November 25, 2020

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Trinity Industries, Inc. Announces Third Quarter 2020 Results

Reports quarterly GAAP and Adjusted earnings from continuing operations of $0.21 and $0.17 per diluted share, respectively Generates both year-to-date operating and free cash flow before leasing investment of $457 million, respectively Returned $193 million of capital to stockholders year-to-date, including $90 million of share repurchases in the third quarter, completing the authorization Announces new $250 million share repurchase authorization DALLAS--(BUSINESS WIRE)--Trinity Industries, Inc. (NYSE:TRN) today announced earnings results for the third quarter ended September 30, 2020. Financial and Operational Highlights — Third Quarter 2020 Quarterly total company revenues of $459 million Quarterly income from continuing operations per common diluted share ("EPS") of $0.21 and quarterly adjusted EPS of $0.17, which excludes the following: Restructuring activities totaling $0.03 per common diluted share Additional income tax benefit of $0.07 per common diluted share related to carryback claims as permitted under recent tax legislation Both year-to-date cash flow from operations and free cash flow before leasing investment were $457 million, respectively Year-to-date investment of $310 million in leasing capital expenditures, net of railcar sales, predominantly for growth Total committed liquidity of $719 million as of September 30, 2020 Repurchases of approximately 4.5 million shares at a cost of $89.9 million Year-to-date returns to shareholders of $193 million through dividends and share repurchases Announces new $250 million share repurchase authorization approved subsequent to quarter-end Completed a new $155.5 million securitization under an existing indenture bearing interest at 1.96% annually to replace $153.1 million of secured railcar equipment notes bearing interest at 3.82%, which were redeemed Previously announced date of 2020 Investor Day on November 19, 2020 “In the wake of the challenges created by the COVID-19 pandemic, I applaud the commitment of Trinity’s people to deliver high-quality products and services to our customers and continue our progress in effecting the transformation of the Company’s rail-focused operating strategy,” said Jean Savage, Trinity’s CEO and President. “Trinity’s third quarter performance reflects solid execution against numerous headwinds including competitive pricing, declining deliveries, and difficult decisions in rightsizing our operations. Through it all, Trinity’s rail platform, which generates significant cash flow, and our strong balance sheet have enabled us to manage through the current environment from a position of strength.” “Railcar loadings rebounded during the third quarter from the historical declines earlier in the year resulting from economic shutdowns amid the coronavirus outbreak. However, market uncertainty continues to cloud demand for railcars as much of the economy remains under pressure. We continue to see a good pipeline of inquiries for available railcars – new and existing – from strategic buyers and owners of railcar assets, and we remain cautiously optimistic regarding the trajectory of demand heading into next year. Average lease rates and the utilization of our lease fleet remained essentially flat from the second quarter, while lease rate renewal pricing continued to experience negative headwinds. Rail manufacturing received orders for 2,000 railcars during the third quarter, composed primarily of larger, complex transactions that leverage the strength of Trinity’s rail platform and our ability to tailor solutions for our customers.” “Our business leaders are taking additional actions to optimize our operating structure and our balance sheet. During the third quarter, Trinity transitioned its U.S. logistics business and outsourced these services to third-party providers, as well as completed the realignment of its organizational structure. The Company also completed the $350 million share repurchase authorization, our second such completion in the past two years, with the purchase of approximately $90 million during the quarter. Earlier this week, Trinity’s Board approved a new $250 million share repurchase authorization that runs through the end of 2021.” Ms. Savage concluded, “As we move forward with the execution of our long-term strategy, we have redefined our purpose to ‘Delivering Goods for the Good of All.’ We are proud of the essential role our railcars play in sustaining our communities, and our strategic initiatives are aimed at enhancing the rail industry's modal advantage while improving our returns on the business. We are strongly committed to accelerating the financial performance of the Company and unlocking value for our shareholders through a disciplined capital allocation framework.” Consolidated Financial Summary Three Months EndedSeptember 30, 2020 2019 Year over Year – Comparison (in millions, except percentages and per share amounts) Revenues $ 459.4 $ 813.6 Lower deliveries in the Rail Products Group and fewer railcars sold from our lease fleet Selling, engineering, and administrative expenses $ 51.2 $ 62.1 Lower employee-related costs resulting from cost optimization initiatives, including headcount reductions and adjustments to incentive-based compensation, and lower litigation-related expenses Operating profit (loss) $ 72.9 $ 120.3 Lower volumes in the Rail Products Group and fewer railcar sales in the Leasing Group Interest expense $ 52.3 $ 55.8 Reduction in the average borrowings and the variable interest rates associated with the Company's debt facilities, as well as the early redemption of a securitization in the first quarter of 2020 EBITDA (1) $ 136.4 $ 194.5 See change in operating profit described above Effective tax expense (benefit) rate (34.9)% 27.5% Primarily tax