0000099780-20-000048.txt : 20200430 0000099780-20-000048.hdr.sgml : 20200430 20200430161819 ACCESSION NUMBER: 0000099780-20-000048 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 29 CONFORMED PERIOD OF REPORT: 20200429 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Regulation FD Disclosure ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20200430 DATE AS OF CHANGE: 20200430 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRINITY INDUSTRIES INC CENTRAL INDEX KEY: 0000099780 STANDARD INDUSTRIAL CLASSIFICATION: RAILROAD EQUIPMENT [3743] IRS NUMBER: 750225040 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-06903 FILM NUMBER: 20835900 BUSINESS ADDRESS: STREET 1: 2525 STEMMONS FREEWAY CITY: DALLAS STATE: TX ZIP: 75207-2401 BUSINESS PHONE: 214-631-4420 MAIL ADDRESS: STREET 1: 2525 N STEMMONS FREEWAY CITY: DALLAS STATE: TX ZIP: 75207 FORMER COMPANY: FORMER CONFORMED NAME: TRINITY STEEL CO INC DATE OF NAME CHANGE: 19720407 8-K 1 q12020earningsrelease.htm 8-K Document
false0000099780TRINITY INDUSTRIES INC 0000099780 2020-04-29 2020-04-29



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported):
 
April 29, 2020
trnlogoverticalhrblacaa14.jpg
_______________________________________
(Exact name of registrant as specified in its charter)
 
 
 
 
 
Delaware
 
1-6903
 
75-0225040
(State or other jurisdiction
of incorporation)
 
(Commission File No.)
 
(I.R.S. Employer
Identification No.)
2525 N. Stemmons Freeway,
Dallas, Texas 75207-2401
(Address of Principal Executive Offices, and Zip Code)
(214) 631-4420
Registrant's Telephone Number, Including Area Code
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
______________________________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock
TRN
New York Stock Exchange
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐






Item 2.02 Results of Operations and Financial Condition.
The Registrant hereby furnishes the information set forth in its News Release, dated April 29, 2020, announcing operating results for the three month period ended March 31, 2020, a copy of which is furnished as Exhibit 99.1 and incorporated herein by reference. On April 30, 2020, the Registrant held a conference call and webcast with respect to its financial results for the three month period ended March 31, 2020. The conference call scripts of Jessica Greiner, Vice President of Investor Relations and Communications; E. Jean Savage, Chief Executive Officer and President; Melendy E. Lovett, Senior Vice President and Chief Administrative Officer; and Eric R. Marchetto, Senior Vice President and Chief Financial Officer; are furnished as exhibits 99.2, 99.3, 99.4, and 99.5, respectively, and incorporated herein by reference. Additionally, the Registrant posted Supplemental Materials to its website to accompany the conference call; a copy of these materials is furnished as Exhibit 99.6 and incorporated herein by reference.
The conference call and News Release included references to Adjusted Operating Results and Adjusted Earnings Per Share, Free Cash Flow, and 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. The Registrant has not provided 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 railcar sales from the lease fleet, capital expenditures, and returns of capital to shareholders; and the amount and timing of certain other items outside the normal course of our core business operations, such as restructuring activities, pension plan termination charges, and the potential financial and operational impacts of the COVID-19 pandemic.
This information is not "filed" pursuant to the Securities Exchange Act of 1934 and is 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."
Forward-Looking Statements
Some statements in this release, which are not historical facts, are “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements about Trinity's estimates, expectations, beliefs, intentions or strategies for the future, and the assumptions underlying these forward-looking statements, including, but not limited to, future financial and operating performance, future opportunities and any other statements regarding events or developments that Trinity believes or anticipates will or may occur in the future, including the potential financial and operational impacts of the COVID-19 pandemic. Trinity uses the words “anticipates,” “assumes,” “believes,” “estimates,” “expects,” “intends,” “forecasts,” “may,” “will,” “should,” “guidance,” “projected,” “outlook,” and similar expressions to identify these forward-looking statements. Forward-looking statements speak only as of the date of this release, and Trinity expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in Trinity’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based, except as required by federal securities laws. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from historical experience or 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.





Item 9.01 Financial Statements and Exhibits.

(a) - (c) Not applicable.

(d) Exhibits:
NO.
 
DESCRIPTION
99.1

 
99.2

 
99.3

 
99.4

 
99.5

 
99.6

 
101.INS

 
Inline XBRL Instance Document — the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH

 
Inline XBRL Taxonomy Extension Schema Document (filed electronically herewith).
101.CAL

 
Inline XBRL Taxonomy Extension Calculation Linkbase Document (filed electronically herewith).
101.LAB

 
Inline XBRL Taxonomy Extension Label Linkbase Document (filed electronically herewith).
101.PRE

 
Inline XBRL Taxonomy Extension Presentation Linkbase Document (filed electronically herewith).
101.DEF

 
Inline XBRL Taxonomy Extension Definition Linkbase Document (filed electronically herewith).
104

 
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).






SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
Trinity Industries, Inc.
 
 
 
April 30, 2020
By:
/s/ Eric R. Marchetto

 
 
Name: Eric R. Marchetto
 
 
Title: Senior Vice President and Chief Financial Officer



EX-99.1 2 exh991pressrelease3312.htm EXHIBIT 99.1 Exhibit


Exhibit 99.1
NEWS RELEASE
logoa19.jpg
FOR IMMEDIATE RELEASE

Trinity Industries, Inc. Announces First Quarter 2020 Results

Reports quarterly GAAP and Adjusted earnings from continuing operations of $1.33 and $0.11 per diluted share, respectively
Generates operating and free cash flow before leasing investment of $174 million and $206 million, respectively
Returns $58 million of capital to stockholders
Total committed liquidity of $760 million at the end of first quarter


DALLAS, Texas - April 29, 2020 - Trinity Industries, Inc. (NYSE:TRN) today announced earnings results for the first quarter ended March 31, 2020.
“Coming into 2020, Trinity was rapidly and effectively executing on a number of optimization efforts to align with the Company’s go-forward business strategy as well as responding to the decline in railcar demand from the slowing industrial economy in the preceding year,” said Jean Savage, Trinity Industries CEO and President. “Our first quarter results reflect solid progress on a number of actions taken to improve the performance of the business. While we have not lost sight of our longer-term goals, the disruption caused by the coronavirus pandemic is unprecedented, and our first priority is the health and safety of our employees and the residents of the communities in which we live and work. The United States government cited the rail and highway industries as critical infrastructure to our country’s response efforts to this pandemic. I applaud our dedicated employees for their service and commitment to business continuity and keeping critical supply chains operational for essential goods and services to move across North America.”
Ms. Savage continued, “We expect COVID-19 to have a negative impact on demand for our products and services, clouding our forecasting abilities and limiting visibility into our financial performance for 2020. Trinity’s leadership team has stress tested our business model in several scenarios, and we continue to expect positive cash flow generation from our platform of businesses. Based on our current knowledge and analysis of market conditions, we believe the resiliency of Trinity’s rail platform, solid cash flow generation, and strong liquidity and balance sheet position the Company to withstand the volatile disruption from the global pandemic and take advantage of potential opportunities that can lead to long-term value creation.”
Financial and Operational Highlights — First Quarter 2020
Quarterly total company revenues of $615.2 million
Quarterly earnings from continuing operations per common diluted share ("EPS") of $1.33, an increase of $1.09 year over year
Quarterly adjusted EPS was $0.11 and excludes $0.04 per share related to restructuring activities, $0.03 per share related to the early redemption of high coupon debt, and $1.29 per share related to the effects of the Coronavirus Aid, Relief, and Economic Security Act of 2020 (the "CARES Act")
Cash flow from operations and free cash flow before leasing investment of $174 million and $206 million, respectively
Quarterly revenues from leasing and management services of $192.0 million with a 43.0% operating profit margin
Growth of the wholly-owned and partially-owned lease fleet to 103,815 units, with lease fleet utilization of 95.4% at quarter-end
Rail Products Group quarterly revenues of $509.4 million and a 4.9% operating profit margin
Rail Products Group quarterly railcar orders and deliveries of 1,970 and 3,705, respectively, resulting in total railcar backlog of $1.6 billion at quarter-end
Repurchases of approximately 1.9 million shares at a cost of $35.4 million
Total committed liquidity of $760 million
Potential additional liquidity of $200 million available under corporate revolver, subject to certain conditions


1


Liquidity Update

As of March 31, 2020, we had total committed liquidity of $759.7 million, which includes $213.2 million of unrestricted cash and cash equivalents, $284.5 million available under our revolving credit facility, and $262.0 million unused and available under the TILC warehouse facility. Our revolving credit facility also contains a $200.0 million expansion feature that can be accessed subject to certain conditions. Additionally, as a result of certain provisions of the CARES Act, Trinity anticipates receiving tax refunds in 2020 totaling approximately $303 million, further bolstering the Company’s strong liquidity position.
2020 Business Update

The COVID-19 pandemic has had an unprecedented impact on global and North American social and economic conditions, and the situation surrounding the virus continues to be volatile and widespread. Trinity’s manufacturing businesses operate within critical infrastructure sectors as currently established by the United States Department of Homeland Security and the Mexico Federal Ministry of Health and Federal Ministry of Communications and Transportation. Our rail manufacturing and maintenance businesses in North America and highway products operations in the United States continue to operate subject to significantly enhanced voluntary and government mandated safety protocols designed to protect the health of our operations workforce. We have taken and will continue to implement measures to protect the safety of our employees and closely monitor the impact of COVID-19 on all aspects of our businesses.
Because Trinity was able to respond to the pandemic without significant interruptions to the Company's daily operations, the pandemic did not materially impact our financial results for the first quarter of 2020. To date, our Railcar Leasing and Management Services Group ("Leasing Group") has not experienced any significant increase in lease payment delinquencies, and has granted rent payment extensions to a relatively small number of railcar lessees upon a credit review. We expect there to be adjustments to our 2020 production plans as customers may need to defer new railcar equipment investments based on specific business needs.
In March 2020, Trinity performed a comprehensive review of potential operational and financial impacts that could stem from the COVID-19 pandemic, and has taken appropriate measures to preserve cash and further bolster liquidity. We also reviewed our goodwill and long-lived assets for potential impairment, and concluded that no such impairment charges were necessary at the time. In addition to cost savings initiatives already underway, the Company eliminated many non-essential expenditures where possible and rightsized our workforce in response to current operating conditions. Trinity believes the Company is in a strong liquidity position with sufficient resources to fund the operating requirements of the business and other capital allocation and investment activities planned for 2020.
The Company expects that the economic impacts of the COVID-19 pandemic will negatively impact our financial results in the near term. Given the uncertainty in the market about the ultimate impact of COVID-19 on the North American economy, the Company cannot reasonably estimate the likelihood of the financial impact on performance. Trinity is closely monitoring business conditions and will make appropriate adjustments to our operations and related financial scenarios as necessary.
Consolidated Results
Trinity Industries, Inc. reported net income from continuing operations attributable to Trinity stockholders of $161.9 million, or $1.33 per common diluted share, for the first quarter ended March 31, 2020. Net income from continuing operations attributable to Trinity stockholders for the same quarter of 2019 was $31.7 million, or $0.24 per common diluted share. On an adjusted basis, earnings per common diluted share for the first quarter of 2020 decreased year over year to $0.11, which excludes the impacts of restructuring activities, early redemption of debt, and the tax impact of the CARES Act. Revenues for the first quarter of 2020 increased slightly to $615.2 million compared with revenues of $604.8 million for the same quarter of 2019 primarily due to a higher volume of railcars sold from our lease fleet.
In connection with our assessment of future needs to support our rail-focused strategy, the Company recognized net pre-tax restructuring charges of $5.5 million, or approximately $0.04 per common diluted share, in the first quarter of 2020. The charge was primarily attributable to write-downs related to our corporate headquarters and employee transition costs, partially offset by a gain on the disposition of a non-operating facility.
As a result of the reinstatement of the tax-loss carryback provisions under the CARES Act, the Company recognized a tax benefit of $154.7 million, or $1.29 per common diluted share, during the first quarter. The CARES Act includes loss carryback provisions that will allow the Company to utilize tax losses generated in recent years (primarily due to accelerated tax depreciation associated with our investment in the lease fleet) to recover taxes paid for the 2013 - 2015 tax years, which were years of elevated Company performance. The Company's effective tax rates, excluding the impact of the CARES Act, were 47.7% and 22.2% for the three months ended March 31, 2020 and 2019, respectively.

2


Quarterly Business Group Results
Railcar Leasing and Management Services Group
In the first quarter of 2020, the Leasing Group increased its revenues and operating profit to $236.3 million and $92.9 million, respectively, compared with $200.4 million and $85.8 million, respectively, in the same quarter of 2019. The increase in the Leasing Group's revenues was primarily due to a higher volume of railcars sold from the lease fleet, growth in the lease fleet, and higher average lease rates, partially offset by lower utilization when compared to the first quarter of 2019. The company-owned lease fleet, which includes wholly-owned, partially-owned, and railcars under sale-leaseback arrangements, grew to 103,815 units as of March 31, 2020, an increase of approximately 2.8% in comparison to March 31, 2019. The total owned and managed lease fleet now stands at 129,655 railcars at the end of the first quarter.
The increase in operating profit for the first quarter was primarily due to growth in the lease fleet, lower rent expense, and higher profits from railcar sales. Additionally, operating profit for the first quarter of 2020 benefited from lower depreciation expense associated with the previously disclosed revisions to the estimated useful lives and salvage values of certain railcar types in our lease fleet, which became effective January 1, 2020. The decrease in depreciation expense was partially offset by higher depreciation associated with growth in the lease fleet.
Total sales of leased railcars were $112.8 million in the first quarter of 2020 compared with $42.7 million in the first quarter of 2019. These totals include sales of railcars owned for more than one year that are not reported as revenues. Supplemental information for the Leasing Group is provided in the accompanying tables.
Rail Products Group
The Rail Products Group reported revenues of $509.4 million during the quarter, a decrease when compared with revenues of $627.9 million in the first quarter of 2019. Operating profit and operating profit margin for the Rail Products Group decreased to $25.1 million and 4.9%, respectively, in the first quarter of 2020 compared with $47.1 million and 7.5%, respectively, in the first quarter of 2019. The decrease in revenues and operating profit primarily resulted from lower railcar deliveries and operational inefficiencies related to reduced production volumes compared to the prior year period.
In connection with the implementation of our rail-focused strategy, in the first quarter of 2020, we realigned certain logistics and central maintenance support activities previously reported in the All Other segment to now be presented within the Rail Products Group. The prior period results have been recast to reflect these changes and present results on a comparable basis.
The Rail Products Group received orders for 1,970 railcars with a value of $227.5 million and delivered 3,705 railcars during the first quarter of 2020, compared with orders for 3,000 railcars and deliveries of 4,505 railcars, respectively, in the same quarter last year. In addition, the Rail Products Group reported first quarter backlog reductions of 540 railcars because of a change in the customers' underlying financial condition. These adjustments remove any remaining exposure in the ending backlog associated with the crude oil and frac sand markets. The railcar backlog in the Rail Products Group decreased during the quarter to $1.6 billion as of March 31, 2020, representing 12,810 railcars, compared with a railcar backlog of $1.8 billion as of December 31, 2019, representing 15,085 railcars.
All Other Group
In the first quarter of 2020, the All Other Group, which now primarily includes the results of our highway products business, reported revenues of $63.4 million, a slight increase when compared to revenues of $62.1 million in the first quarter of 2019. The increase in revenues was primarily due to higher demand and resulting shipping volumes in our highway products business. Operating profit for the All Other Group was $9.3 million for the first quarter of 2020, compared with $10.1 million in the first quarter of 2019. The decline in operating profit was primarily related to insurance recoveries recognized in the prior year.
Corporate
Corporate costs for the quarter ended March 31, 2020 were $28.1 million, compared to $23.6 million in the first quarter of 2019. The increase was primarily the result of consulting costs associated with realigning our corporate structure to support our rail-focused strategy. Additionally, corporate costs for the first quarter of 2019 benefited from a favorable litigation-related recovery.

