Trinity Industries(TRN) - 2020 Q1 - Quarterly Report

PART I FINANCIAL INFORMATION Item 1. Financial Statements The company's Q1 2020 financials show stable revenue but lower operating profit, with net income significantly boosted by a one-time tax benefit Consolidated Statements of Operations Q1 2020 vs Q1 2019 Operations | Financial Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | Total Revenues | $615.2 million | $604.8 million | | Total Operating Profit | $73.0 million | $91.8 million | | Income from Continuing Operations | $162.5 million | $31.2 million | | Net Income | $162.3 million | $30.1 million | | Diluted EPS (Continuing Operations) | $1.33 | $0.24 | - Net income for Q1 2020 was significantly impacted by a tax benefit of $147.6 million, compared to a tax provision of $8.9 million in Q1 2019, primarily due to the CARES Act[7] Consolidated Balance Sheets Financial Position as of March 31, 2020 | Balance Sheet Item | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Total Assets | $9,002.9 million | $8,701.4 million | | Total Liabilities | $6,536.8 million | $6,322.5 million | | Total Debt | $4,870.2 million | $4,881.9 million | | Total Stockholders' Equity | $2,466.1 million | $2,378.9 million | - Income tax receivable increased substantially to $389.1 million as of March 31, 2020, from $14.7 million at December 31, 2019, reflecting anticipated refunds under the CARES Act[11] Consolidated Statements of Cash Flows Q1 2020 vs Q1 2019 Cash Flow | Cash Flow Activity | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $173.6 million | ($125.9 million) | | Net Cash used in Investing Activities | ($64.6 million) | ($438.5 million) | | Net Cash from (used in) Financing Activities | ($77.1 million) | $401.7 million | - The significant improvement in operating cash flow was driven by higher net income (adjusted for non-cash items) and changes in operating assets and liabilities[12] - The reduction in cash used for investing activities was primarily due to lower capital expenditures for the leasing fleet[12] Notes to Consolidated Financial Statements Notes detail a depreciation estimate change, a significant CARES Act tax benefit, restructuring charges, and share repurchase activities - A change in accounting estimate for railcar useful lives decreased depreciation expense by approximately $7.7 million and increased net income by approximately $5.9 million for the quarter[38] - The CARES Act allowed the company to carry back tax losses, generating a tax benefit of $154.7 million for the quarter[91] - In Q1 2020, the company recorded restructuring charges of $5.5 million, consisting of a $5.2 million non-cash impairment of its corporate headquarters and other items[99] Share Repurchase Activity (Q1 2020) | Share Repurchase Activity (Jan 1 - Mar 31, 2020) | Value | | :--- | :--- | | Shares Repurchased | 1,850,000 | | Cost | $35.4 million | | Remaining Authorization (as of Mar 31, 2020) | $89.9 million | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses flat revenue, decreased operating profit due to rail product issues, and the expected future impact of COVID-19 COVID-19 Impact - While COVID-19 did not materially impact Q1 2020 results, the company expects a decline in near-term results due to reduced demand and potential disruptions[145] - The company has taken measures to preserve cash and anticipates receiving tax refunds totaling approximately $303 million in 2020 due to the CARES Act[144] Segment Performance - Railcar Leasing and Management Services Group: Operating profit increased 8.3% YoY to $92.9 million, driven by fleet growth and a reduction in depreciation expense[175][176][181] - Rail Products Group: Operating profit fell 46.7% YoY to $25.1 million due to fewer railcar deliveries and operational inefficiencies, with the backlog value decreasing 52.1% YoY[183][184] - All Other: Operating profit decreased slightly to $9.3 million from $10.1 million, primarily due to insurance recoveries recognized in the prior year period[187] Liquidity and Capital Resources - As of March 31, 2020, the company had total committed liquidity of $759.7 million, including cash and available credit facilities[191] - In March 2020, the company redeemed its 2006 Secured Railcar Equipment Notes, using $109.9 million in cash[192] - For full-year 2020, the company anticipates a net investment in its lease fleet of $350 million to $500 million[200] Quantitative and Qualitative Disclosures About Market Risk The company reports no material changes in its market risks since year-end 2019 - There has been no material change in the company's market risks since December 31, 2019[212] Controls and Procedures Management confirmed the effectiveness of disclosure controls and procedures with no material changes to internal controls - The Chief Executive and Chief Financial Officers concluded that the company's disclosure controls and procedures were effective as of the end of the period[213] - No material changes in internal controls over financial reporting occurred during the quarter[214] PART II OTHER INFORMATION Legal Proceedings This section references ongoing legal matters related to the company's highway products business - The company refers to Note 14 of the Consolidated Financial Statements for information on legal proceedings, which primarily concern litigation related to its highway products[110][113][216] Risk Factors A new risk factor was added to address the material adverse effects of the COVID-19 pandemic - A new risk factor was added to disclose that the COVID-19 pandemic is likely to have a material adverse effect on the company's operations, financial condition, and liquidity[217] Unregistered Sales of Equity Securities and Use of Proceeds The company details its Q1 2020 share repurchase activities and remaining authorization Share Repurchases by Month (Q1 2020) | Period (2020) | Shares Purchased (Program) | Average Price Paid | Total Cost (Program) | | :--- | :--- | :--- | :--- | | February | 550,000 | $21.23 | ~$11.7M | | March | 1,300,000 | $18.25 | ~$23.7M | | Q1 Total | 1,850,000 | - | ~$35.4M | Exhibits This section lists all exhibits filed with the report, including certifications and interactive data files - The report lists exhibits filed, including Amended and Restated Bylaws, CEO and CFO certifications under Sarbanes-Oxley, and Inline XBRL documents[224]