What changed in this filing

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Item 1. Business

2022-02-17 compared with 2021-02-24 · 36 added, 50 removed, 171 unchanged (33% of the section changed)

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and its consolidated subsidiaries (“Trinity,” “Company,” “we,” “our,” or “us”) own businesses that are leading providers of railcar products and services in North America.

Our rail-related businesses market their railcar products and services under the trade name TrinityRail ® .

Our businesses market their railcar products and services under the trade name TrinityRail ® .

The TrinityRail platform provides railcar leasing and management services, railcar manufacturing, and railcar maintenance and modification services.

We also own businesses engaged in the manufacturing of products used on the nation's roadways and in traffic control.

Trinity was incorporated in 1933 and became a Delaware corporation in 1987.

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Unless otherwise stated, any reference to income statement items in this Annual Report on Form 10-K (the "Form 10-K") refers to results from continuing operations.

We report our operating results in three reportable segments.

Sale of Highway Products Business

In the fourth quarter of 2021, the Company completed the sale of Trinity Highway Products, LLC (“THP”), a wholly-owned subsidiary of the Company, and certain direct and indirect subsidiaries of THP, to Rush Hour Intermediate II, LLC, an entity owned by an affiliated investment fund of Monomoy Capital Partners, for an aggregate purchase price of $375.0 million, subject to certain adjustments.

THP is a leading manufacturer and global supplier of commercial highway products.

We concluded that the sale of THP represented a strategic shift that would have a major effect on the Company’s operations and financial results.

Accordingly, we have presented the operating results and cash flows of THP as discontinued operations for all periods in this 2021 Annual Report on Form 10-K.

Results of prior periods have been recast to reflect these changes and present results on a comparable basis.

See Note 2 of the Consolidated Financial Statements for further information related to the sale of THP.

Reportable Segments

Railcar Leasing and Management Services Group Rail Products Group All Other

Following the sale of THP, we report our operating results in two reportable segments.

All segment results set forth herein have been recast to present results on a comparable basis.

Reportable Segments

Railcar Leasing and Management Services Group Rail Products Group

Business Overview and Current Business Strategy

Our purpose is to deliver goods for the good of all by being the premier provider of railcar-related products and services in North America.

Our purpose is delivering goods for the good of all by being a leading provider of railcar products and services in North America.

We strive to operate industry-leading railcar leasing, manufacturing, and services businesses by providing a single source for comprehensive rail transportation solutions and services in North America.

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Our Railcar Leasing and Management Services Group ("Leasing Group") is a leading provider in North America of comprehensive railcar industry services.

Through wholly-owned subsidiaries, primarily Trinity Industries Leasing Company ("TILC"), and partially-owned subsidiaries, TRIP Rail Holdings LLC (“TRIP Holdings”) and RIV 2013 Rail Holdings LLC ("RIV 2013"), we primarily offer operating leases for freight and tank railcars.

Through wholly-owned subsidiaries, including Trinity Industries Leasing Company ("TILC"), and partially-owned subsidiaries, TRIP Rail Holdings LLC (“TRIP Holdings”) and RIV 2013 Rail Holdings LLC ("RIV 2013"), we primarily offer operating leases for freight and tank railcars.

Trinity's Rail Products Group and TILC coordinate sales and marketing activities under the TrinityRail platform, thereby providing a single point of contact for railroads, shippers, and third-party leasing companies seeking rail equipment and services.

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Substantially all of the railcars in our lease fleet were manufactured by our Rail Products Group.

The terms of our railcar leases generally vary from one to ten years and provide for fixed monthly rentals.

The terms of our railcar leases generally provide for fixed monthly rentals that vary from one to ten years.

We compete in the North American full-service leasing market primarily against four major railcar lessors, as well as numerous smaller lessors.

We serve our customers predominantly through full-service leases and compete primarily on the basis of the quality and craftsmanship of our railcars, competitive pricing, and our ability to provide an outstanding customer experience.

As of December 31, 2020, the lease fleet of our subsidiaries included 107,045 railcars that were 94.5% utilized, of which 105,205 railcars were owned by TILC or its affiliates and 1,840 railcars were financed in sale-leaseback transactions that are not reflected in the property, plant, and equipment amounts reported on our Consolidated Balance Sheet.

Railcars under management, which include those owned by third-party investors, totaled 133,690 railcars.

As of December 31, 2021, the lease fleet of our subsidiaries included 106,970 railcars that were 95.7% utilized, of which 104,715 railcars were owned by TILC or its affiliates and 2,255 railcars were leased from others and are not reflected in the property, plant, and equipment amounts reported on our Consolidated Balance Sheet.

