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Section 1: 10-Q (10-Q)

Document

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2018
 
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________ .
Commission File Number 1-6903
394374559_trnlogoverticalhrblac.jpg
(Exact name of registrant as specified in its charter)

Delaware
75-0225040
(State or Other Jurisdiction of Incorporation or Organization)
(I.R.S. Employer Identification No.)
 
 
2525 N. Stemmons Freeway, Dallas, Texas
75207-2401
(Address of principal executive offices)
(Zip Code)

(214) 631-4420
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ  No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes þ   No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ Accelerated filer ¨ Non-accelerated filer ¨ (Do not check if a smaller reporting company)
Smaller reporting company ¨ Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ¨ No þ
At July 13, 2018 the number of shares of common stock outstanding was 147,714,883.




TRINITY INDUSTRIES, INC.
FORM 10-Q
TABLE OF CONTENTS
 
Caption
Page
 
 
 
 
 
 
 
 
 
 
CERTIFICATIONS
 




2

Table of Contents

PART I
Item 1. Financial Statements
Trinity Industries, Inc. and Subsidiaries
Consolidated Statements of Operations
(unaudited)
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2018
 
2017
 
2018
 
2017
 
(in millions, except per share amounts)
Revenues:
 
 
 
 
 
 
 
Manufacturing
$
729.1

 
$
713.6

 
$
1,386.1

 
$
1,412.3

Leasing
213.2

 
191.9

 
387.5

 
370.5

 
942.3

 
905.5

 
1,773.6

 
1,782.8

Operating costs:
 
 
 
 
 
 
 
Cost of revenues:
 
 
 
 
 
 
 
Manufacturing
599.6

 
590.1

 
1,136.3

 
1,166.7

Leasing
118.5

 
92.2

 
211.9

 
175.8

 
718.1

 
682.3

 
1,348.2

 
1,342.5

Selling, engineering, and administrative expenses:
 
 
 
 
 
 
 
Manufacturing
54.4

 
61.5

 
107.6

 
118.1

Leasing
12.6

 
13.1

 
24.8

 
23.9

Other
43.4

 
38.4

 
82.9

 
73.5

 
110.4

 
113.0

 
215.3

 
215.5

Gains on dispositions of property:
 
 
 
 
 
 
 
Net gains on railcar lease fleet sales owned more than one year at the time of sale
9.5

 
23.7

 
11.6

 
23.7

Other
2.2

 
0.7

 
2.4

 
2.0

 
11.7

 
24.4

 
14.0

 
25.7

Total operating profit
125.5

 
134.6

 
224.1

 
250.5

Other (income) expense:
 
 
 
 
 
 
 
Interest income
(3.7
)
 
(2.3
)
 
(7.6
)
 
(4.0
)
Interest expense
43.8

 
45.7

 
90.1

 
90.7

Other, net
(0.7
)
 
(0.1
)
 
(0.9
)
 

 
39.4

 
43.3

 
81.6

 
86.7

Income before income taxes
86.1

 
91.3

 
142.5

 
163.8

Provision for income taxes
20.6

 
37.3

 
35.4

 
58.1

Net income
65.5

 
54.0

 
107.1

 
105.7

Net income attributable to noncontrolling interest
1.4

 
2.9

 
2.8

 
8.6

Net income attributable to Trinity Industries, Inc.
$
64.1

 
$
51.1

 
$
104.3

 
$
97.1

 
 
 
 
 
 
 
 
Net income attributable to Trinity Industries, Inc. per common share:
 
 
 
 
 
 
 
Basic
$
0.43

 
$
0.34

 
$
0.70

 
$
0.64

Diluted
$
0.43

 
$
0.33

 
$
0.68

 
$
0.63

Weighted average number of shares outstanding:
 
 
 
 
 
 
 
Basic
146.2

 
149.1

 
146.7

 
148.9

Diluted
147.0

 
151.0

 
150.2

 
151.0

Dividends declared per common share
$
0.13

 
$
0.13

 
$
0.26

 
$
0.24

See accompanying notes to consolidated financial statements.

3

Table of Contents

Trinity Industries, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
(unaudited)
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2018
 
2017
 
2018
 
2017
 
(in millions)
Net income
$
65.5

 
$
54.0

 
$
107.1

 
$
105.7

Other comprehensive income (loss):
 
 
 
 
 
 
 
Derivative financial instruments:
 
 
 
 
 
 
 
Unrealized losses arising during the period, net of tax expense (benefit) of $(0.2), $-, $-, and $-
(0.9
)
 
(0.2
)
 
(0.1
)
 
(0.2
)
Reclassification adjustments for losses included in net income, net of tax expense (benefit) of $(0.2), $-, $0.1, and $(0.3)
0.3

 
1.2

 
1.3

 
2.2

Currency translation adjustment
(0.8
)
 
0.5

 
(1.5
)
 
0.8

Defined benefit plans:
 
 
 
 
 
 
 
Amortization of net actuarial losses, net of tax benefit of $0.2, $0.5, $0.6, and $0.9
0.9

 
0.7

 
1.7

 
1.5

 
(0.5
)
 
2.2

 
1.4

 
4.3

Comprehensive income
65.0

 
56.2

 
108.5

 
110.0

Less: comprehensive income attributable to noncontrolling interest
1.8

 
3.6

 
3.6

 
10.1

Comprehensive income attributable to Trinity Industries, Inc.
$
63.2

 
$
52.6

 
$
104.9

 
$
99.9

See accompanying notes to consolidated financial statements.

