Trinity Industries, Inc. · NYSE:TRN
Trinity Industries — Investor Day (October 2018)
62 slides from Trinity Industries's investor day presentation, Oct 4, 2018
Slide 1: Investor Day Presentation
Exhibit 99.1 INVESTOR DAY PRESENTATION October 4, 2018 – New York City, NY Investor Contact: TrinityInvestorRelations@trin.net Website: www.trin.net
Slide 2: Introduction
Introduction Jessica L. Greiner — Vice President, Investor Relations – Trinity Corporate Services, LLC 2
Slide 3: Investor Day Agenda
Investor Day Agenda 9:00 – 9:05 a.m Introduction – Jessica Greiner, VP Investor Relations, Trinity Corporate Services 9:05 – 9:25 a.m Opening Remarks and Future Vision — Tim Wallace, Chief Executive Officer 9:25 – 9:40 a.m Railcar Products — Paul Mauer, President of TrinityRail Products 9:40 – 9:55
Slide 4: Forward Looking Statements
Forward Looking Statements Some statements in this release, 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, intentions
Slide 5: Proven Leadership Team With Deep Expertise
Proven Leadership Team With Deep Expertise Executive Experience Timothy R. Wallace ■ Year joined TRN: 1975 Chairman, CEO and ■ Years in industry: 44 Proven management with extensive President industry experience James E. Perry ■ Year joined TRN: 2004 CFO, Senior Vice ■ Years in industry: 14 Presiden
Slide 6: The Separation of Trinity and Arcosa as Springboard for Next Phase of Growth
The Separation of Trinity and Arcosa is Expected to be the Springboard for the Next Phase of Evolutionary Growth Enhances Trinity’s Growth Potential through a Concentration of Focus • Trinity to operate industry-leading integrated rail leasing, manufacturing, and services business, providing a singl
Slide 7: Opening Remarks & Future Vision
Opening Remarks & Future Vision Timothy R. Wallace — Chairman, Chief Executive Officer, and President 7
Slide 8: Video: A Look Into the Culture of Trinity Industries
Video: A Look Into the Culture of Trinity Industries 8
Slide 9: Trinity Steel Company 1958 Annual Report
TRINITY STEEL COMPANY, INC. DALLAS, TEXAS A, I Keport FOR THE YEAR ENDED DECEMBER 31st 1958 a Ww TRINITY INDUSTRIES
Slide 10: A 1st generation railcar in Trinity's lease fleet, built in 1979
A 1st generation railcar in Trinity’s lease fleet, built in 1979 10
Slide 11: Railcars are Workhorses in the North American Rail Ecosphere
Railcars are Workhorses in the North American Rail Transportation Ecosphere Building Materials Petrochemicals Coal Grain Cement Chemicals Autos Sand Crude Oil 11
Slide 12: TrinityRail's Vision
TrinityRail’s vision is to be a premier provider of rail transportation products and services in North America 12
Slide 13: Costs and Complexity Associated with Owning Railcars
Costs and Complexity Associated with Owning Railcars 13
Slide 14: Key Functions that Occur During the Life of the Railcar
Key Functions that Occur During the Life of the Railcar 14
Slide 15: Primary Business Sectors in the Railcar Industry
Primary Business Sectors in the Railcar Industry 15
Slide 16: TrinityRail's Platform and Customer-centric Offerings
TrinityRail’s Platform is Designed to Provide an Extensive Array of Customer-centric Products & Service Offerings to the North American Railcar Industry TrinityRail’s Customer- Centric Focus 16
Slide 17: Premier Customer-centric Platform Goal
Our goal is to have a premier platform that is highly customer- centric, providing a variety of railcar related solutions to customers that optimize the ownership and use of railcars 17
Slide 18: A Concentration of Focus on the Integrated Rail Platform
A Concentration of Focus on the Integrated Rail Platform The separation of Arcosa allows us to concentrate our focus and resources towards improving and growing our platform of rail transportation products and services. We see opportunities to grow and enhance our product and service offerings in wa
Slide 19: Growing Leasing and Optimizing Capital Structure
We have placed a high priority on growing our leasing business and optimizing our capital structure $ EQUITY $ DEBT Recalibrating Trinity’s Capital Structure 19
Slide 20: A Fresh Start: Strong Team, Balance Sheet, Market Recovery
Today we have a fresh start – a strong team, a strong balance sheet, and the railcar market recovery timing is ideal 20
Slide 21: Key Points from Our Business Leaders
Key Points from Our Business Leaders • How Rail Products and Leasing and Management Services support and contribute to the Integrated Rail Platform – Broad portfolio of durable and reliable products – Flexible manufacturing footprint to respond to customer needs – Fastest growing lease fleet with a
Slide 22: Railcar Products Group
Railcar Products Group Paul E. Mauer — Executive Vice President, TrinityRail President, TrinityRail Products 22
Slide 23: Products' Contribution to the Integrated Business Platform
Products’ Contribution to the Integrated Business Platform Our business objective is to deliver a premier customer experience through high quality, innovative products and to design solutions that enhance and optimize the business of our customers Premier Railcar Designs & Engineering Highly Flexibl
Slide 24: 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 maintenance costs for the • Maximize the in-service time
Slide 25: Serving Customers with a Broad Product Portfolio
Serving Customers 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 Tank Cars Auto Racks Hoppers Box Cars Coal
Slide 26: 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 27: Strong Historical Financial Performance by Rail Segment
Strong Historical Financial Performance by Rail Segment Long Track Record of Generating Operating Leverage in the Up Cycle Top Line Drivers: • Innovative product designs $5,000 24% $4,462 • Flexibility to scale quickly $3,817 20% $4,000 with demand increases $3,077 16% • On-time delivery of railcars
Slide 28: Railcar Products Summary
• Premier products and services • Broad product portfolio to meet the needs of customers • Organizational synergies between design, manufacturing, modification and maintenance that drive value for all our stakeholders • Collaborative culture focused on continuous improvement • History of operational
Slide 29: Leasing and Management Services Group
Leasing and Management Services Group Brian D. Madison – President, TrinityRail Leasing and Management Services 29
Slide 30: Leasing's Contribution to the Integrated Business Platform
Leasing’s Contribution to the Integrated Business Platform Our objective is to deliver a premier customer experience through superior service and innovative solutions while generating a recurring source of revenue and income for Trinity Unique ability to serve a broad spectrum of customer needs for
Slide 31: Market-Leading Lease Portfolio Growth
Trinity’s Leasing Company Has Experienced Market-Leading Portfolio Growth The Integrated Rail Platform positions Trinity’s lease fleet for continued growth while building a strong performing and diverse railcar lease portfolio Accelerating our Lease Fleet Growth since the Early 2000’s Approximately
Slide 32: Premier Customer Service Drives Results
Premier Customer Service Drives Results Outstanding Customer • Create customer loyalty through dedication to excellent service Experience • Continuous improvement processes and tools combined with data Premier Servicer and analytics capabilities enable the customer experience • Leverage developing t
Slide 33: Preparing for Scale and Transformative Growth
Preparing for Scale and Transformative Growth Trinity’s ready access to the capital markets with its strong balance sheet and railcar investment vehicles support our appetite for transformative growth through new originations and secondary market purchases Strong Platform for New Trinity Leased Rail
Slide 34: Leasing's Financial Results Reflect Strong Growth and Steady Performance
Leasing’s Financial Results Reflect Strong Growth and Steady Performance Historical Leasing Operations Financial Performance (in $millions) Growing Contributor to Company Profit Before Tax (in $millions) $800 50% $1,400 70% $700 45% $1,200 60% $600 40% $1,000 50% $500 35% $800 40% $400 30% $600 30%
Slide 35: Railcar Market Overview
Railcar Market Overview Eric R. Marchetto — Chief Commercial Officer, TrinityRail 35
Slide 36: Marketing the Integrated Business Platform to our Customers
Marketing the Integrated Business Platform to our Customers TrinityRail’s Customer- Centric Focus 36
Slide 37: Rail Transportation in the North American Industrial Supply Chain
Rail Transportation is an Integral Component of the North American Industrial Supply Chain 2017 U.S. Freight Ton Miles Supermarket to the by Mode 1 World Pipeline 19% 1.7 mm 3,500 Air Railcars in North commodities3 2 <1% America Truck 48% Water 6 trillion 35% 80% 8% total ton miles of railroad reven
Slide 38: Analyze the Rail Ecosphere in Five Distinct Markets
Analyze the Rail Ecosphere in Five Distinct Markets Energy Refined Products Construction Consumer & Chemicals Agriculture & Metals Products • NGLs • Coal • Refined Products • Grains • Construction • Autos • Biofuels • Plastics • Grain Mill Products Materials • Paper • Frac Sand • Petro-chemicals • D
Slide 39: Platform Reaches Entire Rail Market
Platform Reaches Entire Rail Market & Delivers to the Needs of Each Channel Shippers Railroads Leasing Rail Investors (RIVs) % 1 1 Bringing investment 17% 32% 51% scale to our market approach N.A. Fleet Fleet N.A. Ownership Products Products Products Products Leasing Leasing Leasing Leasing Services
Slide 40: The Platform is Built to Deliver Value for Customers
The Platform is Built to Deliver Value for Customers Market Scale Flexibility Comprehensive Viewpoint Solutions • 360° view of freight • Broad, deep • Respond effectively rail equipment and portfolio of and proactively to commercial activity products and meet customer services • Industry leadership
Slide 41: Railcar Market Recovery Underway
Railcar Market Recovery Underway North American Railcar Loadings Are Growing Number of Railcars in Storage is Declining 800,000 500,000 30% 450,000 25% 750,000 400,000 350,000 20% 700,000 300,000 250,000 15% 650,000 200,000 10% 600,000 150,000 100,000 5% 550,000 50,000 0 0% 500,000 North American Ra
Slide 42: We Know Railcars, Markets, Customers
• We know railcars • We understand the railcar markets • We partner with our customers 42
Slide 43: Morning Session Break
Morning Session Break Investor Day Agenda 9:00 – 9:05 a.m Introduction – Jessica Greiner, Investor Relations and Communications 9:05 – 9:25 a.m Opening Remarks and Future Vision — Tim Wallace, Chief Executive Officer 9:25 – 9:40 a.m Railcar Products — Paul Mauer, President of TrinityRail Products 9:
Slide 44: Video: A Look Into the TrinityRail Customer Experience
Video: A Look Into the TrinityRail Customer Experience 44
Slide 45: Financial Overview
Financial Overview James E. Perry — Chief Financial Officer 45
Slide 46: Trinity's Business Segment Financials (Post Spin-Off)
Trinity’s Business Segment Financials (Post Spin-Off)* Trinity Industries, Inc. (post spin-off) LTM Revenues (6/30/18): $2.4B LTM Operating Profit (6/30/18): $373M LTM Net Income from Continuing Operations (6/30/18): $618M LTM EBITDA (6/30/18): $623M Rail Leasing and Rail Group Management Services A
Slide 47: Post-spin Pro Forma Financial Highlights
Post-spin Pro Forma Financial Highlights FY 2014 FY 2015 FY 2016 FY 2017 YTD 6/30/2018 Revenues $ 4,548.8 $ 4,602.2 $ 3,089.8 $ 2,397.5 $ 1,167.1 Cost of revenues $ 3,382.8 $ 3,343.9 $ 2,311.3 $ 1,773.8 $ 881.8 Selling, engineering, and administrative expenses $ 303.5 $ 364.8 $ 313.7 $ 339.4 $ 147.1
Slide 48: A Continued Focus on Building the Lease Portfolio
A Continued Focus on Building the Lease Portfolio • Trinity deliberately focused on growing the leasing company in the early 2000’s to provide a profitability “cushion” to withstand the deeply cyclical railcar manufacturing market. • Following the spin-off, we will continue placing a high strategic
Slide 49: Leading Issuer of Long-term Rail Leasing Debt
Leading Issuer of Long-term Rail Leasing Debt • TrinityRail has facilitated numerous long-term debt financings dating back to 2001. We continue to assess market conditions to obtain capital at optimal rates. • There are several methods we have used to raise $4.8B in debt by securitizing $6.4B worth
Slide 50: Railcar Investment Vehicle (RIVs) Programs
Railcar Investment Vehicle (RIVs) Programs TrinityRail has completed $5.6B in total railcar sales to RIV programs, including $2.4B to programs that TILC retains partial ownership in (TRIP / RIV 2013). $6,000 $5,000 $4,000 $3,000 $2,000 Cumulative Total Cumulative SalesTotal ($M) $1,000 $0 2006 2007
Slide 51: Strategically Financing Lease Portfolio Growth
Strategically Financing Lease Portfolio Growth Trinity’s financing of the lease fleet growth has evolved through the years based on the Company’s need for growth capital, ultimately impacting the loan-to-value ratio of the fleet. Began strategic growth of Progressed financing Enhanced the RIV platfo
Slide 52: Balance Sheet Summary
Balance Sheet Summary Wholly-Owned Partially- Manufacturing Fleet Owned Fleet /Corporate Target Cash $100 – $1,816 mm NBV – PP&E $4,547 mm Post-Spin 200mm Total Debt $1,500 mm $1,329 mm Total Debt $398 mm Loan to Value 33% 73% Unencumbered Railcars Available for $2,170 mm Financing/Warehouse Figures
Slide 53: Optimize the Capital Structure to Improve Returns
Optimize the Capital Structure to Improve Returns Target: • Economic downcycle in certain business segments 60-65% LTV • Protracted highway litigation challenges prompting prudent balance sheet • Spin-off planning • High level of cash flow from operations and sales of leased railcars from previous u
Slide 54: Capital Allocation Approach
Capital Allocation Approach Invest in value-creating business opportunities that Optimize the balance grow the lease fleet and sheet through build out our fleet services leverage businesses GOAL: Optimize the Capital Structure Regularly and Balance the risk/reward methodically return between credit
Slide 55: Growing and Adding Revenue Streams through the Railcar Value Chain
Growing and Adding Revenue Streams through Expansion into the Railcar Value Chain Market Transactions RIV / Secondary / RIV Products TrinityRail parts After market market After Services Management Management TrinityRail Leasing & & Leasing TrinityRail Designs Fees products New Product Product New Br
Slide 56: Focus on Enhancing Shareholder Value
Focus on Enhancing Shareholder Value • Concentration of focus – Optimizes balance sheet, provides a concentration of focus, accelerates growth potential, and advances differentiated investment thesis • Economic momentum – Positions Trinity for success within the railcar value chain • Leading market
Slide 57: Question & Answer Session
Question & Answer Session Investor Day Agenda 9:00 – 9:05 a.m Introduction – Jessica Greiner, Investor Relations and Communications 9:05 – 9:25 a.m Opening Remarks and Future Vision — Tim Wallace, Chief Executive Officer 9:25 – 9:40 a.m Railcar Products — Paul Mauer, President of TrinityRail Product
Slide 58: Appendix
Appendix TRINITY INDUSTRIES v
Slide 59: Leasing Group PBT Reconciliation
Leasing Group PBT Reconciliation (in millions except for PBT Margin) 2010 2011 2012 2013 2014 2015 2016 2017 LTM 06/18 From Leasing Operations: Revenue $ 461 $ 493 $ 529 $ 587 $ 632 $ 700 $ 701 $ 744 $ 739 Operating Profit $ 200 $ 225 $ 243 $ 267 $ 288 $ 331 $ 313 $ 341 $ 318 Less: Interest Expense
Slide 60: EBITDA Reconciliation
EBITDA Reconciliation Reconciliation of EBITDA LTM 6/30/2018 LTM 6/30/2018 Net Income from Continuing Operations 617.6 Interest expense 183.4 Provision (benefit) for income taxes (412.8) Depreciation and amortization expense 234.4 EBITDA (1) 622.6 (1) EBITDA is defined as net income from continuing
Slide 61: Adjusted OP Reconciliation
Adjusted OP Reconciliation LTM 6/30/2018 Rail Group Leasing Group All Other Corporate Eliminations Consolidated Operating Profit 214.9 412.4 13.2 (162.4) (105.0) 373.1 Depreciation Expense 32.5 179.2 12.5 10.0 - 234.2 Adjusted Operating Profit (1) 247.4 591.6 25.7 (152.4) (105.0) 607.3 (1) Adjusted
Slide 62: Footnotes
Footnotes Slide 27 - Strong Historical Financial Performance by Rail Segment (1) ROA calculation utilizes Operating Profit / Total Assets, annual 2010-2017 Slide 34- Leasing’s Financial Results Reflect Strong Growth and Steady Performance (1) PBT Reconciliation provided on page 59 Slide 37 - Rail Tr