Trinity Industries, Inc. · NYSE:TRN
Trinity Industries — Investor Day (November 2020)
87 slides from Trinity Industries's investor day presentation, Nov 19, 2020
Slide 1: Trinity Industries Investor Day Presentation
Exhibit 99.1 TRINITY INDUSTRIES, INC. InvestorInvestor Day Day Presentation Presentation November 19, 2020 November 19, 2020 DELIVERING GOODS for THE GOOD of ALL
Slide 2: Presentation Speakers and Management Strengths
Presentation Speakers Management strengths Jean Savage – CEO & President and strategic focus • Joined Trinity in 2020 Proven management team with extensive industry experience Eric Marchetto – EVP & CFO • Joined Trinity in 1995 Experienced operators in cyclical markets Brian Madison – EVP, Services
Slide 3: Investor Day Agenda
Investor Day Agenda 9:00 AM ET Strategy and Value Proposition — Jean Savage, CEO and President 9:30 AM ET Lease Portfolio Strategy — Brian Madison, EVP, Services Operations 9:45 AM ET Commercial Market Strategy — Gregg Mitchell, EVP, Chief Commercial Officer 10:00 AM ET BREAK - - - - - - - - - - - -
Slide 4: Forward Looking Statements and Other References
Forward Looking Statements and Other References 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, expectat
Slide 5: Strategy and Value Proposition
STRATEGY AND VALUE PROPOSITION InvestorJean Savage Day Presentation NovemberCEO and 19, President 2020 DELIVERING GOODS for THE GOOD of ALL
Slide 6: Key Takeaways for Enhancing Shareholder Value
Key Takeaways for Enhancing Shareholder Value Strong Cash Flow Generation through the Rail Cycle Optimize the Returns of the Platform Deliver Premier Financial Performance Prudently Deploy Capital to Drive Value Creation DELIVERING GOODS for THE GOOD of ALL /// 6
Slide 7: Trinity's Value Proposition
Trinity’s Value Proposition Attractive railcar investments with long-tailed asset utility Strategic synergies generated by rail platform with industry-leading positions Significant and compounding cash flows result from platform synergies Capital allocation focused on shareholder returns and discipl
Slide 8: A Legacy of Growth and a Focus on Transformation
A Legacy of Growth and a Focus on Transformation THEN NOW • Industrial Manufacturer • Railcar Equipment & Services Provider • Scaling Businesses • Emphasis on Optimization • Premium on Manufacturing • Scaling Platform Offerings Flexibility • Focus on Cash Flow and • Earnings Growth Returns DELIVERIN
Slide 9: Experienced Team Guides a Resilient Platform
Experienced Team Guides a Resilient Platform . Recent cycle challenged by: . Influx of capital into rail industry . Cyclically Experienced Management Team . Collapse of oil prices . Resilient Cash Flow from Platform of Businesses . Industrial decline . Transformation of Operating Model Underway . Gl
Slide 10: Trinity's Platform is Built to Deliver Shareholder Value
Trinity’s Platform is Built to Deliver Shareholder Value LTM Sales LTM Cash Flow, Continuing Ops $2.4B $687M LTM LTM OP Margin, Shareholder Adjusted* Returns 13.6% $275M * See appendix for reconciliation of non-GAAP measures DELIVERING GOODS for THE GOOD of ALL /// 10
Slide 11: Optimization Efforts Lay Foundation for Further Success
Optimization Efforts Lay Foundation for Further Success Major initiatives since year-end 2018 delivered significant improvement: Operating Cost Structure, Cost of Capital, and Capital Allocation Streamlined Commercial Capacity Reductions Organization Realignment 47% Transitioned from $110M Sales Geo
Slide 12: 3-Year Business & Financial Outlook FY 2021-2023
3 Year Business & Financial Outlook FY 2021 - 2023 Industry Deliveries ~ 120,000 railcars (over 3 years) Lease Portfolio Net $500M - $600M (over 3 years) Investment* Lease Fleet Utilization 95%+ Manufacturing OPM Mid to high single digits Business Drivers Business Pre-tax ROE Mid-teens Total CF from
Slide 13: A New Operating Model and Company Purpose
A New Operating Model and Company Purpose PURPOSE STRATEGY BUSINESS VALUES DELIVERING GOODS for THE GOOD of ALL /// 13
Slide 14: Strategic Initiatives to Achieve Mid-Teen Pre-Tax ROE
Strategic Initiatives to Achieve Mid-Teen Pre-Tax ROE Lower Cost of Capital | Reduce Cyclicality | Improve Rail Supply Chain Optimization Pre-tax ROE Improvement Mid- Balance Sheet Optimization Teen • Increase LTV ratio on wholly-owned leased railcar assets Growth • Opportunistically refinance exist
Slide 15: Strategic Initiative: Recapitalize Balance Sheet
Strategic Initiative: Recapitalize Balance Sheet to Reflect Business Model Q4-18 Current Target Loan to 60- Value 47% 58% Ratio 65% (wholly-owned Lease Fleet) Pre-tax 7.6% 5.2% < 4.5 - 5%* WACC *Noted WACC is an estimate based on current inputs and targeted future capital structure DELIVERING GOODS
Slide 16: Strategic Initiative: Execute Portfolio Optimization
Strategic Initiative: Execute Portfolio Optimization to Improve Lease Fleet IRR “Hold and Earn” • Increase hurdle rates for incremental investment in portfolio • Leverage rail platform to increase service-based revenue and profitability of assets Increase “Transact and Earn” Portfolio IRR by • Trans
Slide 17: RIV Partnerships Extend Our Commercial Reach
RIV Partnerships Extend Our Commercial Reach Source Capitalize/Manage Service Maintenance Hold and Owned Earn (Yield > WACC) Originate & Incremental Management & Service Acquire Income Administration Transact and Managed Analytics Earn (lower-hurdled capital) DELIVERING GOODS for THE GOOD of ALL ///
Slide 18: Strategic Initiative: Improve Manufacturing Margin
Strategic Initiative: Improve Manufacturing Margin by Lowering Breakeven Point Mid-Teen Lower Investment + 3 to 10-12K 5.5 pts • Concentrate manufacturing footprint • Monetize underutilized asset base Reduce Cycle Amplitude • Shift low-value fabrication into supply 2.8% chain • Minimize cycle-relate
Slide 19: Strategic Initiative: Grow New Products and Services
Strategic Initiative: Grow New Products and Services Offerings to Extend Platform New Product Development: • Differentiated value propositions • Focus on higher margin offerings Grow Share of Aftermarket Parts: PRODUCTS • Increased distribution partnerships • R&D / Fabrication • Management services
Slide 20: Execution Roadmap for Improved Returns Performance
Execution Roadmap for Improved Returns Performance Lower Cost of Capital | Reduce Cyclicality | Improve Rail Supply Chain Balance sheet and lease fleet optimization Monetize excess facilities / low-yielding equipment Reset SE&A baseline Shift supplier network Rationalize footprint Reallocate footpri
Slide 21: Enterprise Financial KPIs for Long-Term Performance
Enterprise Financial KPI’s for Long-Term Performance Operating and Free Mid-teen Cash Flow Pre-tax Return Growth on Equity Double- digit Book Value per Share Dividend Growth Growth DELIVERING GOODS for THE GOOD of ALL /// 21
Slide 22: Lease Portfolio Strategy
LEASE PORTFOLIO STRATEGY InvestorBrian MadisonDay Presentation NovemberEVP, Services 19, 2020 Operations DELIVERING GOODS for THE GOOD of ALL
Slide 23: Railcars Are Attractive Long-term Investments
Railcars Are Attractive Long-term Investments Stable and Hard Asset Value Tax-advantaged Predictable Cash with Inflation Investment Flows Benefits • Long-term leases • Accelerated depreciation for • 35-50 year useful life tax purposes • High renewal success rates • Positive yield relationship to • 1
Slide 24: GAAP Returns Accelerate as Lease Portfolio Matures
GAAP Returns Accelerate as Lease Portfolio Matures Illustrative Example of Book Value and Cash Flows* Attractive investment attributes: • Book Values depreciate over 35+ years • Lease revenues generally rise over the life of the railcar due to: • Inflation • Low technological obsolescence • Healthy
Slide 25: Rail Investment Profile vs. Other Asset Classes
Rail Investment Profile vs. Other Asset Classes Leased railcar investments generate attractive risk-adjusted returns relative to other asset classes* Railcar Attributes Aircraft* Real Estate* Cost of Production / Investment Low / Highly diverse High / highly concentrated High / varied by type Concen
Slide 26: Capitalizing on Structural Change in the Rail Market
Capitalizing on Structural Change in the Rail Market Railcar Ownership is Shifting from Railroads to Railcar Lessor Ownership Profile Presents Leasing Companies Consolidation Opportunity 100% TRN 90% 14% 14% 80% 70% 60% 14% 13% 50% 40% 6% 30% 13% 48% 53% 43% 20% 35% 10% 26% 0% 1990s 2000s 2010s 2019
Slide 27: Stable Financial Performance Through the Cycle
Stable Financial Performance Through the Cycle Leasing Operations Revenue and Operating Profit Margin(1) Leading railcar lessor $800 50% • Owned fleet of 105,925 railcars $750 40% $700 • Total Owned and Managed fleet of 132,580 30% railcars $650 20% $600 Growing portfolio and future cash flow $550 1
Slide 28: Proven Asset Management Through Railcar Cycle
Proven Asset Management Through Railcar Cycle Healthy Customer Renewals Lead to Strong Asset Utilization Average Performance since 2010: 100% 90% 80% 98% 74% 70% Utilization Renewal Success 60% 50% 40% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 LTM 3.4 yrs 17% Portfolio Utilization Renewal Su
Slide 29: Diversified Portfolio of Railcar Equipment
Diversified Portfolio of Railcar Equipment ~ 900 Different Commodities ~ 270 Different Railcar Designs Construction & Consumer Refined Products & Total Total Car Type Agriculture Energy Metals Products Chemicals (Units) (NBV) Open Aggregates, Steel and Metals Coal Hopper/Gondolas 11% 8% Small Covere
Slide 30: Servicing High-Quality Industrial Shippers
Servicing High-Quality Industrial Shippers Strong Customer Credit Profiles (by NBV) 700+ 75%+ 14% Customers Full Service Lease 51% 35% Largest customer Top 20 customers represents < 5% of account for 38% of total lease revenue lease revenue Investment Grade Not Rated Non-Investment Grade Serving Ind
Slide 31: Positioned for Further Success in the Marketplace
Positioned for Further Success in the Marketplace Trinity’s Leasing Company has a bright future and is leading the change for network efficiency to enhance the modal advantage of the railcar industry Disciplined Digital Data Scale & Operating Model Platforms Analytics Consolidation • Moderating leas
Slide 32: Moderating the Pace of Growth for the Lease Portfolio
Moderating the Pace of Growth for the Lease Portfolio Trinity’s Lease portfolio has amassed scale, and incremental investment is expected to be accretive to the Company’s target return rate 160,000 CAGR < 4% 140,000 120,000 100,000 80,000 60,000 40,000 20,000 - 2002 2003 2004 2005 2006 2007 2008 200
Slide 33: Commercial Market Strategy
COMMERCIAL MARKET STRATEGY InvestorGregg DayMitchell Presentation NovemberEVP and 19, Chief 2020 Commercial Officer DELIVERING GOODS for THE GOOD of ALL
Slide 34: Integral Part of the North American Supply Chain
Integral Part of the North American Supply Chain U.S. Freight Ton Miles by Mode of Transportation(2) • 1.7 million railcars in North Pipe, 17% America(1) Air, <1% Water, 9% Truck, 47% • 1.5 trillion ton miles 5.4 trillion total ton miles moved by rail in 2019(2) • 3,500+ commodities Rail, 27% moved
Slide 35: Delivering Essential Goods to the Global Marketplace
Delivering Essential Goods to the Global Marketplace Refined Construction Consumer Energy Products & Agriculture & Metals Products Chemicals • Coal • Natural Gas Liquids • Grains • Construction • Autos • Biofuels • Refined Products • Grain Mill Products Materials • Paper • Frac Sand • Plastics • Dis
Slide 36: Railcar Market: Recent Trends and Industry Outlook
Railcar Market: Recent Trends and Industry Outlook Railcar demand is recovering from pandemic lows and remains tepid given economic uncertainty Loadings / Rate Last 4QTR 2021 Projected* Q3-20 Y/Y 2021 Projected* YoY Change Railcar Loadings Railcar Loadings Lease Rates Y/Y Rate Trend Agriculture Cons
Slide 37: Trinity's Platform Services All Customer Channels
Trinity’s Platform Services All Customer Channels Broadest Market View: Trinity’s Lease Fleet Comprises Majority of Commercial Transactions • 700+ customers • Industrial shippers, 3PLs, Railroads 78% 67% 62% • 900+ commodities 56% 57% • 270 railcar designs • Avg 32,000+ railcars transacted per year
Slide 38: A Differentiated Value Proposition for Our Customers
A Differentiated Value Proposition for Our Customers Leasing Manufacturing Maintenance Services • Lease Portfolio • Rail Product • Maintenance • Logistics Services Portfolio • Fleet Management • Modifications • Data Analytics • Aftermarket Parts • Equipment Finance • Repair • Connected Railcar Solut
Slide 39: Enhancing Rail Modal Advantage Through Supply Chain Efficiency
Enhancing Rail Modal Advantage Through Supply Chain Efficiency Modal share from 2000 to 2019: Truck vs. Rail* Shippers demand more information: • Supply chain focus has evolved with technology and lean inventory 2000 Share 45.5% 30.7% management • Rail industry has been slow to innovate 2000 Ton Mil
Slide 40: Investing in High Yield Products and Services
Investing in High Yield Products and Services Engineering Outcomes Enhance existing • Maintain Products products, design competitive products/services Customer new products for Trinity, or develop portfolio Solutions new-to-the-world Ideas products • Differentiated value Innovation propositions -Ori
Slide 41: Financial Strategy and Outlook
FINANCIAL STRATEGY AND OUTLOOK InvestorEric Marchetto Day Presentation NovemberEVP and 19, CFO 2020 DELIVERING GOODS for THE GOOD of ALL
Slide 42: Value Proposition Review
Value Proposition Review Attractive railcar investments with long-tailed asset utility Strategic synergies generated by platform of railcar businesses Significant and compounding cash flows result from platform synergies Capital allocation focused on shareholder returns and prudent growth DELIVERING
Slide 43: Value Proposition Review – A Sustainable Capital Story
Value Proposition Review – A Sustainable Capital Story Reinvestment Attractive and Return of Yielding Capital Assets Compounding Strategic Cash Flows Synergies DELIVERING GOODS for THE GOOD of ALL /// 43
Slide 44: Attractive Yielding Assets with Long-tailed Utility
A Sustainable Capital Story: Attractive Yielding Assets with Long-tailed Utility Rail Assets Generate Steady Cash Flow through Cycle $500 Railcar Asset Cash Flow Profile: $450 $400 Stable generation from long-term leases • $350 and balanced renewal exposure $300 $250 • Rising future contribution fro
Slide 45: Trinity's Rail Platform Delivers Strategic Synergies
A Sustainable Capital Story: Trinity’s Rail Platform Delivers Strategic Synergies FINANCIAL Synergies • Cost-advantaged railcar equipment sourcing ~ $550M+ • Tax-advantaged lease fleet investment Investment advantage offsets taxable income and enhances returns • Lower-relative operational ~$700M+ co
Slide 46: Platform Synergies Create Strong Cash Flows
A Sustainable Capital Story: Platform Synergies Create Strong Cash Flows Steady State Cash Flow Free Cash Flow Measures the potential capital to be Measures excess cash from the platform deployed after investment to maintain after total investments, leverage, and enterprise cash flow maintaining the
Slide 47: Reinvestment & Capital Return Drive Shareholder Value
A Sustainable Capital Story: Reinvestment & Capital Return Drive Shareholder Value A growing stream of cash flow from Trinity’s platform creates shareholder value: - Reinvestment into the business when expected returns are above our hurdle rates - Return capital to shareholders through consistent di
Slide 48: Reinvestment & Capital Return Drive Shareholder Value
A Sustainable Capital Story: Reinvestment & Capital Return Drive Shareholder Value A growing stream of cash flow from Trinity’s platform creates shareholder value: - Reinvestment into the business when expected returns are above our hurdle rates - Return capital to shareholders through consistent di
Slide 49: Enterprise Financial KPIs for Long-Term Performance
Enterprise Financial KPI’s for Long-Term Performance Operating and Free Mid-teen Cash Flow Pre-tax Return Growth on Equity Double- digit Book Value per Share Dividend Growth Growth DELIVERING GOODS for THE GOOD of ALL /// 49
Slide 50: Platform Optimization is Critical to Improve Pre-tax ROE
Platform Optimization is Critical to Improve Pre-tax ROE ~ 2 to 3 pts ~ Mid-teen ~ 4 to 5 LT Pre-tax pts ROE Target ~ 4 to 5 pts 5.5% LTM Pre-tax ROE* Strategic Initiatives in Place to Deliver Results Financial Initiatives Balance Sheet Optimization + Return of Capital Optimization Efforts SE&A and
Slide 51: Capital Allocation Framework – Near Term Strategy
Capital Allocation Framework – Near Term Strategy Trinity’s line of sight on near-term cash flow generation and sources of capital over the next 3 years are expected to create significant shareholder value Cash Flow from Ops • Organic Growth Excess Cash -------------- • Acquisitions Balance Sheet •
Slide 52: Capital Allocation Framework – Long Term Strategy
Capital Allocation Framework – Long Term Strategy Strong cash generation and disciplined capital allocation positions Trinity for shareholder value creation through the railcar cycle Manage Leverage Reinvest Return Capital Minimum Maintenance Double-digit Liquidity CapEx Dividend Requirements Workin
Slide 53: 3-Year Business & Financial Outlook FY 2021-2023
3 Year Business & Financial Outlook FY 2021 - 2023 Industry Deliveries ~ 120,000 railcars (over 3 years) Lease Portfolio Net $500M - $600M (over 3 years) Investment* Lease Fleet Utilization 95%+ Manufacturing OPM Mid to high single digits Business Drivers Business Pre-tax ROE Mid-teens Total CF from
Slide 54: Key Takeaways for Enhancing Shareholder Value
Review Key Takeaways for Enhancing Shareholder Value • Substantial cash flow and balance sheet optimization of over $2B in Strong Cash Flow capital (representing a significant portion of Trinity’s current market cap) Generation to allocate over the next three years • Capitalize on attractive financi
Slide 55: Trinity 2020 Investor Day Q&A
Trinity 2020 Investor Day Q&A DELIVERING GOODS for THE GOOD of ALL /// 55
Slide 56: Management Biographies
Management Biographies Investor Day Presentation November 19, 2020 DELIVERING GOODS for THE GOOD of ALL
Slide 57: Jean Savage – CEO and President
Jean Savage – CEO and President Jean Savage was appointed Chief Executive Officer and President of Trinity Industries in February 2020. She has served as a member of Trinity’s Board of Directors since November 2018. Ms. Savage is also a member of the National Association of Manufacturers Board of Di
Slide 58: Eric Marchetto – EVP and Chief Financial Officer
Eric Marchetto – EVP and Chief Financial Officer Eric Marchetto was appointed EVP and Chief Financial Officer of Trinity Industries in April 2020. Since joining Trinity in 1995, Mr. Marchetto has held numerous leadership roles most recently serving as Group President of TrinityRail, where he had ove
Slide 59: Brian Madison – EVP, Services Operations
Brian Madison – EVP, Services Operations Brian Madison was named EVP, Services Operations for Trinity Industries in July 2020, after previously serving as President for Trinity Industries Leasing Company upon joining the Company in 2016. In his current role, Mr. Madison is responsible for the leasin
Slide 60: Gregg Mitchell, EVP and Chief Commercial Officer
Gregg Mitchell, EVP and Chief Commercial Officer Gregg Mitchell was named Chief Commercial Officer of TrinityRail in October 2019, and EVP and Chief Commercial Officer of Trinity Industries in July 2020. In this role, Mr. Mitchell brings a career of supply chain experience to tailor innovative solut
Slide 61: Jessica Greiner – VP, Investor Relations and Communications
Jessica Greiner – VP, Investor Relations and Communications Jessica Greiner was promoted to Vice President, Investor Relations and Communications for Trinity Industries in 2018. In her previous position as Executive Director, Corporate Strategic Planning, Ms. Greiner was significantly involved in th
Slide 62: Appendix
Appendix Investor Day Presentation November 19, 2020 DELIVERING GOODS for THE GOOD of ALL
Slide 63: Trinity's Business Segments – P&L Breakout
Trinity’s Business Segments – P&L Breakout Trinity $2.4B $330M $83M $607M Industries Adjusted Adjusted Adjusted Total Revenues Income from . Operating Profit* EBITDA* Inc Cont. Ops.* (LTM 9/30/2020) Railcar Leasing and Rail Products Group All Other Intersegment Eliminations Management Services Group
Slide 64: Historical Business Segment Performance Trends
Historical Business Segment Performance Trends Leading railcar leasing and services provider Leasing Operations Revenue and Operating Profit Margin(1) • 105,925 railcars ($7.3B of net PP&E) in owned fleet $800 50% • Future committed lease revenue of $2.0B $750 40% • Leased railcar backlog of 4,060 r
Slide 65: Strong Balance Sheet Positioned for Market Uncertainty
Strong Balance Sheet Positioned for Market Uncertainty and Opportunistic Deployment LIQUIDITY DEBT STRUCTURE CAPITAL LEVERS Cash & Equivalents Recourse Debt Unencumbered Railcars $121M $523M @ ~4%(1) $1.4B Revolver Availability Non-recourse Debt • Pledge to warehouse $279M $4.4B @ ~4%(1) • Additiona
Slide 66: Platform Synergies Enhance Lease Portfolio ROE
Platform Synergies Enhance Lease Portfolio ROE $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 Million) integrated platform (DTL) $2.6 Billion $(719 Million) (Deferred Profit) (Assets – $(349 M
Slide 67: Illustrative Single Unit Leased Railcar Example
Illustrative Single Unit Leased Railcar Example Platform Synergies Enhance the Return Profile (TRN Platform vs. Stand Alone) . The cost-advantage from direct TRN Stand-Alone equipment sourcing increases the pre- New Railcar @ Market Price $ 100,000 $ 100,000 tax ROE potential Railcar Manufacturing C
Slide 68: Case Study #1 – Energy Customer
Case Study #1 – Energy Customer Customer Need: • The customer maintains a fleet of both owned and leased railcars. They needed to modify their owned fleet for continued use and change the mix of their fleet to match their business needs. Products & Services Offered: • Maintenance Services • Investme
Slide 69: Case Study #2 – Railcar Investment Vehicle Platform
Case Study #2 – Railcar Investment Vehicle Platform Customer Need: • Institutional investors have ownership in the railcar asset class and look to partner with best in class providers who can manage the servicing and operations of a diverse portfolio Products & Services Offered: • Investment Service
Slide 70: Case Study #3 – New Product & Service Development
Case Study #3 – New Product & Service Development Customer (Industry) Need: • The industry was oversupplied with tri-level autoracks vs. bi-level autoracks as consumer preference changed from smaller, fuel-efficient automobiles to larger, cross-over and sports-utility vehicles. Products & Services O
Slide 71: Case Study #4 – Large Third Party Leasing Company
Case Study #4 – Large Third Party Leasing Company Customer Need: • The customer owns a large, young lease fleet, with a considerable need for retrofits, traditional maintenance and new railcars to supplement their portfolio growth. Products & Services Offered: • Maintenance Services • Aftermarket Pa
Slide 72: Key Demand Fundamentals: Railcar Loadings by Submarket
Key Demand Fundamentals: Railcar Loadings by Submarket YoY Railcar Loadings Move with GDP but Inflect on Specific Fundamental Drivers 20% 10% 0% -10% -20% -30% -40% -50% 2016 2017 2018 2019 2020 Agriculture Construction/Metals Consumer Products Downstream/Chemicals Energy See appendix for source inf
Slide 73: Key Demand Fundamentals: Railcar Storage by Car Type
Key Demand Fundamentals: Railcar Storage by Car Type Railcars in Storage Follow Railcar Loading Trends 600,000 35% 30% 500,000 25% 400,000 20% 300,000 15% 200,000 10% 100,000 5% - 0% Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19 Jan-20 Jul-20 Box Cars Covered Hoppers Flat Cars All Other Go
Slide 74: Key Demand Fundamentals: Attrition and Replacement
Key Demand Fundamentals: Attrition and Replacement Rail Equipment Fleets Vary in Age Based on Cycle Dynamics 600 500 400 300 200 100 0 0-10 11 - 20 21 - 30 31-40 41-50 (in ‘000s) Years Years Years Years Years Tankcar Covered Hoppers Flat Cars Open Hoppers/Gondolas Box Cars Specialty Freight See appe
Slide 75: Key Demand Fundamentals: Railroad PSR Initiatives
Key Demand Fundamentals: Railroad PSR Initiatives Opinion: PSR efficiencies will reduce overall Opinion: The rail industry has lost modal demand for railcar equipment share due to network inefficiencies and lack of supply chain transparency Research: Efficiency improvement in single Research: A 1% i
Slide 76: Reconciliation: Total Company Pre-tax ROE
Reconciliation: Total Company Pre-tax ROE FY 2019 LTM Q3-20 Numerator: ($ in millions) Income from continuing operations $ 109.0 $ 139.2 $ (77.1) Provision (benefit) for income taxes 42.6 61.5 (205.8) Income from continuing operations before income taxes 151.6 200.7 (282.9) Net (income) loss attribu
Slide 77: Reconciliation: Leasing Group Pre-Tax ROE
Reconciliation: Leasing Group Pre-Tax ROE 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 B
Slide 78: Reconciliation: Leasing Economic Profit
Reconciliation: Leasing Economic Profit 2016 2017 2018 2019 LTM Q3-20 (in millions) Operating Profit – Leasing Operations $ 312.5 $ 341.3 $ 291.8 $ 314.7 $ 327.9 (Less): Interest Expense (125.2) (125.8) (142.3) (197.2) (200.0) Profit Before Tax – Leasing Operations 187.3 215.5 149.5 117.5 127.9 (Add
Slide 79: Reconciliation: Steady State Cash Flow
Reconciliation: Steady State Cash Flow 2016 2017 2018 2019 LTM Q3-20 (in millions) Net cash provided by operating activities – continuing operations $ 837.5 $ 610.1 $ 274.2 $ 396.7 $ 687.2 (Add): Proceeds from railcar lease fleet sales owned more than one year at the time of sale 37.7 360.7 230.5 20
Slide 80: Reconciliation: Lease Investment and Required Equity CapEx
Reconciliation: Lease Investment and Required “Equity CapEx” Lease investment is typically leveraged at a 70-80% LTV, reducing required equity capital and increasing available cash flow. $1,200 $1,000 $800 $600 $400 $200 $0 -$200 2016 2017 2018 2019 LTM Leasing CapEx* Net, New Debt Funding Equity Ca
Slide 81: Reconciliation: Walking FCF Beyond Lease Investment
Reconciliation: Walking FCF Beyond Lease Investment Disciplined Balance Sheet Management Yields Strong Excess Cash Flows 2016 2017 2018 2019 LTM Q3-20 (in millions) Net cash provided by operating activities – continuing operations $ 837.5 $ 610.1 $ 274.2 $ 396.7 $ 687.2 (Add): Proceeds from railcar
Slide 82: Reconciliation: Adjusted Operating Results
Reconciliation: Adjusted Operating Results Nine Months Ended September 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 A
Slide 83: Reconciliation: Adjusted Operating Results (continued)
Reconciliation: Adjusted Operating Results (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 conti
Slide 84: Reconciliation: EBITDA and Adjusted EBITDA
Reconciliation: EBITDA and Adjusted EBITDA LTM Q3-20 (in millions) Net income (loss) $ (78.1) Less: income (loss) from discontinued operations, net of income taxes (1.0) Income (loss) from continuing operations $ (77.1) Add: Interest expense 222.9 Provision (benefit) for income taxes (205.8) Depreci
Slide 85: Presentation Footnotes
Presentation Footnotes SLIDE 11 – Optimization Efforts Lay Foundation for Further Success (1) The Company’s calculation of Weighted Average Cost of Capital (WACC) incorporates a risk free rate using an average of the 10yr and 30yr treasury rates, an equity risk premium compiled by NYU, and an averag
Slide 86: Presentation Footnotes (continued)
Presentation Footnotes (continued) SLIDE 34 – Integral Part of the North American Supply Chain (1) Umler® (October 1, 2020 report), The Umler® system is an electronic resource that contains critical data for North American transportation equipment. Originally created in 1968, Umler ® maintains data
Slide 87: Presentation Footnotes (continued)
Presentation Footnotes (continued) Appendix SLIDE 68 – Case Study #1 – Energy Customer Net Present Value (“NPV”) is used in the calculation of the transaction contribution to the Company’s profitability as the commercial agreement is ongoing and is expected to continue for several more years. Append