3


Progress on Other 2020 Priorities
Cost Optimization
In the first quarter, in connection with the Company's continued assessment of future needs to support our rail-focused strategy and to optimize the performance of the business, the Company recognized a pre-tax restructuring charge of $5.5 million, primarily from the write-down of our corporate headquarters campus and employee transition costs, partially offset by a gain on the sale of a non-operating facility. Trinity currently anticipates that the headcount reductions completed in the first quarter of 2020 will generate approximately $9 million to $10 million in future cost savings on an annualized basis. These activities, in addition to a number of actions the Company is taking, will achieve the previously provided SE&A and other cost reductions goal of $25 million to $30 million for 2020. As the Company continues to reposition the organization to better support Trinity's rail-focused strategy and drive innovation and platform efficiency, we anticipate identifying further cost savings opportunities.
Early Redemption of Leasing Securitization
In late February 2020, Trinity Rail Leasing V, L.P., a limited partnership (“TRL V”) and a limited purpose, indirect wholly-owned subsidiary of the Company owned through Trinity Industries Leasing Company, issued a redemption notice for its 2006 Secured Railcar Equipment Notes due May 2036, of which $104.7 million was outstanding at the redemption date. We completed the redemption of this securitization in March 2020. In connection with the early redemption, we recognized a loss on extinguishment of debt of $5.0 million, which included a $4.7 million early redemption premium and $0.3 million in unamortized debt issuance costs. The loss on extinguishment of debt is included in interest expense in our Consolidated Statement of Operations. The interest coupon for this securitization was at 5.9%. The net book value of the assets securing TRL V at the time of redemption was $303.3 million.
Capital Allocation - Business Investment
During the first quarter of 2020, Trinity invested $60.7 million in railcars for the growth of the leased railcar portfolio, net of all proceeds from the sales of leased railcars. Additionally, Trinity has invested $14.0 million in manufacturing and other capital expenditures for both maintenance of our ongoing operations and to support construction in progress for expansion primarily within our maintenance services business and specialty lining capacity.
Return of Capital to Stockholders
During the first quarter of 2020, the Company repurchased approximately 1.9 million shares at a cost of $35.4 million. As of March 31, 2020, the Company had a remaining authorization to repurchase up to $89.9 million of its common stock under the current repurchase program, which expires at the end of 2020.
When combining capital returned to stockholders in the form of dividends and share repurchases, Trinity returned $58.1 million to stockholders in the first quarter of 2020.
Conference Call
Trinity will hold a conference call at 12:00 p.m. Eastern on April 30, 2020 to discuss its first quarter results. To listen to the call, please visit the Investor Relations section of the Company's website at www.trin.net and access the Events & Presentations webpage, or the live call can be accessed at 203-518-9797 with the conference ID "Trinity". Please call at least 10 minutes in advance to ensure proper connection. An audio replay may be accessed through the Company’s website or by dialing (402) 220-1111 until 11:59 p.m. Eastern on May 7, 2020.
Additionally, the Company will provide Supplemental Materials to accompany the earnings conference call. The materials will be accessible on Trinity's Investor Relations website under the Events and Presentations portion of the site along with the First Quarter Earnings Call event weblink.

4


Non-GAAP Financial Measures
We have included financial measures compiled in accordance with generally accepted accounting principles ("GAAP") and certain non-GAAP measures in this earnings press release to provide management and investors with additional information regarding our financial results. Non-GAAP measures should not be considered in isolation or as a substitute for our reporting results prepared in accordance with GAAP and, as calculated, may not be comparable to other similarly titled measures for other companies. For each non-GAAP financial measure, a reconciliation to the most comparable GAAP measure has been included in the accompanying tables. Quantitative reconciliations of forward-looking non-GAAP measures to the most directly comparable GAAP measures have not been provided because management cannot, without unreasonable effort, predict the timing and amounts of certain items included in the computations of each of these measures. These factors include, but are not limited to: the product mix of expected railcar deliveries; the timing and amount of significant transactions and investments, such as railcar sales from the lease fleet, capital expenditures, and returns of capital to shareholders; and the amount and timing of certain other items outside the normal course of our core business operations, such as restructuring activities and pension plan termination charges.
About Trinity Industries
Trinity Industries, Inc., headquartered in Dallas, Texas, owns businesses that are leading providers of rail transportation products and services in North America. Our rail-related businesses market their railcar products and services under the trade name TrinityRail®. The TrinityRail platform provides railcar leasing and management services, as well as railcar manufacturing, maintenance and modifications. Trinity also owns businesses engaged in the manufacture of products used on the nation’s roadways and in traffic control. Trinity reports its financial results in three principal business segments: the Railcar Leasing and Management Services Group, the Rail Products Group, and the All Other Group. For more information, visit: www.trin.net.
Some statements in this release, which are not historical facts, are “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements about Trinity's estimates, expectations, beliefs, intentions or strategies for the future, and the assumptions underlying these forward-looking statements, including, but not limited to, future financial and operating performance, future opportunities and any other statements regarding events or developments that Trinity believes or anticipates will or may occur in the future, including the potential financial and operational impacts of the COVID-19 pandemic. Trinity uses the words “anticipates,” “assumes,” “believes,” “estimates,” “expects,” “intends,” “forecasts,” “may,” “will,” “should,” “guidance,” “projected,” “outlook,” and similar expressions to identify these forward-looking statements. Forward-looking statements speak only as of the date of this release, and Trinity expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in Trinity’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based, except as required by federal securities laws. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from historical experience or our present expectations, including but not limited to risks and uncertainties regarding economic, competitive, governmental, and technological factors affecting Trinity’s operations, markets, products, services and prices, and such forward-looking statements are not guarantees of future performance. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see “Risk Factors” and “Forward-Looking Statements” in Trinity’s Annual Report on Form 10-K for the most recent fiscal year, as may be revised and updated by Trinity’s Quarterly Reports on Form 10-Q, and Trinity’s Current Reports on Form 8-K.

Investor & Media Contact:
Jessica Greiner
Vice President, Investor Relations and Communications
Trinity Industries, Inc.
 
(Investors) 214/631-4420
(Media Line) 214/589-8909

- TABLES TO FOLLOW -

5



Trinity Industries, Inc.
Condensed Consolidated Statements of Operations
(in millions, except per share amounts)
(unaudited)
 
Three Months Ended
March 31,
 
2020
 
2019
Revenues
$
615.2

 
$
604.8

Operating costs:
 
 
 
Cost of revenues
482.0

 
463.4

Selling, engineering, and administrative expenses
64.3

 
59.6

Gains on dispositions of property:
 
 
 
Net gains on railcar lease fleet sales owned more than one year at the time of sale
8.7

 
7.9

Other
0.9

 
2.1

Restructuring activities, net
5.5

 

 
542.2


513.0

Operating profit
73.0


91.8

Interest expense, net
58.9

 
51.4

Other, net
(0.8
)
 
0.3

Income from continuing operations before income taxes
14.9

 
40.1

Provision (benefit) for income taxes:
 
 
 
Current
(372.8
)
 
(0.8
)
Deferred
225.2

 
9.7

 
(147.6
)
 
8.9

Income from continuing operations
162.5

 
31.2

Loss from discontinued operations, net of income taxes
(0.2
)
 
(1.1
)
Net income
162.3

 
30.1

Net income (loss) attributable to noncontrolling interest
0.6

 
(0.5
)
Net income attributable to Trinity Industries, Inc.
$
161.7

 
$
30.6

 
 
 
 
Basic earnings per common share:
 
 
 
Income from continuing operations
$
1.36

 
$
0.24

Income (loss) from discontinued operations

 
(0.01
)
Basic net income attributable to Trinity Industries, Inc.
$
1.36

 
$
0.23

Diluted earnings per common share:
 
 
 
Income from continuing operations
$
1.33

 
$
0.24

Income (loss) from discontinued operations

 
(0.01
)
Diluted net income attributable to Trinity Industries, Inc.
$
1.33

 
$
0.23

Weighted average number of shares outstanding:
 
 
 
Basic
118.0

 
130.4

Diluted
119.9

 
132.2

Trinity is required to utilize the two-class method of accounting when calculating earnings per share as a result of unvested restricted shares that have non-forfeitable rights to dividends and are, therefore, considered to be participating securities. The calculation of earnings per share using the two-class method excludes income attributable to these participating securities from the numerator and excludes the dilutive impact of those shares from the denominator; therefore, the two-class method may result in a lower earnings per share than is calculated from the face of the income statement.


