Trinity Industries(TRN) - 2021 Q1 - Quarterly Report

PART I Financial Statements This section presents the unaudited Consolidated Financial Statements for Q1 2021, including key statements and notes, highlighting a prospective accounting change for lease fleet sales impacting revenue comparability Consolidated Statements of Operations Highlights (Q1 2021 vs Q1 2020) | Metric | Q1 2021 (in millions) | Q1 2020 (in millions) | | :--- | :--- | :--- | | Total Revenues | $398.8 | $615.2 | | Manufacturing Revenues | $215.5 | $379.1 | | Leasing Revenues | $183.3 | $236.1 | | Total Operating Profit | $60.2 | $73.0 | | Net Income Attributable to Trinity | $3.3 | $161.7 | | Diluted EPS | $0.03 | $1.33 | Consolidated Balance Sheet Highlights | Metric | March 31, 2021 (in millions) | Dec 31, 2020 (in millions) | | :--- | :--- | :--- | | Total Assets | $8,775.5 | $8,701.8 | | Total Liabilities | $6,807.6 | $6,685.8 | | Total Stockholders' Equity | $1,967.9 | $2,016.0 | Consolidated Cash Flow Highlights (Q1 2021 vs Q1 2020) | Metric | Q1 2021 (in millions) | Q1 2020 (in millions) | | :--- | :--- | :--- | | Net Cash from Operating Activities | $69.7 | $173.6 | | Net Cash used in Investing Activities | ($96.0) | ($64.6) | | Net Cash from Financing Activities | $83.4 | ($77.1) | - Beginning in Q4 2020, the company changed its accounting presentation for sales of railcars from the lease fleet to a net basis as 'Lease portfolio sales', a prospective change that affects comparability with prior periods[23][106] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's Q1 2021 financial condition and operational results, detailing impacts from the COVID-19 pandemic, industry pressures, and strategic financial management Executive Summary Q1 2021 performance was negatively impacted by the COVID-19 pandemic and market weakness, resulting in decreased revenue and operating profit, though the company maintained strong liquidity and continued capital returns - The COVID-19 pandemic and related economic pressures negatively impacted Q1 2021 results, with management expecting continued pressure in the near term[112] - A significant increase in steel prices since Q4 2020 is noted as a potential headwind, possibly impacting demand for new railcars and near-term operating profit[117] Q1 2021 Financial & Operational Highlights | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Revenues | $398.8M | $615.2M | | Operating Profit | $60.2M | $73.0M | | Railcar Backlog | $1.0B | $1.6B | | Railcar Orders | 1,410 | 1,970 | | Railcar Deliveries | 1,895 | 3,705 | | Lease Fleet Utilization | 94.5% | 95.4% | Consolidated Results of Operations Consolidated revenues decreased 35.2% to $398.8 million and operating profit fell 17.5% to $60.2 million in Q1 2021, primarily due to lower railcar deliveries and a change in lease fleet sales presentation Consolidated Results of Operations (Q1 2021 vs Q1 2020) | Metric | Q1 2021 (in millions) | Q1 2020 (in millions) | | :--- | :--- | :--- | | Revenues | $398.8 | $615.2 | | Cost of revenues | $296.0 | $482.0 | | Operating profit | $60.2 | $73.0 | | Income from continuing operations | $1.7 | $162.5 | - The effective tax rate for Q1 2021 was 77.9%, primarily due to a CARES Act carryback benefit adjustment; excluding this, the rate was 28.6%, compared to a 990.6% tax benefit in Q1 2020 also influenced by the CARES Act[72][136] Segment Discussion The Railcar Leasing and Management Services Group saw a 15.7% decrease in operating profit, while the Rail Products Group reported an operating loss due to a significant drop in deliveries, and the All Other segment's profit increased Railcar Leasing and Management Services Group Performance (Q1 2021 vs Q1 2020) | Metric | Q1 2021 (in millions) | Q1 2020 (in millions) | | :--- | :--- | :--- | | Total Revenues | $183.5 | $236.3 | | Total Operating Profit | $78.3 | $92.9 | | Fleet Utilization | 94.5% | 95.4% | Rail Products Group Performance (Q1 2021 vs Q1 2020) | Metric | Q1 2021 (in millions) | Q1 2020 (in millions) | | :--- | :--- | :--- | | Total Revenues | $261.0 | $509.4 | | Operating Profit (Loss) | ($8.8) | $25.1 | | Railcar Deliveries (units) | 1,895 | 3,705 | | Backlog Value | $989.9 | $1,557.8 | Liquidity and Capital Resources As of March 31, 2021, Trinity maintained $772.4 million in committed liquidity, generated $70.1 million in operating cash flow, and continued capital returns, while extending its TILC warehouse facility to $1.0 billion - Total committed liquidity as of March 31, 2021, was $772.4 million, comprising $178.1 million in cash, $358.2 million available under the revolving credit facility, and $236.1 million available under the TILC warehouse facility[151] - In March 2021, the TILC warehouse loan facility was extended through March 2024, with the total commitment increased from $750 million to $1.0 billion[70][152] - The company repurchased 1,291,860 shares for $36.8 million in Q1 2021, with $145.4 million remaining available under the share repurchase authorization as of March 31, 2021[85][153] Quantitative and Qualitative Disclosures About Market Risk The company reports no material changes in market risks since December 31, 2020, but highlights exposure to the LIBOR transition potentially affecting future borrowing costs - There has been no material change in market risks since December 31, 2020[181] - The company holds LIBOR-based contracts extending beyond June 2023, and the transition to an alternative rate like SOFR may adversely affect interest rates and result in higher borrowing costs[171] Controls and Procedures The CEO and CFO concluded that disclosure controls and procedures were effective as of Q1 2021, with no material changes to internal controls over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[183] - No changes in internal controls over financial reporting occurred during the quarter that materially affected or are reasonably likely to materially affect the controls[184] PART II Legal Proceedings This section details ongoing legal matters, including qui tam actions and a class-action lawsuit related to the ET-Plus highway guardrail system, with an accrual of $9.2 million for various claims - The company is defending state qui tam actions in Virginia, Massachusetts, and California, along with a class-action lawsuit in Missouri (trial scheduled for April 2022), all related to its ET-Plus highway guardrail system[93][95] - The company believes these lawsuits are without merit and cannot estimate a range of possible losses, with no loss currently considered probable for these specific actions[94][97] - As of March 31, 2021, the company has accrued $9.2 million for various claims and lawsuits, with the range of reasonably possible losses estimated between $8.7 million to $17.2 million[99] Risk Factors The company states that there have been no material changes from the risk factors that were previously disclosed in its 2020 Annual Report on Form 10-K - There have been no material changes from the risk factors previously disclosed in Item 1A of the 2020 Annual Report on Form 10-K[187] Unregistered Sales of Equity Securities and Use of Proceeds In the first quarter of 2021, Trinity repurchased 1,291,860 shares of its common stock at a cost of approximately $36.8 million as part of its authorized share repurchase program Share Repurchase Activity (Q1 2021) | Period | Shares Purchased | Average Price Paid | Total Cost (in millions) | | :--- | :--- | :--- | :--- | | Jan 2021 | 170,863 | $27.28 | ~$4.7 | | Feb 2021 | 0 | N/A | $0.0 | | Mar 2021 | 1,120,997 | $28.61 | ~$32.1 | | Total Q1 | 1,291,860 | N/A | $36.8 | - As of March 31, 2021, the remaining authorization under the share repurchase program was $145.4 million, with the program running through December 31, 2021[188] Defaults Upon Senior Securities None - No defaults upon senior securities were reported[189] Mine Safety Disclosures Not applicable - This section is not applicable to the company[190] Other Information None - No other information was reported under this item[191] Exhibits This section lists the exhibits filed with the Form 10-Q, which include amendments to the company's bylaws, an amended warehouse loan agreement, an amendment to the credit agreement, and various officer certifications - Key exhibits filed include an amendment to the Warehouse Loan Agreement and an amendment to the Amended and Restated Credit Agreement[193]