What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-05-01 compared with 2023-11-02 · 203 added, 286 removed, 296 unchanged (62% of the section changed)

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Trinity uses the words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “forecasts,” “may,” “will,” “should,” and similar expressions to identify these forward-looking statements.

Potential factors, which could cause our actual results of operations to differ materially from those in the forward-looking statements, include, among others:

Potential factors that could cause our actual results of operations to differ materially from those in the forward-looking statements, include, among others:

• market conditions and customer demand for our business products and services;

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• naturally-occurring events, pandemics, and/or disasters causing disruption to our manufacturing, product deliveries, and production capacity, thereby giving rise to an increase in expenses, loss of revenue, and property losses;

• disruptions in the transportation network used to transport parts and components to our production facilities and to deliver products to our customers, which may impact our ability to manufacture and timely deliver railcars to our customers;

• disruptions in the transportation network used to transport parts and components to our production facilities and to deliver products to our customers, particularly with respect to the delivery of finished railcars from Mexico to the U.S., which may impact our ability to manufacture and timely deliver railcars to our customers;

• shortages of labor;

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Trinity Industries, Inc.

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

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

We market our railcar products and services under the trade name TrinityRail ® .

The TrinityRail platform provides railcar leasing and management services;

railcar manufacturing, maintenance and modifications;

railcar manufacturing;

railcar maintenance and modifications;

and other railcar logistics products and services.

We report our operating results in two reportable segments:

(1) the Railcar Leasing and Management Services Group (the "Leasing Group"), which owns and operates a fleet of railcars and provides third-party fleet leasing, management, and administrative services, as well as other railcar logistics products and services;

and (2) the Rail Products Group, which manufactures and sells railcars and related parts and components, and provides railcar maintenance and modification services.

In the fourth quarter of 2021, we completed the sale of Trinity Highway Products, LLC (“THP”) to Rush Hour Intermediate II, LLC ("Rush Hour"), an entity owned by an affiliated investment fund of Monomoy Capital Partners.

Upon completion of the sale, the accounting requirements for reporting THP as a discontinued operation were met.

In connection with the sale of THP, we agreed to indemnify Rush Hour for certain liabilities related to the ET-Plus® System, a highway guardrail end-terminal system (the “ET Plus”).

Consequently, expenses incurred during the three and nine months ended September 30, 2023 and 2022, and that may be incurred in the future related to these retained obligations, will be reported in discontinued operations.

See Note 2 of the Consolidated Financial Statements for further information related to the sale of THP and Note 14 of the Consolidated Financial Statements for information regarding the retained liabilities.

(1) the Railcar Leasing and Services Group (the "Leasing Group"), which owns and operates a fleet of railcars and provides third-party fleet leasing, management, and administrative services;

railcar maintenance and modification services;

and other railcar logistics products and services;

and (2) the Rail Products Group, which manufactures and sells railcars and related parts and components.

Effective January 1, 2024, the Company modified its organizational structure to better leverage our maintenance services capabilities to support lease fleet optimization and to grow our services and parts businesses.

The new structure resulted in a change to our reportable segments beginning in 2024.

In connection with this organizational update, we aligned the maintenance services business, which was previously reported in the Rail Products Group, to now be presented within our leasing business.

This change aligns with the way in which our CODM assesses performance and allocates resources.

Consequently, beginning January 1, 2024, we report our operating results in two reportable segments:

(1) the Railcar Leasing and Services Group, formerly the Railcar Leasing and Management Services Group, and (2) the Rail Products Group.

These changes had no impact to our previously reported consolidated results of operations, financial position, or cash flows.

All prior period segment results set forth herein have been recast to reflect these changes and present results on a comparable basis.

Executive Summary

Recent Market Developments

U.S.-Mexico Border Congestion

On September 20, 2023, the U.S.

Customs and Border Protection Agency (“CBP”) suspended U.S.

bound cross-border rail traffic in Eagle Pass, Texas, the primary border crossing used for railcar deliveries from our manufacturing facilities in Mexico.

According to the CBP, this action was taken to assist U.S.

Border Patrol due to the recent influx of migrants at the border.

While rail traffic operations resumed on September 23, congestion and rail traffic challenges continue to evolve.

The closing of the U.S.-Mexico border by the U.S.

CBP negatively impacted our third quarter railcar deliveries.

Additionally, increased state vehicle inspections have resulted in truck traffic congestion, negatively impacting our supply chain.

We are actively monitoring rail and truck traffic as both continue to be impacted.

We remain in close contact with all stakeholders, including the relevant government agencies, and continue to evaluate available alternatives for rail and truck transportation between Mexico and the United States.

Continued rail and truck congestion at the border could negatively impact our deliveries and supply chain until the congestion is resolved.

Cyclical, Seasonal and Other Trends Impacting Our Business

Although lease rates and lease fleet utilization continue to improve, the industries in which our customers operate are cyclical in nature.

Weaknesses in certain sectors of the North American and global economy may make it more difficult to sell or lease certain types of railcars.

General/Business Trends

The industries in which our customers operate are cyclical in nature.

Although lease rates and lease fleet utilization remain strong, 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 certain commodity prices, or changes in demand for certain commodities, could impact customer demand for various types of railcars.

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We evaluate the creditworthiness of our customers and monitor performance of relevant market sectors;

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

however, weaknesses in any of these market sectors could affect the financial viability of our customers, which could negatively impact our revenues, credit loss expense, and operating profits.

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

Due to their transactional nature, lease portfolio sales are the primary driver of fluctuations in results in the Leasing Group.

U.S.-Mexico Border Disruption

In late 2023, the U.S.

Customs and Border Protection Agency suspended cross-border rail traffic in Eagle Pass, Texas, the primary border crossing used for railcar deliveries from our manufacturing facilities in Mexico, which negatively impacted our railcar deliveries in the second half of 2023.

We have not experienced a border closure at Eagle Pass thus far in 2024, and substantially all railcar shipments that were delayed at the end of 2023 were delivered during the three months ended March 31, 2024;

however, while we have seen some improvement in recent months, there is ongoing instability at the border, and there can be no assurance that similar border closings or congestion will not occur in the future.

We actively monitor rail and truck traffic at the U.S.-Mexico border and remain in close contact with all stakeholders, including the relevant government agencies, and continue to evaluate available alternatives for rail and truck transportation between Mexico and the United States.

Any future rail and truck congestion at the border could negatively impact our deliveries and supply chain.

Supply Chain Disruptions

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, 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.

Foreign Currency Fluctuations

We are exposed to the impact of foreign currency fluctuations in our Mexico operations resulting from certain expenditures that are denominated in the Mexican peso.

We have entered into hedging transactions to mitigate the foreign currency impact of a portion of our peso-denominated expenditures;

however, the magnitude of the peso's strengthening relative to the United States dollar during the first half of 2023 unfavorably impacted the operating results in our Rail Products Group during the three and nine months ended September 30, 2023.

