Trinity Industries, Inc. Announces Second Quarter 2024 Results

Reports quarterly GAAP and adjusted earnings from continuing operations of $0.67 and $0.66 per diluted share, respectively

Lease fleet utilization of 96.9% and Future Lease Rate Differential ("FLRD") of positive 28.3% at quarter-end

Generates year-to-date operating cash flow of $300 million and net gains on lease portfolio sales of $25 million

Delivered 4,755 railcars in the quarter; backlog of $2.7 billion at quarter-end

Trinity Industries, Inc. (NYSE:TRN) today announced earnings results for the second quarter ended June 30, 2024.

Financial and Operational Highlights

• Quarterly total company revenues of $841 million; 16% improvement year over year
• Quarterly income from continuing operations per common diluted share ("EPS") of $0.67 and adjusted EPS of $0.66; $0.43 improvement in adjusted EPS year over year
• Lease fleet utilization of 96.9% and FLRD of positive 28.3% at quarter-end
• Railcar deliveries of 4,755 and new railcar orders of 2,495
• Year-to-date cash flow from continuing operations of $300 million and net gains on lease portfolio sales of $25 million
• Last twelve months ("LTM") Return on Equity ("ROE") of 14.8% and Adjusted ROE of 16.8%

2024 Guidance

• Industry deliveries of approximately 40,000 railcars
• Net fleet investment of $300 million to $400 million
• Operating and administrative capital expenditures of $50 million to $60 million
• EPS of $1.55 to $1.75
  • Excludes items outside of our core business operations

Management Commentary

“Our second quarter GAAP EPS of $0.67 and adjusted EPS of $0.66 represent improvement across our business. Revenues are up 16% year over year, we generated $243 million of cash flow from continuing operations, and our LTM Adjusted ROE of 16.8% showcases the strength of our operations as well as our balance sheet,” said Trinity’s Chief Executive Officer and President, Jean Savage. “At our Investor Day in June, we highlighted the strength of our platform, and our second quarter results display significant progress toward our financial targets.”

Ms. Savage continued, “In our Railcar Leasing and Services segment, we continue to see the benefit of a strong FLRD as we re-price the lease fleet upward, driving an 8.9% revenue increase from our leasing and management business as compared to a year ago. Additionally, we completed an anticipated large portfolio sale in the quarter, utilizing another lever in fleet optimization and asset monetization.”

“In the Rail Products Group, segment operating margin of 7.9% was up substantially both sequentially and year over year, reflecting the focus we have placed on improving labor and operational efficiencies over the last several years.”

Ms. Savage concluded, “We are encouraged by our second quarter results and believe they demonstrate the momentum of our operating platform. We are once again raising our full year guidance to a range of $1.55 to $1.75, which implies continued strength in operating margins through the balance of 2024.”

Consolidated Financial Summary

Additional Business Items

• Total committed liquidity of $985 million as of June 30, 2024.
• In June 2024, we issued an additional $200 million aggregate principal amount of 7.75% senior notes due July 2028, which increased the aggregate principal amount from $400 million to $600 million. Net proceeds received from the issuance, together with cash on hand, were used to repay $400 million of our 4.55% senior notes due 2024, and to pay related fees, costs, premiums, and expenses in connection with the issuance.
• In May 2024, Trinity Rail Leasing 2021 LLC, a wholly-owned subsidiary of the Company, issued an aggregate principal amount of $432 million of its Series 2024-1 Green Secured Railcar Equipment Notes (the "TRL-2024 Notes"). The TRL-2024 Notes bear interest at a fixed rate of 5.78% and have a stated final maturity date of May 19, 2054. Net proceeds received from the issuance of the TRL-2024 Notes were used to repay borrowings under TILC's warehouse loan facility; to redeem the outstanding debt of Trinity Rail Leasing VII LLC's Series 2009-1 Secured Railcar Equipment Notes, of which $94 million was outstanding at the redemption date; and for general corporate purposes.
• In May 2024, we sold a portfolio comprised of 1,315 railcars and related leases to a railcar investment vehicle (RIV) partner for an aggregate sales price of approximately $143 million. We recognized a gain of approximately $19 million on the sale.

Business Group Summary

Conference Call

Trinity will hold a conference call at 8:00 a.m. Eastern on August 1, 2024 to discuss its second quarter results. To listen to the call, please visit the Investor Relations section of the Company's website at www.trin.net and access the Events & Presentations webpage, or the live call can be accessed at 1-888-317-6003 with the conference passcode "6316195". Please call at least 10 minutes in advance to ensure a proper connection. An audio replay may be accessed through the Company’s website or by dialing 1-877-344-7529 with passcode "6133090" until 11:59 p.m. Eastern on August 8, 2024.

Additionally, the Company will provide a quarterly investor presentation that will be accessible both within the webcast and on Trinity's Investor Relations website under the Events and Presentations portion of the site along with the Second Quarter Earnings Call event weblink.

