August 1, 2024August 1, 2024TRINITY INDUSTRIES INC0000099780false00000997802024-08-012024-08-01
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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| Date of Report (Date of Earliest Event Reported): | | August 1, 2024 |
_______________________________________
(Exact name of registrant as specified in its charter)
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| Delaware | | 1-6903 | | 75-0225040 |
(State or other jurisdiction
of incorporation) | | (Commission File No.) | | (I.R.S. Employer
Identification No.) |
14221 N. Dallas Parkway, Suite 1100,
Dallas, Texas 75254-2957
(Address of Principal Executive Offices, and Zip Code)
(214) 631-4420
Registrant's Telephone Number, Including Area Code
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
______________________________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
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| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| Common Stock | TRN | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
Trinity Industries, Inc. ("Trinity") hereby furnishes the information set forth in its News Release, dated August 1, 2024, announcing operating results for the three month period ended June 30, 2024, a copy of which is furnished as Exhibit 99.1 and incorporated herein by reference. On August 1, 2024, Trinity held a conference call and webcast with respect to its financial results for the three month period ended June 30, 2024. The conference call scripts of Leigh Anne Mann, Vice President of Investor Relations; E. Jean Savage, Chief Executive Officer and President; and Eric R. Marchetto, Executive Vice President and Chief Financial Officer are furnished as Exhibit 99.2, and incorporated herein by reference.
The conference call, News Release, and Presentation Materials, described below, included references to Adjusted Operating Results and Adjusted Earnings Per Share, Adjusted Return on Equity, Cash Flow from Operations with Net Gains on Lease Portfolio Sales, EBITDA and Adjusted EBITDA, which are not calculations based on generally accepted accounting principles (“GAAP”). Reconciliations of each of these non-GAAP measures to the most directly comparable GAAP measures have been included in the News Release and/or the Presentation Materials. When forward-looking non-GAAP measures are provided, Trinity does not provide quantitative reconciliations of forward-looking non-GAAP measures to the most directly comparable GAAP measures because it cannot, without unreasonable effort, predict the timing and amounts of certain items included in the computations of each of these measures. These factors include, but are not limited to: the product mix of expected railcar deliveries; the timing and amount of significant transactions and investments, such as lease portfolio sales, capital expenditures, and returns of capital to shareholders; and the amount and timing of certain other items outside the normal course of our core business operations.
This information and the materials described in Item 7.01 are not "filed" pursuant to the Securities Exchange Act of 1934 and are not incorporated by reference into any Securities Act of 1933 registration statements. Additionally, the submission of the report on Form 8-K is not an admission of the materiality of any information in this report that is required to be disclosed solely by Regulation FD.
Item 7.01 Regulation FD Disclosure.
See "Item 2.02 – Results of Operations and Financial Condition." Additionally, Trinity posted its presentation for investors and interested parties to its website to accompany the conference call; a copy of these materials is furnished as Exhibit 99.3 and incorporated herein by reference.
Forward-Looking Statements
Some statements in this release, which are not historical facts, are “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements about Trinity's estimates, expectations, beliefs, intentions or strategies for the future, and the assumptions underlying these forward-looking statements, including, but not limited to, future financial and operating performance, future opportunities and any other statements regarding events or developments that Trinity believes or anticipates will or may occur in the future. Trinity uses the words “anticipates,” “assumes,” “believes,” “estimates,” “expects,” “intends,” “forecasts,” “may,” “will,” “should,” “guidance,” “projected,” “outlook,” and similar expressions to identify these forward-looking statements. Forward-looking statements speak only as of the date of this release, and Trinity expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in Trinity’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based, except as required by federal securities laws. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations, including but not limited to risks and uncertainties regarding economic, competitive, governmental, and technological factors affecting Trinity’s operations, markets, products, services and prices, and such forward-looking statements are not guarantees of future performance. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see “Risk Factors” and “Forward-Looking Statements” in Trinity’s Annual Report on Form 10-K for the most recent fiscal year, as may be revised and updated by Trinity’s Quarterly Reports on Form 10-Q, and Trinity’s Current Reports on Form 8-K.
Item 9.01 Financial Statements and Exhibits.
(a) - (c) Not applicable.
(d) Exhibits:
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| NO. | | DESCRIPTION |
| 99.1 | | | |
| 99.2 | | | |
| 99.3 | | | |
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| 101.SCH | | Inline XBRL Taxonomy Extension Schema Document (filed electronically herewith). |
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| 101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase Document (filed electronically herewith). |
| 101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document (filed electronically herewith). |
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| 104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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| Trinity Industries, Inc. |
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| August 1, 2024 | By: | /s/ Eric R. Marchetto |
| | Name: Eric R. Marchetto |
| | Title: Executive Vice President and Chief Financial Officer |
Exhibit 99.1
FOR IMMEDIATE RELEASE
Trinity Industries, Inc. Announces Second Quarter 2024 Results
Reports quarterly GAAP and adjusted earnings from continuing operations of $0.67 and $0.66 per diluted share, respectively
Lease fleet utilization of 96.9% and Future Lease Rate Differential ("FLRD") of positive 28.3% at quarter-end
Generates year-to-date operating cash flow of $300 million and net gains on lease portfolio sales of $25 million
Delivered 4,755 railcars in the quarter; backlog of $2.7 billion at quarter-end
DALLAS, Texas – August 1, 2024 – Trinity Industries, Inc. (NYSE:TRN) today announced earnings results for the second quarter ended June 30, 2024.
Financial and Operational Highlights
•Quarterly total company revenues of $841 million; 16% improvement year over year
•Quarterly income from continuing operations per common diluted share ("EPS") of $0.67 and adjusted EPS of $0.66; $0.43 improvement in adjusted EPS year over year
•Lease fleet utilization of 96.9% and FLRD of positive 28.3% at quarter-end
•Railcar deliveries of 4,755 and new railcar orders of 2,495
•Year-to-date cash flow from continuing operations of $300 million and net gains on lease portfolio sales of $25 million
•Last twelve months ("LTM") Return on Equity ("ROE") of 14.8% and Adjusted ROE of 16.8%
2024 Guidance
•Industry deliveries of approximately 40,000 railcars
•Net fleet investment of $300 million to $400 million
•Operating and administrative capital expenditures of $50 million to $60 million
•EPS of $1.55 to $1.75
◦Excludes items outside of our core business operations
Management Commentary
“Our second quarter GAAP EPS of $0.67 and adjusted EPS of $0.66 represent improvement across our business. Revenues are up 16% year over year, we generated $243 million of cash flow from continuing operations, and our LTM Adjusted ROE of 16.8% showcases the strength of our operations as well as our balance sheet,” said Trinity’s Chief Executive Officer and President, Jean Savage. “At our Investor Day in June, we highlighted the strength of our platform, and our second quarter results display significant progress toward our financial targets.”
Ms. Savage continued, “In our Railcar Leasing and Services segment, we continue to see the benefit of a strong FLRD as we re-price the lease fleet upward, driving an 8.9% revenue increase from our leasing and management business as compared to a year ago. Additionally, we completed an anticipated large portfolio sale in the quarter, utilizing another lever in fleet optimization and asset monetization.”
“In the Rail Products Group, segment operating margin of 7.9% was up substantially both sequentially and year over year, reflecting the focus we have placed on improving labor and operational efficiencies over the last several years.”
Ms. Savage concluded, “We are encouraged by our second quarter results and believe they demonstrate the momentum of our operating platform. We are once again raising our full year guidance to a range of $1.55 to $1.75, which implies continued strength in operating margins through the balance of 2024.”
Consolidated Financial Summary
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| Three Months Ended
June 30, | | |
| 2024 | | 2023 | | Year over Year – Comparison |
| ($ in millions, except per share amounts) | | |
| Revenues | $ | 841.4 | | $ | 722.4 | | Higher external deliveries in the Rail Products Group, and improved lease rates in the Leasing Group |
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Operating profit | $ | 141.9 | | $ | 99.1 | | Higher external deliveries and improved efficiencies in the Rail Products Group and improved lease rates in the Leasing Group, partially offset by lower lease portfolio sales |
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| Interest expense, net | $ | 70.1 | | $ | 66.9 | | Higher interest rates and higher overall average debt during 2024 |
| Net income from continuing operations attributable to Trinity Industries, Inc. | $ | 56.1 | | $ | 19.3 | | |
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EBITDA (1) | $ | 223.9 | | $ | 173.3 | | |
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| Effective tax expense rate | 22.7 | % | | 23.9 | % | | |
| Diluted EPS – GAAP | $ | 0.67 | | $ | 0.23 | | |
Diluted EPS – Adjusted (1) | $ | 0.66 | | $ | 0.23 | | |
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| Six Months Ended
June 30, | | |
| 2024 | | 2023 | | Year over Year – Comparison |
| (in millions) | | |
| Net cash provided by operating activities – continuing operations | $ | 299.7 | | $ | 140.3 | | Higher external deliveries and working capital improvements |
Cash flow from operations with net gains on lease portfolio sales (1) | $ | 324.5 | | $ | 183.6 | | |
| Net fleet investment | $ | 46.0 | | $ | 214.0 | | Timing of lease portfolio sales relative to fleet additions |
| Returns of capital to stockholders | $ | 48.1 | | $ | 43.3 | | |
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(1) Non-GAAP financial measure. See the Reconciliations of Non-GAAP Measures section within this Press Release for a reconciliation to the most directly comparable GAAP measure and why management believes this measure is useful to management and investors.
Additional Business Items
•Total committed liquidity of $985 million as of June 30, 2024.
•In June 2024, we issued an additional $200 million aggregate principal amount of 7.75% senior notes due July 2028, which increased the aggregate principal amount from $400 million to $600 million. Net proceeds received from the issuance, together with cash on hand, were used to repay $400 million of our 4.55% senior notes due 2024, and to pay related fees, costs, premiums, and expenses in connection with the issuance.
•In May 2024, Trinity Rail Leasing 2021 LLC, a wholly-owned subsidiary of the Company, issued an aggregate principal amount of $432 million of its Series 2024-1 Green Secured Railcar Equipment Notes (the "TRL-2024 Notes"). The TRL-2024 Notes bear interest at a fixed rate of 5.78% and have a stated final maturity date of May 19, 2054. Net proceeds received from the issuance of the TRL-2024 Notes were used to repay borrowings under TILC's warehouse loan facility; to redeem the outstanding debt of Trinity Rail Leasing VII LLC's Series 2009-1 Secured Railcar Equipment Notes, of which $94 million was outstanding at the redemption date; and for general corporate purposes.
•In May 2024, we sold a portfolio comprised of 1,315 railcars and related leases to a railcar investment vehicle (RIV) partner for an aggregate sales price of approximately $143 million. We recognized a gain of approximately $19 million on the sale.
