TRINITY INDUSTRIES INC 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide management's perspective on our financial condition, results of operations, liquidity, and certain other factors that may affect our future results. Our MD&A should be read in conjunction with the unaudited Consolidated Financial Statements and related Notes in Part I, Item 1 of this Quarterly Report on Form 10-Q and Item 8, Financial Statements and Supplementary Data, of our 2021 Annual Report on Form 10-K. This MD&A includes financial measures compiled in accordance with generally accepted accounting principles ("GAAP") and certain non-GAAP measures. Please refer to the Non-GAAP Financial Measures section herein for information on the non-GAAP measures included in the MD&A, reconciliations to the most directly comparable GAAP financial measure, and the reasons why management believes each measure is useful to management and investors. 33 Table of Contents Forward-Looking Statements This quarterly report on Form 10-Q (or statements otherwise made by the Company or on the Company’s behalf from time to time in other reports, filings with the Securities and Exchange Commission (“SEC”), news releases, conferences, website postings or otherwise) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements contained herein that are not historical facts are forward-looking statements and involve risks and uncertainties. These forward-looking statements include expectations, beliefs, plans, objectives, future financial performances, estimates, projections, goals, and forecasts. Trinity uses the words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “forecasts,” “may,” “will,” “should,” and similar expressions to identify these forward-looking statements. Potential factors, which could cause our actual results of operations to differ materially from those in the forward-looking statements, include, among others: • market conditions and customer demand for our business products and services; • the cyclical nature of the industries in which we compete; • variations in weather in areas where our products are sold or used; • naturally-occurring events, pandemics, and/or disasters causing disruption to our manufacturing, product deliveries, and production capacity, thereby giving rise to an increase in expenses, loss of revenue, and property losses; • the impact of the coronavirus pandemic (“COVID-19”) and the response thereto, on, among other things, demand for our products and services, our customers' ability to pay, disruptions to our supply chain, our liquidity and financial position, results of operations, stock price, payment of dividends, our ability to generate new railcar orders, our ability to originate and/or renew leases at favorable rates, our ability to convert backlog to revenue, and the operational status of our facilities; • disruptions in the transportation network used to deliver our products, which may impact our ability to timely deliver railcars to our customers; • shortages of labor; • impacts from asset impairments and related charges; • the timing of introduction of new products; • the timing and delivery of customer orders, lease portfolio sales, or a breach of customer contracts; • the creditworthiness of customers and their access to capital; • product price changes; • changes in mix of products sold; • the costs incurred to align manufacturing capacity with demand and the extent of its utilization; • the operating leverage and efficiencies that can be achieved by our manufacturing businesses; • availability and costs of steel, component parts, supplies, and other raw materials; • competition and other competitive factors; • changing technologies; • material failure, interruption of service, compromised data security, phishing emails, or cybersecurity breaches in our information technology (or that of the third-party vendors who provide information technology or other services); • surcharges and other fees added to fixed pricing agreements for steel, component parts, supplies, and other raw materials; • interest rates and capital costs; • counter-party risks for financial instruments; • long-term funding of our operations; • taxes; • the stability of the governments and political and business conditions in certain foreign countries, particularly Mexico; • geopolitical events, including armed conflicts, and their impact on supply chains, pricing, and the global economy; • changes in import and export quotas and regulations; • business conditions in emerging economies; • costs and results of litigation, including trial and appellate costs; • changes in accounting standards or inaccurate estimates or assumptions in the application of accounting policies; • changes in laws and regulations that may have an adverse effect on demand for our products and services, our results of operations, financial condition or cash flows; • legal, regulatory, and environmental issues, including compliance of our products with mandated specifications, standards, or testing criteria and obligations to remove and replace our products following installation or to recall our products and install different products; 34 Table of Contents • actions by U.S. and/or foreign governments (particularly Mexico and Canada) relative to federal government budgeting, taxation policies, government expenditures, borrowing/debt ceiling limits, tariffs, and trade policies; • the use of social or digital media to disseminate false, misleading and/or unreliable or inaccurate information; and • the inability to sufficiently protect our intellectual property rights. Any forward-looking statement speaks only as of the date on which such statement is made. Except as required by federal securities laws, Trinity undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made. For a discussion of risks and uncertainties which could cause actual results to differ from those contained in the forward-looking statements, see “Risk Factors” in our 2021 Annual Report on Form 10-K, this Form 10-Q and future Forms 10-Q and Current Reports on Forms 8-K. 35 Table of Contents Company Overview Trinity Industries, Inc. 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 ® . The TrinityRail platform provides railcar leasing and management services, railcar manufacturing, and railcar maintenance and modification services. 