What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-02-21 compared with 2022-02-17 · 176 added, 313 removed, 480 unchanged (50% of the section changed)

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These sales are presented in the Lease portfolio sales line in our Consolidated Statements of Operations;

however, because this change in presentation was effected on a prospective basis beginning in the fourth quarter of 2020, lease portfolio sales for the years ended December 31, 2020 and 2019 only include sales of railcars from the lease fleet owned for more than one year.

however, because this change in presentation was effected on a prospective basis beginning in the fourth quarter of 2020, lease portfolio sales for the year ended December 31, 2020 only include sales of railcars from the lease fleet owned for more than one year.

There were no lease portfolio sales during the fourth quarter of 2020.

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and its consolidated subsidiaries own businesses that are leading providers of railcar products and services in North America.

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

We market our 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.

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

A final working capital adjustment was recorded in the second quarter of 2022.

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.

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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 in the future related to these retained obligations will likewise be reported in discontinued operations.

Expenses related to these retained obligations incurred during the year ended December 31, 2022 were, and similar expenses that may be incurred in the future 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 15 for information regarding the retained liabilities.

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Recent Market Developments

The COVID-19 pandemic significantly impacted global and North American economic conditions.

The social and economic effects of the pandemic have been widespread and are ongoing.

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 economic pressures created by the pandemic have negatively impacted our results of operations for the year ended December 31, 2021.

While we are beginning to see signs of economic recovery, we are monitoring the evolving impacts of COVID-19 variants on the economy and our workforce, including reduced employee availability, and expect that our results of operations may remain under pressure in the near term.

Please refer to the "Forward-Looking Statements" section above and Part I, Item 1A “Risk Factors” of this Annual Report on Form 10-K for additional information regarding the potential impacts of COVID-19 on our business.

Other Cyclical Trends Impacting Our Business

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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.

Additionally, changes in certain commodity prices, 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.

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however, weaknesses in any of these market sectors could affect the financial viability of our underlying Leasing Group customers, which could continue to negatively impact our recurring leasing revenues and operating profits.

Although railcar loading volumes, levels of railcars in storage, and orders for new railcar equipment have improved, the recovery of railcar lease rates and utilization is ongoing.

We continue to 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.

Railcar loading volumes, orders for new railcar equipment, lease rates and lease fleet utilization continued to improve in 2022.

We continue to believe that our rail platform is able to respond to cyclical changes in demand and perform throughout the railcar cycle.

Steel prices, which are subject to volatility, were elevated over much of the last two years and are a major component 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.

Additionally, the cost and volume of lease fleet maintenance and compliance events increased in 2022, and we expect elevated levels of these activities to continue in the near term.

Further, 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.

As a result of disruptions in the global supply chain, we have recently experienced temporary shortages of materials used to manufacture or repair certain railcar types, which has impacted our ability to timely deliver these railcars to our customers.

While we believe these shortages are short-term in nature, we will continue to monitor the situation and take appropriate steps to mitigate the impact on our production schedules and delivery timelines.

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.

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.

The ongoing economic pressures related to the effects of the pandemic have negatively impacted our results of operations for the year ended December 31, 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.

Financial and Operational Highlights

• Our revenues for the year ended December 31, 2021 were $1,516.0 million, representing a decrease of 13.4%, compared to the year ended December 31, 2020.

Our operating profit for the year ended December 31, 2021 was $256.8 million, compared to operating loss for the year ended December 31, 2020 of $154.6 million, which includes impairment charges of $396.4 million primarily associated with our small cube covered hopper railcars.

• As we continue to optimize our business and execute toward our rail-focused strategy, in December 2021, we completed the sale of THP for an aggregate purchase price of $375.0 million, subject to certain adjustments, resulting in a gain of $131.4 million, net of income taxes.

The proceeds were used primarily to return capital to stockholders.

• In August 2021, the Company and Wafra, Inc.

announced a new railcar investment vehicle program between Trinity and certain funds managed by Wafra, Inc.

("Wafra Funds").

The joint venture created as part of this program, known as Signal Rail Holdings LLC ("Signal Rail"), is owned 90% by Wafra Funds and 10% by TILC.

We completed the initial railcar portfolio sale to Signal Rail in the third quarter of 2021.

See Note 5 of the Consolidated Financial Statements for more information.

• The total value of the railcar backlog at December 31, 2021 was $1.5 billion, compared to $1.0 billion at December 31, 2020.

The Rail Products Group received orders for 13,870 railcars and delivered 8,875 railcars in 2021, in comparison to orders for 5,980 railcars and deliveries of 11,530 railcars in 2020.

• Our revenues for the year ended December 31, 2022 were $1,977.3 million, representing an increase of 30.4%, compared to the year ended December 31, 2021.

Our operating profit for the year ended December 31, 2022 was $334.0 million, compared to $256.8 million for the year ended December 31, 2021.

• The Leasing Group's lease fleet of 108,440 company-owned railcars was 97.9% utilized as of December 31, 2022, compared to a lease fleet utilization of 95.7% on 106,970 company-owned railcars as of December 31, 2021.

Our company-owned lease fleet includes wholly-owned railcars, partially-owned railcars, and railcars under leased-in arrangements.

• For the year ended December 31, 2021, we made a net investment in our lease fleet of approximately $92.9 million, which primarily includes new railcar additions and railcar modifications, net of deferred profit, and secondary market purchases;

• For the year ended December 31, 2022, we made a net investment in our lease fleet of approximately $178.1 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.

• For the year ended December 31, 2021, we returned $895.1 million of capital to stockholders through share repurchases of $806.6 million and dividends of $88.5 million.

• The total value of the railcar backlog at December 31, 2022 was $3.9 billion, compared to $1.5 billion at December 31, 2021.

The Rail Products Group received orders for 31,905 railcars and delivered 13,315 railcars in 2022, in comparison to orders for 13,870 railcars and deliveries of 8,875 railcars in 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 December 31, 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 year ended December 31, 2022, sustainable railcar conversion revenues totaled $163.7 million, representing 1,725 railcars.

• For the year ended December 31, 2022, our return on equity ("ROE") and Pre-Tax ROE were 7.7% and 10.4% (1) , respectively, in comparison to 2.4% and 3.4% (1) , respectively, for the year ended December 31, 2021.

• For the year ended December 31, 2021, we generated operating cash flows from continuing operations and Total Free Cash Flow After Investments and Dividends ("Free Cash Flow") of $615.6 million and $538.9 million (1) , respectively, in comparison to $622.0 million and $89.4 million (1) , respectively, for the year ended December 31, 2020.

• For the year ended December 31, 2022, we generated operating cash flows from continuing operations and Adjusted Free Cash Flow After Investments and Dividends ("Adjusted Free Cash Flow") of $9.2 million and $138.3 million (1) , respectively, in comparison to $615.6 million and $538.9 million (1) , respectively, for the year ended December 31, 2021.

(1) Non-GAAP financial measure.

See the Non-GAAP Financial Measures section within this Form 10-K 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 for the years ended December 31, 2021 and 2020.

See "Consolidated Results of Operations" and "Segment Discussion" below for additional information regarding our operating results for the year ended December 31, 2022.

See Part II, Item 7 of our 2021 Annual Report on Form 10-K for a discussion of our results of operations and liquidity and capital resources as of and for the year ended December 31, 2021, including a comparison to the year ended December 31, 2020.

Long-Term Enterprise Key Performance Indicators

Our key performance indicators for long-term performance are operating and Free Cash Flow* growth, Pre-Tax ROE*, dividend growth, and book value per share growth.

Our key performance indicators for long-term performance are operating and Adjusted Free Cash Flow* growth, Pre-Tax ROE*, dividend growth, and book value per share growth.

We believe when evaluated over time, these indicators collectively drive long-term sustainable value creation and measure the effectiveness of our value proposition for stockholders.

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Capital Structure Updates

TILC warehouse facility – In March 2021, the TILC warehouse facility was extended through March 15, 2024, and the total facility commitment was increased from $750 million to $1.0 billion.

Repurchase Agreements with ValueAct – On April 29, 2021, we entered into a stock repurchase agreement with ValueAct Capital Master Fund, L.P.