Railcars under management, including those owned by third-party investors, totaled 136,100 railcars.

Lease Fleet Diversification

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Rail Products Group.

Through wholly-owned subsidiaries with manufacturing facilities in the U.S.

Through wholly-owned subsidiaries with facilities in the U.S.

and Mexico, our Rail Products Group is a leading manufacturer of freight and tank railcars in North America used for transporting a wide variety of liquids, gases, and dry cargo.

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No material revenues are received from the licensing of these patents.

All Other includes our highway products business and legal, environmental, and maintenance costs associated with non-operating facilities.

Our highway products business is a leading U.S.

manufacturer of guardrail, crash cushions, and other highway barriers.

The Federal Highway Administration ("FHWA"), which determines product eligibility for cost reimbursement using federal funds, has approved many of our products as eligible for federal-aid reimbursement based on satisfactory performance testing pursuant to criteria established under either the National Cooperative Highway Research Program Report 350 or the Manual for Assessing Safety Hardware, as applicable.

Our crash cushion, barrier, and guardrail product lines include multiple proprietary products manufactured under license from certain public and private research organizations and inventors as well as Company-held patents.

We sell highway products throughout the U.S., Canada, and Mexico, and we export highway products, including proprietary products, internationally.

We do not perform any installation services with respect to our highway products.

Our highway products business is affected by seasonal fluctuations, with the second and third quarters historically being the quarters with the highest revenues.

We sell or lease substantially all of our products and services through our own sales personnel operating from offices in multiple U.S locations as well as Canada and Mexico.

We sell or lease substantially all of our products and services through our own sales personnel operating from offices in multiple U.S.

locations, as well as Canada and Mexico.

We also use independent sales representatives on a limited basis.

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During 2021, the supply of steel was sufficient to support our manufacturing requirements.

Market steel prices continue to exhibit periods of volatility and were higher exiting 2020 compared to 2019.

Steel prices have increased significantly since 2020 and are major components of our cost of revenues.

Steel and component prices may be volatile in the future as a result of market conditions, changes in tariffs or other governmental policies.

We often use contract-specific purchasing practices, existing supplier commitments, contractual price escalation provisions, and other arrangements with our customers to mitigate the effect of steel price volatility on our operating profits for the year.

In general, we believe there is enough capacity in the supply industry to meet current production levels and that our existing contracts and other relationships we have in place will meet our current production forecasts.

We typically use contract-specific purchasing practices, existing supplier commitments, contractual price escalation provisions, and other arrangements with our customers to reduce the impact of plate and coil steel price volatility on our operating profit.

However, higher steel prices could result in increases in the cost of certain railcar components and could also reduce demand for new railcars.

We may from time to time experience shortages of materials used in the production of certain railcar types;

however, in general, we believe there is enough capacity in the supply industry to meet current production levels, and the existing contracts and relationships that we have in place will meet our current production forecasts.

Human Capital.

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Rail Products Group 5,285

All Other 635

Corporate and Enterprise Support 440

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and 3,845 were employed in Mexico.

Additional information on our human capital programs and initiatives is included in our Corporate Social Responsibility Report, which is available on our website.

Information contained on our website is not included in, or incorporated by reference into, this Annual Report on Form 10-K.

We are committed to providing a safe and healthy work environment for all employees.

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This commitment to diversity as a driver of our long-term success is one that we strive to uphold throughout the Company, including through all stages of our human resources process, from recruitment and hiring to talent retention.

We encourage and support employee resource and networking groups, such as WISE (our Women’s Initiative for Success and Empowerment), our diversity and inclusion committee, and other employee groups, which offer educational, professional development, and community service opportunities.

We encourage and support employee resource and networking groups, our diversity and inclusion committee, and other employee groups, which offer educational, professional development, and community service opportunities.

We also provide focused training, mentoring, and employee development for specialized positions, such as plant managers, engineers, accountants, and more.

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We pride ourselves on maintaining an active dialogue with our employees.

facilities, for example, we benchmark overall employee engagement with an annual cross-organization survey targeting metrics such as safety, job satisfaction, and more.

Our Mexico Corporate Social Responsibility program is part of our broader environmental stewardship and social responsibility program, which addresses stakeholders, including employees, suppliers, customers, and the local communities where we operate.

In our facilities, for example, we benchmark overall employee engagement with an annual cross-organization survey targeting metrics such as safety, job satisfaction, and more.

Human Rights.

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Marchetto 52 Executive Vice President and Chief Financial Officer 2001

Lovett 62 Executive Vice President and Chief Administrative Officer 2014

Madison 61 Executive Vice President, Services Operations 2016

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Mitchell 56 Executive Vice President and Chief Commercial Officer 2007

Kevin Poet 54 Executive Vice President, Support Services 2020

Kevin Poet 55 Executive Vice President, Production Operations and Support Services 2020

Teachout 49 Executive Vice President and Chief Legal Officer 2016

West 46 Executive Vice President, Production Operations 2005

Savage was appointed as the Company’s Chief Executive Officer and President, effective February 17, 2020, and has served as a member of the Company’s Board of Directors since 2018.

Savage has served as the Company’s Chief Executive Officer and President since 2020, and has served as a member of the Company’s Board of Directors since 2018.

Prior to her employment with the Company, from 2002 to 2020, she served in a variety of positions with Caterpillar, Inc.

(“Caterpillar”), a manufacturer of construction, industrial, and mining equipment.

From 2017 until her retirement from Caterpillar in February 2020, she served as Vice President of Caterpillar’s Surface Mining and Technology Division.

From 2017 until her retirement from Caterpillar in 2020, she served as Vice President of Caterpillar’s Surface Mining and Technology Division.

From 2014 to 2017, she was Chief Technology Officer and Vice President of Caterpillar’s Innovation and Technology Development Division.

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He joined the Company in 1995.

Lovett has served as Executive Vice President and Chief Administrative Officer since 2020.

From 2019 to 2020, she served as Senior Vice President and Chief Financial Officer.

She joined the Company in 2014 as Senior Vice President and Chief Administrative Officer.

A member of the Company's Board of Directors from 2012 to 2014, Ms.

Lovett resigned her Board position at the time of her appointment as an officer of the Company.

Prior to joining Trinity in 2014, she was the Senior Vice President and President of the Education Technology business for Texas Instruments.

In January 2021, Ms.

Lovett notified the Company of her intention to transition to retirement, effective July 2021.

Madison has served as Executive Vice President, Services Operations since 2020.

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Prior to joining Trinity in 2007, he served as an executive or in senior leadership in supply chain for companies such as Glazers Corporation, Gap Inc., and Wal-Mart.

Poet has served as Executive Vice President, Support Services since 2020.

Poet has served as Executive Vice President, Production Operations and Support Services since 2021, having previously served as Executive Vice President, Support Services since 2020.

He joined Trinity in 2020 from Siemens AG, where from 2016 to 2019 he served in a variety of operational roles, including most recently as Vice President of Operations for Siemens Energy, Inc.

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Teachout had been a partner at the law firm of Haynes and Boone, LLP since 2007.

West has served as Executive Vice President, Production Operations since 2020.

He joined the Company in 1998.

He has served in a variety of roles during his tenure, including service as President of Trinity Rail Maintenance Services since 2015, and service as Senior Vice President of the Company’s galvanizing business from 2012 to 2015.

Commitment to Sustainability.

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Green Financing Framework.

As part of our sustainability efforts, TILC issued its Green Financing Framework in January 2021 supported by a second-party opinion from Sustainalytics, a Morningstar Company and a globally-recognized provider of ESG research, ratings, and data.

The Green Financing Framework enhances the Company’s Sustainability strategy by contributing to a more resource-efficient economy through the financing of railcar assets that contribute to reducing the overall environmental footprint of the transportation industry.

In accordance with the International Capital Market Association's Green Bond Principles, 2018 and the Loan Syndications and Trading Association's Green Loan Principles, 2020, TILC will manage and report on eligible projects and assets to existing debt holders.

The Green Financing Framework will enable Trinity’s leasing company to issue green financing instruments, including green non-recourse ABS bonds and green loans, supported by green eligible railcar assets.

Under the existing framework, TILC has issued over $4 billion of railcar-related debt that meet the criteria and qualify for the Green Financing designation.

The Green Financing Framework will enable Trinity’s leasing company to issue green financing instruments, including green non-recourse bonds and green loans, supported by green eligible railcar assets.

Under the existing framework, TILC has issued over $4 billion of railcar-related debt that meets the criteria and qualifies for the Green Financing designation.

Governmental Regulation.

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We believe that our product designs and operations are in compliance with these specifications, standards, and regulations applicable to our business.

Highway Products.

The primary regulatory and industry authorities involved in the regulation of highway products manufacturers are the USDOT, the FHWA, and various state highway departments and administrative agencies.

These organizations, with participation from the American Association of State Highway and Transportation Officials ("AASHTO"), establish certain specifications, product testing criteria, and performance standards related to the manufacture of our highway products.

We believe that our highway products are in compliance with the standards and specifications applicable to our business.

Occupational Safety and Health Administration and Similar Regulations.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business