Trinity Industries(US:TRN)2024-05-01 16:05PART I FINANCIAL INFORMATION Financial Statements This section presents the unaudited consolidated financial statements for Trinity Industries, Inc. for the three months ended March 31, 2024, including Statements of Operations, Comprehensive Income, Balance Sheets, Cash Flows, and Stockholders' Equity, along with detailed notes explaining accounting policies, segment information, debt, and contingencies Consolidated Statements of Operations For the three months ended March 31, 2024, total revenues increased to $809.6 million from $641.7 million year-over-year, driving total operating profit up to $115.2 million from $69.0 million, with net income attributable to Trinity Industries, Inc. rising significantly to $23.7 million, or $0.28 per diluted share, compared to $4.4 million, or $0.05 per diluted share, in the prior-year period Consolidated Statements of Operations Highlights (Three Months Ended March 31) | Financial Metric | 2024 (in millions) | 2023 (in millions) | YoY Change | | :--- | :--- | :--- | :--- | | Total Revenues | $809.6 | $641.7 | +26.2% | | Manufacturing Revenues | $525.3 | $409.0 | +28.4% | | Leasing & Services Revenues | $284.3 | $232.7 | +22.2% | | Total Operating Profit | $115.2 | $69.0 | +67.0% | | Income from Continuing Operations | $31.7 | $16.8 | +88.7% | | Net Income Attributable to Trinity | $23.7 | $4.4 | +438.6% | | Diluted EPS | $0.28 | $0.05 | +460.0% | Consolidated Balance Sheets As of March 31, 2024, total assets increased slightly to $9.08 billion from $8.91 billion at year-end 2023, primarily due to higher receivables, while total liabilities also increased to $7.79 billion, driven by a rise in total debt to $5.87 billion, with total stockholders' equity standing at $1.29 billion Consolidated Balance Sheet Summary | Account | March 31, 2024 (in millions) | December 31, 2023 (in millions) | | :--- | :--- | :--- | | Cash and cash equivalents | $118.8 | $105.7 | | Property, plant, and equipment, net | $7,059.6 | $7,004.8 | | Total Assets | $9,079.8 | $8,906.5 | | Total Debt | $5,867.0 | $5,754.2 | | Total Liabilities | $7,791.3 | $7,631.0 | | Total Stockholders' Equity | $1,288.5 | $1,275.5 | Consolidated Statements of Cash Flows For the first quarter of 2024, net cash provided by operating activities was $52.2 million, a decrease from $99.4 million in the prior-year period, with net cash used in investing activities at $124.0 million, primarily for lease fleet capital expenditures, and net cash provided by financing activities at $71.8 million, reflecting net proceeds from debt issuance Consolidated Cash Flow Summary (Three Months Ended March 31) | Cash Flow Activity | 2024 (in millions) | 2023 (in millions) | | :--- | :--- | :--- | | Net cash provided by operating activities | $52.2 | $99.4 | | Net cash used in investing activities | $(124.0) | $(203.1) | | Net cash provided by financing activities | $71.8 | $72.4 | Notes to Consolidated Financial Statements The notes detail significant accounting policies, including a key change in reportable segments effective January 1, 2024, and cover acquisitions, discontinued operations, derivative instruments, segment performance, debt structure, income taxes, and legal contingencies, such as litigation related to former highway products and the East Palestine train derailment - Effective January 1, 2024, the company modified its organizational structure, moving the maintenance services business from the Rail Products Group to the newly named Railcar Leasing and Services Group to better leverage maintenance capabilities for lease fleet optimization, with prior period segment results recast for comparability1760 - The company is involved in litigation related to the February 2023 East Palestine, OH train derailment, where its subsidiary TILC was named as a third-party defendant, owning one tank car involved in the incident, and the company believes it has substantial defenses and is vigorously defending itself115116119 - The company retains indemnification obligations for certain liabilities of its divested highway products business (THP), including ongoing state qui tam actions and product liability lawsuits related to the ET-Plus® System, with expenses of $5.6 million related to these obligations recorded in discontinued operations for Q1 202450110113 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses the company's financial performance for Q1 2024, highlighting a 26.2% increase in consolidated revenues and a 67.0% rise in operating profit year-over-year, covering segment performance, key business trends, liquidity, capital resources, and capital structure updates, noting strong performance in the Rail Products Group due to higher deliveries and improved lease rates in the Leasing Group Consolidated Results of Operations Consolidated revenues for Q1 2024 increased by 26.2% to $809.6 million, driven by higher external deliveries in the Rail Products Group and improved lease rates and repair volumes in the Leasing Group, with operating profit growing 67.0% to $115.2 million, reflecting this revenue growth and improved margins, despite a $12.5 million decrease in gains from property dispositions compared to the prior year - Revenues increased by $167.9 million (26.2%) YoY, primarily due to higher external deliveries in the Rail Products Group and improved lease rates and external repair volume in the Leasing Group154 - Operating profit increased by $46.2 million (67.0%) YoY, driven by higher deliveries, improved lease rates, and increased external repair volume, partially offset by lower lease portfolio sales158 - Interest expense, net, increased to $69.1 million from $62.1 million in the prior year period, primarily due to higher average debt levels159 Segment Discussion The Railcar Leasing and Services Group saw revenues increase 22.5% to $285.2 million, with operating profit up 18.6% to $100.3 million, driven by better lease rates and a 121.8% surge in maintenance services revenue, while the Rail Products Group reported a 13.6% revenue increase to $667.4 million and an 81.7% jump in operating profit to $43.8 million, benefiting from higher deliveries and improved operational efficiencies Segment Operating Profit (Three Months Ended March 31) | Segment | 2024 (in millions) | 2023 (in millions) | YoY Change | | :--- | :--- | :--- | :--- | | Railcar Leasing and Services Group | $100.3 | $84.6 | +18.6% | | Rail Products Group | $43.8 | $24.1 | +81.7% | | Consolidated Operating Profit | $115.2 | $69.0 | +67.0% | - The Rail Products Group's new railcar backlog was valued at $2.9 billion as of March 31, 2024, with 23,075 units, down from $3.7 billion and 30,915 units a year prior, and the group delivered 4,695 railcars in Q1 2024144172 - The Leasing Group's company-owned lease fleet utilization was 97.5% on 110,205 railcars as of March 31, 2024, compared to 98.2% on 108,865 railcars a year earlier144167 Liquidity and Capital Resources As of March 31, 2024, the company had total committed liquidity of $798.8 million, including $118.8 million in cash and significant availability under its credit facilities, and in March 2024, it entered into a new $800.0 million TILC warehouse loan facility, with net cash from operations at $56.5 million for the quarter, and plans to use cash and available liquidity to repay its 4.55% senior notes due in 2024 - Total committed liquidity was $798.8 million as of March 31, 2024, comprising $118.8 million in cash, $581.8 million available under the revolving credit facility, and $98.2 million available under the TILC warehouse facility177 - In March 2024, the company replaced its prior $1.0 billion warehouse loan facility with a new $800.0 million TILC warehouse loan facility, maturing in March 2028146178 - For the full year 2024, the company anticipates a net investment in its lease fleet of $300 million to $400 million and capital expenditures for operating activities of $50 million to $60 million189 - The company was in compliance with all financial covenants as of March 31, 2024, with a Maximum Leverage ratio of 2.01 (covenant: <3.75) and Minimum Interest Coverage ratio of 8.20 (covenant: >2.25)183 Quantitative and Qualitative Disclosures About Market Risk The company states that there has been no material change in its market risks since the end of the fiscal year 2023, as disclosed in its 2023 Annual Report on Form 10-K - There has been no material change in the company's market risks since December 31, 2023200 Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of the end of the period, with no material changes in internal controls over financial reporting during the quarter - The Chief Executive and Chief Financial Officers concluded that the company's disclosure controls and procedures were effective as of March 31, 2024201 - No changes in internal controls over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls202 PART II OTHER INFORMATION Legal Proceedings This section incorporates by reference the information on legal contingencies detailed in Note 14 of the Consolidated Financial Statements, which covers litigation related to former highway products and the East Palestine train derailment - Information regarding legal proceedings is provided in Note 14 of the Consolidated Financial Statements and is incorporated by reference205 Risk Factors The company reports that there have been no material changes to the risk factors previously disclosed in its 2023 Annual Report on Form 10-K - There have been no material changes from the risk factors previously disclosed in the 2023 Annual Report on Form 10-K206 Issuer Purchases of Equity Securities During the quarter ended March 31, 2024, the company did not repurchase any shares under its publicly announced share repurchase program, which has $250.0 million remaining, but acquired 9,754 shares to satisfy tax withholding obligations related to vested employee stock awards - No shares were repurchased under the company's $250.0 million share repurchase program during the three months ended March 31, 2024207 - The company acquired 9,754 shares to satisfy tax withholding obligations in connection with the vesting of restricted stock for employees207