Trinity Industries, Inc. · NYSE:TRN
Trinity Industries — Investor Presentation (November 2019)
45 slides from Trinity Industries's investor presentation, Nov 5, 2019
Slide 1: Investor Presentation November 2019
INVESTOR PRESENTATION November 2019 – based on third quarter, September 30, 2019 financial data Investor Contact: TrinityInvestorRelations@trin.net Website: www.trin.net
Slide 2: Investor Presentation Agenda
Investor Presentation –November 2019 I. Trinity Industries, Inc. Overview and Key Investment Considerations 4 II. Railcar Market Overview 10 III. Trinity’s Integrated Rail Platform 15 – Railcar Leasing and Management Services Group 19 – Rail Products Group 24 IV. Financial Discussion and Strategic O
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 External Revenue by Business Segment(1) businesses that provide railcar products and services in North America marketed under the trade name TrinityRail® – Top 5 Leasing company in North America ~ 102,000 railcars under
Slide 5: Key Investment Considerations: a Value, Growth, and Capital Return Story
Key Investment Considerations: a Value, Growth, and Capital Return Story Railcars are a sustainable mode of transportation and an integral component of the North American supply chain that offer attractive investment appeal Trinity’s integrated platform comprises leading market positions with opport
Slide 6: Trinity's Integrated Rail Platform: A Collaboration of Businesses
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 enabling innovative solutions to meet customers’ unique needs across a wide landscape of end markets TrinityRail’s int
Slide 7: Trinity's Rail Platform is Built to Deliver Shareholder Value
Trinity’s Rail Platform is Built to Deliver Shareholder Value . The platform creates significant synergies and Strong Free Cash Flow* Generation before Leasing CapEx strategic advantages: Pre‐Spin Current Year Future Goal Cost‐advantaged railcar equipment sourcing Tax‐advantaged lease fleet inve
Slide 8: 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 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 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 10: Railcar Market Overview
<p TRINITY INDUSTRIES Railcar Market Overview 10
Slide 11: 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 12: 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 13: 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 14: 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 15: Trinity's Integrated Rail Platform
Trinity’s Integrated Rail Platform 15
Slide 16: 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 16
Slide 17: 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 18: 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) % Fleet Bringing investment 17% 31% 52% scale to our market N.A. approach Ownership Products Products Products Used Products Leasing Leasing Leasing Leasing Customer
Slide 19: Railcar Leasing and Management Services Group
Trinity’s Integrated Rail Platform: Railcar Leasing and Management Services Group 19
Slide 20: A Young Lease Portfolio with Solid Cash-on-Cash Returns
A Young Lease Portfolio with Solid Cash‐on‐Cash Returns . Trinity’s leasing business generates stable and Growing Economic Profit* from Leasing Group predictable cash flows from long‐term leases and captures upside demand from portfolio sales Future committed lease revenue totaling $2.5 billion as
Slide 21: 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 portfolio of 102,090 railcars ($7.4B of net PP&E) Leased railcar backlog of 6,160 railcars ($817
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 o
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: Rail Products Group
Trinity’s Integrated Rail Platform: Rail Products Group 24
Slide 25: Elevating our Financial Performance through the Railcar Cycle
Elevating our Financial Performance through the Railcar Cycle . Leading manufacturer of railcars in North America with Flexible Manufacturing Footprint Adjusts to Meet Market Demand(1) the broadest product offering and a focus on advanced engineering designs . Flexible manufacturing footprint with e
Slide 26: 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 27: 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 28: 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 29: Financial Discussion & Strategic Objectives
Financial Discussion & Strategic Objectives 29
Slide 30: Trinity's Business Segments
Trinity’s Business Segments Trinity Industries, Inc. (LTM September 2019 Financials) Total Revenues: $2.9B Operating Profit: $409M Income from Continuing Operations: $145M EBITDA*: $694M Railcar Leasing and Intersegment Management Services Rail Products Group All Other Group Eliminations Revenue: $1
Slide 31: Improving Company Outlook for FY 2019
Improving Company Outlook for FY 2019 (as of 10/24/19) 2018 Results 2019 Guidance YoY Δ Expected Total EPS: $0.70 per diluted share ~ $1.17 ‐ $1.27 ~ +74% at midpoint Corporate expenses: $149mm ~ $105 ‐ $110mm ~ ‐28% at midpoint Interest Expense, net: $167mm ~ $210 ‐ $220mm ~ +29% at midpoint Tax ra
Slide 32: 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 + All Cash $5
Slide 33: 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 34: 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 Billion in Net Lease Fleet Lease fleet growth disciplined growth Investment (2019(P)(1)) Invest in the manufacturing footprint to enhance delivery capabilities and ~ 50 % of Lease fl
Slide 35: 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 36: Appendix
<p TRINITY INDUSTRIES Appendix 36
Slide 37: Lease Accounting Financial Overview: Income Statement to Balance Sheet Transaction Flow
Lease Accounting Financial Overview: Income Statement to Balance Sheet Transaction Flow (in millions) 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 In
Slide 38: Rail Products Group Quarterly Revenue and Operating Profit
Rail Products Group Quarterly Revenue and Operating Profit As Previously Reported vs. Recast Post‐Spin (Unaudited –in millions except percentages) 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 $
Slide 39: EBITDA Reconciliation
EBITDA Reconciliation Last 12 Months ‐ September 30, 2019 (in millions) Net income $ 142.3 Less: income (loss) from discontinued operations, (2.6) Income from continuing operations $ 144.9 Add: Interest Expense 211.9 Provision for Income Taxes 58.9 Depreciation and Amortization Expense 278.1 EBITDA
Slide 40: Free Cash Flow Reconciliation
Free Cash Flow Reconciliation LTM (in millions) 2016 2017 2018 2019 Net cash provided by operating activities ‐ continuing operations$ 837.5 $ 610.1 $ 274.2 $ 258.7 (Add): Proceeds from railcar lease fleet sales owned more than one year at the time of sale 37.7 360.7 230.5 282.1 Adjusted Net Cash Pr
Slide 41: Economic Profit Reconciliation
Economic Profit Reconciliation (in millions) Economic Profit ‐ Leasing Operations 2014 2015 2016 2017 2018 Operating Profit ‐ Leasing Operations$ 287.9 $ 331.1 $ 312.5 $ 341.3 $ 291.8 (Less): Interest Expense (153.3) (138.8) (125.2) (125.8) (142.3) (Add): Depreciation 130.0 142.3 156.2 172.3 196.6 E
Slide 42: Pre-Tax ROE Reconciliation
Pre‐Tax ROE Reconciliation (in millions except percentages) FY 2017 FY 2018 LTM 2019 Numerator: Income from continuing operations before income taxes $ 195.4 $ 151.6 $ 203.8 Net (income)/loss attributable to non‐controlling interest (11.1) (3.8) 1.0 Adjusted Profit Before Tax $ 184.3 $ 147.8 $ 204.8
Slide 43: Leasing Group Cash-on-Cash Return Reconciliation
Leasing Group Cash‐on‐Cash Return Reconciliation (in millions except percentages) 2012 2013 2014 2015 2016 2017 2018 LTM 2019 Economic Profit ‐ Leasing Operations $ 188.8 $ 239.0 $ 264.6 $ 334.6 $ 343.5 $ 387.8 $ 346.1 $ 349.6 Operating Profit ‐ Railcar Sales 29.5 228.4 275.1 47.6 103.2 71.9 105.1 T
Slide 44: Footnotes
Footnotes Slide 4 –Trinity Industries, Inc. Overview (1) Intersegment Revenues are eliminated (2) FY 2017 EPS excludes a $3.06 non‐cash benefit related to the effects of the Tax Cuts and Jobs Act (3) FY 2019 projections (“2019(P)”) represent management’s estimates as of 10/24/19. Any forward‐looking
Slide 45: Footnotes (continued)
Footnotes (continued) Slide 18 –Trinity’s Integrated Rail Platform Delivers to the Needs of Each Customer Channel (1) Umler ® North American fleet ownership data Slide 20‐ A Young Lease Portfolio with Solid Cash‐on‐Cash Returns (1) Excludes $160 million of proceeds associated with a sales‐type lease
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