Business Group Summary
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| Three Months Ended
June 30, | | |
| 2024 | | 2023 | | Year over Year – Comparison |
| ($ in millions) | | |
| Railcar Leasing and Services Group | | |
| Revenues | $ | 281.4 | | $ | 268.3 | | Improved lease rates and net additions to the lease fleet |
| Operating profit | $ | 128.0 | | $ | 116.1 | | Improved lease rates and net additions to the lease fleet, partially offset by lower lease portfolio sales |
| Operating profit margin | 45.5 | % | | 43.3 | % | |
| Gains on lease portfolio sales | $ | 22.7 | | $ | 29.8 | | |
Fleet utilization (1) | 96.9 | % | | 97.9 | % | | |
FLRD (2) | +28.3 | % | | +29.5 | % | | Continued strength in current lease rates |
Owned lease fleet (in units) (1) | 109,365 | | 109,060 | | |
| Investor-owned lease fleet (in units) | 34,305 | | 33,205 | | |
| Rail Products Group | | | | | |
| Revenues | $ | 634.2 | | $ | 655.4 | | Lower deliveries and the mix of railcars sold |
| Operating profit | $ | 50.4 | | $ | 24.3 | | Improved labor and operational efficiencies, partially offset by lower deliveries |
| Operating profit margin | 7.9 | % | | 3.7 | % | |
| New railcars: | | | | | |
| Deliveries (in units) | 4,755 | | 4,985 | | |
| Orders (in units) | 2,495 | | 4,770 | | |
| Order value | $ | 338.8 | | $ | 528.3 | | |
| Backlog value | $ | 2,683.2 | | $ | 3,605.4 | |
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| Sustainable railcar conversions: | | | | | |
| Deliveries (in units) | 195 | | 45 | | |
| Backlog (in units) | 250 | | 2,160 | | |
| Backlog value | $ | 19.6 | | $ | 179.9 | | |
| Eliminations | | | | | |
| Eliminations – revenues | $ | (74.2) | | $ | (201.3) | | |
| Eliminations – operating profit | $ | (3.2) | | $ | (11.5) | | |
| Corporate and other | | | | | |
| Selling, engineering, and administrative expenses | $ | 33.5 | | $ | 31.6 | | |
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| June 30, 2024 | | December 31, 2023 | | |
| Loan-to-value ratio | | | | | |
| Wholly-owned subsidiaries | 68.3 | % | | 64.4 | % | | |
(1) Includes wholly-owned railcars, partially-owned railcars, and railcars under leased-in arrangements.
(2) FLRD calculates the implied change in lease rates for railcar leases expiring over the next four quarters. The FLRD assumes that these expiring leases will be renewed at the most recent quarterly transacted lease rates for each railcar type. We believe the FLRD is useful to both management and investors as it provides insight into the near-term trend in lease rates.
Conference Call
Trinity will hold a conference call at 8:00 a.m. Eastern on August 1, 2024 to discuss its second quarter results. To listen to the call, please visit the Investor Relations section of the Company's website at www.trin.net and access the Events & Presentations webpage, or the live call can be accessed at 1-888-317-6003 with the conference passcode "6316195". Please call at least 10 minutes in advance to ensure a proper connection. An audio replay may be accessed through the Company’s website or by dialing 1-877-344-7529 with passcode "6133090" until 11:59 p.m. Eastern on August 8, 2024.
Additionally, the Company will provide a quarterly investor presentation that will be accessible both within the webcast and on Trinity's Investor Relations website under the Events and Presentations portion of the site along with the Second Quarter Earnings Call event weblink.
Non-GAAP Financial Measures
We have included financial measures compiled in accordance with generally accepted accounting principles ("GAAP") and certain non-GAAP measures in this earnings press release to provide management and investors with additional information regarding our financial results. Non-GAAP measures should not be considered in isolation or as a substitute for our reported results prepared in accordance with GAAP and, as calculated, may not be comparable to other similarly titled measures for other companies. For each non-GAAP financial measure, a reconciliation to the most comparable GAAP measure has been included in the accompanying tables. When forward-looking non-GAAP measures are provided, quantitative reconciliations to the most directly comparable GAAP measures are not provided because management cannot, without unreasonable effort, predict the timing and amounts of certain items included in the computations of each of these measures. These factors include, but are not limited to: the product mix of expected railcar deliveries; the timing and amount of significant transactions and investments, such as lease portfolio sales, capital expenditures, and returns of capital to stockholders; and the amount and timing of certain other items outside the normal course of our core business operations.
About Trinity Industries
Trinity Industries, Inc., headquartered in Dallas, Texas, owns businesses that are leading providers of rail transportation products and services in North America. Our businesses market their railcar products and services under the trade name TrinityRail®. The TrinityRail platform provides railcar leasing and management services; railcar manufacturing; railcar maintenance and modifications; and other railcar logistics products and services. Beginning January 1, 2024, Trinity reports its financial results in two reportable business segments: (1) Railcar Leasing and Services Group, formerly the Railcar Leasing and Management Services Group, and (2) Rail Products Group. For more information, visit: www.trin.net.
Some statements in this release, which are not historical facts, are “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements about Trinity's estimates, expectations, beliefs, intentions or strategies for the future, and the assumptions underlying these forward-looking statements, including, but not limited to, future financial and operating performance, future opportunities and any other statements regarding events or developments that Trinity believes or anticipates will or may occur in the future. Trinity uses the words “anticipates,” “assumes,” “believes,” “estimates,” “expects,” “intends,” “forecasts,” “may,” “will,” “should,” “guidance,” “projected,” “outlook,” and similar expressions to identify these forward-looking statements. Forward-looking statements speak only as of the date of this release, and Trinity expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in Trinity’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based, except as required by federal securities laws. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from historical experience or our present expectations, including but not limited to risks and uncertainties regarding economic, competitive, governmental, and technological factors affecting Trinity’s operations, markets, products, services and prices, and such forward-looking statements are not guarantees of future performance. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see “Risk Factors” and “Forward-Looking Statements” in Trinity’s Annual Report on Form 10-K for the most recent fiscal year, as may be revised and updated by Trinity’s Quarterly Reports on Form 10-Q, and Trinity’s Current Reports on Form 8-K.
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| Investor Contact: |
| Leigh Anne Mann |
| Vice President, Investor Relations |
| Trinity Industries, Inc. |
| (Investors) 214/631-4420 |
|
| Media Contact: |
| Jack L. Todd |
| Vice President, Public Affairs |
| Trinity Industries, Inc. |
| (Media Line) 214/589-8909 |
- TABLES TO FOLLOW -
Trinity Industries, Inc.
Condensed Consolidated Statements of Operations
(in millions, except per share amounts)
(unaudited)
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| Three Months Ended
June 30, | | Six Months Ended
June 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
| Revenues | $ | 841.4 | | | $ | 722.4 | | | $ | 1,651.0 | | | $ | 1,364.1 | |
| Operating costs: | | | | | | | |
| Cost of revenues | 662.4 | | | 601.2 | | | 1,307.3 | | | 1,139.7 | |
| Selling, engineering, and administrative expenses | 61.3 | | | 54.3 | | | 113.6 | | | 104.2 | |
| Gains on dispositions of property: | | | | | | | |
| Lease portfolio sales | 22.7 | | | 29.8 | | | 24.8 | | | 43.3 | |
| Other | 1.5 | | | 0.6 | | | 2.2 | | | 2.4 | |
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| Restructuring activities, net | — | | | (1.8) | | | — | | | (2.2) | |
| 699.5 | | | 623.3 | | | 1,393.9 | | | 1,196.0 | |
| Operating profit | 141.9 | | | 99.1 | | | 257.1 | | | 168.1 | |
| Interest expense, net | 70.1 | | | 66.9 | | | 139.2 | | | 129.0 | |
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| Other, net | (3.4) | | | 1.3 | | | — | | | 2.9 | |
| Income from continuing operations before income taxes | 75.2 | | | 30.9 | | | 117.9 | | | 36.2 | |
| Provision (benefit) for income taxes: | | | | | | | |
| Current | 13.8 | | | 3.1 | | | 26.9 | | | 4.0 | |
| Deferred | 3.3 | | | 4.3 | | | 1.2 | | | (8.1) | |
| 17.1 | | | 7.4 | | | 28.1 | | | (4.1) | |
| Income from continuing operations | 58.1 | | | 23.5 | | | 89.8 | | | 40.3 | |
| Loss from discontinued operations, net of income taxes | (1.7) | | | (2.3) | | | (6.0) | | | (5.4) | |
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| Net income | 56.4 | | | 21.2 | | | 83.8 | | | 34.9 | |
| Net income attributable to noncontrolling interest | 2.0 | | | 4.2 | | | 5.7 | | | 13.5 | |
| Net income attributable to Trinity Industries, Inc. | $ | 54.4 | | | $ | 17.0 | | | $ | 78.1 | | | $ | 21.4 | |
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| Basic earnings per common share: | | | | | | | |
| Income from continuing operations | $ | 0.68 | | | $ | 0.24 | | | $ | 1.03 | | | $ | 0.33 | |
| Loss from discontinued operations | (0.02) | | | (0.03) | | | (0.07) | | | (0.07) | |
| Basic net income attributable to Trinity Industries, Inc. | $ | 0.66 | | | $ | 0.21 | | | $ | 0.96 | | | $ | 0.26 | |
| Diluted earnings per common share: | | | | | | | |
| Income from continuing operations | $ | 0.67 | | | $ | 0.23 | | | $ | 1.01 | | | $ | 0.32 | |
| Loss from discontinued operations | (0.02) | | | (0.03) | | | (0.07) | | | (0.06) | |
| Diluted net income attributable to Trinity Industries, Inc. | $ | 0.65 | | | $ | 0.20 | | | $ | 0.94 | | | $ | 0.26 | |
| Weighted average number of shares outstanding: | | | | | | | |
| Basic | 82.4 | | | 81.2 | | | 81.7 | | | 81.0 | |
| Diluted | 84.1 | | | 83.4 | | | 83.4 | | | 83.5 | |
Trinity has certain unvested restricted stock awards that participate in dividends on a nonforfeitable basis and are therefore considered to be participating securities. Consequently, diluted net income attributable to Trinity Industries, Inc. per common share is calculated under both the two-class method and the treasury stock method, and the more dilutive of the two calculations is presented.
Trinity Industries, Inc.
Condensed Consolidated Balance Sheets
(in millions)
(unaudited)
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| June 30, 2024 | | December 31, 2023 |
| ASSETS | | | |
| Cash and cash equivalents | $ | 257.1 | | | $ | 105.7 | |
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| Receivables, net of allowance | 397.5 | | | 363.5 | |
| Income tax receivable | 4.6 | | | 5.2 | |
| Inventories | 616.9 | | | 684.3 | |
| Restricted cash | 107.1 | | | 129.4 | |
| Property, plant, and equipment, net: | | | |
| Railcars in our lease fleet: | | | |
| Wholly-owned subsidiaries | 5,884.2 | | | 5,931.8 | |
| Partially-owned subsidiaries | 1,446.8 | | | 1,473.2 | |
| Deferred profit on railcar products sold | (729.9) | | | (750.2) | |
| Operating and administrative assets | 341.2 | | | 350.0 | |
| 6,942.3 | | | 7,004.8 | |
| Goodwill | 221.5 | | | 221.5 | |
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| Other assets | 410.8 | | | 392.1 | |
| Total assets | $ | 8,957.8 | | | $ | 8,906.5 | |
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| LIABILITIES AND STOCKHOLDERS' EQUITY | | | |
| Accounts payable | $ | 315.4 | | | $ | 305.3 | |
| Accrued liabilities | 353.9 | | | 302.3 | |
| Debt: | | | |
| Recourse | 597.5 | | | 794.6 | |
| Non-recourse: | | | |
| Wholly-owned subsidiaries | 4,019.6 | | | 3,819.2 | |
| Partially-owned subsidiaries | 1,110.3 | | | 1,140.4 | |
| 5,727.4 | | | 5,754.2 | |
| Deferred income taxes | 1,104.2 | | | 1,103.5 | |
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| Other liabilities | 152.9 | | | 165.7 | |
| Stockholders' equity: | | | |
| Trinity Industries, Inc. | 1,065.5 | | | 1,037.1 | |
| Noncontrolling interest | 238.5 | | | 238.4 | |
| 1,304.0 | | | 1,275.5 | |
| Total liabilities and stockholders' equity | $ | 8,957.8 | | | $ | 8,906.5 | |
Trinity Industries, Inc.
Condensed Consolidated Statements of Cash Flows
(in millions)
(unaudited)
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| Six Months Ended
June 30, |
| 2024 | | 2023 |
| Operating activities: | | | |
| Net cash provided by operating activities – continuing operations | $ | 299.7 | | | $ | 140.3 | |
| Net cash used in operating activities – discontinued operations | (6.0) | | | (5.4) | |
| Net cash provided by operating activities | 293.7 | | | 134.9 | |
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| Investing activities: | | | |
| Proceeds from lease portfolio sales | 186.7 | | | 185.7 | |
| Capital expenditures – lease fleet | (232.7) | | | (399.7) | |
| Capital expenditures – operating and administrative | (15.9) | | | (20.8) | |
| Acquisitions, net of cash acquired | — | | | (65.8) | |
| Other investing activities | 6.0 | | | 8.5 | |
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| Net cash used in investing activities | (55.9) | | | (292.1) | |
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| Financing activities: | | | |
| Net proceeds from (repayments of) debt | (37.7) | | | 218.6 | |
| Shares repurchased | (0.9) | | | — | |
| Dividends paid to common shareholders | (47.2) | | | (43.3) | |
| Other financing activities | (22.9) | | | (15.8) | |
| | | |
| | | |
| Net cash provided by (used in) financing activities | (108.7) | | | 159.5 | |
| Net increase in cash, cash equivalents, and restricted cash | 129.1 | | | 2.3 | |
| Cash, cash equivalents, and restricted cash at beginning of period | 235.1 | | | 294.3 | |
| Cash, cash equivalents, and restricted cash at end of period | $ | 364.2 | | | $ | 296.6 | |
Trinity Industries, Inc.
Reconciliations of Non-GAAP Measures
(in millions, except per share amounts)
(unaudited)
Adjusted Operating Results
We have supplemented the presentation of our reported GAAP operating profit, income from continuing operations before income taxes, provision (benefit) for income taxes, income from continuing operations, net income from continuing operations attributable to Trinity Industries, Inc., and diluted income from continuing operations per common share attributable to Trinity Industries, Inc. with non-GAAP measures that adjust the GAAP measures to exclude the impact of certain selling, engineering, and administrative expenses; gains on dispositions of other property; restructuring activities, net; interest expense, net; and certain other transactions or events (as applicable), described in the footnotes to the tables below. These non-GAAP measures are derived from amounts included in our GAAP financial statements and are reconciled to the most directly comparable GAAP financial measures in the tables below. Management believes that these measures are useful to both management and investors for analyzing the performance of our business without the impact of certain items that are not indicative of our normal business operations. Non-GAAP measures should not be considered in isolation or as a substitute for our reported 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, 2024 |
| GAAP | | | | | | | | | | Interest expense, net (1) | | | | Adjusted |
| Operating profit | $ | 141.9 | | | | | | | | | | | $ | — | | | | | $ | 141.9 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Income from continuing operations before income taxes | $ | 75.2 | | | | | | | | | | | $ | (0.4) | | | | | $ | 74.8 | |
| | | | | | | | | | | | | | | |
| Provision (benefit) for income taxes | $ | 17.1 | | | | | | | | | | | $ | (0.1) | | | | | $ | 17.0 | |
| | | | | | | | | | | | | | | |
| Income from continuing operations | $ | 58.1 | | | | | | | | | | | $ | (0.3) | | | | | $ | 57.8 | |
| | | | | | | | | | | | | | | |
| Net income from continuing operations attributable to Trinity Industries, Inc. | $ | 56.1 | | | | | | | | | | | $ | (0.3) | | | | | $ | 55.8 | |
| | | | | | | | | | | | | | | |
| Diluted weighted average shares outstanding | 84.1 | | | | | | | | | | | | | | 84.1 |
| | | | | | | | | | | | | | | |
| Diluted income from continuing operations per common share attributable to Trinity Industries, Inc. | $ | 0.67 | | | | | | | | | | | | | | | $ | 0.66 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, 2024 |
| GAAP | | | | | | | | | | Interest expense, net (1) | | | | | | Adjusted |
| Operating profit | $ | 257.1 | | | | | | | | | | | $ | — | | | | | | | $ | 257.1 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Income from continuing operations before income taxes | $ | 117.9 | | | | | | | | | | | $ | (0.8) | | | | | | | $ | 117.1 | |
| | | | | | | | | | | | | | | | | |
| Provision (benefit) for income taxes | $ | 28.1 | | | | | | | | | | | $ | (0.2) | | | | | | | $ | 27.9 | |
| | | | | | | | | | | | | | | | | |
| Income from continuing operations | $ | 89.8 | | | | | | | | | | | $ | (0.6) | | | | | | | $ | 89.2 | |
| | | | | | | | | | | | | | | | | |
| Net income from continuing operations attributable to Trinity Industries, Inc. | $ | 84.1 | | | | | | | | | | | $ | (0.6) | | | | | | | $ | 83.5 | |
| | | | | | | | | | | | | | | | | |
| Diluted weighted average shares outstanding | 83.4 | | | | | | | | | | | | | | | | 83.4 |
| | | | | | | | | | | | | | | | | |
| Diluted income from continuing operations per common share attributable to Trinity Industries, Inc. | $ | 1.01 | | | | | | | | | | | | | | | | | $ | 1.00 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, 2023 |
| GAAP | | Selling, engineering, and administrative expenses (2) | | | | Restructuring activities, net | | Interest expense, net (1) | | Adjusted |
| Operating profit | $ | 99.1 | | | $ | 2.0 | | | | | $ | (1.8) | | | $ | — | | | $ | 99.3 | |
| | | | | | | | | | | |
| Income from continuing operations before income taxes | $ | 30.9 | | | $ | 2.0 | | | | | $ | (1.8) | | | $ | (0.3) | | | $ | 30.8 | |
| | | | | | | | | | | |
| Provision (benefit) for income taxes | $ | 7.4 | | | $ | 0.5 | | | | | $ | (0.5) | | | $ | (0.1) | | | $ | 7.3 | |
| | | | | | | | | | | |
| Income from continuing operations | $ | 23.5 | | | $ | 1.5 | | | | | $ | (1.3) | | | $ | (0.2) | | | $ | 23.5 | |
| | | | | | | | | | | |
| Net income from continuing operations attributable to Trinity Industries, Inc. | $ | 19.3 | | | $ | 1.5 | | | | | $ | (1.3) | | | $ | (0.2) | | | $ | 19.3 | |
| | | | | | | | | | | |
| Diluted weighted average shares outstanding | 83.4 | | | | | | | | | | 83.4 |
| | | | | | | | | | | |
| Diluted income from continuing operations per common share attributable to Trinity Industries, Inc. | $ | 0.23 | | | | | | | | | | | $ | 0.23 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, 2023 |
| GAAP | | Selling, engineering, and administrative expenses (2) | | Gains on dispositions of property – other (3) | | Restructuring activities, net | | | | | | Interest expense, net (1) | | Adjusted |
| Operating profit | $ | 168.1 | | | $ | 2.0 | | | $ | (1.2) | | | $ | (2.2) | | | | | | | $ | — | | | $ | 166.7 | |
| | | | | | | | | | | | | | | |
| Income from continuing operations before income taxes | $ | 36.2 | | | $ | 2.0 | | | $ | (1.2) | | | $ | (2.2) | | | | | | | $ | (0.7) | | | $ | 34.1 | |
| | | | | | | | | | | | | | | |
| Provision (benefit) for income taxes | $ | (4.1) | | | $ | 0.5 | | | $ | (0.4) | | | $ | (0.6) | | | | | | | $ | (0.2) | | | $ | (4.8) | |
| | | | | | | | | | | | | | | |
| Income from continuing operations | $ | 40.3 | | | $ | 1.5 | | | $ | (0.8) | | | $ | (1.6) | | | | | | | $ | (0.5) | | | $ | 38.9 | |
| | | | | | | | | | | | | | | |
| Net income from continuing operations attributable to Trinity Industries, Inc. | $ | 26.8 | | | $ | 1.5 | | | $ | (0.8) | | | $ | (1.6) | | | | | | | $ | (0.5) | | | $ | 25.4 | |
| | | | | | | | | | | | | | | |
| Diluted weighted average shares outstanding | 83.5 | | | | | | | | | | | | | | 83.5 |
| | | | | | | | | | | | | | | |
| Diluted income from continuing operations per common share attributable to Trinity Industries, Inc. | $ | 0.32 | | | | | | | | | | | | | | | $ | 0.30 | |
(1) Represents interest income accretion related to a seller-financing agreement associated with the sale of certain non-operating assets.
(2) Represents the change in estimated fair value of additional contingent consideration associated with an acquisition.
(3) Represents insurance recoveries in excess of net book value for assets damaged by a tornado at the Company’s rail maintenance facility in Cartersville, Georgia in the first quarter of 2021.
