Trinity Industries, Inc. · NYSE:TRN
Trinity Industries — Investor Presentation (August 2019)
46 slides from Trinity Industries's investor presentation, Aug 6, 2019
Slide 1: Investor Presentation August 2019
INVESTOR PRESENTATION August 2019 – based on second quarter, June 30, 2019 financial data Investor Contact: TrinityInvestorRelations@trin.net Website: www.trin.net
Slide 2: Investor Presentation – August 2019 Contents
Investor Presentation – August 2019 I. Trinity Industries, Inc. Overview and Key Investment Considerations 4 II. Railcar Market Overview 11 III. Trinity’s Integrated Rail Platform 16 – Railcar Leasing and Management Services Group 20 – Rail Products Group 25 IV. Financial Discussion and Strategic Ob
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 • Trinity Industries, Inc. owns market‐leading businesses that provide railcar products and services in North America marketed under the trade name TrinityRail® • The Company services its customers through a unique integrated rail platform that combines premier rail
Slide 5: Key Investment Considerations: a Value, Growth, and Capital Return Story
Key Investment Considerations: a Value, Growth, and Capital Return Story Railcars are an attractive long‐term investment in a tax‐advantaged asset class that transport goods and commodities in a sustainable, environmentally‐friendly way Trinity’s integrated platform comprises leading market position
Slide 6: Trinity’s Integrated Rail Platform: A Collaboration of Businesses Focused on a Strategic Purpose
Trinity’s Integrated Rail Platform: A Collaboration of Businesses Focused on a Strategic Purpose The TrinityRail platform includes a broad portfolio of railcar products and services across a wide landscape of end markets enabling customized solutions to fulfill each customer’s unique needs TrinityRa
Slide 7: 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 market 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 co
Slide 8: Trinity’s Rail Platform is Built to Deliver Shareholder Value
Trinity’s Rail Platform is Built to Deliver Shareholder Value . The combined strength and cash flow generation Strong Free Cash Flow* Generation before Leasing CapEx capability of the integrated rail platform enables Trinity to meaningfully invest in high‐return growth Pre‐Spin Current Year Future G
Slide 9: Strategic Objectives to Improve Returns and Unlock Shareholder Value
Strategic Objectives to Improve Returns and Unlock Shareholder Value 3 Yr 2019 Long‐Term Pre‐Spin (P) ROE* Target ROE*(1) ROE* ROE* Target 11 ‐ 13% 6.3% 9.5% Average Mid Teens Financial Levers to Generate Operational Levers to Drive Improvement in Returns in the Greater Returns and Growth over Near
Slide 10: Improving Company Outlook for FY 2019
Improving Company Outlook for FY 2019 (as of 7/25/19) 2018 Results 2019 Guidance YoY Δ Expected Total EPS: $0.70 per share ~ $1.15 ‐ $1.35 ~ +79% at midpoint Corporate expenses: $149mm ~ $105 ‐ $115mm ~ ‐26% at midpoint Total Company Leasing & Management Revenues: $729mm ~ $760 ‐ $775mm ~ +5% at mid
Slide 11: Railcar Market Overview
<p TRINITY INDUSTRIES Railcar Market Overview 11
Slide 12: Railcars are an Attractive Long-term Investment in an Undervalued Asset Class
Railcars are an Attractive Long‐term Investment in an Undervalued Asset Class Stable and predictable Tax‐advantaged Serves as a natural cash flows asset class 50 year hard asset interestwith inflationrate hedge protection • Stable, predictable cash flows through • Superior risk‐adjusted returns; tax
Slide 13: Rail Transportation is an Integral Component of the North American Industrial Supply Chain
Rail Transportation is an Integral Component of the North American Industrial Supply Chain U.S. Freight Ton Miles Connecting the Consumer by Mode(1) to the Global Market Pipeline 19% 1.7 mm 3,500 Air Railcars in North commodities3 America2 < 1% Truck 47% Water 35% 6.2 trillion 80% 8% of railroad rev
Slide 14: 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 15: 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 6.5% since 2001 (CAGR of 0.3%) and totals 1.7 million railcars at the end of 2018 . Railcar ownership has shi
Slide 16: Trinity’s Integrated Rail Platform
Trinity’s Integrated Rail Platform 16
Slide 17: Trinity’s Integrated Rail Platform Delivers Value to Stakeholders