(“ValueAct”), the Company's then-largest shareholder and a related party, to repurchase 8.1 million shares of our common stock for $27.47 per share, for an aggregate purchase price of $222.5 million, in a privately negotiated transaction.

The price per share represents a discount of 3.5% from the closing price for a share of common stock on the New York Stock Exchange on April 29, 2021.

On December 31, 2021, using a portion of the proceeds from the sale of THP, we entered into an additional stock repurchase agreement with ValueAct to repurchase 8.8 million shares of our common stock for $28.49 per share, for an aggregate purchase price of $250.0 million, in a privately negotiated transaction.

The price per share represents a discount of 3.5% from the closing price for a share of common stock on the New York Stock Exchange on December 30, 2021.

Triumph Rail – In June 2021, Triumph Rail LLC ("Triumph Rail"), formerly known as TRIP Master Funding LLC, an indirect, wholly-owned subsidiary of TRIP Rail Holdings LLC ("TRIP Holdings"), issued $560.4 million of its Series 2021-2 Green Secured Railcar Equipment Notes.

These notes bear interest at an all-in interest rate of 2.20% and have a stated final maturity date of 2051.

Net proceeds received from the issuance of these notes, as well as proceeds from the sale of railcars and related operating leases to TRIP Railcar Co.

LLC described below, were used to redeem Triumph Rail's existing Secured Railcar Equipment Notes, of which $869.1 million was outstanding at the redemption date.

The all-in rate for these notes was 5.16% per annum.

TRIP Railcar Co.

Term Loan – In June 2021, TRIP Railcar Co.

LLC ("TRIP Railcar Co."), a direct wholly-owned subsidiary of TRIP Holdings, drew down $329.6 million under a term loan agreement ("TRIP Railcar Co.

The TRIP Railcar Co.

term loan bears interest at LIBOR plus 1.85% and has a stated maturity date of June 2025.

Net proceeds received from the transaction were used to purchase railcars and related operating leases from Triumph Rail.

TRP-2021 – In June 2021, TRP 2021 LLC ("TRP-2021"), formerly known as Trinity Rail Leasing 2012 LLC, an indirect, wholly-owned subsidiary of RIV 2013 Rail Holdings LLC, issued $355.0 million of its Series 2021-1 Green Secured Railcar Equipment Notes.

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 these notes were used to redeem TRP-2021's existing Secured Railcar Equipment Notes, of which $348.0 million was outstanding at the redemption date.

The all-in rate for these notes was 3.59% per annum.

TRL-2021 – In June 2021, Trinity Rail Leasing 2021 LLC, a Delaware limited liability company ("TRL-2021") and a limited purpose, indirect wholly-owned subsidiary of the Company owned through TILC, issued $325.0 million of its Series 2021-1 Green Secured Railcar Equipment Notes.

These notes bear interest at an all-in interest rate of 2.31% and have a final maturity date of 2051.

Net proceeds received from the transaction were used to repay borrowings under TILC's secured warehouse credit facility and for general corporate purposes.

New Share Repurchase Program – In September 2021, our Board of Directors authorized a new share repurchase program effective September 9, 2021 through December 31, 2022.

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.

New Share Repurchase Program – In December 2022, our Board of Directors authorized a new share repurchase program effective December 9, 2022 with no expiration.

The new share repurchase program authorizes the Company to repurchase up to $250 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 is expected to be completed during the third quarter of 2022, at which time any remaining shares will be delivered to the Company.

See "Liquidity and Capital Resources" below for further information regarding these activities.

There were no shares repurchased under the new share repurchase program during the year ended December 31, 2022.

Litigation Updates

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Year Ended December 31,

2021 2020 2019

(in millions)

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Gains on dispositions of property 152.7 78.2

Impairment of long-lived assets — 396.4 —

Restructuring activities, net 1.0 (3.7)

Total operating profit (loss) 256.8 (154.6) 396.8

Total operating profit 334.0 256.8

Interest expense, net 207.6 191.4

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Other, net (1.6) (0.9)

Income (loss) from continuing operations before income taxes 55.2 (524.6) 181.2

Income from continuing operations before income taxes 126.5 55.2

Provision (benefit) for income taxes 27.6 15.9

Income (loss) from continuing operations $ 39.3 $ (250.5) $ 122.4

Income from continuing operations $ 98.9 $ 39.3

The tables below present revenues by segment for the years ended December 31, 2022 and 2021:

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Consolidated Total $ 1,516.0 $ — $ 1,516.0

Year Ended December 31, 2019

External Intersegment Total

(in millions)

Railcar Leasing and Management Services Group $ 1,116.3 $ 0.9 $ 1,117.2

Rail Products Group 1,635.3 1,339.5 2,974.8

Segment Totals 2,751.6 1,340.4 4,092.0

Corporate and other 0.8 0.4 1.2

Eliminations – Lease Subsidiary — (1,331.1) (1,331.1)

Eliminations – Other — (9.7) (9.7)

Consolidated Total $ 2,752.4 $ — $ 2,752.4

Operating Costs

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gains or losses on property disposals;

impairment of long-lived assets;

and restructuring activities.

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Year Ended December 31,

2021 2020 2019

(in millions)

Railcar Leasing and Management Services Group (1)

$ 347.3 $ 384.4

Rail Products Group 2,015.6 1,260.1

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Corporate and other 80.8 84.1

Impairment of long-lived assets — 396.4 —

Restructuring activities, net 1.0 (3.7)

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Consolidated Total $ 1,643.3 $ 1,259.2

Operating Profit (Loss)

Operating profit (loss) by segment for the years ended December 31, 2021, 2020, and 2019 was as follows:

(1) Includes gains on lease portfolio sales of $127.5 million and $54.1 million for the years ended December 31, 2022 and 2021, respectively.

Operating Profit

Operating profit by segment for the years ended December 31, 2022 and 2021 was as follows:

Year Ended December 31,

2021 2020 2019

(in millions)

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Corporate and other (80.8) (84.1)

Impairment of long-lived assets — (396.4) —

Restructuring activities, net (1.0) 3.7

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Discussion of Consolidated Results

Revenues – Our revenues for the year ended December 31, 2021 were $1,516.0 million, representing a decrease of $233.7 million, or 13.4%, over the prior year, primarily related to lower deliveries in the Rail Products Group and the change in the presentation of sales of railcars from the lease fleet.

See Matters Affecting Comparability above and Note 1 of the Consolidated Financial Statements for further information regarding the change in presentation.

Our revenues for the year ended December 31, 2020 were $1,749.7 million, representing a decrease of $1,002.7 million, or 36.4%, when compared to the year ended December 31, 2019, primarily related to lower deliveries in the Rail Products Group and fewer railcars sold from our lease fleet.

Cost of revenues – Our cost of revenues for the year ended December 31, 2021 were $1,161.5 million, representing a decrease of $165.9 million, or 12.5%, over the prior year, primarily due to lower deliveries in the Rail Products Group and the change in the presentation of sales of railcars from the lease fleet.

Our cost of revenues for the year ended December 31, 2020 were $1,327.4 million, representing a decrease of $851.0 million, or 39.1%, when compared to the year ended December 31, 2019, primarily due to lower deliveries in the Rail Products Group and a lower volume of railcars sales in the Leasing Group.

Selling, engineering, and administrative expenses – Selling, engineering, and administrative expenses decreased by 5.3% for the year ended December 31, 2021, when compared to the prior year, primarily due to consulting costs incurred in the prior year period associated with aligning our operating structure to support our rail-focused strategy, partially offset by higher employee-related costs, including increased incentive-based compensation, and higher litigation-related expenses.

Selling, engineering, and administrative expenses decreased by 12.6% for the year ended December 31, 2020, when compared to the year ended December 31, 2019, primarily due to lower employee-related costs, including headcount reductions and adjustments to incentive-based compensation, and lower litigation-related expenses.

Gains on dispositions of property – Gains on dispositions of property increased by $58.2 million for the year ended December 31, 2021, when compared to the prior year period primarily due to higher lease portfolio sales activity and gains associated with the disposition of non-operating facilities.

Additionally, during the year ended December 31, 2021, we recorded a $7.8 million gain related to insurance recoveries in excess of net book value received for assets damaged by a tornado at the Company’s rail maintenance facility in Cartersville, Georgia in the first quarter of 2021.