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 ("Rush Hour"), 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. We concluded that the sale of THP represented a strategic shift that will 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 Quarterly Report on Form 10-Q. Results of prior periods have been recast to reflect these changes and present results on a comparable basis. In connection with the sale of THP, we agreed to indemnify Rush Hour for certain liabilities related to the ET-Plus® System, a highway guardrail end-terminal system (the “ET Plus”). Consequently, results from discontinued operations include certain legal expenses that were directly attributable to the highway products business, which were previously reported in continuing operations. Similar expenses incurred during the three and nine months ended September 30, 2022 and that may be incurred in the future related to these retained obligations will likewise be reported in discontinued operations. See Note 2 of the Consolidated Financial Statements for further information related to the sale of THP and Note 14 for information regarding the retained liabilities. Following the sale of THP, we report our operating results in two reportable segments: (1) the Railcar Leasing and Management Services Group (the "Leasing Group"), which owns and operates a fleet of railcars and provides third-party fleet leasing, management, and administrative services; and (2) the Rail Products Group, which manufactures and sells railcars and related parts and components, and provides railcar maintenance and modification services. Additionally, we have combined the results of the prior Corporate and All Other groupings into a single Corporate and other grouping. The remaining activity previously reported in All Other primarily includes legal, environmental, and maintenance costs associated with non-operating facilities. Results of prior periods have been recast to reflect these changes and present results on a comparable basis. Executive Summary Recent Market Developments Cyclical, Seasonal and Other Trends Impacting Our Business The industries in which our customers operate are cyclical in nature. Weaknesses in certain sectors of the North American and global economy may make it more difficult to sell or lease certain types of railcars. Additionally, changes in commodity prices, including fluctuations in the crude oil market, or changes in demand for certain commodities, could impact customer demand for various types of railcars. Further, disruptions in the global supply chain have impacted demand for, and the costs of, certain of our products and services. We continuously assess demand for our products and services and take steps to rationalize and diversify our leased railcar portfolio and align our operating capacity appropriately. We diligently evaluate the creditworthiness of our customers and monitor performance of relevant market sectors; however, weaknesses in any of these market sectors could affect the financial viability of our underlying Leasing Group customers, which could negatively impact our recurring leasing revenues and operating profits. Railcar loading volumes, levels of railcars in storage, and orders for new railcar equipment have improved, and railcar lease rates and utilization continue to improve. We believe that our rail platform is designed to respond to cyclical changes in demand and perform throughout the railcar cycle. Steel prices and labor costs have increased significantly since the fourth quarter of 2020 and are major components of our cost of revenues. 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 have resulted in increases in the cost of certain railcar components and could reduce demand for new railcars. Additionally, although we remain committed to attracting and retaining a highly skilled and diverse workforce, labor shortages, high turnover, and increases in labor costs have negatively impacted our operations. We continue to monitor the impact of potential margin and operating profit headwinds resulting from these factors. 36 Table of Contents As a result of disruptions in the global supply chain, we have continued to experience shortages of materials used to manufacture or repair certain railcar types, as well as disruptions in the transportation network used to deliver our products, which have impacted our ability to timely deliver these railcars to our customers. While we believe these challenges will be resolved over time, they may persist over the foreseeable future, which could continue to impact our operations. We will continue to monitor the situation and take appropriate steps within our control to mitigate the potential impacts on our production schedules and delivery timelines. Due to their transactional nature, lease portfolio sales are the primary driver of fluctuations in results in the Leasing Group. COVID-19 The COVID-19 pandemic significantly impacted global and North American economic conditions. The social and economic effects of the pandemic have been widespread. We continue to monitor the operational and financial impacts of the pandemic and other economic factors. Although we have not experienced significant interruptions to our daily operations or a material impact to our operating costs, the ongoing economic pressures related to the effects of the pandemic have negatively impacted our results of operations for the three and nine months ended September 30, 2022. While we continue to see gradual reduction of the impacts of the pandemic, we are monitoring the impacts of COVID-19 variants on the economy and our workforce. Please refer to the "Forward-Looking Statements" section above and Part I, Item 1A “Risk Factors” of the 2021 Annual Report on Form 10-K for additional information regarding the potential impacts of COVID-19 on our business. Financial and Operational Highlights • Our revenues for the nine months ended September 30, 2022 were $1,386.1 million, representing an increase of 32.8%, compared to the nine months ended September 30, 2021. Our operating profit for the nine months ended September 30, 2022 was $220.5 million compared to $187.6 million for the nine months ended September 30, 2021. • The Leasing Group's lease fleet of 109,195 company-owned railcars was 97.9% utilized as of September 30, 2022, compared to a lease fleet utilization of 95.0% on 105,915 company-owned railcars as of September 30, 2021. Our company-owned lease fleet includes wholly-owned railcars, partially-owned railcars, and railcars under leased-in arrangements. • For the nine months ended September 30, 2022, we made a net investment in our lease fleet of approximately $176.3 million, which primarily includes new railcar additions, sustainable railcar conversions, railcar modifications, and other betterments, net of deferred profit, and secondary market purchases; and is net of proceeds from lease portfolio sales. • The total value of the new railcar backlog at September 30, 2022 was $4.1 billion, compared to $1.2 billion at September 30, 2021. The Rail Products Group received orders for 28,890 railcars and delivered 8,915 railcars in the nine months ended September 30, 2022, in comparison to orders for 8,510 railcars and deliveries of 6,070 railcars in the nine months ended September 30, 2021. ◦ In the third quarter of 2022, we entered into a new long-term railcar supply agreement with GATX Corporation (“GATX”) to deliver a mix of 15,000 newly built tank and freight railcars over a six-year period. Our ending backlog at September 30, 2022 includes 15,000 railcars valued at approximately $1.8 billion associated with this agreement. • The Rail Products Group offers a sustainable railcar conversion program whereby certain tank cars and freight cars are converted or upgraded to better meet changing market demands. During the nine months ended September 30, 2022, sustainable railcar conversion revenues totaled $117.9 million, representing 1,230 railcars. • For the nine months ended September 30, 2022, operating cash flows from continuing operations was a net use of $52.6 million and Free Cash Flow After Investments and Dividends ("Free Cash Flow") was $0.1 million (1) , in comparison to generating operating cash flows from continuing operations and Free Cash Flow of $418.8 million and $510.9 million (1) , respectively, for the nine months ended September 30, 2021. (1) Non-GAAP financial measure. See the Non-GAAP Financial Measures section within this Form 10-Q for a reconciliation to the most directly comparable GAAP measure and why management believes this measure is useful to management and investors. See "Consolidated Results of Operations" and "Segment Discussion" below for additional information regarding our operating results. 