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Section 1: 8-K (8-K)

Document



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported):
 
July 25, 2018

394376633_trinityinclogoverticalhrblac.jpg
__________________________________________
(Exact name of registrant as specified in its charter)
 
 
 
 
 
Delaware
 
1-6903
 
75-0225040
(State or other jurisdiction
of incorporation
 
(Commission File No.)
 
(I.R.S. Employer
Identification No.)
  
 
 
 
 
2525 N. Stemmons Freeway, Dallas, Texas
 
 
 
75207-2401
(Address of principal executive offices)
 
 
 
(Zip Code)

 
 
 
Registrant's telephone number, including area code:
 
214-631-4420
Not Applicable
Former name or former address, if changed since last report
______________________________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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. ¨






Item 2.02 Results of Operations and Financial Condition.
The Registrant hereby furnishes the information set forth in its News Release, dated July 25, 2018, announcing operating results for the three and six month periods ended June 30, 2018, a copy of which is furnished as exhibit 99.1 and incorporated herein by reference. On July 26, 2018, the Registrant held a conference call and web cast with respect to its financial results for the three and six month periods ended June 30, 2018. The conference call scripts of Gail M. Peck, Vice President, Finance and Treasurer; S. Theis Rice, Senior Vice President and Chief Legal Officer; Timothy R. Wallace, Chairman, Chief Executive Officer, and President; Melendy E. Lovett, Senior Vice President and Chief Administrative Officer; Antonio Carrillo, Senior Vice President and Group President of the Construction, Energy, Marine and Components Group; Scott C. Beasley, Chief Financial Officer of the Construction, Energy, Marine and Components Group; Eric R. Marchetto, Executive Vice President and Chief Commercial Officer, TrinityRail; and James E. Perry, Senior Vice President and Chief Financial Officer are furnished as exhibits 99.2, 99.3, 99.4, 99.5, 99.6, 99.7, 99.8, and 99.9 respectively, and incorporated herein by reference.
This information is not "filed" pursuant to the Securities Exchange Act of 1934 and is not incorporated by reference into any Securities Act of 1933 registration statements. Additionally, the submission of the report on Form 8-K is not an admission of the materiality of any information in this report that is required to be disclosed solely by Regulation FD.
Item 7.01 Regulation FD Disclosure.
See "Item 2.02 — Results of Operations and Financial Condition."
Additionally, the Registrant has made available on its website, certain information, furnished as exhibit 99.9 and incorporated herein by reference, regarding the anticipated alignment of its businesses after the expected spin-off of its infrastructure businesses. See the Investor Relations - Events & Presentations portion and the Trinity Spin-Off portion of the website at www.trin.net.
This information is not "filed" pursuant to the Securities Exchange Act of 1934 and is not incorporated by reference into any Securities Act of 1933 registration statements. Additionally, the submission of the report on Form 8-K is not an admission of the materiality of any information in this report that is required to be disclosed solely by Regulation FD.
Forward-Looking Statements
Some statements in this Form 8-K, 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 the Registrant's estimates, expectations, beliefs, intentions or strategies for the future, and the assumptions underlying these forward-looking statements, including, but not limited to, statements regarding the effect of the anticipated separation of the Registrant into two separate public companies, the expected timetable for completing the spin-off transaction, whether or not the spin-off transaction occurs, and any other statements regarding events or developments that the Registrant believes or anticipates will or may occur in the future. The Registrant uses the words “anticipates,” “assumes,” “believes,” “estimates,” “expects,” “intends,” “forecasts,” “may,” “will,” “should,” “guidance,” “outlook,” and similar expressions to identify these forward-looking statements. Forward-looking statements speak only as of the date of this Form 8-K, and the Registrant expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in the Registrant’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. There is no assurance that the proposed spin-off transaction will be completed, that the Registrant's Board of Directors will continue to pursue the proposed spin-off transaction (even if there are no impediments to completion), that the Registrant will be able to separate its businesses, or that the proposed spin-off transaction will be the most beneficial alternative considered. Forward looking statements involve risks and uncertainties that could cause actual results to differ materially from historical experience or the Registrant’s present expectations, including but not limited to risks and uncertainties regarding economic, competitive, governmental, and technological factors affecting the Registrant’s operations, markets, products, services and prices, as well as any changes in or abandonment of the proposed separation or the ability to effect the separation and satisfy the conditions to the proposed separation, and such forward-looking statements are not guarantees of future performance. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see “Risk Factors” and “Forward-Looking Statements” in the Registrant’s Annual Report on Form 10-K for the most recent fiscal year, and as may be revised and updated by the Registrant’s Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.
Item 9.01 Financial Statements and Exhibits.

(a) - (c) Not applicable.

(d) Exhibits:
Exhibit No. / Description
99.1 News Release dated July 25, 2018 with respect to the operating results for the three and six month periods ended June 30, 2018.





99.2 Conference call script of July 26, 2018 of Gail M. Peck, Vice President, Finance and Treasurer.
99.3 Conference call script of July 26, 2018 of S. Theis Rice, Senior Vice President and Chief Legal Officer.
99.4 Conference call script of July 26, 2018 of Timothy R. Wallace, Chairman, Chief Executive Officer, and President.
99.5 Conference call script of July 26, 2018 of Melendy E Lovett, Senior Vice President and Chief Administrative Officer.
99.6 Conference call script of July 26, 2018 of Antonio Carrillo, Senior Vice President and Group President of the Construction, Energy, Marine and Components Group.
99.7 Conference call script of July 26, 2018 of Scott C. Beasley, Chief Financial Officer of the Construction, Energy, Marine and Components Group.
99.8 Conference call script of July 26, 2018 of Eric R. Marchetto, Executive Vice President and Chief Commercial Officer, TrinityRail.
99.9 Conference call script of July 26, 2018 of James E. Perry, Senior Vice President and Chief Financial Officer.






SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
Trinity Industries, Inc.
 
 
 
July 26, 2018
By:
/s/ James E. Perry
 
 
Name: James E. Perry
 
 
Title: Senior Vice President and Chief Financial Officer



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Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit
Exhibit 99.1
NEWS RELEASE
                 394376633_logoa11.jpg

FOR IMMEDIATE RELEASE
Trinity Industries, Inc. Announces Second Quarter 2018 Results

DALLAS, Texas - July 25, 2018 - Trinity Industries, Inc. (NYSE:TRN) today announced earnings results for the second quarter ended June 30, 2018, including the following highlights:
Earnings per common diluted share improved to $0.43 compared with $0.33 in 2017
Adjusted earnings per common diluted share of $0.48, excluding $10.4 million, or $0.05 per share, of transaction costs incurred related to the planned spin-off of Arcosa, Inc. to Trinity stockholders
Lower effective tax rate of 23.9% compared with 40.9% in 2017 due primarily to the Tax Cut and Jobs Act, increasing earnings per common diluted share by $0.10 year-over-year
Railcar deliveries and orders totaling 5,105 and 8,320 railcars, respectively, in the Rail Group, compared with 4,055 and 5,705 railcars, respectively, in 2017
Orders with a value of $116.8 million in the Inland Barge Group
Full year 2018 earnings per common diluted share guidance increased to between $1.15 and $1.40, compared with previous earnings guidance of between $0.95 and $1.20 per share
Full year 2018 adjusted earnings, excluding spin-off related transaction costs of approximately $30 to $40 million, increased to between $1.45 and $1.65 per common diluted share compared with previous earnings guidance, excluding spin-off related transaction costs of approximately $30 to $35 million, of between $1.20 and $1.40 per share
Consolidated Results
Trinity Industries, Inc. reported net income attributable to Trinity stockholders of $64.1 million, or $0.43 per common diluted share, for the second quarter ended June 30, 2018. Net income for the same quarter of 2017 was $51.1 million, or $0.33 per common diluted share. Revenues for the second quarter of 2018 increased to $942.3 million compared with revenues of $905.5 million for the same quarter of 2017. In addition, the Company incurred approximately $10.4 million of corporate costs, or $0.05 per share, related to the expected spin-off transaction during the quarter and no costs were incurred in the prior year period. Second quarter 2018 net income benefitted from a lower effective tax rate of 23.9% compared with 40.9% in the same quarter of 2017 due primarily to the Tax Cut and Jobs Act (“the Act”), increasing earnings per common diluted share by $0.10 year-over-year. For the full year 2018, the Company expects a 25.0% effective tax rate compared with 36.2% in full year 2017, excluding the positive one-time benefit from adoption of the Act in the fourth quarter of 2017.
“Trinity’s consolidated second quarter financial results exceeded our expectations due to better operational performance,” said Timothy R. Wallace, Trinity’s Chairman, CEO and President. “Overall market fundamentals continue to improve. The level of orders received by our railcar and inland barge manufacturing businesses during the second quarter reflects growing momentum in respect to demand for our products.”
Mr. Wallace added, “We remain on track for the planned spin-off of Trinity’s infrastructure-related businesses to our shareholders in the fourth quarter. Both Trinity and Arcosa are expected to launch with very solid foundations.”

1


Quarterly Business Group Results
In the second quarter of 2018, the Rail Group reported higher revenues of $575.2 million compared with revenues of $465.9 million in the second quarter of 2017. Operating profit and profit margin for the Rail Group of $57.7 million and 10.0% in the second quarter of 2018 also improved compared with $36.7 million and 7.9% in the second quarter of 2017. The increases in revenues and operating profit were primarily due to higher railcar deliveries and improved operational efficiencies during the quarter. The Rail Group delivered 5,105 railcars and received orders for 8,320 railcars during the second quarter of 2018, including orders for 4,800 railcars resulting from an extension of the supply agreement with GATX through 2023, compared with 4,055 and 5,705 railcars, respectively, in the same quarter last year. The railcar backlog in the Rail Group was $2.7 billion as of June 30, 2018, representing 24,580 railcars, compared with a railcar backlog of $2.1 billion as of March 31, 2018, representing 21,365 railcars.
The Railcar Leasing and Management Services Group (“Leasing Group”) reported revenues and operating profit of $213.4 million and $91.8 million, respectively, in the second quarter of 2018, compared with $192.1 million and $110.8 million, respectively, in the same quarter of 2017. The increase in revenues was primarily due to higher sales of railcars owned one year or less and additions to the lease fleet, partially offset by lower average lease rates and utilization. Total proceeds from the sale of leased railcars, including sales of railcars owned for more than one year that are not reported as revenues, were $70.1 million in the second quarter of 2018 compared with $99.5 million of leased railcars in the second quarter of 2017. The decrease in operating profit for the second quarter was primarily the result of lower profit from railcar sales and higher overall cost of sales. Supplemental information for the Leasing Group is provided in the accompanying tables.
The Inland Barge Group reported higher revenues of $42.9 million in the second quarter of 2018 compared with revenues of $33.5 million in the second quarter of 2017. Operating profit for this Group also improved to $2.9 million in the second quarter of 2018 compared with $0.5 million in the second quarter of 2017. The increases in revenues and operating profit compared with the same quarter last year were primarily due to higher barge deliveries. The Inland Barge Group received orders of $116.8 million during the quarter and, as of June 30, 2018, had a backlog of $198.4 million compared with a backlog of $124.5 million as of March 31, 2018.
The Energy Equipment Group reported lower revenues of $199.3 million in the second quarter of 2018 compared with revenues of $238.5 million in the same quarter of 2017. Operating profit and profit margin for this Group also declined to $13.1 million and 6.6% compared with $24.1 million and 10.1% in the same quarter last year. The decreases in revenues and operating profit were primarily due to a decrease in volumes in the Group's wind towers product line and the combination of lower pricing and lower production efficiencies in the Group's utility structures product line, partially offset by a $3.9 million insurance recovery. The backlog for wind towers and utility structures as of June 30, 2018 was $780.1 million compared with a backlog of $809.7 million as of March 31, 2018.
The Construction Products Group reported higher revenues of $155.6 million in the second quarter of 2018 compared with revenues of $131.3 million in the second quarter of 2017. Operating profit and profit margin also improved to $31.4 million and 20.2% in the second quarter of 2018 compared with $22.2 million and 16.9% in the same quarter last year. The increases in revenues compared with the same quarter last year were primarily due to higher volumes in our construction aggregates business and other businesses. The increase in revenues from other businesses was primarily a result of our trench shoring products acquisition in the third quarter of 2017. The increase in operating profit compared with the same quarter last year was related to volumes increases, a reduction in legal expenses, and $1.7 million in insurance recoveries related to damages at two of our highway products facilities.

2


Redemption of Company's $449.3 million 3 7/8% Convertible Subordinated Notes
As previously disclosed, on April 23, 2018, the Company gave notice of its election to redeem all of the $449.3 million of Convertible Subordinated Notes (the "Notes") on June 1, 2018 at a redemption price in cash equal to 100% of their principal amount plus accrued but unpaid interest. As a result, holders of the entire par amount, excluding $0.8 million, submitted notices for conversion of their Notes at a conversion rate equivalent to 41.4390 shares per each $1,000 principal amount of the Notes. The settlement of the Notes submitted for conversion occurred on various dates between May 30, 2018 and July 3, 2018. The Company elected to exercise its rights to settle the converting Notes in cash rather than in shares of common stock or a combination of cash and shares of common stock. As of July 3, 2018, the Company had completed conversion settlements for an aggregate cash amount of approximately $646.6 million.
In connection with the election to settle the redemption of the Notes entirely with cash, the Company avoided the issuance of up to 5.7 million shares, valued at approximately $198.1 million and representing the amount in excess of par.
The Company funded the redemption and conversion payments through a combination of cash on hand and the proceeds from a $482.5 million railcar asset-backed securitization.
Share Repurchase
During the second quarter of 2018, the Company repurchased 1,451,171 shares of common stock at a cost of approximately $50 million, leaving $400 million remaining under its current authorization through December 31, 2019.
Proposed Spin-off
On December 12, 2017, the Company announced that its Board of Directors unanimously approved a plan to pursue a spin-off of the Company's infrastructure-related businesses to Trinity stockholders. The separation is planned as a tax-free spin-off transaction to the Company's stockholders for U.S. federal income tax purposes. The transaction is expected to result in two separate public companies: (1) Trinity, the currently existing company which will be comprised primarily of Trinity’s rail-related businesses and (2) a new infrastructure company, Arcosa, Inc., focused on infrastructure-related products and services.
Completion of the spin-off will be subject to, among other things, the effectiveness of appropriate filings with the Securities and Exchange Commission, final approval from the Company's Board of Directors, and other customary conditions. The Company may, at any time and for any reason until the proposed transaction is complete, abandon the separation or modify or change its terms. The separation is expected to be completed in the fourth quarter of 2018, but there can be no assurance regarding the ultimate timing of the separation or that the separation will ultimately occur.
Earnings Guidance for 2018
The 2018 earnings guidance reflects consolidated results for the Company and has not been adjusted to incorporate the completion of a potential spin-off transaction.
The Company expects full year 2018 earnings per common diluted share of between $1.15 and $1.40, including spin-off related transaction costs of approximately $30 to $40 million, compared with its previous earnings guidance of between $0.95 and $1.20 per share, including $30 to $35 million of transaction costs. Excluding transaction costs, the Company anticipates full year 2018 earnings per common diluted share of between $1.45 and $1.65 compared with its previous guidance of between $1.20 and $1.40 per share. Refer to the 2018 Full Year Guidance and Outlook table for further information regarding the spin-off related transaction costs and other supplemental guidance details.
Actual results in 2018 may differ from present expectations and could be impacted by a number of factors including, among others, the risk factors disclosed in "Risk Factors" and "Forward-Looking Statements" in the Company's Annual Report on Form 10-K for the most recent fiscal year, and may be revised and updated by our Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