Adjusted Return on Equity
Adjusted Return on Equity (“Adjusted ROE”) is defined as a ratio for which (i) the numerator is calculated as income or loss from continuing operations, adjusted to exclude the effects of net income or loss attributable to noncontrolling interest, and certain other adjustments, described in the footnotes to the table below, which include certain selling, engineering, and administrative expenses; gains on dispositions of other property; and interest expense, net; and (ii) the denominator is calculated as average Trinity stockholders’ equity (which excludes noncontrolling interest). In the following table, the numerator and denominator of our Adjusted ROE calculation are reconciled to income from continuing operations and total stockholders’ equity, respectively, which are the most directly comparable GAAP financial measures. Management believes that Adjusted ROE is a useful measure to both management and investors as it provides an indication of the economic return on the Company’s investments over time. Non-GAAP measures should not be considered in isolation or as a substitute for our reported results prepared in accordance with GAAP and, as calculated, may not be comparable to other similarly titled measures for other companies.
| | | | | | | | | | | |
| LTM June 30, 2024 | | June 30, 2023 |
| ($ in millions) |
| Numerator: | | | |
| Income from continuing operations | $ | 189.5 | | | |
| Net income attributable to noncontrolling interest | (12.8) | | | |
| Net income from continuing operations attributable to Trinity Industries, Inc. | 176.7 | | | |
| Adjustments (net of income taxes): | | | |
Selling, engineering, and administrative expenses (1) | 1.5 | | | |
Gains on dispositions of property – other (2) | (3.9) | | | |
| | | |
Interest expense, net (3) | (1.2) | | | |
| Adjusted Net Income | $ | 173.1 | | | |
| | | |
| Denominator: | | | |
| Total stockholders' equity | $ | 1,304.0 | | | $ | 1,249.0 | |
| Noncontrolling interest | (238.5) | | | (254.4) | |
| Trinity stockholders' equity | $ | 1,065.5 | | | $ | 994.6 | |
| | | |
| Average total stockholders' equity | $ | 1,276.5 | | | |
Return on Equity (4) | 14.8 | % | | |
| | | |
| Average Trinity stockholders' equity | $ | 1,030.1 | | | |
Adjusted Return on Equity (5) | 16.8 | % | | |
(1) Represents the change in estimated fair value of additional contingent consideration associated with an acquisition.
(2) Represents insurance recoveries in excess of net book value for assets damaged by a tornado at the Company’s rail maintenance facility in Cartersville, Georgia in the first quarter of 2021.
(3) Represents interest income accretion related to a seller-financing agreement associated with the sale of certain non-operating assets.
(4) Return on Equity is calculated as income from continuing operations divided by average total stockholders' equity.
(5) Adjusted Return on Equity is calculated as adjusted net income divided by average Trinity stockholders' equity, each as defined and reconciled above.
Cash Flow from Operations with Net Gains on Lease Portfolio Sales
Cash flow from operations with net gains on lease portfolio sales is a non-GAAP financial measure. We believe this measure is useful to both management and investors as it provides a relevant measure of liquidity and a useful basis for assessing the breadth of the cash flow generation capabilities across our operating platform, as well as our ability to fund our operations and repay our debt. This measure is defined as net cash provided by operating activities from continuing operations as computed in accordance with GAAP, plus net gains on lease portfolio sales and 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 reported 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, |
| 2024 | | 2023 |
| Net cash provided by operating activities – continuing operations | $ | 299.7 | | | $ | 140.3 | |
| Net gains on lease portfolio sales | 24.8 | | | 43.3 | |
Cash flow from operations with net gains on lease portfolio sales | $ | 324.5 | | | $ | 183.6 | |
EBITDA and Adjusted EBITDA
“EBITDA” is defined as income from continuing operations plus interest expense, income taxes, and depreciation and amortization expense. Adjusted EBITDA is defined as EBITDA plus certain selling, engineering, and administrative expenses; gains on dispositions of other property; restructuring activities, net; and interest income. EBITDA and Adjusted EBITDA are non-GAAP financial measures; however, the amounts included in these calculations are derived from amounts included in our GAAP financial statements. EBITDA and Adjusted EBITDA are reconciled to net income, the most directly comparable GAAP financial measure, in the following table. This information is provided to assist management and investors in making meaningful comparisons of our operating performance between periods. We believe EBITDA is a useful measure for analyzing the performance of our business. We also believe that EBITDA is commonly reported and widely used by investors and other interested parties as a measure of a company’s operating performance and debt servicing ability because it assists in comparing performance on a consistent basis without regard to capital structure, depreciation or amortization (which can vary significantly depending on many factors). EBITDA and Adjusted EBITDA should not be considered as alternatives to net income as indicators of our operating performance, or as alternatives to operating cash flows as measures of liquidity. Non-GAAP measures should not be considered in isolation or as a substitute for our reported 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, |
| 2024 | | 2023 | | 2024 | | 2023 |
| Net income | $ | 56.4 | | | $ | 21.2 | | | $ | 83.8 | | | $ | 34.9 | |
| Less: Loss from discontinued operations, net of income taxes | (1.7) | | | (2.3) | | | (6.0) | | | (5.4) | |
| | | | | | | |
| Income from continuing operations | 58.1 | | | 23.5 | | | 89.8 | | | 40.3 | |
| Interest expense | 74.9 | | | 69.6 | | | 147.0 | | | 134.4 | |
| Provision (benefit) for income taxes | 17.1 | | | 7.4 | | | 28.1 | | | (4.1) | |
| Depreciation and amortization expense | 73.8 | | | 72.8 | | | 147.2 | | | 146.8 | |
EBITDA | 223.9 | | | 173.3 | | | 412.1 | | | 317.4 | |
| Selling, engineering, and administrative expenses | — | | | 2.0 | | | — | | | 2.0 | |
| Gains on dispositions of property – other | — | | | — | | | — | | | (1.2) | |
| | | | | | | |
| Restructuring activities, net | — | | | (1.8) | | | — | | | (2.2) | |
| Interest income | (0.4) | | | (0.3) | | | (0.8) | | | (0.7) | |
| | | | | | | |
| | | | | | | |
| Adjusted EBITDA | $ | 223.5 | | | $ | 173.2 | | | $ | 411.3 | | | $ | 315.3 | |
Exhibit 99.2
Trinity Industries, Inc.
Earnings Release Conference Call – Q2 2024
August 1, 2024
Leigh Anne Mann
Vice President, Investor Relations
Thank you, operator. Good morning everyone. We appreciate you joining us for the Company’s second quarter 2024 financial results conference call.
Our prepared remarks will include comments from Jean Savage, Trinity’s Chief Executive Officer and President, and Eric Marchetto, the Company’s Chief Financial Officer. We will hold a Q&A session following the prepared remarks from our leaders.
During the call today, we will reference certain non-GAAP financial metrics. The reconciliations of the non-GAAP metrics to comparable GAAP measures are provided in the appendix of the quarterly investor slides, which are accessible on our investor relations website at www.trin.net. These slides are under the Events and Presentations portion of the website, along with the Second Quarter Earnings Conference Call event link.
A replay of today’s call will be available after 10:30 a.m. Eastern time through midnight on August 8, 2024. Replay information is available under the Events and Presentations page on our Investor Relations website.
Before I turn the call to Jean, I wanted to remind you that Trinity completed our 2024 Investor Day on June 25th. The replay of that webcast is also available under the Events and Presentations page on our Investor Relations website.
It is now my pleasure to turn the call over to Jean.
E. Jean Savage
Chief Executive Officer and President
Thank you, Leigh Anne, and good morning everyone. Seeing some of you in person for our Investor Day in June was great. I encourage you to watch the webcast as it lays out our longer-term priorities over the next several years and our progress since our last event in 2020. We believe we have an unmatched rail platform that provides a full suite of customer solutions and will ultimately drive higher shareholder returns. We are a premier railcar leasing company with a platform of integrated rail capabilities to support our lease fleet and serve our customers.
One of the messages we wanted to convey at our Investor Day was our ability to optimize life-cycle returns due to a less volatile operating environment, combined with the reduced cyclicality of our platform. Our strong performance in the second quarter highlights this ability and showcases significant improvement and durability of margins across our business. Here are a few key points before we get into the details.
First, we earned GAAP EPS of $0.67 and adjusted EPS of $0.66, which is up $0.33 sequentially and $0.43 year over year on an adjusted basis.
Second, revenues are up 16% year over year, and operating profit is up 43% year over year. This reflects improved lease rates, higher external deliveries, and improved labor and operational efficiencies.
Third, our cash flow from continuing operations in the quarter was $243 million, driven by higher external deliveries and working capital improvements.
And finally, as we discussed at Investor Day, we are moving to a more traditional post-tax definition of ROE as a Key Performance Indicator. Using this updated metric, Trinity’s last twelve-month Adjusted ROE was 16.8%, showcasing strength in operating results and balance sheet positioning.
In short, our team delivered strong financial results in the second quarter, giving us confidence in the second half of the year. As Eric will discuss in his prepared remarks, we are raising our annual guidance by $0.20 to a 2024 full year range of $1.55 to $1.75, which implies steady performance in the second half of the year.
Market Update
Before discussing Trinity’s performance, I’d like to update you on the railcar market. Demand for existing railcars remains strong with continued steady carload volumes expected in the back half of the year. Consistent with normal seasonal trends, we have seen railcars in storage tick up slightly, but we view the overall state of the railcar market favorably. The North American railcar fleet has grown somewhat in the last 18 months as railcar users look to optimize scrapping decisions as replacement cars are delivered. As we mentioned at our Investor Day, there are still large pockets of aging railcars that will need to be replaced in the coming years. Furthermore, train speeds are favorable, and dwell times are down, which is a good sign for the overall longer-term conversion of modal share to rail but reduces the demand for railcars in the short term.
Carloads are down slightly year over year, primarily due to a slowdown in coal carloads. Removing coal, carloads are up slightly year over year. Over the last few weeks, North American rail originations of construction and metals, agriculture, and downstream and chemical products were up about 9%. Combined railcars in these segments represent over 75% of our fleet’s net book value.
We expect industry deliveries of around 40,000 railcars in 2024 and 120,000 railcars over the next three years. The builders, including Trinity, are demonstrating great market discipline, to keep the industry fleet well-utilized and diversified. The railcar build cycle is expected to be less volatile than prior cycles with lower peaks and higher floors.
Segment Performance
Trinity’s business has two main segments – Leasing and Services and Rail Products. I’ll start my comments in the Leasing and Services segment, which includes our leasing, maintenance, and logistics services businesses.
Leasing and Services
In our leasing business, we are proud of our lease fleet’s continued strength and momentum. The Future Lease Rate Differential, or FLRD, is a positive 28.3%. This metric has stayed consistently high as market rates maintain their strength. During the nine quarters in which we have seen this metric in positive double digits, we have repriced about 44% of our fleet. Our renewal lease rates were 32.5% above expiring rates, and leasing and management revenues were about 9% higher than a year ago.
In the quarter, we had a renewal success rate of 72% and a utilization rate of 96.9%. Our strategy is to evaluate the best market for our railcars to maximize long-term returns, which can mean shifting railcars at the end of expiring contracts to best position our fleet for long-term value creation. Given the markets, car types, and customers with expirations in the quarter, we feel good about our fleet’s current positioning and utilization.
We completed a portfolio sale of 1,315 railcars and related leases for an aggregate sales price of approximately $143 million, and we recognized gains of $23 million on all lease portfolio sales in the secondary market this quarter.
Maintenance
Our maintenance business is part of our leasing segment, and as volume shifts between internal and external repairs, the margin in that business can vary significantly. However, having a strong
maintenance network and the ability to service our own fleet is a competitive advantage and makes us a better railcar owner and partner.
Rail Products
Moving to our Rail Products business, which supports our lease fleet and includes railcar manufacturing and our aftermarket parts business, I am pleased with our substantial progress, especially in labor and operational efficiencies. Our operating margin of 7.9% in the second quarter is up significantly both sequentially and year over year and is at the higher end of our full year guidance of 6 to 8 percent.
We received orders for 2,495 railcars in the quarter and delivered 4,755 railcars. Inquiries remain supportive of replacement-level demand, and customers continue to efficiently place deliveries into service. A narrower railcar build cycle allows for more consistent operations and smoother labor and supply chain planning. This helps support consistent or modest margin growth in this business without volume growth in the near-term.
Conclusion
Before I conclude, I want to note that at the end of June we published an interim update to our Corporate Social Responsibility report, which is available on our website. I encourage you to review the report to get a timely update on our Company’s sustainability initiatives.
I’ll now turn to Eric to discuss the financial statements and update our views on the rest of the year.
Eric R. Marchetto
Executive Vice President and Chief Financial Officer
Thank you, Jean, and good morning everyone. I’m going to walk through some highlights from our financial statements, and then I’ll close with some thoughts on our expectations for the rest of 2024.
Income Statement
Starting on the income statement, quarterly revenues of $841 million reflect higher external railcar deliveries and improved lease rates.
GAAP earnings per share from continuing operations was $0.67, and adjusted EPS was $0.66. As Jean noted, this represents significant growth both sequentially and year over year. We benefited in the quarter by lower eliminations and lease portfolio sales. We also saw consistently better performance in our business and improved operating margins for both segments of our business.
Cash Flow Statement
Moving to the cash flow statement, we generated cash flow from continuing operations of $243 million in the quarter and $300 million year-to-date. As you’ll remember, we ended 2023 with a higher working capital balance driven by year-end issues at the border. Those railcars have now been delivered and converted into cash, which you can see in our lower working capital balance of $699 million, down approximately $92 million from the first quarter.
The combined result of $163 million in lease railcar sales and fewer deliveries to the lease fleet in the quarter is a net fleet investment of a negative $77 million. Our net fleet investment guidance range for the full year remains unchanged as secondary market activity is often lumpy, and we expect to see net investment increase in the back half of the year with more deliveries into the lease fleet and fewer railcar sales in the secondary market. The RIV sale in the second quarter marks the fulfillment of our original program agreement. We expect to continue selling leased railcars to our RIV partners.
We currently have liquidity of $985 million. Our loan-to-value for the wholly-owned lease portfolio is 68.3%, within our new target range of 60 to 70 percent.
In the second quarter, two significant debt and capital markets transactions strengthened our balance sheet and optimized our loan-to-value.
First, in May, we issued $432 million of Green Secured Railcar Equipment Notes, the TRL-2024 notes. The proceeds from this issuance were used to repay warehouse borrowings and redeem the outstanding ABS debt of TRL VII.
Second, in June, we issued an additional $200 million of principal on our unsecured senior notes, increasing the aggregate principal amount to $600 million. We used the proceeds from this transaction and cash on hand to repay our Trinity unsecured 2024 senior notes.
And now, let’s talk about what we expect in the second half of 2024.
Guidance
As Jean mentioned, we still expect about 40,000 industry railcar deliveries in 2024 to support replacement-level demand.
We expect to invest between $300 and $400 million in our fleet on a net basis. Our operating and administrative capital expenditures of $50 to $60 million in the year, which includes investments in
automation, technology, and modernization of facilities and processes, remains unchanged from previous guidance.
Finally, as Jean mentioned, we are increasing our full year EPS guidance to a range of $1.55 to $1.75 for 2024. As we plan for the next six months, I want to provide more color around our guidance.
First, as expected, we accomplished a large railcar sale in the quarter. Year-to-date, our gains on railcar sales are $25 million. We previously stated that we expect gains to be about half of what they were in 2023. So, the implication is that gains from sales in the secondary market will be lower in the second half of the year.
Second, on our 2023 fourth quarter call, we stated that we expect about 20 to 25% of our deliveries to go into our lease fleet for 2024. In the second quarter, that was about 10% due to the timing and planning of our manufacturing and delivery schedule. This benefited our quarterly earnings in the second quarter due to lower revenue and profit eliminations. We expect a higher percentage of deliveries going into our lease fleet the second half of the year. This is in support of our fleet investment goals and our conviction in the returns we will achieve by leasing these railcars instead of selling them new.
When we add a railcar into our fleet, the associated revenue and profit from manufacturing are eliminated. Therefore, a higher percentage of railcars going to our fleet on the same number of deliveries will reduce quarterly earnings per share but will generate better long-term returns on the railcar and provide multi-year visibility in forward cash flow through lease contracts.
As we discussed at our Investor Day, we expect 2024 operating margins between 38% and 41% in our Leasing segment and between 6% and 8% in our Rail Products segment. While we expect margins to average at these rates over the year, there can be some variability throughout the year. Leasing segment operating margins can move due to secondary market activity, maintenance volume, and mix. Rail Products margins can move due to product mix, line changeovers, and production efficiency.
We are proud of our performance in the second quarter and feel increasingly confident in our visibility into the rest of the year, as evidenced by raising EPS guidance. In our Leasing segment, a consistently high FLRD has driven lease rates upward, and the revenue growth from higher lease rates flows to the bottom line. Our maintenance and digital services businesses are also performing well, providing a broader customer offering and a better customer experience. In the Rail Products Group, our higher operating margin reflects consistent and disciplined efforts around labor and
operational efficiency. Our legacy parts and Holden businesses are performing well and reducing the overall cyclicality of the segment. In summary, our suite of products and services are all performing well, improving the returns of our business and driving shareholder value.
Operator, we are now ready to take our first question.
(after Q&A)
E. Jean Savage
Chief Executive Officer and President
Thank you for your time today. The strength of the Trinity platform comes from our consistent focus on protecting and enhancing the returns of our lease fleet, and we are pleased with our second quarter results, and we believe we are well-positioned for continued improvement on the returns of our business.
Q2 2024 Investor Presentation Exhibit 99.3 August 1, 2024 – based on financial results as of June 30, 2024
2Investor Presentation 2 Forward Looking Statements Some statements in this presentation, which are not historical facts, are “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements about Trinity's estimates, expectations, beliefs, intentions or strategies for the future, and the assumptions underlying these forward-looking statements, including, but not limited to, future financial and operating performance, future opportunities and any other statements regarding events or developments that Trinity believes or anticipates will or may occur in the future. 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 material, 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. This presentation also includes references to calculations that are not based on generally accepted accounting principles (“GAAP”). Reconciliations of each of these non-GAAP measures to the most directly comparable GAAP measures have been included in the Appendix. When forward-looking non-GAAP measures are provided, Trinity does not provide quantitative reconciliations of forward-looking non-GAAP measures to the most directly comparable GAAP measures because it cannot, without unreasonable effort, predict the timing and amounts of certain items included in the computations of each of these measures. These factors include, but are not limited to: the product mix of expected railcar deliveries; the timing and amount of significant transactions and investments, such as lease portfolio sales, capital expenditures, and returns of capital to shareholders; and the amount and timing of certain other items outside the normal course of our core business operations. Except where noted, financial data is presented as of the Company’s most recent fiscal quarter ending June 30, 2024. “LTM” represents Last Twelve Months(1) financial information from July 1, 2023 to June 30, 2024. See appendix for footnotes
3Investor Presentation I. Quarter Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 II. Company Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 III. Financial Positioning and Strategic Initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 IV. Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Investor Presentation – Q2 2024
4Investor Presentation Quarter Results
5Investor Presentation Key Takeaways from Q2 2024 Second quarter adjusted EPS from continuing operations of $0.66*, up $0.33 sequentially and $0.43 year over year on an adjusted basis Continued strength in lease rates; FLRD +28.3%, utilization 96.9% Quarterly revenue up 16% and quarterly operating profit up 43% year over year, reflecting improved lease rates, higher external deliveries, and improved labor and operational efficiencies Raising 2024 EPS guidance to a range of $1.55 to $1.75 based on strong Q2 performance * See appendix for reconciliation of non-GAAP measures
