBOR. We repurchased $14 million worth of shares and now have $34 million remaining on our current authorization.
Year to date, our net investment in the lease fleet is $176 million, which went down in the quarter due to our large portfolio sale to Wafra more than offsetting additions to the fleet.
Our sustainable railcar conversion program continues to have good results, and the current conversion backlog is 2,420 railcars.
Finally, I am proud to report that Trinity completed its first ESG Roadshow. The presentation is available on our website if you are interested in reading about some of the great initiatives our team is pursuing. I’m impressed by Trinity’s focus on improved sustainability, both for our business and for the industry as a whole, as we fulfill our company purpose of Delivering Goods for the Good of All.
And now I’ll turn the call over to Eric to review our financial results.
Eric R. Marchetto
Executive Vice President and Chief Financial Officer
Thank you, Jean – and good morning everyone.
I’ll start my comments on Slide 8.
Starting with the income statement, our total revenues of $497 million reflect higher external railcar deliveries. Our adjusted earnings per share from continuing operations are $0.34 and exclude the gain from the insurance recoveries. As Jean mentioned, we benefited from the $254 million lease portfolio sale to Wafra in the quarter.
Moving to the cash flow statement, our cash from continuing operations was $9 million, and our free cash flow was a negative $42 million for the quarter. This is mainly due to a year-to-date working capital increase of $226 million, which is a function of multiple factors. First, as we prepare for higher deliveries, we have increased our inventories in anticipation of the accelerated pace of production. Inventories have also been affected by rail service issues at the border that Jean mentioned. And, finally, in the current environment, raw materials are more expensive. As we deliver the railcars currently in production, we expect to see our cash flow improve.
Our net lease fleet investment year-to-date is $176 million. The third quarter included $217 million in new railcar deliveries to our lease fleet, as well as a small secondary market portfolio purchase. In
addition to the Wafra car sale, we sold additional leased railcars in the quarter for total proceeds of $300 million and a gain of $34 million.
Secondary market valuations remain strong, reflecting assumptions of rising lease rates and increased input costs in new railcars. We remain disciplined in our secondary market transactions and view these transactions as an effective way to optimize our fleet and take advantage of any opportunities we see in the market.
Continuing our conversation on liquidity, please turn to Slide 9.
Our liquidity is currently $465 million.
In the current rising interest rate environment, our debt profile contains a favorable mix of fixed to floating rate debt, relatively low interest rates, and no maturities until 2024. This debt profile, combined with the strength of our lease fleet and a robust manufacturing backlog, provides us with good visibility of our cash flow over the coming quarters as we continue to optimize our business.
While we are not prepared to give commentary on 2023, we think railcar demand will remain strong, and we expect to exit this year with good momentum and visibility. Please turn to Slide 10, where I will talk about our expectations for the rest of 2022. We continue to think industry deliveries for the year will be between 40,000 and 50,000 railcars, which is predominantly driven by replacement demand. Our views have not changed as we have progressed through the year, despite macroeconomic headwinds.
We are revising our guidance on net lease fleet investment for the year to a range of $250 to $300 million due to lower internal deliveries and higher railcar sales. Given the nature of the macro economy, we are managing our cadence of investment as some deliveries have moved into next year. We have also been able to take advantage of an attractive secondary market and have had higher railcar sales than previously forecasted. Year to date, our net lease fleet investment is $176 million, and includes $532 million of fleet additions, both through internal deliveries and secondary market additions, and $159 million of fleet modifications and conversions, offset by $515 million in railcar sales. We are still on target for our three-year net lease fleet investment forecast.
And finally, with nine months of the year complete, we are reinforcing our adjusted EPS guidance range of $0.90 to $1.10 for continuing operations. Our fourth quarter results will rise sequentially due to higher expected external deliveries. However, we want to acknowledge that any further rail service issues or other supply chain challenges may delay some deliveries into 2023. We believe we have
good line of sight into fourth quarter deliveries and have been working all year to mitigate risk in our supply chain. And while we are insulated from higher interest rates, we are not immune from their impact; our full year guidance reflects much higher interest expense in the year than we expected.
Before we take questions, I did want to briefly talk about our three-year targets we introduced in November of 2020. 2023 will be year three of our plan, and despite a challenging and unanticipated operating environment over the plan period, we remain on track to meet all but one of the objectives that we put forth.
In 2020, we projected cash flow from operations of $1.5 to $2.0 billion over the three years. Through seven quarters, we have generated $563 million, and with our visibility into 2023, we are revising our target. We believe our three-year cash from operations will come in between $1.2 and $1.4 billion. Our initial assumption included cash flow from our highway business, which is removed in this update. Additionally, significantly higher working capital and geography of railcar sales is impacting our forecast for cash flow, with a partial offset due to the timing of cash received from our income tax receivable.
We believe we are still on track for the rest of our three-year targets despite a lot of unexpected headwinds in the market, and we will continue to update you if our expectations change over the next year.
To put it all together, I want to reinforce Jean’s comments from the start of the call. We think our third quarter results are proof of our ability to execute on our goals, and we feel positive about the progress we are making. With strong forward-looking metrics, we expect to end 2022 with a lot of momentum into 2023.
And now, operator, we are ready for our first question.
(after Q&A)
E. Jean Savage
Chief Executive Officer and President
Thank you, and thank you again everyone for joining us this morning.
As you have heard on our call today, our third quarter results show progress and improvement in our business, despite continued headwinds in the rail network. I am extremely proud of our dedicated team and how they’ve managed these unexpected challenges, and I continue to believe Trinity will perform well in the coming years.
Thank you again for your continued support.