Trinity’s Integrated Rail Platform Delivers Value to Stakeholders The TrinityRail® integrated platform is strategically “Built to Deliver,” leveraging our deep rail industry knowledge from our broad market view point to differentiate the value proposition to all of our stakeholders 17
Slide 18: Integrated Rail Platform Meets Customer Demand with a Broad Product Portfolio
Trinity’s Integrated Rail Platform Meets Customer Demand with a Broad Product Portfolio TrinityRail offers: • The broadest array of railcar types for every commodity – over 100 different models • Quality, craftsmanship, and superior product service support • Custom design configurations covering all
Slide 19: Integrated Rail Platform Delivers to the Needs of Each Customer Channel
Trinity’s Integrated Rail Platform Delivers to the Needs of Each Customer Channel Shippers Railroads Leasing Rail Investors (RIVs) % 1 Bringing investment Fleet 17% 31% 52% scale to our market approach N.A. Ownership Products Products Products Used Products Leasing Leasing Leasing Leasing Customer C
Slide 20: Railcar Leasing and Management Services Group
Trinity’s Integrated Rail Platform: Railcar Leasing and Management Services Group 20
Slide 21: Solid Financial Performance with Multiple Sources of Revenue
Solid Financial Performance with Multiple Sources of Revenue . Leading provider of comprehensive railcar leasing Leasing & Management Revenues and Profit (Excludes Car Sales)(1) and management services Leasing and Management Revenue has grown 24% since 2013 Future committed lease revenue totals
Slide 22: Premier Portfolio Management and Asset Placement
Premier Portfolio Management and Asset Placement . Trinity’s portfolio management team manages risk Strong Portfolio Management of Lease Fleet Assets exposure by commodity, end‐market, railcar type, customer concentration and credit profile . The commercial team’s track record for renewal success of
Slide 23: 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 Commercial End Markets / Commodities Construction & Consumer
Slide 24: Strong Economic Profit and Healthy Cash on Cash Returns from a Young Lease Portfolio
Strong Economic Profit and Healthy Cash on Cash Returns from a Young Lease Portfolio . Trinity’s railcar leasing business generates stable and Growing Economic Profit* from Lease Operations (in $millions) predictable cash flows from long‐term leases 2013 2014 2015 2016 2017 2018 Leasing & Mgmt Reven
Slide 25: Rail Products Group
Trinity’s Integrated Rail Platform: Rail Products Group 25
Slide 26: Elevating our Financial Performance through the Railcar Cycle
Elevating our Financial Performance through the Railcar Cycle . Leading manufacturer of railcars in North America with Rail Products Revenues and Profit Cycle is Inflecting Positive(1) the broadest product offering and a focus on advanced engineering designs . Flexible manufacturing footprint with e
Slide 27: 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 28: Flexibility in Manufacturing is Key to Our Operations
Flexibility in Manufacturing is Key to Our Operations Trinity has invested significantly in its manufacturing footprint, establishing a strong manufacturing platform and ability to respond to changes in market demand Flexibility Trinity's manufacturing flexibility across railcar products –both tank
Slide 29: Growing Maintenance Services to Benefit Leasing Operations
Growing Maintenance Services to Benefit Leasing Operations and Enhance the Flexibility of the Manufacturing Platform Trinity plans to grow its Maintenance Services business in key geographic areas with high railcar traffic to support the lease fleet’s growing need for more maintenance capacity Leasi
Slide 30: Financial Discussion & Strategic Objectives
Financial Discussion & Strategic Objectives 30
Slide 31: Trinity’s Business Segments
Trinity’s Business Segments Trinity Industries, Inc. (LTM June 2019 Financials) Total Revenues: $2.7B Operating Profit: $364M Income from Continuing Operations: $125M EBITDA*: $642M Railcar Leasing and Intersegment Management Services Rail Products Group All Other Group Eliminations Revenue: $932M $
Slide 32: Improving Company Outlook for FY 2019
Improving Company Outlook for FY 2019 (as of 7/25/19) 2018 Results 2019 Guidance YoY Δ Expected Total EPS: $0.70 per diluted share ~ $1.15 ‐ $1.35 ~ +79% at midpoint Corporate expenses: $149mm ~ $105 ‐ $115mm ~ ‐26% at midpoint Interest Expense, net: $167mm ~ $220 ‐ $230mm ~ +35% at midpoint Tax rat