4

Table of Contents

Trinity Industries, Inc. and Subsidiaries
Consolidated Balance Sheets
 
June 30,
2018
 
December 31,
2017
 
(unaudited)
 
 
 
(in millions)
ASSETS
 
 
 
Cash and cash equivalents
$
612.7

 
$
778.6

Short-term marketable securities
25.0

 
319.5

Receivables, net of allowance
356.1

 
369.7

Income tax receivable
34.6

 
29.0

Inventories:
 
 
 
Raw materials and supplies
300.4

 
296.7

Work in process
149.2

 
179.0

Finished goods
136.8

 
164.9

 
586.4

 
640.6

Restricted cash, including partially-owned subsidiaries of $42.0 and $62.9
142.2

 
195.2

Property, plant, and equipment, at cost, including partially-owned subsidiaries of $2,005.7 and $1,985.9
8,864.1

 
8,385.2

Less accumulated depreciation, including partially-owned subsidiaries of $444.6 and $418.0
(2,375.9
)
 
(2,250.5
)
 
6,488.2

 
6,134.7

Goodwill
789.4

 
780.3

Other assets
320.1

 
295.6

 
$
9,354.7

 
$
9,543.2

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Accounts payable
$
205.3

 
$
175.4

Accrued liabilities
435.0

 
440.0

Debt:
 
 
 
Recourse
424.4

 
866.8

Non-recourse:
 
 
 
Wholly-owned subsidiaries
1,473.0

 
1,024.8

Partially-owned subsidiaries
1,329.9

 
1,350.8

 
3,227.3

 
3,242.4

Deferred income
19.1

 
20.5

Deferred income taxes
734.0

 
743.2

Other liabilities
66.2

 
63.7

 
4,686.9

 
4,685.2

Stockholders’ equity:
 
 
 
Preferred stock – 1.5 shares authorized and unissued

 

Common stock – 400.0 shares authorized
1.5

 
1.6

Capital in excess of par value
237.2

 
482.5

Retained earnings
4,203.4

 
4,123.4

Accumulated other comprehensive loss
(122.9
)
 
(104.8
)
Treasury stock
(1.6
)
 
(1.6
)
 
4,317.6

 
4,501.1

Noncontrolling interest
350.2

 
356.9

 
4,667.8

 
4,858.0

 
$
9,354.7

 
$
9,543.2

See accompanying notes to consolidated financial statements.

5

Table of Contents

Trinity Industries, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(unaudited)
 
Six Months Ended
June 30,
 
2018
 
2017
 
(in millions)
Operating activities:

 

Net income
$
107.1

 
$
105.7

Adjustments to reconcile net income to net cash provided by operating activities:

 

Depreciation and amortization
152.6

 
146.5

Stock-based compensation expense
19.0

 
13.8

Provision for deferred income taxes
36.2

 
116.4

Net gains on railcar lease fleet sales owned more than one year at the time of sale
(11.6
)
 
(23.7
)
Gains on dispositions of property and other assets
(2.4
)
 
(2.0
)
Non-cash interest expense
12.6

 
14.7

Other
(0.7
)
 
(0.6
)
Changes in assets and liabilities:

 

(Increase) decrease in receivables
31.8

 
(52.8
)
(Increase) decrease in inventories
26.1

 
39.6

(Increase) decrease in other assets
(26.4
)
 
(0.9
)
Increase (decrease) in accounts payable
29.9

 
11.0

Increase (decrease) in accrued liabilities
(27.8
)
 
(4.9
)
Increase (decrease) in other liabilities
1.9

 
(26.7
)
Net cash provided by operating activities
348.3

 
336.1



 

Investing activities:

 

(Increase) decrease in short-term marketable securities
294.5

 
55.1

Proceeds from dispositions of property and other assets
5.5

 
6.0

Proceeds from railcar lease fleet sales owned more than one year at the time of sale
56.4

 
92.4

Capital expenditures – leasing, net of sold lease fleet railcars owned one year or less with a net cost of $24.8 and $5.6
(503.2
)
 
(271.6
)
Capital expenditures – manufacturing and other
(33.9
)
 
(43.4
)
Acquisitions, net of cash acquired
(25.0
)
 
(5.3
)
Other
1.3

 
(2.1
)
Net cash required by investing activities
(204.4
)
 
(168.9
)


 

Financing activities:

 

Payments to retire debt
(674.6
)
 
(98.3
)
Proceeds from issuance of debt
478.0

 
299.4

Shares repurchased
(102.2
)
 
(41.9
)
Dividends paid to common shareholders
(39.3
)
 
(33.5
)
Purchase of shares to satisfy employee tax on vested stock
(11.3
)
 
(14.0
)
Distributions to noncontrolling interest
(10.3
)
 
(16.9
)
Other
(3.1
)
 
(0.1
)
Net cash (required) provided by financing activities
(362.8
)
 
94.7

Net (decrease) increase in cash, cash equivalents, and restricted cash
(218.9
)
 
261.9

Cash, cash equivalents, and restricted cash at beginning of period
973.8

 
741.6

Cash, cash equivalents, and restricted cash at end of period
$
754.9

 
$
1,003.5

See accompanying notes to consolidated financial statements.

6

Table of Contents

Trinity Industries, Inc. and Subsidiaries
Consolidated Statement of Stockholders' Equity
(unaudited)
 
 
Common
Stock
 
Capital in
Excess of
Par Value
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Loss
 
Treasury
Stock
 
Trinity
Stockholders’
Equity
 
Noncontrolling
Interest
 
Total
Stockholders’
Equity
 
 
Shares
 
$0.01 Par Value
 
 
 
 
Shares
 
Amount
 
 
 
 
 
(in millions, except par value)
Balances at
December 31, 2017
 
150.9

 
$
1.6

 
$
482.5

 
$
4,123.4

 
$
(104.8
)
 
(0.1
)
 
$
(1.6
)
 
$
4,501.1

 
$
356.9

 
$
4,858.0

Cumulative effect of adopting accounting standards (see Note 1)
 

 

 

 
14.7

 
(18.7
)
 

 

 
(4.0
)
 

 
(4.0
)
Net income
 

 

 

 
104.3

 

 

 

 
104.3

 
2.8

 
107.1

Other comprehensive income
 

 

 

 

 
0.6

 

 

 
0.6

 
0.8

 
1.4

Cash dividends on common stock
 

 

 

 
(39.0
)
 

 

 

 
(39.0
)
 

 
(39.0
)
Restricted shares, net
 
0.2

 

 
22.3

 

 

 
(0.4
)
 
(14.7
)
 