3


Conference Call
Trinity will hold a conference call at 11:00 a.m. Eastern on July 26, 2018 to discuss its second quarter results. To listen to the call, please visit the Investor Relations section of the Trinity Industries website, www.trin.net and select the Events & Presentations menu link. An audio replay may be accessed through the Company’s website or by dialing (402) 220-2672 until 11:59 p.m. Eastern on August 2, 2018.
Company Description
Trinity Industries, Inc., headquartered in Dallas, Texas, is a diversified industrial company that owns complementary market-leading businesses providing products and services to the energy, chemical, agriculture, transportation, and construction sectors, among others. Trinity reports its financial results in five principal business segments: the Rail Group, the Railcar Leasing and Management Services Group, the Inland Barge Group, the Construction Products Group, and the Energy Equipment Group. For more information, visit: www.trin.net.
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 or strategies for the future, and the assumptions underlying these forward-looking statements, including, but not limited to, statements regarding the effect of the Tax Cuts and Jobs Act on Trinity's financial results, any non-cash tax benefits from the remeasurement of Trinity's net deferred tax liabilities, the anticipated separation of Trinity into two separate public companies, the expected timetable for completing the spin-off transaction, whether or not the spin-off transaction occurs, future financial and operating performance of each company, benefits and synergies of the spin-off transaction, strategic and competitive advantages of each company, future opportunities for each company and any other statements regarding events or developments that Trinity believes or anticipates will or may occur in the future. Trinity uses the words “anticipates,” “assumes,” “believes,” “estimates,” “expects,” “intends,” “forecasts,” “may,” “will,” “should,” “guidance,” “outlook,” and similar expressions to identify these forward-looking statements. Forward-looking statements speak only as of the date of this release, and Trinity expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in Trinity’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based, except as required by federal securities laws. There is no assurance that the proposed spin-off transaction will be completed, that the Company's Board of Directors will continue to pursue the proposed spin-off transaction (even if there are no impediments to completion), that the Company will be able to separate its businesses, or that the proposed spin-off transaction will be the most beneficial alternative considered. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from historical experience or our present expectations, including but not limited to risks and uncertainties regarding economic, competitive, governmental, and technological factors affecting Trinity’s operations, markets, products, services and prices, as well as any changes in or abandonment of the proposed separation or the ability to effect the separation and satisfy the conditions to the proposed separation, and such forward-looking statements are not guarantees of future performance. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see “Risk Factors” and “Forward-Looking Statements” in the Company's Annual Report on Form 10-K for the most recent fiscal year, and as may be revised and updated by our Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

4


Investor Contact:
Preston Bass
Director, Investor Relations
Trinity Industries, Inc.
214/631-4420
 
Media Contact:
Jack Todd
Vice President, Public Affairs
Trinity Industries, Inc.
214/589-8909
- TABLES TO FOLLOW -

5




Trinity Industries, Inc.
Condensed Consolidated Income Statements
(in millions, except per share amounts)
(unaudited)
 
Three Months Ended
June 30,
 
2018
 
2017
Revenues
$
942.3

 
$
905.5

Operating costs:
 
 
 
Cost of revenues
718.1

 
682.3

Selling, engineering, and administrative expenses
110.4

 
113.0

Losses (gains) on dispositions of property:
 
 
 
Net gains on lease fleet sales
(9.5
)
 
(23.7
)
Other
(2.2
)
 
(0.7
)
 
816.8

 
770.9

Operating profit
125.5

 
134.6

Interest expense, net
40.1

 
43.4

Other, net
(0.7
)
 
(0.1
)
Income before income taxes
86.1

 
91.3

Provision for income taxes
20.6

 
37.3

Net income
65.5

 
54.0

Net income attributable to noncontrolling interest
1.4

 
2.9

Net income attributable to Trinity Industries, Inc.
$
64.1

 
$
51.1

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

 
$
0.34

Diluted
$
0.43

 
$
0.33

Weighted average number of shares outstanding:
 
 
 
Basic
146.2

 
149.1

Diluted
147.0

 
151.0

Results for the three months ended June 30, 2017 have been revised to reflect the retrospective adoption of Accounting Standards Update No. 2017-07, Compensation - Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Cost ("ASU 2017-07"). The adoption of ASU 2017-07 on January 1, 2018 resulted in a net decrease to previously reported Operating Profit of $0.6 million and a corresponding increase to Other, net of $0.6 million for the three months ended June 30, 2017, with no impact to net income or earnings per share.
Trinity is required to utilize the two-class method of accounting when calculating earnings per share as a result of unvested restricted shares that have non-forfeitable rights to dividends and are, therefore, considered to be a participating security. The unvested restricted shares are excluded from the weighted average number of shares outstanding for the purposes of determining earnings per share. The two-class method results in a lower earnings per share than is calculated from the face of the income statement. See Earnings Per Share Calculation table below.
The Act, enacted in December 2017, reduced the U.S. federal corporate income tax rate from 35.0% to 21.0%. In December 2017, we recorded a tax benefit after the initial assessment of the tax effects of the Act, and we will continue refining this amount throughout 2018, which could potentially affect the measurement of our deferred tax balance or give rise to new deferred tax amounts in future periods of 2018. The impact of the Act may differ from our estimate due to changes in the regulations, rulings, guidance, and interpretations issued by the IRS and the FASB as well as interpretations and assumptions made by the Company. For the items for which we were able to determine a reasonable estimate, we recognized an additional provisional net expense of $0.2 million for the three months ended June 30, 2018, which is included as a component of income tax expense.

6



Trinity Industries, Inc.
Condensed Consolidated Income Statements
(in millions, except per share amounts)
(unaudited)
 
Six Months Ended
June 30,
 
2018
 
2017
Revenues
$
1,773.6

 
$
1,782.8

Operating costs:
 
 
 
Cost of revenues
1,348.2

 
1,342.5

Selling, engineering, and administrative expenses
215.3

 
215.5

Losses (gains) on dispositions of property:
 
 
 
Net gains on lease fleet sales
(11.6
)
 
(23.7
)
Other
(2.4
)
 
(2.0
)
 
1,549.5

 
1,532.3

Operating profit
224.1

 
250.5

Interest expense, net
82.5

 
86.7

Other, net
(0.9
)
 

Income before income taxes
142.5

 
163.8

Provision for income taxes
35.4

 
58.1

Net income
107.1

 
105.7

Net income attributable to noncontrolling interest
2.8

 
8.6

Net income attributable to Trinity Industries, Inc.
$
104.3

 
$
97.1

 
 
 
 
Net income attributable to Trinity Industries, Inc. per common share:
 
 
Basic
$
0.70

 
$
0.64

Diluted
$
0.68

 
$
0.63

Weighted average number of shares outstanding:
 
 
 
Basic
146.7

 
148.9

Diluted
150.2

 
151.0

Results for the six months ended June 30, 2017 have been revised to reflect the retrospective adoption of ASU 2017-07. The adoption of ASU 2017-07 on January 1, 2018 resulted in a net decrease to previously reported Operating Profit of $1.3 million and a corresponding increase to Other, net of $1.3 million for the six months ended June 30, 2017, with no impact to net income or earnings per share.
Trinity is required to utilize the two-class method of accounting when calculating earnings per share as a result of unvested restricted shares that have non-forfeitable rights to dividends and are, therefore, considered to be a participating security. The unvested restricted shares are excluded from the weighted average number of shares outstanding for the purposes of determining earnings per share. The two-class method results in a lower earnings per share than is calculated from the face of the income statement. See Earnings Per Share Calculation table below.
The Act, enacted in December 2017, reduced the U.S. federal corporate income tax rate from 35.0% to 21.0%. In December 2017, we recorded a tax benefit after the initial assessment of the tax effects of the Act, and we will continue refining this amount throughout 2018, which could potentially affect the measurement of our deferred tax balance or give rise to new deferred tax amounts in future periods of 2018. The impact of the Act may differ from our estimate due to changes in the regulations, rulings, guidance, and interpretations issued by the IRS and the FASB as well as interpretations and assumptions made by the Company. For the items for which we were able to determine a reasonable estimate, we recognized an additional provisional net benefit of $0.3 million for the six months ended June 30, 2018, which is included as a component of income tax expense.


7



Trinity Industries, Inc.
Condensed Segment Data
(in millions)
(unaudited)
 
Three Months Ended
June 30,
Revenues:
2018
 
2017
Rail Group
$
575.2

 
$
465.9

Construction Products Group
155.6

 
131.3

Inland Barge Group
42.9

 
33.5

Energy Equipment Group
199.3

 
238.5

Railcar Leasing and Management Services Group
213.4

 
192.1

All Other
23.3

 
22.7

Segment Totals before Eliminations
1,209.7

 
1,084.0

Eliminations - lease subsidiary
(228.3
)
 
(130.6
)
Eliminations - other
(39.1
)
 
(47.9
)
Consolidated Total
$
942.3

 
$
905.5

 
 
 
 
 
Three Months Ended
June 30,
Operating profit (loss):
2018
 
2017
Rail Group
$
57.7

 
$
36.7

Construction Products Group
31.4

 
22.2

Inland Barge Group
2.9

 
0.5

Energy Equipment Group
13.1

 
24.1

Railcar Leasing and Management Services Group
91.8

 
110.8

All Other
(3.0
)
 
(5.7
)
Segment Totals before Eliminations and Corporate Expenses
193.9

 
188.6

Corporate
(43.4
)
 
(38.4
)
Eliminations - lease subsidiary
(24.5
)
 
(14.4
)
Eliminations - other
(0.5
)
 
(1.2
)
Consolidated Total
$
125.5

 
$
134.6



8



Trinity Industries, Inc.
Condensed Segment Data
(in millions)
(unaudited)
 
Six Months Ended
June 30,
Revenues:
2018
 
2017
Rail Group
$
1,173.7

 
$
944.2

Construction Products Group
280.6

 
254.4

Inland Barge Group
73.7

 
96.2

Energy Equipment Group
426.0

 
493.9

Railcar Leasing and Management Services Group
388.0

 
371.0

All Other
48.1

 
45.5

Segment Totals before Eliminations
2,390.1

 
2,205.2

Eliminations - lease subsidiary
(524.4
)
 
(322.8
)
Eliminations - other
(92.1
)
 
(99.6
)
Consolidated Total
$
1,773.6

 
$
1,782.8

 
 
 
 
 
Six Months Ended
June 30,
Operating profit (loss):
2018
 
2017
Rail Group
$
116.6

 
$
87.2

Construction Products Group
50.8

 
37.7

Inland Barge Group
2.2

 
6.8

Energy Equipment Group
34.4

 
53.7

Railcar Leasing and Management Services Group
162.9

 
195.8

All Other
(6.3
)
 
(10.3
)
Segment Totals before Eliminations and Corporate Expenses
360.6

 
370.9

Corporate
(82.9
)
 
(73.5
)
Eliminations - lease subsidiary
(53.2
)
 
(43.8
)
Eliminations - other
(0.4
)
 
(3.1
)
Consolidated Total
$
224.1

 
$
250.5



9



Trinity Industries, Inc.
Leasing Group
Condensed Results of Operations (unaudited)
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2018
 
2017
 
2018
 
2017
 
($ in millions)
Revenues:
 
 
 
 
 
 
 
Leasing and management
$
184.2

 
$
185.0

 
$
358.8

 
$
363.9

Sales of railcars owned one year or less at the time of sale(1)
29.2

 
7.1

 
29.2

 
7.1

Total revenues
$
213.4

 
$
192.1

 
$
388.0

 
$
371.0

Operating profit:
 
 
 
 
 
 
 
Leasing and management
$
77.9

 
$
85.6

 
$
146.9

 
$
170.6

Railcar sales(1):
 
 
 
 
 
 
 
Railcars owned one year or less at the time of sale
4.4

 
1.5

 
4.4

 
1.5

Railcars owned more than one year at the time of sale
9.5

 
23.7

 
11.6

 
23.7

Total operating profit
$
91.8

 
$
110.8

 
$
162.9

 
$
195.8

Operating profit margin:
 
 
 
 
 
 
 
Leasing and management
42.3
%
 
46.3
%
 
40.9
%
 
46.9
%
Railcar sales
*
 
*
 
*
 
*
Total operating profit margin
43.0
%
 
57.7
%
 
42.0
%
 
52.8
%
Selected expense information(2):
 
 
 
 
 
 
 
Depreciation
$
47.0

 
$
43.1

 
$
92.1

 
$
85.2

Maintenance and compliance
$
25.0

 
$
23.9

 
$
51.4

 
$
44.4

Rent
$
9.9

 
$
9.9

 
$
20.0

 
$
20.0

Interest
$
32.3

 
$
31.3

 
$
63.8

 
$
61.9

 
June 30,
2018
 
June 30,
2017
Leasing portfolio information:
 
 
 
Portfolio size (number of railcars):
 
 
 
Wholly-owned
69,480

 
62,570

Partially-owned
24,655

 
24,660

 
94,135

 
87,230

Managed (third-party owned)
27,150

 
19,495

 
121,285

 
106,725

Portfolio utilization (Company-owned railcars)
97.1
%
 
97.5
%
 
Six Months Ended June 30,
 
2018
 
2017
 
(in millions)
Proceeds from sales of leased railcars:
 
 
 
Leasing Group:
 
 
 
Railcars owned one year or less at the time of sale
$
29.2

 
$
7.1

Railcars owned more than one year at the time of sale
56.4

 
92.4

Rail Group

 

 
$
85.6

 
$
99.5

* Not meaningful
(1) The Company recognizes sales of railcars from the lease fleet which have been owned by the lease fleet for one year or less as revenue. Sales of railcars from the lease fleet which have been owned by the lease fleet for more than one year are recognized as a net gain or loss from the disposal of a long-term asset.
(2)Depreciation, maintenance and compliance, and rent expense are components of operating profit. Amortization of deferred profit on railcars sold from the Rail Group 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. Interest expense is not a component of operating profit and includes the effect of hedges.

10



Trinity Industries, Inc.
Condensed Consolidated Balance Sheets
(in millions)
(unaudited)
 
June 30,
2018
 
December 31,
2017
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
586.4

 
640.6

Restricted cash
142.2

 
195.2

Net property, plant, and equipment
6,488.2

 
6,134.7

Goodwill
789.4

 
780.3

Other assets
320.1

 
295.6

 
$
9,354.7

 
$
9,543.2

 
 
 
 
Accounts payable
$
205.3

 
$
175.4

Accrued liabilities
435.0

 
440.0

Debt
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

Stockholders' equity:
 
 
 
Trinity Industries, Inc.
4,317.6

 
4,501.1

Noncontrolling interest
350.2

 
356.9

 
4,667.8

 
4,858.0

 
$
9,354.7

 
$
9,543.2



11



Trinity Industries, Inc.
Additional Balance Sheet Information
(in millions)
(unaudited)


June 30,
2018
 
December 31,
2017
Property, Plant, and Equipment
 
 
 
Corporate/Manufacturing:
 
 
 
Property, plant, and equipment
$
2,077.1

 
$
2,046.4

Accumulated depreciation
(1,115.6
)
 
(1,073.7
)
 
961.5

 
972.7

Leasing:
 
 
 
Wholly-owned subsidiaries:
 
 
 
Machinery and other
10.7

 
10.7

Equipment on lease
5,461.2

 
4,995.7

Accumulated depreciation
(924.8
)
 
(858.9
)
 
4,547.1

 
4,147.5

Partially-owned subsidiaries:
 
 
 
Equipment on lease
2,340.7

 
2,317.7

Accumulated depreciation
(524.7
)
 
(493.1
)
 
1,816.0

 
1,824.6

 
 
 
 
Deferred profit on railcars sold to the Leasing Group
(1,025.6
)
 
(985.2
)
Accumulated amortization
189.2

 
175.1

 
(836.4
)
 
(810.1
)
 
$
6,488.2

 
$
6,134.7



12



Trinity Industries, Inc.
Additional Balance Sheet Information
(in millions)
(unaudited)
 
June 30,
2018
 
December 31,
2017
Debt
 
 
 
Corporate - Recourse:
 
 
 
Revolving credit facility
$

 
$

Senior notes due 2024, net of unamortized discount of $0.3 and $0.3
399.7

 
399.7

Convertible subordinated notes, net of unamortized discount of $- and $8.2

 
441.2

Other
0.4

 
0.5

 
400.1

 
841.4

Less: unamortized debt issuance costs
(2.5
)
 
(2.9
)
 
397.6

 
838.5

Leasing:
 
 
 
Wholly-owned subsidiaries:
 
 
 
Recourse:
 
 
 
Capital lease obligations
26.8

 
28.3

 
26.8

 
28.3

Non-recourse:
 
 
 
Secured railcar equipment notes
1,054.2

 
591.6

Warehouse facility
151.1

 
150.7

Promissory notes
286.0

 
293.6

 
1,491.3

 
1,035.9

Less: unamortized debt issuance costs
(18.3
)
 
(11.1
)
 
1,473.0

 
1,024.8

Partially-owned subsidiaries - non-recourse:
 
 
 
Secured railcar equipment notes
1,343.5

 
1,365.3

Less: unamortized debt issuance costs
(13.6
)
 
(14.5
)
 
1,329.9

 
1,350.8

 
$
3,227.3

 
$
3,242.4



13



Trinity Industries, Inc.
Additional Balance Sheet Information
($ in millions)
(unaudited)
 
June 30,
2018
 
December 31,
2017
Leasing Debt Summary
 
 
 
Total Recourse Debt
$
26.8

 
$
28.3

Total Non-Recourse Debt
2,802.9

 
2,375.6

 
$
2,829.7

 
$
2,403.9

Total Leasing Debt
 
 
 
Wholly-owned subsidiaries
$
1,499.8

 
$
1,053.1

Partially-owned subsidiaries
1,329.9

 
1,350.8

 
$
2,829.7

 
$
2,403.9

Equipment on Lease(1)
 
 
 
Wholly-owned subsidiaries
$
4,547.1

 
$
4,147.5

Partially-owned subsidiaries
1,816.0

 
1,824.6

 
$
6,363.1

 
$
5,972.1

Total Leasing Debt as a % of Equipment on Lease
 
 
 
Wholly-owned subsidiaries
33.0
%
 
25.4
%
Partially-owned subsidiaries
73.2
%
 
74.0
%
Combined
44.5
%
 
40.3
%
(1) Excludes net deferred profit on railcars sold to the Leasing Group.


14



Trinity Industries, Inc.
Condensed Consolidated Cash Flow Statements
(in millions)
(unaudited)
 
Six Months Ended
June 30,
 
2018
 
2017
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

Provision (benefit) 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
)
Other
28.5

 
25.9

Changes in assets and liabilities:
 
 
 
(Increase) decrease in receivables
31.8

 
(52.8
)
(Increase) decrease in inventories
26.1

 
39.6

Increase (decrease) in accounts payable and accrued liabilities
2.1

 
6.1

Other
(24.5
)
 
(27.6
)
Net cash provided by operating activities
348.3

 
336.1

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

 
92.4

Proceeds from dispositions of property
5.5

 
6.0

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
)
(Increase) decrease in short-term marketable securities
294.5

 
55.1

Acquisitions
(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 for financing activities
(362.8
)
 
94.7

Net increase (decrease) 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


15



Trinity Industries, Inc.
Earnings per Share Calculation
(in millions, except per share amounts)
(unaudited)

Basic net income attributable to Trinity Industries, Inc. per common share is computed by dividing net income attributable to Trinity remaining after allocation to unvested restricted shares by the weighted average number of basic common shares outstanding for the period.
 
Three Months Ended
June 30, 2018
 
Three Months Ended
June 30, 2017
 
Income
 
Average Shares
 
EPS
 
Income
 
Average Shares
 
EPS
Net income attributable to Trinity Industries, Inc.
$
64.1

 
 
 
 
 
$
51.1

 
 
 
 
Unvested restricted share participation
(1.1
)
 
 
 
 
 
(1.1
)
 
 
 
 
Net income attributable to Trinity Industries, Inc. - basic
63.0

 
146.2

 
$
0.43

 
50.0

 
149.1

 
$
0.34

Effect of dilutive securities:
 
 
 
 
 
 
 
 
 
 
 
Nonparticipating unvested restricted shares and stock options

 
0.8

 
 
 

 
0.3

 
 
  Convertible subordinated notes

 

 
 
 

 
1.6

 
 
Net income attributable to Trinity Industries, Inc. - diluted
$
63.0

 
147.0

 
$
0.43

 
$
50.0

 
151.0

 
$
0.33


 
Six Months Ended
June 30, 2018
 
Six Months Ended
June 30, 2017
 
Income
 
Average Shares
 
EPS
 
Income
 
Average Shares
 
EPS
Net income attributable to Trinity Industries, Inc.
$
104.3

 
 
 
 
 
$
97.1

 
 
 
 
Unvested restricted share participation
(1.9
)
 
 
 
 
 
(2.3
)
 
 
 
 
Net income attributable to Trinity Industries, Inc. - basic
102.4

 
146.7

 
$
0.70

 
94.8

 
148.9

 
$
0.64

Effect of dilutive securities:
 
 
 
 
 
 
 
 
 
 
 
Nonparticipating unvested restricted shares and stock options

 
0.8

 
 
 

 
0.4

 
 
  Convertible subordinated notes

 
2.7

 
 
 

 
1.7

 
 
Net income attributable to Trinity Industries, Inc. - diluted
$
102.4

 
150.2

 
$
0.68

 
$
94.8

 
151.0

 
$
0.63



16



Trinity Industries, Inc.
Reconciliation of EBITDA
(in millions)
(unaudited)

“EBITDA” is defined as net income plus interest expense, income taxes, and depreciation and amortization including goodwill impairment charges. EBITDA is not a calculation based on generally accepted accounting principles. The amounts included in the EBITDA calculation are, however, derived from amounts included in the historical consolidated statements of operations data. In addition, EBITDA should not be considered as an alternative to net income or operating income as an indicator of our operating performance, or as an alternative to operating cash flows as a measure of liquidity. We believe EBITDA assists investors in comparing a company’s performance on a consistent basis without regard to depreciation and amortization, which can vary significantly depending upon many factors. However, the EBITDA measure presented in this press release may not always be comparable to similarly titled measures by other companies due to differences in the components of the calculation.

 
Three Months Ended
June 30,
 
2018
 
2017
Net income
$
65.5

 
$
54.0

Add:
 
 
 
Interest expense
43.8

 
45.7

Provision (benefit) for income taxes
20.6

 
37.3

Depreciation and amortization expense
77.3

 
73.7

Earnings before interest expense, income taxes, and depreciation and amortization expense
$
207.2

 
$
210.7


 
Six Months Ended
June 30,
 
2018
 
2017
Net income
$
107.1

 
$
105.7

Add:
 
 
 
Interest expense
90.1

 
90.7

Provision (benefit) for income taxes
35.4

 
58.1

Depreciation and amortization expense
152.6

 
146.5

Earnings before interest expense, income taxes, and depreciation and amortization expense
$
385.2

 
$
401.0



17



Trinity Industries, Inc.
2018 Full Year Guidance and Outlook
(unaudited)
Total Company:
 
Total earnings per share(1)
$1.15 - $1.40 per share

Earnings per share, excluding spin-off transaction costs(1)
$1.45 - $1.65 per share

Corporate expense
$160 - $180 million

Spin-off transaction costs
$30 - $40 million

Corporate expense, excluding spin-off transaction costs
$130 - $140 million

Interest expense, net
$165 million

Tax rate, excluding spin-off transaction costs
25
%
 
 
Rail Group:
 
Revenue
$2.3 billion

Operating margin
9.0%

Railcar deliveries
21,000 railcars

Revenue elimination from sales to Leasing Group(2)
$945 million

Operating profit elimination from sales to Leasing Group(2)
$95 million

 
 
Railcar Leasing and Management Services Group:
 
Leasing and management revenues(3)
$725 million

Leasing and management operating profit(4)
$295 million

Proceeds from sales of leased railcars
$350 million

 
 
Inland Barge Group:
 
Revenue
$170 million

Operating profit margin
3.0%

 
 
Construction Products Group:
 
Revenue
$550 million

Operating profit margin
14.5%

 
 
Energy Equipment Group:
 
Revenue
$875 million

Operating profit margin
7.5%

(1) The range for earnings per share guidance reflects variability in the point estimates provided above for each business segment. (2) Revenue and operating profit elimination from sales to the Leasing Group include maintenance services in addition to railcar sales.
(3) Excludes sales of railcars owned one year or less at time of sale.
(4) Excludes operating profit from railcar sales.

- END -

18
(Back To Top)

Section 3: EX-99.2 (EXHIBIT 99.2)

Exhibit


Exhibit 99.2
Trinity Industries, Inc.
Earnings Release Conference Call
Comments of Gail M. Peck
Vice President, Finance and Treasurer
July 26, 2018
Thank you, David. Good morning everyone. Welcome to the Trinity Industries’ second quarter 2018 results conference call.
As we make further preparations for the spin-off of Trinity’s infrastructure-related businesses, we have slightly adjusted the format of today’s call. Similar to past calls, we will begin with commentary from Theis Rice, Tim Wallace, and Melendy Lovett.
Antonio Carrillo, the future President and Chief Executive Officer of the new infrastructure company, Arcsoa, Inc., is joining today’s call. Antonio officially joined Trinity in late April as Senior Vice President and Group President over the Construction, Energy, Marine and Components Group.
Antonio and Scott Beasley, currently Chief Financial Officer for these businesses and future CFO of Arcosa, will provide earnings and guidance commentary for the Groups following Melendy’ s remarks. We will conclude with commentary for the rail-related businesses provided by Eric Marchetto, Chief Commercial Officer for TrinityRail, and James Perry, Trinity’s Chief Financial Officer.
Following prepared remarks, we will move to the Q&A session. Mary Henderson, our Chief Accounting Officer, is also in the room with us today.
I will now turn the call over to Theis.
Theis
Tim
Melendy
Antonio
Scott
Eric
James
Q&A Session
Thank you, David. That concludes today's conference call. A replay of today’s call will be available after one o'clock eastern standard time through midnight on August 2, 2018. The access number is (402) 220-2672. The replay will also be available on our website located at www.trin.net.
We look forward to visiting with you again on our next conference call. Thank you for joining us this morning.



(Back To Top)

Section 4: EX-99.3 (EXHIBIT 99.3)

Exhibit


Exhibit 99.3
Trinity Industries, Inc.
Earnings Release Conference Call
Comments of S. Theis Rice
Senior Vice President and Chief Legal Officer
July 26, 2018
Thank you Gail and good morning.
In our last call I reported on the status of the Joshua Harman False Claims Act litigation pertaining to the Company’s ET Plus guardrail end terminal system. As noted, the United States Court of Appeals for the Fifth Circuit reversed the trial court’s judgment and rendered judgment for Trinity as a matter of law. Following the ruling, the Fifth Circuit also denied Mr. Harman’s Petition for Rehearing. Mr. Harman thereafter filed an appellate petition with the United States Supreme Court requesting review of the Fifth Circuit’s reverse and render ruling.
Mr. Harman’s petition for review at the Supreme Court remains pending. The Court recessed in June 2018 and will reconvene in September 2018, after which the Court could rule on Mr. Harman’s petition for review.
I have also reported previously on lawsuits regarding the ET Plus that were filed in the wake of the original jury verdict in the Harman case. While we continue to incur costs associated with our defense in these cases, we are supported in that defense by the Fifth Circuit’s unanimous panel opinion in which the Court recognized that the ET Plus end terminal system meets all applicable federal safety standards and the government has never wavered in its approval of the product.
For a more detailed disclosure of the False Claims Act case and the Company’s other litigation, please see Note 18 to the financial statements in Trinity’s Form 10-Q for the period ended June 30, 2018, which will be filed today. Additional information on the False Claims Act case and a copy of the Fifth Circuit’s opinion can be found at www.etplusfacts.com.
I will now turn the call over to Tim.




(Back To Top)

Section 5: EX-99.4 (EXHIBIT 99.4)

Exhibit


Exhibit 99.4
Trinity Industries, Inc.
Earnings Release Conference Call
Comments of Timothy R. Wallace
Chairman, Chief Executive Officer, and President
July 26, 2018
Thank you, Theis, and good morning everyone.
We are excited about the momentum our company is experiencing both operationally and as we progress towards the expected spin-off of Arcosa. Trinity’s 2nd quarter financial results exceeded our expectations as a result of strong operational performance. We are experiencing positive momentum in respect to inquiries and orders for a number of our products.
During the second quarter, TrinityRail extended its long-term supply agreement with GATX into 2023. The agreement contains orders for the delivery of an additional 4,800 railcars. We have provided railcars to GATX for more than 30 years, and they continue to be a highly valuable customer.
I continue to be impressed with the way our businesses adjust to changes in demand. Our employees are highly flexible when confronting the various challenges associated with the complexities of today’s business environment. We remain well positioned to respond as market demand shifts.
During the second quarter, Antonio rejoined our management team and is overseeing the businesses that will be spun off as Arcosa. We are continuing to build a solid foundation for both companies and are making good progress toward achieving our goal of a seamless and efficient spin-off. You will hear more about this from others on today’s call.
I am excited about the future of our company and the potential opportunities for long-term growth for both Trinity and Arcosa. We have a highly-seasoned group of employees who are extremely capable.
I will now turn it over to Melendy.




(Back To Top)

Section 6: EX-99.5 (EXHIBIT 99.5)

Exhibit


Exhibit 99.5
Trinity Industries, Inc.
Earnings Release Conference Call
Comments of Melendy E. Lovett
Senior Vice President and Chief Administrative Officer
July 26, 2018
Thank you Tim and good morning everyone.     
We’ve made excellent progress on the expected spin-off of Trinity’s infrastructure-related businesses and remain on track to complete the transaction in the fourth quarter of this year. We are grateful to all of our employees - those who are continuing to deliver quality business results to both internal and external stakeholders as well as those who are working on the spin-off.
Our initial Form 10 was filed in May with the SEC. In June, we filed an amended Form 10 that included first quarter 2018 financial information for Arcosa and its expected business segments. We have made significant progress in our financial reporting preparations and will continue with amended filings as needed leading up to the spin off in the fourth quarter.
Our spin-off project leadership teams are continuing their work on all of the key transaction and separation deliverables.
Both companies expect to host their own Investor Days, most likely in the fourth quarter following the declaration date for the distribution of Arcosa shares. Details will be provided to the investment community when plans are finalized.
We will continue to update our stakeholders on our quarterly earnings calls, and at other times as appropriate. Again, we want to recognize our employees, leadership teams, and external advisors for the significant effort and accomplishments through the first half of this year. Their dedication and focus can be seen in the excellent progress achieved to date as well as in the positive outlook for both companies. I will now turn the call over to Antonio.



(Back To Top)

Section 7: EX-99.6 (EXHIBIT 99.6)

Exhibit


Exhibit 99.6
Trinity Industries, Inc.
Earnings Release Conference Call
Comments of Antonio Carrillo,
Senior Vice President and Group President
Construction, Energy, Marine and Components Group
July 26, 2018
Thank you Melendy and good morning everyone.     
It is a great pleasure to be joining this call. Having spent 16 years at Trinity before leaving to be the CEO of Mexichem 6 years ago, I am very happy to be back. After a few months of re-engaging with the different businesses I can tell you that I am even more excited about the future of the new company and the opportunity to lead my team through this important milestone.
You heard from Tim and Melendy about some of the progress we are making as we move closer to the spin-off. Let me provide some additional color.
In May, along with the initial Form 10 filing with the SEC, we announced the name of the new company, “Arcosa”. We are proud of the historical roots our businesses have within Trinity, and we are equally as excited for Arcosa’s future as a successful standalone public company.
Also, we have made some significant progress in developing the operational model for Arcosa. The model is based on a small corporate office, flat organizations, lean operations, and decentralized decision making. Using this model, we have completed the reorganization of our management team and corporate staffing in preparation for the spin. At the same time, we have been working on all the infrastructure support for the new company, securing office space in the Dallas area, establishing the IT infrastructure platform, and making sure that the company will continue to operate smoothly day one after the spin.
In addition, I have spent the last three months visiting facilities, talking to employees, and meeting with customers and suppliers. During this time, I have been challenging our team to expand their views on strategic approaches to achieve long term sustainable organic growth, as well as identify attractive inorganic growth opportunities. This time has been extremely valuable to begin developing the growth roadmap for Arcosa, which we expect to share during our Investor Day.
From a market conditions standpoint, in general, I am optimistic. Supportive macroeconomic trends are helping our customers put capital to work. We continue to see strong construction activity in most of the markets where we have a presence, and some of our more cyclical businesses, like inland barge, are experiencing a much needed lift in order activity from historically low levels.
Our businesses are well positioned to capitalize good macroeconomic trends and increases in infrastructure spending, whose long-term fundamentals remain very encouraging.
The diverse experience I have gained from my previous roles at Trinity and most recent tenure leading a global, growth-oriented organization, provide a great foundation to execute a successful launch of Arcosa as a stand-alone company. We have a fantastic organization, built upon a portfolio of market-leading businesses, long-standing customer relationships, and a highly talented and dedicated group of employees.
I look forward to sharing more about Arcosa’s vision and growth opportunities in the near future. I will now turn this over to Scott.




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Section 8: EX-99.7 (EXHIBIT 99.7)

Exhibit


Exhibit 99.7
Trinity Industries, Inc.
Earnings Release Conference Call
Comments of Scott C. Beasley,
Chief Financial Officer
Construction, Energy, Marine and Components Group
July 26, 2018
Thank you Antonio, and good morning everyone.
Today, I will provide commentary on Trinity’s Construction Products, Energy Equipment, and Inland Barge groups. I will cover our second quarter results and provide updates to our guidance. As a reminder, Arcosa’s expected reporting segments for these businesses do not align exactly with Trinity’s reporting segments today, and certain businesses that I will discuss, including highway products, will remain with Trinity after the spin. For more details on Arcosa’s anticipated reporting segments, please refer to the Form 10 filing on Trinity’s Investor Relations website.
Starting with the Construction Products Group, second quarter revenues increased 19 percent year-over year, driven by higher revenues in our construction aggregates, trench shoring, and highway products businesses. Operating profit increased 41 percent year-over-year. Excluding a $1.7 million dollar insurance recovery, operating profit increased 34% year-over-year, driven by higher profits in our trench shoring business and lower legal expenses in our highway products business.
In construction aggregates, overall market conditions and demand drivers remain favorable, and we continue to seek opportunities to grow this business. As we have mentioned on previous calls, we are experiencing pricing pressure from increased supply in the Dallas-Fort Worth market, but long-term fundamentals in the market remain strong.
The trench shoring acquisition that we made in the 3rd quarter of 2017 continued to contribute to the positive year-over-year performance of this Group. The management team in Michigan has done an excellent job integrating the business, and we are excited about the financial performance and the strategic fit of the combined trench shoring businesses.
Overall, long term demand fundamentals across our Construction Products Group remain strong. We believe that our platform of businesses is well-positioned to benefit from economic growth in our key markets and long-term infrastructure spending.
Turning to guidance, we adjusted our revenue guidance up modestly to $550 million dollars and increased our projected operating margin from 13.0 percent to 14.5 percent. This increase in margin is primarily due to higher operating profit expectations in our highway products business.
Moving to Energy Equipment, the Group reported lower revenues and operating profit in the second quarter compared to last year.
A primary factor driving the year-over-year revenue decline was lower wind tower volume planned as part of a long-term customer contract. Second quarter revenue and operating profit in wind towers was roughly flat versus the 1st quarter, and we expect a relatively stable production schedule for the remaining quarters of 2018. As we have indicated on many of our previous calls, the scheduled phase out of the production tax credit for wind power continues to create a challenging pricing dynamic in the wind tower market.
Additionally, we had weaker-than-expected performance in our utility structures product line in the second quarter. The quarter’s results were negatively impacted by lower pricing and lower production efficiencies related to an order for a new type of product that we began producing during the quarter. We have delivered most of the product for this order and plan to be back to normal operating levels by the middle of the 3rd





quarter. This performance issue was partially offset by a $3.9 million dollar insurance recovery that settled during the quarter.
On a more positive note, bidding activity continues to improve, and we remain optimistic about long term fundamentals in the utility structures market. The country’s need to replace aging infrastructure, to improve the reliability of the grid, and to connect renewables and other new sources of generation, continue to support our positive long-term view of this business.
Turning to guidance, we are maintaining our revenue guidance of $875 million dollars for the Energy Equipment Group. We are reducing our expected operating margin to 7.5 percent, compared to previous guidance of 8.5 percent, largely due to lower profit expectations in our other energy equipment product lines, which include storage tank, cryogenic equipment, and oil and gas processing products.
Turning to the Inland Barge Group, our performance showed improvement year-over-year with higher revenues and operating profit. Market conditions remain weak, however, and our results are still well below this group’s historical performance levels and our expectations for returns on invested capital.
We reported on our last call that second quarter inquiry levels had been encouraging, and we are pleased to report that we received orders totaling $117 million dollars during the quarter. The orders in the quarter were primarily for liquid barges, covering a variety of commodity types. Our quarter-end backlog totaled $198 million dollars.
We are frequently asked about whether we have seen the bottom of the new inland barge manufacturing cycle. Conversations with our customers indicate that they are cautiously optimistic that supply and demand for barges have moved closer into balance, particularly in liquid markets, as retirements have outpaced new builds and the movement of crude and petrochemicals has improved. However, there are too many unknowns right now to say that we are in a sustained recovery. Customers continue to watch industry utilization metrics, long term contract rates, and steel prices as they make purchasing decisions.
For the full year, we are raising our revenue and operating profit guidance modestly, to $170 million dollars of revenue and a 3.0% operating margin. Orders that will be produced in the second half of the year were primarily taken in a weak pricing environment. In addition, we expect a higher level of production changeovers than we had in the second quarter, as we switch between different barge types and prepare our plants to build barges that will be delivered in 2019. If recent trends continue, 2019 should be a better year than 2018, and we look forward to sharing additional information with you as we progress through the rest of the year.
I will now turn the presentation over to Eric.


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Section 9: EX-99.8 (EXHIBIT 99.8)

Exhibit


Exhibit 99.8
Trinity Industries, Inc.
Earnings Release Conference Call
Comments of Eric R. Marchetto,
Executive Vice President and Chief Commercial Officer
TrinityRail
July 26, 2018
Thank you, Scott, and good morning!
TrintyRail’s performance exceeded our internal expectations for the second quarter as a result of additional lease assignments, more railcar deliveries, improved operational efficiencies, and overall cost control measures. Our culture of flexibility and collaboration positions us well to respond to the momentum we see building in the current railcar market.
North American rail traffic volumes during the second quarter continued to improve with year-to-date growth of more than 3.5% compared to 2017. Available equipment tightened, leading to an increase in orders for new railcars. The industry received orders for approximately 23,800 railcars during the second quarter, the highest level in nearly 4 years. Commercial inquiries for railcars are continuing at elevated levels, reflecting improved industry fundamentals. In addition, railcar scrapping rates have kept pace with industry new railcar builds. These supply and demand dynamics have resulted in some improvement in pricing fundamentals for new and existing railcars.
While railcar fundamentals are improving, various geo-political events are creating a dynamic environment that we are watching carefully. At this point, recent impacts from steel tariffs on our supply chain have not materially impacted our margins. Also railcars serving markets potentially impacted by trade tariffs, namely agricultural and consumer goods, are being partially buffered by increases in global demand. We are monitoring these situations very closely and are ready to respond should the market shift.
During the second quarter, leased railcar utilization improved to 97.1% from 96.1% in the previous quarter, reflecting a higher level of lease assignments of existing railcars. Our total owned and managed fleet included approximately 121,000 railcars at the end of the second quarter, representing 13.6% year-over-year growth and demonstrating our Commercial Services team’s ability to originate railcar leases. As our lease fleet grows, more of our commercial efforts are focused on renewing and placing available railcars on lease. Growth of our lease fleet is a priority for our business.
New railcar order activity in the second quarter increased over the previous quarter. We received orders for approximately 8,320 new railcars spanning a broad range of railcar types. Orders included 4,800 tank cars that are part of an extension to our long-term supply agreement with GATX that continues into 2023. 80% of the orders received during the second quarter are sales to third parties, with the balance for customers of our lease fleet.
Our railcar backlog at the end of the second quarter totaled 24,580 railcars with a value of $2.7 billion. Backlog visibility provides an opportunity to more effectively manage our production schedules and create operating leverage with incremental orders. We expect to deliver approximately 21,000 railcars, approximately 45% of which will go into our lease fleet.
We are pleased with the performance of our railcar maintenance business. In the last few years, we have made significant investments in the expansion of our service capabilities. Growing our maintenance services business allows us to control costs, as well as offer fleet service to key customers as part of our comprehensive rail transportation solution. The team has done a tremendous job improving operational efficiencies and reducing turn times for both maintenance and compliance activities. We continue to see opportunities for growth associated with additional service offerings for the railcar products we manufacture and lease.





In closing, the TrinityRail platform provides scale, speed and innovation, all of which are competitive advantages in today’s marketplace. Our platform of rail transportation offerings differentiates us. Our broad participation in the railcar industry value chain gives us insight into market conditions, positioning us to respond quickly to changes in market demand.
I will now turn it over to James for his remarks.



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Section 10: EX-99.9 (EXHIBIT 99.9)

Exhibit


Exhibit 99.9
Trinity Industries, Inc.
Earnings Release Conference Call
Comments of James E. Perry
Senior Vice President and Chief Financial Officer
July 26, 2018
Thank you, Eric, and good morning everyone.
We are very pleased with our second-quarter operating results and the positive momentum in many of our businesses. We recognize the year-over-year comparison for consolidated results is complicated by several items, most notably tax reform, the call of the convertible notes, and our planned spin-off transaction. I will provide some details today that should assist in the comparison.
In yesterday’s earnings release, we announced revenues of $942 million, up 4% year-over-year, and earnings per share of $0.43, including spin-off transaction costs of $0.05 per share. This compares to EPS of $0.33 in last year’s second quarter, which did not include any transaction costs. This resulted in adjusted second quarter EPS of $0.48 for core earnings for the second quarter this year, a 45% increase year-over-year.
Our results benefitted from U.S. tax reform and a higher-than normal rate in last year’s second quarter, adding EPS of $0.10 on a year-over-year basis. We expect a 25% tax rate in 2018 compared to 36% last year, excluding the one-time benefit from adoption of tax reform.
In April, we provided a notice to call our $449 million convertible notes at par on June 1st, which forced conversion by the holders. We settled the entire amount of the notes, par plus the “in-the-money” premium, in cash for $647 million, the bulk of which settled in the second quarter. We funded the redemption with a combination of cash on hand and proceeds from a non-recourse railcar-backed securitization completed in June, issued on favorable terms and conditions due to strong investor interest. As a result, we eliminated the dilutive impact of the convertible notes, beginning in the second quarter, which was incorporated into the guidance we provided in April. While not a direct usage of our authorized share repurchase program, it had the same permanent effect by reducing our diluted share count going forward.
With respect to our share repurchase program activity, we repurchased $50 million of stock during the quarter. We have $400 million of remaining authorization.
Our second quarter results included $10.4 million, or $0.05 cents per share, of spin-related transaction costs that are reported in corporate expenses. For the full year, we now expect transaction costs of $30 to $40 million, or $0.25 to $0.30 cents per share, which is up slightly from our previous range. Transaction-related expenses primarily include costs related to financial and legal advisors as well as some compensation-related expenses.
For the full year 2018, we now anticipate core EPS, excluding spin-off transaction costs, of between $1.45 and $1.65 compared to our previous EPS range of $1.20 to $1.40. Our guidance reflects consolidated results for Trinity and will be adjusted for the pro-forma Company at a later date once the planned spin-off is complete.
The increase in our guidance reflects our better than expected second quarter results and higher profitability across most of our businesses in the second half of the year. Scott outlined the Construction, Energy and Marine outlook. I will cover the Rail, Leasing, Corporate, and consolidated guidance.
With the expectation for higher railcar deliveries that Eric mentioned, our guidance for the Rail Group is now for revenues of $2.3 billion with a 9% operating margin. The decline in the back-half margin as compared to our first half results are due to production line changeovers and deliveries of railcars priced in a softer market environment.





In our Leasing and Management Services Group, we expect revenues from operations of $725 million and operating profit from operations of $295 million.
Our corporate expenses are down $9 million year-to-date, or 12%, as compared to the same period in 2017, excluding the transaction-related expenses. This is primarily due to lower legal expenses related to our highway litigation. Our guidance for 2018 corporate expenses is now $130 to $140 million, as compared to our previous range of $130 to $150 million, with both ranges exclusive of non-recurring spin-related costs.
From a second quarter capital expenditures perspective, we invested $210 million in our wholly-owned lease fleet - including new railcars, secondary market purchases, and modifications - and invested $18 million at the corporate level and across our businesses during the quarter.
Investing in our lease fleet continues to be a strategic priority for the Company, while we continue to sell leased railcars to the RIV platform and maintain the management responsibility. For full year 2018, we now expect to add railcars to our lease fleet with a value of $960 million, primarily from our manufacturing lines, but also from secondary market purchases. In addition, we will invest approximately $85 million in our owned and partially-owned lease fleets to modify certain tank cars to meet the new regulatory standards for flammable service. The investment will also make these railcars available to carry a wider range of commodities.
In addition, as previously disclosed, we provided a 12-month notice in January that we intend to exercise our option to purchase $224 million of leased railcars in two of our off-balance sheet financings.  These are attractive assets, and we may accelerate the timing of the purchase into 2018. 
We continue to expect proceeds from sales of leased railcars of $350 million, with $86 million completed in the first half of the year. As a reminder, the guidance figure for proceeds from sales of leased railcars is not included in the segment guidance for leasing revenue and profit from operations.
After taking into account deferred profit on new railcar additions and planned modifications to our lease fleet, as well as the proceeds from sales of leased railcars, we now anticipate a net lease fleet investment of approximately $600 million to $825 million in 2018, with the high end of the range being a function of whether we accelerate the purchase option I mentioned.
For our businesses and at the Corporate level, we expect capital expenditures of between $100 million and $135 million in 2018. We expect to have additional capital expenditures related to the proposed spin-off that are not included in this range at this time.
As Melendy mentioned, both Trinity and Arcosa expect to host an Investor Day as we approach the spin-off date. We look forward to discussing more details related to our growth strategies, investment priorities, and capital structures in due course. We are progressing well with our separation efforts and various financial reporting requirements. However, given the regulatory filing process as a matter of course, we are unable to refine our fourth quarter timing expectation at this time.
As we indicated in our press release yesterday, actual results in 2018 may differ from present expectations and could be impacted by a number of factors including, among others, the “Risk Factors” and “Forward-Looking Statements” disclosed in our 10-K.
Our operator will now prepare us for the question and answer session.
-- Q&A Session --




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