Slide 33: 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 Lease Fleet Owned Fleet NBV, PP&E + All Cash NBV, PP&E + All Cash
Slide 34: Financial and Operational Priorities for Improving Returns
Financial and Operational Priorities for Improving Returns Optimize the capital structure while growing the business through disciplined investment to drive growth and enhance returns for shareholders Target high‐return capital Invest in value‐creating investments that position business opportunitie
Slide 35: Strong Progress on Near Term Strategic Financial Priorities
Strong Progress on Near Term Strategic Financial Priorities Target Progress/Current State Scale lease fleet with $0.9 ‐ $1.1 Billion in Net Lease Lease fleet growth disciplined growth Fleet Investment (2019(P)(1)) Invest in the manufacturing footprint to Announced plans to greenfield ~ 50 % of Lease
Slide 36: Commitment to Environmental, Social, & Governance Practices
Commitment to Environmental, Social, & Governance Practices 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 green way to fuel the
Slide 37: Appendix
< TRINITY INDUSTRIES Appendix 37
Slide 38: Lease Accounting Financial Overview: Income Statement to Balance Sheet Transaction Flow
Lease Accounting Financial Overview: Income Statement to Balance Sheet Transaction Flow 1 In 2018, $990mm 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 2018 Income Statement
Slide 39: Rail Products Group Quarterly Revenue and Operating Profit
Rail Products Group Quarterly Revenue and Operating Profit As Previously Reported vs. Recast Post‐Spin (Unaudited) Rail Products Group Q1‐2017 Q2‐2017 Q3‐2017 Q4‐2017 Q1‐2018 Q2‐2018 Q3‐2018 Q4‐2018 ‐ Recast post‐spin Revenue $ 469.0 $ 455.8 $ 481.2 $ 638.0 $ 588.1 $ 566.2 $ 497.6 $ 694.8 Operating
Slide 40: EBITDA Reconciliation
EBITDA Reconciliation Last 12 Months ‐ June 30, 2019 Income from Continuing Operations $ 125.3 Interest Expense 198.9 Provision for income taxes 47.4 Depreciation and Amortization Expense 270.3 EBITDA $ 641.9 EBITDA is defined as net income from continuing operations plus interest expense, income ta
Slide 41: Free Cash Flow Reconciliation
Free Cash Flow Reconciliation Free Cash Flow Calculation 2016 2017 2018 Net Cash Provided by Operating Activities, Continuing Operations837.5$ $ 610.1 $ 274.2 Add: Proceeds from railcar lease fleet sales owned more than one year at the time of sale 37.7 360.7 230.5 Net Cash Provided by Operating Act
Slide 42: Economic Profit Reconciliation
Economic Profit Reconciliation Economic Profit ‐ Leasing 2014 2015 2016 2017 2018 Profit from Operations$ 287.9 $ 331.1 $ 312.5 $ 341.3 $ 291.8 (Less): Interest Expense (153.3) (138.8) (125.2) (125.8) (142.3) Profit Before Tax (from Operations)$ 134.6 $ 192.3 $ 187.3 $ 215.5 $ 149.5 (Add): Depreciat
Slide 43: Pre-Tax ROE Reconciliation
Pre‐Tax ROE Reconciliation FY 2017 FY 2018 LTM 2019 Numerator: Income from continuing operations before income taxes $ 195.4 $ 151.6 $ 172.7 Net income attributable to non‐controlling interest (11.1) (3.8) (6.7) Adjusted Profit Before Tax $ 184.3 $ 147.8 $ 166.0 Denominator: Stockholders' Equity $ 4
Slide 44: Lease Operations Cash on Cash Return Reconciliation
Lease Operations Cash on Cash Return Reconciliation 2012 2013 2014 2015 2016 2017 2018 LTM 2019 Revenue from Leasing Operations $ 528.5 $ 586.9 $ 632.0 $ 699.9 $ 700.9 $ 743.6 $ 728.9 $ 746.6 Profit from Operations 242.6 267.3 287.9 331.1 312.5 341.3 291.8 299.7 OP Margin 45.9% 45.5% 45.6% 47.3% 44.
Slide 45: Footnotes Slide – Trinity Industries, Inc. Overview
Footnotes Slide 4 –Trinity Industries, Inc. Overview (1) Shares outstanding as of July 18, 2019 –presented on the face of the second quarter Form 10‐Q (2) Intersegment Revenues are eliminated (3) FY 2017 EPS excludes a $3.06 non‐cash benefit related to the effects of the Tax Cuts and Jobs Act (4) FY
Slide 46: Footnotes (continued)
Footnotes (continued) Slide 19 –Trinity’s Integrated Rail Platform Delivers to the Needs of Each Customer Channel Umler ® North American fleet ownership data Slide 21‐ Solid Financial Performance with Multiple Sources of Revenue (1) Leasing and Management Operating Profit Margin calculated using onl
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