37 Table of Contents Returns of Capital to Shareholders Returns of capital to shareholders in the form of dividends and share repurchases are summarized below: (1) Dividend yield is calculated as dividends paid for the four previous quarters divided by the closing stock price on the last trading day of each respective quarter. (2) In the third quarter of 2021, we completed the existing share repurchase program, and our Board of Directors authorized a new $250.0 million share repurchase program. (3) In the fourth quarter of 2021, we entered into an additional stock repurchase agreement with ValueAct Capital Master Fund, L.P. ("ValueAct") in a privately negotiated transaction. Additionally, we entered into an accelerated share repurchase agreement (the "ASR") to repurchase $125.0 million of our common stock. See Note 12 of the Consolidated Financial Statements for more information on the ASR. (4) There were no shares repurchased during the first quarter of 2022 due to the ongoing ASR. (5) In the second quarter of 2022, we completed the final settlement of the ASR. See Note 12 of the Consolidated Financial Statements for more information on the ASR. Capital Structure Updates TRL-2022 – In April 2022, Trinity Rail Leasing 2022 LLC, a Delaware limited liability company ("TRL-2022") and a limited purpose, indirect wholly-owned subsidiary of the Company owned through Trinity Industries Leasing Company ("TILC"), issued $244.8 million of its Series 2022-1 Green Secured Railcar Equipment Notes. These notes bear interest at a fixed rate of 4.55%, are payable monthly, and have a stated final maturity date of 2052. Net proceeds received from the transaction were used to repay borrowings under TILC's warehouse loan facility and for general corporate purposes. Tribute Rail – In May 2022, Tribute Rail LLC ("Tribute Rail"), an indirect, wholly-owned subsidiary of TRIP Rail Holdings LLC ("TRIP Holdings"), issued $327.0 million of its Series 2022-1 Green Secured Railcar Equipment Notes. These notes bear interest at an all-in interest rate of 4.88% and have a stated final maturity date of 2052. Net proceeds received from the issuance of these notes were used to redeem TRIP Railcar Co. LLC's ("TRIP Railcar Co.") existing term loan agreement, of which $319.4 million was outstanding at the redemption date. While the stated final maturity date of these debt issuances is in 2052, the cash flows from the encumbered assets of each of TRL-2022 and Tribute Rail will be applied, pursuant to the payment priorities of their respective indentures, so as to amortize their respective notes to achieve monthly targeted principal balances. If the cash flow assumptions used in determining the targeted balances are met, it is anticipated that the notes will be repaid well in advance of their stated final maturity date. There can be no assurance, however, that such cash flow assumptions will be realized. See Note 8 of the Consolidated Financial Statements for more information. Litigation Updates See Note 14 of the Consolidated Financial Statements for an update on the status of certain litigation retained in connection with the sale of THP. 38 Table of Contents Consolidated Results of Operations The following table summarizes our consolidated results of operations for the three and nine months ended September 30, 2022 and 2021: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 (in millions) Revenues $ 496.6 $ 419.8 $ 1,386.1 $ 1,043.8 Cost of revenues 395.3 337.4 1,119.4 785.8 Selling, engineering, and administrative expenses 48.0 45.8 137.7 136.7 Gains on dispositions of property 39.4 41.6 92.5 65.2 Restructuring activities, net — (0.1) 1.0 (1.1) Total operating profit 92.7 78.3 220.5 187.6 Interest expense, net 55.0 45.2 148.2 147.5 Loss on extinguishment of debt — — 1.5 11.7 Other, net (0.6) (0.7) (2.7) 1.3 Income from continuing operations before income taxes 38.3 33.8 73.5 27.1 Provision (benefit) for income taxes 8.6 8.3 17.4 9.4 Income from continuing operations $ 29.7 $ 25.5 $ 56.1 $ 17.7 39 Table of Contents Revenues The tables below present revenues by segment for the three and nine months ended September 30, 2022 and 2021: Three Months Ended September 30, 2022 Revenues Percent External Intersegment Total Change (in millions) Railcar Leasing and Management Services Group $ 194.6 $ 0.2 $ 194.8 5.0 % Rail Products Group 302.0 295.3 597.3 75.7 % Segment Totals 496.6 295.5 792.1 50.8 % Eliminations – Lease Subsidiary — (295.3) (295.3) Eliminations – Other — (0.2) (0.2) Consolidated Total $ 496.6 $ — $ 496.6 18.3 % Three Months Ended September 30, 2021 Revenues External Intersegment Total (in millions) Railcar Leasing and Management Services Group $ 185.3 $ 0.2 $ 185.5 Rail Products Group 234.5 105.4 339.9 Segment Totals 419.8 105.6 525.4 Eliminations – Lease Subsidiary — (105.3) (105.3) Eliminations – Other — (0.3) (0.3) Consolidated Total $ 419.8 $ — $ 419.8 Nine Months Ended September 30, 2022 Revenues Percent External Intersegment Total Change (in millions) Railcar Leasing and Management Services Group $ 572.6 $ 0.6 $ 573.2 3.4 % Rail Products Group 813.5 605.5 1,419.0 64.5 % Segment Totals 1,386.1 606.1 1,992.2 40.6 % Eliminations – Lease Subsidiary — (605.5) (605.5) Eliminations – Other — (0.6) (0.6) Consolidated Total $ 1,386.1 $ — $ 1,386.1 32.8 % Nine Months Ended September 30, 2021 Revenues External Intersegment Total (in millions) Railcar Leasing and Management Services Group $ 553.6 $ 0.5 $ 554.1 Rail Products Group 490.2 372.5 862.7 Segment Totals 1,043.8 373.0 1,416.8 Eliminations – Lease Subsidiary — (367.6) (367.6) Eliminations – Other — (5.4) (5.4) Consolidated Total $ 1,043.8 $ — $ 1,043.8 40 Table of Contents Operating Costs Operating costs are comprised of cost of revenues; selling, engineering, and administrative costs; gains or losses on property disposals; and restructuring activities. Operating costs by segment for the three and nine months ended September 30, 2022 and 2021 were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 (in millions) Railcar Leasing and Management Services Group $ 86.9 $ 76.2 $ 280.0 $ 285.4 Rail Products Group 571.3 343.0 1,378.5 871.4 Segment Totals 658.2 419.2 1,658.5 1,156.8 Corporate and other 21.4 23.1 62.2 63.1 Restructuring activities, net — (0.1) 1.0 (1.1) Eliminations – Lease Subsidiary (275.7) (100.8) (556.8) (358.3) Eliminations – Other — 0.1 0.7 (4.3) Consolidated Total $ 403.9 $ 341.5 $ 1,165.6 $ 856.2 Operating Profit Operating profit by segment for the three and nine months ended September 30, 2022 and 2021 was as follows: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 (in millions) Railcar Leasing and Management Services Group $ 107.9 $ 109.3 $ 293.2 $ 268.7 Rail Products Group 26.0 (3.1) 40.5 (8.7) Segment Totals 133.9 106.2 333.7 260.0 Corporate and other (21.4) (23.1) (62.2) (63.1) Restructuring activities, net — 0.1 (1.0) 1.1 Eliminations – Lease Subsidiary (19.6) (4.5) (48.7) (9.3) Eliminations – Other (0.2) (0.4) (1.3) (1.1) Consolidated Total $ 92.7 $ 78.3 $ 220.5 $ 187.6 Discussion of Consolidated Results Revenues – Our revenues for the three months ended September 30, 2022 were $496.6 million, representing an increase of $76.8 million, or 18.3%, over the prior year period. Our revenues for the nine months ended September 30, 2022 were $1,386.1 million, representing an increase of $342.3 million, or 32.8%, over the prior year period. The increases in revenues were primarily due to a higher volume of, and improved pricing on, external deliveries in the Rail Products Group. Cost of revenues – Our cost of revenues for the three months ended September 30, 2022 was $395.3 million, representing an increase of $57.9 million, or 17.2%, over the prior year period. Our cost of revenues for the nine months ended September 30, 2022 was $1,119.4 million, representing an increase of $333.6 million, or 42.5%, over the prior year period. The increases in cost of revenues were primarily due to a higher volume of, and input cost inflation associated with, external deliveries in the Rail Products Group. Selling, engineering, and administrative expenses – Selling, engineering, and administrative expenses were substantially unchanged for the three and nine months ended September 30, 2022 when compared to the prior year periods. Gains on dispositions of property – Gains on dispositions of property decreased by $2.2 million for the three months ended September 30, 2022 when compared to the prior year period. During the three months ended September 30, 2022 and 2021, we recorded gains of $1.1 million and $4.7 million, respectively, related to insurance recoveries in excess of net book value for assets damaged by a tornado at the Company’s rail maintenance facility in Cartersville, Georgia in the first quarter of 2021. See Note 14 of the Consolidated Financial Statements for more information. 41 Table of Contents Gains on dispositions of property increased by $27.3 million for the nine months ended September 30, 2022 when compared to the prior year period primarily due to higher lease portfolio sales. Results for the nine months ended September 30, 2022 and 2021 included gains of $7.5 million and $4.7 million, respectively, related to insurance recoveries in excess of net book value for assets damaged by a tornado at the Company’s rail maintenance facility in Cartersville, Georgia in the first quarter of 2021. See Note 14 of the Consolidated Financial Statements for more information. Operating profit – Operating profit for the three months ended September 30, 2022 totaled $92.7 million, representing an increase of $14.4 million, or 18.4%, from the prior year period primarily due to higher deliveries and improved pricing in the Rail Products Group, partially offset by higher fleet operating costs and increased depreciation in the Leasing Group. Operating profit for the nine months ended September 30, 2022 totaled $220.5 million, representing an increase of $32.9 million, or 17.5%, from the prior year period primarily due to higher lease portfolio sales activity, partially offset by higher costs associated with external deliveries in the Rail Products Group, including the impact of deliveries of orders taken at the bottom of the cycle, as well as higher fleet operating costs and increased depreciation in the Leasing Group. Operating profit was favorably impacted in the current and prior year periods by insurance recoveries related to a tornado at the Company’s rail maintenance facility in Cartersville, Georgia in the first quarter of 2021. For further information regarding the operating results of individual segments, see "Segment Discussion" below. Interest expense, net – Interest expense, net for the three months ended September 30, 2022 totaled $55.0 million, compared to $45.2 million for the three months ended September 30, 2021, primarily driven by higher variable interest rates associated with TILC's warehouse loan facility and higher overall average debt. Interest expense, net for the nine months ended September 30, 2022 totaled $148.2 million, compared to $147.5 million for the nine months ended September 30, 2021, primarily driven by higher variable interest rates associated with TILC's warehouse loan facility and higher overall average debt in 2022, partially offset by lower overall borrowing costs associated with the Company's debt facilities resulting from debt refinancing activity during the second quarter of 2021. Loss on extinguishment of debt – Loss on extinguishment of debt for the nine months ended September 30, 2022 was $1.5 million from the write-off of unamortized debt issuance costs associated with the repayment of TRIP Railcar Co.'s outstanding term loan agreement. Loss on extinguishment of debt for the nine months ended September 30, 2021 was $11.7 million from the refinancing of our partially-owned subsidiaries' debt, which included the write-off of $8.4 million in unamortized debt issuance costs and a $3.3 million early redemption premium. There was no loss on extinguishment of debt for the three months ended September 30, 2022 and 2021. Income taxes – The effective tax rate from continuing operations for the three and nine months ended September 30, 2022 was 22.5% and 23.7%, respectively, which differs from the U.S. statutory rate of 21.0% primarily due to state income taxes, foreign taxes, non-deductible executive compensation, excess tax benefits associated with equity-based compensation, taxes not recorded on our non-controlling interests in partially-owned subsidiaries, and a reduction of our uncertain tax positions balance due to a lapse of a state statute of limitations. For the three months ended September 30, 2021, we recorded income tax expense of $8.3 million on income from continuing operations before income taxes of $33.8 million, which differs from the U.S. statutory rate primarily due to excess tax benefits associated with equity-based compensation. For the nine months ended September 30, 2021, we recorded income tax expense of $9.4 million on income from continuing operations before income taxes of $27.1 million, which differs from the U.S. statutory rate primarily due to adjustments to the Coronavirus Aid, Relief, and Economic Security Act carryback benefit previously recognized, partially offset by excess tax benefits associated with equity-based compensation. 