TRINITY INDUSTRIES, INC. Jessica Greiner Jack Todd
Director of Investor Relations Vice President, Public Affairs
Trinity Industries, Inc. Trinity Industries, Inc.
214/631-4420 214/589-8909
FOR IMMEDIATE RELEASEDALLAS, Texas - October 22, 2015 - Trinity Industries, Inc. (NYSE:TRN) today announced earnings results for the third quarter ended September 30, 2015, including the following significant highlights:
- Third quarter earnings per common diluted share of $1.31 compared to $0.91 for the third quarter of 2014, a 44% increase year-over-year
- Increased earnings guidance for the Company for full year 2015 to between $4.65 and $4.90 per common diluted share compared to previous guidance of between $4.45 and $4.75 per share
- A record operating margin for the Rail Group during the third quarter of 20.8% compared to 18.7% last year
- Record operating profit of $44.8 million for the Energy Equipment Group during the third quarter
Consolidated Results
Trinity Industries, Inc. reported net income attributable to Trinity stockholders of $204.3 million, or $1.31 per common diluted share. Net income for the same quarter of 2014 was $149.4 million, or $0.91 per common diluted share. Revenues for the third quarter of 2015 totaled $1.54 billion compared to revenues of $1.56 billion for the same quarter of 2014.
'During the third quarter, Trinity maintained its positive momentum generating high quality results that led to 37% year-over-year growth in our net income,' said Timothy R. Wallace, Trinity's Chairman, CEO, and President. 'Our performance continues to reflect the strength of our diversified industrial business model and our ability to shift our resources to meet our customers' needs.'
Mr. Wallace added, 'An increased level of uncertainty in the macro-economic environment tempered the pace of new order volumes in our businesses during the third quarter. I am confident in our Company's ability to respond to shifts in market demand.'
Business Group Results
In the third quarter of 2015, the Rail Group reported revenues and operating profit of approximately $1.07 billion and $223.3 million, respectively, resulting in year-over-year increases compared to the third quarter of 2014 of 8% and 20%, respectively. The increases in revenues and profit were due primarily to higher deliveries, improved pricing, and increased operating efficiencies partially offset by product mix changes. The Rail Group shipped 8,220 railcars and received orders for 3,655 railcars during the third quarter. The Rail Group had a backlog of $6.25 billion as of September 30, 2015, representing 55,265 railcars, compared to a backlog of $6.90 billion as of June 30, 2015, representing 59,830 railcars. At the end of the third quarter, the backlog of railcar orders extends into 2020.
During the third quarter of 2015, the Railcar Leasing and Management Services Group reported leasing and management revenues of $176.6 million compared to $158.3 million in the third quarter of 2014 due to higher
average rental rates and net fleet additions. In addition, the Group recognized revenue of $72.6 million from sales of railcars from the lease fleet owned for less than a year during the third quarter compared to $47.4 million in the third quarter of 2014. Operating profit for this Group was $158.2 million in the third quarter of 2015 compared to operating profit of $87.0 million in the third quarter of 2014 due to higher leasing and management operating profit and higher operating profit from sales of railcars from the lease fleet. Supplemental information for the Railcar Leasing and Management Services Group is provided in the following tables.
During the third quarter, the Company sold $267.3 million of leased railcars to Element Financial Corporation ('Element') under a strategic alliance launched in 2013. Since the fourth quarter of 2013 when the alliance was announced, the Company has completed $1.60 billion of leased railcar sales to Element. On October 14th, the Company and Element announced a $1 billion extension of the alliance through December 2019. The Company's third quarter results included $0.39 per common diluted share related to sales of leased railcars to Element and other third parties compared to $0.13 per share in the same quarter last year.
The Inland Barge Group reported revenues of $164.8 million for the third quarter of 2015 compared to revenues of $168.4 million in the third quarter of 2014. Operating profit for this Group was $28.1 million in the third quarter of 2015 compared to $31.0 million in the third quarter of 2014. The slight decrease in revenues compared to the same quarter last year was primarily due to the mix of tank barges partially offset by higher delivery volumes of hopper barges. The Inland Barge Group received orders of $83.9 million during the quarter, and as of September 30, 2015 had a backlog of $373.1 million compared to a backlog of
$454.0 million as of June 30, 2015.