Non-GAAP Financial Measures

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

About Trinity Industries

Trinity Industries, Inc., headquartered in Dallas, Texas, owns businesses that are leading providers of rail transportation products and services in North America. Our businesses market their railcar products and services under the trade name TrinityRail®. The TrinityRail platform provides railcar leasing and management services; railcar manufacturing; railcar maintenance and modifications; and other railcar logistics products and services. Beginning January 1, 2024, Trinity reports its financial results in two reportable business segments: (1) Railcar Leasing and Services Group, formerly the Railcar Leasing and Management Services Group, and (2) Rail Products Group. For more information, visit: www.trin.net.

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

- TABLES TO FOLLOW -

Trinity has certain unvested restricted stock awards that participate in dividends on a nonforfeitable basis and are therefore considered to be participating securities. Consequently, diluted net income attributable to Trinity Industries, Inc. per common share is calculated under both the two-class method and the treasury stock method, and the more dilutive of the two calculations is presented.

Trinity Industries, Inc.

Reconciliations of Non-GAAP Measures

(in millions, except per share amounts)

(unaudited)

Adjusted Operating Results

We have supplemented the presentation of our reported GAAP operating profit, income from continuing operations before income taxes, provision (benefit) for income taxes, income from continuing operations, net income from continuing operations attributable to Trinity Industries, Inc., and diluted income from continuing operations per common share attributable to Trinity Industries, Inc. with non-GAAP measures that adjust the GAAP measures to exclude the impact of certain selling, engineering, and administrative expenses; gains on dispositions of other property; restructuring activities, net; interest expense, net; and certain other transactions or events (as applicable), described in the footnotes to the tables below. These non-GAAP measures are derived from amounts included in our GAAP financial statements and are reconciled to the most directly comparable GAAP financial measures in the tables below. Management believes that these measures are useful to both management and investors for analyzing the performance of our business without the impact of certain items that are not indicative of our normal business operations. Non-GAAP measures should not be considered in isolation or as a substitute for our reported results prepared in accordance with GAAP and, as calculated, may not be comparable to other similarly titled measures for other companies.

Adjusted Return on Equity

Adjusted Return on Equity (“Adjusted ROE”) is defined as a ratio for which (i) the numerator is calculated as income or loss from continuing operations, adjusted to exclude the effects of net income or loss attributable to noncontrolling interest, and certain other adjustments, described in the footnotes to the table below, which include certain selling, engineering, and administrative expenses; gains on dispositions of other property; and interest expense, net; and (ii) the denominator is calculated as average Trinity stockholders’ equity (which excludes noncontrolling interest). In the following table, the numerator and denominator of our Adjusted ROE calculation are reconciled to income from continuing operations and total stockholders’ equity, respectively, which are the most directly comparable GAAP financial measures. Management believes that Adjusted ROE is a useful measure to both management and investors as it provides an indication of the economic return on the Company’s investments over time. Non-GAAP measures should not be considered in isolation or as a substitute for our reported results prepared in accordance with GAAP and, as calculated, may not be comparable to other similarly titled measures for other companies.

Cash Flow from Operations with Net Gains on Lease Portfolio Sales

Cash flow from operations with net gains on lease portfolio sales is a non-GAAP financial measure. We believe this measure is useful to both management and investors as it provides a relevant measure of liquidity and a useful basis for assessing the breadth of the cash flow generation capabilities across our operating platform, as well as our ability to fund our operations and repay our debt. This measure is defined as net cash provided by operating activities from continuing operations as computed in accordance with GAAP, plus net gains on lease portfolio sales and is reconciled to net cash provided by operating activities from continuing operations, the most directly comparable GAAP financial measure, in the following table. Non-GAAP measures should not be considered in isolation or as a substitute for our reported results prepared in accordance with GAAP and, as calculated, may not be comparable to other similarly titled measures for other companies.

EBITDA and Adjusted EBITDA

“EBITDA” is defined as income from continuing operations plus interest expense, income taxes, and depreciation and amortization expense. Adjusted EBITDA is defined as EBITDA plus certain selling, engineering, and administrative expenses; gains on dispositions of other property; restructuring activities, net; and interest income. EBITDA and Adjusted EBITDA are non-GAAP financial measures; however, the amounts included in these calculations are derived from amounts included in our GAAP financial statements. EBITDA and Adjusted EBITDA are reconciled to net income, the most directly comparable GAAP financial measure, in the following table. This information is provided to assist management and investors in making meaningful comparisons of our operating performance between periods. We believe EBITDA is a useful measure for analyzing the performance of our business. We also believe that EBITDA is commonly reported and widely used by investors and other interested parties as a measure of a company’s operating performance and debt servicing ability because it assists in comparing performance on a consistent basis without regard to capital structure, depreciation or amortization (which can vary significantly depending on many factors). EBITDA and Adjusted EBITDA should not be considered as alternatives to net income as indicators of our operating performance, or as alternatives to operating cash flows as measures of liquidity. Non-GAAP measures should not be considered in isolation or as a substitute for our reported results prepared in accordance with GAAP and, as calculated, may not be comparable to other similarly titled measures for other companies.

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