benefit due to the carryback of net operating losses Net income (loss) attributable to Trinity Industries, Inc. $ 25.1 $ 49.0 Diluted EPS – GAAP $ 0.21 $ 0.39 Diluted EPS – Adjusted (1) $ 0.17 $ 0.39 Nine Months EndedSeptember 30, 2020 2019 Year over Year – Comparison (in millions) Net cash provided by operating activities – continuing operations $ 456.8 $ 166.3 Cash impacts include cyclical shifts and working capital initiatives, as well as inflows from a customer's exercise of a purchase option on a sales-type lease Free cash flow before leasing investment (1) $ 457.0 $ 217.2 Capital expenditures – leasing, net $ 448.8 $ 854.3 Reduced lease fleet investment in 2020 Returns of capital to shareholders $ 193.1 $ 294.7 Reduced share repurchase activity in 2020 (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. Business Group Summary Three Months EndedSeptember 30, 2020 2019 Year over Year – Comparison (in millions, except percentages and number of units) Leasing and Management Services Group Leasing and management revenues $ 183.9 $ 190.1 Lower fleet utilization and lower lease rates on renewals, partially offset by growth in the lease fleet and higher lease rates associated with new railcar additions Leasing and management operating profit $ 86.8 $ 79.8 Growth in the lease fleet and lower depreciation expense Operating profit on sales of leased railcars $ 2.9 $ 35.9 Lower volume of railcars sold from the lease fleet Fleet utilization 94.8% 96.7% Primarily driven by decrease in energy-related markets Owned lease fleet (in units) (1) 105,925 102,090 Managed lease fleet (in units) 26,655 24,215 Additional sales of leased railcars to third-party fleets managed by the Company Rail Products Group Revenues $ 381.2 $ 735.1 Lower deliveries and railcar modification services Operating profit margin 0.8% 8.9% Lower deliveries resulting in additional unabsorbed burden in addition to lower pricing Deliveries (in units) 2,605 5,320 Orders (in units) 2,000 2,530 Order value $ 186.8 $ 259.2 Lower number of units and competitive pricing Backlog value $ 1,155.4 $ 2,445.7 All Other Group Revenues $ 62.6 $ 70.3 Decreased demand for highway products Operating profit $ 7.3 $ 3.9 Lower employee-related costs and lower costs associated with our non-operating facilities September 30, 2020 December 31, 2019 Loan-to-value ratio: Wholly-owned subsidiaries, including corporate revolving credit facility 57.9% 55.1% (1) Includes wholly-owned and partially-owned railcars and railcars under sale-leaseback arrangements. Additional Business Items Income Tax Adjustments As a result of the reinstatement of the tax-loss carryback provisions in recent tax legislation, the Company recognized an additional tax benefit in the third quarter of $8.6 million, or $0.07 per common diluted share. The associated income tax losses were primarily due to accelerated tax depreciation associated with our investment in the lease fleet. The Company’s tax rate was a benefit of 34.9% for the quarter and a benefit of 69.5% for the year. These rates differed from the U.S. statutory rate primarily as a result of the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"). Liquidity and Capital Source Updates In July 2020, Trinity Rail Leasing 2017 LLC, a wholly-owned subsidiary of the Company, issued $225.0 million of additional promissory notes through its existing loan agreement. The promissory notes bear interest at LIBOR plus 1.50%. Net proceeds received from the transaction were used to repay borrowings under TILC's secured warehouse credit facility and under the Company’s revolving credit facility, and for general corporate purposes. In July 2020, we amended our revolving credit facility to increase the maximum leverage ratio through December 31, 2021 to provide near-term covenant flexibility. In October 2020, Trinity Rail Leasing 2018 LLC (“TRL-2018”), a wholly-owned subsidiary of the Company, issued $155.5 million of Series 2020-1 Class A Secured Railcar Equipment Notes (the “2020-1 Notes”) under an existing indenture. The 2020-1 Notes bear interest at a fixed rate of 1.96% per annum and have a stated final maturity date of 2050. In a separate transaction during October 2020, TRL-2018 redeemed its Series 2018-1 Class A-1 Secured Railcar Equipment Notes, of which $153.1 million was outstanding at the redemption date. The fixed interest rate for these notes was 3.82% per annum. In October 2020, our Board of Directors authorized a new share repurchase program effective October 23, 2020 through December 31, 2021. The new share repurchase program authorizes the Company to repurchase up to $250.0 million of its common stock. The Company's income tax receivable at the end of the third quarter was $485 million. Cost Optimization In connection with the Company's ongoing assessment of future needs to support our rail-focused strategy and to optimize the performance of the business, the Company recognized pre-tax restructuring charges totaling $10.5 million year to date, primarily from employee transition costs and the write-down of our corporate headquarters campus, partially offset by a net gain on the disposition of a non-operating facility and certain related assets. Restructuring charges for the third quarter of 2020 totaled $4.7 million, which included $3.4 million for severance costs, $0.7 million in asset write-downs from transportation equipment related to our logistics operations, and $0.6 million of contract termination costs. Trinity currently anticipates that the structural and cyclical administrative cost reductions completed thus far in 2020 will generate approximately $80 million in future annualized cost savings. As the Company continues to reposition its operating structure and drive platform efficiency, we anticipate identifying further cost savings opportunities, which could lead to additional restructuring charges. In connection with the Company's