6


Trinity Industries, Inc.
Condensed Segment Data
(in millions)
(unaudited)
 
Three Months Ended
March 31,
Revenues:
2020
 
2019
Railcar Leasing and Management Services Group
$
236.3

 
$
200.4

Rail Products Group
509.4

 
627.9

All Other
63.4

 
62.1

Segment Totals before Eliminations
809.1

 
890.4

Eliminations – Lease Subsidiary
(190.4
)
 
(270.1
)
Eliminations – Other
(3.5
)
 
(15.5
)
Consolidated Total
$
615.2

 
$
604.8

 
 
 
 
 
Three Months Ended
March 31,
Operating profit (loss):
2020
 
2019
Railcar Leasing and Management Services Group
$
92.9

 
$
85.8

Rail Products Group
25.1

 
47.1

All Other
9.3

 
10.1

Segment Totals before Eliminations, Corporate Expenses, and Restructuring activities
127.3

 
143.0

Corporate
(28.1
)
 
(23.6
)
Restructuring activities, net
(5.5
)
 

Eliminations – Lease Subsidiary
(19.9
)
 
(27.2
)
Eliminations – Other
(0.8
)
 
(0.4
)
Consolidated Total
$
73.0

 
$
91.8





7


Trinity Industries, Inc.
Selected Financial Information Leasing Group
($ in millions)
(unaudited)
 
Three Months Ended
March 31,
 
2020
 
2019
Revenues:
 
 
 
Leasing and management
$
192.0

 
$
187.1

Sales of railcars owned one year or less at the time of sale (1)
44.3

 
13.3

Total revenues
$
236.3

 
$
200.4

Operating profit(2):
 
 
 
Leasing and management
$
82.5

 
$
77.1

Railcar sales(1):
 
 
 
Railcars owned one year or less at the time of sale
1.7

 
0.8

Railcars owned more than one year at the time of sale
8.7

 
7.9

Total operating profit
$
92.9

 
$
85.8

Total operating profit margin
39.3
%

42.8
%
 
 
 
 
Leasing and management operating profit margin
43.0
%

41.2
%
 
 
 
 
Selected expense information:
 
 
 
Depreciation (3)
$
53.6

 
$
54.4

Maintenance and compliance
$
25.9

 
$
27.8

Rent
$
3.0

 
$
5.5

Selling, engineering, and administrative expenses
$
14.3

 
$
12.8

Interest
$
55.1

 
$
46.0

 
Three Months Ended March 31,
 
2020
 
2019
Sales of leased railcars:
 
 
 
Railcars owned one year or less at the time of sale
$
44.3

 
$
13.3

Railcars owned more than one year at the time of sale
68.5

 
29.4

 
$
112.8

 
$
42.7

 
 
 
 
Operating profit on sales of leased railcars:
 
 
 
Railcars owned one year or less at the time of sale
$
1.7

 
$
0.8

Railcars owned more than one year at the time of sale
8.7

 
7.9

 
$
10.4


$
8.7

 
 
 
 
Operating profit margin on sales of leased railcars:
 
 
 
Railcars owned one year or less at the time of sale
3.8
%

6.0
%
Railcars owned more than one year at the time of sale
12.7
%

26.9
%
Weighted average operating profit margin on sales of leased railcars
9.2
%

20.4
%
(1) The Company recognizes sales of railcars from the lease fleet which have been owned by the lease fleet for one year or less as revenue. Sales of railcars from the lease fleet which have been owned by the lease fleet for more than one year are recognized as a net gain or loss from the disposal of a long-term asset.
(2) Operating profit includes: depreciation; maintenance and compliance; rent; and selling, engineering, and administrative expenses. Amortization of deferred profit on railcars sold from the Rail Products Group to the Leasing Group is included in the operating profit of the Leasing Group, resulting in the recognition of depreciation expense based on the Company's original manufacturing cost of the railcars. Interest expense is not a component of operating profit and includes the effect of hedges.
(3) Effective January 1, 2020, we revised the estimated useful lives and salvage values of certain railcar types in our lease fleet. This change in estimate resulted in a decrease in depreciation expense in the three months ended March 31, 2020 of approximately $7.7 million. This decrease was partially offset by higher depreciation associated with growth in the lease fleet.

8


 
March 31, 2020
 
March 31, 2019
Number of railcars:
 
 
 
Wholly-owned
79,245

 
76,365

Partially-owned
24,570

 
24,640

 
103,815

 
101,005

Managed (third-party owned)
25,840

 
21,725

 
129,655

 
122,730

Fleet utilization (Company-owned railcars)
95.4
%
 
98.4
%


9


Trinity Industries, Inc.
Condensed Consolidated Balance Sheets
(in millions)
(unaudited)
 
March 31,
2020
 
December 31, 2019
ASSETS
 
 
 
Cash and cash equivalents
$
213.2

 
$
166.2

Receivables, net of allowance
297.8

 
260.1

Income tax receivable
389.1

 
14.7

Inventories
442.0

 
433.4

Restricted cash
96.3

 
111.4

Property, plant, and equipment, net
7,118.7

 
7,110.6

Goodwill
208.8

 
208.8

Other assets
237.0

 
396.2

Total assets
$
9,002.9

 
$
8,701.4

 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Accounts payable
$
208.5

 
$
203.9

Accrued liabilities
348.5

 
342.1

Debt
4,870.2

 
4,881.9

Deferred income taxes
1,016.1

 
798.3

Other liabilities
93.5

 
96.3

Stockholders' equity:
 
 
 
Trinity Industries, Inc.
2,116.4

 
2,030.1

Noncontrolling interest
349.7

 
348.8

 
2,466.1

 
2,378.9

Total liabilities and stockholders' equity
$
9,002.9

 
$
8,701.4



10


Trinity Industries, Inc.
Additional Balance Sheet Information
(in millions)
(unaudited)


March 31, 2020
 
December 31, 2019
Property, Plant, and Equipment
 
 
 
Manufacturing/Corporate:
 
 
 
Property, plant, and equipment
$
1,045.5

 
$
1,040.4

Accumulated depreciation
(641.2
)
 
(631.6
)
 
404.3

 
408.8

Leasing:
 
 
 
Wholly-owned subsidiaries:
 
 
 
Machinery and other
13.7

 
13.7

Equipment on lease
7,000.0

 
6,944.2

Accumulated depreciation
(1,176.2
)
 
(1,139.0
)
 
5,837.5

 
5,818.9

Partially-owned subsidiaries:
 
 
 
Equipment on lease
2,415.0

 
2,410.0

Accumulated depreciation
(638.4
)
 
(623.3
)
 
1,776.6

 
1,786.7

 
 
 
 
Deferred profit on railcars sold to the Leasing Group
(1,138.5
)
 
(1,135.8
)
Accumulated amortization
238.8

 
232.0

 
(899.7
)
 
(903.8
)
 
$
7,118.7

 
$
7,110.6

 
March 31,
2020
 
December 31, 2019
Debt
 
 
 
Corporate – Recourse:
 
 
 
Revolving credit facility
$
130.0

 
$
125.0

Senior notes, net of unamortized discount of $0.2 and $0.2
399.8

 
399.8

 
529.8

 
524.8

Less: unamortized debt issuance costs
(1.9
)
 
(2.0
)
 
527.9

 
522.8

Leasing – Non-recourse:
 
 
 
Wholly-owned subsidiaries:
 
 
 
Secured railcar equipment notes, net of unamortized discount of $1.7 and $2.0
1,994.2

 
2,124.1

TILC warehouse facility
488.0

 
353.4

Promissory notes
618.8

 
627.1

 
3,101.0

 
3,104.6

Less: unamortized debt issuance costs
(22.2
)
 
(23.9
)
 
3,078.8

 
3,080.7

Partially-owned subsidiaries:
 
 
 
Secured railcar equipment notes
1,273.9

 
1,289.3

Less: unamortized debt issuance costs
(10.4
)
 
(10.9
)
 
1,263.5

 
1,278.4

Total debt
$
4,870.2

 
$
4,881.9



11


Trinity Industries, Inc.
Additional Balance Sheet Information
($ in millions)
(unaudited)
 
March 31,
2020
 
December 31, 2019
Leasing Group Debt
 
 
 
Wholly-owned subsidiaries
$
3,078.8

 
$
3,080.7

Partially-owned subsidiaries
1,263.5

 
1,278.4

 
$
4,342.3

 
$
4,359.1

 
 
 
 
Corporate – Revolving credit facility
$
130.0

 
$
125.0

 
 
 
 
Equipment on Lease(1)
 
 
 
Wholly-owned subsidiaries
$
5,837.5

 
$
5,818.9

Partially-owned subsidiaries
1,776.6

 
1,786.7

 
$
7,614.1

 
$
7,605.6

 
 
 
 
Total Leasing Debt as a % of Equipment on Lease ("Loan-to-value ratio")
 
 
 
Wholly-owned subsidiaries
52.7
%
 
52.9
%
Wholly-owned subsidiaries, including corporate revolving credit facility(2)
55.0
%

55.1
%
Partially-owned subsidiaries
71.1
%
 
71.6
%
Combined
57.0
%
 
57.3
%
(1) Excludes net deferred profit on railcars sold to the Leasing Group.
(2) The corporate revolving credit facility was primarily used to finance growth of the lease fleet. Accordingly, the outstanding balance has been included in this computation of the loan-to-value ratio.


12


Trinity Industries, Inc.
Condensed Consolidated Statements of Cash Flows
(in millions)
(unaudited)
 
Three Months Ended
March 31,
 
2020
 
2019
Operating activities:
 
 
 
Net income
$
162.3

 
$
30.1

Loss from discontinued operations, net of income taxes
0.2

 
1.1

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
 
 
 
Depreciation and amortization
66.9

 
67.5

Provision for deferred income taxes
225.2

 
9.7

Net gains on railcar lease fleet sales owned more than one year at the time of sale
(8.7
)
 
(7.9
)
Restructuring activities
5.2

 

Other
13.3

 
7.0

Changes in operating assets and liabilities:
 
 
 
(Increase) decrease in receivables, inventories, and other assets
113.0

 
(182.8
)
(Increase) decrease in income tax receivable
(374.4
)
 
24.3

Increase (decrease) in accounts payable, accrued liabilities, and other liabilities
(29.2
)
 
(73.8
)
Net cash provided by (used in) operating activities – continuing operations
173.8

 
(124.8
)
Net cash used in operating activities – discontinued operations
(0.2
)
 
(1.1
)
Net cash provided by (used in) operating activities
173.6

 
(125.9
)
Investing activities:
 
 
 
Proceeds from railcar lease fleet sales owned more than one year at the time of sale
68.5

 
29.4

Proceeds from disposition of property and other assets
9.8

 
7.3

Capital expenditures – leasing, net of sold lease fleet railcars owned one year or less with a net cost of $42.5 and $12.5
(129.2
)
 
(465.0
)
Capital expenditures – manufacturing and other
(14.0
)
 
(11.5
)
Other
0.3

 
1.3

Net cash used in investing activities
(64.6
)
 
(438.5
)
Financing activities:
 
 
 
Net (repayments of) proceeds from debt
(19.0
)
 
434.9

Shares repurchased
(35.4
)
 
(15.0
)
Dividends paid to common shareholders
(22.7
)
 
(17.3
)
Other

 
(0.9
)
Net cash provided by (used in) financing activities
(77.1
)
 
401.7

Net increase (decrease) in cash, cash equivalents, and restricted cash
31.9

 
(162.7
)
Cash, cash equivalents, and restricted cash at beginning of period
277.6

 
350.8

Cash, cash equivalents, and restricted cash at end of period
$
309.5

 
$
188.1


13


Trinity Industries, Inc.
Reconciliations of Non-GAAP Measures
(unaudited)

Adjusted Operating Results
We have supplemented the presentation of our reported GAAP operating profit, interest expense, net, provision (benefit) for income taxes, income from continuing operations and diluted income from continuing operations per common share with non-GAAP measures that adjust the GAAP measures to exclude the impact of restructuring activities, asset write-downs, early redemption of debt, the income tax effects of the CARES Act and certain other non-recurring transactions or events (as applicable).These non-GAAP measures are derived from amounts included in our GAAP financial statements and are reconciled to the most directly comparable GAAP financial measures in the tables below. Management believes that these measures are useful to both management and investors for analyzing the performance of our business without the impact of certain non-recurring items. Non-GAAP measures should not be considered in isolation or as a substitute for our reporting results prepared in accordance with GAAP and, as calculated, may not be comparable to other similarly titled measures for other companies.
 
Three Months Ended March 31, 2020
 
GAAP
 
Restructuring activities (1)
 
Early redemption of debt (1)
 
Income Tax
 
Adjusted
 
(in millions, except per share amounts)
Operating profit
$
73.0

 
$
5.5

 
$

 
$

 
$
78.5

 
 
 
 
 
 
 
 
 
 
Interest expense, net
$
58.9

 
$

 
$
(5.0
)
 
$

 
$
53.9

 
 
 
 
 
 
 
 
 
 
Provision (benefit) for income taxes
$
(147.6
)
 
$
1.3

 
$
(1.2
)
 
$
154.7

 
$
7.2

 
 
 
 
 
 
 
 
 
 
Income (loss) from continuing operations
$
162.5

 
$
4.2

 
$
3.8

 
$
(154.7
)
 
$
15.8

 
 
 
 
 
 
 
 
 
 
Diluted income (loss) from continuing operations per common share
$
1.33

 
$
0.04

 
$
0.03

 
$
(1.29
)
 
$
0.11

(1) The effective tax rate for restructuring activities and the early redemption of debt is before consideration of the CARES Act.

14


Free Cash Flow
Free Cash Flow before Capital expenditures – leasing ("Free Cash Flow") is a non-GAAP financial measure and is defined as net cash provided by operating activities from continuing operations as computed in accordance with GAAP, plus cash proceeds from sales of leased railcars owned more than one year at the time of sale, less cash payments for manufacturing capital expenditures and dividends. We believe Free Cash Flow is useful to both management and investors as it provides a relevant measure of liquidity and a useful basis for assessing our ability to fund our operations and repay our debt. Free Cash Flow is reconciled to net cash provided by operating activities from continuing operations, the most directly comparable GAAP financial measure, in the following table. Non-GAAP measures should not be considered in isolation or as a substitute for our reporting results prepared in accordance with GAAP and, as calculated, may not be comparable to other similarly titled measures for other companies.
 
Three Months Ended
March 31,
 
2020
 
2019
 
(in millions)
Net cash provided by (used in) operating activities – continuing operations
$
173.8

 
$
(124.8
)
Add:
 
 
 
Proceeds from railcar lease fleet sales owned more than one year at the time of sale
68.5

 
29.4

Adjusted Net Cash Provided by (Used In) Operating Activities
$
242.3

 
$
(95.4
)
Less:
 
 
 
Capital expenditures – manufacturing and other
(14.0
)
 
(11.5
)
Dividends paid to common shareholders
(22.7
)
 
(17.3
)
Free Cash Flow (before Capital expenditures – leasing)
$
205.6

 
$
(124.2
)

EBITDA
“EBITDA” is defined as income from continuing operations plus interest expense, income taxes, and depreciation and amortization expense. EBITDA is a non-GAAP financial measure; however, the amounts included in the EBITDA calculation are derived from amounts included in our GAAP financial statements. EBITDA is 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 should not be considered as an alternative to net income as an indicator of our operating performance, or as an alternative to operating cash flows as a measure of liquidity. Non-GAAP measures should not be considered in isolation or as a substitute for our reporting results prepared in accordance with GAAP and, as calculated, may not be comparable to other similarly titled measures for other companies.
 
Three Months Ended
March 31,
 
2020
 
2019
 
(in millions)
Net income
$
162.3

 
$
30.1

Less: loss from discontinued operations, net of income taxes
(0.2
)
 
(1.1
)
Income from continuing operations
$
162.5

 
$
31.2

Add:
 
 
 
Interest expense
61.3

 
52.7

Provision (benefit) for income taxes
(147.6
)
 
8.9

Depreciation and amortization expense
66.9

 
67.5

EBITDA
$
143.1

 
$
160.3



15
EX-99.2 3 q12020exh992greiner.htm EXHIBIT 99.2 Exhibit


Exhibit 99.2

Trinity Industries, Inc.
Earnings Release Conference Call – Q1 2020
Comments of Jessica Greiner
Vice President, Investor Relations and Communications
April 30, 2020
Thank you, David. Good morning everyone. I’m Jessica Greiner, Vice President of Investor Relations and Communications for Trinity. We appreciate you joining us for the Company’s first quarter 2020 financial results conference call.
We will begin our prepared remarks with comments from Trinity’s Chief Executive Officer and President, Jean Savage, followed by Melendy Lovett, our Chief Administrative Officer. Eric Marchetto, the Company’s new Chief Financial Officer will provide the financial highlights. We will hold a Q&A session following the prepared remarks from the leadership team.
During the call today, we will refer to a few slides highlighting key points of discussion. The supplemental materials are accessible on our IR website at www.trin.net. These slides can be found under the Events and Presentations portion of the site along with the First Quarter Earnings Call event links.
It is now my pleasure to turn the call over to Jean.

Jean
Melendy
Eric
Q&A Session

Thank you, David. That concludes today's conference call. A replay of today’s call will be available after one o'clock eastern standard time through midnight on May 7, 2020. The access number is (402) 220-1111. A replay of the webcast will also be available under the Events and Presentations page on our Investor Relations website located at www.trin.net. We look forward to visiting with you again on our next conference call. Thank you for joining us this morning.


EX-99.3 4 q12020exh993savage.htm EXHIBIT 99.3 Exhibit


Exhibit 99.3

Trinity Industries, Inc.
Earnings Release Conference Call – Q1 2020
Comments of E. Jean Savage
Chief Executive Officer and President
April 30, 2020
Thank you, Jessica – and good morning, everyone.
The economic events and governmental actions surrounding the coronavirus are unprecedented, and I am extremely proud of the response from the men and women at Trinity. TrinityRail is designated as an “essential business” by the North American federal authorities.
The executive leadership team and I, first and foremost, would like to commend our employees for their service and commitment to health and safety, to business continuity, and to keeping critical supply chains operational. We thank you for your work, your spirit, and your dedication to excellence, which all reflect the strong culture and heart of Trinity. We’d also like to thank our customers, suppliers, and all of the businesses working to ensure our communities stay safe and have access to all of our daily needs. Of course, we want to express our deepest appreciation for all of those on the front lines in fighting COVID-19: we are most grateful for your commitment and service.
We are proud of the function our employees and our railcars perform in sustaining our communities. Not only does the rail industry play an important role in preserving our planet as the most sustainable mode of land-based transportation, rail transportation is the livelihood of the North American economy. Railcars are a critical part of the supply chain of nearly every market. We all depend daily on food, treated water, energy-generating commodities, and medical-grade products – all goods delivered through the rail supply chain.
When the going gets tough, the tough get going, I believe Trinity’s commitment to excellence and the rail platform will once again prove our ability to withstand an economic crisis.
In my prepared remarks today, I want to cover 3 main points:
1)
The impact of COVID-19 on our business, and our actions to address it,
2)
The financial resiliency of Trinity’s railcar platform, our cost structure and liquidity position, and the strength of Trinity’s leadership team to manage through this crisis, and
3)
Our scenario assumptions for managing our business performance and capital allocation decisions amid market uncertainty.
In the first two months of the first quarter, Trinity was executing on a number of optimization efforts, which we had previously communicated to the market. The purpose of these efforts was to improve our go-forward cost structure and decrease our cost of capital to accelerate our competitiveness in the marketplace.
Certain of our COVID-19 response actions, which I’ll address next, are highlighted in the Supplemental Materials on slide 3. As the gravity of the implications surrounding COVID-19 began to unfold, Trinity’s leaders took significant steps to protect the health and safety of our employees and to support the communities in which we live and operate.    We instituted policies and procedures that adhere to CDC and WHO guidelines for social distancing, cleaning and sanitizing, restricting visitation at our manufacturing facilities, and establishing remote work arrangements for our corporate and services workforce. We restricted employee travel and have shifted most of our customer interactions to virtual methods.
We have maintained our on-going operations. To date, we have not experienced any production delays in delivering products or services to our customers, and we continue to work closely with our customers to understand their needs.





Procurement teams have also monitored our supply chains for potential disruptions, and I am pleased that they have been able to ensure continuity of operations to date. Our first tier suppliers are predominantly based in North America and have yet to be significantly affected by the restricted flow of goods from other countries. We have established contingency plans should we begin to see major disruptions in our second and third tier supply network.
On our last conference call, we discussed the rightsizing actions we anticipated from the industrial slowdown and decline in railcar demand in 2019. In March, as we began seeing the impacts from COVID-19, we reevaluated the potential for lower railcar volumes and equipment demand in the near term. As a result, we took additional action and further reduced our manufacturing workforce by 30% from year end to align with our production capacity. Based on our current backlog visibility, we believe our manufacturing platform is appropriately sized to serve our customers.
The second point I wanted to be sure we addressed today is our belief in the financial resiliency of Trinity’s business model. During our COVID-19 preparedness actions, we extensively reviewed our financial models and assumptions, stress testing our balance sheet and liquidity against various scenarios as deep or deeper than those experienced during the financial crisis in 2009 and 2010. We will go into more detail on this analysis later in our prepared remarks.
During railcar down cycles, the long-term nature of the contracts in Trinity’s leasing business protect the Company from short term market disruptions and is critical to the relative stability and cash flow generation of the Company. There are also counter-cyclical aspects of our operational cash flow from working capital release, given the highly variable cost structure of our manufacturing business.
Another driver of value creation for our business model is the significant tax efficiencies that come from combining our leasing company and our manufacturing business. As we continue to grow the lease fleet, the accelerated depreciation of railcars offsets taxable income from our other businesses. The net operating losses generated are then generally carried forward to reduce future taxable income. The recently passed CARES Act further enhances the tax synergies of the rail platform. Trinity will utilize the tax losses generated in 2018 and 2019, primarily from accelerated depreciation associated with our lease fleet investment, to recover taxes paid in prior years at higher tax rates. By year end, we expect to receive $300 million in tax refunds resulting from the loss carryback provisions in the legislation.
I could not have imagined that, in my first few months as Trinity’s new CEO, I would be leading this great company through one of the biggest financial and economic crises our markets have seen. Our leadership team has deep experience in managing through rail cycle volatility, and they are prepared for the challenge at hand.
Based on our current knowledge and analysis of market conditions, we believe Trinity’s platform and cash generation capability can withstand the global pandemic and take advantage of value creation opportunities we may find. I expect that through it all, we will emerge with a championed spirit, and prove that our rail platform is “Built to Deliver” – to deliver essential goods to society; to deliver innovative solutions, products, and world-class service to our customers; and also to deliver long-term value creation and returns to shareholders.
I’ll now turn the call over to Melendy and Eric to talk through our operational and financial remarks in more detail before closing with my final point on our go-forward business assumptions.






Thank you, Eric. As you can see from our first quarter performance, Trinity is taking steps to align our cost structure to our current demand environment. We are doing this amid a challenging market environment and in accordance with our longer-term plan to accelerate Trinity’s performance through the cycle.
Given the limited visibility in the market stemming from the coronavirus, we are not providing financial guidance at this time. Like numerous other companies have stated, we cannot predict at this time the impact or duration of COVID-19 and the collapse in energy prices on our business, or the impact to our customers’ and suppliers’ businesses. We are highly focused on scenario analysis, business continuity and contingency planning, and preserving and bolstering our liquidity position. Fortunately, Trinity has long-duration lease contracts that protect against market disruption, and a solid backlog in which we can flex our capacity to rightsize for demand.
We do hope to put forth a broader framework for Trinity’s strategic roadmap on our third quarter call in October. However, for the time being, we thought it would be helpful to give you some context behind the scenario analyses we performed on the financial position and condition of the Company as guideposts. Slide 5 of the Supplemental Materials provides a summary of the inputs to this analysis.These scenarios also provide a framework to guide our capital allocation decisions in the current market environment.
The base case scenario assumes the economy reopens in the near term and railcar loadings begin to improve sometime in or around the third quarter. In this type of environment, we would expect that our lease fleet utilization remains approximately 95%, that our backlog delivers, that we transact a modest amount of leased railcar portfolio sales, and achieve our SE&A optimization target. In our stress case scenario, if COVID-19 continues to restrict the recovery of the market, we have modeled the potential for deferrals of our backlog, utilization to drop below 90%, and the inability to transact railcar sales in the secondary market. In either scenario, we expect the financial synergies of the rail platform to yield positive operating cash flows.
The closer our financial performance resembles our stress case scenario, our capital allocation framework will shift towards preservation. The more our performance reflects our base case scenario, our capital allocation will enable continued and prudent investment in the business.
Trinity’s current plans for manufacturing and corporate capex is fairly committed in 2020 due to construction in progress for new maintenance facilities required to service our growing lease fleet. This spend is estimated to be approximately $100 million for the year. However, historically, manufacturing capex for the Rail business has ranged from $5 to 20 million per year in downturns, proving our ability to pull in this spend significantly if necessary. As a result of railcars in our backlog for delivery to leasing customers, and the potential for lower secondary market sales in our various scenarios, we believe the range of net lease fleet investment could be between $350 million to $500 million in 2020 in either of these scenarios.
While combating the economic ramifications of COVID-19 will be a major feat, Trinity has historically maintained its dividend. Again, in either scenario as shown, our confidence in the cash generation of Trinity’s platform supports our commitment to shareholder returns. Today, the Company will pay out our 224th consecutive quarterly dividend. Management and the Board of Directors are aligned in our expectation that the synergies of the rail platform enable meaningful reinvestment in the business while continuing to support substantial returns of capital to shareholders.
In the time I’ve spent in my first few months as Trinity’s CEO, I could not be more proud of the team we have in place, from our welders on the shop floor, to the dedicated men and women that service our customers and business stakeholders, to the experienced leadership team and support of our Board. We are continuing to align our organization and operations to maximize our performance. Slide 6 in the supplemental material recaps our key financial and operational goals.
The coronavirus has created a challenging hurdle to overcome in pursuit of our longer-term goals. That being said, and regardless of the point in the cycle we find ourselves, the synergies of the rail platform and the cash flow generation are the driving engine behind Trinity’s value creation for shareholders. Our platform is built to deliver, and we believe we are in a position to withstand the current market environment and deliver long-term value to our shareholders.





Operator, we will now take questions from our listeners.


EX-99.4 5 q12020exh994lovett.htm EXHIBIT 99.4 Exhibit


Exhibit 99.4

Trinity Industries, Inc.
Earnings Release Conference Call – Q1 2020
Comments of Melendy E. Lovett
Senior Vice President and Chief Administrative Officer
April 30, 2020
Thank you, Jean and good morning everyone.
Our first quarter results reflect the commitment and execution on a number of actions taken to align the Company’s organization with our go-forward rail strategy and to improve business performance. While we recognize the current environment will make accomplishing our financial priorities more challenging, we have not lost sight of our longer-term goals. Our primary objectives as a leadership team are to protect the health and safety of our employees, and to ensure business continuity and capital preservation. Fortunately, the steps we were taking to optimize the Company’s cost structure were timely and advantageous given actions needed amid the COVID-19 crisis.
During the Company’s fourth quarter earnings call, we announced a target reduction of $25 to $30 million in administrative costs across the organization. In the first quarter, the Company took action on savings totaling $9 to 10 million which included employee reductions, and the consolidation of our logistics and equipment services businesses into the operations of the Rail Products Group. It also included the decision to relocate our corporate campus to a more cost-effective location, and the disposition of a non-operational facility. These actions resulted in a restructuring charge of approximately $5.5 million. Additionally, management has identified savings of $15 to $20 million that we expect to take action on during the next few quarters as we realign our organization and streamline administrative support costs. When combined with the cost saving actions taken throughout 2019, total reductions in SE&A and other administrative costs are nearing $60 million. We are committed to accelerating the performance of the platform through effective and efficient alignment of our organization, and we will provide updates on our cost optimization progress through the year.
Another key priority for the Company has been the optimization of our balance sheet through the leveraging of our lease fleet to lower our cost of capital. As part of this process, we identified the early redemption of our 2006 securitization (“TRL V”) as an optimization opportunity. This securitization had a remaining principal balance of approximately $105 million and a coupon of 5.9%. The net book value of these assets at the time of redemption was approximately $303 million. These railcars are now available to be monetized through recapitalization of the assets or through secondary market transactions. With this redemption, the weighted average coupon rate on our wholly-owned leasing debt was just under 4% at quarter end.
The company also purchased approximately 1.9 million shares for $35.4 million in the weeks following our fourth quarter conference call. As of the end of the first quarter, the Company has approximately $90 million remaining under our current amended authorization.
Trinity’s management has served together and collaborated very closely in setting the strategic priorities for the Company as a rail-focused organization. It’s been my honor to serve as Trinity’s CFO over the last year, and to get to know many of our shareholders and potential investors. I have great confidence that we are aligning our leadership and organization to better serve our customers and our stakeholders, and to accelerate Trinity’s performance to unlock shareholder value once we emerge from the coronavirus pandemic. Eric has been a key leader in this Company and the rail industry throughout his career. This has been a seamless transition for our team and for our business leaders, and he will be a familiar face to our investors as well.
I’ll now turn the call over to Eric to discuss more detail of our financial performance.


EX-99.5 6 q12020exh995marchetto.htm EXHIBIT 99.5 Exhibit


Exhibit 99.5

Trinity Industries, Inc.
Earnings Release Conference Call – Q1 2020
Comments of Eric R. Marchetto
Senior Vice President and Chief Financial Officer
April 30, 2020
Thank you, Melendy, and good morning everyone. I am honored to be assuming the CFO position after 25 years of service to the Company. I look forward to working with our stakeholders in this role as we continue to improve upon both the effectiveness and efficiency of our platform and to drive enhanced performance and value creation opportunities.
With the onset of the COVID-19 outbreak, we have implemented preventative measures without significant interruptions thus far to our daily operations. However, we expect that there will be negative financial impacts to our business, and we will adjust accordingly.
While there were a number of moving pieces in the first quarter within Trinity’s corporate line items and consolidated results, the operational performance of the Railcar Leasing and Products businesses were slightly better than our internal expectations. The Leasing Group’s revenue and profit from operations grew year over year primarily due to growth in the lease fleet and higher average lease rates. The change in our depreciation policy also contributed to the increase in the segment profit margin. During the first quarter, we completed a small portfolio sale to one of our RIV partners, demonstrating the value of railcar assets with leases attached – even in a state of heightened financial market disruptions.
The Rail Products Group delivered just over 3,700 railcars in the first quarter while reducing production capacity within our manufacturing facilities. As I mentioned on our February earnings call, we expected these margin headwinds from the inefficiencies in slowing our production and reducing our manufacturing capacity and headcount.
Commercially, we were impacted by the evolving uncertainty within the industrial market and lower North American railcar loadings. Lease fleet utilization declined to 95.4%, and new railcar orders for the quarter totaled 1,970 railcars.
By our analysis, we believe approximately 80% of our customers operate as essential businesses and infrastructure as defined by governmental authorities, and many of our other customers indirectly support these businesses within the supply chain. Given the prevalence of public data on railcar loadings, which is a primary indicator for our business, the shift in the demand environment for railcar equipment should not come as a surprise. We have seen significant declines in rail volumes, which ultimately leads to underutilized railcar equipment. However, there are a few market sectors that present as a bright spot for rail equipment demand. The best near-term opportunity, we believe, will be in agricultural markets - specific to grains and fertilizers - due to the age of the fleet of railcars and relatively high asset utilization. There is not one “railcar market,” there are several markets of railcars – each one specific to their own demand drivers and fleet dynamics. We are closely monitoring economic forecasts for recovery in all of our markets. Regardless of the market trajectory, our management team is experienced in responding to rapid shifts in railcar demand.
Compounding the issues surrounding COVID-19, the drastic decline in crude oil prices in the first quarter has created a historic jolt to the energy markets. In response, we removed approximately 540 tank cars from our first quarter backlog that were expected to go primarily into crude service because the customers’ financial condition had changed materially since the orders were made. Our backlog no longer includes any railcars for frac sand service or crude oil service. With that said, in Trinity’s lease portfolio, approximately 4% currently serves the crude oil market, and approximately 8% serves the frac sand market. These markets have experienced numerous structural shifts over the past decade, and the challenges spurred by the mining of brown sand the last few years are widely acknowledged. We expect the collapse in shale oil production





could leave the frac sand industry financially vulnerable, and we are closely and continually monitoring market developments to mitigate our risk and protect the return on this investment.
A small percentage of our customers have also requested financial relief in the current environment. Where appropriate, Trinity has implemented certain criteria for extending payment terms for customers at this time, and we will continue to evaluate how we can support our customers.
As it pertains to Trinity’s financial position, we believe Trinity is starting from a position of strength. Following the rapid deterioration of the financial markets due to COVID-19, the Company tested several scenario analyses on our cash flows to evaluate the strength of our balance sheet and liquidity. Through all of our assumptions, Trinity’s platform was resilient.
A summary of our liquidity and balance sheet is provided on slide 4 of the Supplemental Materials.
As of the end of the first quarter, the Company had committed available liquidity of $760 million. In addition, we expect to receive $300 million in tax refunds this year resulting from reinstatement of tax-loss carryback provisions in the CARES Act. The cash tax benefit reflects the significant financial synergies within our platform. We have a diverse lease fleet of approximately 130,000 railcars providing lease and fee income visibility, which includes total committed revenue of $2.5 billion, as well as a railcar backlog with a value of $1.6 billion. When considering the relative market stability to date from our highway and maintenance businesses, we expect Trinity to generate solid cash flow in 2020 and to maintain our liquidity position in our base case scenario.
As further liquidity options, the Company has unencumbered assets of approximately $1.5 billion available for monetization through leverage or secondary market transactions. When considering the Company’s debt maturity profile, and the additional levers we have to unlock capital, we believe our balance sheet and financial strength enables Trinity to navigate the COVID-19 pandemic. We will continue to maximize the cash flow from the committed business while using our commercial reach and market knowledge to navigate these unusual times. As a result of our shifting priorities to manage our balance sheet amid COVID-19, we anticipate the Company’s leverage ratios may decline as we go through the year. We are closely monitoring our available capital and liquidity needs to determine our course of action and to balance our long-term goal of balance sheet optimization. Our platform is demonstrating that it is built to deliver and sustain!
I’ll now turn the call back over to Jean for closing comments.

On the webcast and conference call, Mr. Marchetto responded to a question from an analyst regarding expected railcar deliveries from the Company's backlog. The Company would like to clarify that the 10,000 railcars scheduled for delivery for 2020 is a full-year quantity.


EX-99.6 7 trinityfirstquarterearni.htm EXHIBIT 99.6 trinityfirstquarterearni
Exhibit 99.6 1Q 2020 – Earnings Conference Call Supplemental Material April 30, 2020 – based on financial results as of March 31, 2020 Investor Contact: TrinityInvestorRelations@trin.net Website: www.trin.net


 
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, including the potential financial and operational impacts of the COVID‐19 pandemic. Trinity uses the words “anticipates,”  “assumes,” “believes,” “estimates,” “expects,” “intends,” “forecasts,” “may,” “will,” “should,” “guidance,” “projected,” “outlook,” and similar  expressions to identify these forward‐looking statements. Forward‐looking statements speak only as of the date of this release, and Trinity  expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward‐looking statement contained herein to  reflect any change in Trinity’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement  is based, except as required by federal securities laws. Forward‐looking statements involve risks and uncertainties that could cause actual results to  differ materially from historical experience or our present expectations, including but not limited to risks and uncertainties regarding economic,  competitive, governmental, and technological factors affecting Trinity’s operations, markets, products, services and prices, and such forward‐ looking statements are not guarantees of future performance. For a discussion of such risks and uncertainties, which could cause actual results to  differ from those contained in the forward‐looking statements, see “Risk Factors” and “Forward‐Looking Statements” in Trinity’s Annual Report on  Form 10‐K for the most recent fiscal year, as may be revised and updated by Trinity’s Quarterly Reports on Form 10‐Q, and Trinity’s Current Reports on Form 8‐K. Additionally, the information and metrics on slide 5 are assumptions used for scenario modeling purposes only.  They are not statements of the  Company’s expectations, projections, guidance, forecasts, or estimates and readers should not interpret them as such. 2


 
Trinity’s Response Actions to COVID‐19 Health & Safety  Community  Supply Chain  Protocols Support Monitoring Cost  Financial  Optimization Modeling 3


 
Facing Market Challenge from a Position of Strength Attractive   Solid Liquidity  Conservative  Debt  of $760mm Capitalization Structures LIQUIDITY DEBT STRUCTURE CAPITAL LEVERS Cash & Equivalents Recourse Debt Unencumbered  $213mm $530mm @ ~4%(1) Railcars $1.5B Non‐recourse Debt Revolver Availability $4.4B @ ~4%(1) • Pledge to warehouse $285mm • Additional assets can be  sold or financed • Low‐cost funds • LTV of 55% for the  Warehouse Availability • Flexible term structures wholly‐owned lease  $262mm • No maturities until 2022 portfolio as of 1Q‐20(2) Expected Tax Refund  $300mm (1) Blended average interest rate as of March 31, 2020; (2) Includes corporate revolving credit facility as part of the short‐term financing structure 4


 
Management Scenario Analysis Factors BASE CASE STRESS CASE (Economic Recovery) (Further Contraction or Relapse) Railcar Deliveries Backlog Delivers Deferred Deliveries Lease Portfolio ~ 95% Utilization Rate < 90% Utilization Rate Drivers   Customer Late Payments Lease Fleet Sales Modest Sales Q1‐20 Sales Only Business 30% Mfg Reduction Further Reductions  Cost Optimization SE&A Target Achieved (in line with business) Committed Deliveries       Modest Deferrals and Modifications Leasing CapEx No Sec. Mkt Purchases Modest Sec. Mkt Purchases FY20 – Continue CIP Manufacturing CapEx FY20 – Delay CIP Allocation FY21 – Min New Growth FY21 – Maintenance Only   Share Repurchases Complete Authorization Minimal Activity Capital Dividends MAINTAIN MAINTAIN 5 5 The information and metrics on this slide are assumptions used for scenario modeling purposes only.  They are not statements of the Company’s expectations, projections,  guidance, forecasts, or estimates and readers should not interpret them as such.


 
Key Financial and Operational Performance Takeaways Continuity Prioritize health and safety of operations and maintain  business continuity Customers Focus on world class service dedicated to assisting our  customers Cost  Realize opportunities for structural changes to  Reduction enhance future performance Cash Flow Maximize the financial synergies of the TrinityRail  platform and cash flow from long‐term lease contracts Capital  Prudent investment and balance sheet positioning in  Allocation down cycles drives long term value creation 6


 
Q&A


 
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