Trinity Industries(TRN) - 2023 Q1 - Quarterly Report

PART I FINANCIAL INFORMATION This section presents Trinity Industries, Inc.'s unaudited consolidated financial statements, management's discussion, market risk, and internal controls for the first quarter Item 1. Financial Statements This section presents Trinity Industries, Inc.'s unaudited consolidated financial statements for Q1 2023 and 2022, including key statements and detailed accounting notes Consolidated Statements of Operations This statement details the company's revenues, operating costs, and net income for the three months ended March 31, 2023 and 2022 Consolidated Statements of Operations (in millions, except per share) | Metric (in millions, except per share) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------------------------- | :---------------------------------- | :---------------------------------- | | Revenues | $641.7 | $472.7 | | Operating costs | $538.5 | $398.5 | | Selling, engineering, and admin expenses | $49.9 | $44.7 | | Gains on dispositions of property | $15.3 | $25.3 | | Restructuring activities, net | $(0.4) | $— | | Total operating profit | $69.0 | $54.8 | | Interest expense, net | $62.1 | $43.5 | | Other, net | $1.6 | $(1.6) | | Income from continuing operations before income taxes | $5.3 | $12.9 | | Provision (benefit) for income taxes | $(11.5) | $3.0 | | Income from continuing operations | $16.8 | $9.9 | | Loss from discontinued operations, net | $(3.1) | $(6.9) | | Loss on sale of discontinued operations, net | $— | $(1.1) | | Net income | $13.7 | $1.9 | | Net income attributable to noncontrolling interest | $9.3 | $2.6 | | Net income (loss) attributable to Trinity Industries, Inc. | $4.4 | $(0.7) | | Basic EPS (continuing operations) | $0.09 | $0.09 | | Basic EPS (discontinued operations) | $(0.04) | $(0.10) | | Basic net income (loss) per share | $0.05 | $(0.01) | | Diluted EPS (continuing operations) | $0.09 | $0.09 | | Diluted EPS (discontinued operations) | $(0.04) | $(0.10) | | Diluted net income (loss) per share | $0.05 | $(0.01) | | Weighted average shares outstanding (Basic) | 80.8 | 82.9 | | Weighted average shares outstanding (Diluted) | 83.2 | 85.5 | Consolidated Statements of Comprehensive Income (Loss) This statement presents net income and other comprehensive income components, leading to total comprehensive income for the periods Consolidated Statements of Comprehensive Income (Loss) (in millions) | Metric (in millions) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------- | :---------------------------------- | :---------------------------------- | | Net income | $13.7 | $1.9 | | Other comprehensive income (loss): | | | | Derivative financial instruments: | | | | Unrealized gains arising during the period, net of tax | $0.5 | $14.7 | | Reclassification adjustments for (gains) losses included in net income, net of tax | $(14.9) | $2.5 | | Defined benefit plans: | | | | Amortization of net actuarial losses, net of tax | $— | $0.1 | | Total other comprehensive income (loss) | $(14.4) | $17.3 | | Comprehensive income (loss) | $(0.7) | $19.2 | | Less: comprehensive income attributable to noncontrolling interest | $1.9 | $2.8 | | Comprehensive income (loss) attributable to Trinity Industries, Inc. | $(2.6) | $16.4 | Consolidated Balance Sheets This statement provides a snapshot of the company's assets, liabilities, and stockholders' equity at specific reporting dates Consolidated Balance Sheets (in millions) | Metric (in millions) | March 31, 2023 | December 31, 2022 | | :------------------- | :------------- | :---------------- | | ASSETS | | | | Cash and cash equivalents | $81.9 | $79.6 | | Receivables, net | $333.2 | $323.5 | | Income tax receivable | $10.1 | $7.8 | | Inventories | $632.7 | $629.4 | | Restricted cash | $181.1 | $214.7 | | Property, plant, and equipment, net | $6,976.5 | $6,886.8 | | Goodwill | $222.3 | $195.9 | | Other assets | $401.4 | $386.6 | | Total assets | $8,839.2 | $8,724.3 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Accounts payable | $314.5 | $287.5 | | Accrued liabilities | $273.7 | $261.0 | | Debt | $5,707.6 | $5,607.6 | | Deferred income taxes | $1,133.2 | $1,134.7 | | Other liabilities | $159.8 | $163.9 | | Total liabilities | $7,588.8 | $7,454.7 | | Common stock | $0.8 | $0.8 | | Capital in excess of par value | $6.6 | $— | | Retained earnings | $975.6 | $992.6 | | Accumulated other comprehensive income | $12.7 | $19.7 | | Treasury stock | $(1.5) | $(0.7) | | Noncontrolling interest | $256.2 | $257.2 | | Total stockholders' equity | $1,250.4 | $1,269.6 | | Total liabilities and stockholders' equity | $8,839.2 | $8,724.3 | Consolidated Statements of Cash Flows This statement details the cash inflows and outflows from operating, investing, and financing activities for the periods Consolidated Statements of Cash Flows (in millions) | Metric (in millions) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------- | :---------------------------------- | :---------------------------------- | | Operating activities: | | | | Net income | $13.7 | $1.9 | | Net cash provided by operating activities – continuing operations | $102.5 | $28.5 | | Net cash used in operating activities – discontinued operations | $(3.1) | $(8.0) | | Net cash provided by operating activities | $99.4 | $20.5 | | Investing activities: | | | | Proceeds from dispositions of property and other assets | $4.9 | $15.6 | | Proceeds from lease portfolio sales | $56.7 | $71.1 | | Capital expenditures – leasing | $(191.5) | $(84.6) | | Capital expenditures – manufacturing and other | $(7.1) | $(2.3) | | Acquisitions, net of cash acquired | $(66.2) | $— | | Net cash used in investing activities | $(203.1) | $(0.2) | | Financing activities: | | | | Payments to retire debt | $(149.6) | $(73.0) | | Proceeds from issuance of debt | $246.3 | $127.2 | | Dividends paid to common shareholders | $(21.1) | $(19.1) | | Distributions to noncontrolling interest | $(2.9) | $(6.2) | | Net cash provided by financing activities | $72.4 | $28.7 | | Net increase (decrease) in cash, cash equivalents, and restricted cash | $(31.3) | $49.0 | | Cash, cash equivalents, and restricted cash at beginning of period | $294.3 | $302.4 | | Cash, cash equivalents, and restricted cash at end of period | $263.0 | $351.4 | Consolidated Statements of Stockholders' Equity This statement outlines changes in equity components, including net income, other comprehensive income, and dividends, over the reporting periods - Total stockholders' equity decreased from $1,269.6 million at December 31, 2022, to $1,250.4 million at March 31, 2023. This change was influenced by net income attributable to Trinity Industries, Inc. of $4.4 million, an other comprehensive loss of $7.0 million, cash dividends declared of $21.4 million, and stock-based compensation expense of $6.2 million[13] - Dividends declared on common stock were $0.26 per common share for the three months ended March 31, 2023, an increase from $0.23 per common share for the same period in 2022[13] Note 1. Summary of Significant Accounting Policies This note details the company's key accounting principles, including recent ASU adoptions, revenue recognition, and goodwill allocation - The company adopted ASU 2022-04 (Disclosure of Supplier Finance Program Obligations) effective January 1, 2023, which did not have a significant impact on its Consolidated Financial Statements. Amounts due to participating suppliers in the SCF program totaled $17.3 million as of March 31, 2023, down from $22.8 million at December 31, 2022[38][39][40] Unsatisfied Performance Obligations (as of March 31, 2023) | Group | Total Amount (in millions) | Percent expected to be delivered in 2023 | | :---------------------------------------- | :------------------------- | :--------------------------------------- | | Rail Products Group: New railcars (External customers) | $3,257.1 | | | Rail Products Group: New railcars (Leasing Group) | $448.8 | | | Rail Products Group Total | $3,705.9 | 42.3% | | Sustainable railcar conversions | $173.7 | 76.9% | | Railcar Leasing and Management Services Group | $73.0 | 15.9% | - Goodwill by segment as of March 31, 2023, was $33.5 million for the Railcar Leasing and Management Services Group (up from $7.1 million at Dec 31, 2022) and $188.8 million for the Rail Products Group (unchanged)[36] Note 2. Acquisitions and Discontinued Operations This note discusses the acquisition of RSI Logistics and the financial impact of discontinued operations - On March 8, 2023, Trinity acquired RSI Logistics for $72.1 million, recording $37.4 million in identifiable intangible assets and $26.3 million in goodwill, with the purchase price allocation still preliminary[41][42] - The company incurred a loss from discontinued operations (related to the previously sold Highway Products Business) of $3.1 million for the three months ended March 31, 2023, an improvement from a $6.9 million loss in the prior year period[44][45] Note 3. Derivative Instruments and Fair Value Measurements This note