Additionally, we have experienced increases in the costs of steel, components, and certain other inputs that represent a substantial portion of our cost of revenues.

The strengthening of the Mexican peso relative to the U.S.

dollar unfavorably impacted the operating results in our Rail Products Group in 2023.

We have expanded our hedging program and have taken other actions to mitigate the foreign currency impact of a portion of our peso-denominated expenditures.

We regularly evaluate and update our strategies to mitigate the negative effects on margins and operating profits that may arise due to foreign currency fluctuations.

Input and Labor Costs

We periodically experience increases in the costs of steel, components, and certain other inputs that represent a substantial portion 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 the volatility of certain input costs on our operating profit.

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Finally, although we remain committed to attracting and retaining a highly skilled and diverse workforce, challenging labor market conditions 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 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.

We continually assess the impact of input and labor costs on our operational efficiency, margins, and overall profitability.

Financial and Operational Highlights

• Our revenues for the nine months ended September 30, 2023 were $2,185.4 million, representing an increase of 57.7%, compared to the nine months ended September 30, 2022.

Our operating profit for the nine months ended September 30, 2023 was $268.3 million compared to $220.5 million for the nine months ended September 30, 2022.

• The Leasing Group's lease fleet of 109,055 company-owned railcars was 98.1% utilized as of September 30, 2023, compared to a lease fleet utilization of 97.9% on 109,195 company-owned railcars as of September 30, 2022.

• Our revenues for the three months ended March 31, 2024 were $809.6 million, representing an increase of 26.2%, compared to the three months ended March 31, 2023.

Our operating profit for the three months ended March 31, 2024 was $115.2 million compared to $69.0 million for the three months ended March 31, 2023.

• The Leasing Group's lease fleet of 110,205 company-owned railcars was 97.5% utilized as of March 31, 2024, compared to a lease fleet utilization of 98.2% on 108,865 company-owned railcars as of March 31, 2023.

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

• For the nine months ended September 30, 2023, we made a net investment in our lease fleet of approximately $237.5 million, which primarily includes new railcar additions, sustainable railcar conversions, railcar modifications, and other betterments, net of deferred profit, and secondary market purchases;

• For the three months ended March 31, 2024, we made a net investment in our lease fleet of approximately $123.3 million, which primarily includes new railcar additions, sustainable railcar conversions, railcar modifications, and other betterments, net of deferred profit, and secondary market purchases;

and is net of proceeds from lease portfolio sales.

• The total value of the new railcar backlog at September 30, 2023 was $3.6 billion, compared to $4.1 billion at September 30, 2022.

The Rail Products Group received orders for 10,660 railcars and delivered 13,355 railcars in the nine months ended September 30, 2023, in comparison to orders for 28,890 railcars and deliveries of 8,915 railcars in the nine months ended September 30, 2022.

◦ In the third quarter of 2022, we entered into a 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.

Orders received during the nine months ended September 30, 2022 include 15,000 railcars associated with this agreement.

• During the nine months ended September 30, 2023, sustainable railcar conversion revenues totaled $123.3 million, representing 1,255 railcars.

• For the nine months ended September 30, 2023, we generated operating cash flows from continuing operations and Adjusted Free Cash Flow After Investments and Dividends ("Adjusted Free Cash Flow") of $215.8 million and $49.5 million (1) , respectively.

For the nine months ended September 30, 2022, operating cash flows from continuing operations was a net use of $52.6 million and Adjusted Free Cash Flow was $0.1 million (1) .

• The total value of the new railcar backlog at March 31, 2024 was $2.9 billion, compared to $3.7 billion at March 31, 2023.

The Rail Products Group received orders for 1,880 railcars and delivered 4,695 railcars in the three months ended March 31, 2024, in comparison to orders for 2,690 railcars and deliveries of 4,045 railcars in the three months ended March 31, 2023.

• During the three months ended March 31, 2024, sustainable railcar conversion revenues totaled $50.2 million, representing 675 railcars.

• For the three months ended March 31, 2024, we generated operating cash flows from continuing operations and Adjusted Free Cash Flow After Investments and Dividends ("Adjusted Free Cash Flow") of $56.5 million and $11.7 million (1) , respectively, in comparison to $102.5 million and $36.2 million (1) , respectively, for the three months ended March 31, 2023.

(1) Non-GAAP financial measure.

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Returns of Capital to Shareholders

Returns of capital to shareholders in the form of dividends and share repurchases are summarized below:

Returns of capital to shareholders in the form of dividends are summarized below.

There were no shares repurchased during the three months ended March 31, 2024 and 2023.

(1) Dividend yield is calculated as dividends paid for the four previous quarters divided by the closing stock price on the last trading day of each respective quarter.

(2) In the fourth quarter of 2022, our Board of Directors terminated the existing share repurchase program and authorized a new $250.0 million share repurchase program.

Capital Structure Updates

TRL-2023 Term Loan – In June 2023, Trinity Rail Leasing 2023 LLC (“TRL-2023”), a limited purpose, indirect wholly-owned subsidiary of the Company owned through Trinity Industries Leasing Company ("TILC"), entered into a $340.0 million term loan agreement ("TRL-2023 term loan").

The TRL-2023 term loan bears interest at a variable rate of daily simple Secured Overnight Financing Rate ("SOFR") plus (1) a benchmark adjustment of 10 basis points and (2) a facility margin of 1.80%.

The TRL-2023 term loan has a stated maturity date of June 2028.

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

Senior Notes Due 2028 – In June 2023, we issued $400.0 million aggregate principal amount of 7.75% senior notes due July 2028 ("Senior Notes due 2028").

Interest on the Senior Notes due 2028 is payable semiannually commencing January 15, 2024.

Net proceeds received from the issuance were used to repay outstanding borrowings under our revolving credit facility and to pay related fees, costs, premiums, and expenses in connection with the issuance.

We intend to use the remainder of the net proceeds for general corporate purposes, which may include repayment of other debt, including our 4.55% senior notes due 2024 ("Senior Notes due 2024").

TILC Warehouse Loan Facility – In March 2024, we entered into a new Trinity Industries Leasing Company ("TILC") warehouse loan facility with a total commitment amount of $800.0 million, a revolving termination date of March 15, 2027, and a maturity date of March 15, 2028.

This warehouse loan facility replaced the prior $1.0 billion warehouse loan facility.

See Note 8 of the Consolidated Financial Statements for additional information regarding this debt transaction.

Litigation Updates

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Consolidated Results of Operations

The following table summarizes our consolidated results of operations for the three and nine months ended September 30, 2023 and 2022:

The following table summarizes our consolidated results of operations for the three months ended March 31, 2024 and 2023:

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

(in millions)

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Interest expense, net 69.1 62.1

Loss on extinguishment of debt — — — 1.5

Other, net 3.4 1.6

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Income from continuing operations $ 31.7 $ 16.8

The tables below present revenues by segment for the three and nine months ended September 30, 2023 and 2022:

Three Months Ended September 30, 2023

Revenues Percent

External Intersegment Total Change

(in millions)

Railcar Leasing and Management Services Group $ 222.3 $ 0.3 $ 222.6 14.3 %

Rail Products Group 599.0 83.2 682.2 14.2 %

Segment Totals 821.3 83.5 904.8 14.2 %

Eliminations – Lease Subsidiary — (83.2) (83.2)

Eliminations – Other — (0.3) (0.3)

Consolidated Total $ 821.3 $ — $ 821.3 65.4 %

Three Months Ended September 30, 2022

External Intersegment Total

(in millions)

Railcar Leasing and Management Services Group $ 194.6 $ 0.2 $ 194.8

Rail Products Group 302.0 295.3 597.3

Segment Totals 496.6 295.5 792.1

Eliminations – Lease Subsidiary — (295.3) (295.3)

Eliminations – Other — (0.2) (0.2)

Consolidated Total $ 496.6 $ — $ 496.6

Nine Months Ended September 30, 2023

The tables below present revenues by segment for the three months ended March 31, 2024 and 2023:

Three Months Ended March 31, 2024

Revenues Percent

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(in millions)

Railcar Leasing and Management Services Group $ 648.6 $ 0.7 $ 649.3 13.3 %

Railcar Leasing and Services Group $ 284.3 $ 0.9 $ 285.2 22.5 %

Rail Products Group 525.3 142.1 667.4 13.6 %

Segment Totals 809.6 143.0 952.6 16.1 %

Eliminations – Lease Subsidiary — (492.2) (492.2)

Eliminations – Other — (0.7) (0.7)

Eliminations — (143.0) (143.0)

Consolidated Total $ 809.6 $ — $ 809.6 26.2 %

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

External Intersegment Total

(in millions)

Railcar Leasing and Management Services Group $ 572.6 $ 0.6 $ 573.2

Railcar Leasing and Services Group $ 232.7 $ 0.2 $ 232.9

Rail Products Group 409.0 178.6 587.6

Segment Totals 641.7 178.8 820.5

Eliminations – Lease Subsidiary — (605.5) (605.5)

Eliminations – Other — (0.6) (0.6)

Eliminations — (178.8) (178.8)

Consolidated Total $ 641.7 $ — $ 641.7

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and restructuring activities.

Operating costs by segment for the three and nine months ended September 30, 2023 and 2022 were as follows:

Operating costs by segment for the three months ended March 31, 2024 and 2023 were as follows:

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

(in millions)

Railcar Leasing and Management Services Group (1)

Railcar Leasing and Services Group (1)

$ 184.9 $ 148.3

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Restructuring activities, net — (0.4)

Eliminations – Lease Subsidiary (80.8) (275.7) (459.9) (556.8)

Eliminations – Other (0.3) — (1.1) 0.7

Eliminations (140.6) (164.7)

Consolidated Total $ 694.4 $ 572.7

(1) Includes gains on lease portfolio sales of $3.1 million and $34.3 million for the three months ended September 30, 2023 and 2022, respectively.

Includes gains on lease portfolio sales of $46.4 million and $73.0 million for the nine months ended September 30, 2023 and 2022, respectively.

(1) Includes gains on lease portfolio sales of $2.1 million and $13.5 million for the three months ended March 31, 2024 and 2023, respectively.

Operating Profit

Operating profit by segment for the three and nine months ended September 30, 2023 and 2022 was as follows:

Operating profit by segment for the three months ended March 31, 2024 and 2023 was as follows:

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

(in millions)

Railcar Leasing and Management Services Group $ 88.6 $ 107.9 $ 292.6 $ 293.2

Railcar Leasing and Services Group $ 100.3 $ 84.6

Rail Products Group 43.8 24.1

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Restructuring activities, net — 0.4

Eliminations – Lease Subsidiary (2.4) (19.6) (32.3) (48.7)

Eliminations – Other — (0.2) 0.4 (1.3)

Eliminations (2.4) (14.1)

Consolidated Total $ 115.2 $ 69.0

Discussion of Consolidated Results

Revenues – Our revenues for the three months ended September 30, 2023 were $821.3 million, representing an increase of $324.7 million, or 65.4%, over the prior year period.

Our revenues for the nine months ended September 30, 2023 were $2,185.4 million, representing an increase of $799.3 million, or 57.7%, over the prior year period.

The increases in revenues were primarily due to a higher volume of external deliveries in the Rail Products Group and improved lease rates, higher utilization, and the impact of the acquisition of RSI Logistics ("RSI") in the Leasing Group.

Cost of revenues – Our cost of revenues for the three months ended September 30, 2023 was $679.5 million, representing an increase of $284.2 million, or 71.9%, over the prior year period.

Our cost of revenues for the nine months ended September 30, 2023 was $1,819.2 million, representing an increase of $699.8 million, or 62.5%, over the prior year period.

The increases in cost of revenues were primarily due to a higher volume of external deliveries and the impact of foreign currency fluctuations in the Rail Products Group.

Cost of revenues for the nine months ended September 30, 2023 was further impacted by operational and labor-related inefficiencies in the Rail Products Group.

Selling, engineering, and administrative expenses – Selling, engineering, and administrative expenses for the three months ended September 30, 2023 were $49.1 million, representing an increase of $1.1 million, or 2.3%, when compared to the prior year period.

Selling, engineering, and administrative expenses for the nine months ended September 30, 2023 were $153.3 million, representing an increase of $15.6 million, or 11.3%, when compared to the prior year period.

These increases were primarily due to higher employee-related costs.

Gains on dispositions of property – Gains on dispositions of property decreased by $31.9 million and $39.3 million for the three and nine months ended September 30, 2023, respectively, when compared to the prior year periods primarily due to lower lease portfolio sales volume in the current year periods, as well as gains associated with the disposition of certain non-operating facilities in the prior year periods.

Additionally, we recorded gains of $3.7 million and $1.1 million during the three months ended September 30, 2023 and 2022, respectively, and gains of $4.9 million and $7.5 million during nine months ended September 30, 2023 and 2022, respectively, related to insurance recoveries in excess of net book value for assets damaged by a tornado at the Company’s rail maintenance facility in Cartersville, Georgia.

See Note 14 of the Consolidated Financial Statements for more information.

Operating profit – Operating profit for the three months ended September 30, 2023 totaled $100.2 million, representing an increase of $7.5 million, or 8.1%, from the prior year period.

Operating profit for the nine months ended September 30, 2023 totaled $268.3 million, representing an increase of $47.8 million, or 21.7%, from the prior year period.

These increases were primarily due to a higher volume of external deliveries in the Rail Products Group and improved lease rates and higher utilization in the Leasing Group, partially offset by lower lease portfolio sales volume in the current year periods and higher employee-related and other operating costs across the enterprise.

Operating profit for the three and nine months ended September 30, 2023 and 2022 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.

Revenues – Our revenues for the three months ended March 31, 2024 were $809.6 million, representing an increase of $167.9 million, or 26.2%, over the prior year period.

The increase in revenues was primarily due to higher external deliveries in the Rail Products Group, and improved lease rates and a higher volume of external repairs in the Leasing Group.

Cost of revenues – Our cost of revenues for the three months ended March 31, 2024 was $644.9 million, representing an increase of $106.4 million, or 19.8%, over the prior year period.

The increase in cost of revenues was primarily due to higher external deliveries and the impact of foreign currency fluctuations in the Rail Products Group.

Selling, engineering, and administrative expenses – Selling, engineering, and administrative expenses for the three months ended March 31, 2024 were $52.3 million, representing an increase of $2.4 million, or 4.8%, when compared to the prior year period primarily due to higher employee-related costs.

Gains on dispositions of property – Gains on dispositions of property decreased by $12.5 million for the three months ended March 31, 2024, when compared to the prior year period primarily due to lower lease portfolio sales volume in the current year period.

Additionally, we recorded gains of $1.2 million during three months ended March 31, 2023 related to insurance recoveries in excess of net book value for assets damaged by a tornado at the Company’s rail maintenance facility in Cartersville, Georgia.

Operating profit – Operating profit for the three months ended March 31, 2024 totaled $115.2 million, representing an increase of $46.2 million, or 67.0%, from the prior year period.

The increase was primarily due to higher external deliveries in the Rail Products Group, improved lease rates in the Leasing Group, and a higher volume of external repairs in our maintenance services business, partially offset by lower lease portfolio sales volume in the current year period.

For further information regarding the operating results of individual segments, see "Segment Discussion" below.

Interest expense, net – Interest expense, net for the three months ended September 30, 2023 totaled $68.8 million, compared to $55.0 million for the three months ended September 30, 2022, primarily driven by higher average debt due to the issuance of the Senior Notes due 2028 and the TRL-2023 term loan in June 2023, as well as higher interest rates.

Interest expense, net for the nine months ended September 30, 2023 totaled $197.8 million, compared to $148.2 million for the nine months ended September 30, 2022.

The increase was primarily driven by higher variable interest rates and higher average debt due to the issuance of the Senior Notes due 2028 and the TRL-2023 term loan in June 2023.

Income taxes – The effective tax rate from continuing operations for the three months ended September 30, 2023 was an expense of 18.6%, which differs from the U.S.

statutory rate of 21.0% primarily due to state income taxes, foreign income taxes, non-deductible executive compensation, excess tax benefits associated with equity-based compensation, taxes not recorded on our non-controlling interests in partially-owned subsidiaries, and the remeasurement of deferred tax liabilities due to state tax law changes and rate reductions enacted during the third quarter.

The effective tax rate from continuing operations for the nine months ended September 30, 2023 was an expense of 2.8%, which differs from the U.S.

statutory rate of 21.0% primarily due to the release of residual taxes out of AOCI;

the re-measurement of our net deferred tax liabilities due to the acquisition of RSI and state tax law changes and rate reductions enacted during the year;

Interest expense, net – Interest expense, net for the three months ended March 31, 2024 totaled $69.1 million, compared to $62.1 million for the three months ended March 31, 2023.

The increase was primarily driven by higher average debt in 2024.

Income taxes – The effective tax rate from continuing operations for the three months ended March 31, 2024 was an expense of 25.8%, which differs from the U.S.

statutory rate of 21.0% primarily due to state income taxes and foreign income taxes, partially offset by the benefit of noncontrolling interest, for which we do not provide income taxes.

The effective tax rate from continuing operations for the three months ended March 31, 2023 was a benefit of 217.0%, which differs from the U.S.

statutory rate of 21.0% primarily due to the release of residual taxes out of accumulated other comprehensive income;

the re-measurement of our net deferred tax liabilities due to the acquisition of a subsidiary;

changes in our valuation allowances;

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See Note 9 of the Consolidated Financial Statements for additional information.

The effective tax rates from continuing operations for the three and nine months ended September 30, 2022 were expenses of 22.5% and 23.7%, respectively, which differ from the U.S.

statutory rate of 21.0% primarily due to state income taxes, foreign income taxes, non-deductible executive compensation, excess tax benefits associated with equity-based compensation, taxes not recorded on our non-controlling interests in partially-owned subsidiaries, and a reduction of our uncertain tax positions balance due to a lapse of a state statute of limitations.

Segment Discussion

Railcar Leasing and Management Services Group

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 Percent 2023 2022 Percent

($ in millions) Change ($ in millions) Change

Leasing and management $ 222.6 $ 194.8 14.3 % $ 649.3 $ 573.2 13.3 %

Operating profit (1) :

Railcar Leasing and Services Group

Three Months Ended March 31,

2024 2023 Percent

($ in millions) Change

Leasing and management $ 209.0 $ 194.7 7.3 %

Lease portfolio sales (2)

Maintenance services (1)

65.2 29.4 121.8 %

Digital and logistics services 11.0 8.8 25.0 %

Total revenues $ 285.2 $ 232.9 22.5 %

Cost of revenues (2)

169.6 146.8 15.5 %

Selling, engineering, and administrative expenses 18.1 16.9 7.1 %

Gains on dispositions of property:

Lease portfolio sales 2.1 13.5 *

Other 0.7 1.9 *

Total operating profit $ 100.3 $ 84.6 18.6 %

Total operating profit margin 35.2 % 36.3 %

Leasing and management operating profit margin

Total operating profit margin, excluding lease portfolio sales 34.4 % 30.5 %

Selected expense information for Company-owned railcars (3) :

Depreciation and amortization expense (4)

$ 59.9 $ 61.6 (2.8) %

Selected expense information:

Depreciation and amortization (3)

Maintenance and compliance expense (5)

$ 30.4 $ 34.8 (12.6) %

Maintenance and compliance $ 36.4 $ 28.2 29.1 % $ 107.2 $ 84.7 26.6 %

Rent and ad valorem taxes $ 4.0 $ 5.2 (23.1) % $ 12.5 $ 15.5 (19.4) %

Selling, engineering, and administrative expenses

Other fleet operating costs (6)

$ 7.7 $ 9.2 (16.3) %

Interest expense (7)

$ 57.4 $ 54.8 4.7 %

* Not meaningful

(1) Operating profit includes:

depreciation and amortization;

fleet operating costs, which include maintenance, compliance, freight, and storage;

rent and ad valorem taxes;

and selling, engineering, and administrative expenses.

Amortization of deferred profit on railcars sold from the Rail Products Group to the Leasing Group is included in the operating profits of the Leasing Group, resulting in the recognition of depreciation expense based on our original manufacturing cost of the railcars.

(1) Revenues related to services performed by the maintenance services business to support the railcars in our lease fleet are eliminated within the Railcar Leasing & Services Group and are excluded from the totals reported on this line.

(2) Includes depreciation and amortization expense, maintenance and compliance expense, and other fleet operating costs related to our lease fleet, as well as operating costs for our maintenance services and digital and logistics services businesses.

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

(4) Depreciation and amortization expense includes $4.7 million for the three months ended March 31, 2023 related to the disposal of certain railcar components associated with our sustainable railcar conversion program.

Additionally, amortization of deferred profit on railcars sold from the Rail Products Group to the Leasing Group is included in depreciation and amortization expense, resulting in the recognition of depreciation expense based on our original manufacturing cost of the railcars.

(5) Maintenance and compliance expense is reported at cost with respect to the services performed by our maintenance services business to support the railcars in our lease fleet.

(6) Other fleet operating costs include freight, storage, rent, and ad valorem taxes.

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

(2) Includes $1.3 million selling profit associated with sales-type leases for the nine months ended September 30, 2022.

(3) Depreciation and amortization expense includes $0.1 million and $5.6 million for the three and nine months ended September 30, 2023, respectively, related to the disposal of certain railcar components associated with our sustainable railcar conversion program.

For the three and nine months ended September 30, 2022, depreciation and amortization expense includes $2.4 million and $8.5 million, respectively, related to our sustainable railcar conversion program.

(4) Interest expense for the nine months ended September 30, 2022 includes $1.5 million of loss on extinguishment of debt associated with the repayment of TRIP Railcar Co.

LLC's outstanding term loan agreement.

Information related to lease portfolio sales is as follows:

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

($ in millions)

1 unchanged sentence

Operating profit on lease portfolio sales $ 2.1 $ 13.5

$ 3.1 $ 34.3 $ 46.4 $ 71.7

Operating profit margin on lease portfolio sales 8.7 % 23.8 %

(1) Excludes $1.3 million selling profit associated with sales-type leases for the nine months ended September 30, 2022.

Total revenues for the Railcar Leasing and Management Services Group increased by 14.3% and 13.3% for the three and nine months ended September 30, 2023, respectively, compared to the prior year periods.

Leasing and management revenues for the three and nine months ended September 30, 2023 were favorably impacted primarily by improved lease rates and higher utilization, which resulted in higher revenues when compared to the three and nine months ended September 30, 2022.

Revenues for the Leasing Group were also favorably impacted for the three and nine months ended September 30, 2023 by the acquisition of RSI.

Leasing and management operating profit for the three and nine months ended September 30, 2023 increased by 16.2% and 11.8%, respectively, compared to the prior year periods primarily due to improved lease rates and higher utilization, partially offset by higher maintenance costs and increased depreciation and selling, engineering, and administrative expenses.

Leasing Group operating profit decreased by 17.9% and 0.2% for the three and nine months ended September 30, 2023, respectively, compared to the prior year periods primarily due to lower lease portfolio sales volume in the current year periods.

Total revenues for the Railcar Leasing and Services Group increased by 22.5% for the three months ended March 31, 2024, compared to the prior year period.

Leasing and management revenues for the three months ended March 31, 2024 were favorably impacted primarily by improved lease rates and net additions to the lease fleet, which resulted in higher revenues when compared to the three months ended March 31, 2023.

Our maintenance services business is primarily dedicated to servicing our lease fleet pursuant to the provisions of our lease contracts.

This may include services that are not included in the full-service lease agreement, such as repairs of railcar damage or other customer-specific requirements.

We also perform maintenance and repair activities on railcars owned by third parties, including our investor-owned fleet.

Revenues in our maintenance services business increased for the three months ended March 31, 2024 as a result of a higher volume of repairs completed for third parties, including our investor-owned fleet, as well as favorable pricing.

Cost of revenues for the Railcar Leasing and Services Group increased by 15.5% for the three months ended March 31, 2024, compared to the prior year period.

In our maintenance services business, cost of revenues increased for the three months ended March 31, 2024 as a result of the volume of external repairs.

Cost of revenues was favorably impacted by lower maintenance and fleet operating costs and reduced depreciation in the leasing and management business.

Leasing Group operating profit increased by 18.6% for the three months ended March 31, 2024, compared to the prior year period primarily due to improved lease rates and a higher volume of external repairs in the maintenance services business, partially offset by lower lease portfolio sales volume in the current year period.

Additionally, operating profit was favorably impacted by gains of $1.2 million during the three months ended March 31, 2023 related to insurance recoveries in excess of net book value for assets damaged by a tornado at the Company’s rail maintenance facility in Cartersville, Georgia in the first quarter of 2021.

The Leasing Group generally uses its non-recourse warehouse loan facility or cash to provide initial funding for a portion of the purchase price of the railcars.

After initial funding, the Leasing Group may obtain long-term financing for the railcars in the lease fleet through non-recourse asset-backed securities;

long-term recourse debt such as equipment trust certificates;

long-term recourse debt;

long-term non-recourse promissory notes;

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

September 30, 2023 September 30, 2022

March 31, 2024 March 31, 2023

Number of railcars:

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Fleet utilization 97.5 % 98.2 %

(1) Includes 2,495 railcars and 2,805 railcars under leased-in arrangements as of September 30, 2023 and 2022, respectively.

(1) Includes 2,490 railcars and 2,470 railcars under leased-in arrangements as of March 31, 2024 and 2023, respectively.

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

Rail Products Group

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 Percent 2023 2022 Percent

($ in millions) Change ($ in millions) Change

Three Months Ended March 31,

2024 2023 Percent

($ in millions) Change

Rail products (1)

$ 639.2 $ 558.4 14.5 %

Maintenance services 66.0 51.9 27.2 % 180.8 151.9 19.0 %

Other 23.1 14.3 61.5 % 70.7 38.6 83.2 %

Parts & components 28.2 29.2 (3.4) %

Total revenues $ 667.4 $ 587.6 13.6 %

3 unchanged sentences

7.7 7.0 10.0 %

Gains on dispositions of property (3.7) (0.9) * (4.6) (7.2) *

Losses on dispositions of property — (0.1) *

Operating profit $ 43.8 $ 24.1 81.7 %

1 unchanged sentence

* Not meaningful

(1) Includes sustainable railcar conversion revenues of $63.0 million, representing 620 railcars, for the three months ended September 30, 2023 and sustainable railcar conversion revenues of $123.3 million, representing 1,255 railcars, for the nine months ended September 30, 2023.

Includes sustainable railcar conversion revenues of $28.9 million, representing 300 railcars, for the three months ended September 30, 2022 and sustainable railcar conversion revenues of $117.9 million, representing 1,230 railcars, for the nine months ended September 30, 2022.

Revenues for the Rail Products Group increased for the three and nine months ended September 30, 2023 by 14.2% and 43.0%, respectively, when compared to the prior year periods.

For the three months ended September 30, 2023, revenues in our rail products business increased as a result of higher deliveries and a favorable mix of railcars sold.

For the nine months ended September 30, 2023, revenues in our rail products business increased as a result of higher deliveries, partially offset by the mix of railcars sold.

Revenues in our maintenance services business increased for the three and nine months ended September 30, 2023 as a result of higher volumes and favorable pricing, partially offset by the mix of repairs.

Increases in other revenues were driven by the growth of our parts business as a result of the acquisition of Holden America.

Cost of revenues for the Rail Products Group increased for the three and nine months ended September 30, 2023 by 13.3% and 41.2%, respectively, when compared to the prior year periods.

In our rail products business, the increase in cost of revenues for the three and nine months ended September 30, 2023 was driven by higher deliveries and the impact of foreign currency fluctuations.

For the nine months ended September 30, 2023, cost of revenues in our rail products business was further impacted by operational inefficiencies associated with production line changeovers and supply chain disruptions, and labor inefficiencies associated with onboarding of new employees.

In our maintenance services business, cost of revenues increased for the three and nine months ended September 30, 2023 as a result of a higher volume of general repairs and the mix of repairs and continues to be impacted by labor shortages leading to operating inefficiencies.

Operating profit for the three and nine months ended September 30, 2023 was favorably impacted by higher deliveries, partially offset by the mix of railcars sold and the impact of foreign currency fluctuations.

Operating profit for the nine months ended September 30, 2023 was further impacted by operational and labor inefficiencies.

Additionally, operating profit was favorably impacted by gains of $3.7 million and $4.9 million during the three and nine months ended September 30, 2023, respectively, and gains of $1.1 million and $7.5 million during the three and nine months ended September 30, 2022, respectively, related to insurance recoveries in excess of net book value for assets damaged by a tornado at the Company’s rail maintenance facility in Cartersville, Georgia in the first quarter of 2021.

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

In addition to the amounts below, as of September 30, 2023, our backlog related to sustainable railcar conversions totaled $124.4 million, representing 1,540 railcars.

September 30,

(1) Includes sustainable railcar conversion revenues of $50.2 million, representing 675 railcars, for the three months ended March 31, 2024 and sustainable railcar conversion revenues of $53.9 million, representing 590 railcars, for the three months ended March 31, 2023.

Revenues for the Rail Products Group increased for the three months ended March 31, 2024 by 13.6%, when compared to the prior year period primarily as a result of higher deliveries.

Cost of revenues for the Rail Products Group increased for the three months ended March 31, 2024 by 10.7%, when compared to the prior year period.

The increase in cost of revenues for the three months ended March 31, 2024 was driven by higher deliveries and the impact of foreign currency fluctuations, partially offset by operational efficiencies associated with reduced production line changeovers and fewer supply chain disruptions, and improved labor efficiencies when compared to the prior year period.

Operating profit for the Rail Products Group increased for the three months ended March 31, 2024 by 81.7%, when compared to the prior year period primarily due to higher deliveries and improved operational and labor efficiencies.

Information related to our Rail Products Group backlog of new railcars is set forth below.

In addition to the amounts below, as of March 31, 2024, our backlog related to sustainable railcar conversions totaled $35.8 million, representing 445 railcars.

2024 2023 Percent

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Total $ 2,938.9 $ 3,705.9 (20.7) %

Three Months Ended September 30, Nine Months Ended

September 30,

Three Months Ended

2024 2023 Percent

2 unchanged sentences

Orders received 1,880 2,690 (30.1) %

3,200 19,500 10,660 28,890 (63.1) %

Deliveries (4,695) (4,045) 16.1 %

Other adjustments (2)

— — (160) (300)

Ending balance 23,075 30,915 (25.4) %

Average selling price in ending backlog $ 127,363 $ 119,874 6.2 %

(1) Orders received for the three and nine months ended September 30, 2022 include 15,000 railcars valued at approximately $1.8 billion associated with a long-term railcar supply agreement with GATX.

(2) The adjustment for the nine months ended September 30, 2023 includes 160 railcars valued at $19.2 million that were placed with a different customer and are also included in orders received in the table above, resulting in no net effect on ending backlog.

The adjustment for the nine months ended September 30, 2022 includes 300 railcars valued at $34.6 million that were removed from the new railcar backlog and shifted to the sustainable railcar conversion backlog.

Total backlog dollars decreased by 20.7% when compared to the prior year period.

The ending backlog as of September 30, 2022 included approximately $1.8 billion associated with a long-term railcar supply agreement with GATX.

We expect to deliver approximately 17.2% of our railcar backlog value during the remaining three months of 2023 and 39.6% during 2024, with the remainder to be delivered through 2028.

We expect to deliver approximately 49.1% of our railcar backlog value during the remaining nine months of 2024 and 20.4% during 2025, with the remainder to be delivered through 2028.

The orders in our backlog from the Leasing Group are fully supported by lease commitments with external customers.

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Transactions between the Rail Products Group and the Leasing Group are as follows:

Three Months Ended September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Three Months Ended

($ in millions)

1 unchanged sentence

Sustainable railcar conversions $ 0.4 $ 39.0

Other maintenance services $ 26.8 $ 37.2 $ 68.0 $ 92.4

Parts & components $ 6.5 $ 5.3

Deferred profit $ 2.1 $ 14.7

2 unchanged sentences

Corporate and other

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 Percent 2023 2022 Percent

(in millions) Change (in millions) Change

Three Months Ended March 31,

2024 2023 Percent

(in millions) Change

Operating costs:

1 unchanged sentence

$ 26.5 $ 26.0 1.9 %

Gains on dispositions of property — (3.7) * — (10.5) *

Operating loss $ (26.5) $ (26.0) 1.9 %

* Not meaningful

Selling, engineering, and administrative expenses for the three and nine months ended September 30, 2023 increased 0.4% and 13.9%, respectively, compared to the prior year periods primarily from higher employee-related costs.

Additionally, selling, engineering, and administrative expenses for the nine months ended September 30, 2023 include the change in estimated fair value of additional contingent consideration associated with an acquisition.

Total operating costs during the three and nine months ended September 30, 2022 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 three months ended March 31, 2024 were relatively flat when compared to the prior year period.

There were no gains or losses on dispositions of property for the three months ended March 31, 2024 and 2023;

however, as we continue to streamline our operational footprint, we may have gains or losses on the disposition of non-operating facilities.

Liquidity and Capital Resources

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

As of September 30, 2023, we have total committed liquidity of $780.0 million.

As of March 31, 2024, we have total committed liquidity of $798.8 million.

Our total available liquidity includes:

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We believe we have access to adequate capital resources to fund operating requirements and are an active participant in the capital markets.

We intend to use cash from operations and our available liquidity to repay our 4.55% senior notes due 2024 ("Senior Notes due 2024").

Liquidity Highlights

Revolving Credit Facility – In March 2023, we amended our revolving credit facility to increase the total facility commitment from $450.0 million to $600.0 million, increase the maximum leverage ratio to provide additional flexibility, modify the limitations on restricted payments, and allow up to $100.0 million of annual dividends on the Company's common stock.

See Note 8 of the Consolidated Financial Statements for additional information regarding this amendment.

TRL-2023 Term Loan – In June 2023, TRL-2023 entered into a $340.0 million term loan agreement.

The TRL-2023 term loan bears interest at a variable rate of daily simple SOFR plus (1) a benchmark adjustment of 10 basis points and (2) a facility margin of 1.80%.

The TRL-2023 term loan has a stated maturity date of June 2028.

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

Senior Notes Due 2028 – In June 2023, we issued $400.0 million aggregate principal amount of 7.75% senior notes due July 2028.

Interest on the Senior Notes due 2028 is payable semiannually commencing January 15, 2024.

We intend to use the remainder of the net proceeds for general corporate purposes, which may include repayment of other debt, including our Senior Notes due 2024.

Dividend Payments – We paid $64.7 million in dividends to our common stockholders during the nine months ended September 30, 2023.

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.

There were no shares repurchased during the three and nine months ended September 30, 2023.

The following table summarizes our cash flows from operating, investing, and financing activities for the nine months ended September 30, 2023 and 2022:

Nine Months Ended

September 30,

TILC Warehouse Loan Facility – In March 2024, we entered into a new TILC warehouse loan facility with a total commitment amount of $800.0 million, a revolving termination date of March 15, 2027, and a maturity date of March 15, 2028.

This warehouse loan facility replaced the prior $1.0 billion warehouse loan facility.

See Note 8 of the Consolidated Financial Statements for additional information regarding this debt transaction.

Dividend Payments – We paid $23.0 million in dividends to our common stockholders during the three months ended March 31, 2024.

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

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

There were no shares repurchased during the three months ended March 31, 2024.

The following table summarizes our cash flows from operating, investing, and financing activities for the three months ended March 31, 2024 and 2023:

Three Months Ended

(in millions)

4 unchanged sentences

Net cash flows from discontinued operations (4.3) (3.1)

Net decrease in cash, cash equivalents, and restricted cash $ (27.6) $ (63.7)

Net increase (decrease) in cash, cash equivalents, and restricted cash $ — $ (31.3)

Operating Activities .

Net cash provided by operating activities from continuing operations for the nine months ended September 30, 2023 was $215.8 million compared to net cash used in operating activities from continuing operations of $52.6 million for the nine months ended September 30, 2022.

Net cash provided by operating activities from continuing operations for the three months ended March 31, 2024 was $56.5 million compared to net cash provided by operating activities from continuing operations of $102.5 million for the three months ended March 31, 2023.

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

Nine Months Ended

September 30,

Three Months Ended

(in millions)

2 unchanged sentences

Changes in operating assets and liabilities $ (52.3) $ 32.9

The changes in our operating assets and liabilities resulted in a net use of $15.2 million for the nine months ended September 30, 2023, as compared to a net use of $263.3 million for the nine months ended September 30, 2022.

Operating assets in the prior year period were impacted by higher inventory balances in anticipation of higher volumes of railcar deliveries in future periods, as well as continued supply chain challenges.

The changes in our operating assets and liabilities resulted in a net use of $52.3 million for the three months ended March 31, 2024, as compared to a net source of $32.9 million for the three months ended March 31, 2023.

The change in operating assets for the current year period was impacted by higher receivables balances, partially offset by lower inventory balances associated with railcar deliveries.

Investing Activities.

Net cash used in investing activities from continuing operations for the nine months ended September 30, 2023 was $316.3 million compared to $186.1 million of net cash used in investing activities from continuing operations for the nine months ended September 30, 2022.

Net cash used in investing activities from continuing operations for the three months ended March 31, 2024 was $124.0 million compared to $203.1 million of net cash used in investing activities from continuing operations for the three months ended March 31, 2023.

Significant investing activities are as follows:

• We made a net investment in our lease fleet of $237.5 million during the nine months ended September 30, 2023, compared to $176.3 million in the prior year period.

• We made a net investment in our lease fleet of $123.3 million during the three months ended March 31, 2024, compared to $134.8 million in the prior year period.

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

and is net of proceeds from lease portfolio sales.

• During the nine months ended September 30, 2023, we acquired a company that is a provider of proprietary software and logistics and terminal management solutions for net cash of $66.6 million.

During the nine months ended September 30, 2022, we acquired a company that owns and operates an end-to-end rail logistics software platform providing a real-time data universe to freight rail shippers and operators for net cash of $9.4 million.

• We purchased equity investments totaling $1.1 million and $15.5 million during the nine months ended September 30, 2023 and 2022, respectively, primarily related to our investments in Signal Rail Holdings LLC.

See Note 5 of the Consolidated Financial Statements.

• During the three months ended March 31, 2023, we acquired a company that is a provider of proprietary software and logistics and terminal management solutions for net cash of $66.2 million.

We had no acquisitions during the three months ended March 31, 2024.

Financing Activities.

Net cash provided by financing activities during the nine months ended September 30, 2023 was $81.0 million compared to $193.1 million of net cash provided by financing activities for the nine months ended September 30, 2022.

Net cash provided by financing activities during the three months ended March 31, 2024 was $71.8 million compared to $72.4 million of net cash provided by financing activities for the three months ended March 31, 2023.

Significant financing activities are as follows:

• During the nine months ended September 30, 2023, we had total borrowings of $1,444.3 million and total repayments of $1,279.0 million, for net proceeds of $165.3 million, primarily from debt proceeds for general corporate purposes and to support our investment in the lease fleet.

During the nine months ended September 30, 2022, we had total borrowings of $1,664.5 million and total repayments of $1,351.5 million, for net proceeds of $313.0 million, primarily from debt proceeds to support our investment in the lease fleet.

• We paid $64.7 million and $58.3 million in dividends to our common stockholders during the nine months ended September 30, 2023 and 2022, respectively.

• We repurchased common stock totaling $36.8 million during the nine months ended September 30, 2022.

The prior 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.

Certain shares of stock repurchased during September 2022, totaling $2.6 million, were cash settled in October 2022 in accordance with normal settlement practices.

There were no shares repurchased during the nine months ended September 30, 2023.

• During the three months ended March 31, 2024, we had total borrowings of $909.9 million and total repayments of $803.8 million, for net proceeds of $106.1 million, primarily from debt proceeds to support our investment in the lease fleet and for general corporate purposes.

During the three months ended March 31, 2023, we had total borrowings of $246.3 million and total repayments of $149.6 million, for net proceeds of $96.7 million, primarily from debt proceeds to support our investment in the lease fleet and for general corporate purposes.

• We paid $23.0 million and $21.1 million in dividends to our common stockholders during the three months ended March 31, 2024 and 2023, respectively.

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 March 2023, we amended our revolving credit facility to increase the maximum leverage ratio to provide additional flexibility and to amend certain other terms.

A summary of our financial covenants is detailed below:

Ratio Covenant Actual at

September 30, 2023

March 31, 2024

Maximum leverage (1)

2 unchanged sentences

No less than 2.25 to 1.00 8.20

(1) Defined as the ratio of consolidated total indebtedness to consolidated earnings before interest, taxes, depreciation and amortization ("EBITDA") for the Borrower and its restricted subsidiaries for the period of four consecutive quarters ending with September 30, 2023.

(2) Defined as the ratio of the difference of (A) consolidated EBITDA less (B) consolidated capital expenditures – manufacturing and other to consolidated interest expense to the extent paid in cash, in each case for the Borrower and its restricted subsidiaries for the period of four consecutive quarters ending with September 30, 2023.

As of September 30, 2023, we were in compliance with all such financial covenants.

(2) Defined as the ratio of the difference of (A) consolidated EBITDA less (B) consolidated capital expenditures – operating and administrative to consolidated interest expense to the extent paid in cash, in each case for the Borrower and its restricted subsidiaries for the period of four consecutive quarters ending with March 31, 2024.

As of March 31, 2024, we were in compliance with all such financial covenants.

Please refer to Note 8 of the Consolidated Financial Statements for a description of our current debt obligations.

10 unchanged sentences

The Senior Notes due 2024 are not guaranteed by any of our remaining 100%-owned subsidiaries or partially-owned subsidiaries (“Non-Guarantor Subsidiaries”).

As of September 30, 2023, assets held by the Non-Guarantor Subsidiaries included $119.7 million of restricted cash that was not available for distribution to Trinity Industries, Inc.

As of March 31, 2024, assets held by the Non-Guarantor Subsidiaries included $110.7 million of restricted cash that was not available for distribution to Trinity Industries, Inc.

(“Parent”), $7,223.9 million of equipment securing certain non-recourse debt, and $545.7 million of assets located in foreign locations.

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Investments in and equity in the earnings of the Non-Guarantor Subsidiaries (the non-obligor group) have been excluded.

Nine Months Ended September 30, 2023

Three Months Ended March 31, 2024

Summarized Statement of Operations:

Cost of revenues (2)

Income (loss) from continuing operations $ (33.8)

Net income (loss) (3)

September 30, 2023 December 31, 2022

Income from continuing operations $ 6.0

Net income (3)

March 31, 2024 December 31, 2023

Summarized Balance Sheets:

10 unchanged sentences

Noncontrolling interest $ 239.2 $ 238.4

(1) There were no net sales from the obligor group to Non-Guarantor Subsidiaries during the nine months ended September 30, 2023.

(2) Cost of revenues includes $345.5 million of purchases from Non-Guarantor Subsidiaries during the nine months ended September 30, 2023.

(3) Net income (loss) includes $8.1 million of net loss related to discontinued operations.

(4) Receivables, net of allowance includes $91.6 million and $87.9 million of receivables from Non-Guarantor Subsidiaries as of September 30, 2023 and December 31, 2022, respectively.

(5) Accounts payable includes $76.7 million and $57.8 million of payables to Non-Guarantor Subsidiaries as of September 30, 2023 and December 31, 2022, respectively.

(1) There were no net sales from the obligor group to Non-Guarantor Subsidiaries during the three months ended March 31, 2024.

(2) Cost of revenues includes $102.1 million of purchases from Non-Guarantor Subsidiaries during the three months ended March 31, 2024.

(3) Net income includes $4.3 million of net loss related to discontinued operations.

(4) Receivables, net of allowance includes $87.9 million and $87.7 million of receivables from Non-Guarantor Subsidiaries as of March 31, 2024 and December 31, 2023, respectively.

(5) Accounts payable includes $96.5 million and $109.8 million of payables to Non-Guarantor Subsidiaries as of March 31, 2024 and December 31, 2023, respectively.

Capital Expenditures

For the full year 2024, we anticipate a net investment in our lease fleet of between $300 million and $400 million.

Capital expenditures related to manufacturing and other activities, including expansion of our fleet maintenance capabilities and systems upgrades, are projected to range between $40 million and $50 million for the full year 2023.

Capital expenditures related to operating and administrative activities, including supporting automation, technology, and modernization of our facilities and processes, are projected to range between $50 million and $60 million for the full year 2024.

Equity Investment

See Note 5 of the Consolidated Financial Statements for information about our investment in partially-owned leasing subsidiaries.

See Note 5 of the Consolidated Financial Statements for information about our investment in partially-owned subsidiaries.

Off Balance Sheet Arrangements

As of September 30, 2023, we had letters of credit issued under our revolving credit facility in an aggregate amount of $15.9 million, the majority of which are expected to expire in October 2024.

As of March 31, 2024, we had letters of credit issued under our revolving credit facility in an aggregate amount of $18.2 million, the majority of which are expected to expire in October 2024.

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.

Additionally, we had a letter of credit issued outside our revolving credit facility for $8.5 million.

This letter of credit obligation replaces a required cash liquidity reserve to support the TILC warehouse loan facility and renews by its terms each year.

Derivative Instruments

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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 table.

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) recourse and non-recourse debt.

Nine Months Ended

September 30,

Adjusted 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 table.

Adjusted 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 operating and administrative activities, dividends paid, and Equity CapEx for leased railcars.

Equity CapEx for leased railcars is defined as capital expenditures for our lease fleet, adjusted to exclude net proceeds from (repayments of) recourse and non-recourse debt.

Three Months Ended

(in millions)

Net cash provided by (used in) operating activities – continuing operations $ 215.8 $ (52.6)

Net cash provided by operating activities – continuing operations $ 56.5 $ 102.5

Proceeds from lease portfolio sales 24.2 56.7

Capital expenditures – manufacturing and other (29.4) (25.7)

Dividends paid to common stockholders (64.7) (58.3)

Capital expenditures – operating and administrative (4.6) (7.1)

Dividends paid to common shareholders (23.0) (21.1)

Equity CapEx for leased railcars (41.4) (94.8)

Adjusted Free Cash Flow After Investments and Dividends

Capital expenditures – leasing $ 483.3 $ 691.1

$ 11.7 $ 36.2

Capital expenditures – lease fleet $ 147.5 $ 191.5

Payments to retire debt (803.8) (149.6)

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Contractual Obligations and Commercial Commitments

Except as described below, as of September 30, 2023, there have been no material changes to our contractual obligations from December 31, 2022:

• In March 2023, we amended our revolving credit facility to increase the total facility commitment from $450.0 million to $600.0 million and to amend certain other terms.

• In June 2023, TRL-2023 entered into a $340.0 million term loan agreement with a stated maturity date of June 2028.

• In June 2023, we issued $400.0 million aggregate principal amount of 7.75% senior notes due July 2028.

See Note 8 of the Consolidated Financial Statements for additional information regarding this amendment.

Except as described below, as of March 31, 2024, there have been no material changes to our contractual obligations from December 31, 2023:

• In March 2024, we entered into a new TILC warehouse loan facility with a total commitment amount of $800.0 million, a revolving termination date of March 15, 2027, and a maturity date of March 15, 2028.

This warehouse loan facility replaced the prior $1.0 billion warehouse loan facility.

See Note 8 of the Consolidated Financial Statements for additional information regarding this debt transaction.

Recent Accounting Pronouncements

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis