Reports quarterly GAAP and Adjusted earnings
(loss) from continuing operations of $(1.76) and $0.02 per diluted
share, respectively
Generates year-to-date operating and free
cash flow before leasing investment of $328 million and $372
million, respectively
Total committed liquidity of $709 million at
the end of the second quarter
Pre-tax non-cash asset impairment charges of
$369 million related to small cube covered hopper railcars
Returned $82 million of capital to
stockholders year-to-date
Trinity Industries, Inc. (NYSE:TRN) today announced earnings
results for the second quarter ended June 30, 2020.
Financial and Operational Highlights —
Second Quarter 2020
- Quarterly total company revenues of $509 million
- Quarterly loss from continuing operations per common diluted
share ("EPS") of $(1.76) and quarterly adjusted EPS of $0.02, which
excludes the following:
- Non-cash impairment of long-lived assets totaling $1.86 per
common diluted share
- Additional income tax benefit of $0.10 per common diluted share
related to the effects of the Coronavirus Aid, Relief, and Economic
Security Act (the "CARES Act")
- Year-to-date cash flow from operations and free cash flow
before leasing investment of $328 million and $372 million,
respectively
- Year-to-date investment of $127 million in leasing capital
expenditures, net of railcar sales, predominantly for growth
- Total committed liquidity of $709 million as of June 30, 2020
- Expanded lease fleet borrowings by $225 million subsequent to
quarter-end
- Expects $303 million in federal income tax refunds in 2020, and
an additional $150 million in 2021, as a result of utilizing loss
carryback provisions included in the CARES Act
- Annualized cost savings of $70 million underway, encompassing
both structural and cyclical savings
- Year-to-date returns to shareholders of $82 million through
dividends and share repurchases
“During the second quarter, Trinity managed through significant
headwinds related to the COVID-19 pandemic and economic fallout
while executing on optimization initiatives to support the
transition of our rail-focused strategy,” said Jean Savage, Trinity
Industries CEO and President. “Our first priority is the safety of
our employees, and we have taken actions designed to prevent
community spread of the virus within our manufacturing facilities
and administrative offices while ensuring business continuity. Our
people have risen to the occasion with a spirit of resilience and
collaboration – completing significant milestones in the
streamlining of our organization structure and further positioning
Trinity’s rail-platform for improved financial performance.”
“Our businesses are facing challenging market dynamics resulting
from the historic decline in railcar loadings and the resulting
underutilized railcars in North America. Commercially, our primary
focus is to maintain the utilization of our lease fleet, then to
meet customer demand for newly manufactured railcars as
appropriate. Our lease fleet utilization is holding around 95%,
albeit with pricing pressure on lease rates, and our production
capacity for 2020 railcar deliveries is essentially sold. The
timeline for a recovery in the rail sector remains unclear as
increasing COVID-19 cases in the U.S. potentially threaten the
recent improvement in economic and rail market activity. However,
we are seeing a strong increase in railcar inquiries relative to
last quarter from strategic buyers and large leasing customers, and
we expect a number of these will turn to orders or lease contracts
in the near term.”
“Trinity has realigned its organization from the previous
holding company structure, to an operating model centrally focused
on our customers’ business needs. As we work through the process
flows for various production and service functions, we are
establishing additional structural savings goals that will be part
of our near-term focus. We are also prepared to take further
actions to reduce our cost structure and manufacturing footprint in
the event of a prolonged railcar down cycle.”
Ms. Savage concluded, “I am pleased Trinity’s rail platform
continues to display its resiliency with strong cash flow
generation stemming from the platform synergies. Leased railcar
assets remain attractive to the capital markets, and we’ve had
continued success in financing new railcar portfolios and selling
railcars to our institutional investor partners in
mutually-beneficial transactions. Trinity delivered second quarter
cash flow from operations of $154 million, made a net investment of
$94 million in our leasing and manufacturing businesses, and
returned $24 million to shareholders in the form of dividends –
highlighting again that Trinity’s platform enables meaningful
investment in the business for growth while returning substantial
capital to shareholders. Our liquidity stayed strong at $709
million at quarter end, and has been further enhanced by the recent
completion of the $225 million rail financing and amendments to our
corporate revolver in the month of July. We are committed to
delivering long-term shareholder value, and Trinity is taking the
necessary steps to optimize our business and position the Company
for an acceleration in financial performance.”
Consolidated Financial
Summary
Three Months Ended June
30,
2020
2019
Year over Year – Comparison
(in millions, except
percentages and per share amounts)
Revenues
$
509.2
$
736.0
Lower deliveries in the Rail Products
Group and fewer railcars sold from our lease fleet
Selling, engineering, and administrative
expenses
$
56.8
$
69.8
Lower employee-related costs resulting
from cost optimization initiatives and lower litigation-related
expenses
Operating profit (loss)
$
(307.3
)
$
107.0
Includes $369.4 million non-cash
impairment of long-lived assets charge
Adjusted Operating profit (loss) (1)
$
62.4
$
107.0
Operational inefficiencies and related
costs associated with lower manufacturing volumes in the Rail
Products Group and lower profits associated with railcar sales in
the Leasing Group
Interest expense
$
53.0
$
57.0
Reduction in the average borrowings and
the variable interest rates associated with the Company's debt
facilities, as well as the early redemption of a securitization in
the first quarter of 2020
EBITDA (1)
$
(238.9
)
$
179.3
Includes $369.4 million in impairment of
long-lived assets
Adjusted EBITDA (1)
$
130.8
$
179.3
See change in adjusted operating profit
described above
Effective tax expense (benefit) rate
(20.0
)%
27.3
%
Primarily tax benefit due to the CARES
Act, reduced by the portion of the impairment charge attributable
to the noncontrolling interest, for which Trinity does not provide
income taxes
Diluted EPS – GAAP
$
(1.76
)
$
0.29
Q2 2020 includes the impact of $1.86 in
impairment of long-lived assets
Diluted EPS – Adjusted (1)
$
0.02
$
0.29
Six Months Ended June
30,
2020
2019
Year over Year – Comparison
(in millions)
Net cash provided by operating activities
– continuing operations
$
327.8
$
4.0
Cash impacts include cyclical shifts and
working capital initiatives, as well as inflows from a customer's
exercise of a purchase option on a sales-type lease
Free cash flow before leasing investment
(1)
$
372.1
$
30.4
Capital expenditures – leasing, net
$
259.5
$
690.9
Reduced lease fleet investment in 2020
Returns of capital to shareholders
$
81.8
$
172.5
Reduced share repurchase activity in
2020
(1) Non-GAAP financial measure. See the
Reconciliations of Non-GAAP Measures section within this Form 8-K
for a reconciliation to the most directly comparable GAAP measure
and why management believes this measure is useful to management
and investors.
Business Group Summary
Three Months Ended June
30,
2020
2019
Year over Year – Comparison
(in millions, except
percentages and number of units)
Leasing and Management Services
Group
Leasing and management revenues
$
182.7
$
189.4
Lower fleet utilization, partially offset
by growth in the lease fleet and higher lease rates associated with
new railcar additions
Leasing and management operating
profit
$
78.5
$
77.7
Growth in the lease fleet
Operating profit on sales of leased
railcars
$
4.4
$
27.1
Lower volume and associated margin of
railcars sold from the lease fleet
Fleet utilization
94.7
%
97.8
%
Primarily driven by decrease in
energy-related markets
Owned lease fleet (in units) (1)
104,085
102,140
Managed lease fleet (in units)
26,710
22,510
Increased sales of leased railcars to RIV
partners managed by the Company
Rail Products Group
Revenues
$
405.6
$
723.2
Lower deliveries
Operating profit margin
1.9
%
9.2
%
Operational inefficiencies and related
costs associated with lower manufacturing volumes
Deliveries (in units)
2,985
5,255
Orders (in units)
840
2,105
Order value
$
105.9
$
213.9
Backlog value
$
1,337.3
$
2,865.5
All Other Group
Revenues
$
69.3
$
67.9
Increased demand in highway products
business
Operating profit
$
7.3
$
7.9
Insurance recoveries recognized in the
prior year period
June 30, 2020
December 31, 2019
Loan-to-value ratio:
Wholly-owned subsidiaries, including
corporate revolving credit facility
57.1
%
55.1
%
(1) Includes wholly-owned and
partially-owned railcars and railcars under sale-leaseback
arrangements.
Additional Business
Items
Income Tax Adjustments
- As a result of the reinstatement of the tax-loss carryback
provisions under the CARES Act, the Company recognized an
additional tax benefit in the second quarter of $11.3 million, or
$0.10 per common diluted share. The CARES Act includes loss
carryback provisions that will allow the Company to utilize tax
losses generated in recent years and our expectations for the
current year to recover taxes paid for the 2013-2015 tax years,
which were years of elevated Company performance. The associated
income tax losses were primarily due to accelerated tax
depreciation associated with our investment in the lease
fleet.
- The Company’s tax rate was a benefit of 20.0% for the quarter
and a benefit of 63.6% for the year. These rates differed from the
U.S. statutory rate primarily as a result of the CARES Act, offset
by the portion of the non-cash impairment charge that is not
tax-effected because it is related to the noncontrolling
interest.
- The $73.9 million net increase in our income tax receivable
during the quarter primarily reflects additional 2020 tax losses
accrued through June 30, 2020 that will be utilized to recover
taxes paid in 2015, after the Company files its 2020 tax return in
the fall of 2021.
Non-Cash Impairment of Small Cube Covered Hopper
Railcars
- During the second quarter, the oil and gas proppants (or “frac
sand”) industry continued to experience economic pressure created
by low oil prices, reduced fracking activity, and the ongoing
economic impact of COVID-19. The recent significant price declines
in the crude oil market, as well as lower demand for certain
commodities, have resulted in a decline in customer demand for
certain types of railcars. Given these factors and the pressure on
the oil and gas industry to maintain a low cost structure, fracking
operations, particularly those located in the Permian Basin, have
increasingly shifted away from the use of Northern White sand and
towards the use of in-basin sand. Consequently, the cash flows and
profitability of the frac sand industry continued to decline during
the second quarter. As a result, certain of the Leasing Group's
small cube covered hopper customers requested rent relief and, in a
number of cases, filed for bankruptcy in the second quarter. These
events led us to evaluate our small cube covered hopper railcars
for potential impairment. As a result of our analysis, we recorded
a pre-tax non-cash impairment charge of $369.4 million, or
approximately $1.86 per adjusted diluted share, during the second
quarter ended June 30, 2020. The impairment charge reflects the
Company's estimates of the fair value of the assets based upon
anticipated future net cash flows, which considered the depressed
long-term market outlook for small cube covered hoppers, continued
pressure on lease rates and utilization, and the salvage value of
the assets. This impairment charge does not affect Trinity's
compliance with any existing debt covenants.
Liquidity and Capital Source Updates
- In July 2020, Trinity Rail Leasing 2017 LLC, a wholly-owned
subsidiary of the Company, issued $225.0 million of additional
promissory notes through its existing loan agreement. The
additional promissory notes increased the aggregate amount of such
promissory notes outstanding as of July 17, 2020 to $831.8 million.
The promissory notes bear interest at LIBOR plus 1.50%. Net
proceeds received from the transaction will be used to repay
borrowings under TILC's secured warehouse credit facility and under
the Company’s revolving credit facility, and for general corporate
purposes.
- In July 2020, we amended our revolving credit facility to
increase the maximum leverage ratio through December 31, 2021 to
provide near-term covenant flexibility.
- In addition to the $303 million of anticipated income tax
refunds related to the 2018 and 2019 expected carryback claims, the
Company also expects to receive anticipated income tax refunds of
approximately $150 million in 2021 as a result of the expected tax
losses in 2020, subject to the Company’s actual performance in the
current year. A portion of this benefit was previously accrued and
recognized in the Company’s first quarter financials.
Cost Optimization
Conference Call
Trinity will hold a conference call at 11:00 a.m. Eastern on
July 23, 2020 to discuss its second quarter results. To listen to
the call, please visit the Investor Relations section of the
Company's website at www.trin.net and access the Events &
Presentations webpage, or the live call can be accessed at
203-518-9544 with the conference ID "Trinity". Please call at least
10 minutes in advance to ensure proper connection. An audio replay
may be accessed through the Company’s website or by dialing (402)
220-6088 until 11:59 p.m. Eastern on July 30, 2020.
Additionally, the Company will provide Supplemental Materials to
accompany the earnings conference call. The materials will be
accessible on Trinity's Investor Relations website under the Events
and Presentations portion of the site along with the Second Quarter
Earnings Call event weblink.
Non-GAAP Financial
Measures
We have included financial measures compiled in accordance with
generally accepted accounting principles ("GAAP") and certain
non-GAAP measures in this earnings press release to provide
management and investors with additional information regarding our
financial results. Non-GAAP measures should not be considered in
isolation or as a substitute for our reporting results prepared in
accordance with GAAP and, as calculated, may not be comparable to
other similarly titled measures for other companies. For each
non-GAAP financial measure, a reconciliation to the most comparable
GAAP measure has been included in the accompanying tables. When
forward-looking non-GAAP measures are provided, quantitative
reconciliations to the most directly comparable GAAP measures are
not provided because management cannot, without unreasonable
effort, predict the timing and amounts of certain items included in
the computations of each of these measures. These factors include,
but are not limited to: the product mix of expected railcar
deliveries; the timing and amount of significant transactions and
investments, such as railcar sales from the lease fleet, capital
expenditures, and returns of capital to shareholders; and the
amount and timing of certain other items outside the normal course
of our core business operations, such as restructuring activities
and pension plan termination charges.
About Trinity Industries
Trinity Industries, Inc., headquartered in Dallas, Texas, owns
businesses that are leading providers of rail transportation
products and services in North America. Our rail-related businesses
market their railcar products and services under the trade name
TrinityRail®. The TrinityRail platform provides railcar leasing and
management services, as well as railcar manufacturing, maintenance
and modifications. Trinity also owns businesses engaged in the
manufacture of products used on the nation’s roadways and in
traffic control. Trinity reports its financial results in three
principal business segments: the Railcar Leasing and Management
Services Group, the Rail Products Group, and the All Other Group.
For more information, visit: www.trin.net.
Some statements in this release, which are not historical facts,
are “forward-looking statements” as defined by the Private
Securities Litigation Reform Act of 1995. Forward-looking
statements include statements about Trinity's estimates,
expectations, beliefs, intentions or strategies for the future, and
the assumptions underlying these forward-looking statements,
including, but not limited to, future financial and operating
performance, future opportunities and any other statements
regarding events or developments that Trinity believes or
anticipates will or may occur in the future, including the
potential financial and operational impacts of the COVID-19
pandemic. Trinity uses the words “anticipates,” “assumes,”
“believes,” “estimates,” “expects,” “intends,” “forecasts,” “may,”
“will,” “should,” “guidance,” “projected,” “outlook,” and similar
expressions to identify these forward-looking statements.
Forward-looking statements speak only as of the date of this
release, and Trinity expressly disclaims any obligation or
undertaking to disseminate any updates or revisions to any
forward-looking statement contained herein to reflect any change in
Trinity’s expectations with regard thereto or any change in events,
conditions or circumstances on which any such statement is based,
except as required by federal securities laws. Forward-looking
statements involve risks and uncertainties that could cause actual
results to differ materially from historical experience or our
present expectations, including but not limited to risks and
uncertainties regarding economic, competitive, governmental, and
technological factors affecting Trinity’s operations, markets,
products, services and prices, and such forward-looking statements
are not guarantees of future performance. For a discussion of such
risks and uncertainties, which could cause actual results to differ
from those contained in the forward-looking statements, see “Risk
Factors” and “Forward-Looking Statements” in Trinity’s Annual
Report on Form 10-K for the most recent fiscal year, as may be
revised and updated by Trinity’s Quarterly Reports on Form 10-Q,
and Trinity’s Current Reports on Form 8-K.
Trinity Industries, Inc.
Condensed Consolidated Statements of
Operations
(in millions, except per share
amounts)
(unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2020
2019
2020
2019
Revenues
$
509.2
$
736.0
$
1,124.4
$
1,340.8
Operating costs:
Cost of revenues
396.6
578.5
878.6
1,041.9
Selling, engineering, and administrative
expenses
56.8
69.8
121.1
129.4
Gains on dispositions of property:
Net gains on railcar lease fleet sales
owned more than one year at the time of sale
5.7
18.7
14.4
26.6
Other
0.9
0.6
1.8
2.7
Impairment of long-lived assets
369.4
—
369.4
—
Restructuring activities, net
0.3
—
5.8
—
816.5
629.0
1,358.7
1,142.0
Operating profit (loss)
(307.3
)
107.0
(234.3
)
198.8
Interest expense, net
53.0
55.4
111.9
106.8
Other, net
(0.7
)
(0.1
)
(1.5
)
0.2
Income (loss) from continuing operations
before income taxes
(359.6
)
51.7
(344.7
)
91.8
Provision (benefit) for income taxes:
Current
(79.7
)
1.0
(452.5
)
0.2
Deferred
7.9
13.1
233.1
22.8
(71.8
)
14.1
(219.4
)
23.0
Income (loss) from continuing
operations
(287.8
)
37.6
(125.3
)
68.8
Loss from discontinued operations, net of
income taxes
—
(0.8
)
(0.2
)
(1.9
)
Net income (loss)
(287.8
)
36.8
(125.5
)
66.9
Net income (loss) attributable to
noncontrolling interest
(80.9
)
0.4
(80.3
)
(0.1
)
Net income (loss) attributable to Trinity
Industries, Inc.
$
(206.9
)
$
36.4
$
(45.2
)
$
67.0
Basic earnings per common share:
Income (loss) from continuing
operations
$
(1.76
)
$
0.29
$
(0.38
)
$
0.53
Income (loss) from discontinued
operations
—
(0.01
)
—
(0.02
)
Basic net income (loss) attributable to
Trinity Industries, Inc.
$
(1.76
)
$
0.28
$
(0.38
)
$
0.51
Diluted earnings per common share:
Income (loss) from continuing
operations
$
(1.76
)
$
0.29
$
(0.38
)
$
0.52
Income (loss) from discontinued
operations
—
(0.01
)
—
(0.01
)
Diluted net income (loss) attributable to
Trinity Industries, Inc.
$
(1.76
)
$
0.28
$
(0.38
)
$
0.51
Weighted average number of shares
outstanding:
Basic
117.3
127.6
117.6
129.0
Diluted
117.3
129.2
117.6
130.7
Trinity is required to utilize the two-class method of
calculating earnings per share ("EPS") as a result of unvested
restricted shares that have non-forfeitable rights to dividends and
are, therefore, considered to be participating securities. The
calculation of EPS using the two-class method excludes income
attributable to these participating securities from the numerator
and excludes the dilutive impact of those shares from the
denominator; therefore, the two-class method may result in a lower
EPS than is calculated from the face of the income statement. There
were no restricted shares and stock options included in the
computation of diluted EPS for the three and six months ended June
30, 2020 as we incurred a loss for these periods, and any effect on
loss per common share would have been antidilutive.
Trinity Industries, Inc.
Condensed Segment Data
(in millions)
(unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
Revenues:
2020
2019
2020
2019
Railcar Leasing and Management Services
Group
$
192.8
$
277.1
$
429.1
$
477.5
Rail Products Group
405.6
723.2
915.0
1,340.7
All Other
69.3
67.9
132.7
130.0
Segment Totals before Eliminations
667.7
1,068.2
1,476.8
1,948.2
Eliminations – Lease Subsidiary
(156.0
)
(328.9
)
(346.4
)
(599.0
)
Eliminations – Other
(2.5
)
(3.3
)
(6.0
)
(8.4
)
Consolidated Total
$
509.2
$
736.0
$
1,124.4
$
1,340.8
Three Months Ended June
30,
Six Months Ended June
30,
Operating profit (loss):
2020
2019
2020
2019
Railcar Leasing and Management Services
Group
$
82.9
$
104.8
$
175.8
$
190.6
Rail Products Group
7.9
66.3
33.0
115.4
All Other
7.3
7.9
16.6
16.0
Segment Totals before Eliminations,
Corporate Expenses, Impairment of long-lived assets, and
Restructuring activities
98.1
179.0
225.4
322.0
Corporate
(24.2
)
(30.6
)
(52.3
)
(54.2
)
Impairment of long-lived assets
(369.4
)
—
(369.4
)
—
Restructuring activities, net
(0.3
)
—
(5.8
)
—
Eliminations – Lease Subsidiary
(11.0
)
(41.6
)
(30.9
)
(68.8
)
Eliminations – Other
(0.5
)
0.2
(1.3
)
(0.2
)
Consolidated Total
$
(307.3
)
$
107.0
$
(234.3
)
$
198.8
Trinity Industries, Inc.
Selected Financial Information –
Leasing Group
($ in millions)
(unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2020
2019
2020
2019
Revenues:
Leasing and management
$
182.7
$
189.4
$
374.7
$
376.5
Sales of railcars owned one year or less
at the time of sale (1)(2)
10.1
87.7
54.4
101.0
Total revenues
$
192.8
$
277.1
$
429.1
$
477.5
Operating profit (loss)(3):
Leasing and management
$
78.5
$
77.7
$
161.0
$
154.8
Railcar sales(1):
Railcars owned one year or less at the
time of sale
(1.3
)
8.4
0.4
9.2
Railcars owned more than one year at the
time of sale
5.7
18.7
14.4
26.6
Total operating profit
$
82.9
$
104.8
$
175.8
$
190.6
Total operating profit margin
43.0
%
37.8
%
41.0
%
39.9
%
Leasing and management operating profit
margin
43.0
%
41.0
%
43.0
%
41.1
%
Selected expense information:
Depreciation (4)(5)
$
54.0
$
57.8
$
107.6
$
112.2
Maintenance and compliance
$
23.0
$
26.5
$
48.9
$
54.3
Rent
$
3.0
$
4.3
$
6.0
$
9.8
Selling, engineering, and administrative
expenses
$
13.0
$
12.7
$
27.3
$
25.5
Interest
$
47.1
$
50.4
$
102.2
$
96.4
Three Months Ended June
30,
Six Months Ended June
30,
2020
2019
2020
2019
Sales of leased railcars:
Railcars owned one year or less at the
time of sale (2)
$
10.1
$
87.7
$
54.4
$
101.0
Railcars owned more than one year at the
time of sale
63.7
70.5
132.2
99.9
$
73.8
$
158.2
$
186.6
$
200.9
Operating profit (loss) on sales of leased
railcars:
Railcars owned one year or less at the
time of sale
$
(1.3
)
$
8.4
$
0.4
$
9.2
Railcars owned more than one year at the
time of sale
5.7
18.7
14.4
26.6
$
4.4
$
27.1
$
14.8
$
35.8
Operating profit (loss) margin on sales of
leased railcars:
Railcars owned one year or less at the
time of sale
(12.9
)%
9.6
%
0.7
%
9.1
%
Railcars owned more than one year at the
time of sale
8.9
%
26.5
%
10.9
%
26.6
%
Weighted average operating profit margin
on sales of leased railcars
6.0
%
17.1
%
7.9
%
17.8
%
(1) The Company recognizes sales of
railcars from the lease fleet which have been owned by the lease
fleet for one year or less as revenue. Sales of railcars from the
lease fleet which have been owned by the lease fleet for more than
one year are recognized as a net gain or loss from the disposal of
a long-term asset.
(2) Includes revenues associated with
sales-type leases of $32.3 million and $34.2 million for the three
and six months ended June 30, 2019, respectively.
(3) Operating profit includes:
depreciation; maintenance and compliance; rent; and selling,
engineering, and administrative expenses. Amortization of deferred
profit on railcars sold from the Rail Products Group to the Leasing
Group is included in the operating profit of the Leasing Group,
resulting in the recognition of depreciation expense based on the
Company's original manufacturing cost of the railcars. Interest
expense is not a component of operating profit and includes the
effect of hedges.
(4) Effective January 1, 2020, we revised
the estimated useful lives and salvage values of certain railcar
types in our lease fleet. This change in estimate resulted in a
decrease in depreciation expense in the three and six months ended
June 30, 2020 of approximately $7.7 million and $15.4 million,
respectively. This decrease was partially offset by higher
depreciation associated with growth in the lease fleet.
(5) As a result of the impairment of
long-lived assets related to our small cube covered hopper railcars
recorded in the second quarter of 2020, our future quarterly
depreciation expense will decrease approximately $3.5 million.
Trinity Industries, Inc.
Condensed Consolidated Balance
Sheets
(in millions)
(unaudited)
June 30, 2020
December 31, 2019
ASSETS
Cash and cash equivalents
$
157.0
$
166.2
Receivables, net of allowance
226.9
260.1
Income tax receivable
463.0
14.7
Inventories
421.5
433.4
Restricted cash
136.9
111.4
Property, plant, and equipment, net
6,784.4
7,110.6
Goodwill
208.8
208.8
Other assets
266.9
396.2
Total assets
$
8,665.4
$
8,701.4
LIABILITIES AND STOCKHOLDERS'
EQUITY
Accounts payable
$
188.2
$
203.9
Accrued liabilities
325.6
342.1
Debt
4,825.4
4,881.9
Deferred income taxes
1,026.4
798.3
Other liabilities
139.4
96.3
Stockholders' equity:
Trinity Industries, Inc.
1,891.3
2,030.1
Noncontrolling interest
269.1
348.8
2,160.4
2,378.9
Total liabilities and stockholders'
equity
$
8,665.4
$
8,701.4
Trinity Industries, Inc.
Additional Balance Sheet
Information
(in millions)
(unaudited)
June 30, 2020
December 31, 2019
Property, Plant, and Equipment
Manufacturing/Corporate:
Property, plant, and equipment
$
1,056.1
$
1,040.4
Accumulated depreciation
(644.4
)
(631.6
)
411.7
408.8
Leasing:
Wholly-owned subsidiaries:
Machinery and other
13.9
13.7
Equipment on lease
6,692.2
6,944.2
Accumulated depreciation
(1,149.0
)
(1,139.0
)
5,557.1
5,818.9
Partially-owned subsidiaries:
Equipment on lease
2,239.7
2,410.0
Accumulated depreciation
(591.5
)
(623.3
)
1,648.2
1,786.7
Deferred profit on railcars sold to the
Leasing Group
(1,062.4
)
(1,135.8
)
Accumulated amortization
229.8
232.0
(832.6
)
(903.8
)
$
6,784.4
$
7,110.6
June 30, 2020
December 31, 2019
Debt
Corporate – Recourse:
Revolving credit facility
$
130.0
$
125.0
Senior notes, net of unamortized discount
of $0.2 and $0.2
399.8
399.8
529.8
524.8
Less: unamortized debt issuance costs
(1.8
)
(2.0
)
528.0
522.8
Leasing – Non-recourse:
Wholly-owned subsidiaries:
Secured railcar equipment notes, net of
unamortized discount of $1.4 and $2.0
1,974.5
2,124.1
TILC warehouse facility
482.5
353.4
Promissory notes
609.6
627.1
3,066.6
3,104.6
Less: unamortized debt issuance costs
(20.9
)
(23.9
)
3,045.7
3,080.7
Partially-owned subsidiaries:
Secured railcar equipment notes
1,261.7
1,289.3
Less: unamortized debt issuance costs
(10.0
)
(10.9
)
1,251.7
1,278.4
Total debt
$
4,825.4
$
4,881.9
Trinity Industries, Inc.
Condensed Consolidated Statements of
Cash Flows
(in millions)
(unaudited)
Six Months Ended June
30,
2020
2019
Operating activities:
Net income (loss)
$
(125.5
)
$
66.9
Loss from discontinued operations, net of
income taxes
0.2
1.9
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization
134.6
138.1
Provision for deferred income taxes
233.1
22.8
Net gains on railcar lease fleet sales
owned more than one year at the time of sale
(14.4
)
(26.6
)
Impairment of long-lived assets
369.4
—
Restructuring activities
5.2
—
Other
13.7
16.7
Changes in operating assets and
liabilities:
(Increase) decrease in receivables,
inventories, and other assets
214.7
(183.9
)
(Increase) decrease in income tax
receivable
(448.3
)
19.4
Increase (decrease) in accounts payable,
accrued liabilities, and other liabilities
(54.9
)
(51.3
)
Net cash provided by operating activities
– continuing operations
327.8
4.0
Net cash used in operating activities –
discontinued operations
(0.2
)
(1.1
)
Net cash provided by operating
activities
327.6
2.9
Investing activities:
Proceeds from railcar lease fleet sales
owned more than one year at the time of sale
132.2
99.9
Proceeds from disposition of property and
other assets
14.2
14.3
Capital expenditures – leasing, net of
sold lease fleet railcars owned one year or less with a net cost of
$54.0 and $91.8
(259.5
)
(690.9
)
Capital expenditures – manufacturing and
other
(41.5
)
(34.0
)
Other
—
(1.2
)
Net cash used in investing activities
(154.6
)
(611.9
)
Financing activities:
Net (repayments of) proceeds from debt
(65.9
)
582.0
Shares repurchased
(35.4
)
(59.0
)
Dividends paid to common shareholders
(46.4
)
(39.5
)
Other
(9.0
)
(8.8
)
Net cash provided by (used in) financing
activities
(156.7
)
474.7
Net increase (decrease) in cash, cash
equivalents, and restricted cash
16.3
(134.3
)
Cash, cash equivalents, and restricted
cash at beginning of period
277.6
350.8
Cash, cash equivalents, and restricted
cash at end of period
$
293.9
$
216.5
Trinity Industries, Inc. Reconciliations of Non-GAAP
Measures (unaudited) Adjusted Operating Results
We have supplemented the presentation of our reported GAAP
operating profit (loss), interest expense, net, provision (benefit)
for income taxes, income (loss) from continuing operations, net
income (loss) attributable to Trinity Industries, Inc., diluted
weighted average shares outstanding and diluted income (loss) from
continuing operations per common share attributable to Trinity
Industries, Inc. with non-GAAP measures that adjust the GAAP
measures to exclude the impact of restructuring activities,
impairment of long-lived assets, early redemption of debt, the
income tax effects of the CARES Act and certain other non-recurring
transactions or events (as applicable).These non-GAAP measures are
derived from amounts included in our GAAP financial statements and
are reconciled to the most directly comparable GAAP financial
measures in the tables below. Management believes that these
measures are useful to both management and investors for analyzing
the performance of our business without the impact of certain
non-recurring items. Non-GAAP measures should not be considered in
isolation or as a substitute for our reporting results prepared in
accordance with GAAP and, as calculated, may not be comparable to
other similarly titled measures for other companies.
Three Months Ended June 30,
2020
GAAP
Impairment of long-lived
assets – Controlling Interest (1)(2)
Impairment of long-lived
assets – Noncontrolling Interest (3)
Restructuring activities
(2)
Income tax effect of CARES
Act
Adjusted
(in millions, except per share
amounts)
Operating profit (loss)
$
(307.3
)
$
288.1
$
81.3
$
0.3
$
—
$
62.4
Provision (benefit) for income taxes
$
(71.8
)
$
67.4
$
—
$
0.1
$
11.3
$
7.0
Income (loss) from continuing
operations
$
(287.8
)
$
220.7
$
81.3
$
0.2
$
(11.3
)
$
3.1
Net income (loss) attributable to Trinity
Industries, Inc.
$
(206.9
)
$
220.7
$
—
$
0.2
$
(11.3
)
$
2.7
Diluted weighted average shares
outstanding (4)
117.3
118.7
Diluted income (loss) from continuing
operations per common share attributable to Trinity Industries,
Inc.
$
(1.76
)
$
0.02
Six Months Ended June 30,
2020
GAAP
Impairment of long-lived
assets – Controlling Interest (1)(2)
Impairment of long-lived
assets – Noncontrolling Interest (3)
Restructuring activities
(2)
Early redemption of debt
(2)
Income tax effect of CARES
Act
Adjusted
(in millions, except per share
amounts)
Operating profit (loss)
$
(234.3
)
$
288.1
$
81.3
$
5.8
$
—
$
—
$
140.9
Interest expense, net
$
111.9
$
—
$
—
$
—
$
(5.0
)
$
—
$
106.9
Provision (benefit) for income taxes
$
(219.4
)
$
67.4
$
—
$
1.4
$
1.2
$
166.0
$
16.6
Income (loss) from continuing
operations
$
(125.3
)
$
220.7
$
81.3
$
4.4
$
3.8
$
(166.0
)
$
18.9
Net income (loss) attributable to Trinity
Industries, Inc.
$
(45.2
)
$
220.7
$
—
$
4.4
$
3.8
$
(166.0
)
$
17.7
Diluted weighted average shares
outstanding (4)
117.6
119.3
Diluted income (loss) from continuing
operations per common share attributable to Trinity Industries,
Inc.
$
(0.38
)
$
0.15
(1) Excludes $81.3 million of non-cash
impairment of long-lived asset charges associated with the
noncontrolling interest.
(2) The effective tax rate for impairment
of long-lived assets, restructuring activities, and the early
redemption of debt is before consideration of the CARES Act.
(3) Represents the portion of the non-cash
impairment of long-lived asset charge attributable to the
noncontrolling interest, for which Trinity does not provide income
taxes.
(4) GAAP diluted weighted average shares
outstanding excludes 1.4 million and 1.7 million shares for the
three and six months ended June 30, 2020, respectively, since the
Company was in a net loss position for those periods. When
adjusting for the items above, these shares become dilutive.
Free Cash Flow
Free Cash Flow before Capital expenditures – leasing ("Free Cash
Flow") is a non-GAAP financial measure and is defined as net cash
provided by operating activities from continuing operations as
computed in accordance with GAAP, plus cash proceeds from sales of
leased railcars owned more than one year at the time of sale, less
cash payments for manufacturing capital expenditures and dividends.
We believe Free Cash Flow is useful to both management and
investors as it provides a relevant measure of liquidity and a
useful basis for assessing our ability to fund our operations and
repay our debt. Free Cash Flow is reconciled to net cash provided
by operating activities from continuing operations, the most
directly comparable GAAP financial measure, in the following table.
Non-GAAP measures should not be considered in isolation or as a
substitute for our reporting results prepared in accordance with
GAAP and, as calculated, may not be comparable to other similarly
titled measures for other companies.
Six Months Ended June
30,
2020
2019
(in millions)
Net cash provided by operating activities
– continuing operations
$
327.8
$
4.0
Add:
Proceeds from railcar lease fleet sales
owned more than one year at the time of sale
132.2
99.9
Adjusted Net Cash Provided by Operating
Activities
$
460.0
$
103.9
Less:
Capital expenditures – manufacturing and
other
(41.5)
(34.0)
Dividends paid to common shareholders
(46.4)
(39.5)
Free Cash Flow (before Capital
expenditures – leasing)
$
372.1
$
30.4
EBITDA and Adjusted EBITDA
“EBITDA” is defined as income (loss) from continuing operations
plus interest expense, income taxes, and depreciation and
amortization expense. Adjusted EBITDA is defined as EBITDA plus
non-cash impairment of long-lived assets and restructuring
activities. EBITDA and Adjusted EBITDA are non-GAAP financial
measures; however, the amounts included in these calculations are
derived from amounts included in our GAAP financial statements.
EBITDA and Adjusted EBITDA are reconciled to net income (loss), the
most directly comparable GAAP financial measure, in the following
table. This information is provided to assist management and
investors in making meaningful comparisons of our operating
performance between periods. We believe EBITDA is a useful measure
for analyzing the performance of our business. We also believe that
EBITDA is commonly reported and widely used by investors and other
interested parties as a measure of a company’s operating
performance and debt servicing ability because it assists in
comparing performance on a consistent basis without regard to
capital structure, depreciation or amortization (which can vary
significantly depending on many factors). EBITDA and Adjusted
EBITDA should not be considered as alternatives to net income as
indicators of our operating performance, or as alternatives to
operating cash flows as measures of liquidity. Non-GAAP measures
should not be considered in isolation or as a substitute for our
reporting results prepared in accordance with GAAP and, as
calculated, may not be comparable to other similarly titled
measures for other companies.
Three Months Ended June
30,
Six Months Ended June
30,
2020
2019
2020
2019
(in millions)
Net income (loss)
$
(287.8)
$
36.8
$
(125.5)
$
66.9
Less: loss from discontinued operations,
net of income taxes
—
(0.8)
(0.2)
(1.9)
Income (loss) from continuing
operations
$
(287.8)
$
37.6
$
(125.3)
$
68.8
Add:
Interest expense
53.0
57.0
114.3
109.7
Provision (benefit) for income taxes
(71.8)
14.1
(219.4)
23.0
Depreciation and amortization expense
67.7
70.6
134.6
138.1
EBITDA
$
(238.9)
$
179.3
$
(95.8)
$
339.6
Add:
Impairment of long-lived assets
369.4
—
369.4
—
Restructuring activities, net
0.3
—
5.8
—
Adjusted EBITDA
$
130.8
$
179.3
$
279.4
$
339.6
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200722005840/en/
Investor & Media Contact: Jessica Greiner Vice
President, Investor Relations and Communications Trinity
Industries, Inc.
(Investors) 214/631-4420 (Media Line) 214/589-8909
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