details the company's use of derivative instruments for risk mitigation and fair value measurements of financial assets - Trinity uses derivative instruments to mitigate interest rate risk and foreign currency exchange rate risk. For the three months ended March 31, 2023, the open interest rate swap on 2017 promissory notes had a positive effect on interest expense of $(2.5) million, compared to $2.8 million in the prior year[46][47] - Foreign currency hedges resulted in a $(1.7) million effect on cost of revenues for the three months ended March 31, 2023, compared to $0.2 million in the prior year[48] Fair Value Measurements (Level 1 Assets) (in millions) | Asset (in millions) | March 31, 2023 | December 31, 2022 | | :------------------ | :------------- | :---------------- | | Cash equivalents | $41.0 | $29.8 | | Restricted cash | $181.1 | $214.7 | | Total assets | $222.1 | $244.5 | Note 4. Segment Information This note provides financial data for Trinity's two reportable segments: Railcar Leasing and Management Services Group and Rail Products Group - Trinity operates in two reportable segments: Railcar Leasing and Management Services Group and Rail Products Group. The Chief Operating Decision Maker (CODM) reviews segment operating results to assess performance and allocate resources, excluding restructuring activities[54][55] Total Revenues by Segment (in millions) | Segment | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :---------------------------------------- | :---------------------------------- | :---------------------------------- | | Railcar Leasing and Management Services Group | $203.5 | $183.1 | | Rail Products Group | $637.8 | $391.1 | | Eliminations – Lease Subsidiary | $(199.4) | $(101.3) | | Eliminations – Other | $(0.2) | $(0.2) | | Consolidated Total | $641.7 | $472.7 | Operating Profit by Segment (in millions) | Segment | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :---------------------------------------- | :---------------------------------- | :---------------------------------- | | Railcar Leasing and Management Services Group | $85.5 | $79.8 | | Rail Products Group | $25.3 | $0.8 | | Corporate and other | $(26.0) | $(15.7) | | Restructuring activities, net | $0.4 | $— | | Eliminations – Lease Subsidiary | $(16.8) | $(8.8) | | Eliminations – Other | $0.6 | $(1.3) | | Consolidated operating profit | $69.0 | $54.8 | Note 5. Partially-Owned Leasing Subsidiaries This note describes Trinity's controlling interests in partially-owned leasing subsidiaries and its equity interest in an unconsolidated joint venture - Trinity has a controlling interest in partially-owned leasing subsidiaries TRIP Holdings and RIV 2013, with a weighted average ownership interest of 38% (62% owned by third-party funds). The carrying value of this investment was $135.3 million at March 31, 2023[59][60] - Trinity does not guarantee performance under debt agreements, railcar residual values, or minimum yields for its partially-owned subsidiaries[62] - Trinity holds a 12.9% equity interest in Signal Rail Holdings LLC, an unconsolidated joint venture with Wafra Funds, which is accounted for under the equity method. The carrying value of this investment was $21.2 million at March 31, 2023[65][66][67] Note 6. Railcar Leasing and Management Services Group This note provides detailed financial and operational performance metrics for the Railcar Leasing and Management Services Group Railcar Leasing and Management Services Group Financial Information (in millions) | Metric | March 31, 2023 | December 31, 2022 | | :---------------------------------------- | :------------- | :---------------- | | Total assets (Adjusted Total Leasing Group) | $7,153.9 | $7,016.6 | | Total liabilities (Adjusted Total Leasing Group) | $6,191.1 | $6,156.4 | | Total Equity (Adjusted Total Leasing Group) | $706.6 | $603.0 | Leasing Group Operating Results (in millions, except percentages) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Percent Change | | :---------------------------------------- | :---------------------------------- | :---------------------------------- | :------------- | | Leasing and management revenues | $203.5 | $183.1 | 11.1% | | Leasing and management operating profit | $72.0 | $68.0 | 5.9% | | Lease portfolio sales operating profit | $13.5 | $11.8 | * | | Total operating profit | $85.5 | $79.8 | 7.1% | | Total operating profit margin | 42.0% | 43.6% | | | Depreciation | $62.4 | $57.2 | 9.1% | | Maintenance and compliance | $35.8 | $29.2 | 22.6% | | Selling, engineering, and administrative expenses | $15.7 | $12.8 | 22.7% | | Interest | $54.8 | $38.7 | 41.6% | - The Leasing Group's lease fleet utilization increased to 98.2% as of March 31, 2023, from 96.5% in the prior year, with the average age of company-owned railcars at 12.5 years and an average remaining lease term of 3.0 years[131][152] Note 7. Property, Plant, and Equipment This note presents the net carrying values of property, plant, and equipment across manufacturing, corporate, and leasing segments Property, Plant, and Equipment, Net (in millions) | Category | March 31, 2023 | December 31, 2022 | | :---------------------------------------- | :------------- | :---------------- | | Manufacturing/Corporate, net | $341.9 | $340.7 | | Leasing: Wholly-owned subsidiaries, net | $5,888.1 | $5,788.1 | | Leasing: Partially-owned subsidiaries, net | $1,509.9 | $1,521.3 | | Deferred profit on railcars sold to Leasing Group, net | $(763.4) | $(763.3) | | Total Property, Plant, and Equipment, net | $6,976.5 | $6,886.8 | Note 8. Debt This note details the company's debt structure, including corporate recourse and leasing non-recourse debt, and recent credit facility amendments Carrying Amounts of Debt (in millions) | Category | March 31, 2023 | December 31, 2022 | | :---------------------------------------- | :------------- | :---------------- | | Corporate – Recourse | $704.3 | $624.1 | | Leasing – Non-recourse: Wholly-owned subsidiaries | $3,826.9 | $3,800.7 | | Leasing – Non-recourse: Partially-owned subsidiaries | $1,176.4 | $1,182.8 | | Total debt | $5,707.6 | $5,607.6 | - The company amended its revolving credit facility in March 2023, increasing the commitment from $450.0 million to $600.0 million and modifying leverage ratios and dividend limitations. As of March 31, 2023, $278.2 million was available for borrowing[76][77] - The TILC warehouse loan facility had $91.4 million available as of March 31, 2023. The TRL-2017 loan agreement and interest rate swap agreements transitioned from LIBOR to SOFR in February 2023[79][80] Note 9. Income Taxes This note explains the effective tax rate from continuing operations and the factors influencing tax provisions or benefits - The effective tax rate from continuing operations for the three months ended March 31, 2023, was a benefit of 217.0% (compared to an expense of 23.3% in 2022), primarily due to the release of residual taxes from AOCI ($11.9 million benefit), re-measurement of deferred tax liabilities due to the RSI acquisition ($3.2 million increase), and a $4.0 million tax benefit from valuation allowance adjustments[82][83][84][85][86] Note 10. Employee Retirement Plans This note outlines the defined contribution expense and details related to the terminated pension plan - Defined contribution expense increased to $2.4 million for the three months ended March 31, 2023, from $2.1 million in the prior year. The company reverted $0.4 million in surplus pension assets and incurred $0.1 million in excise tax following the termination of its Pension Plan in 2020[88][89] Note 11. Accumulated Other Comprehensive Income This note details the changes in accumulated other comprehensive income, including derivative gains/losses and reclassification adjustments Changes in AOCI (in millions) | Metric | Unrealized gains/(losses) on derivative financial instruments | Net actuarial gains/(losses) of defined benefit plans | Accumulated other comprehensive income (loss) | | :---------------------------------------- | :------------------------------------------------------------ | :---------------------------------------------------- | :-------------------------------------------- | | Balances at December 31, 2022 | $20.9 | $(1.2) | $19.7 | | Other comprehensive income, net of tax, before reclassifications | $0.5 | $— | $0.5 | | Amounts reclassified from AOCI, net of tax benefit | $(14.9) | $— | $(14.9) | | Less: noncontrolling interest | $7.4 | $— | $7.4 | | Other comprehensive loss | $(7.0) | $— | $(7.0) | | Balances at March 31, 2023 | $13.9 | $(1.2) | $12.7 | - An income tax benefit of $13.2 million was recorded for TRIP Holdings due to the reclassification of residual tax effects from AOCI, with the controlling interest portion being $4.4 million[90] Note 12. Common Stock and Stock-Based Compensation This note discusses share repurchase programs, stock-based compensation expense, and details of awards granted - The Board authorized a new $250.0 million share repurchase program in December 2022, but no shares were repurchased during the three months ended March 31, 2023 or 2022[92] - Stock-based compensation expense increased to $6.2 million for the three months ended March 31, 2023, from $5.1 million in the prior year[93] Stock-Based Compensation Awards Granted (Three Months Ended March 31, 2023) | Award Type | Number of Shares Granted | Weighted Average Grant-Date Fair Value per Award | | :------------------ | :----------------------- | :----------------------------------------------- | | Restricted stock units | 30,799 | $26.42 | | Performance units | 114,875 | $41.96 | Note 13. Earnings Per Common Share This note provides the calculation of basic and diluted earnings per common share for the reporting periods Basic and Diluted EPS (in millions, except per share amounts) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :---------------------------------------- | :---------------------------------- | :---------------------------------- | | Net income (loss) attributable to Trinity Industries, Inc. | $4.4 | $(0.7) | | Basic weighted average shares outstanding | 80.8 | 82.9 | | Diluted weighted average shares outstanding | 83.2 | 85.5 | | Basic net income (loss) attributable to Trinity Industries, Inc. | $0.05 | $(0.01) | | Diluted net income (loss) attributable to Trinity Industries, Inc. | $0.05 | $(0.01) | Note 14. Contingencies This note details ongoing legal proceedings, including qui tam actions and class action settlements, and their potential financial impact - The company is vigorously defending against state qui tam actions in Virginia, Tennessee, and New Jersey related to the ET Plus system, believing the claims are without merit and currently not accruing losses as they are not deemed probable[101][102][103][104] - The Missouri class action settlement liability was $7.8 million as of March 31, 2023, after funding $17.5 million. This is part of a pre-tax charge of $23.9 million recorded in 2021[106] - Total accruals for claims and lawsuits, including environmental and workplace matters, were $10.5 million at March 31, 2023, with a range of reasonably possible losses estimated between $10.0 million and $20.9 million[110] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Trinity's financial condition, operations, and liquidity for Q1 2023, covering consolidated results, segment performance, and capital resources Forward-Looking Statements This section cautions that the report contains forward-looking statements subject to various market, industry, and geopolitical risks - The report contains forward-looking statements subject to various risks and uncertainties, including market conditions, cyclical industries, weather, pandemics, supply chain disruptions, labor shortages, and geopolitical events[118][119] Company Overview Trinity Industries, Inc. is a leading North American railcar products and services provider, operating in two main segments - Trinity Industries, Inc. is a leading provider of railcar products and services in North America, operating under the TrinityRail trade name, offering leasing, manufacturing, maintenance, and logistics services[122] - The company reports in two segments: Railcar Leasing and Management Services Group and Rail Products Group. Liabilities related to the previously sold Trinity Highway Products, LLC (THP) are reported in discontinued operations[122][123] Executive Summary This summary highlights improving lease rates and utilization, alongside challenges from cyclical industries, supply chain issues, and labor costs - Lease rates and lease fleet utilization continue to improve, but the company faces challenges from cyclical industries, commodity price changes, global supply chain disruptions, and elevated labor costs[124][126][127] Financial and Operational Highlights (Three Months Ended March 31) | Metric | 2023 | 2022 | Change | | :---------------------------------------- | :---------- | :---------- | :---------- | | Revenues | $641.7M | $472.7M | +35.8% | | Operating profit | $69.0M | $54.8M | +25.9% | | Lease fleet utilization | 98.2% | 96.5% | +1.7 pp | | Company-owned railcars | 108,865 | 107,090 | +1.7% | | Net investment in lease fleet | $134.8M | $13.5M | +898.5% | | New railcar backlog | $3.7B | $1.9B | +94.7% | | Rail Products Group orders received | 2,690 | 5,055 | -46.8% | | Rail Products Group deliveries | 4,045 | 2,470 | +63.8% | | Sustainable railcar conversion revenues | $53.9M | | | | Operating cash flows (continuing operations) | $102.5M | $28.5M | +259.6% | | Adjusted Free Cash Flow | $36.2M | $47.8M | -24.3% | Returns of Capital to Shareholders This section details dividends paid to common stockholders and the status of the share repurchase program - The company paid $21.1 million in dividends to common stockholders during the three months ended March 31, 2023. A new $250.0 million share repurchase program was authorized in December 2022, but no shares were repurchased in Q1 2023[132] Litigation Updates This section refers to Note 14 for detailed updates on litigation related to the sale of Trinity Highway Products - Updates on litigation related to the sale of Trinity Highway Products (THP) are provided in Note 14 of the Consolidated Financial Statements[133] Consolidated Results of Operations This section analyzes the company's consolidated revenues, operating profit, and net income, highlighting key drivers and changes Consolidated Results of Operations (in millions) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :---------------------------------------- | :---------------------------------- | :---------------------------------- | | Revenues | $641.7 | $472.7 | | Cost of revenues | $538.5 | $398.5 | | Selling, engineering, and administrative expenses | $49.9 | $44.7 | | Gains on dispositions of property | $15.3 | $25.3 | | Restructuring activities, net | $(0.4) | $— | | Total operating profit | $69.0 | $54.8 | | Interest expense, net | $62.1 | $43.5 | | Other, net | $1.6 | $(1.6) | | Income from continuing operations before income taxes | $5.3 | $12.9 | | Provision (benefit) for income taxes | $(11.5) | $3.0 | | Income from continuing operations | $16.8 | $9.9 | - Consolidated revenues increased by 35.8% to $641.7 million, driven by higher volume and improved pricing in the Rail Products Group and better lease rates in the Leasing Group. Cost of revenues increased by 35.1% due to higher deliveries, labor costs, and operational inefficiencies[140][141] - Operating profit rose by 25.9% to $69.0 million, benefiting from increased deliveries, improved pricing, and lease rates, partially offset by higher employee-related and other operating costs. Interest expense, net, increased significantly due to higher variable interest rates and average debt[144][145] Segment Discussion This section provides a detailed analysis of the financial performance for both the Railcar Leasing and Rail Products segments Railcar Leasing and Management Services Group Performance (in millions, except percentages) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Percent Change | | :---------------------------------------- | :---------------------------------- | :---------------------------------- | :------------- | | Leasing and management revenues | $203.5 | $183.1 | 11.1% | | Total operating profit | $85.5 | $79.8 | 7.1% | | Operating profit margin on lease portfolio sales | 23.8% | 14.8% | | Rail Products Group Performance (in millions, except percentages) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Percent Change | | :---------------------------------------- | :---------------------------------- | :---------------------------------- | :------------- | | Rail products revenues | $558.4 | $338.4 | 65.0% | | Maintenance services revenues | $55.3 | $43.0 | 28.6% | | Other revenues | $24.1 | $9.7 | 148.5% | | Total revenues | $637.8 | $391.1 | 63.1% | | Operating profit | $25.3 | $0.8 | * | | Operating profit margin | 4.0% | 0.2% | | - The Rail Products Group's new railcar backlog increased by 95.5% to $3.7 billion, with an average selling price of $119,874 per railcar. Orders received decreased by 46.8% to 2,690 railcars, while deliveries increased by 63.8% to 4,045 railcars[159] Corporate and other This section discusses the financial performance of the corporate and other segment, focusing on administrative expenses and operating loss - Corporate and other selling, engineering, and administrative expenses increased by 17.1% to $26.0 million, primarily due to higher employee-related costs. The operating loss for this segment increased by 65.6% to $(26.0) million[161] Liquidity and Capital Resources This section analyzes the company's liquidity position, cash flow activities, and compliance with financial covenants - Total committed liquidity as of March 31, 2023, was $451.5 million, including $81.9 million in unrestricted cash, $278.2 million available under the revolving credit facility, and $91.4 million under the TILC warehouse loan facility[164] - Net cash provided by operating activities from continuing operations was $102.5 million (up from $28.5 million YoY). Net cash used in investing activities was $203.1 million (up from $0.2 million YoY), primarily due to a $134.8 million net investment in the lease fleet and a $66.2 million acquisition[168][169][170] - Net cash provided by financing activities was $72.4 million (up from $28.7 million YoY), driven by $96.7 million in net debt proceeds to support lease fleet investment and general corporate purposes[170] Financial Covenants (as of March 31, 2023) | Ratio | Covenant | Actual at March 31, 2023 | | :-------------------- | :------------------------ | :----------------------- | | Maximum leverage | No greater than 4.25 to 1.00 | 2.76 | | Minimum interest coverage | No less than 2.25 to 1.00 | 7.66 | Non-GAAP Financial Measures This section presents and defines non-GAAP financial measures, such as Adjusted Free Cash Flow After Investments and Dividends - Adjusted Free Cash Flow After Investments and Dividends (a non-GAAP measure) was $36.2 million for the three months ended March 31, 2023, compared to $47.8 million in the prior year period[184][186] - Adjusted Free Cash Flow is defined as net cash provided by operating activities from continuing operations, plus cash proceeds from lease portfolio sales, less capital expenditures for manufacturing, dividends paid, and Equity CapEx for leased railcars[185] Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes in market risks occurred since December 31, 2022, with details on hedging and debt in Notes 3 and 8 - No material changes in market risks have occurred since December 31, 2022[189] Item 4. Controls and Procedures Disclosure controls and procedures were effective as of March 31, 2023, with no material changes in internal controls over financial reporting - Disclosure controls and procedures were deemed effective as of March 31, 2023, ensuring timely and accurate reporting to the SEC[190] - No material changes in internal controls over financial reporting occurred during the three months ended March 31, 2023[191] PART II OTHER INFORMATION This section covers legal proceedings, risk factors, equity security sales, defaults, mine safety, other information, and exhibits Item 1. Legal Proceedings Information on legal proceedings is incorporated by reference from Note 14 of the Consolidated Financial Statements - Information on legal proceedings is incorporated from Note 14 of the Consolidated Financial Statements[194] Item 1A. Risk Factors No material changes to the risk factors have occurred since the 2022 Annual Report on Form 10-K - No material changes to risk factors have occurred since the 2022 Annual Report on Form 10-K[195] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details common stock transactions, including shares for tax obligations and employee plan purchases, with no repurchases under the new program Common Stock Purchases (Three Months Ended March 31, 2023) | Period | Number of Shares Purchased | Average Price Paid per Share | | :-------------------------------------- | :------------------------- | :--------------------------- | | January 1, 2023 through January 31, 2023 | 4,625 | $27.77 | | February 1, 2023 through February 28, 2023 | 6,967 | $28.29 | | March 1, 2023 through March 31, 2023 | 207 | $23.96 | | Total | 11,799 | | - The total number of shares purchased (11,799) includes 11,438 shares surrendered for tax withholding on vested restricted stock and 361 shares purchased by a non-qualified employee profit sharing plan trust[196] - No shares were repurchased under the $250.0 million share repurchase program during the three months ended March 31, 2023[196] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[197] Item 4. Mine Safety Disclosures This item is not applicable to the company's operations - This item is not applicable[198] Item 5. Other Information No other information was reported under this item for the period - No other information was reported[199] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including key agreements, certifications, and XBRL documents - Key exhibits include Amended and Restated Bylaws, Amendment No. 2 to Second Amended and Restated Credit Agreement, Third Amendment and Waiver to the Fifth Amended and Restated Warehouse Loan Agreement, and Amendment No. 3 to Amended and Restated Term Loan Agreement[201] SIGNATURES The report is signed by Eric R. Marchetto, Executive Vice President and Chief Financial Officer, on May 2, 2023 - The report was signed by Eric R. Marchetto, Executive Vice President and Chief Financial Officer, on May 2, 2023[203]