previously communicated pension plan termination, the plan is expected to be fully settled in the fourth quarter of 2020. Upon settlement, the Company currently expects to recognize a pre-tax non-cash pension settlement charge totaling between $145 million to $160 million, which includes the recognition of all pre-tax actuarial losses accumulated in Accumulated Other Comprehensive Loss. Conference Call Trinity will hold a conference call at 11:00 a.m. Eastern on October 22, 2020 to discuss its third quarter results. To listen to the call, please visit the Investor Relations section of the Company's website at www.trin.net and access the Events & Presentations webpage, or the live call can be accessed at 785-424-1854 with the conference ID "Trinity". Please call at least 10 minutes in advance to ensure a timely connection. An audio replay may be accessed through the Company’s website or by dialing (402) 220-1140 until 11:59 p.m. Eastern on October 29, 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 Third Quarter Earnings Call event weblink. 2020 Investor Day Trinity Industries will also hold a virtual Investor Day at 9:00 a.m. Eastern on November 19, 2020. The half-day event will include presentations on the Company’s business strategy from Jean Savage, Trinity’s CEO and President; Eric Marchetto, EVP and Chief Financial Officer; as well as other members of executive management. The live webcast and presentation slides will be accessible via the Events & Presentations portion of the Investor Relations website located at www.trin.net. A replay of the event will also be made available on the Company’s website following the event. Non-GAAP Financial Measures We have included financial measures compiled in accordance with generally accepted accounting principles ("GAAP") and certain non-GAAP measures in this earnings press release to provide management and investors with additional information regarding our financial results. Non-GAAP measures should not be considered in isolation or as a substitute for our reporting results prepared in accordance with GAAP and, as calculated, may not be comparable to other similarly titled measures for other companies. For each non-GAAP financial measure, a reconciliation to the most comparable GAAP measure has been included in the accompanying tables. When forward-looking non-GAAP measures are provided, quantitative reconciliations to the most directly comparable GAAP measures are not provided because management cannot, without unreasonable effort, predict the timing and amounts of certain items included in the computations of each of these measures. These factors include, but are not limited to: the product mix of expected railcar deliveries; the timing and amount of significant transactions and investments, such as railcar sales from the lease fleet, capital expenditures, and returns of capital to shareholders; and the amount and timing of certain other items outside the normal course of our core business operations, such as restructuring activities and non-cash pension plan termination charges. About Trinity Industries Trinity Industries, Inc., headquartered in Dallas, Texas, owns businesses that are leading providers of rail transportation products and services in North America. Our rail-related businesses market their railcar products and services under the trade name TrinityRail®. The TrinityRail platform provides railcar leasing and management services, as well as railcar manufacturing, maintenance and modifications. Trinity also owns businesses engaged in the manufacture of products used on the nation’s roadways and in traffic control. Trinity reports its financial results in three principal business segments: the Railcar Leasing and Management Services Group, the Rail Products Group, and the All Other Group. For more information, visit: www.trin.net. Some statements in this release, which are not historical facts, are “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements about Trinity's estimates, expectations, beliefs, intentions or strategies for the future, and the assumptions underlying these forward-looking statements, including, but not limited to, future financial and operating performance, future opportunities and any other statements regarding events or developments that Trinity believes or anticipates will or may occur in the future, including the potential financial and operational impacts of the COVID-19 pandemic. Trinity uses the words “anticipates,” “assumes,” “believes,” “estimates,” “expects,” “intends,” “forecasts,” “may,” “will,” “should,” “guidance,” “projected,” “outlook,” and similar expressions to identify these forward-looking statements. Forward-looking statements speak only as of the date of this release, and Trinity expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in Trinity’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based, except as required by federal securities laws. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from historical experience or our present expectations, including but not limited to risks and uncertainties regarding economic, competitive, governmental, and technological factors affecting Trinity’s operations, markets, products, services and prices, and such forward-looking statements are not guarantees of future performance. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see “Risk Factors” and “Forward-Looking Statements” in Trinity’s Annual Report on Form 10-K for the most recent fiscal year, as may be revised and updated by Trinity’s Quarterly Reports on Form 10-Q, and Trinity’s Current Reports on Form 8-K. Trinity Industries, Inc. Condensed Consolidated Statements of Operations (in millions, except per share amounts) (unaudited) Three Months EndedSeptember 30, Nine Months EndedSeptember 30, 2020 2019 2020 2019 Revenues $ 459.4 $ 813.6 $ 1,583.8 $ 2,154.4 Operating costs: Cost of revenues 334.5 649.1 1,213.1 1,691.0 Selling, engineering, and administrative expenses 51.2 62.1 172.3 191.5 Gains (losses) on dispositions of property: Net gains on railcar lease fleet sales owned more than one year at the time of sale 2.9 18.1 17.3 44.7 Other 1.0 (0.2) 2.8 2.5 Impairment of long-lived assets — — 369.4 — Restructuring activities, net 4.7 — 10.5 — 386.5 693.3 1,745.2 1,835.3 Operating profit (loss) 72.9 120.3 (161.4) 319.1 Interest expense, net 51.7 54.0 163.6 160.8 Other, net 2.0 — 0.5 0.2 Income (loss) from continuing operations before income taxes 19.2 66.3 (325.5) 158.1 Provision (benefit) for income taxes: Current (18.7) 2.5 (471.2) 2.7 Deferred 12.0 15.7 245.1 38.5 (6.7) 18.2 (226.1) 41.2 Income (loss) from continuing operations 25.9 48.1 (99.4) 116.9 Loss from discontinued operations, net of income taxes — (0.4) (0.2) (2.3) Net income (loss) 25.9 47.7 (99.6) 114.6 Net income (loss) attributable to noncontrolling interest 0.8 (1.3) (79.5) (1.4) Net income (loss) attributable to Trinity Industries, Inc. $ 25.1 $ 49.0 $ (20.1) $ 116.0 Basic earnings per common share: Income (loss) from continuing operations $ 0.21 $ 0.39 $ (0.17) $ 0.91 Income (loss) from discontinued operations — — — (0.02) Basic net income (loss) attributable to Trinity Industries, Inc. $ 0.21 $ 0.39 $ (0.17) $ 0.89 Diluted earnings per common share: Income (loss) from continuing operations $ 0.21 $ 0.39 $ (0.17) $ 0.90 Income (loss) from discontinued operations — — — (0.02) Diluted net income (loss) attributable to Trinity Industries, Inc. $ 0.21 $ 0.39 $ (0.17) $ 0.88 Weighted average number of shares outstanding: Basic 116.4 124.7 117.2 127.6 Diluted 117.0 126.0 117.2 129.2 Trinity is required to utilize the two-class method of calculating earnings per share ("EPS") as a result of unvested restricted shares that have non-forfeitable rights to dividends and are, therefore, considered to be participating securities. The calculation of EPS using the two-class method excludes income attributable to these participating securities from the numerator and excludes the dilutive impact of those shares from the denominator; therefore, the two-class method may result in a lower EPS than is calculated from the face of the income statement. There were no restricted shares and stock options included in the computation of diluted EPS for the nine months ended September 30, 2020 as we incurred a loss for the period, and any effect on loss per common share would have been antidilutive. Trinity Industries, Inc. Condensed Segment Data (in millions) (unaudited) Three Months EndedSeptember 30, Nine Months EndedSeptember 30, Revenues: 2020 2019 2020 2019 Railcar Leasing and Management Services Group $ 183.9 $ 326.4 $ 613.0 $ 803.9 Rail Products Group 381.2 735.1 1,296.2 2,075.8 All Other 62.6 70.3 195.3 200.3 Segment Totals before Eliminations 627.7 1,131.8 2,104.5 3,080.0 Eliminations – Lease Subsidiary (166.0) (314.0) (512.4) (913.0) Eliminations – Other (2.3) (4.2) (8.3) (12.6) Consolidated Total $ 459.4 $ 813.6 $ 1,583.8 $ 2,154.4 Three Months EndedSeptember 30, Nine Months EndedSeptember 30, Operating profit (loss): 2020 2019 2020 2019 Railcar Leasing and Management Services Group $ 89.7 $ 115.7 $ 265.5 $ 306.3 Rail Products Group 3.2 65.4 36.2 180.8 All Other 7.3 3.9 23.9 19.9 Segment Totals before Eliminations, Corporate Expenses, Impairment of long-lived assets, and Restructuring activities 100.2 185.0 325.6 507.0 Corporate (21.0) (23.9) (73.3) (78.1) Impairment of long-lived assets — — (369.4) — Restructuring activities, net (4.7) — (10.5) — Eliminations – Lease Subsidiary (2.6) (40.7) (33.5) (109.5) Eliminations – Other 1.0 (0.1) (0.3) (0.3) Consolidated Total $ 72.9 $ 120.3 $ (161.4) $ 319.1 Trinity Industries, Inc. Selected Financial Information – Leasing Group ($ in millions) (unaudited) Three Months EndedSeptember 30, Nine Months EndedSeptember 30, 2020 2019 2020 2019 Revenues: Leasing and management $ 183.9 $ 190.1 $ 558.6 $ 566.6 Sales of railcars owned one year or less at the time of sale (1)(2) — 136.3 54.4 237.3 Total revenues $ 183.9 $ 326.4 $ 613.0 $ 803.9 Operating profit (3): Leasing and management $ 86.8 $ 79.8 $ 247.8 $ 234.6 Railcar sales(1): Railcars owned one year or less at the time of sale — 17.8 0.4 27.0 Railcars owned more than one year at the time of sale 2.9 18.1 17.3 44.7 Total operating profit $ 89.7 $ 115.7 $ 265.5 $ 306.3 Total operating profit margin 48.8 % 35.4 % 43.3 % 38.1 % Leasing and management operating profit margin 47.2 % 42.0 % 44.4 % 41.4 % Selected expense information: Depreciation (4)(5) $ 51.5 $ 59.4 $ 159.1 $ 171.6 Maintenance and compliance $ 18.5 $ 24.9 $ 67.4 $ 79.2 Rent $ 2.1 $ 3.8 $ 8.1 $ 13.6 Selling, engineering, and administrative expenses $ 11.7 $ 10.7 $ 39.0 $ 36.2 Interest $ 47.0 $ 50.0 $ 149.2 $ 146.4 Three Months EndedSeptember 30, Nine Months EndedSeptember 30, 2020 2019 2020 2019 Sales of leased railcars: Railcars owned one year or less at the time of sale (2) $ — $ 136.3 $ 54.4 $ 237.3 Railcars owned more than one year at the time of sale 6.5 75.1 138.7 175.0 $ 6.5 $ 211.4 $ 193.1 $ 412.3 Operating profit on sales of leased railcars: Railcars owned one year or less at the time of sale $ — $ 17.8 $ 0.4 $ 27.0 Railcars owned more than one year at the time of sale 2.9 18.1 17.3 44.7 $ 2.9 $ 35.9 $ 17.7 $ 71.7 Operating profit margin on sales of leased railcars: Railcars owned one year or less at the time of sale — % 13.1 % 0.7 % 11.4 % Railcars owned more than one year at the time of sale 44.6 % 24.1 % 12.5 % 25.5 % Weighted average operating profit margin on sales of leased railcars 44.6 % 17.0 % 9.2 % 17.4 % Contacts Investor Contact:Jessica L. Greiner Vice President, Investor Relations and Communications Trinity Industries, Inc. (Investors) 214/631-4420 Media Contact:Jack L. Todd Vice President, Public Affairs Trinity Industries, Inc. (Media Line) 214/589-8909 Read full story here