42 Table of Contents Segment Discussion Railcar Leasing and Management Services Group Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 Percent 2022 2021 Percent ($ in millions) Change ($ in millions) Change Revenues: Leasing and management $ 194.8 $ 185.5 5.0 % $ 573.2 $ 554.1 3.4 % Operating profit (1) : Leasing and management $ 73.6 $ 76.4 (3.7) % $ 220.2 $ 223.0 (1.3) % Lease portfolio sales (2) 34.3 32.9 * 73.0 45.7 * Total operating profit $ 107.9 $ 109.3 (1.3) % $ 293.2 $ 268.7 9.1 % Total operating profit margin 55.4 % 58.9 % 51.2 % 48.5 % Leasing and management operating profit margin 37.8 % 41.2 % 38.4 % 40.2 % Selected expense information: Depreciation (3) $ 59.1 $ 58.7 0.7 % $ 175.7 $ 170.5 3.0 % Maintenance and compliance $ 28.2 $ 22.8 23.7 % $ 84.7 $ 73.7 14.9 % Rent and ad valorem taxes $ 5.2 $ 5.0 4.0 % $ 15.5 $ 14.3 8.4 % Selling, engineering, and administrative expenses $ 14.2 $ 11.6 22.4 % $ 39.6 $ 36.1 9.7 % Interest (4) $ 49.2 $ 39.9 23.3 % $ 133.9 $ 142.6 (6.1) % * Not meaningful (1) Operating profit includes: depreciation; fleet operating costs, which include maintenance, compliance, freight, and storage; rent and ad valorem taxes; 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 profits of the Leasing Group, resulting in the recognition of depreciation expense based on our original manufacturing cost of the railcars. Interest expense is not a component of operating profit and includes the effect of hedges. (2) Includes $1.3 million selling profit associated with sales-type leases for the nine months ended September 30, 2022. (3) Depreciation expense includes $2.4 million and $8.5 million for the three and nine months ended September 30, 2022, respectively, related to the disposal of certain railcar components associated with our sustainable railcar conversion program. For the three and nine months ended September 30, 2021, depreciation expense includes $4.7 million and $7.3 million, respectively, related to our sustainable railcar conversion program. (4) Interest expense for the nine months ended September 30, 2022 includes $1.5 million of loss on extinguishment of debt associated with the repayment of TRIP Railcar Co.'s outstanding term loan agreement. Interest expense for the nine months ended September 30, 2021 includes $11.7 million of loss on extinguishment of debt associated with the refinancing of our partially-owned subsidiaries' debt. Information related to lease portfolio sales is as follows: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 ($ in millions) Lease portfolio sales $ 299.6 $ 322.1 $ 514.8 $ 410.9 Operating profit on lease portfolio sales (1) $ 34.3 $ 32.9 $ 71.7 $ 45.7 Operating profit margin on lease portfolio sales 11.4 % 10.2 % 13.9 % 11.1 % (1) Excludes $1.3 million selling profit associated with sales-type leases for the nine months ended September 30, 2022. Total revenues for the Railcar Leasing and Management Services Group increased by 5.0% and 3.4% for the three and nine months ended September 30, 2022, respectively, compared to the prior year periods. Leasing and management revenues for the three and nine months ended September 30, 2022 were favorably impacted by higher utilization, improved renewal rates, and the effect of net lease fleet investment activities, which resulted in higher revenues when compared to the three and nine months ended September 30, 2021. 43 Table of Contents Operating profit for the Leasing Group decreased by 1.3% for the three months ended September 30, 2022 and increased by 9.1% for the nine months ended September 30, 2022, compared to the prior year periods. Operating profit for the nine months ended September 30, 2022 was favorably impacted by higher lease portfolio sale activity. Leasing and management operating profit for the three and nine months ended September 30, 2022 decreased by 3.7% and 1.3%, respectively, compared to the prior year periods primarily due to higher fleet operating costs and increased depreciation, partially offset by higher utilization on a larger lease fleet. The Leasing Group generally uses its non-recourse warehouse loan facility or cash to provide initial funding for a portion of the purchase price of the railcars. After initial funding, the Leasing Group may obtain long-term financing for the railcars in the lease fleet through non-recourse asset-backed securities; long-term non-recourse operating leases pursuant to sale-leaseback transactions; long-term recourse debt such as equipment trust certificates; long-term non-recourse promissory notes; or third-party equity. Information regarding the Leasing Group’s lease fleet is as follows: September 30, 2022 September 30, 2021 Number of railcars: Wholly-owned (1) 85,280 81,395 Partially-owned 23,915 24,520 109,195 105,915 Investor-owned 33,245 30,060 142,440 135,975 Company-owned railcars (2) : Average age in years 12.1 10.9 Average remaining lease term in years 3.0 2.9 Fleet utilization 97.9 % 95.0 % (1) Includes 2,805 railcars and 2,280 railcars under leased-in arrangements as of September 30, 2022 and 2021, respectively. (2) Includes wholly-owned railcars, partially-owned railcars, and railcars under leased-in arrangements. 44 Table of Contents Rail Products Group Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 Percent 2022 2021 Percent ($ in millions) Change ($ in millions) Change Revenues: Rail products (1) $ 531.1 $ 297.6 78.5 % $ 1,228.5 $ 709.2 73.2 % Maintenance services 51.9 33.3 55.9 % 151.9 124.4 22.1 % Other 14.3 9.0 58.9 % 38.6 29.1 32.6 % Total revenues $ 597.3 $ 339.9 75.7 % $ 1,419.0 $ 862.7 64.5 % Operating costs: Cost of revenues 563.5 339.5 66.0 % 1,360.3 850.7 59.9 % Selling, engineering, and administrative expenses 8.7 8.3 4.8 % 25.4 25.4 — % Gains on dispositions of property (0.9) (4.8) * (7.2) (4.7) * Operating profit (loss) $ 26.0 $ (3.1) * $ 40.5 $ (8.7) * Operating profit (loss) margin 4.4 % (0.9) % 2.9 % (1.0) % * Not meaningful (1) Includes sustainable railcar conversion revenues of $28.9 million, representing 300 railcars, for the three months ended September 30, 2022 and sustainable railcar conversion revenues of $117.9 million, representing 1,230 railcars, for the nine months ended September 30, 2022. Includes sustainable railcar conversion revenues of $26.0 million, representing 242 railcars for the three months ended September 30, 2021 and sustainable railcar conversion revenues of $38.8 million, representing 361 railcars for the nine months ended September 30, 2021. Revenues for the Rail Products Group increased for the three and nine months ended September 30, 2022 by 75.7% and 64.5%, respectively, when compared to the prior year periods. Revenues in our rail products business increased as a result of higher deliveries, favorable pricing, and price escalation provisions contained in our customer contracts, and revenues in our maintenance services business increased as a result of a higher mix of HM-251 modifications relative to other maintenance services revenues. Cost of revenues for the Rail Products Group increased for the three and nine months ended September 30, 2022 by 66.0% and 59.9%, respectively, when compared to the prior year periods. In our rail products business, the increase in cost of revenues was driven by higher deliveries and input cost inflation, as well as operational inefficiencies associated with supply chain disruptions. In our maintenance services business, cost of revenues increased as a result of a higher volume of HM-251 modifications. Cost of revenues for the nine months ended September 30, 2022 were further impacted by the introduction of additional products into the production line in our rail products business and continued to be negatively impacted by labor shortages leading to operating inefficiencies in our maintenance services business. Operating profit for the three and nine months ended September 30, 2022 was favorably impacted by higher deliveries and improved pricing, partially offset by disruptions in the transportation network used to deliver our products. Operating profit for the nine months ended September 30, 2022 was unfavorably impacted by deliveries of orders taken at the bottom of the cycle. Additionally, during the three and nine months ended September 30, 2022 and 2021, operating profit was favorably impacted by insurance recoveries related to a tornado at the Company’s rail maintenance facility in Cartersville, Georgia in the first quarter of 2021. 