6Investor Presentation Financial Results Highlights Cash Flow from Cont. Operations $243M $+205M Revenues $841M +16% Adjusted EPS* $0.66 $+0.43 Q2 2024 – Year over Year Adjusted ROE* 16.8% LTM Q2-24 * See appendix for reconciliation of non-GAAP measures
7Investor Presentation North American Railcar Market In Balance C ha ng e in N or th A m er ic an R ai lc ar F le et (r ai lc ar s Y /Y ) S hare of R ailcars in S torage (M onthly % ) Change in Fleet Size (Y/Y) Percent in storage 1/1/2021 1/1/2022 1/1/2023 1/1/2024 -30,000 -20,000 -10,000 0 10,000 20,000 —% 5% 10% 15% 20% 25% North American Railcar Fleet and Railcars in Storage Source: Association of American Railroads (“AAR”) RAILCAR FLEET The industry fleet continues to expand, but the rate of expansion has slowed. Industry deliveries expected to be ~40K for 2024, offset by attrition to keep fleet at replacement level RAILCARS IN STORAGE Industry storage rates ticked slightly up to just below 20% in the month of July, driven by coal cars and box cars, and train speeds continue to improve requiring less railcars in the near term
8Investor Presentation8 Leasing & Services Revenue and Operating Profit Margin (1) (in m ill io ns ) Leasing & Management Revenue Maintenance Services Revenue Digital & Logistics Services Revenue OP Margin (1) Q2-23 Q3-23 Q4-23 Q1-24 Q2-24 $— $100 $200 $300 20% 40% 60%Leasing & Services Segment Revenue Drivers • Revenue higher year over year due to improved lease rates and net additions to the lease fleet Leasing & Services Margin Performance Drivers • Margin up year over year due to improved lease rates and net additions to the lease fleet, partially offset by lease portfolio sales • Completed $163M of lease portfolio sales in the quarter, resulting in gains of $23M • Segment margin includes gains from insurance recoveries in Q3 2023 and Q4 2023 Leasing & Services Business Highlights • Quarterly net fleet investment of $(77) million • Owned fleet of 109,365 railcars • Total owned and investor-owned fleet of 143,670 railcars • Fleet utilization of 96.9% • Renewal success rate of 72% for Q2 2024 • FLRD remains strong at +28.3% See appendix for footnotes Segment Performance: Railcar Leasing & Services Group Fl ee t U til iz at io n FLR D Fleet Utilization FLRD (2) Q2-23 Q3-23 Q4-23 Q1-24 Q2-24 80% 90% 100% —% 25% 50% FLRD and Utilization Remain Favorable
9Investor Presentation9 Rail Products Segment Revenue Drivers • Quarterly revenue down year over year due to lower deliveries and the mix of railcars sold Rail Products Margin Performance Drivers • Operating margin of 7.9% in the quarter reflects year over year and sequential improvement in labor and operational efficiencies Rail Products Business Highlights • 2,495 new railcar orders in the quarter and 4,755 new railcar deliveries in the quarter ▪ Inquiry levels remain supportive of industry-level demand for 2025 • Backlog of $2.7 billion at quarter-end Rail Products Segment Revenue and Operating Profit Margin (in m ill io ns ) Rail Products Revenue Parts & Components Revenue OP Margin Q2-23 Q3-23 Q4-23 Q1-24 Q2-24 $— $250 $500 $750 —% 2% 4% 6% 8% 10% Segment Performance: Rail Products Group Orders Deliveries Q2-23 Q3-23 Q4-23 Q1-24 Q2-24 0 2,500 5,000 Order Volume Supports Replacement-Level Demand
10Investor Presentation Revenue Improved Year over Year Q2 2024 Financial Summary: Income Statement: • Total revenues of $841M reflect higher external railcar deliveries and improved lease rates • GAAP EPS from continuing operations of $0.67 • Adjusted EPS of $0.66* • Lease portfolio sales proceeds of $163M in the quarter due to large portfolio sale 10 Cash Flow From Operations Reflects Higher Deliveries * See appendix for reconciliation of non-GAAP measures (in m ill io ns ) Leasing & Services Rail Products Adj EPS, Cont Ops (Diluted) * Q2-23 Q3-23 Q4-23 Q1-24 Q2-24 $— $450 $900 $— $0.50 $1.00 (in m ill io ns ) Cash Flow from Cont Ops Net Gains on Lease Portfolio Sales Q2-23 Q3-23 Q4-23 Q1-24 Q2-24 $— $100 $200 $300 Total Company Results Year-to-Date Cash Flow: • Cash flow from continuing operations of $300M • Net gains on lease portfolio sales of $25M • Net fleet investment of $46M • Investment of $16M in operating and administrative capex • Shareholder returns of $48M through dividends paid and share repurchases
11Investor Presentation Unencumbered Railcars $292M LTV of 68.3% for the wholly-owned lease portfolio as of Q2-24 Pledge to warehouse and additional assets can be sold or financed CAPITAL LEVERS Recourse Debt $598M @ ~7.8%(1) Non-recourse Debt $5.1B @ ~4.3%(1) Favorable average cost of debt with flexible term structures DEBT STRUCTURE Cash & Equivalents $257M Revolver Availability $595M Warehouse Availability $133M LIQUIDITY Solid Liquidity of $985M(1) Attractive Debt Structures Conservative Capitalization See appendix for footnotes Balance Sheet Positioning Strategically Positioned for Value Creation
12Investor Presentation C ap ita l A llo ca tio n FY 2024 Summary Detail Industry Deliveries Approximately 40K Does not include sustainable railcar conversions Net Fleet Investment $300M — $400M Includes deliveries to our lease fleet, sustainable railcar conversions, railcar modifications and betterments, and secondary market purchases; offset by proceeds from lease portfolio sales Operating and Administrative Capital Expenditures $50M — $60M Investments in automation, technology, and modernization of facilities and processes EPS from Continuing Operations $1.55 — $1.75 Excludes items outside of our normal business operations Any forward-looking statements made by the Company speak only as of the date on which they are made. Except as required by federal securities law, the Company is under no obligation to update or alter its forward-looking statements, whether as a result of new information, subsequent events or otherwise. Management Outlook for Business Performance
13Investor Presentation Company Overview
14Investor Presentation Trinity Industries, Inc. is a market leading railcar leasing business that provides rail transportation products and services in North America – Top 5 Leasing company ~ 109,365 railcars under ownership ~ 34,305 additional investor-owned railcars – Leading railcar manufacturer with 37% of industry deliveries in FY 2023 – Railcar maintenance network and growing railcar logistics products and services Unique rail platform provides single source for comprehensive rail transportation solutions • LTM Q2-24 total revenues of $3.3 billion • LTM Q2-24 Adjusted EBITDA* of $810 million • Current dividend yield of 3.7%(1) – 241 consecutive quarterly dividend payments External Revenue by Business Segment(2) *All specified data as of June 30, 2024; See appendix for footnotes and reconciliation of non-GAAP measures $7.9 billion* Enterprise Value $91 million* LTM Q2-24 Stockholder Returns $468 million* LTM Q2-24 Cash Flow from Cont. Ops $2.5 billion* Market Cap Leasing & Services Rail Products Adj EPS, Cont Ops (Diluted) * 2022 2023 LTM Q2-24 $— $1,000 $2,000 $3,000 $4,000 $0.80 $1.20 $1.60 $2.00 $2.40 (in $mms) Trinity Industries, Inc. Overview
15Investor Presentation Optimize customers’ ownership and usage of railcar equipment Cross-sell to deliver innovative solutions and differentiated experience Create an unmatched rail platform that provides a full suite of customer solutions to make a Trinity leased railcar the “railcar of choice” for our shipper customers for higher fleet utilization, more value streams per railcar, and higher shareholder returns Trinity’s Platform Built for Superior Performance
16Investor Presentation Platform Capabilities Support Optimized Lease Fleet Returns Lease Originations Captive Maintenance Parts and Services Manufacturing excellence and new product development Market data and leading market view Asset Management / RIV Partnerships Dual role as owner and builder creates a feedback loop reinforcing asset differentiation Complementary lines of business give us a broad industry view and early visibility to industry trends Lease origination capabilities give customer flexibility and unlock multiple monetization options for each asset Fee income from Rail Investment Vehicle partnerships worth an average of 100bp to Adjusted ROE over last 5 years Captive maintenance and Mobile Repair Units allow for more time on rent Parts and services reduce cyclicality of earnings stream and enhance customer experience
17Investor Presentation Establishing New Value Streams Across Railcar Life Cycle
18Investor Presentation Diversified Portfolio of Railcar Equipment ~ 900 Different Commodities ~ 270 Different Railcar Designs Refined Products & Chemicals Energy Agriculture Construction & Metals Consumer Products Fr ei gh t C ar s 53 % Open Hoppers & Gondolas Coal Aggregates, Steel and Metals 11% Small Covered Hopper (< 5k cu/ft) Frac Sand Fertilizer Cement, Construction Materials, Steel and Metals 12% Large Covered Hopper (< 5k cu/ft) Other Chemical (Soda Ash) DDG and Feeds, Grain Mill Products, Grains, Food and Other Ag, Fertilizer Lumber (Wood Chips) 12% Specialty Covered Hopper Plastics Coal (Fly Ash) Grain Mill Products Aggregates, Cement 7% Other Freight Other Chemicals Food Lumber, Steel and Metals, Cement Autos, Paper, Intermodal 11% Ta nk C ar s 47 % Pressure Tank Cars NGL, Chlor Alkali, Petro- chemical, Other Chemicals Fertilizer 9% Gen. Service Tank Cars (< 20k. Gal) Sulfur Products, Chlor Alkali, Other Chemicals Grain Mill Products Aggregates (Clay Slurry) 3% Gen. Service Tank Cars (20k. - 25k Gal.) Refined Products, Petro- chemicals, Other Chemicals Fertilizer, Food, Animal Feed 5% Gen. Service Tank Cars (25k. - 30k Gal.) Refined Products, Petro- chemicals, Other Chemicals Crude Oil, Biofuels Grain Mill Products, Food 12% Gen. Service Tank Cars (> 30k. Gal) Refined Products, Petrochemicals, Other Chemicals, NGL's Biofuels, Crude Oil 13% Specialty Tank Chlor Alkali, Other Chemicals, Sulfur Products Fertilizer 5% 34% 27% 20% 10% 9% Commercial End Markets / Commodities M aj or R ai lc ar C at eg or y r l ll r r (< 5k cu/ft) Large overed opper (> 5k cu/ft) i lt r r t r r i t r r r . r i r (< 20k. Gal) . r i r (20k. - 25k Gal.) . r i r (25k. - 30k Gal.) . r i r (> 30k. Gal) i lt *All percentage information reflects Company-owned fleet assets as of December 31, 2023
19Investor Presentation 13% 13% 9% 26% 12% 13% TRN, 14% TRN UnionTank GATX All other * ITE CIT Wells Fargo The TrinityRail platform has grown at a 11% CAGR since 2003 Lessors Make Up A Growing Share of the North American Fleet Railcar Lessor Ownership Profile Presents Consolidation Opportunity Operating Lessors *Over 100 lessors own 242K railcars in “All other” 19 Financial Lessors 55% 19% 16% 10% Lessor Railroad Shipper TTX See appendix for source information Capitalizing on Structural Change in the Rail Market
20Investor Presentation20 Operating our business in a way that minimizes impact on natural resources and the environment • Leveraged Green Financing Framework, for financing of green-eligible railcars assets, supported by Sustainalytics • Sustainable railcar conversions allow for re-use of railcar components while still addressing a changing demand environment • Innovative products and services that enhance the rail modal supply chain advantage and reduce GHG emissions Attracting and retaining a diverse and empowered workforce • Fostering an inclusive and collaborative workplace • Hiring and retaining the best talent and providing opportunities for continuing professional development • Improving the well being of our employees and stakeholders • Contributing to the communities in which we operate Promoting the long-term interests of stakeholders, strengthening accountability and inspiring trust • Independent Chairman and Board of Directors with diverse backgrounds and experienced oversight • Incentive compensation programs aligned with shareholder interests • Board of Directors and Executive Leadership Team oversight of ESG initiatives Strong track record of operational excellence • All Trinity Rail manufacturing facilities and Trinity HQ achieved ISO 14001 (Environmental) and ISO 45001 (Safety) certification, the only railcar manufacturer in North America certified to both rigorous standards • Actively engage stakeholders in environmental, health, and safety (EHS) initiatives and continually improve EHS processes, practices, and operational performance Commitment to Premier Performance and Sustainability Environmental Commitment Social Responsibility Governance Excellence Risk Management
21Investor Presentation • 1.7 million railcars in North America(1) • 1.4 trillion ton miles moved by rail in 2023(2) • 3,500+ commodities moved by rail(3) • Annual railcar loadings of 17 million in 2023(4), highly correlated to U.S. GDP U.S. Freight Ton Miles by Mode of Transportation(2) See appendix for footnotes 21 Truck, 48% Rail, 26% Water, 9% Pipe, 17% 5.4 trillion total ton miles Integral Part of North American Supply Chain 26% of U.S. Freight Ton Miles move by rail
22Investor Presentation Financial Positioning and Strategic Initiatives
23Investor Presentation Fleet investment generates highest returns for Trinity Strong FLRD and growing end market demand supports our conviction in the return opportunities from fleet investment Requires diligence, but strategic M&A around Parts and Services can drive meaningful returns Committed to dividend growth and will be opportunistic around share repurchases Current debt profile supports ROE outlook Committed to maintaining appropriate liquidity Capital Allocation Strategy Focused on Returns HIGHER RETURNS LOWER RETURNS Fleet InvestmentCapital Investments and M&AReturn of CapitalDebt RepaymentHold Cash
24Investor Presentation • Long-term leases • High renewal success rates • Low credit defaults and bad debt expense • Active secondary market Stable and Predictable Cash Flows • 35-50 year useful life • Positive yield relationship to inflation • Low volatility for residuals • Low technological obsolescence Hard Asset Value with Inflation Benefits • Integral component of North American supply chain • Multiple market sectors with varying demand drivers Strong Correlation with GDP • Rent yields highly correlate to interest rates Natural Interest Rate Hedge • Accelerated depreciation for tax purposes • Bonus depreciation allowed under current tax law • Superior risk-adjusted returns Tax-advantaged Investment • Accounts for 1/3 of U.S. freight, but only 0.5% of greenhouse emissions • Up to 95% recyclable through scrap and salvage Environmental Profile* *See appendix for source information 24 Railcars are Sustainable Long-Term Investments
25Investor Presentation Trinity’s Operating Model and Company Purpose Purpose Business Strategy Values
26Investor Presentation Appendix
27Investor Presentation 27 Three Months Ended June 30, 2024 (in millions, except per share amounts) GAAP Interest expense, net (1) Adjusted Operating profit $ 141.9 $ — $ 141.9 Income from continuing operations before income taxes $ 75.2 $ (0.4) $ 74.8 Provision (benefit) for income taxes $ 17.1 $ (0.1) $ 17.0 Income from continuing operations $ 58.1 $ (0.3) $ 57.8 Net income from continuing operations attributable to Trinity Industries, Inc. $ 56.1 $ (0.3) $ 55.8 Diluted weighted average shares outstanding 84.1 84.1 Diluted income from continuing operations per common share attributable to Trinity Industries, Inc. $ 0.67 $ 0.66 (1) Represents interest income accretion related to a seller-financing agreement associated with the sale of certain non-operating assets. We have supplemented the presentation of our reported GAAP operating profit, income from continuing operations before income taxes, provision (benefit) for income taxes, income from continuing operations, net income from continuing operations attributable to Trinity Industries, Inc., and diluted income from continuing operations per common share attributable to Trinity Industries, Inc. with non-GAAP measures that adjust the GAAP measures to exclude the impact of certain interest expense, net; and certain other transactions or events (as applicable), described in the footnotes to the table above. These non-GAAP measures are derived from amounts included in our GAAP financial statements and are reconciled to the most directly comparable GAAP financial measures in the table above. Management believes that these measures are useful to both management and investors for analyzing the performance of our business without the impact of certain items that are not indicative of our normal business operations. Non-GAAP measures should not be considered in isolation or as a substitute for our reported results prepared in accordance with GAAP and, as calculated, may not be comparable to other similarly titled measures for other companies. Reconciliation: Adjusted Operating Results
28Investor Presentation 28 Six Months Ended June 30, 2024 (in millions, except per share amounts) GAAP Interest expense, net (1) Adjusted Operating profit $ 257.1 $ — $ 257.1 Income from continuing operations before income taxes $ 117.9 $ (0.8) $ 117.1 Provision (benefit) for income taxes $ 28.1 $ (0.2) $ 27.9 Income from continuing operations $ 89.8 $ (0.6) $ 89.2 Net income from continuing operations attributable to Trinity Industries, Inc. $ 84.1 $ (0.6) $ 83.5 Diluted weighted average shares outstanding 83.4 83.4 Diluted income from continuing operations per common share attributable to Trinity Industries, Inc. $ 1.01 $ 1.00 (1) Represents interest income accretion related to a seller-financing agreement associated with the sale of certain non-operating assets. We have supplemented the presentation of our reported GAAP operating profit, income from continuing operations before income taxes, provision (benefit) for income taxes, income from continuing operations, net income from continuing operations attributable to Trinity Industries, Inc., and diluted income from continuing operations per common share attributable to Trinity Industries, Inc. with non-GAAP measures that adjust the GAAP measures to exclude the impact of certain interest expense, net; and certain other transactions or events (as applicable), described in the footnotes to the table above. These non-GAAP measures are derived from amounts included in our GAAP financial statements and are reconciled to the most directly comparable GAAP financial measures in the table above. Management believes that these measures are useful to both management and investors for analyzing the performance of our business without the impact of certain items that are not indicative of our normal business operations. Non-GAAP measures should not be considered in isolation or as a substitute for our reported results prepared in accordance with GAAP and, as calculated, may not be comparable to other similarly titled measures for other companies. Reconciliation: Adjusted Operating Results
29Investor Presentation 29 Reconciliation: Adjusted Operating Results (1) Represents the change in estimated fair value of additional contingent consideration associated with an acquisition. (2) Represents insurance recoveries in excess of net book value for assets damaged by a tornado at the Company’s rail maintenance facility in Cartersville, Georgia in the first quarter of 2021. (3) Represents interest income accretion related to a seller-financing agreement associated with the sale of certain non-operating assets. We have supplemented the presentation of our reported GAAP operating profit, income from continuing operations before income taxes, provision (benefit) for income taxes, income from continuing operations, net income from continuing operations attributable to Trinity Industries, Inc., and diluted income from continuing operations per common share attributable to Trinity Industries, Inc. with non-GAAP measures that adjust the GAAP measures to exclude the impact of certain selling, engineering, and administrative expenses; gains on dispositions of other property; restructuring activities, net; interest expense, net; and certain other transactions or events (as applicable), described in the footnotes to the table above. These non-GAAP measures are derived from amounts included in our GAAP financial statements and are reconciled to the most directly comparable GAAP financial measures in the table above. Management believes that these measures are useful to both management and investors for analyzing the performance of our business without the impact of certain items that are not indicative of our normal business operations. Non-GAAP measures should not be considered in isolation or as a substitute for our reported 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, 2023 (in millions, except per share amounts) GAAP Selling, engineering, and administrative expenses (1) Gains on dispositions of property – other (2) Restructuring activities, net Interest expense, net (3) Adjusted Operating profit $ 168.1 $ 2.0 $ (1.2) $ (2.2) $ — $ 166.7 Income from continuing operations before income taxes $ 36.2 $ 2.0 $ (1.2) $ (2.2) $ (0.7) $ 34.1 Provision (benefit) for income taxes $ (4.1) $ 0.5 $ (0.4) $ (0.6) $ (0.2) $ (4.8) Income from continuing operations $ 40.3 $ 1.5 $ (0.8) $ (1.6) $ (0.5) $ 38.9 Net income from continuing operations attributable to Trinity Industries, Inc. $ 26.8 $ 1.5 $ (0.8) $ (1.6) $ (0.5) $ 25.4 Diluted weighted average shares outstanding 83.5 83.5 Diluted income from continuing operations per common share attributable to Trinity Industries, Inc. $ 0.32 $ 0.30
30Investor Presentation 30 (1) Represents the change in estimated fair value of additional contingent consideration associated with an acquisition. (2) Represents insurance recoveries in excess of net book value for assets damaged by a tornado at the Company’s rail maintenance facility in Cartersville, Georgia in the first quarter of 2021. (3) Represents interest income accretion related to a seller-financing agreement associated with the sale of certain non-operating assets. We have supplemented the presentation of our reported GAAP operating profit, income from continuing operations before income taxes, provision (benefit) for income taxes, income from continuing operations, net income from continuing operations attributable to Trinity Industries, Inc., and diluted income from continuing operations per common share attributable to Trinity Industries, Inc. with non-GAAP measures that adjust the GAAP measures to exclude the impact of certain selling, engineering, and administrative expenses; gains on dispositions of other property; restructuring activities, net; interest expense, net; and certain other transactions or events (as applicable), described in the footnotes to the table above. These non-GAAP measures are derived from amounts included in our GAAP financial statements and are reconciled to the most directly comparable GAAP financial measures in the table above. Management believes that these measures are useful to both management and investors for analyzing the performance of our business without the impact of certain items that are not indicative of our normal business operations. Non-GAAP measures should not be considered in isolation or as a substitute for our reported results prepared in accordance with GAAP and, as calculated, may not be comparable to other similarly titled measures for other companies. Year Ended December 31, 2023 (in millions, except per share amounts) GAAP Selling, engineering, and administrative expenses (1) Gains on dispositions of property – other (2) Restructuring activities, net Interest expense, net (3) Adjusted Operating profit $ 417.0 $ 4.0 $ (6.3) $ (2.2) $ — $ 412.5 Income from continuing operations before income taxes $ 149.0 $ 4.0 $ (6.3) $ (2.2) $ (1.5) $ 143.0 Provision (benefit) for income taxes $ 9.0 $ 1.0 $ (1.6) $ (0.6) $ (0.4) $ 7.4 Income from continuing operations $ 140.0 $ 3.0 $ (4.7) $ (1.6) $ (1.1) $ 135.6 Net income from continuing operations attributable to Trinity Industries, Inc. $ 119.4 $ 3.0 $ (4.7) $ (1.6) $ (1.1) $ 115.0 Diluted weighted average shares outstanding 83.4 83.4 Diluted income from continuing operations per common share attributable to Trinity Industries, Inc. $ 1.43 $ 1.38 Reconciliation: Adjusted Operating Results
31Investor Presentation (1) The effective tax rate for gains on dispositions of other property; restructuring activities, net; and interest expense, net is before consideration of the CARES Act. (2) Represents insurance recoveries in excess of net book value for assets damaged by a tornado at the Company’s rail maintenance facility in Cartersville, Georgia in the first quarter of 2021. (3) Represents interest income accretion related to a seller-financing agreement associated with the sale of certain non-operating assets. We have supplemented the presentation of our reported GAAP operating profit, income (loss) from continuing operations before income taxes, provision (benefit) for income taxes, income (loss) from continuing operations, net income from continuing operations attributable to Trinity Industries, Inc., and diluted income from continuing operations per common share attributable to Trinity Industries, Inc. with non-GAAP measures that adjust the GAAP measures to exclude the impact of certain gains on dispositions of other property; restructuring activities, net; interest expense, net; the income tax effects of the CARES Act; and certain other transactions or events (as applicable), described in the footnotes to the table above. These non-GAAP measures are derived from amounts included in our GAAP financial statements and are reconciled to the most directly comparable GAAP financial measures in the table above. Management believes that these measures are useful to both management and investors for analyzing the performance of our business without the impact of certain items that are not indicative of our normal business operations. Non-GAAP measures should not be considered in isolation or as a substitute for our reported results prepared in accordance with GAAP and, as calculated, may not be comparable to other similarly titled measures for other companies. 31 Year Ended December 31, 2022 (in millions, except per share amounts) GAAP Gains on dispositions of property – other (1)(2) Restructuring activities, net (1) Interest expense, net (1)(3) Income tax effect of CARES Act Adjusted Operating profit $ 334.0 $ (7.5) $ 1.0 $ — $ — $ 327.5 Income (loss) from continuing operations before income taxes $ 126.5 $ (7.5) $ 1.0 $ (1.4) $ — $ 118.6 Provision (benefit) for income taxes $ 27.6 $ (1.9) $ 0.3 $ (0.3) $ 0.6 $ 26.3 Income (loss) from continuing operations $ 98.9 $ (5.6) $ 0.7 $ (1.1) $ (0.6) $ 92.3 Net income from continuing operations attributable to Trinity Industries, Inc. $ 86.1 $ (5.6) $ 0.7 $ (1.1) $ (0.6) $ 79.5 Diluted weighted average shares outstanding 84.2 84.2 Diluted income from continuing operations per common share attributable to Trinity Industries, Inc. $ 1.02 $ 0.94 Reconciliation: Adjusted Operating Results
32Investor Presentation Q2-23 Q3-23 Q4-23 Q1-24 Q2-24 (in millions) Net cash provided by operating activities – continuing operations $ 37.8 $ 75.5 $ 93.2 $ 56.5 $ 243.2 Net gains on lease portfolio sales 29.8 3.1 36.4 2.1 22.7 Cash flow from operations with net gains on lease portfolio sales $ 67.6 $ 78.6 $ 129.6 $ 58.6 $ 265.9 Reconciliation: Cash Flow from Operations with Net Gains on Lease Portfolio Sales Cash flow from operations with net gains on lease portfolio sales is a non-GAAP financial measure. We believe this measure is useful to both management and investors as it provides a relevant measure of liquidity and a useful basis for assessing the breadth of the cash flow generation capabilities across our operating platform, as well as our ability to fund our operations and repay our debt. This measure is defined as net cash provided by operating activities from continuing operations as computed in accordance with GAAP, plus net gains on lease portfolio sales and is reconciled to net cash provided by operating activities from continuing operations, the most directly comparable GAAP financial measure, in the table above. Non-GAAP measures should not be considered in isolation or as a substitute for our reported results prepared in accordance with GAAP and, as calculated, may not be comparable to other similarly titled measures for other companies.
33Investor Presentation (1) Represents the change in estimated fair value of additional contingent consideration associated with an acquisition. (2) Represents insurance recoveries in excess of net book value for assets damaged by a tornado at the Company’s rail maintenance facility in Cartersville, Georgia in the first quarter of 2021. (3) Represents interest income accretion related to a seller-financing agreement associated with the sale of certain non-operating assets. (4) Return on Equity is calculated as income from continuing operations divided by average total stockholders' equity. (5) Adjusted Return on Equity is calculated as adjusted net income divided by average Trinity stockholders' equity, each as defined below and reconciled above. Adjusted Return on Equity (“Adjusted ROE”) is a non-GAAP measure that is derived from amounts included in our GAAP financial statements. We define Adjusted ROE as a ratio for which (i) the numerator is calculated as income or loss from continuing operations, adjusted to exclude the effects of net income or loss attributable to noncontrolling interest, and certain other adjustments, described in the footnotes to the table above, which include certain selling, engineering, and administrative expenses; gains on dispositions of other property; and interest expense, net; and (ii) the denominator is calculated as average Trinity stockholders’ equity (which excludes noncontrolling interest). In the table above, the numerator and denominator of our Adjusted ROE calculation are reconciled to income from continuing operations and total stockholders’ equity, respectively, which are the GAAP financial measures used in the computation of ROE. Management believes that Adjusted ROE is a useful measure to both management and investors as it provides an indication of the economic return on the Company’s investments over time. Non-GAAP measures should not be considered in isolation or as a substitute for our reported results prepared in accordance with GAAP and, as calculated, may not be comparable to other similarly titled measures for other companies. LTM June 30, 2024 June 30, 2023 ($ in millions) Numerator: Income from continuing operations $ 189.5 Net income attributable to noncontrolling interest (12.8) Net income from continuing operations attributable to Trinity Industries, Inc. 176.7 Adjustments (net of income taxes): Selling, engineering, and administrative expenses (1) 1.5 Gains on dispositions of property – other (2) (3.9) Interest expense, net (3) (1.2) Adjusted Net Income $ 173.1 Denominator: Total stockholders' equity $ 1,304.0 $ 1,249.0 Noncontrolling interest (238.5) (254.4) Trinity stockholders' equity $ 1,065.5 $ 994.6 Average total stockholders' equity $ 1,276.5 Return on Equity (4) 14.8 % Average Trinity stockholders' equity $ 1,030.1 Adjusted Return on Equity (5) 16.8 % Reconciliation: Adjusted Return on Equity
34Investor Presentation “EBITDA” is defined as income from continuing operations plus interest expense, income taxes, and depreciation and amortization expense. Adjusted EBITDA is defined as EBITDA plus certain selling, engineering, and administrative expenses; gains on dispositions of other property; and interest income. EBITDA and Adjusted EBITDA are non-GAAP financial measures; however, the amounts included in these calculations are derived from amounts included in our GAAP financial statements. EBITDA and Adjusted EBITDA are reconciled to net income, the most directly comparable GAAP financial measure, in the table above. 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 reported results prepared in accordance with GAAP and, as calculated, may not be comparable to other similarly titled measures for other companies. LTM June 30, 2024 ($ in millions) Net income $ 175.5 Less: Loss from discontinued operations, net of income taxe (14.0) Income from continuing operations 189.5 Interest expense 290.5 Provision (benefit) for income taxes 41.2 Depreciation and amortization expense 293.6 EBITDA 814.8 Selling, engineering, and administrative expenses 2.0 Gains on dispositions of property – other (5.1) Interest income (1.6) Adjusted EBITDA $ 810.1 Reconciliation: EBITDA and Adjusted EBITDA
35Investor Presentation Slide 2 – Forward Looking Statements (1) LTM is calculated as the year ended December 31, 2023, less the six months ended June 30, 2023, plus the six months ended June 30, 2024, representing the financial information from July 1, 2023 to June 30, 2024. Slide 8 – Segment Performance: Railcar Leasing & Services Group (1) OP margin for the Railcar Leasing and Services Group includes gains from insurance recoveries of $3.7M in Q3-23 and $1.4M in Q4-23. (2) Future Lease Rate Differential (FLRD) calculates the implied change in lease rates for railcar leases expiring over the next four quarters. The FLRD assumes that these expiring leases will be renewed at the most recent quarterly transacted lease rates for each railcar type. We believe the FLRD is useful to both management and investors as it provides insight into the near-term trend in lease rates. The FLRD is calculated as follows: (New Lease Rates – Expiring Lease Rates) x Expiring Railcar Leases (Expiring Lease Rates x Expiring Railcar Leases) Slide 10 – Total Company Results Adjusted EPS includes the following adjustments reported by the Company (each per common diluted share): • Reported Q2-23 GAAP EPS was $0.23; Adjusted EPS excludes $0.02 related to the change in estimated fair value of additional contingent consideration associated with an acquisition and $0.02 related to gains associated with restructuring activities. • Reported Q3-23 GAAP EPS was $0.29; Adjusted EPS excludes $0.03 related to the insurance recoveries in excess of net book value for assets damaged by a tornado at the Company’s rail maintenance facility in Cartersville, Georgia in the first quarter of 2021. • Reported Q4-23 GAAP EPS was $0.81; Adjusted EPS excludes $0.02 related to the change in estimated fair value of additional contingent consideration associated with an acquisition and $0.01 related to the insurance recoveries in excess of net book value for assets damaged by a tornado at the Company’s rail maintenance facility in Cartersville, Georgia in the first quarter of 2021. • Reported Q1-24 GAAP EPS and Adjusted EPS were both $0.33. • Reported Q2-24 GAAP EPS was $0.67; Adjusted EPS excludes $0.01 related to interest income accretion related to a seller-financing agreement associated with the sale of certain non-operating assets. Slide 11 – Balance Sheet Positioning (1) Balances and blended average interest rate (including the effect of interest rate hedges, as applicable) as of June 30, 2024 Slide 14 – Trinity Industries, Inc. Overview (1) Current dividend yield represents the Company’s most recent quarterly dividend, annualized, and the stock price (NYSE: TRN) as of June 30, 2024. (2) Intersegment revenues are eliminated. Slide 19 – Capitalizing on Structural Change in the Rail Market Umler® North American fleet ownership data as of January 1, 2024 Slide 21 – Integral Part of North American Supply Chain (1) Umler® source data, January 1, 2024 report (2) FTR Associates 12/31/2023 (3) Association of American Railroads (“AAR”), accessed on March 1, 2022 with data as of February 20, 2022 (4) Association of American Railroads (“AAR”) 12/31/2023 Slide 24 – Railcars are Sustainable Long-Term Investments https://www.aar.org/wp-content/uploads/2023/06/AAR-Climate-Change-Fact-Sheet.pdf Presentation Footnotes
36Investor Presentation Leigh Anne Mann, Vice President of Investor Relations 214-631-4420 TrinityInvestorRelations@trin.net Investor Website: www.trin.net/investor-relations Contact Information
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