Reports quarterly GAAP and Adjusted earnings from continuing operations of $0.21 and $0.17 per diluted share, respectively

Generates both year-to-date operating and free cash flow before leasing investment of $457 million, respectively

Returned $193 million of capital to stockholders year-to-date, including $90 million of share repurchases in the third quarter, completing the authorization

Announces new $250 million share repurchase authorization

DALLAS–(BUSINESS WIRE)–Trinity Industries, Inc. (NYSE:TRN) today announced earnings results for the third quarter ended September 30, 2020.

Financial and Operational Highlights — Third Quarter 2020

  • Quarterly total company revenues of $459 million
  • Quarterly income from continuing operations per common diluted share ("EPS") of $0.21 and quarterly adjusted EPS of $0.17, which excludes the following:

    • Restructuring activities totaling $0.03 per common diluted share
    • Additional income tax benefit of $0.07 per common diluted share related to carryback claims as permitted under recent tax legislation
  • Both year-to-date cash flow from operations and free cash flow before leasing investment were $457 million, respectively
  • Year-to-date investment of $310 million in leasing capital expenditures, net of railcar sales, predominantly for growth
  • Total committed liquidity of $719 million as of September 30, 2020
  • Repurchases of approximately 4.5 million shares at a cost of $89.9 million
  • Year-to-date returns to shareholders of $193 million through dividends and share repurchases
  • Announces new $250 million share repurchase authorization approved subsequent to quarter-end
  • Completed a new $155.5 million securitization under an existing indenture bearing interest at 1.96% annually to replace $153.1 million of secured railcar equipment notes bearing interest at 3.82%, which were redeemed
  • Previously announced date of 2020 Investor Day on November 19, 2020

“In the wake of the challenges created by the COVID-19 pandemic, I applaud the commitment of Trinity’s people to deliver high-quality products and services to our customers and continue our progress in effecting the transformation of the Company’s rail-focused operating strategy,” said Jean Savage, Trinity’s CEO and President. “Trinity’s third quarter performance reflects solid execution against numerous headwinds including competitive pricing, declining deliveries, and difficult decisions in rightsizing our operations. Through it all, Trinity’s rail platform, which generates significant cash flow, and our strong balance sheet have enabled us to manage through the current environment from a position of strength.”

“Railcar loadings rebounded during the third quarter from the historical declines earlier in the year resulting from economic shutdowns amid the coronavirus outbreak. However, market uncertainty continues to cloud demand for railcars as much of the economy remains under pressure. We continue to see a good pipeline of inquiries for available railcars – new and existing – from strategic buyers and owners of railcar assets, and we remain cautiously optimistic regarding the trajectory of demand heading into next year. Average lease rates and the utilization of our lease fleet remained essentially flat from the second quarter, while lease rate renewal pricing continued to experience negative headwinds. Rail manufacturing received orders for 2,000 railcars during the third quarter, composed primarily of larger, complex transactions that leverage the strength of Trinity’s rail platform and our ability to tailor solutions for our customers.”

“Our business leaders are taking additional actions to optimize our operating structure and our balance sheet. During the third quarter, Trinity transitioned its U.S. logistics business and outsourced these services to third-party providers, as well as completed the realignment of its organizational structure. The Company also completed the $350 million share repurchase authorization, our second such completion in the past two years, with the purchase of approximately $90 million during the quarter. Earlier this week, Trinity’s Board approved a new $250 million share repurchase authorization that runs through the end of 2021.”

Ms. Savage concluded, “As we move forward with the execution of our long-term strategy, we have redefined our purpose to ‘Delivering Goods for the Good of All.’ We are proud of the essential role our railcars play in sustaining our communities, and our strategic initiatives are aimed at enhancing the rail industry's modal advantage while improving our returns on the business. We are strongly committed to accelerating the financial performance of the Company and unlocking value for our shareholders through a disciplined capital allocation framework.”

Consolidated Financial Summary

Three Months Ended
September 30,

2020

2019

Year over Year – Comparison

(in millions, except percentages and per share amounts)

Revenues

$

459.4

$

813.6

Lower deliveries in the Rail Products Group and fewer railcars sold from our lease fleet

Selling, engineering, and administrative expenses

$

51.2

$

62.1

Lower employee-related costs resulting from cost optimization initiatives, including headcount reductions and adjustments to incentive-based compensation, and lower litigation-related expenses

Operating profit (loss)

$

72.9

$

120.3

Lower volumes in the Rail Products Group and fewer railcar sales in the Leasing Group

Interest expense

$

52.3

$

55.8

Reduction in the average borrowings and the variable interest rates associated with the Company's debt facilities, as well as the early redemption of a securitization in the first quarter of 2020

EBITDA (1)

$

136.4

$

194.5

See change in operating profit described above

Effective tax expense (benefit) rate

(34.9)%

27.5%

Primarily tax benefit due to the carryback of net operating losses

Net income (loss) attributable to Trinity Industries, Inc.

$

25.1

$

49.0

Diluted EPS – GAAP

$

0.21

$

0.39

Diluted EPS – Adjusted (1)

$

0.17

$

0.39

Nine Months Ended
September 30,

2020

2019

Year over Year – Comparison

(in millions)

Net cash provided by operating activities – continuing operations

$

456.8

$

166.3

Cash impacts include cyclical shifts and working capital initiatives, as well as inflows from a customer's exercise of a purchase option on a sales-type lease

Free cash flow before leasing investment (1)

$

457.0

$

217.2

Capital expenditures – leasing, net

$

448.8

$

854.3

Reduced lease fleet investment in 2020

Returns of capital to shareholders

$

193.1

$

294.7

Reduced share repurchase activity in 2020

(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.