See Note 15 of the Consolidated Financial Statements for more information.

Gains on dispositions of property decreased by $34.4 million for the year ended December 31, 2020, when compared to the year ended December 31, 2019, primarily due to lower lease portfolio sales activity.

Impairment of long-lived assets – Impairment of long-lived assets for the year ended December 31, 2020 was $396.4 million, primarily related to our small cube covered hopper railcars, the planned divestiture of certain non-strategic maintenance facilities, and investments in certain emerging technologies.

Revenues – Our revenues for the year ended December 31, 2022 were $1,977.3 million, representing an increase of $461.3 million, or 30.4%, over the prior year, primarily related 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 year ended December 31, 2022 was $1,609.6 million, representing an increase of $448.1 million, or 38.6%, over the prior year, primarily due to a higher volume of, and input cost inflation associated with, deliveries in the Rail Products Group.

Selling, engineering, and administrative expenses – Selling, engineering, and administrative expenses were substantially unchanged for the year ended December 31, 2022 when compared to the prior year.

Gains on dispositions of property – Gains on dispositions of property increased by $74.5 million for the year ended December 31, 2022, when compared to the prior year period primarily due to lease portfolio sales.

Results for the years ended December 31, 2022 and 2021 included gains of $7.5 million and $7.8 million, respectively, related to insurance recoveries in excess of net book value received for assets damaged by a tornado at the Company’s rail maintenance facility in Cartersville, Georgia in the first quarter of 2021.

See Note 15 of the Consolidated Financial Statements for more information.

We had no impairment of long-lived assets during the years ended December 31, 2021 and December 31, 2019.

Restructuring activities, net – Our restructuring activities for the year ended December 31, 2021 resulted in a net gain of $3.7 million, primarily as a result of the disposition of our prior corporate headquarters facility and certain non-operating facilities, partially offset by employee transition costs.

Our restructuring activities for the year ended December 31, 2020 totaled $10.9 million, primarily as a result of employee transition costs, asset write-downs related to our corporate headquarters facility and certain other assets, and contract termination costs, partially offset by a net gain on the disposition of a non-operating facility and certain related assets.

Our restructuring activities for the year ended December 31, 2019 totaled $14.6 million, primarily from write-downs related to underutilized assets in our manufacturing footprint and employee transition costs.

Operating profit (loss) – Operating profit for the year ended December 31, 2021 totaled $256.8 million, representing an increase of 266.1% from the prior year period.

Operating loss for the year ended December 31, 2020 included a $396.4 million impairment charge primarily related to our small cube covered hopper railcars.

Operating profit for the year ended December 31, 2021 was impacted by increased lease fleet portfolio sales, partially offset by lower railcar deliveries and reduced profitability in our maintenance services business in the Rail Products Group, and lower lease rates and higher fleet operating costs in the Leasing Group.

Operating loss for the year ended December 31, 2020 totaled $154.6 million, representing a decrease of 139.0% from the year ended December 31, 2019.

The decrease in operating profit resulted primarily from the impairment of long-lived assets, lower deliveries in the Rail Products Group, and lower lease fleet portfolio sales in the Leasing Group, partially offset by lower selling, engineering, and administrative expenses.

Operating profit – Operating profit for the year ended December 31, 2022 totaled $334.0 million, representing an increase of $77.2 million, or 30.1%, from the prior year period primarily due to higher lease portfolio sale 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 year ended December 31, 2022 totaled $207.6 million, compared to $191.4 million for the year ended December 31, 2021.

The decrease in interest expense, net was primarily driven by lower overall borrowing costs associated with the Company's debt facilities resulting from debt refinancing activity during the year, partially offset by higher overall average debt.

Interest expense, net for the year ended December 31, 2020 totaled $211.0 million, compared to $214.5 million for the year ended December 31, 2019.

The decrease in interest expense, net was primarily driven by lower variable interest rates associated with TILC's warehouse loan facility and our revolving credit facility, partially offset by higher debt obligations in the Leasing Group in connection with the Company's efforts to optimize its capital structure.

Loss on extinguishment of debt – Loss on extinguishment of debt for the year ended December 31, 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.

Loss on extinguishment of debt for the year ended December 31, 2020 was $5.0 million, which included a $4.7 million early redemption premium and the write-off of $0.3 million in unamortized debt issuance costs.

There was no loss on extinguishment of debt for the year ended December 31, 2019.

Pension plan settlement – Pension plan settlement charges for the year ended December 31, 2021 resulted in a net gain of $0.6 million primarily related to a refund received upon final settlement of the annuity contract, partially offset by pension administrative expenses and excise taxes incurred related to the reversion of surplus pension assets to the Company.

Pension plan settlement charges associated with the termination of our pension plan totaled $151.5 million for the year ended December 31, 2020.

See Note 10 of the Consolidated Financial Statements for further information.

There were no pension plan settlement charges during the year ended December 31, 2019.

The increase in interest expense, net was 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 year ended December 31, 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 year ended December 31, 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.

Income taxes – The effective tax rate from continuing operations for the year ended December 31, 2022 was an expense of 21.8%, which differs from the U.S.

statutory rate of 21.0% primarily due to an adjustment to the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") carryback benefit previously recognized, state taxes, and foreign taxes, partially offset by excess tax benefits associated with equity based compensation.

Our effective tax rate from continuing operations for the year ended December 31, 2020 was a benefit of 52.2%, primarily due to carryback claims as permitted under the CARES Act, partially offset by the portion of the non-cash impairment charge that is not tax-effected because it is related to the noncontrolling interest.

Our effective tax rate, without the impact of the CARES Act, was a benefit of 17.9% for the year ended December 31, 2020, which differs from the U.S.

statutory rate primarily due to the impacts of state income taxes, foreign taxes, tax return true-ups, and non-deductible executive compensation.

Our effective tax rate from continuing operations for the year ended December 31, 2019 was an expense of 32.5%, which differs from the U.S.

statutory rate primarily due to the impacts of state income tax expense, foreign branch taxes, and changes in state tax laws and apportionment.

Income tax refunds received, net of payments, differ from the current provision primarily based on when estimated tax payments were due as compared to when the related income was earned and taxable.

statutory rate of 21.0% primarily due to foreign taxes, state income taxes, and non-deductible executive compensation, offset by taxes not recorded on our non-controlling interests in partially-owned subsidiaries, reductions in tax reserves for uncertain tax positions, and excess tax benefits associated with equity-based compensation.

Our effective tax rate from continuing operations for the year ended December 31, 2021 was an expense of 28.8%, primarily due to adjustments to the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") carryback benefit previously recognized, state taxes, and foreign taxes, partially offset by excess tax benefits associated with equity-based compensation.

Net income tax refunds (payments) differ from the current provision primarily based on when estimated tax payments were due as compared to when the related income was earned and taxable.

The total income tax receivable position was $7.8 million and $5.4 million at December 31, 2022 and 2021, respectively.

Income tax refunds received, net of payments, during the years ended December 31, 2021 and 2020 totaled $435.7 million and $62.5 million, respectively.

Net income tax refunds (payments) during the years ended December 31, 2022 and 2021 totaled $(19.3) million and $435.7 million, respectively.

Segment Discussion

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Year Ended December 31, Percent Change

2021 2020 2019 2021 versus 2020 2020 versus 2019

($ in millions)

Leasing and management $ 770.6 $ 735.3 4.8 %

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

— 54.4 360.7 * (84.9) %

Total revenues $ 735.3 $ 802.3 $ 1,117.2 (8.4) % (28.2) %

Operating profit (1) :

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Lease portfolio sales (2)

54.1 17.7 91.9 205.6 % (80.7) %

Total operating profit $ 423.3 $ 350.9 20.6 %

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Leasing and management operating profit margin 38.4 % 40.4 %

40.4 % 44.9 % 41.6 %

Selected expense information:

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* Not meaningful

(1) Beginning in the fourth quarter of 2020, we made a prospective change in the presentation of sales of railcars from the lease fleet.

Therefore, all railcar sales for the year ended December 31, 2021 are presented as a net gain or loss from the disposal of a long-term asset regardless of the age of railcar that is sold.

See Note 1 of the Consolidated Financial Statements for more information.

