What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-01 compared with 2024-10-31 · 118 added, 231 removed, 288 unchanged (55% 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 that could cause our actual results of operations to differ materially from those in the forward-looking statements, include, among others:

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

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

• the cyclical nature of the industries in which we compete;

• actions by U.S.

and/or foreign governments (particularly Mexico and Canada) relative to tariffs, trade policies, federal government budgeting, taxation policies, government expenditures, and borrowing/debt ceiling limits;

• variations in weather in areas where our products are manufactured, delivered, or used;

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

• naturally-occurring events, pandemics, fires, and/or disasters causing disruption to our facilities, 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, 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;

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• legal, regulatory, and environmental issues, including compliance of our products with mandated specifications, standards, or testing criteria and obligations to remove and replace our products following installation or to recall our products and install different products;

• actions by U.S.

and/or foreign governments (particularly Mexico and Canada) relative to federal government budgeting, taxation policies, government expenditures, borrowing/debt ceiling limits, tariffs, and trade policies;

• the use of social or digital media to disseminate false, misleading and/or unreliable or inaccurate information;

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Trinity Industries, Inc.

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

and its consolidated subsidiaries 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;

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;

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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

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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.

We are actively monitoring trade policy and tariff announcements and the potential impacts to our business.

Uncertainty in the macroeconomic environment is negatively impacting our results of operations and demand for our products and services, and is likely to continue.

We remain focused on minimizing impacts to our supply chain resulting from these announcements and any future developments.

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

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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 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 all railcar shipments that were delayed at the end of 2023 were delivered during the first half of 2024;

however, there remains a risk of 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, from time to time, experienced shortages of materials used to manufacture or repair certain railcar types, as well as disruptions in the transportation network.

Such challenges could negatively impact our operations or our ability to timely deliver railcars to our customers.

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.

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 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.

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 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.

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.

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, including potential rail traffic closures or congestion in Eagle Pass, Texas, the primary border crossing used for railcar deliveries from our manufacturing facilities in Mexico.

We continuously monitor rail and truck traffic at the U.S.-Mexico border 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.

Financial and Operational Highlights

• Our revenues for the nine months ended September 30, 2024 were $2,449.8 million, representing an increase of 12.1%, compared to the nine months ended September 30, 2023.

Our operating profit for the nine months ended September 30, 2024 was $379.5 million compared to $268.3 million for the nine months ended September 30, 2023.

• The Leasing Group's lease fleet of 109,555 company-owned railcars was 96.6% utilized as of September 30, 2024, compared to a lease fleet utilization of 98.1% on 109,055 company-owned railcars as of September 30, 2023.

• Our revenues for the three months ended March 31, 2025 were $585.4 million, representing a decrease of 27.7%, compared to the three months ended March 31, 2024.

Our operating profit for the three months ended March 31, 2025 was $99.8 million, representing a decrease of 13.4%, compared to $115.2 million for the three months ended March 31, 2024.

• The Leasing Group's lease fleet of 110,150 company-owned railcars was 96.8% utilized as of March 31, 2025, compared to a lease fleet utilization of 97.5% on 110,205 company-owned railcars as of March 31, 2024.

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, 2024, we made a net fleet investment of approximately $86.5 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, 2025, we made a net fleet investment of approximately $86.5 million, which primarily includes new railcar additions, railcar modifications, and other betterments, net of deferred profit, as well as secondary market purchases;

and is net of proceeds from lease portfolio sales.

• The total value of the new railcar backlog at September 30, 2024 was $2.4 billion, compared to $3.6 billion at September 30, 2023.

The Rail Products Group received orders for 6,185 railcars and delivered 13,810 railcars in the nine months ended September 30, 2024, in comparison to orders for 10,660 railcars and deliveries of 13,355 railcars in the nine months ended September 30, 2023.

• The total value of the new railcar backlog at March 31, 2025 was $1.9 billion, compared to $2.9 billion at March 31, 2024.

The Rail Products Group received orders for 695 railcars and delivered 3,060 railcars in the three months ended March 31, 2025, in comparison to orders for 1,880 railcars and deliveries of 4,695 railcars in the three months ended March 31, 2024.

◦ Deliveries in 2024 included approximately 1,200 railcar shipments that were delayed at the end of 2023 due to the U.S.-Mexico border closure and delivered during the first quarter of 2024.

See "Consolidated Results of Operations" and "Segment Discussion" below for additional information regarding our operating results.

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See the Non-GAAP Financial Measures section within this Form 10-Q for a reconciliation to the most directly comparable GAAP measure and why management believes this measure is useful to management and investors.

Dollar amounts are presented for the nine months ended September 30, 2024 and 2023.

Capital Structure Updates

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.

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 8 of the Consolidated Financial Statements for additional information regarding these debt transactions.

Dollar amounts are presented for the three months ended March 31, 2025 and 2024.

Litigation Updates

See Note 13 of the Consolidated Financial Statements for an update on the status of certain litigation.

Subsequent Events

On April 30, 2025, 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 an amended and restated term loan agreement to (i) increase the aggregate amount of the term loan from $320.7 million as of March 31, 2025 to $1.05 billion;

(ii) extend the maturity date to April 30, 2030;

and (iii) reduce the applicable interest rate to daily simple SOFR plus a facility margin of 1.50%.

Net proceeds received from the transaction were used to redeem in full the outstanding borrowings of approximately $616.0 million under Trinity Rail Leasing 2017, LLC (“TRL-2017”);

to repay approximately $75.8 million of borrowings under TILC's warehouse loan facility;

and for general corporate purposes.

The interest rate for the TRL-2017 promissory notes was at one-month term SOFR plus (1) a benchmark adjustment of 11 basis points and (2) a facility margin of 1.50%.

Consolidated Results of Operations

The following table summarizes our consolidated results of operations for the three and nine months ended September 30, 2024 and 2023:

The following table summarizes our consolidated results of operations for the three months ended March 31, 2025 and 2024:

Three Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

(in millions)

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Gains on dispositions of property 7.6 2.8

Restructuring activities, net — — — (2.2)

Total operating profit 99.8 115.2

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Income from continuing operations $ 29.0 $ 31.7

The tables below present revenues by segment for the three and nine months ended September 30, 2024 and 2023:

Three Months Ended September 30, 2024

Revenues Percent

External Intersegment Total Change

(in millions)

Railcar Leasing and Services Group $ 289.2 $ 0.3 $ 289.5 10.6 %

Rail Products Group 509.6 93.6 603.2 (3.3) %

Segment Totals 798.8 93.9 892.7 0.8 %

Eliminations — (93.9) (93.9)

Consolidated Total $ 798.8 $ — $ 798.8 (2.7) %

Three Months Ended September 30, 2023

External Intersegment Total

(in millions)

Railcar Leasing and Services Group $ 261.3 $ 0.4 $ 261.7

Rail Products Group 560.0 64.1 624.1

Segment Totals 821.3 64.5 885.8

Eliminations — (64.5) (64.5)

Consolidated Total $ 821.3 $ — $ 821.3

Nine Months Ended September 30, 2024

The tables below present revenues by segment for the three months ended March 31, 2025 and 2024:

Three Months Ended March 31, 2025

Revenues Percent

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Consolidated Total $ 585.4 $ — $ 585.4 (27.7) %

Nine Months Ended September 30, 2023

Three Months Ended March 31, 2024

External Intersegment Total

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selling, engineering, and administrative costs;

gains or losses on property disposals;

and restructuring activities.

Operating costs by segment for the three and nine months ended September 30, 2024 and 2023 were as follows:

and gains or losses on property disposals.

Operating costs by segment for the three months ended March 31, 2025 and 2024 were as follows:

Three Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

(in millions)

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Corporate and other 24.4 26.5

Restructuring activities, net — — — (2.2)

Eliminations (116.3) (140.6)

Consolidated Total $ 485.6 $ 694.4

(1) Includes gains on lease portfolio sales of $11.4 million and $3.1 million for the three months ended September 30, 2024 and 2023, respectively.

Includes gains on lease portfolio sales of $36.2 million and $46.4 million for the nine months ended September 30, 2024 and 2023, respectively.

(1) Includes gains on lease portfolio sales of $5.9 million and $2.1 million for the three months ended March 31, 2025 and 2024, respectively.

Operating Profit

Operating profit by segment for the three and nine months ended September 30, 2024 and 2023 was as follows:

Operating profit by segment for the three months ended March 31, 2025 and 2024 was as follows:

Three Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

(in millions)

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Corporate and other (24.4) (26.5)

Restructuring activities, net — — — 2.2

Eliminations (6.2) (2.4)

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Discussion of Consolidated Results

Revenues – Our revenues for the three months ended September 30, 2024 were $798.8 million, representing a decrease of $22.5 million, or 2.7%, over the prior year period primarily due to lower external deliveries in the Rail Products Group, partially offset by favorable pricing and a higher volume of external repairs, as well as improved lease rates and net additions to the lease fleet in the Leasing Group.

Our revenues for the nine months ended September 30, 2024 were $2,449.8 million, representing an increase of $264.4 million, or 12.1%, over the prior year period primarily due to higher external deliveries in the Rail Products Group, as well as favorable pricing and a higher volume of external repairs and improved lease rates in the Leasing Group.

Cost of revenues – Our cost of revenues for the three months ended September 30, 2024 was $629.3 million, representing a decrease of $50.2 million, or 7.4%, over the prior year period primarily due to lower external deliveries and improved efficiencies in the Rail Products Group.

Our cost of revenues for the nine months ended September 30, 2024 was $1,936.6 million, representing an increase of $117.4 million, or 6.5%, over the prior year period primarily due to higher external deliveries, partially offset by improved efficiencies in the Rail Products Group.

Selling, engineering, and administrative expenses – Selling, engineering, and administrative expenses for the three months ended September 30, 2024 were $60.5 million, representing an increase of $11.4 million, or 23.2%, when compared to the prior year period.

Selling, engineering, and administrative expenses for the nine months ended September 30, 2024 were $174.1 million, representing an increase of $20.8 million, or 13.6%, when compared to the prior year period.

These increases were primarily due to higher employee-related costs, including increased incentive-based compensation, and continued investments in technology.

Gains on dispositions of property – Gains on dispositions of property increased by $5.9 million for the three months ended September 30, 2024, when compared to the prior year period primarily due to higher gains on lease portfolio sales in the current year period.

Gains on dispositions of property decreased by $12.8 million for the nine months ended September 30, 2024, when compared to the prior year period primarily due to lower gains on lease portfolio sales in the current year period.

Additionally, we recorded gains of $3.7 million and $4.9 million during the three and nine months ended September 30, 2023, 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.

Operating profit – Operating profit for the three months ended September 30, 2024 totaled $122.4 million, representing an increase of $22.2 million, or 22.2%, from the prior year period primarily due to improved lease rates and higher gains on lease portfolio sales in the Leasing Group, and improved efficiencies in the Rail Products Group, partially offset by lower external deliveries in the Rail Products Group.

Operating profit for the nine months ended September 30, 2024 totaled $379.5 million, representing an increase of $111.2 million, or 41.4%, from the prior year period primarily due to higher external deliveries and improved efficiencies in the Rail Products Group and improved lease rates and a higher volume of external repairs in the Leasing Group, partially offset by lower gains on lease portfolio sales in the current year period.

Revenues – Our revenues for the three months ended March 31, 2025 were $585.4 million, representing a decrease of $224.2 million, or 27.7%, over the prior year period primarily due to lower external deliveries, including sustainable railcar conversions, in the Rail Products Group.

Cost of revenues – Our cost of revenues for the three months ended March 31, 2025 was $443.2 million, representing a decrease of $201.7 million, or 31.3%, over the prior year period primarily due to lower external deliveries, including sustainable railcar conversions, in the Rail Products Group.

Selling, engineering, and administrative expenses – Selling, engineering, and administrative expenses for the three months ended March 31, 2025 were $50.0 million, representing a decrease of $2.3 million, or 4.4%, when compared to the prior year period primarily due to lower employee-related costs, including incentive-based compensation, and lower consulting costs.

Gains on dispositions of property – Gains on dispositions of property increased by $4.8 million for the three months ended March 31, 2025, when compared to the prior year period primarily due to higher gains on lease portfolio sales.

Operating profit – Operating profit for the three months ended March 31, 2025 totaled $99.8 million, representing a decrease of $15.4 million, or 13.4%, from the prior year period primarily due to lower external deliveries and costs associated with workforce reductions in the Rail Products Group, partially offset by higher lease rates and higher gains on lease portfolio sales.

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, 2024 totaled $67.4 million, compared to $68.8 million for the three months ended September 30, 2023.

Interest expense, net for the nine months ended September 30, 2024 totaled $206.6 million, compared to $197.8 million for the nine months ended September 30, 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.

Other, net – Other, net for the three months ended September 30, 2024 resulted in income of $1.4 million, compared to income of $0.9 million for the three months ended September 30, 2023.

Other, net for the nine months ended September 30, 2024 resulted in income of $1.4 million, compared to expense of $2.0 million for the nine months ended September 30, 2023.

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 nine months ended September 30, 2024 includes a fee of $3.1 million related to the execution of back-to-back interest rate caps associated with the new TILC warehouse loan facility.

Income taxes – The effective tax rates from continuing operations for the three and nine months ended September 30, 2024 were expenses of 27.7% and 25.1%, 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, and return to provision adjustments, partially offset by the benefit of noncontrolling interest for which we do not provide income taxes, excess tax benefits associated with equity-based compensation, and changes in state tax laws.

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 of 2023.

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 accumulated other comprehensive income;

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

changes in our valuation allowances;

state income taxes;

and foreign income taxes.

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

Interest expense, net – Interest expense, net for the three months ended March 31, 2025 totaled $66.1 million, compared to $69.1 million for the three months ended March 31, 2024, primarily driven by lower average debt and lower interest rates in 2025.

Other, net – Other, net for the three months ended March 31, 2025 resulted in income of $2.7 million, compared to expense of $3.4 million for the three months ended March 31, 2024.

Other, net for the three months ended March 31, 2024 includes a fee related to the execution of back-to-back interest rate caps associated with the TILC warehouse loan facility.

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

Income taxes – The effective tax rate from continuing operations for the three months ended March 31, 2025 was an expense of 20.3%, which differs from the U.S.

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

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.

Segment Discussion

Railcar Leasing and Services Group

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

2024 2023 Percent 2024 2023 Percent

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

Three Months Ended March 31,

2025 2024 Percent

($ in millions) Change

Leasing and management $ 219.0 $ 209.0 4.8 %

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* Not meaningful

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

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

(4) 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.

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.

(4) 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.

(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.

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Three Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

($ in millions)

2 unchanged sentences

Operating profit margin on lease portfolio sales 17.5 % 8.7 %

Total revenues for the Railcar Leasing and Services Group increased by 10.6% and 12.2% for the three and nine months ended September 30, 2024, respectively, compared to the prior year periods.

Leasing and management revenues for the three and nine months ended September 30, 2024 were favorably impacted primarily by improved lease rates and net additions to the lease fleet, partially offset by lower utilization, when compared to the three and nine months ended September 30, 2023.

Digital and logistics services revenues for the three and nine months ended September 30, 2024 decreased when compared to the prior year periods primarily due to a change in revenue recognition from gross basis to net basis based on our conclusion that we are acting as an agent for certain services provided to a small number of customers.

Our maintenance services business is primarily dedicated to servicing our lease fleet of Company-owned railcars 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 and nine months ended September 30, 2024 as a result of favorable pricing, as well as a higher volume of repairs completed for third parties, including our investor-owned fleet.

Cost of revenues for the Railcar Leasing and Services Group increased by 7.6% and 5.2% for the three and nine months ended September 30, 2024, respectively, compared to the prior year periods.

In our maintenance services business, cost of revenues increased for the three and nine months ended September 30, 2024 as a result of the volume of external repairs.