Business Group Summary

Three Months Ended
September 30,

2020

2019

Year over Year – Comparison

(in millions, except percentages and number of units)

Leasing and Management Services Group

Leasing and management revenues

$

183.9

$

190.1

Lower fleet utilization and lower lease rates on renewals, partially offset by growth in the lease fleet and higher lease rates associated with new railcar additions

Leasing and management operating profit

$

86.8

$

79.8

Growth in the lease fleet and lower depreciation expense

Operating profit on sales of leased railcars

$

2.9

$

35.9

Lower volume of railcars sold from the lease fleet

Fleet utilization

94.8%

96.7%

Primarily driven by decrease in energy-related markets

Owned lease fleet (in units) (1)

105,925

102,090

Managed lease fleet (in units)

26,655

24,215

Additional sales of leased railcars to third-party fleets managed by the Company

Rail Products Group

Revenues

$

381.2

$

735.1

Lower deliveries and railcar modification services

Operating profit margin

0.8%

8.9%

Lower deliveries resulting in additional unabsorbed burden in addition to lower pricing

Deliveries (in units)

2,605

5,320

Orders (in units)

2,000

2,530

Order value

$

186.8

$

259.2

Lower number of units and competitive pricing

Backlog value

$

1,155.4

$

2,445.7

All Other Group

Revenues

$

62.6

$

70.3

Decreased demand for highway products

Operating profit

$

7.3

$

3.9

Lower employee-related costs and lower costs associated with our non-operating facilities

September 30,

2020

December 31,

2019

Loan-to-value ratio:

Wholly-owned subsidiaries, including corporate revolving credit facility

57.9%

55.1%

(1) Includes wholly-owned and partially-owned railcars and railcars under sale-leaseback arrangements.

Additional Business Items

Income Tax Adjustments

  • As a result of the reinstatement of the tax-loss carryback provisions in recent tax legislation, the Company recognized an additional tax benefit in the third quarter of $8.6 million, or $0.07 per common diluted share. The associated income tax losses were primarily due to accelerated tax depreciation associated with our investment in the lease fleet.
  • The Company’s tax rate was a benefit of 34.9% for the quarter and a benefit of 69.5% for the year. These rates differed from the U.S. statutory rate primarily as a result of the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act").

Liquidity and Capital Source Updates

  • In July 2020, Trinity Rail Leasing 2017 LLC, a wholly-owned subsidiary of the Company, issued $225.0 million of additional promissory notes through its existing loan agreement. The promissory notes bear interest at LIBOR plus 1.50%. Net proceeds received from the transaction were used to repay borrowings under TILC's secured warehouse credit facility and under the Company’s revolving credit facility, and for general corporate purposes.
  • In July 2020, we amended our revolving credit facility to increase the maximum leverage ratio through December 31, 2021 to provide near-term covenant flexibility.
  • In October 2020, Trinity Rail Leasing 2018 LLC (“TRL-2018”), a wholly-owned subsidiary of the Company, issued $155.5 million of Series 2020-1 Class A Secured Railcar Equipment Notes (the “2020-1 Notes”) under an existing indenture. The 2020-1 Notes bear interest at a fixed rate of 1.96% per annum and have a stated final maturity date of 2050. In a separate transaction during October 2020, TRL-2018 redeemed its Series 2018-1 Class A-1 Secured Railcar Equipment Notes, of which $153.1 million was outstanding at the redemption date. The fixed interest rate for these notes was 3.82% per annum.
  • In October 2020, our Board of Directors authorized a new share repurchase program effective October 23, 2020 through December 31, 2021. The new share repurchase program authorizes the Company to repurchase up to $250.0 million of its common stock.
  • The Company's income tax receivable at the end of the third quarter was $485 million.

Cost Optimization

  • In connection with the Company's ongoing assessment of future needs to support our rail-focused strategy and to optimize the performance of the business, the Company recognized pre-tax restructuring charges totaling $10.5 million year to date, primarily from employee transition costs and the write-down of our corporate headquarters campus, partially offset by a net gain on the disposition of a non-operating facility and certain related assets.

    • Restructuring charges for the third quarter of 2020 totaled $4.7 million, which included $3.4 million for severance costs, $0.7 million in asset write-downs from transportation equipment related to our logistics operations, and $0.6 million of contract termination costs.
  • Trinity currently anticipates that the structural and cyclical administrative cost reductions completed thus far in 2020 will generate approximately $80 million in future annualized cost savings.

    • As the Company continues to reposition its operating structure and drive platform efficiency, we anticipate identifying further cost savings opportunities, which could lead to additional restructuring charges.
  • In connection with the Company's previously communicated pension plan termination, the plan is expected to be fully settled in the fourth quarter of 2020. Upon settlement, the Company currently expects to recognize a pre-tax non-cash pension settlement charge totaling between $145 million to $160 million, which includes the recognition of all pre-tax actuarial losses accumulated in Accumulated Other Comprehensive Loss.

Conference Call

Trinity will hold a conference call at 11:00 a.m. Eastern on October 22, 2020 to discuss its third quarter results. To listen to the call, please visit the Investor Relations section of the Company's website at www.trin.net and access the Events & Presentations webpage, or the live call can be accessed at 785-424-1854 with the conference ID "Trinity". Please call at least 10 minutes in advance to ensure a timely connection. An audio replay may be accessed through the Company’s website or by dialing (402) 220-1140 until 11:59 p.m. Eastern on October 29, 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 Third Quarter Earnings Call event weblink.