(2) Includes revenues associated with sales-type leases of $160.5 million for the year ended December 31, 2019.

(1) Operating profit includes:

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Interest expense is not a component of operating profit and includes the effect of hedges.

(4) In connection with our sustainable railcar conversion program, depreciation expense increased $8.8 million for the year ended December 31, 2021, as a result of the disposal of certain railcar components.

Additionally, depreciation expense related to our small cube covered hopper railcars decreased by approximately $7.0 million for the years ended December 31, 2021 and 2020 as a result of the impairment charge recorded in the second quarter of 2020 related to these railcars.

(5) Effective January 1, 2020, we revised the estimated useful lives and salvage values of certain railcar types in our lease fleet.

This change in estimate resulted in a decrease in depreciation expense of approximately $30.8 million in the years ended December 31, 2021 and 2020.

See Note 1 of the Consolidated Financial Statements for further information.

(6) Interest expense for the year ended December 31, 2021 includes $11.7 million of loss on extinguishment of debt associated with the refinancing of our partially-owned subsidiaries' debt.

(2) Includes $1.3 million selling profit associated with sales-type leases for the year ended December 31, 2022.

(3) Depreciation expense includes $12.1 million and $8.8 million for the years ended December 31, 2022 and 2021, respectively, related to the disposal of certain railcar components associated with our sustainable railcar conversion program.

(4) Interest expense for the year ended December 31, 2022 includes $1.5 million of loss on extinguishment of debt associated with the repayment of TRIP Railcar Co.'s outstanding term loan agreement.

See Note 8 of the Consolidated Financial Statements for more information.

Interest expense for the year ended December 31, 2020 includes $5.0 million of loss on extinguishment of debt associated with the early redemption of debt.

Interest expense for the year ended December 31, 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:

Year Ended December 31,

2021 2020 2019

($ in millions)

Lease portfolio sales $ 750.7 $ 460.7

$ 460.7 $ 193.1 $ 566.4

Operating profit on lease portfolio sales (1)

$ 126.2 $ 54.1

Operating profit margin on lease portfolio sales 16.8 % 11.7 %

(1) Includes revenues associated with sales-type leases of $160.5 million for the year ended December 31, 2019.

Total revenues for the Railcar Leasing and Management Services Group decreased by 8.4% for the year ended December 31, 2021 when compared to the year ended December 31, 2020.

Revenues related to sales of leased railcars owned one year or less decreased due to the change in the presentation of sales of railcars from the lease fleet.

Leasing and management revenues for the year ended December 31, 2021 were impacted by lower lease rates, partially offset by growth in the lease fleet, increased servicer fees, and slightly higher utilization, which resulted in relatively flat revenues when compared to the year ended December 31, 2020.

Operating profit for the Leasing Group decreased by 0.8% for the year ended December 31, 2021 compared to the year ended December 31, 2020.

Leasing and management operating profit decreased by 11.7% primarily due to lower lease rates, higher fleet operating costs, and increased depreciation, partially offset by higher utilization when compared to the prior year period.

Additionally, operating profit was favorably impacted by increased lease fleet portfolio sales.

Total revenues for the Railcar Leasing and Management Services Group decreased by 28.2% for the year ended December 31, 2020 when compared to the year ended December 31, 2019.

Revenues related to sales of leased railcars owned one year or less decreased primarily due to a lower volume of railcars sold from the lease fleet.

Additionally, leasing and management revenues decreased 1.1% for the year ended December 31, 2020 as a result of lower utilization and lower lease rates on renewals, partially offset by growth in the lease fleet and higher lease rates associated with new railcar additions when compared to the year ended December 31, 2019.

Operating profit decreased by 13.0% for the year ended December 31, 2020 compared to the year ended December 31, 2019.

The decrease was primarily due to lower lease fleet portfolio sales.

Leasing and management operating profit increased by 6.8% primarily from growth in the lease fleet and reduced operating expenses resulting from fewer maintenance compliance events scheduled during the year.

Additionally, leasing and management operating profit and operating profit margin for the year ended December 31, 2020 benefited from lower depreciation expense associated with the revisions to the estimated useful lives and salvage values of certain railcar types in our lease fleet, as well as the impact of the small cube covered hopper railcar impairment described above.

The decrease in depreciation expense was partially offset by higher depreciation associated with growth in the lease fleet.

(1) Excludes $1.3 million selling profit associated with sales-type leases for the year ended December 31, 2022.

Total revenues for the Railcar Leasing and Management Services Group increased by 4.8% for the year ended December 31, 2022 when compared to the year ended December 31, 2021.

Leasing and management revenues for the year ended December 31, 2022 were favorably impacted by higher utilization, the effect of net lease fleet investment activities, and improved renewal rates, which resulted in higher revenues when compared to the year ended December 31, 2021.

Operating profit for the Leasing Group increased by 20.6% for the year ended December 31, 2022 compared to the year ended December 31, 2021.

Operating profit for the year ended December 31, 2022 was favorably impacted by higher lease portfolio sale activity.

Leasing and management operating profit decreased by 0.3% compared to the prior year period primarily due to a higher volume of, and higher costs associated with, fleet maintenance and compliance activities and increased depreciation, partially offset by higher utilization and improved renewal rates 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.

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Information regarding the Leasing Group’s lease fleet is as follows:

2021 2020 2019

Number of railcars:

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Fleet utilization 97.9 % 95.7 %

(1) Includes 2,255 railcars, 1,840 railcars, and 2,175 railcars under leased-in arrangements as of December 31, 2021, 2020, and 2019, respectively.

(1) Includes 2,810 railcars and 2,255 railcars under leased-in arrangements as of December 31, 2022 and 2021, respectively.

(2) Includes wholly-owned railcars, partially-owned railcars, and railcars under leased-in arrangements.

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Year Ended December 31, Percent Change

2021 2020 2019 2021 versus 2020 2020 versus 2019

($ in millions)

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34.2 32.5 5.2 %

(Gains) losses on dispositions of property (8.1) 0.1 0.2 * *

Gains on dispositions of property (6.6) (8.1) *

Operating profit $ 59.1 $ 4.7 *

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* Not meaningful

(1) Includes sustainable railcar conversion revenues of $65.4 million, representing 650 railcars, for the year ended December 31, 2021, of which $57.6 million, representing 520 railcars, related to the Leasing Group, and $7.8 million, representing 130 railcars, related to external customers.

(1) Includes sustainable railcar conversion revenues of $163.7 million, representing 1,725 railcars, for the year ended December 31, 2022.

Includes sustainable railcar conversion revenues of $65.4 million, representing 650 railcars, for the year ended December 31, 2021.

Revenues for the Rail Products Group increased for the year ended December 31, 2022 by 64.0% when compared to the prior year period.

Revenues in our rail products business increased as a result of higher deliveries, favorable pricing, and price escalation provisions contained in our customer contracts.

Revenues in our maintenance services business increased as a result of a higher volume of, and improved pricing on, HM-251 modifications.

Cost of revenues for the Rail Products Group increased for the year ended December 31, 2022 by 60.9% when compared to the prior year period.

In our rail products business, the increase in cost of revenues was driven by higher deliveries, input cost inflation, operational inefficiencies associated with supply chain disruptions, labor inefficiencies associated with turnover and onboarding of new employees, and the introduction of additional products into the production line.

In our maintenance services business, cost of revenues increased as a result of a higher volume of HM-251 modifications and continued to be negatively impacted by labor shortages leading to operational inefficiencies.

Operating profit for the year ended December 31, 2022 was favorably impacted by higher deliveries and improved pricing in our rail products business, and a higher volume of, and improved pricing on, HM-251 modifications in our maintenance services business, partially offset by disruptions in the transportation network used to deliver our products, deliveries of orders taken at the bottom of the cycle, and labor inefficiencies associated with turnover and onboarding of new employees.

Additionally, during the years ended December 31, 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.

Information related to our Rail Products Group backlog of new railcars is as follows.

In addition to the amounts below, as of December 31, 2021, our backlog related to sustainable railcar conversions totaled $111.5 million, representing 1,150 railcars, primarily for the Leasing Group.

In addition to the amounts below, as of December 31, 2022, our backlog related to sustainable railcar conversions totaled $166.5 million, representing 1,965 railcars.

