TRN Trinity Industries Inc

2525 N. Stemmons Freeway
Dallas, Texas 75207-2401
www.trin.net

This Proxy Statement is being mailed on or about April 3, 2020 to the stockholders of Trinity Industries, Inc. (the “Company”) in connection with the solicitation of proxies by the Company's Board of Directors to be voted at the Annual Meeting of Stockholders to be held at the Company's offices, 2525 N. Stemmons Freeway, Dallas, Texas, on Monday, May 4, 2020, at 8:30 a.m., Central Daylight Time (the “Annual Meeting”), or at any postponement or adjournment thereof, for the purposes set forth in the accompanying Notice of Annual Meeting of Stockholders. The Company’s mailing address is 2525 N. Stemmons Freeway, Dallas, Texas 75207.

You may vote in person by attending the meeting, by completing and returning a proxy by mail, or by using the internet or telephone. To vote your proxy by mail, mark your vote on the enclosed proxy card, then follow the instructions on the card. To vote your proxy using the internet or telephone, see the instructions on the proxy form and have the proxy form available when you access the internet website or place your telephone call.

The named proxies will vote your shares according to your directions. If you sign and return your proxy but do not make any of the selections, the named proxies will vote your shares: (i) FOR election of the seven nominees for directors as set forth in this Proxy Statement, (ii) FOR approval, on an advisory basis, of the compensation of the Company’s named executive officers as disclosed in these materials, and (iii) FOR ratification of Ernst & Young LLP as the independent registered public accounting firm of the Company for the fiscal year ending December 31, 2020. The proxy may be revoked at any time before it is exercised by filing with the Company a written revocation addressed to the Corporate Secretary, by executing a proxy bearing a later date, or by attending the Annual Meeting and voting in person.

The cost of soliciting proxies will be borne by the Company. In addition to the use of postal services or the internet, proxies may be solicited by directors, officers, and regular employees of the Company (none of whom will receive any additional compensation for any assistance they may provide in the solicitation of proxies) in person or by telephone. The Company has hired Georgeson, Inc. to assist in the solicitation of proxies at an estimated cost of $11,000 plus expenses.

The outstanding voting securities of the Company consist of shares of common stock, $0.01 par value per share (“Common Stock”). The record date for the determination of the stockholders entitled to notice of and to vote at the Annual Meeting, or any postponement or adjournment thereof, has been established by the Board of Directors as the close of business on March 13, 2020. At that date, there were outstanding and entitled to vote 118,369,037 shares of Common Stock.

The presence, in person or by proxy, of the holders of record of a majority of the outstanding shares entitled to vote is necessary to constitute a quorum for the transaction of business at the Annual Meeting, but if a quorum should not be present, the meeting may be adjourned from time to time until a quorum is obtained. A holder of Common Stock will be entitled to one vote per share on each matter properly brought before the meeting. Cumulative voting is not permitted in the election of directors.

On December 31, 2019, in connection with his transition to retirement, Timothy R. Wallace resigned from his positions as Chief Executive Officer and President of the Company and as a member of its Board of Directors. E. Jean Savage, a member of the Board of Directors, was appointed Chief Executive Officer and President of the Company, effective February 17, 2020. Upon accepting the Company's offer of employment, Ms. Savage resigned from her membership on the Company's Audit Committee, Finance and Risk Committee, and Human Resources Committee.

The business affairs of the Company are managed under the direction of the Board of Directors (also referred to in this proxy statement as the “Board”) in accordance with the General Corporation Law of the State of Delaware and the Company’s Certificate of Incorporation and Bylaws. The role of the Board of Directors is to oversee the management of the Company for the benefit of the stockholders. This responsibility includes monitoring senior management’s conduct of the Company’s business operations and affairs; reviewing and approving the Company’s financial objectives, strategies, and plans; risk management oversight; evaluating the performance of the Chief Executive Officer and other executive officers; and overseeing the Company’s policies and procedures regarding corporate governance, legal compliance, ethical conduct, and maintenance of financial and accounting controls. The Board of Directors includes an independent Chairman and diverse and independent Board members who help ensure that the Company's business strategies and programs are aligned with stakeholder interests.

The Board first adopted Corporate Governance Principles in 1998, which are reviewed annually by the Corporate Governance and Directors Nominating Committee and were last amended in March 2019. The Company has a long-standing Code of Business Conduct and Ethics, which is applicable to all employees of the Company, including the Chief Executive Officer, the Chief Financial Officer, principal accounting officer, and controller, as well as the Board. The Company intends to post any amendments or waivers for its Code of Business Conduct and Ethics to the Company's website at www.trin.net to the extent applicable to an executive officer, principal accounting officer, controller, or director of the Company. The Corporate Governance Principles and the Code of Business Conduct and Ethics are available on the Company’s web site at www.trin.net under the heading “Investor Relations — Governance — Governance Documents.”

The directors hold regular and special meetings and spend such time on the affairs of the Company as their duties require. During 2019, the Board of Directors held ten meetings. The Board also meets regularly in non-management executive sessions. The Board has elected Leldon E. Echols as non-executive Chairman of the Board. In this role, Mr. Echols chairs the non-management executive sessions. In 2019, all directors of the Company attended at least 75% of the meetings of the Board of Directors and the committees on which they served. It is Company policy that each director is expected to attend the Annual Meeting. All eight of the directors then serving were in attendance at the 2019 Annual Meeting.

The Board of Directors makes all determinations with respect to director independence in accordance with the New York Stock Exchange (“NYSE”) listing standards and the rules and regulations promulgated by the Securities and Exchange Commission (“SEC”). In addition, the Board of Directors established certain guidelines to assist it in making any such determinations regarding director independence (the “Independence Guidelines”), which are available on the Company’s website at www.trin.net under the heading “Investor Relations — Governance — Governance Documents — Categorical Standards of Director Independence.” The Independence Guidelines set forth commercial and charitable relationships that may not rise to the level of material relationships that would impair a director’s independence as set forth in the NYSE listing standards and SEC rules and regulations. The determination of whether such relationships as described in the Independence Guidelines actually impair a director’s independence is made by the Board on a case-by-case basis.

The Board undertook its annual review of director independence and considered transactions and relationships between each director, or any member of his or her immediate family, and the Company and its subsidiaries and affiliates. In making its determination, the Board applied the NYSE listing standards and SEC rules and regulations together with the Independence Guidelines. In making such determinations, the Board, amongst other things, considered the transactions described below.

Brandon B. Boze is a Partner and the President of ValueAct Capital, the Company's largest stockholder. ValueAct Capital and its affiliates own approximately 22.8% of the Company's outstanding shares of Common Stock. Mr. Boze qualifies as independent under the NYSE listing standards and SEC rules and regulations, and the Board does not believe that ValueAct Capital's ownership level impairs Mr. Boze's independence.

John J. Diez is President of Fleet Management Solutions for Ryder System, Inc. (“Ryder”). The Company rents equipment from, and provides transportation services to, subsidiaries of Ryder from time to time. The Company in prior years sold construction products to subsidiaries of Ryder as well. These transactions involved less than 2% of the consolidated gross revenues of each of Ryder and the Company for each fiscal year since January 1, 2017. The amounts involved in these transactions for 2017, 2018, and 2019 were, respectively, $13,016, $313,330, and $20,189. These transactions were conducted in the ordinary course of business, at arms-length.

As a result of its review, the Board affirmatively determined that the following directors are independent of the Company and its management under the standards set forth in the listing standards of the NYSE and the SEC rules and regulations: John L. Adams, Brandon B. Boze, John J. Diez, Leldon E. Echols, Charles W. Matthews, and Dunia A. Shive. Although she was considered to be independent prior to accepting the Company's offer of employment, the Board determined that E. Jean Savage is not independent because of her employment by the Company. Mr. Wallace was not considered to be independent during 2019 due to his employment with the Company. He did not serve on any committees of the Board of Directors.

Mr. Echols serves as the independent, non-executive Chairman of the Board. As stated in the Corporate Governance Principles, the Board believes that the decision as to whether the offices of Chairman and Chief Executive Officer should be combined or separated is the responsibility of the Board. The members of the Board possess experience and unique knowledge of the challenges and opportunities the Company faces. They are, therefore, in the best position to evaluate the current and future needs of the Company and to judge how the capabilities of the directors and senior managers can be most effectively organized to meet those needs. The separation of the roles of Chairman and Chief Executive Officer allows Ms. Savage to concentrate her focus on leading the Company’s business strategies, operations, and other corporate activities, while Mr. Echols provides independent oversight and direction and presides at meetings of the Board of Directors. For these reasons, the Board believes that this leadership structure is effective for the Company.

The standing committees of the Board of Directors are the Audit Committee, Corporate Governance and Directors Nominating Committee, Finance and Risk Committee, and Human Resources Committee. Each of the committees is governed by a charter, current copies of which are available on the Company’s website at www.trin.net under the heading “Investor Relations — Governance — Governance Documents.” Ms. Savage, Chief Executive Officer and President (collectively referred to as the “CEO”) of the Company, does not serve on any Board committee. Director membership of the committees is identified below.

The Audit Committee’s function is to oversee, on behalf of the Board, (i) the integrity of the Company’s financial statements and related disclosures; (ii) the Company’s compliance with legal and regulatory requirements; (iii) the qualifications, independence, and performance of the Company’s independent auditing firm; (iv) the performance of the Company’s internal audit function; (v) the Company’s internal accounting and disclosure control systems and practices; (vi) the Company’s procedures for monitoring compliance with its Code of Business Conduct and Ethics; and (vii) the Company’s policies and procedures with respect to risk assessment, management, and mitigation. In carrying out its function, the Audit Committee (a) reviews with management, the chief audit executive, and the independent auditors, the Company’s financial statements, the accounting principles applied in their preparation, the scope of the audit, any comments made by the independent auditors on the financial condition of the Company and its accounting controls and procedures; (b) reviews with management its processes and policies related to risk assessment, management, and mitigation, compliance with corporate policies, compliance programs, and internal controls; and (c) performs such other matters as the Audit Committee deems appropriate.

The Audit Committee also pre-approves all auditing and all allowable non-audit services provided to the Company by the independent auditors. The Audit Committee selects and retains the independent auditors for the Company, subject to stockholder ratification, and approves audit fees. The Audit Committee met seven times during 2019. The Board of Directors has determined that all members of the Audit Committee are “independent” as defined by the rules of the SEC and the listing standards of the NYSE. The Board has determined that each member of the Audit Committee qualifies as an audit committee financial expert within the meaning of SEC regulations.

The functions of the Corporate Governance and Directors Nominating Committee (the “Governance Committee”) are to identify and recommend to the Board individuals qualified to be nominated for election to the Board; review the qualifications of the members of each committee (including the independence of directors) to ensure that each committee’s membership meets applicable criteria established by the SEC and NYSE; recommend to the Board the members and Chairperson for each Board committee; periodically review and assess the Company’s Corporate Governance Principles and the Company’s Code of Business Conduct and Ethics and make recommendations for changes thereto to the Board; periodically review the Company’s orientation program for new directors and the Company’s practices for continuing education of existing directors; annually review director compensation and benefits and make recommendations to the Board regarding director compensation and benefits; review, approve, and ratify all transactions with related persons that are required to be disclosed under the rules of the SEC; annually conduct an individual director performance review of each incumbent director; and oversee the annual self-evaluation of the performance of the Board. Each of the members of the Governance Committee is an independent director under the NYSE listing standards. The Governance Committee met three times during 2019.

In performing its annual review of director compensation, the Governance Committee utilizes independent compensation consultants from time to time to assist in making its recommendations to the Board. The Governance Committee reviewed the director compensation in 2019, considered benchmarking information provided by Meridian Compensation Partners, LLC (the “Compensation Consultant”), and established director compensation as discussed in “Director Compensation.”

The Governance Committee will consider director candidates recommended to it by stockholders. In considering candidates submitted by stockholders, the Governance Committee will take into consideration the needs of the Board and the qualifications of the candidate. To have a candidate considered by the Governance Committee, a stockholder must submit the recommendation in writing and must include the following information:

The stockholder recommendation and information described above must be sent to the Corporate Secretary at 2525 N. Stemmons Freeway, Dallas, Texas 75207 and must be received by the Corporate Secretary not less than 120 days prior to the anniversary date of the date the Company’s proxy statement was released in connection with the previous year’s Annual Meeting of Stockholders.

The Governance Committee believes that the qualifications for serving as a director of the Company are that a nominee demonstrate depth of experience at the policy-making level in business, government, or education; possess the ability to make a meaningful contribution to the Board’s oversight of the business and affairs of the Company and a willingness to exercise independent judgment; and have an impeccable reputation for honest and ethical conduct in both professional and personal activities. In addition, the Governance Committee examines a candidate’s time availability, the candidate’s ability to make analytical and probing inquiries, and financial independence to ensure he or she will not be financially dependent on director compensation.

The Governance Committee periodically identifies potential nominees by asking current directors and executive officers for their recommendations of persons meeting the criteria described above who might be available to serve on the Board. The Governance Committee may also engage firms that specialize in identifying director candidates, which it did in 2019. The Governance Committee paused its search for director candidates during the search for Mr. Wallace's successor as Chief Executive Officer and President, but has resumed this effort in 2020. As described above, the Governance Committee will also consider candidates recommended by stockholders.

Once a person has been identified as a potential candidate, the Governance Committee makes an initial determination regarding the need for additional Board members to fill vacancies or expand the size of the Board. If the Governance Committee determines that additional consideration is warranted, the Governance Committee will review such information and conduct interviews as it deems necessary to fully evaluate each director candidate. In addition to the qualifications of a candidate, the Governance Committee will consider such relevant factors as it deems appropriate, including the current composition of the Board, the evaluations of other prospective nominees, and the need for any required expertise on the Board or one of its committees. The Governance Committee considers potential candidates in light of the skills, experience, and attributes (i) possessed by current directors and (ii) that the Board has identified as important for new directors to possess. The Governance Committee also contemplates multiple dynamics that promote and advance diversity among its members. Although the Governance Committee does not have a formal diversity policy, the Governance Committee considers a number of factors regarding diversity of personal and professional backgrounds (both domestic and international), gender, national origins, specialized skills and acumen, and breadth of experience in industry, manufacturing, financing transactions, and business combinations. The Governance Committee’s evaluation process will not vary based on whether or not a candidate is recommended by a stockholder.

The duties of the Finance and Risk Committee (the “Finance Committee”) include reviewing significant acquisitions and dispositions of businesses or assets and authorizing such transactions within limits prescribed by the Board; periodically reviewing the Company’s financial status and compliance with debt instruments; reviewing and making recommendations to the Board regarding financings and refinancings; authorizing financings and refinancings within limits prescribed by the Board; reviewing and assessing risk and litigation exposure related to the Company’s operations; monitoring the funds for the Company’s benefit plans; reviewing the Company's liquidity; reviewing stockholder returns including the Company's dividend and share repurchase program; and reviewing the Company’s insurance coverages. In addition, the Finance Committee periodically identifies, assesses, and reviews the business, commercial, operational, financial, and other risks associated with the Company's products and services. The Finance Committee also receives regular reports on legal, environmental, and safety matters. The Finance Committee met eight times in 2019.

The Human Resources Committee (the “HR Committee”) makes recommendations to the independent members of the Board of Directors in its responsibilities relating to the fair and competitive compensation of the Company’s CEO. The HR Committee has been delegated authority by the Board to make compensation decisions with respect to the other named executive officers (as defined below). Each member of the HR Committee is an independent director under the NYSE listing standards, including those standards applicable specifically to members of compensation committees. The HR Committee met five times during 2019.

The HR Committee reviews management succession planning and approves awards under the Company’s incentive compensation and equity-based plans. The HR Committee annually evaluates the leadership and performance of the Company’s CEO, and recommends the CEO's compensation to the Company’s independent directors. The independent directors are responsible for approving the CEO’s compensation. The CEO provides to the HR Committee an assessment of the performance of the other named executive officers. The HR Committee also has direct access to the Company’s key leaders. The HR Committee reviews and approves compensation for the Chief Financial Officer (the “CFO”) and the other executive officers named in the “Summary Compensation Table.” The CEO, the CFO, and the other executive officers named in the “Summary Compensation Table” are referred to in this proxy statement as the “named executive officers.”

The HR Committee retains an independent executive compensation consultant to provide an assessment of the Company’s executive compensation programs and to perform five key tasks. The consultant (i) reviews and assists in the design of the Company’s compensation programs, (ii) provides insight into executive compensation practices used by other companies, (iii) benchmarks the Company’s executive compensation pay levels with relevant peer survey data, (iv) provides proxy disclosure information for comparator companies, and (v) provides input to the HR Committee on the risk assessment, structure, and overall competitiveness of the Company’s executive compensation programs.

The HR Committee retained the services of the Compensation Consultant to assist in providing an independent assessment of the executive compensation programs. Meridian Compensation Partners, LLC was the HR Committee’s sole compensation consultant in 2019 and was chosen given its (i) depth of resources, (ii) content expertise, and (iii) extensive experience. The Compensation Consultant reported directly to the HR Committee for the purposes of advising it on matters relating to 2019 executive compensation. The services of the Compensation Consultant were used only in conjunction with executive compensation matters and to provide benchmarking information regarding director compensation and compensation trends for similar companies. The Compensation Consultant was not retained by the Company for any purpose. The Compensation Consultant’s ownership structure, limited service lines, and policies and procedures are designed to ensure that the Compensation Consultant’s work for the HR Committee does not raise any conflicts of interest. The amount of fees paid in 2019 to the Compensation Consultant by the Company represented less than 1% of the Compensation Consultant’s total annual revenues for 2019. The internal policies of the Compensation Consultant prohibit its partners, consultants, and employees from engaging in conduct that could give rise to conflicts of interest and from buying, selling, and trading in the securities of client companies when that partner, consultant, or employee is providing consulting services to the client. The employees of the Compensation Consultant providing consulting services to the HR Committee have no other business or personal relationship with any member of the HR Committee or any executive officer of the Company. After a review of these factors and the considerations outlined in applicable SEC and NYSE rules, the HR Committee has concluded that the work of the Compensation Consultant has not raised any conflicts of interest and that the Compensation Consultant is independent from the Company and from management.

The HR Committee instructed the Compensation Consultant to provide analyses, insight, and benchmarking information for 2019 on the named executive officers and other key executives to determine whether the compensation packages for these executives were competitive with the market and met the Company’s objectives. The Compensation Consultant was instructed to:

The Compensation Consultant benchmarked all cash and equity components of compensation for 2019, excluding deferred compensation, and, for each position, determined certain percentile benchmarks.

The CEO, the CFO, the Chief Administrative Officer, and the Chief Human Resources Officer work with the HR Committee and the Compensation Consultant to develop the framework and design the plans for all compensation components. The CEO and CFO recommend the financial performance measurements for the annual incentive awards and the long-term performance-based equity awards, subject to HR Committee approval. The CFO certifies the achievement of these financial performance measures. The HR Committee recommends the CEO's compensation to the independent directors for their approval. The CEO makes recommendations to the HR Committee on compensation for each of the other named executive officers.

Throughout the year, the CEO provides the HR Committee with an ongoing assessment of the performance of the other named executive officers. These assessments provide background information for any adjustment to base salary, annual incentive, or long-term incentive. Both annual incentives and long-term incentives are established with threshold, target, and maximum payout levels.

The HR Committee realizes that benchmarking and comparing peer group proxy disclosure data require certain levels of interpretation due to the complexities associated with executive compensation plans. The HR Committee uses the benchmarking information and the peer group proxy disclosure data provided by the Compensation Consultant as general guidelines and makes adjustments to compensation levels based on what the HR Committee believes is in the best interests of the Company’s stockholders. The HR Committee uses its judgment and bases its consideration of each executive’s compensation on performance in respect to the value of the executive’s contributions to the Company, the executive’s tenure, and peer survey data that establishes the ranges against which compensation is benchmarked.

The Audit Committee has the responsibility to oversee the Company’s policies and procedures relating to risk assessment, management, and mitigation. The Finance Committee has the responsibility to review and assess risk exposure related to the Company’s operations, including safety, environmental, financial, contingent liabilities, and other risks that may be material to the Company, as well as the activities of management in identifying, assessing, and mitigating against business, commercial, operational, financial, and personal risks associated with the Company’s products and services. The Finance Committee accomplishes this responsibility as described at www.trin.net under the heading “Investor Relations - Governance - Governance Documents - Finance and Risk Committee Charter.” In addition, the Audit Committee, in its discretion, reviews the Company’s major risks and exposures, including (i) any special-purpose entities, complex financing transactions and related off-balance sheet accounting matters and (ii) legal matters that may significantly impact the Company’s financial statements or risk management.

The Company conducts a detailed risk assessment of its compensation policies and practices (the “Compensation Policies”) for its employees, including its executive officers. Participants in the Compensation Policies risk assessment include the Company’s management, human resources group, internal audit group, Corporate Compliance and Risk Management Committee (which consists of senior corporate and business segment executives who meet regularly to identify and review risks and assess exposures), the Compensation Consultant, and the HR Committee.

At the request of the HR Committee, the Compensation Consultant performs a risk assessment with respect to the Compensation Policies applicable to executive officers. The Compensation Consultant did not find any excessive risk in its review of the Compensation Policies applicable to executive officers.

Also, representatives of the Company’s management, human resources group, and internal audit group review the Compensation Policies and meet to discuss and assess the likelihood and potential impact of the risk presented by the Compensation Policies and present findings to the Company’s internal Corporate Compliance and Risk Management Committee. The Corporate Compliance and Risk Management Committee considers these findings and assessments

and reviews the Compensation Policies and the Compensation Consultant’s risk assessment. The Corporate Compliance and Risk Management Committee has concluded that the Compensation Policies are not reasonably likely to have a material adverse effect on the Company.

Messrs. Boze, Echols, Matthews, and Ms. Savage served on the HR Committee during the last completed fiscal year. During the time of her service on the HR Committee, Ms. Savage was considered independent of the Company and its management under the standards set forth in the listing standards of the NYSE and the SEC rules and regulations.

None of the members of the HR Committee had ever served as an executive officer or employee of the Company or any of its subsidiaries at the time of such member's service on the HR Committee. There were no compensation committee interlocks during 2019.

The Board has established a process to receive communications by mail from stockholders and other interested parties. Stockholders and other interested parties may contact any member of the Board, including the Chairman, Mr. Echols, or the non-management directors as a group, any Board committee or any chair of any such committee. To communicate with the Board of Directors, any individual director, or any group or committee of directors, correspondence should be addressed to the Board of Directors or any such individual director or group or committee of directors by either name or title. All such correspondence should be sent “c/o Corporate Secretary” at 2525 N. Stemmons Freeway, Dallas, Texas 75207.

All communications received as set forth in the preceding paragraph will be opened by the office of the Corporate Secretary for the sole purpose of determining whether the contents represent a message to directors. Any contents that are not in the nature of advertising, promotions of a product or service, or offensive material will be forwarded promptly to the addressee. In the case of communications to the Board or any group or committee of directors, the Corporate Secretary will make sufficient copies of the contents to send to each director who is a member of the group or committee to which the envelope is addressed.

The Company strives to employ company resources in ways that make positive contributions to its stakeholders. As the Company pursues improvements to its products and services, it keeps in mind the environmental and societal impacts of its decisions and works to protect natural resources and the environment for the benefit of current and future generations. The Company continuously looks for ways to improve its governance practices with the goal of promoting the long-term interests of stakeholders, strengthening accountability and inspiring trust.

The Company aims to operate its business in a manner that minimizes the impact on natural resources and the environment. The Company believes railcars are a more environmentally friendly way to fuel the North American supply chain. U.S. freight railroads produce far fewer greenhouse gas emissions than certain other modes of commercial transportation, such as trucks. The Company strives to responsibly support customers' products at each stage of the product lifecycle, including recycling the railcar through scrap and salvage at the end of its useful life.

The Company's goal is to add value to the communities in which its employees live and work, strengthening relationships and leveraging partnerships to amplify its impact. The Company strives to attract and retain a diverse and empowered workforce. Its priorities include fostering an inclusive and collaborative workplace, promoting opportunities for professional development, improving the wellbeing of its employees and other stakeholders, and contributing to the communities in which the Company operates.

served on the management committee at ValueAct Capital since 2018. Prior to joining ValueAct Capital in 2005, Mr. Boze was an investment banker at Lehman Brothers, focused on power utilities and technology mergers and acquisitions. Mr. Boze serves as independent board Chair of CBRE Group, Inc., a commercial real estate and investment services firm. From 2009 to 2010, he served on the board of directors of Valeant Pharmaceuticals International.

Mr. Boze has experience in finance, strategy, and mergers and acquisitions, as well as deep knowledge of our business as a Partner and President of the Company's largest stockholder. In addition, Mr. Boze is a CFA charterholder. His service on the board of other significant companies provides the Board with additional perspective on the Company’s operations.

John J. Diez, 49. Director since 2018. Mr. Diez is Chair of the Governance Committee and a member of the Audit Committee and the Finance Committee. Since 2019, Mr. Diez has served as the President of Fleet Management Solutions for Ryder System, Inc., a commercial fleet management and supply chain solutions company. From 2015 to 2019, he was President of Dedicated Transportation Solutions for Ryder. From 2013 to 2014, Mr. Diez was Senior Vice President of Ryder Dedicated, and from 2011 to 2013, he served as Senior Vice President of Asset Management. He served as Senior Vice President, Global Field Finance from 2008 to 2011 and as Vice President and Chief Financial Officer for the Fleet Management Solutions business segment from 2007 to 2008. He joined Ryder as Assistant Controller in 2002. Mr. Diez spent eight years in the audit practice of KPMG LLP prior to joining Ryder. He is a Certified Public Accountant in the state of Florida and a member of the American Institute of CPAs.

Mr. Diez has extensive experience in managing a significant industrial enterprise. In addition, he possesses important skills and experience gained through his service in public accounting. His experience in logistics and supply chain matters provides the Board with key skills relevant to the Company’s operations.

Leldon E. Echols, 64. Director since 2007. Mr. Echols serves as non-executive Chairman of the Board, Chair of the HR Committee, and a member of the Audit Committee, the Governance Committee, and the Finance Committee. He served as Executive Vice President and Chief Financial Officer of Centex Corporation, a residential construction company, from 2000 to 2006, when he retired. Prior to joining Centex, he spent 22 years with Arthur Andersen LLP and served as Managing Partner, Audit Practice for the North Texas, Colorado, and Oklahoma Region from 1997 to 2000. Mr. Echols is a member of the American Institute of Certified Public Accountants and the Texas Society of CPAs. Mr. Echols has been engaged in private investments since 2006. He is a member of the board of directors and Chair of the audit committee of EnLink Midstream Manager, LLC, a company that owns interests in EnLink Midstream, LLC, which is engaged in the gathering, transmission, treating, processing, and marketing of natural gas, natural gas liquids, and crude oil. He is also a member of the board of directors and Chair of the audit committee of HollyFrontier Corporation, an independent petroleum refiner. From 2008 to 2014, Mr. Echols served on the boards of directors of Crosstex Energy, L.P. and Crosstex Energy, Inc., which are predecessors to certain of the EnLink entities. From 2014 to 2019, he was a member of the board of directors of EnLink Midstream GP, LLC, a company that owned interests in EnLink Midstream Partners, LP.

In addition to having gained substantial managerial experience as an executive officer of Centex, Mr. Echols possesses important skills and experience gained through his service in public accounting. His service on the boards of other significant companies provides the Board with additional perspective on the Company’s operations.

Charles W. Matthews, 75. Director since 2010. Mr. Matthews is a member of the Governance Committee and the HR Committee. Beginning in 1971, Mr. Matthews served Exxon Mobil Corporation, one of the leading energy companies in the world, and its predecessor, Exxon Corporation, in several capacities in its legal department, including Vice President and General Counsel from 1995 until his retirement in 2010. Mr. Matthews has been engaged in private law practice since 2010. He is the Lead Director of Cullen/Frost Bankers, Inc., a financial holding company and bank holding company, and has been a member of the audit committee since 2017. From 2012 to 2016, he was a member of the board of directors of Forestar Group Inc., a real estate and natural resources company.

During his long employment at Exxon Mobil Corporation, Mr. Matthews accumulated broad experience in legal, managerial, and other matters in the energy industry around the world. His service on the board of other significant companies provides the Board with additional perspective on the Company’s operations.

E. Jean Savage, 56. Director since 2018. Ms. Savage has served as Chief Executive Officer and President of the Company since February 2020. From 2017 until her retirement in February 2020, Ms. Savage served as Vice President

of Caterpillar, Inc. (“Caterpillar”), a manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives. She had responsibility for the Surface Mining & Technology Division. From 2014 to 2017, she was Chief Technology Officer and Vice President of Caterpillar’s Innovation and Technology Development Division. From 2009 to 2014, she served as Senior Vice President and Chief Operating Officer of the Locomotive and Railcar Services business unit for Caterpillar subsidiary Progress Rail Services, an integrated and diversified supplier of railroad and transit products and services as well as railcar leasing. Ms. Savage joined Progress Rail Services in 2002 as Vice President for Quality and Continuous Improvement. She also served as Vice President of Progress Rail’s Freight Car Repair, Parts and Quality Divisions. Prior to joining Progress Rail, she worked in a variety of manufacturing and engineering positions in her 14 years at Parker Hannifin Corporation, a leader in motion and control technologies and systems. Ms. Savage also served for nine years in the U.S. Army Reserves as a military intelligence officer.

With her experience in leading and transforming significant industrial enterprises during her time at Caterpillar, including optimizing business operations and corporate infrastructure, Ms. Savage brings substantial expertise to the Company. In addition, her experience in the railcar industry, as well as her knowledge of the complex public company reporting requirements to consolidate an operating company and a financial company, provide the Board with key skills relevant to the Company’s operations.

Dunia A. Shive, 59. Director since 2014. Ms. Shive is Chair of the Audit Committee and a member of the Governance Committee and the Finance Committee. From 2008 to 2013, she served as Chief Executive Officer and President of Belo Corp., a media company that owned several television stations, until its acquisition by Gannett Co., Inc. After the acquisition, Ms. Shive served as Senior Vice President of TEGNA Inc., formerly Gannett Co., Inc., a publishing, broadcast and digital media company, until 2017. She joined Belo Corp. in 1993 and served in a variety of leadership positions during her tenure, including Chief Financial Officer. Ms. Shive is a member of the board of directors of Kimberly-Clark Corporation, a global manufacturer of branded tissue and personal care products, where she serves on the audit committee. Ms. Shive is also a member of the board of directors of Main Street Capital Corporation, a principal investment firm that provides long-term debt and equity capital to lower middle market companies and debt capital to middle market companies. From 2014 to 2018, Ms. Shive was a director of Dr Pepper Snapple Group, Inc. From 2009 to 2015, she served on the board of directors of the Associated Press, where she served as Chair of the audit committee from 2011 to 2015. From 2008 to 2013, she served on the board of directors of Belo Corp.

Ms. Shive has broad experience in managing and leading a significant publicly-traded company. In addition, she possesses important skills and experience gained through her position of Chief Financial Officer and service in public accounting prior to joining Belo Corp. Her service on the board of other significant companies provides the Board with additional perspective on the Company’s operations.

The Board of Directors recommends that you vote FOR all of the Nominees.

The Audit Committee pre-approves all audit and permissible non-audit services provided by Ernst & Young. These services may include audit services, audit-related services, tax services, and other services. The Audit Committee has adopted a policy for the pre-approval of services provided by Ernst & Young. In addition, the Audit Committee also may pre-approve particular services on a case-by-case basis. The Audit Committee has delegated pre-approval authority to the Chair of the Audit Committee. Pursuant to this delegation, the Chair must report any pre-approval decision to the Audit Committee at its first meeting after the pre-approval was obtained. Under this policy, pre-approval is generally provided for up to one year, and any pre-approval is detailed as to the particular services or category of services and includes an anticipated budget.

We are a standing committee comprised of independent directors as “independence” is currently defined by SEC regulations and the applicable listing standards of the NYSE. The Board of Directors has determined that all three of the members of the Audit Committee are “audit committee financial experts” as defined by applicable SEC rules. We operate under a written charter adopted by the Board of Directors. A copy of the charter is available free of charge on the Company’s website at www.trin.net under the heading “Investor Relations — Governance — Governance Documents — Audit Committee Charter.”

We annually select the Company’s independent auditors. That recommendation is subject to ratification by the Company’s stockholders.

Management is responsible for the Company’s internal controls and the financial reporting process. The independent auditors are responsible for performing an independent audit of the Company’s consolidated financial statements in accordance with auditing standards generally accepted in the United States of America and issuing a report thereon. As provided in our charter, our responsibilities include the monitoring and oversight of these processes.

Consistent with our charter responsibilities, we met and held discussions with management and the independent auditors. In this context, management and the independent auditors represented to us that the Company’s consolidated financial statements for the fiscal year ended December 31, 2019 were prepared in accordance with U.S. Generally Accepted Accounting Principles. We reviewed and discussed the consolidated financial statements with management and the independent auditors and discussed with the independent auditors matters required to be discussed by Auditing Standard No. 1301, “Communications with Audit Committees,” issued by the Public Company Accounting Oversight Board.

The Company’s independent auditors have also provided to us the written disclosures and the letter required by applicable requirements of The Public Company Accounting Oversight Board regarding the independent auditors’ communications with the Audit Committee, including concerning independence, and we discussed with the independent auditors that firm’s independence. We also considered whether the provision of non-audit services is compatible with maintaining the independent auditors’ independence and concluded that such services have not impaired the auditors’ independence.

Based upon our reviews and discussions with management and the independent auditors, and our review of the representation of management and the report of the independent auditors to the Audit Committee, we recommended that the Board of Directors include the audited consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the Securities and Exchange Commission.

Audit Committee

Dunia A. Shive, Chair
John J. Diez
Leldon E. Echols

The Board of Directors recommends that you vote FOR ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2020.

The Board has delegated oversight of the Company’s executive compensation program to the HR Committee, which includes a representative of the Company's largest stockholder. This Compensation Discussion and Analysis describes how the HR Committee designed the executive compensation program and set individual pay for the executive officers named in the Summary Compensation Table. The HR Committee reviews and recommends the CEO’s compensation to the independent directors of the Board for their approval. The HR Committee reviews and approves the compensation of the other named executive officers.

Executive officers named in the 2019 Summary Compensation Table are:

After 44 years of service to the Company, including 20 years as Chief Executive Officer, Mr. Wallace stepped down as Chairman in March 2019 and stepped down as Chief Executive Officer and President on December 31, 2019, as part of his transition to retirement. He remains an employee, consistent with the terms of a transition agreement disclosed previously. While the primary components of Mr. Wallace’s 2019 compensation were not increased from 2018, his compensation as disclosed in the Summary Compensation Table reflects an increase primarily due to an increase in pension value. This increase in pension value is attributable to:

See “Summary Compensation Table” footnote 5 for additional details.

Mr. Perry stepped down as Senior Vice President and Chief Financial Officer in February 2019 in connection with his transition from employment. Mr. Perry’s compensation for 2019 was negotiated as part of a previously-disclosed transition agreement. Accordingly, unless otherwise indicated, Mr. Perry’s 2019 compensation was negotiated and not determined through the same process used for other named executive officers. Unless specifically indicated, quantitative information presented in this Compensation Discussion and Analysis section regarding the compensation of our named executive officers does not include Mr. Perry’s compensation.

On January 15, 2020, the Company announced the appointment of E. Jean Savage as Chief Executive Officer and President, effective February 17, 2020.

As described in more detail below, in connection with the spin-off of Arcosa and in the months following, a number of the named executive officers took on new roles and increased responsibilities. In addition, given its changed size and strategic direction following the spin-off, the Company utilized a new peer group for compensation benchmarking. As a result of these changes, year over year comparisons for some of the named executive officers' compensation may not be meaningful.

Following the 2018 spin-off of Arcosa, 2019 began with enthusiasm as a company focused as an industry-leading integrated railcar leasing, manufacturing, and services business, providing a single source for comprehensive rail transportation solutions and services in North America. The Company began 2019 with a solid foundation of recurring revenue from our leased railcar portfolio and a 69% increase in railcar order backlogs. Although levels of uncertainty remained within the economy, the Company forecasted and delivered improvement in its financial performance.

The industries in which the Company operates are highly cyclical in nature. Weaknesses in certain sectors of the U.S. and global economy may make it more difficult to sell or lease certain types of railcars. Additionally, adverse changes in commodity prices or lower demand for certain commodities could result in a decline in customer demand for various types of railcars. The Company has regularly experienced this cyclicality and recognizes the challenges of providing competitive compensation through these business cycles, and designs its incentive compensation programs to encourage returns-focused long-term growth. The Company sets goals intended to retain and motivate its executives to improve the Company’s performance throughout its normal business cycle, with a particular focus in 2019 on profit before tax improvement and improvement in the pre-tax return on total stockholder equity, as well as relative total stockholder return.

In 2019, the HR Committee made several important changes to the annual and long-term incentive programs as well as to other important aspects of our compensation programs. These changes were made to enhance the alignment of the compensation programs with market practice and stockholders’ interests, reinforce a pay for performance philosophy, retain executives, and embed a returns focus into the Company’s culture. Listed below are key changes for 2019:

More detailed information may be found in the following discussion.

The Company began 2019 essentially as a new company after completing the spin-off of Arcosa, and concentrated its focus as an integrated railcar leasing, manufacturing, and services business, with a vision to grow throughout the rail transportation value chain. Maximizing earnings and returns across economic and business sector cycles requires a team of innovative, dedicated, and experienced executives who can successfully assess the market and quickly adapt to changing economic cycles and business climates. The Company maintains a competitive advantage by retaining seasoned executives, developing a strong leadership succession plan, and seeking to ensure long tenure and orderly transitions among its senior executives.

During 2019, the Company utilized the strengths of its business model to (i) remain operationally and financially flexible; (ii) make strategic decisions when market conditions shifted; (iii) grow its leasing and maintenance services business, (iv) reposition and streamline its operations based on product demand; and (v) maintain a conservative and liquid balance sheet to provide stability and capitalize on attractive investment opportunities. Financial and operational highlights are shown below:

The financial and operations highlights listed above include financial measures compiled in accordance with generally accepted accounting principles (“GAAP”) and certain non-GAAP measures. Please refer to the “Appendix - Reconciliations of Non-GAAP Measures” for information on the non-GAAP measures included above, reconciliations to the most directly comparable GAAP financial measure, and the reasons why the Company believes each measure is useful to management and investors.

As further described in this Compensation Discussion and Analysis, key features of the Company’s compensation practices for the named executive officers include:

In May 2019, the Company held a stockholder advisory vote on the compensation of its named executive officers as described in the 2019 proxy statement, commonly referred to as a say-on-pay vote. The executive officers’ compensation was approved with approximately 98% of the stockholders present and entitled to vote, voting in favor of the 2019 say-on-pay resolution. The Company typically engages in multiple industry/investor conferences and roadshows each calendar quarter, in addition to handling routine investor calls and questions. Also, as noted above, a representative of the Company’s largest stockholder serves on the HR Committee. Based on our 2019 stockholder engagement efforts, we are not aware of any named executive officer compensation concerns. As the Company evaluated its compensation practices and talent needs throughout 2019, it continued to apply its strong pay for performance compensation philosophy in keeping with the stockholders' strong support of the Company’s compensation programs. Following its annual review of executive compensation, the HR Committee decided to continue utilizing annual and long-term incentive compensation that rewards senior executives for delivering value for stockholders throughout the Company’s business cycle.

In addition, the HR Committee considered ways to strengthen the pay for performance culture as a rail-focused Company, and implemented the following decisions for 2020:

The HR Committee considers each named executive officer’s compensation based on the overall objectives of the Company’s executive compensation program by considering the following for each named executive officer:

The Company’s executive compensation is designed to drive executive accountability for performance of the Company as a whole. This approach is reflected in the Company’s compensation program and contributes to a performance-driven culture where executives are expected to deliver results that promote the Company’s position as an industry-leading integrated railcar leasing, manufacturing, and services business. In setting 2019 compensation, the Company utilized the Peer Survey Data and generally targeted the total target compensation of its named executive officers between 10% above or below the 50th percentile of the Peer Survey Data. This approach supports the Company’s philosophy of driving performance and accountability. For further explanation of the Peer Survey Data, see “Benchmarking and Peer Survey Data for 2019 Compensation” below.

The HR Committee realizes that benchmarking against the Peer Survey Data requires interpretation due to the potential differences in position scope. The HR Committee uses the Peer Survey Data benchmarking information and the peer group proxy disclosure data provided by the Compensation Consultant as general guidance, making adjustments to compensation levels based on such interpretations and what the HR Committee believes to be consistent with the overall compensation objectives of the Company and in the best long-term interests of the Company’s stockholders.

The Company’s compensation philosophy has proven to be appropriate and sufficient to attract, motivate, and retain the key executives needed to enhance the performance and profitability of the Company. The HR Committee considers the targeted range and develops a total target compensation amount for each named executive officer using the objectives described below and the Peer Survey Data as general guidelines. An individual’s total target compensation may be set at or below the 50th percentile if a named executive officer is in the early stages of his or her career or relatively new to his or her current position. Total target compensation may be set above the 50th percentile if a named executive officer is a seasoned executive and has significant experience and achievements in his or her role at the Company or has extensive work experience in similar positions elsewhere that the HR Committee has determined provides additional value. In evaluation of such situations, the HR Committee also considers:

The HR Committee may periodically modify one or more compensation components to reflect the cyclical nature of the business.

The Company’s executive compensation philosophy is based on pay for performance. As illustrated in Table 1 below, target performance-based incentive compensation, including both annual and performance-based long-term compensation is generally within a range of 60% to 72% of a named executive officer’s total target compensation. To increase the alignment of rewarding executives based on strong financial performance associated with TSR and ROE, the portion of 2019 LTI awards issued as performance-based restricted stock units was increased to 80%, from 60% in 2018. The remaining 20% was issued as time-based restricted stock units, which was lowered from 40% in 2018. The HR Committee believes that by having a significant amount of an executive’s compensation based on performance, and therefore at risk of non-payment, the executive will be properly motivated to bring added value to the Company and stockholders. The Company’s executive compensation program is also designed to provide significant upside opportunity for exceptional performance and above-market compensation for above-market performance and, conversely, reduce compensation when Company performance is lower than expected.

The primary emphasis of the Company’s executive compensation program is to encourage and reward progress toward the Company’s strategic operational and financial objectives. These objectives are recommended by management, with oversight of the Board of Directors, and are designed to promote the long-term interests of the Company’s stockholders. As stockholders themselves, the Company’s leaders are keenly focused on achieving these objectives. The executive compensation program reflects the Company’s pay for performance philosophy. In support of this philosophy:

In connection with the spin-off and based on forecasted performance at the time of the HR Committee’s determination, the HR Committee approved a 22% payout of 2016-2018 performance-based long-term incentive awards and a 158%

payout of 2017-2019 performance-based long-term incentive awards, each of which have become time-based awards and will vest pursuant to the terms of the original awards. See “Treatment of Equity Awards in Connection with the Spin-off of Arcosa” for further discussion on the performance assessment for these awards.

Table 2 below provides a summary of the executive compensation program objectives.

The HR Committee retains the Compensation Consultant to provide the HR Committee with guidance on executive compensation-related matters and to perform an annual total compensation study, the product of which is benchmarking information on each of the named executive officers. In setting 2019 compensation, this benchmarking information included data from each company named in the peer group shown in Table 3. The HR Committee considered the data provided by the Compensation Consultant when developing 2019 base salaries, annual incentive compensation, long-term incentive compensation, and total target compensation for the Company’s named executive officers.

The HR Committee performs an annual review to determine whether peer companies remain appropriate. For the November 2018 compensation study to establish 2019 compensation, the peer companies as shown in Table 3 below were updated from the peer group companies used to establish 2018 compensation. These companies had median 2017 fiscal year revenue of $2.2 billion and market capitalization of $2.5 billion as of July 2018. The peer group shown in Table 3 below is comprised of industrial companies with similar size (measured by revenue and market capitalization), span of operation, and business complexity, that the Company could potentially compete with for executive talent.

The HR Committee considered the Company’s and each named executive officer’s 2018 performance when setting 2019 target compensation. The named executive officers provided the leadership and management that were pivotal to the Company’s success in 2018. Total target compensation for Mr. Wallace was not increased in 2019 and the HR Committee’s assessment was that the executive compensation program was providing appropriate incentive to drive performance. The following individual performance factors were applicable in determining 2019 compensation:

Mr. Wallace - his leadership in positioning the Company to maximize the strengths of its diversified portfolio of businesses in 2018 through the fourth quarter 2018 spin-off of Arcosa. Mr. Wallace’s leadership defined Trinity’s strong character and culture, the Company’s confidence in its products and its business practices, and most importantly, the quality of its people;

Ms. Lovett - her exceptional performance as Chief Administrative Officer with oversight of the Company’s logistics group, human resources and information technology in 2018. Ms. Lovett provided outstanding leadership of the Company’s fourth quarter 2018 spin-off of Arcosa. In December 2018, the Company announced that Ms. Lovett would assume the role of Senior Vice President and Chief Financial Officer in 2019 and her total 2019 target compensation was increased to reflect her new responsibilities;

Mr. Marchetto - his long tenure in the company’s rail business, having held executive positions in the areas of finance, sales, administration, leasing, and commercial activities. In March 2019, Mr. Marchetto became Senior Vice President and Group President, TrinityRail and his total 2019 target compensation was increased to reflect his new responsibilities;

Mr. Mauer - his leadership in managing the Company’s railcar products business. In over 25 years with the Company, Mr. Mauer has held a variety of leadership roles across various business lines and is a seasoned executive with a proven ability to deliver excellent results; and

Ms. Teachout - her significant contributions with regard to the Company’s legal activities including her successful oversight of the Company’s litigation since joining the Company in 2015 as Vice President and Deputy General Counsel. Following the spin-off of Arcosa, Ms. Teachout became Senior Vice President and Chief Legal Officer and her 2019 target compensation reflects her new responsibilities. Ms. Teachout has significant legal expertise that greatly benefits the Company’s business.

In December 2018, Mr. Perry notified the Company of his plans to transition from employment with the Company to pursue other opportunities. In conjunction with the terms of this transition compensation agreement, Mr. Perry’s employment with the Company continued in order to ensure a smooth transition of his responsibilities and his compensation for 2019 was negotiated as part of a transition agreement.

In addition to the above performance-related factors, the HR Committee considered the executive compensation program design features shown in Table 2 above in setting each component of compensation. Total target compensation for four of the named executive officers was within the targeted range, while total target compensation for Ms. Lovett was below the targeted range. In the aggregate, excluding Mr. Perry, the 2019 total target compensation for the named executive officers was within the targeted range of 10% above or below the 50th percentile of the Peer Survey Data. The HR Committee believes that the 2019 total target compensation levels for the named executive officers were appropriate.

The Company’s 2019 executive compensation program has three key components:

At the direction of the HR Committee, the Compensation Consultant met with Company management, including the CEO, to discuss the scope and complexity of responsibilities, level of revenue responsibility, and internal reporting relationships for the Company’s named executive officers. Following these discussions, the Compensation Consultant determined the reference points from the Peer Survey Data for base salary, target annual incentive compensation, target long-term incentive compensation, and total target compensation of each named executive officer as compared to the 50th percentile of the Peer Survey Data.

After discussions with the HR Committee, Company management, and a review of the Peer Survey Data, the Compensation Consultant provided comparative information for each named executive officer position. The Compensation Consultant’s analyses, along with the CEO’s compensation recommendations for each named executive officer, were presented to the HR Committee.

Set forth below are the components of total target compensation, how these components were applied to each named executive officer, and an analysis of why such amounts were set or paid. Although the HR Committee generally utilized the range of 10% above or below the 50th percentile of the Peer Survey Data for each component of compensation as a reference point, the HR Committee does not target each component within that particular range as it does generally with total target compensation. In establishing each component of compensation for the named executive officers, the HR Committee considered the same factors as it did for establishing total target compensation, as well as any additional factors noted below.

Base salary is intended to attract, motivate, and retain key executives by providing a consistent level of pay that appropriately and fairly compensates the executive for the breadth, complexity, and scope of responsibility inherent in the position. After evaluating the market compensation data, the CEO discusses with the HR Committee his evaluation of each named executive officer, excluding himself. The discussion includes performance for the past year; specific achievements he believed should be highlighted; changes in the breadth, complexity, or scope of responsibilities that have occurred or will occur in the next year; operating results; organizational improvements; and relative pay equity among the named executive officers. As noted above, Mr. Wallace’s compensation is established by the independent members of the Board.

In light of current market data for the new rail-focused company, Mr. Wallace’s 2018 base salary, and the cyclical nature of the Company’s business, the Committee decided not to increase Mr. Wallace’s base salary for 2019. Given Mr. Perry’s resignation, his 2019 base salary was not increased. In light of their strong operational performance and new roles for Ms. Lovett and Mr. Marchetto, the base salaries for all other named executive officers increased for 2019.

In recognition of the individual performance factors set forth under “2019 Total Target Compensation,” recognizing the importance of retaining key executives, and upon review of the Peer Survey Data, the 2019 base salaries for the named executive officers were set at the amounts listed below based on the rationale set forth above under “2019 Total Target Compensation.”

The following discussion contains statements regarding future performance goals. These statements are solely disclosed in the limited context of the Company’s compensation program and should not be considered as statements of the Company’s expectations or estimates. The Company specifically cautions investors not to apply these statements to other contexts.

The Company approaches goal setting throughout its typical business cycle by considering its business plan forecast over the relevant performance period for each incentive program and the Company’s historical incentive plan payouts, to strike a balance amongst motivational goals and business conditions that support creation of stockholder value. To set 2019 annual performance levels, each business unit developed a forecast that included both upside and downside business projections for the respective incentive plan performance period. These business unit projections were consolidated at the corporate level to obtain company-wide forecasts. Incentive targets for 2019 were established by the HR Committee for the named executive officers, other than Mr. Wallace, and recommended by the HR Committee to the independent directors regarding Mr. Wallace based on several important factors, including

Because the Company is a cyclical business, its goal setting philosophy for the annual incentive program is based on its annual operating plan, while the long-term goal setting process encourages performance improvement over a longer period. The annual goal setting process seeks strong performance throughout our normal business cycle. When the business cycle indicates that the performance opportunity may be lower than prior years due to economic conditions, incentive plan targets may be lower than prior years’ targets. The Company’s goal setting process is structured so that its incentive compensation programs provide significant motivation to achieve considerable results within the current business cycle. The long-term goal setting process strives for long-term company performance improvement that rewards

stockholders and aligns annual decisions to the long-term business plan. This goal setting philosophy has been in place for many years, and has served to drive effective results for stockholders as illustrated by the Company’s long-term performance.

The HR Committee believes that (i) the threshold performance level should be set such that a participant will not earn incentive compensation until a significant portion of target performance is attained; (ii) the target performance level should represent a considerable but reasonable level of performance; and (iii) the maximum performance level should represent an aggressive level of performance that will be difficult to achieve. The amount of incentive compensation earned is linearly interpolated for Company performance falling between the specified performance levels.

Once the HR Committee has established performance levels for incentive compensation, it receives regular updates throughout the year regarding the Company’s progress with respect to the performance levels and potential payouts under the incentive compensation programs. The HR Committee also continually assesses whether it believes the programs are producing the desired results. At the end of each year, the HR Committee reviews the results of the programs and further assesses the effectiveness of the programs over the preceding year. This review forms the foundation for the incentive compensation programs for the coming year.

The HR Committee may adjust, from year to year, the performance metrics, performance levels, or other elements of the annual incentive compensation program (referred to as “AIP”) with the objective of assuring management’s focus on appropriate performance metrics. The HR Committee also may choose to: (i) modify or discontinue the AIP at any time, overall or as to any one or more named executive officers, including non-payment or partial payment of incentive compensation or granting equity in lieu of cash compensation, with or without notice; (ii) modify a named executive officer’s AIP target if his or her responsibilities change significantly; (iii) reduce a named executive officer’s annual incentive compensation on a discretionary basis for failing to meet job performance expectations; (iv) recoup all or any portion of annual incentive compensation under circumstances where the Company restates its financial statements; or (v) remove named executive officers from the AIP at any time. The HR Committee may remove any unusual or infrequently occurring, or non-recurring items of income or expense from the calculation of financial goal attainment and incentive compensation.

The 2019 AIP target amount for Mr. Wallace was not increased from 2018, given current market data for his role with the new rail-focused company. In light of their strong operational performance and in certain cases to reflect their new roles, all other named executive officers received increases to their AIP target amounts for 2019. Further, the HR Committee desires collaboration and innovation among the named executive officers, and understands the Company’s business in relation to the overall economic cycle. The HR Committee approved 2019 AIP targets as follows:

Mr. Wallace’s potential annual incentive compensation was greater than the other named executive officers since he had ultimate responsibility for the overall success of the Company. To moderate the impact of base salary adjustments on other components of compensation, and to facilitate comparisons to market data, a specified dollar amount was used for annual incentive compensation targets rather than a percentage of base salary.

In performing its annual review of the Company’s incentive compensation programs, the HR Committee determined that applying Company-wide goals has been highly effective in achieving a desired level of accountability for the success of the Company as a whole. The HR Committee believed that emphasizing both PBT growth and returns was important as the Company became rail-focused while continuing to seek operational efficiencies and cost reductions. Employing PBT as the financial metric also emphasized earnings. Accordingly, the HR Committee approved PBT as the exclusive financial performance metric for the Company’s 2019 AIP program, weighted 85% of an executive’s target AIP. PBT is defined as net income before tax.

The threshold performance level of PBT is intended to motivate participants to achieve a significant percentage of target and was set at 80% of the PBT target performance level. By attaining the threshold PBT performance level, participants would earn 40% of the PBT portion of their annual incentive compensation target.

The target PBT performance level was selected because it was aligned with the Company's 2019 operating plan. The maximum payout was set at 125% of the target PBT payout and would only be achieved if extraordinary results were achieved in 2019. Table 5 below provides the threshold, target, and maximum PBT performance levels for the 2019 AIP. Table 5 also shows the potential payout opportunities as a percent of the annual incentive compensation target for the named executive officers.

Since the Company elected to focus on improving returns in 2019, the remaining 15% of each participant’s 2019 target AIP could be earned based on a qualitative evaluation of implementing returns “scorecards” throughout the Company. Implementation of these scorecards had a common objective of embedding return metrics into the Company’s culture. The payout of this portion of the AIP could range from a minimum of 0% to a target and maximum of the entire 15% of each participant’s 2019 target AIP. The payout was evaluated subjectively based on the creation of a scorecard for each business unit and each corporate function that included the key levers that influence ROE improvement. These scorecards serve to drive understanding and line of sight into the organization, resulting in measurement and management of improved ROE throughout the Company.

See the “Grants of Plan-Based Awards Table” for more information on possible AIP payments to the named executive officers.

The Company exceeded the 2019 AIP PBT target performance level as a result of the Company's efforts throughout the year to maximize profitability. In addition, successful implementation of returns scorecards added 15% of target AIP compensation. Accordingly, the named executive officers earned 104% of their respective target annual incentive compensation payout amounts under the program described above. The HR Committee approved the exclusion of $14.7 million of fourth quarter 2019 restructuring charges from the AIP payout calculation.

The HR Committee believes that this exclusion is appropriate because (i) the AIP was performing as intended and the Company’s employees were highly motivated and producing significant results; and (ii) the decision to execute a restructuring program was not anticipated at the time the 2019 AIP PBT goals were considered.

The 2019 annual incentive compensation amounts paid to each named executive officer were as follows: Mr. Wallace $1,365,000; Ms. Lovett $416,000; Mr. Marchetto $442,000; Mr. Mauer $416,000; and Ms. Teachout $312,000. Since Mr. Perry announced his resignation and entered into a transition agreement with the Company, he was not eligible for a payment from the 2019 AIP. The HR Committee believed that the 2019 AIP performed as designed by motivating the program participants to maximize the Company’s performance throughout the year.

In addition, Messrs. Marchetto and Mauer each received retention payments of $37,500 and $45,000, respectively, in 2019. These payments were part of a 2018 retention program for employees who were the most critical to the success of the spin-off of Arcosa and took on additional workload to complete the spin-off. Ms. Teachout received a retention payment of $250,000 as part of a 2016 retention program to help ensure retention of her expertise in managing the Company's primary litigation and her leadership.

Long-term incentive compensation is a key part of the total target compensation for executives and is provided through the stockholder-approved Fourth Amended and Restated Trinity Industries, Inc. 2004 Stock Option and Incentive Plan (the “Stock Plan”). The overarching purpose of LTI is to align executives’ interests with those of the Company’s stockholders and motivate executives to create long-term stockholder value by improving the Company’s earnings and returns through a variety of strategic and operational initiatives.

For 2019, the HR Committee established a target level of LTI (the “target LTI”) for the named executive officers. The target LTI for each named executive officer was set as a specified dollar amount used to calculate the named executive officer’s target LTI grant. The target LTI grant was calculated by dividing the target LTI dollar amount for each named executive officer by the closing stock price on the date of grant.

A named executive officer’s target LTI grant can be composed of multiple types of long-term incentives as provided in the Stock Plan. Since 2008, the Company has utilized two types of long-term incentives for the named executive officers’ target LTI grants: (i) performance-based restricted stock or stock units; and (ii) time-based restricted stock or stock units.

The 2019 target LTI grants made to the named executive officers were comprised of 80% performance-based restricted stock units (“Performance Units”) for the 2019-2021 performance period, and 20% time-based restricted stock units. When granted in 2019, the target LTI grants of 80% Performance Units were to help drive executive accountability for performance of the Company as a whole. As shown in Table 6 below, the Company’s use of 80% Performance Units in 2019 compares to 48% of performance-based LTI opportunity made by the 2019 compensation benchmarking peer group. The time-based restricted stock unit weighting was decreased to 20% from 40% of the LTI grant to reflect the HR Committee’s continued desire to focus on the company’s returns while continuing to ensure the long-term commitment of the key executives to build stockholder value.

The HR Committee makes additional time-based awards to the named executive officers when it determines that such awards will be helpful in retaining the officers. In making this determination, the HR Committee considers a number of factors, including historical time-based awards provided, the officer’s tenure with the Company, the officer’s performance in his or her respective roles, and the criticality of the officer’s retention to achieve future strategic objectives.

Given that Ms. Lovett, Mr. Marchetto, and Ms. Teachout took on new roles in connection with the spin-off of Arcosa or in early 2019, the HR Committee increased LTI targets for them to maintain competitive compensation for the new roles. The 2019 LTI target for Mr. Wallace was unchanged from 2018 given that his LTI compensation was competitive with market practice. Mr. Mauer’s LTI target was increased to maintain a market-competitive level and to strengthen retention. The HR Committee approved the following target LTI amounts:

To moderate the impact of base salary adjustments on other components of compensation, and to facilitate comparisons to market data, a specified dollar amount was used for long-term incentive compensation targets rather than a percentage of base salary. See the “Grants of Plan-Based Awards Table” for more information on possible future payments to the named executive officers.

The Company uses a performance-based restricted stock unit program (the “Performance Unit Program”) for the performance-based component of the named executive officers’ target LTI grants. This program is designed to (i) increase the visibility of the long-term incentive performance goals for the program’s participants, (ii) align their efforts toward achieving these goals, and (iii) reinforce pay for performance linkage through settlement of awards immediately following the end of the relevant performance period.

The Performance Unit Program is designed to accomplish these goals by granting Performance Units as 80% of the participant’s pre-established target LTI level at the beginning of a three-year performance period. The Company’s

attainment of the performance levels during the performance period determines the number of units that are ultimately earned following the end of the performance period. These units are non-voting and do not receive dividends during the performance period.

In 2019, the HR Committee established relative TSR and three-year average ROE as the performance metrics for the 2019-2021 performance period, each representing 50% of the named executive officer’s target performance-based LTI grant. The HR Committee established the 2019-2021 relative TSR performance levels as follows: (i) threshold of 25th percentile; (ii) target of 50th percentile; and (iii) maximum of 75th percentile.

The HR Committee defined ROE as PBT adjusted for non-controlling income or loss divided by equity. “Equity” is defined as total stockholder’s equity excluding non-controlling interest, adjusted for accumulated other comprehensive income and loss. Any share repurchases executed during the performance period reduce stockholders’ equity. The HR Committee established the 2019-2021 three-year average ROE threshold, target, and maximum performance levels as 8.0%, 10.0% and 12.5%, respectively. These performance levels were set after a rigorous analysis of leasing industry ROE history and the Company’s ROE history, overlayed with the Company's 3-year financial model with improved ROE drivers above the forecast. Please refer to “Incentive Compensation Overview” for a description of the HR Committee’s performance goal setting process.

In 2019, the named executive officers were granted 80% of their respective target LTI compensation as Performance Units. At the end of the 2019-2021 performance period, for both relative TSR and three- year average ROE components combined, the named executive officers can earn from 30% of the target grant at the threshold performance level up to 200% of the target grant at the maximum performance level. If the Company achieves target relative TSR and target three-year average ROE, the named executive officers will retain 100% of their grant. The named executive officers will retain 0% of the target grant if the Company does not achieve the threshold performance levels. For Company performance falling between the performance levels, the amount of the grant awarded is linearly interpolated. See the “Grants of Plan-Based Awards Table” for the specific number of Performance Units granted to each named executive officer in 2019 under the Performance Unit Program. The relative TSR portion of the 2019 Performance Unit payout will be capped at 100% of target if the three-year annualized relative TSR is negative over the performance period.

In 2019, the named executive officers were granted 20% of their respective target LTI compensation as time-based restricted stock units. These units were granted to reflect the HR Committee’s desire for long-term retention of the key executives to build stockholder value. These time-based restricted stock units will vest in equal installments on May 15, 2022 and 2023 if the named executive officer remains an employee with the Company on such dates. These units are non-voting and do not receive dividends during the vesting period.

Performance levels for the 2016-2018 Performance Unit grants were set at cumulative three-year earnings per share (“EPS”) and return on net assets (“RONA”) levels for the 2016-2018 performance period as shown in Table 7 above. Participants had an opportunity to earn from 30% of the target grant by attaining threshold performance for both EPS and RONA to 200% of the target grant by attaining maximum performance for both EPS and RONA. Because of the spin-off of Arcosa, the total combined EPS and RONA performance of the 2016-2018 Performance Units was assessed to be 22% of target based on the Company's forecast of below threshold RONA performance and just above threshold EPS performance at the time of the HR Committee’s determination (September 2018) prior to the spin-off. After the performance adjustment, the awards became time-based restricted stock units that vest over the remaining vesting period, which ended on May 15, 2019. RONA was defined as profit before taxes divided by net assets, which included: cash, net working capital, property plant and equipment, goodwill, and intangibles.

Performance levels for the 2017-2019 Performance Unit grants were set at cumulative three year EPS and return on operating capital (“ROOC”) levels for the 2017-2019 performance period as shown in Table 7 above. Participants had an opportunity to earn from 30% of the target grant by attaining threshold EPS and ROOC performance to 200% of the target grant by attaining maximum EPS and ROOC performance. Because of the spin-off of Arcosa, the total EPS and ROOC performance of the 2017-2019 Performance Units was assessed to be 158% of target based on the Company's forecast at the time of the HR Committee’s determination prior to the spin-off. After the performance adjustment, the awards became time-based restricted stock units that vest over the remaining vesting period, which ends on May 15, 2020. ROOC was defined as profit before taxes divided by the Company’s property, plant and equipment, net working capital, and goodwill and intangible assets.

Except for basing the remainder of the Performance Unit period for 2016-2018 and for 2017-2019 on the September 2018 forecast as described above, the HR Committee did not exercise any positive or negative discretion regarding the Performance Units for 2016-2018 or 2017-2019.

For 2019, the executive perquisite allowance program was discontinued. The HR Committee believed that this adjustment was appropriate as such programs are not widely utilized by peer companies.

Named executive officers are encouraged to have a physical examination each year that is paid for by the Company.

The Company’s retirement, savings, and transition compensation plans are designed to assist executives in the transition from active employment. The HR Committee believes these plans assist in recruiting and retaining senior executives and facilitate employment transition. Each of the plans is discussed in the “Compensation of Executives” section of this proxy statement. The Company’s retirement, savings, and transition compensation plans consist of the following:

Effective March 31, 2009, the Board amended the Standard Pension Plan to reduce future pension costs. Under this amendment, all future benefit accruals under the Standard Pension Plan automatically ceased for all participants, and the accrued benefits under the Standard Pension Plan were determined and frozen as of that date. The amendment to the Standard Pension Plan did not affect other benefits earned by participants prior to March 31, 2009. No new participants have been added to the Standard Pension Plan since it was frozen.

Effective December 31, 2019, the Standard Pension Plan was terminated. Consequently, upon completion of the termination and annuitization of the Standard Pension Plan, the Company will no longer have any remaining funded pension plan obligations. The annuitization is scheduled to be completed in 2021.

In 2009, the Board, in connection with its decision to freeze the Standard Pension Plan, amended the 401(k) Plan effective with the 2009 plan year to (i) allow the participants in the Standard Pension Plan to participate in the enhanced portion of the 401(k) Plan that provides for potential annual contributions by the Company to the participating employee’s account of up to an additional 3% of an employee’s base pay, subject to the Code limit for 401(k) plans, depending upon years of service (the “Annual Retirement Contribution”) and (ii) require Board approval for the Company to make the 401(k) Company match and the Annual Retirement Contribution.

A breach of any of the foregoing conditions will cause the forfeiture of any remaining unpaid amounts. Notwithstanding the foregoing, in the event of a participant’s separation from service due to death, disability or a change in control of the Company, the conditions set forth above shall be of no force and effect. Payment will commence in accordance with the participant’s election. If no election is made, payment will be made as a lump sum on the one year anniversary of the participant’s separation from service.

The Board has determined that it is appropriate to reinforce and encourage the continued attention and dedication of members of the Company’s management to the interests of stockholders without distraction in potential circumstances arising from the possibility of a change in control of the Company. Accordingly, the Company has entered into a change in control agreement with Mses. Lovett and Teachout and Messrs. Marchetto and Mauer. These agreements have a three-year term. The agreements provide for payment to the named executive officers of a lump sum equal to two times the executive’s base salary plus the target annual bonus in effect upon the change of control, or if higher, at the time of termination. The severance benefits provided by the change in control agreements also include, for 24 months after termination, continuation of all medical, dental, vision, health, and life insurance benefits which were being provided to the named executive officer at the time of termination of employment and a lump sum equivalent to the amount of income tax payable due to the continuation of insurance benefits.

The change in control agreements contain a “double trigger” provision that requires both a change in control of the Company and a qualifying termination of the named executive officer’s employment before cash compensation will be paid under the agreement. A qualifying termination of employment must be in connection with a change in control or within two years following a change in control where the executive officer is terminated without “cause” or the executive officer terminates his or her employment for “good reason” (a “Qualifying Termination”). In addition, the agreements contain a non-compete provision to protect the Company’s business goodwill. Further, the named executive officer is required to execute a release of claims against the Company to receive compensation under the agreement.

The change in control agreements provide for the single trigger of a change in control for vesting of equity awards granted prior to January 1, 2019 and provide for the Qualifying Termination double-trigger for vesting for equity awards granted on or after January 1, 2019. Vesting of retirement and deferred compensation benefits under the Company’s non-qualified retirement and deferred compensation plans is accelerated upon the Qualifying Termination double trigger.

The change in control agreements do not include excise tax gross ups. Instead, if any payment to which the named executive officer is entitled would be subject to the excise tax imposed by Section 4999 of the Code, then the named executive officer shall be solely responsible for the payment of all income and excise taxes due from the named executive officer and attributable to such payment, with no right of additional payment from the Company as reimbursement for any excise taxes.

The Company considers the compensation payable under the agreements upon specified events of termination following a change in control to be appropriate in light of the industries in which it is engaged, the limited number of companies in many of those industries, and the uncertain length of time necessary to find new employment. The level of payments and benefits provided under the change in control agreements are considered appropriate. These benefits are recognized as part of the total compensation package and are reviewed periodically, but are not specifically considered by the HR Committee when making changes in base salary, annual incentive compensation, or long-term incentive compensation. The change in control severance benefits are discussed in the Compensation of Executives section under “Potential Payments Upon Termination or Change in Control.” The Company does not have severance agreements with named executive officers other than in connection with the change in control agreements.

In January 2019, the Company entered into amendments to the change in control agreements for Mses. Lovett and Teachout and Messrs. Marchetto and Mauer. The amendments, which are included in the summary above, were as follows:

Mr. Perry’s change in control agreement was terminated effective June 30, 2019. Mr. Wallace’s change in control agreement was terminated effective December 17, 2019.

As previously disclosed in the current reports on Form 8-K, the Company entered into transition agreements with Messrs. Wallace and Perry. Key compensation terms of these agreements are set forth below.

Mr. Wallace’s Transition Agreement

Mr. Wallace served in a full time capacity as Chief Executive Officer and President of the Company, and a member of the Company’s Board of Directors, until the close of business on December 31, 2019, at which time he stepped down from those roles.

Through March 5, 2020, Mr. Wallace was paid at his 2019 compensation level. He received his 2019 short-term incentive award payable in March 2020, but is not eligible to receive additional short-term incentive awards or new long-term incentive compensation grants from and after December 17, 2019, the effective date of the agreement.

From March 6, 2020 through May 31, 2021, Mr. Wallace will be paid a base salary of $20,000 per calendar month, subject to Mr. Wallace’s accessibility to the Company for consultation with the Chairman of the Board, his successor as Chief Executive Officer, or their designees.

Mr. Wallace will be paid a stipend of $3,500 per month for use in obtaining office space of his choosing. The Company also provides Mr. Wallace with administrative support.

All outstanding, performance and time-based, restricted stock, stock units, career stock grants, and career step share grants awarded to Mr. Wallace will be governed by the express language, terms, and conditions of the plans and agreements under which they were granted.

Mr. Perry’s Transition Agreement

Through June 30, 2019, Mr. Perry was paid at his then-current compensation level. He received his 2018 short-term incentive award, paid in March 2019, but is not eligible to receive additional short-term incentive awards or new long-term incentive compensation grants from and after the effective date of the agreement.

From July 1, 2019 through May 31, 2020, Mr. Perry will be paid a base salary of $10,000 per calendar month, subject to Mr. Perry’s accessibility to the Company for up to thirty (30) hours per calendar month for consultation with the Company’s Chief Executive Officer or delegate pertaining to the Company’s commercial and legal affairs. In addition, Mr. Perry will be paid $300 per hour, prorated, in excess of the thirty (30) hours in any calendar month for special projects or other assignments.

All outstanding, performance and time-based, restricted stock, stock units, career stock grants, and career step share grants awarded to Mr. Perry will be governed by the express language, terms, and conditions of the plans and agreements under which they were granted.

The Company-supported medical plan, life insurance, and long-term disability plan, and employee-paid dental, vision, critical illness insurance, and supplemental life insurance are substantially similar for the named executive officers as for all full-time employees. The Company does not provide health benefits to retirees.

The HR Committee follows the same processes and methods disclosed herein to establish the compensation for all other named executive officers as it does in recommending to the independent directors the compensation package for the CEO. As noted previously, the CEO is compared to other executives in comparable positions in the Peer Survey Data. Since the CEO of the Company has a unique and greater set of responsibilities as compared to the other named executive officers, including having the ultimate responsibility for the overall success of the Company, the Board does not consider the CEO’s compensation to be comparable to the compensation of the other named executive officers.

The Board has adopted a Company policy that allows payouts to be recouped under annual and/or long-term incentive plans if the financial statements on which they are based are subsequently required to be restated as a result of errors, omissions, fraud, or other misconduct. The policy provides discretion to the HR Committee to make such determinations while providing a framework to guide their decisions.

Stock ownership requirements have been adopted that require the CEO to maintain ownership of Company Common Stock valued at six times base salary, the other named executive officers at three times base salary, and the Board at five times annual cash retainer. Stock ownership is defined as (i) stock owned without restrictions; (ii) shares or units granted on which restrictions remain, including restricted shares that vest at retirement; (iii) shares or share equivalents held in a qualified or non-qualified profit sharing plan; and (iv) equivalent shares determined from vested, in-the-money stock options. Individuals subject to the stock ownership requirements have five years to achieve compliance with the ownership requirements, subject to extensions in limited circumstances. Prior to achieving compliance and the applicable compliance date, the named executive officers may sell up to 50% of shares received from each award that vests after becoming subject to stock ownership requirements, subject to compliance with the Transactions in Trinity Securities Policy. The named executive officers and the directors are all in compliance with the Company’s stock ownership requirements or are within the time period allowed to achieve compliance. Mr. Wallace and Mr. Perry are no longer subject to stock ownership requirements.

The Company has also adopted a policy prohibiting officers, directors, such additional persons as may be recommended by the Company’s Disclosure Committee and approved by the CEO and CFO, and their respective related persons from (i) selling Company securities short, (ii) pledging or hypothecating any Company securities (e.g., using such securities for margin loans or to collateralize other indebtedness), or (iii) engaging in derivative transactions, including without limitation hedging, puts and calls, involving Company securities. Other than with regard to the specified persons above, the Company does not have a policy regarding the ability of our employees to hedge or pledge Company securities, including with respect to the types of transactions identified in Item 407(i)(1) of Regulation S-K.

Due to the tax revisions in the Tax Cuts and Jobs Act, no deduction is allowed for compensation of certain executive officers that exceeds $1 million per year, unless certain specific “grandfather” conditions are met.

The HR Committee believes the executive compensation program provides appropriate incentives for each named executive officer to strive for the Company’s achievement of exceptional operating results and concurrent preservation of, and improvements to, the Company’s financial condition, thereby clearly aligning each executive’s potential compensation with the long-term interests of stockholders. In summary, the Company’s executive compensation program contributes to a high-performance culture where executives are expected to deliver results that promote the Company’s position as an industry-leading integrated railcar leasing, manufacturing, and services business.

We have reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K and based on such review and discussions, we recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.

Human Resources Committee

Leldon E. Echols, Chair
Brandon B. Boze
Charles W. Matthews

The following table and accompanying narrative disclosure should be read in conjunction with the Compensation Discussion and Analysis, which sets forth the objectives of the Company’s executive compensation programs.

The “Summary Compensation Table” below summarizes the total compensation paid to or earned by each of the named executive officers for the fiscal years ended December 31, 2019, 2018, and 2017.

Mr. Wallace stepped down as Chief Executive Officer and President of the Company on December 31, 2019, as part of his transition to retirement. His compensation in the table below includes $3,075,556 attributable to a change in pension value and nonqualified deferred compensation earnings. The increase in this amount year-over-year is primarily attributable to:

The stock awards described in the “Summary Compensation Table” are the dollar amounts of the grant date fair value of the awards calculated in accordance with ASC Topic 718. The following discussion contains statements regarding future performance goals. These statements are solely disclosed in the limited context of the Company’s compensation program and should not be considered as statements of the Company’s expectations or estimates. The Company specifically cautions investors not to apply these statements in other contexts.

The equity awards granted in May 2019 to the named executive officers were grants of 80% performance-based restricted stock units and 20% time-based restricted stock units, all granted pursuant to the Stock Plan. The performance-based restricted stock unit awards were made at the target amount for each named executive officer. Recipients of the performance-based restricted stock units will not earn any such units unless the Company achieves (i) threshold performance level of 25th percentile of the annualized relative TSR measured against the average three-year annualized TSR of the companies comprising the S&P MidCap 400 index or (ii) 2019-2021 three-year average ROE of 8.0%. Recipients may earn the following percentages of the target grant amount: (i) 30% of the target grant for threshold performance (25th percentile of relative TSR measured against S&P MidCap 400 index and 2019-2021 three-year average ROE of 8.0%); (ii) 100% of the target grant for target performance (50th percentile of relative TSR measured against S&P MidCap 400 index and 2019-2021 three-year average ROE of 10.0%); and (iii) 200% of the target grant for maximum performance (75th percentile of relative TSR measured against S&P MidCap 400 index and 2019-2021 three-year average ROE of 12.5%). For performance falling between the specified levels, the amount of units earned will be interpolated accordingly. During the performance period, recipients do not earn dividends on, and are not entitled to vote with respect to, the performance-based restricted stock units.

In 2019, the named executive officers were granted 20% of their respective target LTI compensation as time-based restricted stock units. These units were granted to reflect the HR Committee’s desire to ensure the long-term commitment of key executives to build stockholder value. These time-based restricted stock units will vest in equal installments on May 15, 2022 and 2023 if the named executive officer remains an employee on such dates. During the vesting period, recipients do not earn dividends on, and are not entitled to vote with respect to, the time-based restricted stock units. Dividends on these units are accrued and paid upon vesting.

Each performance-based restricted stock unit earned will convert into either one share of Common Stock or the cash value of one share of Common Stock and vest on May 15, 2022. In the event of death or disability occurring prior to the third anniversary of the date of grant, the performance metrics will be assumed to have been met at target, with the actual number of shares to be awarded determined by multiplying the target grant by a fraction, the numerator of which is the number of days since the date of grant to the date of death or disability and the denominator of which is the number of days in the full performance period. In the event of a change in control of the Company, the performance metrics will be assumed to have been met at target level and the recipients will earn the target grant of units. In the event of retirement or termination without cause prior to the third anniversary of the date of grant, the number of performance-based restricted stock units earned will be based on the level of achievement for the entire performance period, multiplied by a fraction, the numerator of which is the number of days from the date of grant to the date of retirement or termination without cause, and the denominator of which is the number of days in the full performance period. However, in the event of such a retirement or termination without cause, all units earned (and shares payable with respect thereto) are subject to forfeiture, at the discretion of the HR Committee, if the recipient of the grant is affiliated in certain respects with a competitor, customer, or supplier of the Company.

The non-equity incentive plan awards for 2019 to the named executive officers were based 85% on the profit before tax of $213 million. A remaining 15% of each participant's 2019 target AIP was earned based on the successful return scorecard implementation metric.

See “Setting 2019 Annual Incentive Compensation Performance Levels” under “Compensation Discussion and Analysis” above for a description of the goals.

The value attributed to personal use of the Company's aircraft, if any, is calculated using the aggregate incremental cost method. Incremental costs include the cost of fuel, catering, landing fees, flight crew expenses, “dead head” costs of flying aircraft to and from locations for personal use, and the additional tax paid as a result of lost tax deductions. During 2019, no named executive officer had personal use of Company aircraft.

The Company has a 401(k) Plan that permits employees to elect to set aside a portion of their compensation (subject to the maximum limit on the amount of compensation permitted by the Code to be deferred for this purpose) in a trust to pay future retirement benefits. Depending upon years of service, the Company may match up to 50% of no more than 6% of the employee’s compensation set aside for this purpose. For employees who participate in the enhancement to the 401(k) Plan, the Company contributes up to an additional 3% of the employee’s base salary (subject to the maximum limit permitted by the Code) depending upon years of service to the account of employees participating in the enhanced portion of the 401(k) Plan as an Annual Retirement Contribution. As a result of the amendment to the Standard Pension Plan adopted in 2009, the named executive officers’ accrued benefits were frozen and no future benefits will accrue under the Standard Pension Plan. Therefore, commencing with the 401(k) Plan’s 2009 plan year, all of the named executive officers were eligible to participate in the enhanced portion of the 401(k) Plan. Matching contributions under the Supplemental Plan are discussed under “Nonqualified Deferred Compensation.”

Base salary and annual incentive compensation in 2019 represented from 23.6% to 81.1% of the named executive officers’ total compensation as reflected in the “Summary Compensation Table.”