2020 Investor Day

Trinity Industries will also hold a virtual Investor Day at 9:00 a.m. Eastern on November 19, 2020. The half-day event will include presentations on the Company’s business strategy from Jean Savage, Trinity’s CEO and President; Eric Marchetto, EVP and Chief Financial Officer; as well as other members of executive management. The live webcast and presentation slides will be accessible via the Events & Presentations portion of the Investor Relations website located at www.trin.net. A replay of the event will also be made available on the Company’s website following the event.

Non-GAAP Financial Measures

We have included financial measures compiled in accordance with generally accepted accounting principles ("GAAP") and certain non-GAAP measures in this earnings press release to provide management and investors with additional information regarding our financial results. Non-GAAP measures should not be considered in isolation or as a substitute for our reporting results prepared in accordance with GAAP and, as calculated, may not be comparable to other similarly titled measures for other companies. For each non-GAAP financial measure, a reconciliation to the most comparable GAAP measure has been included in the accompanying tables. When forward-looking non-GAAP measures are provided, quantitative reconciliations to the most directly comparable GAAP measures are not provided because management cannot, without unreasonable effort, predict the timing and amounts of certain items included in the computations of each of these measures. These factors include, but are not limited to: the product mix of expected railcar deliveries; the timing and amount of significant transactions and investments, such as railcar sales from the lease fleet, capital expenditures, and returns of capital to shareholders; and the amount and timing of certain other items outside the normal course of our core business operations, such as restructuring activities and non-cash pension plan termination charges.

About Trinity Industries

Trinity Industries, Inc., headquartered in Dallas, Texas, owns businesses that are leading providers of rail transportation products and services in North America. Our rail-related businesses market their railcar products and services under the trade name TrinityRail®. The TrinityRail platform provides railcar leasing and management services, as well as railcar manufacturing, maintenance and modifications. Trinity also owns businesses engaged in the manufacture of products used on the nation’s roadways and in traffic control. Trinity reports its financial results in three principal business segments: the Railcar Leasing and Management Services Group, the Rail Products Group, and the All Other Group. For more information, visit: www.trin.net.

Some statements in this release, which are not historical facts, are “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements about Trinity's estimates, expectations, beliefs, intentions or strategies for the future, and the assumptions underlying these forward-looking statements, including, but not limited to, future financial and operating performance, future opportunities and any other statements regarding events or developments that Trinity believes or anticipates will or may occur in the future, including the potential financial and operational impacts of the COVID-19 pandemic. Trinity uses the words “anticipates,” “assumes,” “believes,” “estimates,” “expects,” “intends,” “forecasts,” “may,” “will,” “should,” “guidance,” “projected,” “outlook,” and similar expressions to identify these forward-looking statements. Forward-looking statements speak only as of the date of this release, and Trinity expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in Trinity’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based, except as required by federal securities laws. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from historical experience or our present expectations, including but not limited to risks and uncertainties regarding economic, competitive, governmental, and technological factors affecting Trinity’s operations, markets, products, services and prices, and such forward-looking statements are not guarantees of future performance. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see “Risk Factors” and “Forward-Looking Statements” in Trinity’s Annual Report on Form 10-K for the most recent fiscal year, as may be revised and updated by Trinity’s Quarterly Reports on Form 10-Q, and Trinity’s Current Reports on Form 8-K.

Trinity Industries, Inc.

Condensed Consolidated Statements of Operations

(in millions, except per share amounts)

(unaudited)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2020

2019

2020

2019

Revenues

$

459.4

$

813.6

$

1,583.8

$

2,154.4

Operating costs:

Cost of revenues

334.5

649.1

1,213.1

1,691.0

Selling, engineering, and administrative expenses

51.2

62.1

172.3

191.5

Gains (losses) on dispositions of property:

Net gains on railcar lease fleet sales owned more than one year at the time of sale

2.9

18.1

17.3

44.7

Other

1.0

(0.2)

2.8

2.5

Impairment of long-lived assets

369.4

Restructuring activities, net

4.7

10.5

386.5

693.3

1,745.2

1,835.3

Operating profit (loss)

72.9

120.3

(161.4)

319.1

Interest expense, net

51.7

54.0

163.6

160.8

Other, net

2.0

0.5

0.2

Income (loss) from continuing operations before income taxes

19.2

66.3

(325.5)

158.1

Provision (benefit) for income taxes:

Current

(18.7)

2.5

(471.2)

2.7

Deferred

12.0

15.7

245.1

38.5

(6.7)

18.2

(226.1)

41.2

Income (loss) from continuing operations

25.9

48.1

(99.4)

116.9

Loss from discontinued operations, net of income taxes

(0.4)

(0.2)

(2.3)

Net income (loss)

25.9

47.7

(99.6)

114.6

Net income (loss) attributable to noncontrolling interest

0.8

(1.3)

(79.5)

(1.4)

Net income (loss) attributable to Trinity Industries, Inc.

$

25.1

$

49.0

$

(20.1)

$

116.0

Basic earnings per common share:

Income (loss) from continuing operations

$

0.21

$

0.39

$

(0.17)

$

0.91

Income (loss) from discontinued operations

(0.02)

Basic net income (loss) attributable to Trinity Industries, Inc.

$

0.21

$

0.39

$

(0.17)

$

0.89

Diluted earnings per common share:

Income (loss) from continuing operations

$

0.21

$

0.39

$

(0.17)

$

0.90

Income (loss) from discontinued operations

(0.02)

Diluted net income (loss) attributable to Trinity Industries, Inc.

$

0.21

$

0.39

$

(0.17)

$

0.88

Weighted average number of shares outstanding:

Basic

116.4

124.7

117.2

127.6

Diluted

117.0

126.0

117.2

129.2

Trinity is required to utilize the two-class method of calculating earnings per share ("EPS") as a result of unvested restricted shares that have non-forfeitable rights to dividends and are, therefore, considered to be participating securities. The calculation of EPS using the two-class method excludes income attributable to these participating securities from the numerator and excludes the dilutive impact of those shares from the denominator; therefore, the two-class method may result in a lower EPS than is calculated from the face of the income statement. There were no restricted shares and stock options included in the computation of diluted EPS for the nine months ended September 30, 2020 as we incurred a loss for the period, and any effect on loss per common share would have been antidilutive.

Trinity Industries, Inc.

Condensed Segment Data

(in millions)

(unaudited)

Three Months Ended
September 30,

Nine Months Ended
September 30,

Revenues:

2020

2019

2020

2019

Railcar Leasing and Management Services Group

$

183.9

$

326.4

$

613.0

$

803.9

Rail Products Group

381.2

735.1

1,296.2

2,075.8

All Other

62.6

70.3

195.3

200.3

Segment Totals before Eliminations

627.7

1,131.8

2,104.5

3,080.0

Eliminations – Lease Subsidiary

(166.0)

(314.0)

(512.4)

(913.0)

Eliminations – Other

(2.3)

(4.2)

(8.3)

(12.6)

Consolidated Total

$

459.4

$

813.6

$

1,583.8

$

2,154.4

Three Months Ended
September 30,

Nine Months Ended
September 30,

Operating profit (loss):

2020

2019

2020

2019

Railcar Leasing and Management Services Group

$

89.7

$

115.7

$

265.5

$

306.3

Rail Products Group

3.2

65.4

36.2

180.8

All Other

7.3

3.9

23.9

19.9

Segment Totals before Eliminations, Corporate Expenses, Impairment of long-lived assets, and Restructuring activities

100.2

185.0

325.6

507.0

Corporate

(21.0)

(23.9)

(73.3)

(78.1)

Impairment of long-lived assets

(369.4)

Restructuring activities, net

(4.7)

(10.5)

Eliminations – Lease Subsidiary

(2.6)

(40.7)

(33.5)

(109.5)

Eliminations – Other

1.0

(0.1)

(0.3)

(0.3)

Consolidated Total

$

72.9

$

120.3

$

(161.4)

$

319.1

Trinity Industries, Inc.

Selected Financial Information – Leasing Group

($ in millions)

(unaudited)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2020

2019

2020

2019

Revenues:

Leasing and management

$

183.9

$

190.1

$

558.6

$

566.6

Sales of railcars owned one year or less at the time of sale (1)(2)

136.3

54.4

237.3

Total revenues

$

183.9

$

326.4

$

613.0

$

803.9

Operating profit (3):

Leasing and management

$

86.8

$

79.8

$

247.8

$

234.6

Railcar sales(1):

Railcars owned one year or less at the time of sale

17.8

0.4

27.0

Railcars owned more than one year at the time of sale

2.9

18.1

17.3

44.7

Total operating profit

$

89.7

$

115.7

$

265.5

$

306.3

Total operating profit margin

48.8

%

35.4

%

43.3

%

38.1

%

Leasing and management operating profit margin

47.2

%

42.0

%

44.4

%

41.4

%

Selected expense information:

Depreciation (4)(5)

$

51.5

$

59.4

$

159.1

$

171.6

Maintenance and compliance

$

18.5

$

24.9

$

67.4

$

79.2

Rent

$

2.1

$

3.8

$

8.1

$

13.6

Selling, engineering, and administrative expenses

$

11.7

$

10.7

$

39.0

$

36.2

Interest

$

47.0

$

50.0

$

149.2

$

146.4

Three Months Ended
September 30,

Nine Months Ended
September 30,

2020

2019

2020

2019

Sales of leased railcars:

Railcars owned one year or less at the time of sale (2)

$

$

136.3

$

54.4

$

237.3

Railcars owned more than one year at the time of sale

6.5

75.1

138.7

175.0

$

6.5

$

211.4

$

193.1

$

412.3

Operating profit on sales of leased railcars:

Railcars owned one year or less at the time of sale

$

$

17.8

$

0.4

$

27.0

Railcars owned more than one year at the time of sale

2.9

18.1

17.3

44.7

$

2.9

$

35.9

$

17.7

$

71.7

Operating profit margin on sales of leased railcars:

Railcars owned one year or less at the time of sale

%

13.1

%

0.7

%

11.4

%

Railcars owned more than one year at the time of sale

44.6

%

24.1

%

12.5

%

25.5

%

Weighted average operating profit margin on sales of leased railcars

44.6

%

17.0

%

9.2

%

17.4

%

Contacts

Investor Contact:
Jessica L. Greiner

Vice President, Investor Relations and Communications

Trinity Industries, Inc.

(Investors) 214/631-4420

Media Contact:
Jack L. Todd

Vice President, Public Affairs

Trinity Industries, Inc.

(Media Line) 214/589-8909

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