December 31, Percent Change

2021 2020 2019 2021 versus 2020 2020 versus 2019

(in millions)

External customers (1)

$ 3,444.1 $ 1,018.1

Leasing Group 458.9 498.7

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Year Ended December 31, Percent Change

2021 2020 2019 2021 versus 2020 2020 versus 2019

Beginning balance 13,980 8,985

Orders received (1)

31,905 13,870 130.0 %

Deliveries (13,315) (8,875) 50.0 %

Other adjustments (2)

— (550) (4,050)

Ending balance (1)

32,270 13,980 130.8 %

Average selling price in ending backlog $ 120,948 $ 108,498 11.5 %

(1) For the year ended December 31, 2020, the adjustment includes 550 railcars valued at $82 million, primarily from railcars that were removed from the backlog because of a change in the underlying financial condition of certain customers.

For the year ended December 31, 2019, the adjustment includes 3,280 leased railcars that were removed from the backlog because of the financial condition of Leasing Group customers, and 625 railcars that resulted from order cancellations negotiated with customers for which the Company received compensation and recorded cancellation fees.

Additionally, the adjustment includes 145 railcars for which the original order was satisfied with railcars from the Company's existing lease fleet.

These adjustments resulted in a reduction of the backlog of approximately $364 million.

Revenues and cost of revenues for the Rail Products Group decreased for the year ended December 31, 2021 by 21.4% and 19.5%, respectively, when compared to the prior year.

These decreases primarily resulted from lower deliveries and a shift in the mix of railcar products and services sold, including a lower volume of HM-251 modifications.

Cost of revenues for the year ended December 31, 2021 was negatively impacted by operating inefficiencies, such as labor shortages and turnover, in our maintenance services business, higher input costs, and supply chain disruptions, partially offset by operational cost savings related to railcar production.

Operating profit and operating profit margin was favorably impacted by gains related to insurance recoveries in excess of net book value received for assets damaged by a tornado at the Company’s rail maintenance facility in Cartersville, Georgia in the first quarter of 2021.

Revenues and cost of revenues for the Rail Products Group decreased for the year ended December 31, 2020 by 45.9% and 41.8%, respectively, when compared to the year ended December 31, 2019.

These decreases primarily resulted from lower deliveries, pricing pressures, and a shift in the mix of railcars sold, as well as a lower volume of railcar modifications in our maintenance services business.

The decrease in cost of revenues for the year ended December 31, 2020 was partially offset by increased costs from operational inefficiencies associated with lower manufacturing volumes.

Total backlog dollars for the year ended December 31, 2021 increased by 49.5% when compared to the prior year primarily from an increase in orders received, partially offset by a 3.9% lower average selling price as a result of changes in the mix of railcars in the backlog.

Total backlog dollars for the year ended December 31, 2020 decreased by 44.6% when compared to December 31, 2019 primarily from a reduction in orders received, as well as a 7.1% lower average selling price on railcars included in backlog as a result of pricing pressures.

(1) Ending backlog and orders received for the year ended December 31, 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 year ended December 31, 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 for the year ended December 31, 2022 increased by 157.3% when compared to the prior year primarily from an increase in the volume and average selling price of orders received.

Approximately 49% of our railcar backlog value is expected to be delivered during 2023, with the remainder to be delivered thereafter into 2028.

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Year Ended December 31,

2021 2020 2019

($ in millions)

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Year Ended December 31, Percent Change

2021 2020 2019 2021 versus 2020 2020 versus 2019

(in millions)

Total revenues $ — $ — $ 1.2 * *

Operating costs:

Cost of revenues $ — $ 0.2 $ 1.2 * *

Selling, engineering, and administrative expenses

$ 97.2 $ 96.5 0.7 %

(Gains) losses on dispositions of property (12.4) (0.2) 0.3 * *

Operating profit (loss) $ (84.1) $ (99.7) $ (107.7) (15.6) % (7.4) %

Gains on dispositions of property (16.4) (12.4) *

Operating loss $ (80.8) $ (84.1) (3.9) %

* Not meaningful

Selling, engineering, and administrative expenses for the year ended December 31, 2021 decreased 3.2%, compared to the year ended December 31, 2020, primarily from reduced costs associated with streamlining our corporate structure to support our rail-focused strategy, partially offset by higher employee-related costs, including increased incentive-based compensation, and higher litigation-related expenses.

Total operating costs were favorably impacted in the year ended December 31, 2021 by gains associated with the disposition of non-operating facilities.

Selling, engineering, and administrative expenses for the year ended December 31, 2022 were substantially unchanged compared to the year ended December 31, 2021.

Total operating costs in the years ended December 31, 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.

Selling, engineering, and administrative expenses for the year ended December 31, 2020 decreased 7.2%, compared to the year ended December 31, 2019, primarily from lower employee-related costs, including headcount reductions and adjustments to incentive-based compensation, and lower litigation-related expenses, partially offset by technology investments and consulting costs associated with realigning our corporate structure to support our rail-focused strategy.

Liquidity and Capital Resources

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and short-term debt, long-term debt, and equity.

Debt instruments that we have utilized include the TILC warehouse facility, senior notes, convertible subordinated notes, asset-backed securities, non-recourse promissory notes, sale-leaseback transactions, and our revolving credit facility.

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 December 31, 2022, we have total committed liquidity of $397.9 million.

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$208.2 million unused and available under our revolving credit facility;

and $438.2 million unused and available under the TILC warehouse facility based on the amount of warehouse-eligible, unpledged equipment.

and $110.1 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.

Our material cash requirements from known contractual or other obligations primarily include principal and interest payments on long-term debt, payments on operating leases, and purchase obligations as part of the normal course of business.

See Note 8 of the Consolidated Financial Statements for information regarding scheduled maturities of our long-term debt.

Interest payable associated with our long-term debt due in the next twelve months is approximately $157.0 million, with $481.2 million due thereafter.

Our material cash requirements from known contractual or other obligations primarily include principal and interest payments on debt, payments on operating leases, and purchase obligations as part of the normal course of business.

See Note 8 of the Consolidated Financial Statements for information regarding scheduled maturities of our debt.

Interest payable associated with our debt due in the next twelve months is approximately $215.2 million, with $482.7 million due thereafter.

See Note 1 and Note 6 of the Consolidated Financial Statements for further information on operating leases.

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Liquidity Highlights

TILC warehouse facility – In March 2021, the TILC warehouse facility was extended through March 15, 2024, and the total facility commitment was increased from $750 million to $1.0 billion.

TRL-2021 – In June 2021, TRL-2021 issued $325.0 million of its Series 2021-1 Green Secured Railcar Equipment Notes.

These notes bear interest at an all-in interest rate of 2.31% and have a final maturity date of 2051.

Net proceeds received from the transaction were used to repay borrowings under TILC's secured warehouse credit facility and for general corporate purposes.

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 – In December 2022, our Board of Directors declared an increase of approximately 13% to our quarterly dividend from $0.23 per share to $0.26 per share.

We paid $76.9 million in dividends to our common stockholders during the year ended December 31, 2022.

Repurchase Agreements with ValueAct – On April 29, 2021, we entered into a stock repurchase agreement with ValueAct, the Company's then-largest shareholder and a related party, to repurchase 8.1 million shares of our common stock for $27.47 per share, for an aggregate purchase price of $222.5 million, in a privately negotiated transaction.

The price per share represents a discount of 3.5% from the closing price for a share of common stock on the New York Stock Exchange on April 29, 2021.

The price per share represents a discount of 3.5% from the closing price for a share of common stock on the New York Stock Exchange on December 30, 2021.

New Share Repurchase Authorization – In September 2021, our Board of Directors authorized a new share repurchase program effective September 9, 2021 through December 31, 2022.

New Share Repurchase Authorization – In December 2022, our Board of Directors authorized a new share repurchase program effective December 9, 2022 with no expiration.

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.

There were no shares repurchased under the new share repurchase program during the year ended December 31, 2022.

Previous Share Repurchase Authorization – In September 2021, our Board of Directors authorized a share repurchase program effective September 9, 2021 through December 31, 2022.

The share repurchase program authorized the Company to repurchase up to $250.0 million of its common stock.

In December 2021, we entered into an accelerated share repurchase agreement (the "ASR") to repurchase $125.0 million of our common stock.

The ASR is expected to be completed during the third quarter of 2022, at which time any remaining shares will be delivered to the Company.

Approximately $73.1 million of the share repurchase program will remain after the completion of the ASR.

Share repurchase activity under the authorized program is as follows:

The ASR was completed in April 2022.

Our Board of Directors terminated this share repurchase program effective December 8, 2022, and the remaining authorization of $21.3 million under this program expired unused.

Share repurchase activity under this program was as follows:

Shares Repurchased Remaining Authorization to Repurchase

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October 1, 2021 through December 31, 2021 5,155,491 151.9 $ 98.1

Total 5,155,491 $ 151.9

Previous Share Repurchase Authorization – In October 2020, our Board of Directors authorized a share repurchase program effective October 23, 2020 through December 31, 2021.

The share repurchase program authorized the Company to repurchase up to $250.0 million of its common stock and was completed in the third quarter of 2021.

Share repurchase activity under this program is as follows:

Shares Repurchased Remaining Authorization to Repurchase

Period Number of shares Cost

(in millions) Cost

(in millions)

October 23, 2020 Authorization $ 250.0

October 23, 2020 through December 31, 2020 2,974,922 $ 67.8 $ 182.2

January 1, 2022 through March 31, 2022 — — $ 98.1

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July 1, 2022 through September 30, 2022 610,000 14.1 $ 33.7

October 1, 2022 through December 31, 2022 427,383 12.4 $ 21.3

Total 7,953,336 $ 228.7

(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.

During the years ended December 31, 2022, 2021, and 2020, share repurchases totaled 2.8 million, 28.5 million, and 9.3 million shares, respectively, at a cost of approximately $76.8 million, $806.6 million, and $193.1 million, respectively.

Share repurchases during the year ended December 31, 2021 included 16.9 million shares, at a cost of approximately $472.5 million, from privately negotiated transactions with ValueAct Capital Master Fund, L.P ("ValueAct").

The repurchases from ValueAct were approved by our Board of Directors separately from, and did not reduce the authorized amount remaining under, any of our share repurchase programs.

The following table summarizes our cash flows from operating, investing, and financing activities for the years ended December 31, 2022 and 2021:

Year Ended December 31,

2021 2020 2019

(in millions)

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Net cash flows from discontinued operations (1)

355.5 23.5 19.4

Net increase (decrease) in cash, cash equivalents, and restricted cash $ (8.1) $ 74.0

(1) Includes $364.7 million in net proceeds received from the sale of THP for the year ended December 31, 2021.

2021 compared to 2020

Operating Activities .

Net cash provided by operating activities from continuing operations for the year ended December 31, 2021 was $615.6 million compared to $622.0 million for the year ended December 31, 2020.

Net cash provided by operating activities from continuing operations for the year ended December 31, 2022 was $9.2 million compared to $615.6 million net cash provided by operating activities from continuing operations for the year ended December 31, 2021.

The changes in our operating assets and liabilities are as follows:

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Changes in operating assets and liabilities $ (261.0) $ 336.4

The changes in our operating assets and liabilities resulted in a net source of $336.4 million for the year ended December 31, 2021, as compared to a net use of $199.3 million for the year ended December 31, 2020.

The decrease in the income tax receivable was primarily driven by the collection of approximately $438.2 million of income tax refunds in the current year period associated with the loss carryback provisions included in recent tax legislation.

Additionally, operating assets were negatively impacted by cyclical shifts in anticipation of higher volumes of railcar deliveries in future periods.

Further, in the prior year period, the changes in our operating assets and liabilities were impacted by a customer's election to exercise a purchase option on a sales-type lease.

The changes in our operating assets and liabilities resulted in a net use of $261.0 million for the year ended December 31, 2022, as compared to a net source of $336.4 million for the year ended December 31, 2021.

Operating assets in the current year period were impacted by increased inventory balances in anticipation of higher volumes of railcar deliveries in future periods and the effects of continued supply chain challenges, and higher receivables balances associated with deliveries late in the year.

The decrease in the income tax receivable in the prior year period was primarily driven by the collection of approximately $438.2 million of income tax refunds associated with the loss carryback provisions included in recent tax legislation.

Investing Activities.

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• We had a net investment in the lease fleet of $178.1 million during the year ended December 31, 2022, compared to $92.9 million during the year ended December 31, 2021.

Our investment in the lease fleet primarily includes new railcar additions and railcar modifications, net of deferred profit, and secondary market purchases;

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.

• We acquired a company that owns and operates proprietary railcar cleaning technology systems during the year ended December 31, 2021 for net cash of $16.6 million.

We had no acquisitions during the year ended December 31, 2020.

• We received $9.5 million in insurance proceeds during the year ended December 31, 2021 for property damage sustained at a rail maintenance facility.

• During the year ended December 31, 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, as well as a company that manufactures multi-level vehicle securement and protection systems, gravity-outlet gates, and gate accessories for freight rail in North America.

The total net cash outlay for these two acquisitions was $80.4 million.

During the year ended December 31, 2021, we acquired a company that owns and operates proprietary railcar cleaning technology systems for a net cash outlay of $16.6 million.

See Note 2 of the Consolidated Financial Statements for additional information on these acquisitions.

• We made equity investments totaling $15.5 million during the year ended December 31, 2022, primarily related to our investments in Signal Rail Holdings LLC.

See Note 5 of the Consolidated Financial Statements.

• We received $10.0 million and $9.5 million in insurance proceeds during the years ended December 31, 2022 and 2021, respectively, for property damage sustained at a rail maintenance facility.

See Note 15 of the Consolidated Financial Statements for more information.

We received no insurance proceeds during the year ended December 31, 2020.

Financing Activities.

Net cash used in financing activities during the year ended December 31, 2021 was $814.1 million compared to $168.0 million of net cash used in financing activities for the same period in 2020.

Net cash provided by financing activities during the year ended December 31, 2022 was $265.4 million compared to $814.1 million of net cash used in financing activities for the same period in 2021.

Significant financing activities are as follows:

• During the year ended December 31, 2022, we had total borrowings of $2,000.6 million and total repayments of $1,578.5 million, for net proceeds of $422.1 million, primarily from debt proceeds to support our investment in the lease fleet and for general corporate purposes.

During the year ended December 31, 2021, we had total borrowings of $2,444.1 million and total repayments of $2,315.8 million, for net proceeds of $128.3 million, primarily from debt proceeds to support our investment in the lease fleet.

During the year ended December 31, 2020, we had total borrowings of $1,561.4 million and total repayments of $1,442.9 million, for net proceeds of $118.5 million, primarily from debt proceeds to support our investment in the lease fleet, partially offset by the early redemption of debt.

• We paid $76.9 million and $88.5 million in dividends to our common stockholders during the years ended December 31, 2022 and 2021, respectively.

• We repurchased common stock totaling $51.8 million and $833.4 million during the years ended December 31, 2022 and 2021, respectively.

The current year period includes shares repurchased in privately negotiated transactions with ValueAct totaling $472.5 million.

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.

The prior year period includes shares repurchased in privately negotiated transactions with ValueAct totaling $472.5 million.

Shares repurchased as part of the ASR on December 31, 2021, totaling $100.0 million, were delivered to the Company in January 2022 in accordance with normal settlement practices.

Additionally, shares repurchased during the year ended December 31, 2021 includes $25.0 million related to the ASR for shares that were funded in December 2021 but are expected to be delivered during the third quarter of 2022 upon completion of the ASR.

Certain shares repurchased during December 2020, totaling $1.8 million, were cash settled in January 2021 in accordance with normal settlement practices.

2020 compared to 2019

Operating Activities .

Net cash provided by operating activities from continuing operations for the year ended December 31, 2020 was $622.0 million compared to $365.4 million for the year ended December 31, 2019.

The changes in our operating assets and liabilities are as follows.

Year Ended December 31,

(in millions)

(Increase) decrease in receivables, inventories, and other assets $ 314.1 $ (15.4)

(Increase) decrease in income tax receivable (441.5) 25.7

Increase (decrease) in accounts payable, accrued liabilities, and other liabilities (71.9) (93.1)

Changes in operating assets and liabilities $ (199.3) $ (82.8)

The changes in our operating assets and liabilities resulted in a net use of $199.3 million for the year ended December 31, 2020, compared to a net use of $82.8 million for the year ended December 31, 2019.

