Trinity Industries, Inc. · NYSE:TRN
Trinity Industries — Investor Presentation (July 2020)
53 slides from Trinity Industries's investor presentation, Jul 31, 2020
Slide 1: Investor Presentation August 2020
Exhibit 99.1 INVESTOR PRESENTATION August 2020 – based on second quarter, June 30, 2020 financial data Investor Contact: TrinityInvestorRelations@trin.net Website: www.trin.net
Slide 2: Investor Presentation – August 2020 agenda
Investor Presentation – August 2020 I. Trinity Industries, Inc. Overview and Key Investment Considerations 4 II. Response Plan Amid COVID-19 11 III. Railcar Market Overview 16 IV. Trinity’s Rail Platform 21 – Railcar Leasing and Management Services Group 25 – Rail Products Group 31 V. Financial Disc
Slide 3: Forward Looking Statements
Forward Looking Statements Some statements in this presentation, which are not historical facts, are “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements about Trinity's estimates, expectations, beliefs, intent
Slide 4: Trinity Industries, Inc. Overview
Trinity Industries, Inc. Overview (2) • Trinity Industries, Inc. owns market-leading External Revenue by Business Segment businesses that provide railcar products and services in North America – Top 5 Leasing company ~ 104,000 railcars under ownership ~ 27,000 additional railcars under management –
Slide 5: Key Investment Considerations: a Value, Growth, and Capital Return Story
Key Investment Considerations: a Value, Growth, and Capital Return Story Integral component of the North American supply chain with ESG appeal Leading market positions and attractive, long-lived assets Differentiated rail platform creates commercial and financial synergies Synergies generate signifi
Slide 6: Trinity's Rail Platform: A Collaboration of Businesses Focused on Customer Solutions
Trinity’s Rail Platform: A Collaboration of Businesses Focused on Customer Solutions The rail platform includes a broad portfolio of products and services to meet customers’ unique railcar needs across a wide landscape of end markets These businesses work together to deliver innovative solutions tha
Slide 7: Trinity's Rail Platform is Built to Deliver Shareholder Value
Trinity’s Rail Platform is Built to Deliver Shareholder Value . Inherent synergies within the rail platform: Strong Free Cash Flow* Generation before Leasing CapEx Cost-advantaged railcar equipment sourcing Tax-advantaged lease fleet investment offsets taxable income and enhances returns FINANCI
Slide 8: Strategic Objectives to Improve Returns and Unlock Shareholder Value
Strategic Objectives to Improve Returns and Unlock Shareholder Value 2019 Long-Term ROE*(1) ROE* Target 9.0% Mid Teens Financial Levers to Generate Operational Levers to Drive Improvement in Returns in the Greater Returns and Growth over Near Term the Longer Term • Reduce Trinity’s cost of capital t
Slide 9: A Legacy of Evolutionary Growth and Focus on the Future
A Legacy of Evolutionary Growth and Focus on the Future A proven history of market leadership: A strong focus on transformation: 1930’s- Trinity’s earliest legacy company was founded - Optimize the ownership and usage of railcars to make rail transportation more economically attractive and compellin
Slide 10: Commitment to Premier Performance and Sustainability
Commitment to Premier Performance and Sustainability Environmental Commitment Social Responsibility Operating our business in a way that minimizes impact Attracting and retaining a diverse and empowered workforce on natural resources and the environment • Railcars are a sustainable way to fuel the N
Slide 11: Trinity's Response Plan Amid COVID-19
Trinity’s Response Plan Amid COVID-19 11
Slide 12: Key Financial and Operational Performance Focus
Key Financial and Operational Performance Focus Continuity Prioritize health and safety of operations and maintain business continuity and focus on customer service Cash Flow Maximize the financial synergies of the TrinityRail platform and cash flow from long-term lease contracts Cost Optimization f
Slide 13: Trinity's Response Actions to COVID-19
Trinity’s Response Actions to COVID-19 Health and Safety Community Supply Chain Protocols 50 year hard asset Support withMonitoring inflation protection • Social distancing • Essential business federal • Maintained business • Restricted visitation designation continuity • Cleaning and sanitizing • P
Slide 14: Facing Market Challenge from a Position of Strength
Facing Market Challenge from a Position of Strength Attractive Solid Liquidity Conservative Debt of $709mm(1) Capitalization Structures LIQUIDITY DEBT STRUCTURE CAPITAL LEVERS Cash & Equivalents Recourse Debt Unencumbered $157mm $530mm @ ~4%(1) Railcars $1.6B Non-recourse Debt Revolver Availability
Slide 15: Management Scenario Analysis Guideposts
Management Scenario Analysis Guideposts BASE CASE STRESS CASE Improved assumptions since Q1 (Economic Recovery) (Further Contraction or Relapse) Railcar Deliveries Backlog Delivers Deferred Deliveries Lease Portfolio ~ 95% Utilization Rate > 90% Utilization Rate Customer Late Payments Lease Fleet Sa
Slide 16: Railcar Market Overview
4 ~. > TRINITY INDUSTRIES Railcar Market Overview 16
Slide 17: Railcars are Undervalued and Attractive Long-term Investments
Railcars are Undervalued and Attractive Long-term Investments Stable and predictable Tax-advantaged Serves as a natural cash flows investment 50 year hard asset interestwith inflationrate hedge protection • Long-term leases with high utilization • Superior risk-adjusted returns and tax • Rising inte
Slide 18: An Integral Component of the North American Supply Chain
An Integral Component of the North American Supply Chain U.S. Freight Ton Miles Delivering Essential Goods by Mode(1) to the Global Market Pipeline 17% 1.7 mm 3,500+ Air Railcars commodities3 in North America2 < 1% Truck 47% Water 35% 5.4 trillion 80% 9% of railroad revenue is of U.S. grain total to
Slide 19: The Railcar Industry Spans Five Commercial End Markets
The Railcar Industry Spans Five Commercial End Markets Energy Refined Products Construction Consumer & Chemicals Agriculture & Metals Products • Natural Gas Liquids • Coal • Refined Products • Grains • Construction • Autos • Biofuels • Plastics • Grain Mill Products Materials • Paper • Frac Sand • P
Slide 20: The Ownership Landscape for Railcars is Changing
The Ownership Landscape for Railcars is Changing Ownership of Railcars Built has Trended Favorably to Lessors . The number of railcars in the North American railcar fleet has grown less than 6.4% since 2001 (CAGR of 0.3%) and totals 1.7 million railcars at the end of 2019 . Railcar ownership has shi
Slide 21: Trinity's Rail Platform
4 TRINITY INDUSTRIES Trinity’s Rail Platform 21
Slide 22: Trinity's Rail Platform Delivers Value to All Stakeholders
Trinity’s Rail Platform Delivers Value to All Stakeholders Trinity’s platform is “Built to Deliver,” leveraging our rail expertise across a broad market viewpoint to differentiate our value proposition to all stakeholders 22
Slide 23: Broadest Array of Railcar Products and Services
Broadest Array of Railcar Products and Services TrinityRail offers: • The broadest array of railcar types for every commodity – over 100 different models • Quality, craftsmanship, and a focus on advanced engineering designs • Custom design configurations and superior product service support • The op
Slide 24: Delivers to the Needs of Each Customer Channel
Delivers to the Needs of Each Customer Channel Shippers Railroads Leasing Rail Investors (RIVs) (1) % % Bringing investment 30% scale to our market 17% 53% approach N.A. Fleet N.A. Ownership Products Products Products Used Used Products Leasing Leasing Leasing Leasing Channels Services Services Serv
Slide 25: Railcar Leasing and Management Services Group
Trinity’s Integrated Rail Platform: Railcar Leasing and Management Services Group 25
Slide 26: Solid Financial Performance with Multiple Sources of Income
Solid Financial Performance with Multiple Sources of Income . Leading provider of comprehensive railcar leasing Leasing Operations Revenue and Operating Profit Margin(1) and management services Owned fleet of 104,085 railcars ($7.2B of net PP&E) Total managed portfolio of 130,795 railcars Futu
Slide 27: A Young Lease Portfolio with Solid Cash-on-Cash Returns
A Young Lease Portfolio with Solid Cash-on-Cash Returns . Stable and predictable cash flows from long-term Stable Economic Profit* from Leasing Group leases and upside potential from portfolio sales Profit from leased railcar sales of approximately $90 million over last 3 fiscal years Mechanism
Slide 28: The TrinityRail Platform Enhances Leasing's ROE
The TrinityRail Platform Enhances Leasing’s ROE The synergies of Trinity’s rail platform enhance the financial returns on lease fleet investment $8.0 Billion $(4.5 Billion) (Assets) (Liabilities) 13.8% Comparable to third party Pre-Tax ROE* leasing (Leasing Group) company Reflects benefits of $(863
Slide 29: Premier Portfolio Management and Asset Placement
Premier Portfolio Management and Asset Placement . Focused portfolio management by commodity, end- Strong Portfolio Management of Lease Fleet Assets market, railcar type, customer concentration, and credit profile . Track record of strong renewal success and high levels of utilization for the leased
Slide 30: Diversified Portfolio of Assets Across End Markets and Railcar Designs
Diversified Portfolio of Assets Across End Markets and Railcar Designs Trinity maintains a well-balanced portfolio diversified across end markets and railcar designs to minimize risk and exposure concentrations throughout the railcar cycle Consumer Refined Products & Total Total Car Type Agriculture
Slide 31: Rail Products Group
Trinity’s Integrated Rail Platform: Rail Products Group 31
Slide 32: Solid Execution through Railcar Manufacturing Cycles
Solid Execution through Railcar Manufacturing Cycles . Leading manufacturer of railcars in North America Flexible Manufacturing Footprint Adjusts to Meet Market Demand Delivered 18,890 railcars representing 39% of industry shipments during LTM 06/20 Received orders for 7,925 railcars representin
Slide 33: Building Premier Products and Services
Building Premier Products and Services Innovative Durability and Superior Performing Designs Reliability Products Innovative Durability & Superior • Innovative railcar designs • Lower life-cycle Performing that optimizeDesigns and Reliability • Maximize the in-service time maintenance costs for the
Slide 34: Flexibility in Manufacturing is Key to Our Operations
Flexibility in Manufacturing is Key to Our Operations Flexibility Trinity's manufacturing flexibility across railcar products – both tank cars and freight railcars – and maintenance services enhances our ability to opportunistically respond to changes in market demand Cost-Effective Trinity’s manufa
Slide 35: Committed to Scaling the Maintenance Services Business
Committed to Scaling the Maintenance Services Business Trinity plans to scale our Maintenance Services business in geographic areas with high railcar traffic to support the lease fleet’s growing need for more maintenance capacity Leasing Requires More Maintenance Capacity Future Tank Car Fleet Compl
Slide 36: Financial Discussion & Strategic Objectives
Financial Discussion & Strategic Objectives 36
Slide 37: Trinity's Business Segments
Trinity’s Business Segments Trinity Industries, Inc. (LTM June 30, 2020 Financials) Total Revenues: $2.8B Adjusted Operating Profit*: $373M Adjusted Income from Continuing Operations*: $110M Adjusted EBITDA*: $661M Railcar Leasing and Intersegment Management Services Rail Products Group All Other Gr
Slide 38: Balance Sheet Positioned for Deployment of Capital
Balance Sheet Positioned for Deployment of Capital Trinity’s balance sheet positions the Company for opportunistic deployment of capital with an under-levered leasing company and strong liquidity Wholly-Owned Partially- Total Company Fleet Owned Fleet(1) PP&E, Net + All Cash PP&E , Net* $5,557 mm $1
Slide 39: Financial and Operational Priorities for Improving Performance
Financial and Operational Priorities for Improving Performance Optimize the capital structure and lower Trinity’s cost of capital using a disciplined capital allocation framework to drive growth and enhance shareholder returns Target high-return capital Invest in value-creating investments that posi
Slide 40: Strong Progress on Near Term Strategic Financial Priorities
Strong Progress on Near Term Strategic Financial Priorities Target Progress/Current State Scale lease fleet with $0.4B Net Cash Investment Lease fleet growth disciplined growth in Lease Fleet (2020(P)(1)) Invest in the manufacturing footprint to enhance delivery capabilities and ~ 50 % of lease flee
Slide 41: Appendix
4 TRINITY INDUSTRIES Appendix 41
Slide 42: Lease Accounting Financial Overview
Lease Accounting Financial Overview: Income Statement to Balance Sheet Transaction Flow (in millions) 1 In 2019, $1.331B of new railcar assets and maintenance services were sold from the Rail Products Group to the Leasing Group. This Revenues Operating revenue was eliminated within the Income 2019 I
Slide 43: EBITDA Reconciliation
EBITDA Reconciliation Last Twelve Months - June 30, 2020 (in millions) Net income (loss) $ (56.3) Less: income (loss) from discontinued operations, net of income taxes (1.4) Income from continuing operations $ (54.9) Add: Interest expense 226.4 Provision (benefit) for income taxes (180.9) (2) Deprec
Slide 44: Adjusted Operating Results Reconciliation
Adjusted Operating Results Reconciliation Six Months Ended June 30, 2020 Impairment of Impairment of long-lived long-lived assets - assets - Early Income tax Controlling Noncontrolling Restructuring redemption of effect of GAAP Interest (1) (2) Interest (3) activities (2) debt (2) CARES Act Adjusted
Slide 45: Adjusted Operating Results Reconciliation (continued)
Adjusted Operating Results Reconciliation (continued) Year Ended December 31, 2019 Restructuring GAAP activities Income Tax Adjusted (in millions, except per share amounts) Operating profit $ 416.3 $ 14.7 $ - $ 431.0 Provision (benefit) for income taxes $ 61.5 $ 3.3 $ (9.7) $ 55.1 Income from contin
Slide 46: Adjusted Operating Results Reconciliation (continued)
Adjusted Operating Results Reconciliation (continued) Year Ended December 31, 2018 Write-off of assets held GAAP under capital leases Adjusted (in millions, except per share amounts) Operating profit $ 315.1 $ 12.6 $ 327.7 Provision for income taxes $ 42.6 $ 2.8 $ 45.4 Income from continuing operati
Slide 47: Free Cash Flow Before Lease Investment Reconciliation
Free Cash Flow Before Lease Investment Reconciliation Reconciliation of Free Cash Flow (in millions) 2016 2017 2018 2019 LTM 6/20 Net cash provided by operating activities - continuing operations $ 837.5 $ 610.1 $ 274.2 $ 396.7 $ 720.5 (Add): Proceeds from railcar lease fleet sales owned more than o
Slide 48: Economic Profit Reconciliation
Economic Profit Reconciliation (in millions) Economic Profit - Leasing Operations 2016 2017 2018 2019 LTM 6/20 Operating Profit - Leasing Operations $ 312.5 $ 341.3 $ 291.8 $ 314.7 $ 320.9 (Less): Interest Expense (125.2) (125.8) (142.3) (197.2) (203.0) Profit Before Tax - Leasing Operations $ 187.3
Slide 49: Total Company Pre-Tax ROE Reconciliation
Total Company Pre-Tax ROE Reconciliation December 31, 2017 2018 2019 Numerator: ($ in millions) Income from continuing operations $ 610.2 $ 109.0 $ 139.2 Provision (benefit) for income taxes (414.8) 42.6 61.5 Income from continuing operations before tax 195.4 151.6 200.7 Net (income) loss attributab
Slide 50: Leasing Group Cash-on-Cash Return Reconciliation
Leasing Group Cash-on-Cash Return Reconciliation (in millions except percentages) 2015 2016 2017 2018 2019 LTM 06/20 Economic Profit - Leasing Operations $ 334.6 $ 343.5 $ 387.8 $ 346.1 $ 349.7 $ 345.5 Operating Profit - Railcar Sales 275.1 47.6 103.2 71.9 91.9 70.9 Total Leasing Group Economic Prof
Slide 51: Leasing Group Pre-Tax ROE Reconciliation
Leasing Group Pre-Tax ROE Reconciliation December 31, 2018 2019 ($ in millions) Numerator: Operating profit $ 351.1 $ 406.6 Interest expense (142.3) (197.2) Income from continuing operations before tax 208.8 209.4 Net (income) loss attributable to noncontrolling interest (3.8) 1.5 Adjusted Profit Be
Slide 52: Footnotes
Footnotes Slide 4 – Trinity Industries, Inc. Overview (1) Current dividend yield represents the Company’s most recent quarterly dividend, annualized and the Company’s stock price as of 6/30/20 (2) Intersegment revenues are eliminated (3) Leasing Group equity reflects the Leasing segment’s equity bal
Slide 53: Footnotes (continued)
Footnotes (continued) Slide 19 – The Railcar Industry Spans Five Commercial End Markets All statistics cited on this slide: 2018 STB Waybill Sample – reflects vast majority of commodity types Slide 20 – The Ownership Landscape for Railcars is Changing Umler ® North American fleet ownership data as o
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