The increase to cost of revenues for the nine months ended September 30, 2024 was partially offset by a government incentive related to our investment at a rail maintenance facility.

Cost of revenues for the three and nine months ended September 30, 2024 was also impacted by the gross basis to net basis change in our digital and logistics services business described above.

Leasing Group operating profit increased by 20.3% for the three months ended September 30, 2024 when compared to the prior year period primarily due to improved lease rates and net additions to the lease fleet, higher gains on lease portfolio sales in the current year period, as well as favorable pricing and a higher volume of external repairs in the maintenance services business, partially offset by lower utilization.

Leasing Group operating profit for the nine months ended September 30, 2024 increased by 15.9% primarily due to improved lease rates and net additions to the lease fleet, and favorable pricing and a higher volume of external repairs in the maintenance services business, partially offset by lower gains on lease portfolio sales in the current year period.

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, 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.

Total revenues for the Railcar Leasing and Services Group were relatively flat for the three months ended March 31, 2025 compared to the prior year period.

Leasing and management revenues for the three months ended March 31, 2025 were favorably impacted primarily by higher lease rates, when compared to the three months ended March 31, 2024.

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 decreased for the three months ended March 31, 2025 when compared to the prior year period as a result of a lower volume of repairs completed for third parties.

Cost of revenues for the Railcar Leasing and Services Group increased by 1.3% for the three months ended March 31, 2025 compared to the prior year period primarily due to higher maintenance and compliance costs for the lease fleet, partially offset by a lower volume of external repairs, including the impact of weather disruptions, in our maintenance services business.

Leasing Group operating profit for the three months ended March 31, 2025 increased by 4.2% when compared to the prior year period primarily due to higher lease rates and higher gains on lease portfolio sales, partially offset by a lower volume of external repairs in the maintenance services business.

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

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

September 30, 2024 September 30, 2023

March 31, 2025 March 31, 2024

Number of railcars:

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Fleet utilization 96.8 % 97.5 %

(1) Includes 2,490 railcars and 2,495 railcars under leased-in arrangements as of September 30, 2024 and 2023, respectively.

(1) Includes 2,240 railcars and 2,490 railcars under leased-in arrangements as of March 31, 2025 and 2024, 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,

2024 2023 Percent 2024 2023 Percent

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

Three Months Ended March 31,

2025 2024 Percent

($ in millions) Change

Rail products (1)

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6.9 7.7 (10.4) %

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

Operating profit $ 25.9 $ 43.8 (40.9) %

Operating profit margin 6.2 % 6.6 %

* Not meaningful

(1) Includes sustainable railcar conversion revenues of $12.8 million, representing 170 railcars, for the three months ended September 30, 2024 and sustainable railcar conversion revenues of $77.4 million, representing 1,040 railcars, for the nine months ended September 30, 2024.

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.

Revenues for the Rail Products Group decreased for the three months ended September 30, 2024 by 3.3% when compared to the prior year period 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 nine months ended September 30, 2024 by 2.0% when compared to the prior year period primarily as a result of higher new railcar deliveries and the mix of railcars sold, partially offset by a lower volume of sustainable railcar conversions.

Cost of revenues for the Rail Products Group decreased for the three and nine months ended September 30, 2024 by 7.1% and 1.7%, respectively, when compared to the prior year periods primarily due to improved labor efficiencies, operational efficiencies associated with reduced production line changeovers and fewer supply chain disruptions, and a lower volume of sustainable railcar conversions.

These decreases were partially offset by higher new railcar deliveries and costs associated with workforce reductions when compared to the prior year periods.

Operating profit for the Rail Products Group increased for the three and nine months ended September 30, 2024 by 66.3% and 83.9%, respectively, when compared to the prior year periods primarily due to improved labor and operational efficiencies, the mix of railcars sold, and higher new railcar deliveries.

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

There were no sustainable railcar conversion revenues for the three months ended March 31, 2025.

Revenues and cost of revenues for the Rail Products Group decreased for the three months ended March 31, 2025 by 37.0% and 37.1%, respectively, when compared to the prior year period primarily as a result of lower deliveries, including sustainable railcar conversions.

Operating profit for the Rail Products Group decreased for the three months ended March 31, 2025 by 40.9% when compared to the prior year period primarily due to lower deliveries and costs associated with workforce reductions.

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

In addition to the amounts below, as of September 30, 2024, our backlog related to sustainable railcar conversions totaled $6.5 million, representing 75 railcars.

September 30,

2025 2024 Percent

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Total $ 1,886.6 $ 2,938.9 (35.8) %

Three Months Ended September 30, Nine Months Ended

September 30,

Three Months Ended

2025 2024 Percent

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Deliveries (1)

Other adjustments (1)

(3,060) (4,695) (34.8) %

Ending balance 13,640 23,075 (40.9) %

Average selling price in ending backlog $ 138,314 $ 127,363 8.6 %

(1) 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.

(1) Deliveries for the three months ended March 31, 2024 included approximately 1,200 railcar shipments that were delayed at the end of 2023 due to the U.S.-Mexico border closure and delivered during the first quarter of 2024.

Total backlog dollars decreased by 35.8% when compared to the prior year period.

We expect to deliver approximately 19.9% of our railcar backlog value during the remaining three months of 2024 and 39.8% during 2025, with the remainder to be delivered through 2028.

We expect to deliver approximately 40.3% of our railcar backlog value during the remaining nine months of 2025 and 19.7% during 2026, 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,

2024 2023 2024 2023

Three Months Ended

($ in millions)

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Corporate and other

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

2024 2023 Percent 2024 2023 Percent

(in millions) Change (in millions) Change

Three Months Ended March 31,

2025 2024 Percent

(in millions) Change

Operating costs:

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$ 24.4 $ 26.5 (7.9) %

Gains on dispositions of property — — * (0.2) — *

Operating loss $ (24.4) $ (26.5) (7.9) %

*Not meaningful

Selling, engineering, and administrative expenses for the three and nine months ended September 30, 2024 increased by 31.3% and 12.4%, respectively, when compared to the prior year periods primarily from higher employee-related costs, including increased incentive-based compensation.

Total operating costs during the nine months ended September 30, 2024 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, 2025 decreased by 7.9% when compared to the prior year period primarily from lower consulting costs and lower employee-related costs, including incentive-based compensation.

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, 2024, we have total committed liquidity of $924.2 million.

As of March 31, 2025, we have total committed liquidity of $920.2 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.

Liquidity Highlights

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.

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 8 of the Consolidated Financial Statements for additional information regarding these debt transactions.

Dividend Payments – We paid $70.1 million in dividends to our common stockholders during the nine months ended September 30, 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.

During the three and nine months ended September 30, 2024, share repurchases totaled 192,250 shares and 226,150 shares, respectively, at a cost of approximately $6.2 million and $7.1 million, respectively, resulting in a remaining authorization to repurchase up to $242.9 million of our common stock under the share repurchase program as of September 30, 2024.

The following table summarizes our cash flows from operating, investing, and financing activities for the nine months ended September 30, 2024 and 2023:

Nine Months Ended

September 30,

The following table summarizes our cash flows from operating, investing, and financing activities for the three months ended March 31, 2025 and 2024:

Three Months Ended

(in millions)

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Operating Activities .

Net cash provided by operating activities from continuing operations for the nine months ended September 30, 2024 was $383.5 million compared to net cash provided by operating activities from continuing operations of $215.8 million for the nine months ended September 30, 2023.

Net cash provided by operating activities from continuing operations for the three months ended March 31, 2025 was $78.4 million compared to net cash provided by operating activities from continuing operations of $56.5 million for the three months ended March 31, 2024.

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

Nine Months Ended

September 30,

Three Months Ended

(in millions)

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Changes in operating assets and liabilities $ (19.5) $ (52.3)

The changes in our operating assets and liabilities resulted in a net source of $49.9 million for the nine months ended September 30, 2024, as compared to a net use of $15.2 million for the nine months ended September 30, 2023.

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

The changes in our operating assets and liabilities resulted in a net use of $19.5 million for the three months ended March 31, 2025, as compared to a net use of $52.3 million for the three months ended March 31, 2024.

The changes in operating assets and liabilities were impacted primarily by higher receivables balances associated with higher deliveries in the prior year period and by payments of incentive-based compensation during the three months ended March 31, 2025 that were accrued as of December 31, 2024.

Investing Activities.

Net cash used in investing activities from continuing operations for the nine months ended September 30, 2024 was $105.2 million compared to $316.3 million of net cash used in investing activities from continuing operations for the nine months ended September 30, 2023.

Net cash used in investing activities from continuing operations for the three months ended March 31, 2025 was $91.6 million compared to $124.0 million of net cash used in investing activities from continuing operations for the three months ended March 31, 2024.

Significant investing activities are as follows:

• We made a net fleet investment of $86.5 million during the nine months ended September 30, 2024, compared to $237.5 million in the prior year period primarily due to the timing of fleet additions.

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 made a net fleet investment of $86.5 million during the three months ended March 31, 2025, compared to $123.3 million in the prior year period primarily due to the timing of fleet additions.

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.

We had no acquisitions during the nine months ended September 30, 2024.

Financing Activities.

Net cash used in financing activities during the nine months ended September 30, 2024 was $169.7 million compared to $81.0 million of net cash provided by financing activities for the nine months ended September 30, 2023.

Net cash used in financing activities during the three months ended March 31, 2025 was $124.2 million compared to $71.8 million of net cash provided by financing activities for the three months ended March 31, 2024.

Significant financing activities are as follows:

• During the nine months ended September 30, 2024, we had total repayments of $1,831.0 million and total borrowings of $1,762.4 million, for net repayments of $68.6 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 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.

• We paid $70.1 million and $64.7 million in dividends to our common stockholders during the nine months ended September 30, 2024 and 2023, respectively.

• During the three months ended March 31, 2025, we had total debt repayments of $77.3 million related to normal amortization activity.

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.

• We paid $24.6 million and $23.0 million in dividends to our common stockholders during the three months ended March 31, 2025 and 2024, respectively.

• During the three months ended March 31, 2025, we repurchased common stock totaling $8.2 million, resulting in a remaining authorization to repurchase up to $220.8 million of our common stock under the share repurchase program as of March 31, 2025.

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

Current Debt Obligations

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Ratio Covenant Actual at

September 30, 2024

March 31, 2025

Maximum leverage (1)

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No less than 2.25 to 1.00 7.22

(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, 2024.

(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 September 30, 2024.

As of September 30, 2024, we were in compliance with all such financial covenants.

As of March 31, 2025, 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.

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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 September 30, 2024, we had outstanding letters of credit issued under our revolving credit facility in an aggregate amount of $4.4 million, which support performance bonds related to certain railcar orders.

As of March 31, 2025, we had outstanding letters of credit issued under our revolving credit facility in an aggregate amount of $8.7 million, which 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.

Additionally, we had a letter of credit issued outside our revolving credit facility for $8.5 million to satisfy a liquidity reserve requirement associated with our TILC warehouse loan facility, which renews by its terms each year.

Derivative Instruments

We use derivative instruments to mitigate interest rate risk, including risks associated with the impact of changes in interest rates in anticipation of future debt issuances and to offset interest rate variability of certain floating rate debt issuances outstanding.

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

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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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.

Non-GAAP measures should not be considered in isolation or as a substitute for our reported results prepared in accordance with GAAP and, as calculated, may not be comparable to other similarly titled measures for other companies.

Nine Months Ended

September 30,

Three Months Ended

(in millions)

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Contractual Obligations and Commercial Commitments

Except as described below, as of September 30, 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.

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

These notes have a stated final maturity date of 2054.

• In May 2024, we redeemed in full the TRL VII Notes, of which $99.7 million was outstanding as of December 31, 2023.

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

• In June 2024, we redeemed in full $400.0 million aggregate principal amount of 4.55% senior notes due 2024.

See Note 8 of the Consolidated Financial Statements for additional information regarding these debt transactions.

As of March 31, 2025, there have been no material changes to our contractual obligations from December 31, 2024.

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