The increase in the income tax receivable was primarily driven by anticipated tax refunds related to the loss carryback provisions included in recent tax legislation.

Additionally, the changes in our operating assets and liabilities were impacted by a customer's election to exercise a purchase option on a sales-type lease, cyclical shifts, and working capital initiatives.

Investing Activities.

Net cash used in investing activities from continuing operations for the year ended December 31, 2020 was $526.7 million compared to $984.5 million for the year ended December 31, 2019.

Significant investing activities are as follows:

• We made a net investment in the lease fleet of $463.5 million during the year ended December 31, 2020, compared to $916.5 million during the year ended December 31, 2019.

Our investment in the lease fleet primarily includes new railcar additions and railcar modifications, net of deferred profit, and secondary market purchases;

and is net of proceeds from lease portfolio sales.

Financing Activities.

Net cash used in financing activities during the year ended December 31, 2020 was $168.0 million compared to $526.5 million of net cash provided by financing activities for the same period in 2019.

Significant financing activities are as follows:

• During the year ended December 31, 2020, we had total borrowings of $1,561.4 million and total repayments of $1,442.9 million, for net proceeds of $118.5 million, primarily from debt proceeds to support our investment in the lease fleet, partially offset by the early redemption of debt.

During the year ended December 31, 2019, we had total borrowings of $2,567.8 million and total repayments of $1,724.1 million, for net proceeds of $843.7 million, primarily related to the proceeds from the issuance of debt in support of our investment in the lease fleet.

• We paid $91.7 million and $82.1 million in dividends to our common stockholders during the years ended December 31, 2020 and 2019, respectively.

• We repurchased common stock totaling $191.3 million and $224.7 million during the years ended December 31, 2020 and 2019, respectively.

Certain shares repurchased during December 2020, totaling $1.8 million, were cash settled in January 2021 in accordance with normal settlement practices.

The cash outlay for shares repurchased during the year ended December 31, 2019 excludes approximately $70.0 million related to the repurchased shares that were funded in November 2018 under the accelerated share repurchase program but delivered in the first quarter of 2019.

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 December 2021, we amended our revolving credit facility to increase the maximum leverage ratio through June 30, 2022 to provide additional near-term flexibility.

Additionally, in March 2021, we amended our revolving credit facility to decrease the minimum interest coverage ratio through December 31, 2021.

In December 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:

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The Senior Notes are not guaranteed by any of our remaining 100%-owned subsidiaries or partially-owned subsidiaries (“Non-Guarantor Subsidiaries”).

In December 2021, THP was released from its obligation as guarantor for the revolving credit facility and the Senior Notes effective upon completion of the sale of THP.

Additionally, the accounting requirements for reporting THP as a discontinued operation were met.

Accordingly, we have recast the financial information included in the table below to exclude the balances and operating results of THP, which was formerly included in the Guarantor Subsidiaries.

As of December 31, 2022, assets held by the Non-Guarantor Subsidiaries included $209.8 million of restricted cash that was not available for distribution to Trinity Industries, Inc.

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(2) Cost of revenues includes $289.1 million of purchases from Non-Guarantor Subsidiaries during the year ended December 31, 2022.

(3) Net income (loss) for the year ended December 31, 2021 includes a $131.4 million gain on sale of discontinued operations related to the sale of THP described above.

(3) Net income (loss) for the year ended December 31, 2022 includes $24.9 million of net loss related to discontinued operations.

(4) Receivables, net of allowance includes $87.9 million of receivables from Non-Guarantor Subsidiaries as of December 31, 2022.

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Capital Expenditures

Capital expenditures for 2021 were $570.8 million with $547.2 million utilized for net lease fleet additions, which includes new railcar additions and railcar modifications, net of deferred profit, and secondary market purchases.

Capital expenditures for 2022 were $966.8 million with $928.8 million utilized for net lease fleet additions, which includes new railcar additions, sustainable railcar conversions, railcar modifications, and other betterments, net of deferred profit, and secondary market purchases.

Excluding proceeds from lease portfolio sales of $750.7 million, our net investment in the lease fleet was $178.1 million.

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Off Balance Sheet Arrangements

As of December 31, 2021, we had letters of credit issued under our revolving credit facility in an aggregate amount of $28.3 million, the full amount of which is expected to expire in July 2022.

Our letters of credit obligations support our various insurance programs and generally renew by their terms each year.

As of December 31, 2022, we had letters of credit issued under our revolving credit facility in an aggregate amount of $16.8 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.

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As disclosed in Note 10 of the Consolidated Financial Statements, as of December 31, 2022, the benefit obligation associated with our nonqualified retirement plan totaled $11.2 million.

We continue to sponsor an employee savings plan under the existing 401(k) plan that covers substantially all domestic employees and includes a Company matching contribution of up to 6% each of eligible compensation, as well as the Trinity Industries, Inc.

We sponsor a 401(k) plan that covers substantially all domestic employees and includes a Company matching contribution of up to 6% each of eligible compensation, subject to a two-year cliff vesting period, as well as the Trinity Industries, Inc.

Deferred Compensation Plan.

Employer contributions to the 401(k) plan and the Trinity Industries, Inc.

Deferred Compensation Plan for the year ending December 31, 2022 are expected to be $7.6 million compared to $19.4 million contributed during 2021, which included the payment of the contributions accrued as of December 31, 2020, as well as the 2021 contributions pursuant to the plan design changes as described in Note 10 of the Consolidated Financial Statements.

Deferred Compensation Plan for the year ending December 31, 2023 are expected to be $8.7 million, compared to $8.6 million contributed during 2022.

Stock-Based Compensation

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Derivative Instruments

We may use derivative instruments to mitigate the impact of changes in interest rates, both in anticipation of future debt issuances and to offset interest rate variability of certain floating rate debt issuances outstanding.

Derivative instruments that are designated and qualify as cash flow hedges are accounted for in accordance with applicable accounting standards.

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 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.

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In the U.S., the Alternative Reference Rates Committee has identified the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative to LIBOR.

We currently have LIBOR-based contracts that extend beyond June 2023 including derivative instruments, promissory notes for Trinity Rail Leasing 2017 LLC, TILC's warehouse loan facility, the TRIP Railcar Co.

term loan, and our revolving credit facility.

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.

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.

In February 2023, we amended the promissory notes and derivative instruments for Trinity Rail Leasing 2017 LLC to transition the facility benchmark rate from LIBOR to SOFR plus a benchmark adjustment.

Following the completion of these amendments, we have no remaining LIBOR-based contracts.

Critical Accounting Policies and Estimates

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We believe the following critical accounting policies, among others, affect our more significant judgments and estimates used in the preparation of our Consolidated Financial Statements.

Deferred Income Taxes

Description of Estimate We account for income taxes under the asset and liability method prescribed by ASC 740.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amount of existing assets and liabilities and their respective tax bases and other tax attributes using currently enacted tax rates.

The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the provision for income taxes in the period that includes the enactment date.

The effect of a change in enacted laws or tax rates on deferred tax assets and liabilities is recognized in the provision for income taxes in the period that includes the enactment date.

Our net deferred tax liabilities totaled $1,133.8 million as of December 31, 2022, which includes valuation allowances of $29.5 million.

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and tax planning alternatives.

Potential Impact if Results Differ Changes in the calculated deferred tax assets and liabilities may occur in certain circumstances, including statutory income tax rate changes, statutory tax law changes, or changes in our structure or tax status.

Potential Impact if Results Differ Changes in recognized deferred tax assets and liabilities may occur in certain circumstances, including statutory income tax rate changes, statutory tax law changes, or changes in our structure or tax status.

If such changes take place, there is a risk that our effective tax rate could increase or decrease in any period, impacting our net earnings.

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If the recoverability test indicates that an impairment exists, we would recognize an impairment charge equal to the amount by which the carrying value exceeds the fair value.

As of December 31, 2021, our net property, plant, and equipment totaled $6.8 billion, and the net book value of our amortizing intangible assets totaled $28.1 million.

As of December 31, 2022, our net property, plant, and equipment totaled $6.9 billion, and the net book value of our intangible assets totaled $79.0 million.

Judgment and/or Uncertainty The estimates and judgments that most significantly affect the fair value calculations in our recoverability test include assumptions regarding revenue and operating profit;

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An impairment is recognized if the reporting unit's recorded net assets exceed its fair value.

Impairment is assessed at the “reporting unit” level by applying a fair value-based test for each unit with recorded goodwill.

Impairment is assessed at the “reporting unit” level by applying a fair value-based test for each reporting unit with recorded goodwill.

Goodwill totaled $195.9 million as of December 31, 2022.

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For further information regarding our partially-owned leasing subsidiaries and other investments in unconsolidated affiliates, see Note 5 of the Consolidated Financial Statements.

Judgment and/or Uncertainty The determination of whether an entity is considered a VIE and, if so, if we are the primary beneficiary of the VIE, is highly subjective and is dependent on the specific facts and circumstances of each investment.

Judgment and/or Uncertainty The determination of whether an entity is considered a VIE and, if so, if we are the primary beneficiary of the VIE, is subjective and dependent on the specific facts and circumstances of each investment.

Factors considered in these assessments include, but are not limited to, the entity's structure and equity ownership, the contractual terms, the key decision making powers, and the obligation to absorb losses or the right to receive benefits of the VIE.

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Such change could result in the consolidation or deconsolidation of the subsidiary, thus impacting financial results.

Description of Estimate We are effectively self-insured for workers' compensation and employee health care claims.

Third-party administrators process all such claims.

As of December 31, 2021, our liabilities associated with workers' compensation and group medical insurance were $44.9 million and $5.0 million, respectively.

Judgment and/or Uncertainty We accrue our workers' compensation and group medical liabilities based upon independent actuarial studies.

These liabilities are calculated based upon loss development factors, which contemplate a number of variables, including claims history and expected trends.

These loss development factors are determined in consultation with third-party actuaries.

Potential Impact if Results Differ To the extent actuarial assumptions change and claims experience rates differ from historical rates, our liability may change.

A 10% change in our insurance liabilities could impact net earnings by approximately $3.9 million.

Contingencies and Litigation

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We evaluate our exposure to such matters periodically and establish accruals for these contingencies when a range of loss can be reasonably estimated.

As of December 31, 2021, the range of reasonably possible losses for such matters is $37.4 million to $55.4 million, which includes our rights in indemnity and recourse to third parties of approximately $10.3 million.

As of December 31, 2022, the range of reasonably possible losses for such matters is $9.4 million to $20.9 million.

For further information regarding our contingencies and litigation matters, see Note 15 of the Consolidated Financial Statements.

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Pre-Tax Return on Equity

Pre-Tax Return on Equity (“Pre-Tax 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 the provision or benefit for income taxes, net income or loss attributable to noncontrolling interest, and certain other adjustments, which include gains on dispositions of other property, the controlling interest portion of impairment of long-lived assets and loss on extinguishment of debt, restructuring activities, and pension plan settlement;

and (ii) the denominator is calculated as average stockholders’ equity (which excludes noncontrolling interest), adjusted to exclude accumulated other comprehensive income or loss.

In the following table, the numerator and denominator of our Pre-Tax ROE calculation are reconciled to income from continuing operations and stockholders’ equity, respectively, which are the most directly comparable GAAP financial measures.

In the following table, the numerator and denominator of our Pre-Tax 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 Pre-Tax 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.

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Income (loss) from continuing operations before income taxes 126.5 55.2 (524.6)

Net loss attributable to noncontrolling interest 0.2 78.9 1.5

Net (income) loss attributable to noncontrolling interest (12.8) 0.2 78.9

Gains on dispositions of property – other (1)

(7.5) (7.8) —

Impairment of long-lived assets – controlling interest (2)

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Loss on extinguishment of debt – controlling interest (3)

Interest expense, net (4)

Pension plan settlement — (0.6) 151.5

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Noncontrolling interest (257.2) (267.0) (277.2)

Accumulated other comprehensive loss 17.0 30.9 153.1

Accumulated other comprehensive (income) loss (19.7) 17.0 30.9

Adjusted Stockholders' Equity $ 992.7 $ 1,046.8 $ 1,769.7

$ 1,046.8 $ 1,769.7 $ 2,183.2

Average total stockholders' equity $ 1,283.2 $ 1,656.4 $ 2,197.5

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(3) Excludes $7.1 million of loss on extinguishment of debt associated with the noncontrolling interest recorded in the second quarter of 2021.

(4) Represents interest income accretion related to a seller-financing agreement associated with the sale of certain non-operating assets.

(5) Return on Equity is calculated as income (loss) from continuing operations divided by average total stockholders' equity.

(6) Pre-Tax Return on Equity is calculated as adjusted profit before tax divided by average adjusted stockholders' equity, each as defined and reconciled above.

Free Cash Flow

Total Free Cash Flow After Investments and Dividends ("Free Cash Flow") is a non-GAAP financial measure.

The change in presentation of sales of railcars from the lease fleet, which was effected on a prospective basis beginning in the fourth quarter of 2020, had no effect on the Company’s previously reported Free Cash Flow.

We believe Free Cash Flow is useful to both management and investors as it provides a relevant measure of liquidity and a useful basis for assessing our ability to fund our operations and repay our debt.

Free Cash Flow is reconciled to net cash provided by operating activities from continuing operations, the most directly comparable GAAP financial measure, in the following tables.

For the year ended December 31, 2021, Free Cash Flow is defined as net cash provided by 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.

Adjusted Free Cash Flow

Adjusted Free Cash Flow After Investments and Dividends ("Adjusted Free Cash Flow") is a non-GAAP financial measure.

We believe Adjusted 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.

Adjusted 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 tables.

For the years ended December 31, 2022 and 2021, Adjusted 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.

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Net cash provided by operating activities – continuing operations (1)

$ 9.2 $ 615.6

Proceeds from lease portfolio sales 750.7 454.3

Adjusted Net Cash Provided by Operating Activities 1,069.9

Capital expenditures – manufacturing and other (38.0) (23.6)

Dividends paid to common stockholders (76.9) (88.5)

Free Cash Flow (before Capital expenditures – leasing)

Equity CapEx for leased railcars (506.7) (418.9)

Total Free Cash Flow After Investments and Dividends $ 538.9

Adjusted Free Cash Flow After Investments and Dividends $ 138.3 $ 538.9

Capital expenditures – leasing $ 928.8 $ 547.2

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Equity CapEx for leased railcars $ 506.7 $ 418.9

For the years ended December 31, 2020 and 2019, Free Cash Flow is defined as net cash provided by operating activities from continuing operations as computed in accordance with GAAP, plus cash proceeds from sales of leased railcars owned more than one year at the time of sale, less capital expenditures for manufacturing, dividends paid, and Equity CapEx for leased railcars.

(1) Amounts for the year ended December 31, 2021 include the collection of approximately $438.2 million of income tax refunds associated with the loss carryback provisions included in the CARES Act.

For the year ended December 31, 2020, Adjusted 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 sales of leased railcars owned more than one year at the time of sale, less capital expenditures for manufacturing, dividends paid, and Equity CapEx for leased railcars.

Equity CapEx for leased railcars is defined as leasing capital expenditures, net of sold lease fleet railcars owned one year or less, adjusted to exclude net proceeds from (repayments of) debt.

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Proceeds from railcar lease fleet sales owned more than one year at the time of sale 138.7

Adjusted Net Cash Provided by Operating Activities 760.7 571.1

Capital expenditures – manufacturing and other (95.9)

Dividends paid to common stockholders (91.7)

Free Cash Flow (before Capital expenditures – leasing)

Equity CapEx for leased railcars (483.7)

Total Free Cash Flow After Investments and Dividends $ 89.4 $ 122.5

Adjusted Free Cash Flow After Investments and Dividends

Capital expenditures – leasing, net of sold lease fleet railcars owned one year or less $ 602.2

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Recent Accounting Pronouncements

There have been no material changes in recently issued or adopted accounting standards during the year ended December 31, 2021.

See Note 1 of the Consolidated Financial Statements for information about recent accounting pronouncements.

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 7. Management’s Discussion and Analysis