Trinity Industries, Inc. · NYSE:TRN
Trinity Industries — Investor Presentation (March 2019)
47 slides from Trinity Industries's investor presentation, Mar 13, 2019
Slide 1: Investor Presentation – March 2019
Investor Contact: TrinityInvestorRelations@trin.net Website: www.trin.net
Slide 2: Investor Presentation – March 2019 agenda
Investor Presentation – March 2019 I. Trinity Industries Overview and Key Investment Considerations 4 II. Overview of Railcar Market Fundamentals 9 III. Commercial Introduction of Trinity’s Integrated Rail Platform 13 – Railcar Leasing and Management Services Group 18 – Rail Products Group 24 IV. Fi
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: Trinity’s Business Segments
Trinity’s Business Segments Trinity Industries, Inc. (FY 2018 Financials) Total Revenues: $2.5B Operating Profit: $315M Income from Continuing Operations: $109M EBITDA*: $583M Railcar Leasing and Intersegment Management Services Rail Products Group All Other Group Eliminations Revenue: $843M $2,347M
Slide 6: A Rich History of Evolutionary and Transformative Growth
A Rich History of Evolutionary and Transformative Growth The recently completed spin-off of the infrastructure-related businesses enables Trinity to concentrate its focus on the rail transportation industry, where Trinity has established market leading positions over the past 60 years, and align res
Slide 7: Strategic Objectives and Key Priorities for the Future
Strategic Objectives and Key Priorities for the Future Financial Levers to Operational Levers to Generate Improvement in Drive Greater Returns and Returns in the Near Term Growth over the Longer Term • Reduce Trinity’s cost of capital through a more • Scale the lease fleet for transformative growth
Slide 8: Key Investment Considerations
Key Investment Considerations Railcars are an attractive long-term investment in an undervalued asset class with positive fundamental demand drivers Highly compelling integrated rail platform unique to Trinity with leading market positions and distinct opportunities for transformative growth Heighte
Slide 9: Railcar Market Overview
Railcar Market Overview a => TRINITY INDUSTRIES 17
Slide 10: Railcars are an Attractive Long-term Investment in an Undervalued Asset Class
Railcars are an Attractive Long-term Investment in an Undervalued Asset Class Tax-advantaged Direct correlation to 50 year hard asset with 50 year hard asset asset class GDP fundamentals inflation protection with inflation protection • Rail transportation and its • Railcars have economic useful live
Slide 11: 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 12: The Rail Ecosphere Spans Five Commercial End Markets
The Rail Ecosphere 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 • Pet
Slide 13: Trinity’s Integrated Rail Platform
Trinity’s Integrated Rail Platform 13
Slide 14: 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 14
Slide 15: Trinity’s Integrated Rail Platform – a Collaboration of Businesses
Trinity’s Integrated Rail Platform – a Collaboration of Businesses .TrinityRail’s integrated platform of businesses collaborates to create customer-centric solutions designed to optimize the ownership and usage of railcar equipment throughout the railcar’s life cycle . The platform includes a broad
Slide 16: Trinity’s Integrated Rail Platform Reaches the Entire Rail Market
Trinity’s Integrated Rail Platform Reaches the Entire Rail Market and Delivers to the Needs of Each Customer Channel Shippers Railroads Leasing Rail Investors (RIVs) % 1 1 Bringing investment 17% 31% 52% scale to our market approach N.A. Fleet Fleet N.A. Ownership Products Products Products Used Use
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 • Custom design configurations covering all potential end market opportunities • Requested specifications by our customers Covered Tan
Slide 18: Railcar Leasing and Management Services Group
Trinity’s Integrated Rail Platform: Railcar Leasing and Management Services Group 18
Slide 19: 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 with annual recurring revenues and strong organic growth history . Trinity’s owned and partially-o
Slide 20: Strong Commitment to Scaling the Lease Fleet
Strong Commitment to Scaling the Lease Fleet . Transformative growth of the lease fleet has been a Lease Fleet Growth Has Accelerated since the Early 2000’s(1) strategic priority for the Company . The benefits of direct sourcing railcar equipment through the integrated rail platform has allowed Trin
Slide 21: Strong Cash Flow and Economic Profit from Lease Operations
Strong Cash Flow and Economic Profit from Lease Operations and Healthy Cash on Cash Returns from Lease Portfolio . A primary benefit of Trinity’s integrated rail platform is that Economic Profit from Lease Operations is Accelerating (in $millions) Trinity can record its investment in leased railcars
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, and customer concentration . The commercial team’s track record for renewal success of scheduled expi
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: Trinity’s Integrated Rail Platform: 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 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 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: Strong Legacy of Collaborative Culture and Commitment to Excellence
Strong Legacy of Collaborative Culture and Commitment to Excellence The hardworking men and women of Trinity embody the spirit of craftsmanship in their work. They take great pride in what they do, and it translates into strong collaboration and operational flexibility resulting in scale, manufactur
Slide 30: Financial Discussion & Strategic Objectives
Financial Discussion & Strategic Objectives 30
Slide 31: Trinity’s Business Segments
Trinity’s Business Segments Trinity Industries, Inc. (FY 2018 Financials) Total Revenues: $2.5B Operating Profit: $315M Income from Continuing Operations: $109M EBITDA*: $583M Railcar Leasing and Intersegment Management Services Rail Products Group All Other Group Eliminations Revenue: $843M $2,347M
Slide 32: Improving Company Outlook for FY 2019
Improving Company Outlook for FY 2019 (as of 2/21/19) 2018 Results 2019 Guidance YoY Δ Expected Total EPS: $0.70 per diluted share ~ $1.15 - $1.35 ~ +80% at midpoint Corporate expenses: $149mm ~ $115 - $125mm ~ -20% at midpoint Interest Expense, net: $167mm ~ $225mm ~ +35% Tax rate: 28% ~ 27% ~ -100
Slide 33: Long Term Vision Aligned with Shareholder Value
Long Term Vision Aligned with Shareholder Value Our vision for Trinity is to be a premier provider of railcar products and services in North America while generating high-quality earnings and returns for shareholders. While our portfolio of businesses has evolved, our culture and commitment to excel
Slide 34: Focused Approach on Improving Returns
Focused Approach on Improving Returns Optimize the capital structure while growing the business through prudent investment to drive growth and enhance returns for shareholders Target high-return capital Invest in value-creating investments that position business opportunities the manufacturing footp
Slide 35: Near Term Strategic Financial Priorities from Investor Day
Near Term Strategic Financial Priorities from Investor Day Target Progress/Current State Transformative $1.2 - $1.4 Billion in Net Lease Continue growing the lease fleet Growth Fleet Investment (2019) Invest in the manufacturing footprint to enhance delivery capabilities and ~ 50 % of Lease fleet ~
Slide 36: 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 37: TrinityRail Integrated Rail Platform Delivers Value to Stakeholders
TrinityRail Integrated Rail Platform Delivers Value to Stakeholders . The strength and capabilities of the integrated rail Significant 2018 Free Cash Flow Generation Creates Value platform provide TrinityRail a compelling competitive advantage and a significant opportunity for value creation . The T
Slide 38: Appendix
> TRINITY INDUSTRIES NW Appendix 38
Slide 39: Lease Accounting Financial Overview
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 40: Rail Products Group Quarterly Revenue and Operating Profit
Rail Products Group Quarterly Revenue and Operating Profit* As Previously Reported vs. Recast Post-Spin 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 Profi
Slide 41: EBITDA Reconciliation
EBITDA Reconciliation Reconciliation of EBITDA Year Ended 2018 Year Ended 12/31/2018 Income from Continuing Operations $ 109.0 Interest Expense 179.3 Provision for income taxes 42.6 Depreciation and Amortization Expense 251.9 EBITDA (1) $ 582.8 (1) EBITDA is defined as net income from continuing ope
Slide 42: Adjusted OP Reconciliation
Adjusted OP Reconciliation Year Ended 12/31/2018 Rail Products Leasing Group All Other Corporate Eliminations Consolidated Group Operating Profit $ 351.1 $ 172.1 $ 35.7 $ (149.0) $ (94.8) $ 315.1 Depreciation Expense 196.6 30.3 15.1 9.9 - 251.9 Adjusted Operating Profit (1) $ 547.7 $ 202.4 $ 50.8 $
Slide 43: Leasing & Management PBT Reconciliation
Leasing & Management PBT Reconciliation (in millions except for PBT Margin) 2013 2014 2015 2016 2017 2018 From Lease Operations (Ex. Car Sales): Revenue $ 586.9 $ 632.0 $ 699.9 $ 700.9 $ 743.6 $ 728.9 Operating Profit $ 267.3 $ 287.9 $ 331.1 $ 312.5 $ 341.3 $ 291.8 Less: Interest Expense $ (157.3) $
Slide 44: Lease Operations Cash on Cash Return Reconciliation
Lease Operations Cash on Cash Return Reconciliation Cash on Cash Return Calculation 2012 2013 2014 2015 2016 2017 2018 Economic ("Cash") Profit (from Lease Operations) $ 188.8 $ 239.0 $ 264.6 $ 334.6 $ 343.5 $ 387.8 $ 346.1 Net Leasing PP&E $ 4,205.9 $ 4,649.7 $ 4,599.1 $ 5,064.9 $ 5,803.2 $ 5,962.7
Slide 45: Free Cash Flow Reconciliation
Free Cash Flow Reconciliation Free Cash Flow Calculation 2016 2017 2018 Net Cash Provided by Operating Activities, Continuing Operations $ 837.5 $ 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 A
Slide 46: Footnotes
Footnotes Slide 4 – Trinity Industries, Inc. Overview (1) Management’s expectations for shares outstanding expected at 3/31/2019 (provided on Q4-18 Earnings Conference Call) (2) Intersegment Revenues are eliminated (3) FY 2017 EPS excludes a $3.06 non-cash benefit related to the effects of the Tax C
Slide 47: Footnotes (continued)
Footnotes (continued) Slide 20- Solid Financial Performance with Multiple Sources of Revenue (1) Operations Margin calculated using only revenues and profit from Leasing Operations including Partially Owned Subsidiaries and excluding Car Sales; PBT Margin calculated using Operating Profit from Leasi
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