The Energy Equipment Group reported revenues of $289.5 million in the third quarter of 2015 compared to revenues of $269.7 million in the same quarter of 2014. Operating profit for the third quarter of 2015 increased to a record $44.8 million compared to $30.0 million in the same quarter last year. The increases in revenues and operating profit compared to the same quarter last year were due primarily to an acquisition completed in the third quarter of 2014. The backlog for structural wind towers as of September 30, 2015 was $424.4 million compared to a backlog of $502.6 million as of June 30, 2015. At the end of the third quarter, the backlog of structural wind tower orders extends through 2016.
Revenues in the Construction Products Group were $154.8 million in the third quarter of 2015 compared to revenues of $170.4 million in the third quarter of 2014. The Group recorded an operating profit of $19.9 million in the third quarter of 2015 compared to an operating profit of $21.6 million in the third quarter of 2014. Revenues and operating profit decreased compared to the same quarter last year primarily as a result of lower delivery volumes in our Highway Products business partially offset by higher delivery volumes in our Aggregates business.
Cash and Liquidity
At September 30, 2015, the Company had cash and cash equivalents of $677.8 million. When combined with capacity under committed credit facilities, the Company had approximately $1.89 billion of available liquidity at the end of the third quarter.
Share Repurchase
The Company repurchased 1,556,516 shares of common stock at a cost of $40.0 million under its share repurchase authorization during the quarter, leaving $103.6 million remaining under its current authorization through December 31, 2015.
Earnings Outlook
The Company's earnings guidance for the fourth quarter is between $0.87 and $1.12 per common diluted share. This results in full year 2015 earnings guidance of between $4.65 and $4.90 per common diluted share compared to previous earnings guidance of $4.45 to $4.75 per share. The Company's earnings guidance compares to fourth quarter and full year 2014 earnings per common diluted share of $0.86 and $4.19, respectively. The 2015 earnings guidance assumes an annual weighted average diluted share count of 153 million shares, which includes 2.1 million shares from the convertible notes. The dilutive impact of the convertible notes reduces full year 2015 earnings per share by approximately $0.06 per share.
Actual results in 2015 may differ from present expectations and could be impacted by a number of factors including, among others, fluctuations in prices of commodities that our customers produce and transport; expenses related to current and potential litigation involving our Highway Products business; the operating leverage and efficiencies that can be achieved by the Company's manufacturing businesses; the level of sales and profitability of railcars; the level of profitability resulting from sales of leased railcars; the dilutive impact of the convertible notes related to changes in the Company's stock price; and the impact of weather conditions on our operations and delivery schedules.
Conference Call
Trinity will hold a conference call at 11:00 a.m. Eastern on October 23, 2015 to discuss its third quarter results. To listen to the call, please visit the Investor Relations section of the Trinity Industries website, www.trin.net and select the Conference Calls menu link. An audio replay may be accessed through the Company's website or by dialing (402) 220-0116 until 11:59 p.m. Eastern on October 30, 2015.
Trinity Industries, Inc., headquartered in Dallas, Texas, is a diversified industrial company that owns market- leading businesses providing products and services to the energy, transportation, chemical, and construction sectors. 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. Trinity uses the words 'anticipates,' 'believes,' 'estimates,' 'expects,' 'intends,' 'forecasts,' 'may,' 'will,' 'should,' 'guidance' and similar expressions to identify these forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from historical experience or our present expectations. 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.
- TABLES TO FOLLOW -
Trinity Industries, Inc. Condensed Consolidated Income Statements(in millions, except per share amounts) (unaudited)
Revenues $ 1,542.2 $ 1,562.8
Operating costs:
Cost of revenues 1,109.4 1,172.2
Selling, engineering, and administrative expenses 126.6 113.0
Gains on dispositions of property:
Net gains on lease fleet sales (57.8) (3.0)
Other (0.9) (0.6)
1,177.3 1,281.6
Operating profit 364.9 281.2
Interest expense, net 46.1 47.8
Other, net (1.0) (1.6)
Income before income taxes 319.8 235.0
Provision for income taxes 107.6 78.1
Net income 212.2 156.9
Net income attributable to noncontrolling interest 7.9 7.5
Net income attributable to Trinity Industries, Inc. $ 204.3 $ 149.4
Basic | $ 1.32 | $ 0.96 |
Diluted | $ 1.31 | $ 0.91 |
Net income attributable to Trinity Industries, Inc. per common share:
Basic | 150.0 | 151.5 |
Diluted | 150.9 | 159.6 |
Weighted average number of shares outstanding:
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.
(in millions, except per share amounts) (unaudited)
Revenues $ 4,845.7 $ 4,508.6
Operating costs:
Cost of revenues 3,540.1 3,344.5
Selling, engineering, and administrative expenses 339.3 293.0
Gains on dispositions of property:
Net gains on lease fleet sales (102.8) (90.2)
Other (11.8) (13.2)
3,764.8 3,534.1
Operating profit 1,080.9 974.5
Interest expense, net 147.2 139.9
Other, net (4.0) (2.9)
Income before income taxes 937.7 837.5
Provision for income taxes 315.7 274.5
Net income 622.0 563.0
Net income attributable to noncontrolling interest 25.5 23.0
Net income attributable to Trinity Industries, Inc. $ 596.5 $ 540.0
Basic | $ 3.84 | $ 3.46 |
Diluted | $ 3.78 | $ 3.33 |
Net income attributable to Trinity Industries, Inc. per common share:
Basic | 150.6 | 150.9 |
Diluted | 153.1 | 157.0 |
Weighted average number of shares outstanding:
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.
Construction Products Group 154.8 170.4
Inland Barge Group 164.8 168.4
Energy Equipment Group 289.5 269.7
Railcar Leasing and Management Services Group 249.2 205.7
All Other 29.1 28.9
Segment Totals before Eliminations 1,960.8 1,839.5
Eliminations - lease subsidiary (308.4) (186.5)
Eliminations - other (110.2) (90.2)
Consolidated Total $ 1,542.2 $ 1,562.8
Rail Group $ 223.3 $ 186.4
Construction Products Group 19.9 21.6
Inland Barge Group 28.1 31.0
Energy Equipment Group 44.8 30.0
Railcar Leasing and Management Services Group 158.2 87.0
All Other (3.0) (3.3)
Segment Totals before Eliminations and Corporate Expenses 471.3 352.7
Corporate (39.7) (36.7)
Eliminations - lease subsidiary (65.6) (34.3)
Eliminations - other (1.1) (0.5)
Consolidated Total $ 364.9 $ 281.2
Rail Group $ 3,328.2 $ 2,749.4
Construction Products Group 418.9 435.2
Inland Barge Group 505.7 470.7
Energy Equipment Group 871.5 707.9
Railcar Leasing and Management Services Group 732.1 880.3
All Other 84.0 80.2
Segment Totals before Eliminations 5,940.4 5,323.7
Eliminations - lease subsidiary (782.9) (564.2)
Eliminations - other (311.8) (250.9)
Consolidated Total $ 4,845.7 $ 4,508.6
Rail Group $ 663.7 $ 529.9
Construction Products Group 49.5 65.7
Inland Barge Group 96.3 88.6
Energy Equipment Group 118.3 81.2
Railcar Leasing and Management Services Group 418.7 419.7
All Other (4.6) (11.3)
Segment Totals before Eliminations and Corporate Expenses 1,341.9 1,173.8 Corporate (98.7) (89.5)
Eliminations - lease subsidiary (163.8) (110.5)
Eliminations - other 1.5 0.7
Consolidated Total $ 1,080.9 $ 974.5
Leasing Group Condensed Results of Operations(unaudited)
Revenues:
2015 2014 2015 2014Leasing and management $ 176.6 $ 158.3 $ 520.9 $ 469.2 Sales of railcars owned one year or less at the time of
sale 72.6 47.4 211.2 411.1
Total revenues $ 249.2 $ 205.7 $ 732.1 $ 880.3
Operating profit:
Leasing and management $ 81.8 $ 74.4 $ 254.7 $ 213.8
Railcar sales:
Railcars owned one year or less at the time of sale 18.6 9.6 61.2 115.7
Total operating profit Operating profit margin: Leasing and management Railcar sales Total operating profit margin | $ 158.2 46.3% * 63.5% | $ 87.0 47.0% * 42.3% | $ 418.7 48.9% * 57.2% | $ 419.7 45.6% * 47.7% |
Selected expense information(1): | ||||
Depreciation | $ 35.9 | $ 32.4 | $ 105.8 | $ 97.1 |
Maintenance | $ 24.6 | $ 17.8 | $ 65.9 | $ 58.8 |
Rent | $ 9.9 | $ 13.1 | $ 31.3 | $ 39.7 |
Interest | $ 32.5 | $ 39.1 | $ 106.8 | $ 114.5 |
Railcars owned more than one year at the time of sale 57.8 3.0 102.8 90.2
Leasing portfolio information:
2015 2014
Portfolio size (number of railcars) 77,140 75,930
Portfolio utilization 98.5% 99.5%
Nine Months Ended September 30,
2015 2014
(in millions)Proceeds from sale of leased railcars to Element Financial Corporation: Leasing Group:
Railcars owned one year or less at the time of sale | $ 182.7 $ 378.8 |
Railcars owned more than one year at the time of sale | 258.0 235.7 |
Rail Group | 175.8 153.4 |
$ 616.5 $ 767.9 | |
* Not meaningful |
(1) Depreciation, maintenance, 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.
$ 677.8 | $ 887.9 | |
Short-term marketable securities | - | 75.0 |
Receivables, net of allowance | 481.7 | 405.3 |
Income tax receivable | 26.2 | 58.6 |
Inventories | 1,020.9 | 1,068.4 |
Restricted cash | 211.8 | 234.7 |
Net property, plant, and equipment | 5,308.4 | 4,902.9 |
Goodwill | 754.3 | 773.2 |
Other assets | 324.2 | 327.8 |
$ 8,805.3 | $ 8,733.8 | |
Accounts payable | $ 294.6 | $ 295.4 |
Accrued liabilities | 557.5 | 709.6 |
Debt, net of unamortized discount of $48.3 and $60.0 | 3,284.5 | 3,553.0 |
Deferred income | 27.4 | 36.4 |
Deferred income taxes | 665.8 | 632.6 |
Other liabilities | 115.2 | 109.4 |
Stockholders' equity | 3,860.3 | 3,397.4 |
$ 8,805.3 | $ 8,733.8 |
Corporate/Manufacturing:
Property, plant, and equipment | $ 1,819.4 | $ 1,681.7 |
Accumulated depreciation | (885.7) | (820.7) |
933.7 | 861.0 |
Leasing:
Wholly-owned subsidiaries:
Machinery and other | 10.7 | 10.7 |
Equipment on lease | 3,661.7 | 3,189.6 |
Accumulated depreciation | (608.1) | (601.1) |
3,064.3 | 2,599.2 | |
Partially-owned subsidiaries: Equipment on lease | 2,261.3 | 2,261.2 |
Accumulated depreciation | (308.8) | (261.3) |
1,952.5 | 1,999.9 | |
Net deferred profit on railcars sold to the Leasing Group | (642.1) | (557.2) |
$ 5,308.4 | $ 4,902.9 |
Corporate - Recourse:
2015 2014Revolving credit facility $ - $ - Senior notes due 2024, net of unamortized discount of $0.4 and $0.4 399.6 399.6
Convertible subordinated notes, net of unamortized discount of $47.9
and $59.6 401.6 389.9
Other 0.5 0.7
801.7 790.2
Leasing:
Wholly-owned subsidiaries:
Recourse: Capital lease obligations | 36.6 | 39.1 |
36.6 | 39.1 | |
Non-recourse: Secured railcar equipment notes | 690.4 | 723.3 |
Warehouse facility | 291.7 | 120.6 |
Promissory notes | - | 363.9 |
982.1 | 1,207.8 | |
Partially-owned subsidiaries - Non-recourse: Secured railcar equipment notes | 1,464.1 | 1,515.9 |
1,464.1 | 1,515.9 | |
$ 3,284.5 | $ 3,553.0 |
Total Recourse Debt $ 36.6 $ 39.1
Total Non-Recourse Debt 2,446.2 2,723.7
$ 2,482.8 $ 2,762.8
Total Leasing Debt
Wholly-owned subsidiaries $ 1,018.7 $ 1,246.9
Partially-owned subsidiaries 1,464.1 1,515.9
$ 2,482.8 $ 2,762.8
Equipment on Lease(1)
Wholly-owned subsidiaries $ 3,064.3 $ 2,599.2
Partially-owned subsidiaries 1,952.5 1,999.9
$ 5,016.8 $ 4,599.1
Total Leasing Debt as a % of Equipment on Lease
Wholly-owned subsidiaries 33.2% 48.0%
Partially-owned subsidiaries 75.0% 75.8%
Combined 49.5% 60.1%
(1) Excludes net deferred profit on railcars sold to the Leasing Group.
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