7.6

 

 
7.6

Shares repurchased
 

 

 

 

 

 
(3.0
)
 
(100.1
)
 
(100.1
)
 

 
(100.1
)
Stock options exercised
 

 

 
0.1

 

 

 

 

 
0.1

 

 
0.1

Distributions to noncontrolling interest
 

 

 

 

 

 

 

 

 
(10.3
)
 
(10.3
)
Retirement of treasury stock
 
(3.4
)
 

 
(114.8
)
 

 

 
3.4

 
114.8

 

 

 

Redemption of convertible subordinated notes (see Note 11)
 

 

 
(152.9
)
 

 

 

 

 
(152.9
)
 

 
(152.9
)
Other
 

 
(0.1
)
 

 

 

 

 

 
(0.1
)
 

 
(0.1
)
Balances at
June 30, 2018
 
147.7

 
$
1.5

 
$
237.2

 
$
4,203.4

 
$
(122.9
)
 
(0.1
)
 
$
(1.6
)
 
$
4,317.6

 
$
350.2

 
$
4,667.8

See accompanying notes to consolidated financial statements.

7

Table of Contents

Trinity Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

Note 1. Summary of Significant Accounting Policies
Basis of Presentation
The foregoing consolidated financial statements are unaudited and have been prepared from the books and records of Trinity Industries, Inc. and its consolidated subsidiaries (“Trinity,” “Company,” “we,” or “our”) including the accounts of its wholly-owned subsidiaries and its partially-owned subsidiaries, TRIP Rail Holdings LLC (“TRIP Holdings”) and RIV 2013 Rail Holdings LLC ("RIV 2013"), in which the Company has a controlling interest. In our opinion, all normal and recurring adjustments necessary for a fair presentation of the financial position of the Company as of June 30, 2018, and the results of operations for the three and six months ended June 30, 2018 and 2017, and cash flows for the six months ended June 30, 2018 and 2017, have been made in conformity with generally accepted accounting principles. All significant intercompany accounts and transactions have been eliminated. Because of seasonal and other factors, the results of operations for the six months ended June 30, 2018 may not be indicative of expected results of operations for the year ending December 31, 2018. These interim financial statements and notes are condensed as permitted by the instructions to Form 10-Q and should be read in conjunction with the audited consolidated financial statements of the Company included in its Form 10-K for the year ended December 31, 2017.
Stockholders' Equity
In December 2017, the Company’s Board of Directors authorized a $500 million share repurchase program effective January 1, 2018 through December 31, 2019. Under the program, 1,451,171 and 2,970,674 shares, respectively, were repurchased during the three and six months ended June 30, 2018, at a cost of approximately $50.1 million and $100.1 million, respectively, leaving a remaining authorization of $400.0 million. Certain shares of stock repurchased during June 2018, totaling $3.8 million, were cash settled in July 2018 in accordance with normal settlement practices. Under the Company's previous program that expired on December 31, 2017, 1,942,200 shares were repurchased during the three and six months ended June 30, 2017, at a cost of approximately $52.4 million.
Revenue Recognition
Revenue is measured based on the allocation of the transaction price in a contract to satisfied performance obligations. The transaction price does not include any amounts collected on behalf of third parties. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer. The following is a description of principal activities from which the Company generates its revenue, separated by reportable segments. Payments for our products and services are generally due within normal commercial terms. For a further discussion regarding the Company’s reportable segments, see Note 4 Segment Information.
Rail Group
The Rail Group recognizes revenue when the customer has submitted its certificate of acceptance and legal title of the railcar has passed to the customer. Certain long-term contracts for the sales of railcars include price adjustments based on steel-price indices; this amount represents variable consideration for which we are constrained and we do not estimate these amounts prior to the time the railcar is delivered, at which time the pricing becomes fixed.
Construction Products Group
The Construction Products Group recognizes revenue when the customer has accepted the product and legal title of the product has passed to the customer.
Inland Barge Group
The Inland Barge Group recognizes revenue when the customer has accepted the product and legal title of the product has passed to the customer.
Energy Equipment Group
Within the Energy Equipment Group, revenue is recognized for our wind tower and certain utility structure product lines over time as the products are manufactured using an input approach based on the costs incurred relative to the total estimated costs of production. We recognize revenue over time for these products as they are highly customized to the needs of an individual customer resulting in no alternative use to the Company if not purchased by the customer after the contract is executed, and we have the right to bill the customer for our work performed to date plus at least a reasonable profit margin for work performed. For all other products, revenue is recognized when the customer has accepted the product and legal title of the product has passed to the customer.

8

Table of Contents

Railcar Leasing and Management Services Group
Revenue from rentals and operating leases, including contracts that contain non-level fixed rental payments, is recognized monthly on a straight-line basis. Revenue is recognized from the sales of railcars from the lease fleet on a gross basis in leasing revenues and cost of revenues if the railcar has been owned for one year or less at the time of sale. Sales of railcars from the lease fleet owned for more than one year are recognized as a net gain or loss from the disposal of a long-term asset. Revenue from servicing, maintenance, and management agreements is recognized as each performance period occurs.
Fees for shipping and handling are recorded as revenue. The Company has elected to account for shipping and handling costs as activities to fulfill the promise to transfer the good. The fees and costs of shipping and handling activities are accrued if the related performance obligation has been satisfied.
Unsatisfied Performance Obligations
The following table includes estimated revenue expected to be recognized in future periods related to performance obligations that are unsatisfied or partially satisfied as of June 30, 2018 and the percentage of the outstanding performance obligations as of June 30, 2018 expected to be delivered during the remainder of 2018:
 
Unsatisfied performance obligations at June 30, 2018
 
Total
Amount
 
Percent expected to be delivered in 2018
 
(in millions)
 
 
Rail Group:
 
 
 
Railcars:
 
 
 
External Customers
$
1,922.8

 
 
Leasing Group
741.5

 
 
 
$
2,664.3

 
34
%
Components and maintenance services
$
66.4

 
63
%
 
 
 
 
Inland Barge Group
$
198.4

 
44
%
 
 
 
 
Energy Equipment Group:
 
 
 
Wind towers and utility structures
$
780.1

 
37
%
Other
$
53.2

 
86
%
 
 
 
 
Railcar Leasing and Management Services Group
$
124.7

 
10
%
The remainder of the unsatisfied performance obligations for the Rail Group are expected to be delivered through 2023. The remainder of the unsatisfied performance obligations for the Inland Barge Group and wind towers and utility structures are expected to be delivered through 2020. Unsatisfied performance obligations for the Railcar Leasing and Management Services Group are related to servicing, maintenance, and management agreements and are expected to be performed through 2024. Substantially all other unsatisfied performance obligations beyond 2018 are expected to be delivered during 2019.
Financial Instruments
The Company considers all highly liquid debt instruments to be either cash and cash equivalents if purchased with a maturity of three months or less, or short-term marketable securities if purchased with a maturity of more than three months and less than one year. The Company intends to hold its short-term marketable securities until they are redeemed at their maturity date and believes that under the "more likely than not" criteria, the Company will not be required to sell the securities before recovery of their amortized cost bases, which may be at maturity.
Financial instruments that potentially subject the Company to a concentration of credit risk are primarily cash investments including restricted cash, short-term marketable securities, and receivables. The Company places its cash investments and short-term marketable securities in bank deposits and investment grade, short-term debt instruments and limits the amount of credit exposure to any one commercial issuer. Concentrations of credit risk with respect to receivables are limited due to control procedures that monitor the credit worthiness of customers, the large number of customers in the Company's customer base, and their dispersion across different industries and geographic areas. As receivables are generally unsecured, the Company maintains an allowance for doubtful accounts based upon the expected collectibility of all receivables. Receivable balances determined to be uncollectible are charged against the allowance. The carrying values of cash, short-term marketable securities (using level two inputs), receivables, and accounts payable are considered to be representative of their respective fair values.

9

Table of Contents

Restricted Cash
Restricted cash consists of cash and cash equivalents held either as collateral for the Company's non-recourse debt and lease obligations or as security for the performance of certain product sales agreements. As such, they are restricted in use.
Recent Accounting Pronouncements
On January 1, 2018, the Company adopted Accounting Standards Update No. 2014-09, "Revenue from Contracts with Customers," ("ASU 2014-09") which provides common revenue recognition guidance for U.S. generally accepted accounting principles. Under ASU 2014-09, an entity recognizes revenue when it transfers promised goods or services to customers in an amount that reflects what it expects to receive in exchange for the goods or services. It also requires additional detailed disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.
The Company applied ASU 2014-09 to all contracts that were not complete as of January 1, 2018 using the modified retrospective method of adoption, resulting in a reduction to retained earnings of $4.0 million, net of tax, as of January 1, 2018 related to the cumulative effect of applying this standard. Therefore, the comparative information for the three and six months ended June 30, 2017 has not been adjusted and continues to be reported under ASC Topic 605.
The primary impact of adopting the standard is a change in the timing of revenue recognition for our wind towers and certain utility structures product lines within our Energy Equipment Group. Previously, the Company recognized revenue when the product was delivered. Under ASU 2014-09, revenue is recognized over time as the products are manufactured. Revenue recognition policies in our other business segments remain substantially unchanged.

10

Table of Contents

The following tables summarize the impact of adopting ASU 2014-09 on the Company’s consolidated financial statements as of June 30, 2018 and for the three and six months then ended:
 
As Reported
 
Adjustments
 
Balance without adjustment for adoption of ASU 2014-09
 
(in millions)
Consolidated Statement of Operations
 
 
 
 
 
For the three months ended June 30, 2018:
 
 
 
 
 
Revenues - manufacturing
$
729.1

 
$
(3.3
)
 
$
725.8

Cost of revenues - manufacturing
599.6

 
(2.9
)
 
596.7

Operating profit
125.5

 
(0.4
)
 
125.1

Income before income taxes
86.1

 
(0.4
)
 
85.7

Provision for income taxes
20.6

 
(0.1
)
 
20.5

Net income
65.5

 
(0.3
)
 
65.2

Net income attributable to Trinity Industries, Inc.
64.1

 
(0.3
)
 
63.8

 
 
 
 
 
 
For the six months ended June 30, 2018:
 
 
 
 
 
Revenues - manufacturing
$
1,386.1

 
14.7

 
1,400.8

Cost of revenues - manufacturing
1,136.3

 
11.1

 
1,147.4

Operating profit
224.1

 
3.6

 
227.7

Income before income taxes
142.5

 
3.6

 
146.1

Provision for income taxes
35.4

 
0.8

 
36.2

Net income
107.1

 
2.8

 
109.9

Net income attributable to Trinity Industries, Inc.
104.3

 
2.8

 
107.1

 
 
 
 
 
 
Consolidated Balance Sheet
 
 
 
 
 
Receivables, net of allowance
$
356.1

 
$
(12.0
)
 
$
344.1

Inventories:
 
 
 
 
 
Raw materials and supplies
300.4

 

 
300.4

Work in process
149.2

 
15.7

 
164.9

Finished goods
136.8

 
0.8

 
137.6

 
 
 
 
 
 
Accrued liabilities
435.0

 
(4.3
)
 
430.7

Deferred income taxes
734.0

 
2.0

 
736.0

Retained earnings
4,203.4

 
6.8

 
4,210.2

 
 
 
 
 
 
Consolidated Statement of Cash Flows
 
 
 
 
 
For the six months ended June 30, 2018:
 
 
 
 
 
Operating activities:
 
 
 
 
 
Net income
$
107.1

 
$
2.8

 
$
109.9

Provision for deferred income taxes
36.2

 
0.8

 
37.0

(Increase) decrease in receivables
31.8

 
4.1

 
35.9

(Increase) decrease in inventories
26.1

 
11.1

 
37.2

Increase (decrease) in accrued liabilities
(27.8
)
 
(18.8
)
 
(46.6
)
Net cash provided by operating activities
348.3

 

 
348.3

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, "Leases", ("ASU 2016-02") which amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASU 2016-02 will become effective for public companies during interim and annual reporting periods beginning after December 15, 2018, with early adoption permitted. The Company plans to adopt ASU 2016-02 effective January 1, 2019. We are continuing to assess the potential effects of the new standard, including its effects on our consolidated financial statements.
In November 2016, the FASB issued Accounting Standards Update No. 2016-18, "Restricted Cash", ("ASU 2016-18") which clarifies how entities should present restricted cash and restricted cash equivalents in the statement of cash flows. The new guidance requires a reconciliation of totals in the statement of cash flows to the related cash and cash equivalents and restricted cash captions in the balance sheet. The Company adopted ASU 2016-18 effective January 1, 2018. Amounts previously reported have been adjusted to reflect this change.

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Table of Contents

In March 2017, the FASB issued Accounting Standards Update No. 2017-07, “Compensation - Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost”, (“ASU 2017-07”) which changes how companies that sponsor defined benefit pension plans present the related net periodic benefit cost in the income statement. The service cost component of the net periodic benefit cost will continue to be presented in the same income statement line items, however other components of the net periodic benefit cost will be presented as a component of other income and excluded from operating profit. The Company adopted ASU 2017-07 effective January 1, 2018. Amounts previously reported have been adjusted to reflect this change.
In February 2018, the FASB issued Accounting Standards Update No. 2018-02, “Income Statement - Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income”, (“ASU 2018-02”) which gives entities the option to reclassify from Accumulated Other Comprehensive Loss ("AOCL") to retained earnings the stranded tax effects resulting from the Tax Cuts and Jobs Act (the"Act") enacted on December 22, 2017. ASU 2018-02 will become effective for public companies during interim and annual reporting periods beginning after December 15, 2018, with early adoption permitted. The Company elected to adopt ASU 2018-02 as of January 1, 2018 resulting in a reclassification adjustment from AOCL, increasing retained earnings by $18.7 million for the six months ended June 30, 2018.
Reclassifications
Certain prior year balances have been reclassified in the Notes to Consolidated Financial Statements to conform to the 2018 presentation.

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Table of Contents

Note 2. Acquisitions and Divestitures
In March 2018, we completed the acquisition of certain assets of an inland barge business which was recorded as a business combination, based on preliminary valuations of the acquired assets and liabilities at their acquisition date fair value using level three inputs. Such assets and liabilities were not significant in relation to assets and liabilities at the consolidated or segment level. See Note 3 Fair Value Accounting for a discussion of inputs in determining fair value.
In May 2017, we completed the acquisition of the assets of a lightweight aggregates business in our Construction Products Group. The purchase price of the acquisition was not significant.
There was no divestiture activity for the three and six months ended June 30, 2018 and 2017.

Note 3. Fair Value Accounting
Assets and liabilities measured at fair value on a recurring basis are summarized below:
 
Fair Value Measurement as of June 30, 2018
 
(in millions)
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets:
 
 
 
 
 
 
 
Cash equivalents
$
456.9

 
$

 
$

 
$
456.9

Restricted cash
142.2

 

 

 
142.2

Equity instruments(1)

 
1.3

 

 
1.3

Interest rate hedge(1)

 
2.7

 

 
2.7

Total assets
$
599.1

 
$
4.0

 
$

 
$
603.1

 
 
 
 
 
 
 
 
 
Fair Value Measurement as of December 31, 2017
 
(in millions)
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets:
 
 
 
 
 
 
 
Cash equivalents
$
113.1

 
$

 
$

 
$
113.1

Restricted cash
195.2

 

 

 
195.2

Equity instruments(1)

 
1.3

 

 
1.3

Interest rate hedge(1)

 
1.6

 

 
1.6

Total assets
$
308.3

 
$
2.9

 
$

 
$
311.2

(1) Included in other assets on the consolidated balance sheet.

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for that asset or liability in an orderly transaction between market participants on the measurement date. An entity is required to establish a fair value hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. The three levels of inputs that may be used to measure fair value are listed below:
Level 1 – This level is defined as quoted prices in active markets for identical assets or liabilities. The Company’s cash equivalents and restricted cash are instruments of the U.S. Treasury or highly-rated money market mutual funds.
Level 2 – This level is defined as observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. The Company's fuel derivative instruments, which are commodity swaps, are valued using energy and commodity market data. Interest rate hedges are valued at exit prices obtained from each counterparty. See Note 7 Derivative Instruments and Note 11 Debt. The equity instruments consist of warrants for the purchase of certain publicly-traded equity securities and are valued using the Black-Scholes-Merton option pricing model and certain assumptions regarding the exercisability of the options under the related agreement.
Level 3 – This level is defined as unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

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Table of Contents

The carrying amounts and estimated fair values of our long-term debt are as follows:
 
June 30, 2018
 
December 31, 2017
 
Carrying
Value
 
Estimated
Fair Value
 
Carrying
Value
 
Estimated
Fair Value
 
(in millions)
Recourse:
 
 
 
 
 
 
 
Senior notes
$
399.7

 
$
384.2

 
$
399.7

 
$
400.3

Convertible subordinated notes

 

 
449.4

 
715.0

Less: unamortized discount

 
 
 
(8.2
)
 
 
 

 
 
 
441.2

 
 
Capital lease obligations
26.8

 
26.8

 
28.3

 
28.3

Other
0.4

 
0.4

 
0.5

 
0.5

 
426.9

 
411.4

 
869.7

 
1,144.1

Less: unamortized debt issuance costs
(2.5
)
 
 
 
(2.9
)
 
 
 
424.4

 
 
 
866.8

 
 
Non-recourse:
 
 
 
 
 
 
 
2006 secured railcar equipment notes
147.0

 
152.0

 
158.5

 
165.7

2009 secured railcar equipment notes
163.3

 
177.2

 
166.2

 
169.6

2010 secured railcar equipment notes
261.7

 
266.9

 
266.9

 
281.9

2017 promissory notes
286.0

 
286.0

 
293.6

 
293.6

2018 secured railcar equipment notes
482.2

 
487.0

 

 

TILC warehouse facility
151.1

 
151.1

 
150.7

 
150.7

TRL 2012 secured railcar equipment notes
392.3

 
369.6

 
402.8

 
390.4

TRIP Master Funding secured railcar equipment notes
951.2

 
974.7

 
962.5

 
1,007.6

 
2,834.8

 
2,864.5

 
2,401.2

 
2,459.5

Less: unamortized debt issuance costs
(31.9
)
 
 
 
(25.6
)
 
 
 
2,802.9

 
 
 
2,375.6

 
 
Total
$
3,227.3

 
$
3,275.9

 
$
3,242.4

 
$
3,603.6

The estimated fair values of our senior notes and convertible subordinated notes were based on a quoted market price in a market with little activity as of June 30, 2018 and December 31, 2017 (Level 2 input). The estimated fair values of our 2006, 2009, 2010, 2012, and 2018 secured railcar equipment notes and TRIP Rail Master Funding LLC (“TRIP Master Funding”) secured railcar equipment notes are based on our estimate of their fair value as of June 30, 2018 and December 31, 2017 using unobservable input values provided by a third party (Level 3 inputs). The respective carrying values of our Trinity Industries Leasing Company (“TILC”) warehouse facility and 2017 promissory notes approximate fair value because the interest rate adjusts to the market interest rate (Level 3 input). The fair values of all other financial instruments are estimated to approximate carrying value. See Note 11 Debt for a description of the Company's long-term debt.


14

Table of Contents

Note 4. Segment Information
The Company reports operating results in five principal business segments: (1) the Rail Group, which manufactures and sells railcars and related parts, components, and maintenance services; (2) the Construction Products Group, which manufactures and sells highway products, trench shields, shoring products, and services for infrastructure-related projects, and produces and sells construction aggregates; (3) the Inland Barge Group, which manufactures and sells barges and related products for inland waterway services; (4) the Energy Equipment Group, which manufactures and sells products for energy-related businesses, including structural wind towers, steel utility structures for electricity transmission and distribution, storage and distribution containers, and tank heads for pressure and non-pressure vessels; and (5) the Railcar Leasing and Management Services Group (“Leasing Group”), which owns and operates a fleet of railcars as well as provides third-party fleet leasing, management, maintenance, and administrative services. The segment All Other includes our captive insurance and transportation companies; legal, environmental, and maintenance costs associated with non-operating facilities; and other peripheral businesses. Gains and losses from the sale of property, plant, and equipment related to manufacturing and dedicated to the specific manufacturing operations of a particular segment are included in the operating profit of that respective segment. Gains and losses from the sale of property, plant, and equipment that can be utilized by multiple segments are included in operating profit of the All Other segment.
Sales and related net profits ("deferred profit") from the Rail Group to the Leasing Group are recorded in the Rail Group and eliminated in consolidation and reflected in the "Eliminations - Lease subsidiary" line in the table below. Sales between these groups are recorded at prices comparable to those charged to external customers, taking into consideration quantity, features, and production demand. Amortization of deferred profit on railcars sold to the Leasing Group is included in the operating profit of the Leasing Group, resulting in the recognition of depreciation expense based on the Company's original manufacturing cost of the railcars. Sales of railcars from the lease fleet are included in the Leasing Group, with related gains and losses computed based on the net book value of the original manufacturing cost of the railcars.
The financial information for these segments is shown in the tables below. We operate principally in North America.

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Table of Contents

Three Months Ended June 30, 2018
 
Revenues
 
Operating Profit (Loss)
 
External
 
Intersegment
 
Total
 
 
(in millions)
Railcars
 
 
 
 
$
483.8

 
 
Components and maintenance services
 
 
 
 
91.4

 
 
Rail Group
$
346.9

 
$
228.3

 
575.2

 
$
57.7

 
 
 
 
 
 
 
 
Highway products
 
 
 
 
71.7

 
 
Construction aggregates
 
 
 
 
61.1

 
 
Other
 
 
 
 
22.8

 
 
Construction Products Group
153.4

 
2.2

 
155.6

 
31.4

 
 
 
 
 
 
 
 
Inland Barge Group
42.9

 

 
42.9

 
2.9

 
 
 
 
 
 
 
 
Wind towers and utility structures
 
 
 
 
133.0

 
 
Other
 
 
 
 
66.3

 
 
Energy Equipment Group
183.9

 
15.4

 
199.3

 
13.1

 
 
 
 
 
 
 
 
Leasing and management
 
 
 
 
184.2

 
 
Sales of leased railcars owned one year or less at the time of sale
 
 
 
 
29.2

 
 
Railcar Leasing and Management Services Group
213.2

 
0.2

 
213.4

 
91.8

 
 
 
 
 
 
 
 
All Other
2.0

 
21.3

 
23.3

 
(3.0
)
 
 
 
 
 
 
 
 
Segment Totals before Eliminations and Corporate
942.3

 
267.4

 
1,209.7

 
193.9

Corporate

 

 

 
(43.4
)
Eliminations – Lease subsidiary

 
(228.3
)
 
(228.3
)
 
(24.5
)
Eliminations – Other

 
(39.1
)
 
(39.1
)
 
(0.5
)
Consolidated Total
$
942.3

 
$

 
$
942.3

 
$
125.5

Three Months Ended June 30, 2017
 
Revenues
 
Operating Profit (Loss)
 
External
 
Intersegment
 
Total
 
 
(in millions)
Railcars
 
 
 
 
$
407.3

 
 
Components and maintenance services
 
 
 
 
58.6

 
 
Rail Group
$
335.4

 
$
130.5

 
465.9

 
$
36.7

 
 
 
 
 
 
 
 
Highway products
 
 
 
 
65.6

 
 
Construction aggregates
 
 
 
 
52.2

 
 
Other
 
 
 
 
13.5

 
 
Construction Products Group
130.7

 
0.6

 
131.3

 
22.2

 
 
 
 
 
 
 
 
Inland Barge Group
33.5

 

 
33.5

 
0.5

 
 
 
 
 
 
 
 
Wind towers and utility structures
 
 
 
 
166.5

 
 
Other
 
 
 
 
72.0

 
 
Energy Equipment Group
212.2

 
26.3

 
238.5

 
24.1

 
 
 
 
 
 
 
 
Leasing and management
 
 
 
 
185.0

 
 
Sales of leased railcars owned one year or less at the time of sale
 
 
 
 
7.1

 
 
Railcar Leasing and Management Services Group
191.9

 
0.2

 
192.1

 
110.8

 
 
 
 
 
 
 
 
All Other
1.8

 
20.9

 
22.7

 
(5.7
)
 
 
 
 
 
 
 
 
Segment Totals before Eliminations and Corporate
905.5

 
178.5

 
1,084.0

 
188.6

Corporate

 

 

 
(38.4
)
Eliminations – Lease subsidiary

 
(130.6
)
 
(130.6
)
 
(14.4
)
Eliminations – Other

 
(47.9
)
 
(47.9
)
 
(1.2
)
Consolidated Total
$
905.5

 
$

 
$
905.5

 
$
134.6


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Table of Contents

Six Months Ended June 30, 2018
 
Revenues
 
Operating Profit (Loss)
 
External
 
Intersegment
 
Total
 
 
(in millions)
Railcars
 
 
 
 
$
1,004.9

 
 
Components and maintenance services
 
 
 
 
168.8

 
 
Rail Group
$
649.3

 
$
524.4

 
1,173.7

 
$
116.6

 
 
 
 
 
 
 
 
Highway products
 
 
 
 
126.5

 
 
Construction aggregates
 
 
 
 
113.7

 
 
Other
 
 
 
 
40.4

 
 
Construction Products Group
276.8

 
3.8

 
280.6

 
50.8

 
 
 
 
 
 
 
 
Inland Barge Group
73.7

 

 
73.7

 
2.2

 
 
 
 
 
 
 
 
Wind towers and utility structures
 
 
 
 
280.5

 
 
Other
 
 
 
 
145.5

 
 
Energy Equipment Group
383.1

 
42.9

 
426.0

 
34.4

 
 
 
 
 
 
 
 
Leasing and management
 
 
 
 
358.8

 
 
Sales of leased railcars owned one year or less at the time of sale
 
 
 
 
29.2

 
 
Railcar Leasing and Management Services Group
387.5

 
0.5

 
388.0

 
162.9

 
 
 
 
 
 
 
 
All Other
3.2

 
44.9

 
48.1

 
(6.3
)
 
 
 
 
 
 
 
 
Segment Totals before Eliminations and Corporate
1,773.6

 
616.5

 
2,390.1

 
360.6

Corporate

 

 

 
(82.9
)
Eliminations – Lease subsidiary

 
(524.4
)
 
(524.4
)
 
(53.2
)
Eliminations – Other

 
(92.1
)
 
(92.1
)
 
(0.4
)
Consolidated Total
$
1,773.6

 
$

 
$
1,773.6

 
$
224.1

Six Months Ended June 30, 2017
 
Revenues
 
Operating Profit (Loss)
 
External
 
Intersegment
 
Total
 
 
(in millions)
Railcars
 
 
 
 
$
832.4

 
 
Components and maintenance services
 
 
 
 
111.8

 
 
Rail Group
$
621.4

 
$
322.8

 
944.2

 
$
87.2

 
 
 
 
 
 
 
 
Highway products
 
 
 
 
129.1

 
 
Construction aggregates
 
 
 
 
101.8

 
 
Other
 
 
 
 
23.5

 
 
Construction Products Group
251.6

 
2.8

 
254.4

 
37.7

 
 
 
 
 
 
 
 
Inland Barge Group
96.2

 

 
96.2

 
6.8

 
 
 
 
 
 
 
 
Wind towers and utility structures
 
 
 
 
347.3

 
 
Other
 
 
 
 
146.6

 
 
Energy Equipment Group
440.0

 
53.9

 
493.9

 
53.7

 
 
 
 
 
 
 
 
Leasing and management
 
 
 
 
363.9

 
 
Sales of leased railcars owned one year or less at the time of sale
 
 
 
 
7.1

 
 
Railcar Leasing and Management Services Group
370.5

 
0.5

 
371.0

 
195.8

 
 
 
 
 
 
 
 
All Other
3.1

 
42.4

 
45.5

 
(10.3
)
 
 
 
 
 
 
 
 
Segment Totals before Eliminations and Corporate
1,782.8

 
422.4

 
2,205.2

 
370.9

Corporate

 

 

 
(73.5
)
Eliminations – Lease subsidiary

 
(322.8
)
 
(322.8
)
 
(43.8
)
Eliminations – Other

 
(99.6
)
 
(99.6
)
 
(3.1
)
Consolidated Total
$
1,782.8

 
$

 
$
1,782.8

 
$
250.5


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Table of Contents

Note 5. Partially-Owned Leasing Subsidiaries
The Company, through its wholly-owned subsidiary, TILC, formed two subsidiaries, TRIP Holdings and RIV 2013, for the purpose of providing railcar leasing in North America. Each of TRIP Holdings and RIV 2013 are direct, partially-owned subsidiaries of TILC in which the Company has a controlling interest. Each is governed by a seven-member board of representatives, two of whom are designated by TILC. TILC is the agent of each of TRIP Holdings and RIV 2013 and as such, has been delegated the authority, power, and discretion to take certain actions on behalf of the respective companies.
At June 30, 2018, the Company's carrying value of its investment in TRIP Holdings and RIV 2013 totaled $189.6 million. The Company's weighted average ownership interest in TRIP Holdings and RIV 2013 is 38% while the remaining 62% weighted average interest is owned by third-party investor-owned funds. The Company's investments in its partially-owned leasing subsidiaries are eliminated in consolidation.
Each of TRIP Holdings and RIV 2013 has wholly-owned subsidiaries that are the owners of railcars acquired from the Company's Rail and Leasing Groups. These wholly-owned subsidiaries are TRIP Master Funding (wholly-owned by TRIP Holdings) and Trinity Rail Leasing 2012 LLC ("TRL 2012," wholly-owned by RIV 2013). Railcar purchases by these subsidiaries were funded by secured borrowings and capital contributions from TILC and third-party equity investors. TILC is the contractual servicer for TRIP Master Funding and TRL 2012, with the authority to manage and service each entity's owned railcars. The Company's controlling interest in each of TRIP Holdings and RIV 2013 results from its combined role as both equity member and agent/servicer. The noncontrolling interest included in the accompanying consolidated balance sheets represents the non-Trinity equity interest in these partially-owned subsidiaries.
Trinity has no obligation to guarantee performance under any of the partially-owned subsidiaries' (or their respective subsidiaries') debt agreements, guarantee any railcar residual values, shield any parties from losses, or guarantee minimum yields.
The assets of each of TRIP Master Funding and TRL 2012 may only be used to satisfy the particular subsidiary's liabilities, and the creditors of each of TRIP Master Funding and TRL 2012 have recourse only to the particular subsidiary's assets. Each of TILC and the third-party equity investors receive distributions from TRIP Holdings and RIV 2013, when available, in proportion to its respective equity interests, and has an interest in the net assets of the partially-owned subsidiaries upon a liquidation event in the same proportion. TILC is paid fees for the services it provides to TRIP Master Funding and TRL 2012 and has the potential to earn certain incentive fees. TILC and the third-party equity investors have commitments to provide additional equity funding to TRIP Holdings that expire in May 2019 contingent upon certain returns on investment in TRIP Holdings and other conditions being met. There are no remaining equity commitments with respect to RIV 2013.
See Note 11 Debt regarding the debt of TRIP Holdings and RIV 2013 and their respective subsidiaries.


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Table of Contents

Note 6. Railcar Leasing and Management Services Group
The Railcar Leasing and Management Services Group owns and operates a fleet of railcars as well as provides third-party fleet leasing, management, maintenance, and administrative services. Selected consolidating financial information for the Leasing Group is as follows:
 
June 30, 2018
 
Leasing Group
 
 
 
 
 
Wholly-
Owned
Subsidiaries
 
Partially-Owned Subsidiaries
 
Manufacturing/
Corporate
 
Total
 
(in millions)
Cash, cash equivalents, and short-term marketable securities
$
4.8

 
$

 
$
632.9

 
$
637.7

Property, plant, and equipment, net
$
4,547.1

 
$
1,816.0

 
$
961.5

 
$
7,324.6

Net deferred profit on railcars sold to the Leasing Group
 
 
 
 
 
 
(836.4
)
Consolidated property, plant, and equipment, net
 
 
 
 
 
 
$
6,488.2

Restricted cash
$
100.1

 
$
42.0

 
$
0.1

 
$
142.2

Debt:
 
 
 
 
 
 
 
Recourse
$
26.8

 
$

 
$
400.4

 
$
427.2

Less: unamortized discount

 

 
(0.3
)
 
(0.3
)
Less: unamortized debt issuance costs

 

 
(2.5
)
 
(2.5
)
 
26.8

 

 
397.6

 
424.4

Non-recourse
1,491.6

 
1,343.5

 

 
2,835.1

Less: unamortized discount
(0.3
)
 

 

 
(0.3
)
Less: unamortized debt issuance costs
(18.3
)
 
(13.6
)
 

 
(31.9
)
 
1,473.0

 
1,329.9

 

 
2,802.9

Total debt
$
1,499.8

 
$
1,329.9

 
$
397.6

 
$
3,227.3

Net deferred tax liabilities
$
672.7

 
$
0.8

 
$
40.8

 
$
714.3

 
 
December 31, 2017
 
Leasing Group
 
 
 
 
 
Wholly-
Owned
Subsidiaries
 
Partially-Owned Subsidiaries
 
Manufacturing/
Corporate
 
Total
 
(in millions)
Cash, cash equivalents, and short-term marketable securities
$
3.3

 
$

 
$
1,094.8

 
$
1,098.1

Property, plant, and equipment, net
$
4,147.5

 
$
1,824.6

 
$
972.7

 
$
6,944.8

Net deferred profit on railcars sold to the Leasing Group
 
 
 
 
 
 
(810.1
)
Consolidated property, plant, and equipment, net
 
 
 
 
 
 
$
6,134.7

Restricted cash
$
132.2

 
$
62.9

 
$
0.1

 
$
195.2

Debt:
 
 
 
 
 
 
 
Recourse
$
28.3

 
$

 
$
849.9

 
$
878.2

Less: unamortized discount

 

 
(8.5
)
 
(8.5
)
Less: uamortized debt issuance costs

 

 
(2.9
)
 
(2.9
)
 
28.3

 

 
838.5

 
866.8

Non-recourse
1,035.9

 
1,365.3

 

 
2,401.2

Less: unamortized debt issuance costs
(11.1
)
 
(14.5
)
 

 
(25.6
)
 
1,024.8

 
1,350.8

 

 
2,375.6

Total debt
$
1,053.1

 
$
1,350.8

 
$
838.5

 
$
3,242.4

Net deferred tax liabilities
$
653.7

 
$
0.8

 
$
69.4

 
$
723.9


19

Table of Contents

Net deferred profit on railcars sold to the Leasing Group consists of intersegment profit that is eliminated in consolidation and is, therefore, not allocated to an operating segment. See Note 5 Partially-Owned Leasing Subsidiaries and Note 11 Debt for a further discussion regarding the Company’s investment in its partially-owned leasing subsidiaries and the related indebtedness. See Note 13 Income Taxes for a discussion of the effects of the Act on net deferred tax liabilities. See Note 19 Financial Statements of Guarantors of the Senior Notes for a discussion of subsidiary guarantees of the Senior Notes.
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
Percent
 
2018
 
2017
 
Percent
 
($ in millions)
 
Change
 
($ in millions)
 
Change
Revenues: