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Item 7. Management’s Discussion and Analysis

2025-02-20 compared with 2024-02-22 · 267 added, 268 removed, 361 unchanged (60% of the section changed)

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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;

Our platform also includes the brands of RSI Logistics, a provider of software and logistics solutions, and Holden America, a supplier of railcar parts and components.

Our platform provides railcar leasing and management services;

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 years ended December 31, 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 15 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 Chief Operating Decision Maker 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

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General/Business Trends

Demand for many of our railcar products and services is correlated to changes in North American industrial production.

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

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Further, disruptions in the global supply chain have impacted demand for, and the costs of, certain of our products and services.

Our costs and the demand for our products and services could also be impacted by changes in tariffs, retaliatory tariffs, and trade policies.

We continuously assess demand for our products and services and take steps to rationalize and diversify our leased railcar portfolio and align our operating capacity appropriately.

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

We believe that our leasing business provides a natural hedge against inflation and changes in interest rates;

however, like many leasing companies, the debt component of our capital structure exposes us to changes in the interest rate environment.

A significant portion of the earnings from our leasing business is derived from multi-year full-service leases.

We consider changes in interest rates, inflation, and other relevant factors in the pricing of new and renewing leases;

however, only a portion of our leased railcar portfolio is repriced each year.

Consequently, our earnings could be impacted by timing differences between when interest rate changes and changes in the inflationary environment occur and when we are able to factor these changes into our lease rates.

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 September and December 2023, the U.S.

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

Although rail traffic operations have resumed at Eagle Pass, 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.

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

CBP negatively impacted our railcar deliveries.

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

We actively monitor rail and truck traffic 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.

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

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.

Supply Chain and Transportation Network Disruptions

As a result of disruptions in the global supply chain, we have, from time to time, experienced shortages of materials used to manufacture or repair certain railcar types.

We are also subject to disruptions in the rail transportation network.

In 2023, we experienced cross-border rail traffic closures and congestion in Eagle Pass, Texas, the primary border crossing used for railcar deliveries from our manufacturing facilities in Mexico.

While we did not experience a border closure at Eagle Pass in 2024, there remains a risk of instability at the border, and there is a possibility that border closings or congestion could occur in the future.

We continuously 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 U.S.

Additionally, we actively monitor our supply chain and take appropriate steps within our control to mitigate the potential impacts on our production schedules and delivery timelines.

However, challenges related to supply chain and transportation network disruptions could negatively impact our operations or our ability to timely deliver railcars to our customers.

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

dollar during 2023 unfavorably impacted the operating results in our Rail Products Group during the year ended December 31, 2023.

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

We periodically experience volatility 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.

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

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

Further, the cost and volume of lease fleet maintenance and compliance events remain elevated, which we expect to continue in the near term.

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

Financial and Operational Highlights

• Our revenues for the year ended December 31, 2024 were $3,079.2 million, representing an increase of 3.2%, compared to the year ended December 31, 2023.

Our operating profit for the year ended December 31, 2023 was $417.0 million compared to $334.0 million for the year ended December 31, 2022.

Our operating profit for the year ended December 31, 2024 was $491.5 million, representing an increase of 17.9%, compared to $417.0 million for the year ended December 31, 2023.

• The Leasing Group's lease fleet of 109,635 company-owned railcars was 97.0% utilized as of December 31, 2024, compared to a lease fleet utilization of 97.5% on 109,295 company-owned railcars as of December 31, 2023.

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

• For the year ended December 31, 2023, we made a net investment in our lease fleet of approximately $287.0 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 year ended December 31, 2024, we made a net fleet investment of approximately $181.2 million, which primarily includes new railcar additions, sustainable railcar conversions, railcar modifications, and other betterments, net of deferred profit, as well as secondary market purchases;

and is net of proceeds from lease portfolio sales.

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The Rail Products Group received orders for 7,685 railcars and delivered 17,570 railcars in 2024, in comparison to orders for 11,500 railcars and deliveries of 17,355 railcars in 2023.

◦ Orders received during the year ended December 31, 2022 include 15,000 railcars associated with a long-term railcar supply agreement with GATX Corporation (“GATX”).

• During the year ended December 31, 2023, sustainable railcar conversion revenues totaled $170.6 million, representing 1,775 railcars.

• For the year ended December 31, 2023, our return on equity ("ROE") and Pre-Tax ROE were 11.0% and 12.1% (1) , respectively, in comparison to 7.7% and 10.4% (1) , respectively, for the year ended December 31, 2022.

• For the year ended December 31, 2023, we generated operating cash flows from continuing operations and Adjusted Free Cash Flow After Investments and Dividends ("Adjusted Free Cash Flow") of $309.0 million and $28.5 million (1) , respectively, in comparison to $9.2 million and $138.3 million (1) , respectively, for the year ended December 31, 2022.

(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 year ended December 31, 2023.

See Part II, Item 7 of our 2022 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, 2022, including a comparison to the year ended December 31, 2021.

Deliveries in 2024 included approximately 1,300 railcar shipments that were delayed at the end of 2023 due to the U.S.-Mexico border closure and delivered during the first half of 2024.

See "Consolidated Results of Operations" and "Segment Discussion" below for additional information regarding our operating results for the years ended December 31, 2024 and 2023.

Long-Term Enterprise Key Performance Indicators

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.

Our key performance indicators for long-term performance are net fleet investment, cash flow from operations with net gains on lease portfolio sales*, and Adjusted Return on Equity* ("Adjusted ROE").

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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(1) Dividend yield is calculated as annual dividends paid per share divided by the closing stock price on the last trading day of each respective year.

(2) Book value per share is calculated as total stockholders' equity attributable to Trinity Industries, Inc., divided by the number of shares outstanding.

(3) Stockholder returns include shares repurchased and dividends paid to common stockholders and is presented in millions.

In 2021, we entered into stock repurchase agreements with ValueAct Capital Master Fund, L.P.

in privately negotiated transactions at a cost of approximately $472.5 million.

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.

Advances under the facility bear interest at one-month term SOFR plus a facility margin of 1.75%.

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

TRL-2024 Secured Railcar Equipment Notes – In May 2024, 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 $432.4 million of its Series 2024-1 Class A Green Secured Railcar Equipment Notes.

These notes bear interest at a fixed rate of 5.78%, are payable monthly, and have a stated final maturity date of 2054.

Net proceeds received from the transaction were used to repay borrowings under TILC's warehouse loan facility;

to redeem the outstanding debt of Trinity Rail Leasing VII LLC's Series 2009-1 Secured Railcar Equipment Notes (the "TRL VII Notes"), of which $94.1 million was outstanding at the redemption date;

and for general corporate purposes.

The all-in interest rate for the TRL VII Notes was 6.66% per annum.

Senior Notes due 2028 – In June 2024, we issued an additional $200.0 million aggregate principal amount of 7.75% senior notes due July 2028 (the "Additional Senior Notes"), which increased the aggregate principal amount from $400.0 million to $600.0 million.

Interest on the Additional Senior Notes is payable semiannually commencing July 15, 2024.

Net proceeds received from the issuance, together with cash on hand, were used to repay $400.0 million of our 4.55% senior notes due 2024 ("Senior Notes due 2024"), and to pay related fees, costs, premiums, and expenses in connection with the issuance.

See Note 9 of the Consolidated Financial Statements for additional information regarding these debt transactions.

Litigation Updates

See Note 15 of the Consolidated Financial Statements for an update on the status of certain litigation.

Subsequent Events

Change in Organizational Structure – 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 will result in a change to our reportable segments beginning in 2024.

In connection with this organizational update, we will align the maintenance services business, which is currently reported in the Rail Products Group, to be presented within our leasing business.

This change aligns with the way in which our Chief Operating Decision Maker will assess performance and allocate resources.

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

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

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

Consolidated Results of Operations

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Year Ended December 31,

2024 2023 2022

(in millions)

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Interest expense, net 273.5 265.5 209.1

Loss on extinguishment of debt — 1.5

Other, net (3.8) 2.5 (1.6)

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(in millions)

Railcar Leasing and Management Services Group $ 870.0 $ 0.9 $ 870.9 13.0 %

Railcar Leasing and Services Group $ 1,140.8 $ 2.4 $ 1,143.2 9.8 %

Rail Products Group 1,938.4 492.7 2,431.1 (1.9) %

Segment Totals 3,079.2 495.1 3,574.3 1.5 %

Eliminations – Lease Subsidiary — (589.7) (589.7)

Eliminations – Other — (0.9) (0.9)

Eliminations — (495.1) (495.1)

Consolidated Total $ 3,079.2 $ — $ 3,079.2 3.2 %

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(in millions)

Railcar Leasing and Management Services Group $ 769.8 $ 0.8 $ 770.6

Railcar Leasing and Services Group $ 1,039.4 $ 1.6 $ 1,041.0 22.3 %

Rail Products Group 1,943.9 535.5 2,479.4 31.5 %

Segment Totals 2,983.3 537.1 3,520.4 28.6 %

Eliminations – Lease Subsidiary — (867.2) (867.2)

Eliminations – Other — (0.8) (0.8)

Eliminations — (537.1) (537.1)

Consolidated Total $ 2,983.3 $ — $ 2,983.3 50.9 %

Year Ended December 31, 2022

External Intersegment Total

(in millions)

Railcar Leasing and Services Group $ 850.0 $ 1.5 $ 851.5

Rail Products Group 1,127.3 758.2 1,885.5

Segment Totals 1,977.3 759.7 2,737.0

Eliminations — (759.7) (759.7)

Consolidated Total $ 1,977.3 $ — $ 1,977.3

Operating Costs

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Year Ended December 31,

2024 2023 2022

(in millions)

Railcar Leasing and Management Services Group (1)

Railcar Leasing and Services Group (1)

$ 679.2 $ 603.5 $ 449.7

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Restructuring activities, net 4.3 (2.2) 1.0

Eliminations – Lease Subsidiary (553.6) (802.0)

Eliminations – Other (2.2) 0.6

Eliminations (463.2) (510.1) (708.1)

Consolidated Total $ 2,587.7 $ 2,566.3 $ 1,643.3

(1) Includes gains on lease portfolio sales of $82.8 million and $127.5 million for the years ended December 31, 2023 and 2022, respectively.

(1) Includes gains on lease portfolio sales of $57.3 million, $82.8 million, and $127.5 million for the years ended December 31, 2024, 2023, and 2022, respectively.

Operating Profit

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Year Ended December 31,

2024 2023 2022

(in millions)

Railcar Leasing and Management Services Group $ 428.5 $ 423.3

Railcar Leasing and Services Group $ 464.0 $ 437.5 $ 401.8

Rail Products Group 189.4 112.6 65.6

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Restructuring activities, net (4.3) 2.2 (1.0)

Eliminations – Lease Subsidiary (36.1) (65.2)

Eliminations – Other 1.3 (1.4)

Eliminations (31.9) (27.0) (51.6)

Consolidated Total $ 491.5 $ 417.0 $ 334.0

Discussion of Consolidated Results

Revenues – Our revenues for the year ended December 31, 2023 were $2,983.3 million, representing an increase of $1,006.0 million, or 50.9%, over the prior year, primarily related to higher external deliveries in the Rail Products Group and improved lease rates, net additions to the lease fleet, and the impact of the acquisition of RSI Logistics ("RSI") in the Leasing Group.

Cost of revenues – Our cost of revenues for the year ended December 31, 2023 was $2,456.2 million, representing an increase of $846.6 million, or 52.6%, over the prior year, primarily due to higher external deliveries, the impact of foreign currency fluctuations, supply chain disruptions, and operational and labor-related inefficiencies in the Rail Products Group.

Selling, engineering, and administrative expenses – Selling, engineering, and administrative expenses for the year ended December 31, 2023 were $201.9 million, representing an increase of $16.5 million, or 8.9%, over the prior year, primarily due to higher employee-related costs, including an increase in headcount as a result of recent acquisitions.

Gains on dispositions of property – Gains on dispositions of property decreased by $63.1 million for the year ended December 31, 2023, when compared to the prior year period primarily due to lower lease portfolio sales in the current year period.

Additionally, gains on dispositions of property in the prior year period were favorably impacted by disposals of non-operating facilities.

Results for the years ended December 31, 2023 and 2022 included gains of $6.3 million and $7.5 million, respectively, related to insurance recoveries in excess of net book value for assets damaged by a tornado at the Company’s rail maintenance facility in Cartersville, Georgia in the first quarter of 2021.

Revenues – Our revenues for the year ended December 31, 2024 were $3,079.2 million, representing an increase of $95.9 million, or 3.2%, over the prior year, primarily due to a higher volume of external repairs and higher lease rates in the Leasing Group and higher external deliveries, partially offset by a lower volume of external sustainable railcar conversions in the Rail Products Group.

Our revenues for the year ended December 31, 2023 were $2,983.3 million, representing an increase of $1,006.0 million, or 50.9%, when compared to the year ended December 31, 2022, primarily related to higher external deliveries in the Rail Products Group, as well as a higher volume of external repairs, higher lease rates, net additions to the lease fleet, and the impact of the acquisition of RSI Logistics ("RSI") in the Leasing Group.

Cost of revenues – Our cost of revenues for the year ended December 31, 2024 was $2,411.0 million, representing a decrease of $45.2 million, or 1.8%, over the prior year, primarily due to a lower volume of external sustainable railcar conversions and improved efficiencies in the Rail Products Group, partially offset by a higher volume of external repairs in the Leasing Group and higher external deliveries in the Rail Products Group.

Our cost of revenues for the year ended December 31, 2023 was $2,456.2 million, representing an increase of $846.6 million, or 52.6%, when compared to the year ended December 31, 2022, primarily due to higher external deliveries, the impact of foreign currency fluctuations, supply chain disruptions, and operational and labor-related inefficiencies in the Rail Products Group.

Cost of revenues was further impacted by a higher volume of external repairs and the impact of the acquisition of RSI in the Leasing Group.

Selling, engineering, and administrative expenses – Selling, engineering, and administrative expenses for the year ended December 31, 2024 were $235.7 million, representing an increase of $33.8 million, or 16.7%, over the prior year, primarily due to higher employee-related costs, including increased incentive-based compensation, and continued investments in technology.

Selling, engineering, and administrative expenses for the year ended December 31, 2023 were $201.9 million, representing an increase of $16.5 million, or 8.9%, when compared to the year ended December 31, 2022, primarily due to higher employee-related costs, including an increase in headcount as a result of the Holden America and RSI acquisitions.

Gains on dispositions of property – Gains on dispositions of property decreased by $26.3 million for the year ended December 31, 2024, when compared to the prior year primarily due to lower gains on lease portfolio sales.

Gains on dispositions of property decreased by $63.1 million for the year ended December 31, 2023, when compared to the year ended December 31, 2022, primarily due to lower lease portfolio sales volume.

Additionally, gains on dispositions of property for the year ended December 31, 2022 were favorably impacted by disposals of non-operating facilities.

Results for the years ended December 31, 2024, 2023, and 2022 included gains of $2.7 million, $6.3 million, and $7.5 million, respectively, related to insurance recoveries in excess of net book value for assets damaged at the Company’s facility in Cartersville, Georgia in two separate events.

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

Operating profit – Operating profit for the year ended December 31, 2023 totaled $417.0 million, representing an increase of $83.0 million, or 24.9%, from the prior year period primarily due to higher external deliveries in the Rail Products Group and improved lease rates and net additions to the lease fleet in the Leasing Group.

The increase in operating profit was partially offset by lower lease portfolio sales in the current year period, the impact of foreign currency fluctuations in the Rail Products Group, and higher employee-related and other operating costs across the enterprise.

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.

Operating profit – Operating profit for the year ended December 31, 2024 totaled $491.5 million, representing an increase of $74.5 million, or 17.9%, from the prior year.

The increase was primarily due to improved efficiencies and the mix of railcars sold in the Rail Products Group and higher lease rates and a higher volume of external repairs in the Leasing Group, partially offset by lower gains on lease portfolio sales and higher employee-related costs across the enterprise, including increased incentive-based compensation and costs associated with workforce reductions to improve our cost structure.

Operating profit for the year ended December 31, 2023 totaled $417.0 million, representing an increase of $83.0 million, or 24.9%, from the year ended December 31, 2022 primarily due to higher external deliveries in the Rail Products Group, as well as higher lease rates, net additions to the lease fleet, and a higher volume of external repairs in the Leasing Group.

The increase in operating profit was partially offset by lower lease portfolio sales volume, higher maintenance and compliance costs, and labor inefficiencies in the Leasing Group, as well as the impact of foreign currency fluctuations in the Rail Products Group, and higher employee-related and other operating costs across the enterprise.

Operating profit was favorably impacted during each of the years ended December 31, 2024, 2023, and 2022 by the insurance recoveries described above.

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, 2023 totaled $265.5 million, compared to $207.6 million for the year ended December 31, 2022.

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

Interest expense, net – Interest expense, net for the year ended December 31, 2024 totaled $273.5 million, compared to $265.5 million for the year ended December 31, 2023, primarily driven by higher interest rates and higher average debt in 2024, as well as a $1.5 million loss on extinguishment of debt.

Interest expense, net for the year ended December 31, 2023 totaled $265.5 million, compared to $209.1 million for the year ended December 31, 2022, primarily driven by higher variable interest rates, as well as higher average debt due to the issuance of our 7.75% senior notes due July 2028 and a term loan agreement in June 2023.

Other, net – Other, net for the year ended December 31, 2024, 2023, and 2022 resulted in income of $3.8 million, expense of $2.5 million, and income of $1.6 million, respectively.

The changes in other, net (income) expense are primarily due to the remeasurement impact of foreign currency fluctuations related to the Mexican peso.

Additionally, other, net for the year ended December 31, 2024 included a fee related to the execution of back-to-back interest rate caps associated with the new TILC warehouse loan facility.

Income taxes – The effective tax rate from continuing operations for the year ended December 31, 2024 was an expense of 22.7%, 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 state income tax liabilities due to apportionment and state law changes, reducing our net deferred tax liability;

changes in our valuation allowances;

state income taxes;

and foreign income taxes.

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

statutory rate of 21.0% primarily due to state and foreign income taxes and other discrete items.

Our effective tax rate from continuing operations for the year ended December 31, 2023 was an expense of 6.0%, which differs from the U.S.

statutory rate of 21.0% primarily due to foreign income 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.

Net income tax 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 $5.2 million and $7.8 million at December 31, 2023 and 2022, respectively.

Income tax payments, net of refunds, during the years ended December 31, 2023 and 2022 totaled $42.4 million and $19.3 million, respectively.

statutory rate of 21.0% primarily due to the release of residual taxes out of accumulated other comprehensive income and the re-measurement of our net deferred state income tax liabilities due to apportionment and state law changes, reducing our net deferred tax liability.

Our 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 foreign and state income taxes and other discrete items.

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

Income tax payments, net of refunds, 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.

Income tax payments, net of refunds, during the years ended December 31, 2024, 2023, and 2022 totaled $54.6 million, $42.4 million, and $19.3 million, respectively.

Segment Discussion

Railcar Leasing and Management Services Group

Railcar Leasing and Services Group

Year Ended December 31, Percent Change

2024 2023 2022 2024 versus 2023

2023 versus 2022

($ in millions)

Leasing and management $ 867.8 $ 813.8 $ 756.4 6.6 % 7.6 %

Operating profit (1) :

Leasing and management $ 345.7 $ 295.8 16.9 %

Maintenance services (1)

234.0 170.1 80.9 37.6 % 110.3 %

Digital and logistics services 41.4 57.1 14.2 (27.5) % 302.1 %

Total revenues $ 1,143.2 $ 1,041.0 $ 851.5 9.8 % 22.3 %

Cost of revenues (2)

665.2 630.3 527.9 5.5 % 19.4 %

Selling, engineering, and administrative expenses 77.0 62.0 59.1 24.2 % 4.9 %

Gains on dispositions of property:

Lease portfolio sales (3)

57.3 82.8 127.5 * *

Other 5.7 6.0 9.8 * *

Total operating profit $ 464.0 $ 437.5 $ 401.8 6.1 % 8.9 %

Total operating profit margin 40.6 % 42.0 % 47.2 %

Leasing and management operating profit margin 39.7 % 38.4 %

Selected expense information:

Depreciation and amortization (3)

Total operating profit margin, excluding lease portfolio sales 35.6 % 34.1 % 32.2 %

Selected expense information for Company-owned railcars (4) :

Depreciation and amortization expense (5)

$ 240.1 $ 238.5 $ 234.4 0.7 % 1.7 %

Maintenance and compliance $ 138.9 $ 113.4 22.5 %

Rent and ad valorem taxes $ 15.9 $ 19.3 (17.6) %

Selling, engineering, and administrative expenses

Maintenance and compliance expense (6)

$ 131.8 $ 130.5 $ 112.1 1.0 % 16.4 %

Other fleet operating costs (7)

$ 32.3 $ 31.5 $ 46.6 2.5 % (32.4) %

Interest expense (8)

$ 234.4 $ 227.2 $ 186.7 3.2 % 21.7 %

* 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.

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

(1) Revenues related to services performed by the maintenance services business on Company-owned railcars under full-service lease agreements are eliminated within the Railcar Leasing and 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 $1.3 million selling profit associated with sales-type leases for the year ended December 31, 2022.

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

(5) Depreciation and amortization expense includes $5.6 million and $12.1 million for the years ended December 31, 2023 and 2022, 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.

LLC's outstanding term loan agreement.

There were no disposals under this program during the year ended December 31, 2024.

Additionally, depreciation and amortization expense includes deferred profit related to new railcar additions, sustainable railcar conversions, railcar modifications, and other betterments, resulting in the recognition of depreciation expense based on the original cost of the railcars and services.

(6) 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.

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

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

Information related to lease portfolio sales is as follows:

Year Ended December 31,

2024 2023 2022

($ in millions)

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(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 13.0% for the year ended December 31, 2023 when compared to the year ended December 31, 2022.

Leasing and management revenues for the year ended December 31, 2023 were favorably impacted primarily by improved lease rates, net additions to the lease fleet, and higher average utilization, which resulted in higher revenues when compared to the year ended December 31, 2022.

Revenues for the Leasing Group were also favorably impacted for the year ended December 31, 2023 by the acquisition of RSI.

Leasing and management operating profit for the year ended December 31, 2023 increased by 16.9% compared to the prior year period primarily due to improved lease rates, net additions to the lease fleet, and higher average utilization, partially offset by higher maintenance costs and increased depreciation.

Leasing Group operating profit increased by 1.2% for the year ended December 31, 2023 compared to the prior year period as a result of the factors described above, partially offset by lower lease portfolio sales volume in the current year period.

Total revenues for the Railcar Leasing and Services Group increased by 9.8% for the year ended December 31, 2024 when compared to the year ended December 31, 2023.

Leasing and management revenues for the year ended December 31, 2024 were favorably impacted primarily by higher lease rates and net additions to the lease fleet, when compared to the year ended December 31, 2023.

Digital and logistics services revenues for the year ended December 31, 2024 decreased when compared to the prior year primarily due to a change in revenue recognition from gross basis to net basis based on our conclusion in the fourth quarter of 2023 that we are acting as an agent for certain services provided to a small number of customers.

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

Total revenues for the Railcar Leasing and Services Group increased by 22.3% for the year ended December 31, 2023 when compared to the year ended December 31, 2022.

Leasing and management revenues for the year ended December 31, 2023 were favorably impacted primarily by higher lease rates, net additions to the lease fleet, and higher average utilization, which resulted in higher revenues when compared to the year ended December 31, 2022.

Digital and logistics services revenues for the year ended December 31, 2023 were favorably impacted by the acquisition of RSI.

Our maintenance services business is primarily dedicated to servicing our lease fleet.

Revenues related to maintenance services performed on Company-owned railcars under full-service lease agreements are eliminated within the Railcar Leasing and Services Group.

Services that are not included in the full-service lease agreement, such as repairs of railcar damage or other customer-specific requirements, as well as maintenance and repair activities on railcars owned by third parties, including our investor-owned fleet, are reflected in the maintenance services revenues line above and are not eliminated in consolidation.

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

Revenues in our maintenance services business increased for the year ended December 31, 2023 as a result of higher volumes of repairs completed for third parties.

Cost of revenues for the Railcar Leasing and Services Group increased by 5.5% for the year ended December 31, 2024 when compared to the year ended December 31, 2023.

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

Cost of revenues for the year ended December 31, 2024 was also impacted by the gross basis to net basis change in our digital and logistics services business described above.

Cost of revenues for the Railcar Leasing and Services Group increased by 19.4% for the year ended December 31, 2023 when compared to the year ended December 31, 2022.

In our maintenance services business, cost of revenues increased for the year ended December 31, 2023 as a result of a higher volume of external repairs, and continued to be impacted by labor shortages leading to operating inefficiencies.

Cost of revenues were further increased for the year ended December 31, 2023 by the acquisition of RSI.

Leasing Group operating profit for the year ended December 31, 2024 increased by 6.1% primarily due to higher lease rates and net additions to the lease fleet, and a higher volume of external repairs and favorable pricing in the maintenance services business, partially offset by lower gains on lease portfolio sales and higher employee-related costs, including increased incentive-based compensation.

Leasing Group operating profit for the year ended December 31, 2023 increased by 8.9% primarily due to higher lease rates, net additions to the lease fleet, and higher average utilization, as well as a higher volume of external repairs in the maintenance services business.

These increases were partially offset by lower lease portfolio sales volume, higher maintenance and compliance costs, and labor shortages leading to operating inefficiencies in our maintenance services business.

Operating profit for the years ended December 31, 2024, 2023, and 2022 was favorably impacted by gains of $2.7 million, $6.3 million, and $7.5 million, respectively, related to insurance recoveries in excess of net book value for assets damaged at the Company’s facility in Cartersville, Georgia in two separate events.

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

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:

December 31, 2024 December 31, 2023 December 31, 2022

Number of railcars:

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Fleet utilization 97.0 % 97.5 % 97.9 %

(1) Includes 2,495 railcars and 2,810 railcars under leased-in arrangements as of December 31, 2023 and 2022, respectively.

(1) Includes 2,240 railcars, 2,495 railcars, and 2,810 railcars under leased-in arrangements as of December 31, 2024, 2023, and 2022, 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

2024 2023 2022 2024 versus 2023

2023 versus 2022

($ in millions)

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$ 2,321.7 $ 2,363.7 $ 1,819.0 (1.8) % 29.9 %

Maintenance services 251.3 203.8 23.3 %

Other 88.0 51.9 69.6 %

Parts & components 109.4 115.7 66.5 (5.4) % 74.0 %

Total revenues $ 2,431.1 $ 2,479.4 $ 1,885.5 (1.9) % 31.5 %

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32.8 30.5 29.1 7.5 % 4.8 %

Gains on dispositions of property (6.0) (6.6) *

Gains (losses) on dispositions of property 0.1 (0.3) (0.9) * *

Operating profit $ 189.4 $ 112.6 $ 65.6 68.2 % 71.6 %

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Includes sustainable railcar conversion revenues of $170.6 million, representing 1,775 railcars, for the year ended December 31, 2023.

Revenues for the Rail Products Group increased for the year ended December 31, 2023 by 30.3% when compared to the prior year period.

Revenues in our rail products business increased for the year ended December 31, 2023 as a result of higher deliveries and favorable pricing, partially offset by the mix of railcars sold.

Revenues in our maintenance services business increased for the year ended December 31, 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 year ended December 31, 2023 by 28.0% when compared to the prior year period.

In our rail products business, the increase in cost of revenues for the year ended December 31, 2023 was driven by higher deliveries, the impact of foreign currency fluctuations, and labor inefficiencies associated with onboarding of new employees.

Additionally, cost of revenues was unfavorably impacted by operational inefficiencies associated with production line changeovers and supply chain disruptions, including the U.S.-Mexico border closures and continued border congestion.

In our maintenance services business, cost of revenues increased for the year ended December 31, 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 year ended December 31, 2023 was favorably impacted by higher deliveries and favorable pricing, partially offset by the mix of railcars sold, the impact of foreign currency fluctuations, supply chain disruptions, and operational and labor inefficiencies.

Additionally, operating profit was favorably impacted by gains of $6.3 million and $7.5 million for the years ended December 31, 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 in the first quarter of 2021.

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

Revenues for the Rail Products Group decreased for the year ended December 31, 2024 by 1.9% when compared to the prior year primarily as a result of a lower volume of sustainable railcar conversions, partially offset by the mix of railcars sold.

Revenues for the Rail Products Group increased for the year ended December 31, 2023 by 31.5% when compared to the year ended December 31, 2022 primarily as a result of higher deliveries and favorable pricing, partially offset by the mix of railcars sold.

Increases in the parts and components business 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 decreased for the year ended December 31, 2024 by 5.4% when compared to the prior year primarily due to a lower volume of sustainable railcar conversions, improved labor efficiencies, and operational efficiencies associated with reduced production line changeovers and fewer supply chain disruptions.

These decreases were partially offset by the mix of railcars sold when compared to the prior year.

Cost of revenues for the Rail Products Group increased for the year ended December 31, 2023 by 30.5% when compared to the year ended December 31, 2022 primarily driven by higher deliveries, the impact of foreign currency fluctuations, and labor inefficiencies associated with onboarding of new employees.

Operating profit for the Rail Products Group increased for the year ended December 31, 2024 by 68.2% when compared to the prior year primarily due to improved labor and operational efficiencies and the mix of railcars sold.

Operating profit for the Rail Products Group increased for the year ended December 31, 2023 by 71.6% when compared to the year ended December 31, 2022 primarily as a result of higher deliveries and favorable pricing, partially offset by the mix of railcars sold, the impact of foreign currency fluctuations, supply chain disruptions, and operational and labor inefficiencies.

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

In addition to the amounts below, as of December 31, 2023, our backlog related to sustainable railcar conversions totaled $81.9 million, representing 1,015 railcars.

December 31, Percent Change

2024 2023 2022 2024 versus 2023

2023 versus 2022

(in millions)

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Leasing Group

250.3 304.4 458.9

Total $ 2,145.5 $ 3,200.9 $ 3,903.0 (33.0) % (18.0) %

Year Ended December 31, Percent Change

2024 2023 2022 2024 versus 2023

2023 versus 2022

Beginning balance 25,890 32,270 13,980

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Deliveries (2)

(17,570) (17,355) (13,315) 1.2 % 30.3 %

Other adjustments (3)

— (525) (300)

Ending balance 16,005 25,890 32,270 (38.2) % (19.8) %

Average selling price in ending backlog $ 134,052 $ 123,635 $ 120,948 8.4 % 2.2 %

(1) Orders received for the year ended December 31, 2022 include 15,000 railcars valued at approximately $1.8 billion associated with a long-term railcar supply agreement with GATX.

(1) Orders received for the year ended December 31, 2022 include 15,000 railcars valued at approximately $1.8 billion associated with a long-term railcar supply agreement with GATX Corporation ("GATX").

(2) Deliveries for the year ended December 31, 2024 included approximately 1,300 railcar shipments that were delayed at the end of 2023 due to the U.S.-Mexico border closure and delivered during the first half of 2024.

(3) The adjustment for the year ended December 31, 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, as well as 365 railcars valued at $33.4 million that were removed from the new railcar backlog by mutual agreement with customers.

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Total backlog dollars for the year ended December 31, 2024 decreased by 33.0% when compared to the prior year.

Total backlog dollars for the year ended December 31, 2023 decreased by 18.0% when compared to December 31, 2022.

The ending backlog as of December 31, 2022 included approximately $1.8 billion associated with a long-term railcar supply agreement with GATX.

Approximately 53% of our railcar backlog value is expected to be delivered during 2024, with the remainder to be delivered thereafter into 2028.

We expect to deliver approximately 48% of our railcar backlog value 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.

The final amount of backlog attributable to the Leasing Group may vary by the time of delivery as customers may choose to change their procurement decision.

The final amount of backlog attributable to the Leasing Group may vary by the time of delivery as customers may elect to change their procurement decision.

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

Year Ended December 31,

2024 2023 2022

($ in millions)

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Sustainable railcar conversions $ 0.4 $ 45.5 $ 118.6

Other maintenance services $ 82.5 $ 123.7

Parts & components $ 30.9 $ 28.3 $ 14.6

Deferred profit $ 31.9 $ 28.3 $ 50.2

3 unchanged sentences

Year Ended December 31, Percent Change

2024 2023 2022 2024 versus 2023

2023 versus 2022

(in millions)

5 unchanged sentences

* Not meaningful

Selling, engineering, and administrative expenses for the year ended December 31, 2023 increased 12.6%, compared to the prior year period primarily from higher employee-related costs, as well as the change in estimated fair value of additional contingent consideration associated with an acquisition.

Compared to the current year period, total operating costs in the prior year period were favorably impacted by gains associated with the disposition of non-operating facilities.

Selling, engineering, and administrative expenses for the year ended December 31, 2024 increased 15.1%, compared to the prior year primarily from higher employee-related costs, including increased incentive-based compensation and costs associated with workforce reductions to improve our cost structure, as well as continued investments in technology.

Selling, engineering, and administrative expenses for the year ended December 31, 2023 increased 12.6%, compared to the year ended December 31, 2022 primarily from higher employee-related costs, as well as the change in estimated fair value of additional contingent consideration associated with an acquisition.

Total operating costs during each of the years ended December 31, 2024, 2023, and 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.

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See Note 9 of the Consolidated Financial Statements for information regarding scheduled maturities of our debt.

We intend to use cash from operations and our available liquidity to repay our Senior Notes due 2024.

We intend to use cash from operations and our available liquidity to repay or refinance our 2017 promissory notes.

Interest payable associated with our debt due in the next twelve months is approximately $258.8 million, with $501.7 million due thereafter.

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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 9 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.

Other Equipment Financing – In December 2023, we received proceeds of $52.3 million related to an equipment financing transaction for certain railcars in our lease fleet.

Dividend Payments – In December 2023, our Board of Directors declared an increase of approximately 8% to our quarterly dividend from $0.26 per share to $0.28 per share.

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.

Advances under the facility bear interest at one-month term SOFR plus a facility margin of 1.75%.

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

TRL-2024 Secured Railcar Equipment Notes – In May 2024, TRL-2021 issued $432.4 million of its Series 2024-1 Class A Green Secured Railcar Equipment Notes.

These notes bear interest at a fixed rate of 5.78% and have a stated final maturity date of 2054.

Net proceeds received from the transaction were used to repay borrowings under TILC's warehouse loan facility, to redeem the outstanding debt of the TRL VII Notes, and for general corporate purposes.

Redemption of TRL-VII Secured Railcar Equipment Notes – In May 2024, we redeemed in full the TRL VII Notes, of which $94.1 million was outstanding at the redemption date.

The all-in interest rate for the TRL VII Notes was 6.66% per annum.

Senior Notes due 2028 – In June 2024, we issued an additional $200.0 million aggregate principal amount of 7.75% senior notes due July 2028, which increased the aggregate principal amount from $400.0 million to $600.0 million.

Interest on the Additional Senior Notes is payable semiannually commencing July 15, 2024.

Net proceeds received from the issuance, together with cash on hand, were used to repay our Senior Notes due 2024, and to pay related fees, costs, premiums, and expenses in connection with the issuance.

Redemption of Senior Notes due 2024 – In June 2024, we redeemed in full $400.0 million aggregate principal amount of our 4.55% senior notes due 2024.

See Note 9 of the Consolidated Financial Statements for additional information regarding these debt transactions.

Dividend Payments – In December 2024, our Board of Directors declared an increase to our quarterly dividend from $0.28 per share to $0.30 per share.

We paid $93.2 million in dividends to our common stockholders during the year ended December 31, 2024.

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

There were no shares repurchased under this share repurchase program during the year ended December 31, 2023.

During the year ended December 31, 2024, share repurchases totaled 608,052 shares, at a cost of approximately $21.0 million, resulting in a remaining authorization to repurchase up to $229.0 million of our common stock under the share repurchase program as of December 31, 2024.

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

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Net cash flows from discontinued operations (14.3) (13.4)

Net decrease in cash, cash equivalents, and restricted cash $ (59.2) $ (8.1)

Net increase (decrease) in cash, cash equivalents, and restricted cash $ 139.3 $ (59.2)

Operating Activities .

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Changes in operating assets and liabilities $ 168.1 $ (20.6)

The changes in our operating assets and liabilities resulted in a net use of $20.6 million for the year ended December 31, 2023, as compared to a net use of $261.0 million for the year ended December 31, 2022.

The change in operating assets and liabilities for the current year period reflects working capital levels that are consistent with the current business environment.

Operating assets in the prior year period were impacted by higher inventory balances in anticipation of higher railcar deliveries in future periods.

The changes in our operating assets and liabilities resulted in a net source of $168.1 million for the year ended December 31, 2024, as compared to a net use of $20.6 million for the year ended December 31, 2023.

The changes in operating assets and liabilities for the current year period were impacted primarily by lower inventory balances associated with railcar deliveries.

Investing Activities.

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Significant investing activities are as follows:

• We had a net investment in the lease fleet of $287.0 million during the year ended December 31, 2023, compared to $178.1 million during the year ended December 31, 2022.

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;

• We had a net fleet investment of $181.2 million during the year ended December 31, 2024, compared to $287.0 million during the year ended December 31, 2023.

and is net of proceeds from lease portfolio sales.

• During the year ended December 31, 2023, we acquired a company that is a provider of proprietary software and logistics and terminal management solutions for net cash of $62.6 million.

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.

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

• We made equity investments totaling $1.1 million and $15.5 million during the years ended December 31, 2023 and 2022, respectively, primarily related to our investments in Signal Rail Holdings LLC ("Signal Rail").

See Note 5 of the Consolidated Financial Statements.

We had no acquisitions during the year ended December 31, 2024.

Financing Activities.

Net cash provided by financing activities during the year ended December 31, 2023 was $8.2 million compared to $265.4 million of net cash provided by financing activities for the same period in 2022.

Net cash used in financing activities during the year ended December 31, 2024 was $219.9 million compared to $8.2 million of net cash provided by financing activities for the same period in 2023.

Significant financing activities are as follows:

• During the year ended December 31, 2024, we had total borrowings of $1,970.4 million and total repayments of $2,050.5 million, for net repayments of $80.1 million, primarily from the redemption of the Senior Notes due 2024 and the TRL VII Notes, partially offset by debt proceeds to support our investment in the lease fleet and for general corporate purposes.

During the year ended December 31, 2023, we had total borrowings of $1,652.7 million and total repayments of $1,518.9 million, for net proceeds of $133.8 million, primarily from debt proceeds for general corporate purposes and to support our investment in the lease fleet.

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.

• We paid $93.2 million and $86.0 million in dividends to our common stockholders during the years ended December 31, 2024 and 2023, respectively.

• We repurchased common stock totaling $51.8 million during the year ended December 31, 2022.

The prior year period excludes $25.0 million representing the final settlement of an accelerated share repurchase agreement (the "ASR"), which was funded in December 2021 but a portion of which remained outstanding as of December 31, 2021.

There were no shares repurchased during the year ended December 31, 2023.

See Part II, Item 7 of our 2023 Annual Report on Form 10-K for a discussion of our liquidity and capital resources for the year ended December 31, 2023, including a comparison to the year ended December 31, 2022.

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.

A summary of our financial covenants is detailed below:

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Please refer to Note 9 of the Consolidated Financial Statements for a description of our current debt obligations.

Supplemental Guarantor Financial Information

Our Senior Notes due 2024 are fully and unconditionally and jointly and severally guaranteed by certain of Trinity’s 100%-owned subsidiaries:

Trinity Industries Leasing Company;

Trinity North American Freight Car, Inc.;

Trinity Rail Group, LLC;

Trinity Tank Car, Inc.;

and TrinityRail Maintenance Services, Inc.

(collectively, the "Guarantor Subsidiaries”).

The Senior Notes due 2024 indenture agreement includes customary provisions for the release of the guarantees by the Guarantor Subsidiaries upon the occurrence of certain allowed events including the release of one or more of the Guarantor Subsidiaries as guarantor under our revolving credit facility.

See Note 9 of the Consolidated Financial Statements.

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 December 31, 2023, assets held by the Non-Guarantor Subsidiaries included $122.4 million of restricted cash that was not available for distribution to Trinity Industries, Inc.

(“Parent”), $7,157.8 million of equipment securing certain non-recourse debt, and $590.0 million of assets located in foreign locations.

The following tables include the summarized financial information for Parent and Guarantor Subsidiaries (together the obligor group) on a combined basis after elimination of intercompany transactions within the obligor group (in millions).

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

Year Ended December 31, 2023

Summarized Statement of Operations:

Cost of revenues (2)

Income (loss) from continuing operations $ (30.7)

Net income (loss) (3)

December 31, 2023

Summarized Balance Sheet:

Receivables, net of allowance (4)

Inventories $ 628.5

Property, plant, and equipment, net $ 531.2

Goodwill and other assets $ 399.1

Accounts payable and accrued liabilities (5)

Deferred income taxes $ 923.6

Other liabilities $ 150.9

Noncontrolling interest $ 238.4

(1) There were no net sales from the obligor group to Non-Guarantor Subsidiaries during the year ended December 31, 2023.

(2) Cost of revenues includes $485.6 million of purchases from Non-Guarantor Subsidiaries during the year ended December 31, 2023.

(3) Net income (loss) for the year ended December 31, 2023 includes $13.4 million of net loss related to discontinued operations.

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

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

Capital Expenditures

Capital expenditures for 2023 were $710.1 million with $668.8 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.

Proceeds from lease portfolio sales totaled $381.8 million, resulting in a net investment in our lease fleet of $287.0 million.

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 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

Capital expenditures for 2024 were $595.7 million with $541.9 million utilized for net lease fleet additions, which includes new railcar additions, sustainable railcar conversions, railcar modifications, and other betterments, net of deferred profit, as well as secondary market purchases.

Proceeds from lease portfolio sales totaled $360.7 million, resulting in a net fleet investment of $181.2 million.

For the full year 2025, we anticipate a net fleet investment of between $300 million and $400 million.

Capital expenditures related to operating and administrative activities, including supporting automation, technology, and modernization of our facilities and processes, are projected to range between $45 million and $55 million for the full year 2025.

Equity Investments

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

Off Balance Sheet Arrangements

As of December 31, 2023, we had letters of credit issued under our revolving credit facility in an aggregate amount of $17.4 million, the majority of which are expected to expire in October 2024.

As of December 31, 2024, we had outstanding letters of credit issued under our revolving credit facility in an aggregate amount of $8.7 million, which are scheduled to expire beginning in April 2025.

Our letters of credit obligations support performance bonds related to certain railcar orders.

See Note 9 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.

Employee Retirement Plans

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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.

We also use derivative instruments to mitigate the impact of changes in foreign currency exchange rates.

Derivative instruments are accounted for in accordance with applicable accounting standards.

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Description of Estimate Goodwill is required to be tested for impairment at least annually, or on an interim basis if events or circumstances change indicating that the carrying amount of the goodwill might be impaired.

The quantitative goodwill impairment test is a two-step process with step one requiring the comparison of the reporting unit's estimated fair value with the carrying amount of its net assets.

If necessary, step two of the impairment test determines the amount of goodwill impairment to be recorded when 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.

Goodwill totaled $221.5 million as of December 31, 2023.

Indefinite-lived intangible assets are not subject to amortization but are required to be evaluated for impairment at least annually.

We have the option to first assess qualitative factors to determine whether it is necessary to perform the quantitative impairment assessment.

If, after assessing the totality of events and circumstances, we determine that it is more likely than not that the fair value of a reporting unit or an individual indefinite-lived asset is less than its carrying value, the Company will perform the quantitative impairment test.

We can also elect to forgo the qualitative assessment and perform the quantitative test.

The quantitative goodwill impairment test compares the reporting unit's estimated fair value with the carrying amount of its net assets.

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 reporting unit with recorded goodwill.

Goodwill totaled $221.5 million as of December 31, 2024.

If the carrying value of an individual indefinite-lived intangible asset exceeds its fair value, such individual indefinite-lived intangible asset is impaired by the amount of the excess.

Indefinite-lived intangible assets, which are comprised of trade names of recently acquired businesses, totaled $11.2 million as of December 31, 2024.

Judgment and/or Uncertainty The estimates and judgments that most significantly affect the fair value calculations are assumptions related to revenue and operating profit results, discount rates, terminal growth rates, and exit multiples.

Judgment and/or Uncertainty When performing a qualitative assessment, we determine the drivers of fair value for each reporting unit and for each indefinite-lived intangible asset and evaluate whether those drivers have been positively or negatively affected by relevant events and circumstances since the most recent quantitative assessment.

Our evaluation includes, but is not limited to, assessment of macroeconomic trends, industry conditions, operating income trends, and capital accessibility.

When performing a quantitative assessment, the estimates and judgments that most significantly affect the fair value calculations are assumptions related to revenue and operating profit results, discount rates, terminal growth rates, royalty rates, and exit multiples.

We consider these to be Level 3 inputs in the fair value hierarchy, as they involve unobservable inputs for which there is little or no market data and thus require management to develop its own assumptions.

Potential Impact if Results Differ We believe that the assumptions used in our impairment analysis are reasonable;

If the carrying value exceeds the estimated fair value, an impairment loss will be recognized.

Potential Impact if Results Differ If actual results are not consistent with management's estimates and assumptions used to calculate estimated future cash flows, we could be exposed to impairment losses that may be material.

We believe that the assumptions used in our impairment assessments are reasonable;

however, given the uncertainties of the economy and its potential impact on our businesses, there can be no assurance that our estimates and assumptions regarding the fair value of our reporting units or the fair value of each individual indefinite-lived intangible asset will prove to be accurate predictions of the future.

Additionally, variations in any of these assumptions may result in different calculations in fair value that could result in an impairment charge.

Based on our annual goodwill impairment test performed at the reporting unit level as of October 1, 2023, we concluded that there was no impairment of goodwill and that none of the reporting units evaluated was at risk of failing the first step of the goodwill impairment test.

A reporting unit is considered to be at risk if its estimated fair value does not exceed the carrying value of its net assets by 10% or more.

An increase or decrease in the discount rate or a reduction to the terminal growth rate of 100 basis points would not have resulted in an impairment of goodwill for any of our reporting units.

Based on our annual impairment test of indefinite-lived intangible assets as of October 1, 2023, we concluded that there was no impairment of our indefinite-lived intangible assets.

Based on our annual qualitative assessments performed as of October 1, 2024, we concluded that it was not more likely than not that any of our reporting units or any of our indefinite-lived intangible assets had a fair value that was less than its carrying value.

Variable Interest Entities

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At December 31, 2024, the carrying value of our investments in these entities totaled $133.0 million.

We have determined that we are not the primary beneficiary for Signal Rail or certain other entities in which we have an equity interest.

We have determined that we are not the primary beneficiary for Signal Rail Holdings LLC or certain other entities in which we have an equity interest.

At December 31, 2024, the carrying value of these investments totaled $27.8 million.

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For each non-GAAP financial measure, we provide a reconciliation to the most comparable GAAP measure.

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, described in the footnotes to the table below, which include certain selling, engineering, and administrative expenses;

Adjusted Return on Equity

Adjusted ROE is defined as a ratio for which (i) the numerator is calculated as income or loss from continuing operations, adjusted to exclude the effects of net income or loss attributable to noncontrolling interest, and certain other adjustments (net of income taxes), described in the footnotes to the table below, which include certain selling, engineering, and administrative expenses;

gains on dispositions of other property;

restructuring activities, net;

the controlling interest portion of loss on extinguishment of debt;

interest expense, net;

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 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.

Pre-Tax ROE is used in consideration of the Company’s expected tax position in the near-term.

and the income tax effects of the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act");

and (ii) the denominator is calculated as average Trinity stockholders’ equity (which excludes noncontrolling interest).

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

Management believes that Adjusted ROE is a useful measure to both management and investors as it provides an indication of the economic return on the Company’s investments over time.

December 31, 2024 December 31, 2023 December 31, 2022

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Income from continuing operations $ 171.4 $ 140.0 $ 98.9

Provision (benefit) for income taxes 9.0 27.6 15.9

Income from continuing operations before income taxes 149.0 126.5 55.2

Net (income) loss attributable to noncontrolling interest (20.6) (12.8) 0.2

Net income attributable to noncontrolling interest (18.7) (20.6) (12.8)

Net income from continuing operations attributable to Trinity Industries, Inc.

152.7 119.4 86.1

Adjustments (net of income taxes):

Selling, engineering, and administrative expenses (1)

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Restructuring activities, net (3)

Loss on extinguishment of debt – controlling interest (3)

3.4 (1.6) 0.7

Interest expense, net (3)(4)

(0.9) (1.1) (1.1)

Pension plan settlement — — (0.6)

Adjusted Profit Before Tax $ 122.4 $ 105.8 $ 47.9

Income tax effect of CARES Act — — (0.6)

Adjusted Net Income $ 153.1 $ 115.0 $ 79.5

Total stockholders' equity $ 1,307.2 $ 1,275.5 $ 1,269.6

Noncontrolling interest (248.3) (238.4) (257.2)

Accumulated other comprehensive (income) loss (11.0) (19.7) 17.0

Adjusted Stockholders' Equity $ 1,026.1 $ 992.7 $ 1,046.8

Trinity stockholders' equity $ 1,058.9 $ 1,037.1 $ 1,012.4

Average total stockholders' equity $ 1,291.4 $ 1,272.6 $ 1,283.2

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13.3 % 11.0 % 7.7 %

Average Adjusted Stockholders' Equity $ 1,009.4 $ 1,019.8 $ 1,408.3

Pre-Tax Return on Equity (6)

Average Trinity stockholders' equity $ 1,048.0 $ 1,024.8 $ 1,021.1

Adjusted Return on Equity (6)

14.6 % 11.2 % 7.8 %

(1) Represents the change in estimated fair value of additional contingent consideration associated with an acquisition.

(2) Represents 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.

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

(2) Represents insurance recoveries in excess of net book value for assets damaged at the Company’s facility in Cartersville, Georgia in two separate events.

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

(3) For the year ended December 31, 2022, the effective tax rate for gains on dispositions of other property;

restructuring activities, net;

and interest expense, net is before consideration of the CARES Act.

(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 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.

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 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 manufacturing, 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.

(6) Adjusted Return on Equity is calculated as adjusted net income divided by average Trinity stockholders' equity, each as defined and reconciled above.

Cash Flow from Operations with Net Gains on Lease Portfolio Sales

Cash flow from operations with net gains on lease portfolio sales is a non-GAAP financial measure.

We believe this measure is useful to both management and investors as it provides a relevant measure of liquidity and a useful basis for assessing the breadth of the cash flow generation capabilities across our operating platform, as well as our ability to fund our operations and repay our debt.

This measure is defined as net cash provided by operating activities from continuing operations as computed in accordance with GAAP, plus net gains on lease portfolio sales and is reconciled to net cash provided by operating activities from continuing operations, the most directly comparable GAAP financial measure, in the following table.

Year Ended December 31,

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Net cash provided by operating activities – continuing operations $ 588.1 $ 309.0 $ 9.2

Net gains on lease portfolio sales 57.3 82.8 126.2

Cash flow from operations with net gains on lease portfolio sales

$ 645.4 $ 391.8 $ 135.4

Proceeds from lease portfolio sales 381.8 750.7 454.3

Capital expenditures – manufacturing and other (41.3) (38.0) (23.6)

Dividends paid to common stockholders (86.0) (76.9) (88.5)

Equity CapEx for leased railcars (535.0) (506.7) (418.9)

Adjusted Free Cash Flow After Investments and Dividends $ 28.5 $ 138.3 $ 538.9

Capital expenditures – lease fleet $ 668.8 $ 928.8 $ 547.2

Payments to retire debt (1,518.9) (1,578.5) (2,315.8)

Proceeds from issuance of debt 1,652.7 2,000.6 2,444.1

Net proceeds from (repayments of) debt 133.8 422.1 128.3

Equity CapEx for leased railcars $ 535.0 $ 506.7 $ 418.9

(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.

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-K

Item 7. Management’s Discussion and Analysis