45 Table of Contents Information related to our Rail Products Group backlog of new railcars is as follows. In addition to the amounts below, as of September 30, 2022, our backlog related to sustainable railcar conversions totaled $201.4 million, representing 2,420 railcars. September 30, 2022 2021 Percent (in millions) Change External customers (1) $ 3,573.7 $ 980.9 Leasing Group 517.2 247.5 Total (2) $ 4,090.9 $ 1,228.4 233.0 % Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Percent Change Beginning balance 18,090 11,305 13,980 8,985 Orders received (1) 19,500 2,530 28,890 8,510 239.5 % Deliveries (3,935) (2,410) (8,915) (6,070) 46.9 % Other adjustments (2) — — (300) — Ending balance 33,655 11,425 33,655 11,425 194.6 % Average selling price in ending backlog $ 121,554 $ 107,519 13.1 % (1) Ending backlog and orders received for the three and nine months ended September 30, 2022 include 15,000 railcars valued at approximately $1.8 billion associated with a new long-term railcar supply agreement with GATX. (2) The adjustment for the nine months ended September 30, 2022 includes 300 railcars valued at $34.6 million that were removed from the new railcar backlog and shifted to the sustainable railcar conversion backlog. Total backlog dollars increased by 233.0% when compared to the prior year period primarily from an increase in the volume and average selling price of orders received. We expect to deliver approximately 16.2% of our railcar backlog value during 2022 and 35.5% during 2023, with the remainder to be delivered through 2028. The orders in our backlog from the Leasing Group are fully supported by lease commitments with external customers. The final amount of backlog attributable to the Leasing Group may vary by the time of delivery as customers may elect to change their procurement decision. Transactions between the Rail Products Group and the Leasing Group are as follows: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 ($ in millions) Revenues: New railcars $ 229.2 $ 70.8 $ 423.9 $ 279.2 Sustainable railcar conversions $ 28.9 $ 26.0 $ 89.2 $ 38.8 Other maintenance services $ 37.2 $ 8.5 $ 92.4 $ 49.6 Deferred profit $ 19.6 $ 4.5 $ 48.7 $ 9.3 Number of new railcars (in units) 1,735 670 3,205 2,741 Number of sustainable railcar conversions (in units) 300 242 860 361 46 Table of Contents Corporate and other Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 Percent 2022 2021 Percent (in millions) Change (in millions) Change Operating costs: Selling, engineering, and administrative expenses $ 25.1 $ 25.9 (3.1) % $ 72.7 $ 75.2 (3.3) % Gains on dispositions of property (3.7) (2.8) * (10.5) (12.1) * Operating loss $ (21.4) $ (23.1) (7.4) % $ (62.2) $ (63.1) (1.4) % * Not meaningful Selling, engineering, and administrative expenses for the three and nine months ended September 30, 2022 decreased 3.1% and 3.3%, respectively, compared to the prior year periods, primarily from lower litigation-related expenses. Total operating costs in the three and nine months ended September 30, 2022 and 2021 were favorably impacted by gains associated with the disposition of non-operating facilities. As we continue to streamline our operational footprint, we may have additional gains or losses on the disposition of other non-operating facilities. 47 Table of Contents Liquidity and Capital Resources Overview We expect to finance future operating requirements with cash, cash equivalents, and short-term marketable securities; cash flows from operations; and short-term debt, long-term debt, and equity. Debt instruments that we have utilized include the TILC warehouse loan facility, senior notes, convertible subordinated notes, asset-backed securities, non-recourse promissory notes, sale-leaseback transactions, and our revolving credit facility. As of September 30, 2022, we have total committed liquidity of $464.7 million. Our total available liquidity includes: $58.5 million of unrestricted cash and cash equivalents; $264.1 million unused and available under our revolving credit facility; and $142.1 million unused and available under the TILC warehouse loan facility based on the amount of warehouse-eligible, unpledged equipment. We believe we have access to adequate capital resources to fund operating requirements and are an active participant in the capital markets. Liquidity Highlights TRL-2022 – In April 2022, TRL-2022 issued $244.8 million of its Series 2022-1 Green Secured Railcar Equipment Notes. These notes bear interest at a fixed rate of 4.55% and have a stated final maturity date of 2052. Net proceeds received from the transaction were used to repay borrowings under TILC's warehouse loan facility and for general corporate purposes. Dividend Payments – We paid $58.3 million in dividends to our common stockholders during the nine months ended September 30, 2022. Share Repurchase Authorization – In September 2021, our Board of Directors authorized a new share repurchase program effective September 9, 2021 through December 31, 2022. The new share repurchase program authorizes the Company to repurchase up to $250.0 million of its common stock. In December 2021, using a portion of the proceeds from the sale of THP, we entered into an ASR to repurchase $125.0 million of our common stock. Approximately 3.3 million shares repurchased as part of the ASR on December 31, 2021 were delivered to the Company in January 2022 in accordance with normal settlement practices, representing approximately 80% of the total notional value of the ASR. The ASR was completed in April 2022. Share repurchase activity under the authorized program is as follows: Shares Repurchased Remaining Authorization to Repurchase Period Number of shares Cost (in millions) Cost (in millions) September 9, 2021 Authorization $ 250.0 September 9, 2021 through September 30, 2021 — $ — $ 250.0 October 1, 2021 through December 31, 2021 5,155,491 151.9 $ 98.1 January 1, 2022 through March 31, 2022 — — $ 98.1 April 1, 2022 through June 30, 2022 1,760,462 50.3 $ 47.8 (1) July 1, 2022 through September 30, 2022 610,000 14.1 $ 33.7 Total 7,525,953 $ 216.3 (1) Share repurchases during the second quarter of 2022 included 760,602 shares at a cost of $25.0 million representing the final settlement of the ASR, which was funded in December 2021 but a portion of which remained outstanding as of December 31, 2021. 48 Table of Contents Cash Flows The following table summarizes our cash flows from operating, investing, and financing activities for the nine months ended September 30, 2022 and 2021: Nine Months Ended September 30, 2022 2021 (in millions) Net cash flows from continuing operations: Operating activities $ (52.6) $ 418.8 Investing activities (186.1) 47.8 Financing activities 193.1 (354.1) Net cash flows from discontinued operations (18.1) 4.2 Net increase (decrease) in cash, cash equivalents, and restricted cash $ (63.7) $ 116.7 Operating Activities . Net cash used in operating activities from continuing operations for the nine months ended September 30, 2022 was $52.6 million compared to net cash provided by operating activities from continuing operations of $418.8 million for the nine months ended September 30, 2021. The changes in our operating assets and liabilities are as follows: Nine Months Ended September 30, 2022 2021 (in millions) (Increase) decrease in receivables, inventories, and other assets $ (325.4) $ (89.0) (Increase) decrease in income tax receivable (5.6) 249.8 Increase (decrease) in accounts payable, accrued liabilities, and other liabilities 67.7 58.9 Changes in operating assets and liabilities $ (263.3) $ 219.7 The changes in our operating assets and liabilities resulted in a net use of $263.3 million for the nine months ended September 30, 2022, as compared to a net source of $219.7 million for the nine months ended September 30, 2021. Operating assets in the current period were impacted by cyclical shifts in anticipation of higher volumes of railcar deliveries in future periods, as well as continued supply chain challenges. The decrease in the income tax receivable in the prior year period was primarily driven by the collection of approximately $248.3 million of income tax refunds associated with the loss carryback provisions included in recent tax legislation. Investing Activities. Net cash used in investing activities from continuing operations for the nine months ended September 30, 2022 was $186.1 million compared to $47.8 million of net cash provided by investing activities from continuing operations for the nine months ended September 30, 2021. Significant investing activities are as follows: • We made a net investment in our lease fleet of $176.3 million during the nine months ended September 30, 2022, compared to proceeds received from lease portfolio sales exceeding the investment in our lease fleet by approximately $40.6 million in the prior year period. Our investment in the lease fleet primarily includes new railcar additions, sustainable railcar conversions, railcar modifications, and other betterments, net of deferred profit, and secondary market purchases; and is net of proceeds from lease portfolio sales. • During the nine months ended September 30, 2022, we acquired a company that owns and operates an end-to-end rail logistics software platform providing a real-time data universe to freight rail shippers and operators for net cash of $9.4 million. During the nine months ended September 30, 2021, we acquired a company that owns and operates proprietary railcar cleaning technology systems for net cash of $16.5 million. • We purchased equity investments totaling $15.5 million and $0.2 million during the nine months ended September 30, 2022 and 2021, respectively, primarily related to our investments in Signal Rail Holdings LLC. See Note 5 of the Consolidated Financial Statements. 49 Table of Contents Financing Activities. Net cash provided by financing activities during the nine months ended September 30, 2022 was $193.1 million compared to $354.1 million of net cash used in financing activities for the same period in 2021. Significant financing activities are as follows: • During the nine months ended September 30, 2022, we had total borrowings of $1,664.5 million and total repayments of $1,351.5 million, for net proceeds of $313.0 million, primarily from debt proceeds to support our investment in the lease fleet. During the nine months ended September 30, 2021, we had total borrowings of $2,393.7 million and total repayments of $2,256.8 million, for net proceeds of $136.9 million, primarily from debt proceeds to support our investment in the lease fleet. • We paid $58.3 million and $68.5 million in dividends to our common stockholders during the nine months ended September 30, 2022 and 2021, respectively. • We repurchased common stock totaling $36.8 million and $406.5 million during the nine months ended September 30, 2022 and 2021, respectively. The current year period excludes $25.0 million representing the final settlement of the ASR, which was funded in December 2021 but a portion of which remained outstanding as of December 31, 2021. Certain shares of stock repurchased during September 2022, totaling $2.6 million, were cash settled in October 2022 in accordance with normal settlement practices. The prior year period includes shares repurchased in a privately negotiated transaction with ValueAct totaling $222.5 million. Current Debt Obligations The revolving credit facility contains several financial covenants that require the maintenance of ratios related to minimum interest coverage for the leasing and manufacturing operations and maximum leverage. In July 2022, we amended our revolving credit facility to increase the maximum leverage ratio to provide additional flexibility. A summary of our financial covenants is detailed below: Ratio Covenant Actual at September 30, 2022 Maximum leverage (1) No greater than 4.25 to 1.00 2.70 Minimum interest coverage (2) No less than 2.25 to 1.00 6.57 (1) Defined as the ratio of consolidated total indebtedness to consolidated earnings before interest, taxes, depreciation and amortization ("EBITDA") for the Borrower and its restricted subsidiaries for the period of four consecutive quarters ending with September 30, 2022. (2) Defined as the ratio of the difference of (A) consolidated EBITDA less (B) consolidated capital expenditures – manufacturing and other to consolidated interest expense to the extent paid in cash, in each case for the Borrower and its restricted subsidiaries for the period of four consecutive quarters ending with September 30, 2022. As of September 30, 2022, we were in compliance with all such financial covenants. Please refer to Note 8 of the Consolidated Financial Statements for a description of our current debt obligations. 50 Table of Contents Supplemental Guarantor Financial Information Our 4.55% senior notes due 2024 ("Senior Notes") are fully and unconditionally and jointly and severally guaranteed by certain of Trinity’s 100%-owned subsidiaries: Trinity Industries Leasing Company; Trinity North American Freight Car, Inc.; Trinity Rail Group, LLC; Trinity Tank Car, Inc.; and TrinityRail Maintenance Services, Inc. (collectively, the "Guarantor Subsidiaries”). The Senior Notes indenture agreement includes customary provisions for the release of the guarantees by the Guarantor Subsidiaries upon the occurrence of certain allowed events including the release of one or more of the Guarantor Subsidiaries as guarantor under our revolving credit facility. See Note 8 of our 2021 Annual Report on Form 10-K. The Senior Notes are not guaranteed by any of our remaining 100%-owned subsidiaries or partially-owned subsidiaries (“Non-Guarantor Subsidiaries”). As of September 30, 2022, assets held by the Non-Guarantor Subsidiaries included $168.4 million of restricted cash that was not available for distribution to Trinity Industries, Inc. (“Parent”), $7,167.1 million of equipment securing certain non-recourse debt, and $607.8 million of assets located in foreign locations. As of December 31, 2021, assets held by the Non-Guarantor Subsidiaries included $79.6 million of restricted cash that was not available for distribution to the Parent, $6,595.5 million of equipment securing certain non-recourse debt, and $414.8 million of assets located in foreign locations. The following tables include the summarized financial information for Parent and Guarantor Subsidiaries (together, the obligor group) on a combined basis after elimination of intercompany transactions within the obligor group (in millions). Investments in and equity in the earnings of the Non-Guarantor Subsidiaries (the non-obligor group) have been excluded. Nine Months Ended September 30, 2022 Summarized Statement of Operations: Revenues (1) $ 846.6 Cost of revenues (2) $ 793.0 Income (loss) from continuing operations $ (59.6) Net income (loss) (3) $ (77.9) September 30, 2022 December 31, 2021 Summarized Balance Sheets: Assets: Receivables, net of allowance (4) $ 289.0 $ 245.8 Inventories $ 641.6 $ 409.4 Property, plant, and equipment, net $ 447.8 $ 953.3 Goodwill and other assets $ 415.0 $ 385.7 Liabilities: Accounts payable and accrued liabilities (5) $ 389.5 $ 337.0 Debt $ 459.0 $ 398.7 Deferred income taxes $ 944.7 $ 926.2 Other liabilities $ 139.4 $ 147.0 Noncontrolling interest $ 255.2 $ 267.0 (1) There were no net sales from the obligor group to Non-Guarantor Subsidiaries during the nine months ended September 30, 2022. (2) Cost of revenues includes $193.0 million of purchases from Non-Guarantor Subsidiaries during the nine months ended September 30, 2022. (3) Net income (loss) includes $18.3 million of net loss related to discontinued operations. (4) Receivables, net of allowance includes $98.4 million and $93.5 million of receivables from Non-Guarantor Subsidiaries as of September 30, 2022 and December 31, 2021, respectively. (5) Accounts payable includes $38.6 million and $29.7 million of payables to Non-Guarantor Subsidiaries as of September 30, 2022 and December 31, 2021, respectively. 51 Table of Contents Capital Expenditures For the full year 2022, we anticipate a net investment in our lease fleet of between $250 million and $300 million. Capital expenditures related to manufacturing and other activities, including expansion of our fleet maintenance capabilities and systems upgrades, are projected to range between $35 million and $45 million for the full year 2022. Equity Investment See Note 5 of the Consolidated Financial Statements for information about our investment in partially-owned leasing subsidiaries. Off Balance Sheet Arrangements As of September 30, 2022, we had letters of credit issued under our revolving credit facility in an aggregate amount of $4.9 million, the majority of which are expected to expire in November 2023. Our letters of credit obligations support performance bonds related to certain railcar orders. See Note 8 of the Consolidated Financial Statements for further information about our corporate revolving credit facility. Derivative Instruments We use derivative instruments to mitigate interest rate risk, including risks associated with the impact of changes in interest rates in anticipation of future debt issuances and to offset interest rate variability of certain floating rate debt issuances outstanding. We also may use derivative instruments from time to time to mitigate the impact of changes in foreign currency exchange rates. Derivative instruments that are designated and qualify as cash flow hedges are accounted for in accordance with applicable accounting standards. See Note 3 of the Consolidated Financial Statements for discussion of how we utilize our derivative instruments. LIBOR Transition The United Kingdom's Financial Conduct Authority, which regulates the London Interbank Offered Rate ("LIBOR"), has announced that it will no longer persuade or require banks to submit rates for the calculation of LIBOR after June 2023. In the U.S., the Alternative Reference Rates Committee has identified the Secured Overnight Financing Rate ("SOFR") as its preferred alternative to LIBOR. During the third quarter of 2022, we amended our corporate revolving credit facility and warehouse loan facility to transition the facility benchmark rate from LIBOR to SOFR plus a benchmark adjustment. We currently have LIBOR-based contracts that extend beyond June 2023 related to promissory notes and derivative instruments for Trinity Rail Leasing 2017 LLC. After LIBOR is phased out, the interest rates for these obligations might be subject to change. The replacement of LIBOR with an alternative benchmark reference rate may adversely affect interest rates and result in higher borrowing costs under these agreements and any future agreements. 52 Table of Contents Non-GAAP Financial Measures We have included financial measures compiled in accordance with GAAP and certain non-GAAP measures in this Quarterly Report on Form 10-Q 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, we provide a reconciliation to the most comparable GAAP measure. Free Cash Flow Total Free Cash Flow After Investments and Dividends ("Free Cash Flow") is a non-GAAP financial measure. 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 (used in) operating activities from continuing operations, the most directly comparable GAAP financial measure, in the following table. Free Cash Flow is defined as net cash provided by (used in) operating activities from continuing operations as computed in accordance with GAAP, plus cash proceeds from lease portfolio sales, less capital expenditures for manufacturing, dividends paid, and Equity CapEx for leased railcars. Equity CapEx for leased railcars is defined as leasing capital expenditures, adjusted to exclude net proceeds from (repayments of) debt. Nine Months Ended September 30, 2022 2021 (in millions) Net cash provided by (used in) operating activities – continuing operations $ (52.6) $ 418.8 Proceeds from lease portfolio sales 514.8 404.5 Adjusted Net Cash Provided by Operating Activities 462.2 823.3 Capital expenditures – manufacturing and other (25.7) (16.9) Dividends paid to common stockholders (58.3) (68.5) Free Cash Flow (before Capital expenditures – leasing) 378.2 737.9 Equity CapEx for leased railcars (378.1) (227.0) Total Free Cash Flow After Investments and Dividends $ 0.1 $ 510.9 Capital expenditures – leasing $ 691.1 $ 363.9 Less: Payments to retire debt (1,351.5) (2,256.8) Proceeds from issuance of debt 1,664.5 2,393.7 Net proceeds from (repayments of) debt 313.0 136.9 Equity CapEx for leased railcars $ 378.1 $ 227.0 Contractual Obligations and Commercial Commitments Except as described below, as of September 30, 2022, there have been no material changes to our contractual obligations from December 31, 2021: • In April 2022, TRL-2022 issued $244.8 million of its Series 2022-1 Green Secured Railcar Equipment Notes. These notes have a stated final maturity date of 2052. • In May 2022, Tribute Rail issued $327.0 million of its Series 2022-1 Green Secured Railcar Equipment Notes. These notes have a stated final maturity date of 2052. Net proceeds received from the issuance of these notes were used to redeem TRIP Railcar Co.'s existing term loan agreement, of which $323.7 million was outstanding at December 31, 2021. See Note 8 of the Consolidated Financial Statements for additional information regarding these debt transactions. Recent Accounting Pronouncements See Note 1 of the Consolidated Financial Statements for information about recent accounting pronouncements. 53 Table of Contents