Trinity Industries (TRN) 21 Oct 212021 Q3 Earnings call transcript

Good day, and welcome to the Trinity Industries Third Quarter Results Conference Call. All participants will be in listen-only mode. [Operator Instructions]. After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions]. is event this note, being recorded. Please

business Form includes get conference forward-looking. are call we Private predictions Litigation to go a issues any XXXX of Trinity's in started, intentions for SEC performance. Vice from would directed description estimates, defined not let to today's the of that Securities historical and I change other cause of Act of that you the now future Relations. remind those statements. Reform risks, of in as Mann, turn and President contains and Participants Investor filings conference and of XX-K the to actual expectations, me by Before ahead. certain a statements Statements results forward-looking differ expressed are could to financial which as over forward-looking statements are facts Anne to Please like or the outcomes materially Leigh

morning, you conference everyone. call. Thank results you, We financial for Eily. joining the third XXXX appreciate Good quarter company's us

prepared from Trinity's and Executive Officer Officer. Marchetto, Jean and Chief will comments Eric Our Chief President; the Savage, company's include remarks Financial

We the from leaders. prepared session Q&A our will remarks a hold following

to link. website now Presentations earnings with pleasure IR quarter are It key at today, slides appendix the be and of along that reconciliations call non-GAAP our supplemental During reference turn portion the call are the The my our on as the in accessible metrics website, Events These materials is measures provided the points we of over to conference of to under well slides non-GAAP financial the call as Jean. highlighting of discussion can found www.trin.net. The of will certain metrics. comparable the supplemental third GAAP slides.

morning, had and with newly highlighted to and our Thank to Trinity you, very repurchase strong to our joint great about a share on to and venture you basis ago. we and which Wafra Investor make formed year will and execute returns, million confident with a by everyone. Day another our in both continues quarter plan, of consolidated targets Eric I Trinity. remain Good strides Anne, ability shared welcome the our Leigh at optimize talk $XXX we Overall, later. hit new

me themes our industry level, continue quarter. Let At but third summarize improve key unevenly. some from broadly the fundamentals to

While chain disruptions, industrial production industrial few flowed and supply approaching forecasted North next the production is is pre-pandemic levels ebbed have economic American years. with and strong growth levels over overall

At population continue lines. business volumes relatively these for rail point, trends, of vantage lows. same of both fundamentals time, from very scrapping railcar into demand is falling our which rail-focused levels XXXX, recovery year's just will With macroeconomic railcars the From train carload speeds. is in in last the our improving elevated slower supportive stores and are the rising with

look the Slide impact X. of Let's ago. third trends XX% on year at million, our the from generated on Trinity these In revenue a up highlighted consolidated $XXX of results, quarter,

it's an EPS We'll businesses important a diversified but platform. to EPS in minutes, $X.XX. GAAP compared think both the detail $X.XX our few to I was Our of note strength adjusted of

results. equally initiatives see Rail the flow fundamentals and cash all stable Products quarter. flow our will dividends $XXX is returns consistent cash our flow of our and excited was flow underpin but our growth industry cash in our our can future excess the a go value shareholders. continued million. While the we free to summary, model drove against Trinity pleased quarter-to-quarter significant and million detail important based are creation and takeaway after solid vary third specific orders $XX may Eric and or Cash on more operations delivered, Group investments with in here In into results capital totaled through that to optimization that from return remain drive strength execution from cash

as railcar Let's can the we a whole. review and Slide turn X, to market

we're to and last above in is to tank backdrop, compared like Trinity's hoppers fewer markets in in storage fundamental carloads to and traffic and drive terms. X.X% getting rail also pre-pandemic the helping are Against scrapping a speeds closer are performance to railcar as by improve. gondolas, continue carload railcar levels, of continued assets First, and moving seen ago, well. to increase key demand boxcars, deployment improving are North now XXXX. Relative idle cars. The America Railcars the industry train levels slower aided as that continued declined key year-to-date, indicators activity XXXX and in carloads X% modest average quarter roughly

the from we we railcars, Demand up for X,XXX took Our a new for XX% and which just XX% a quarter, orders now FLRD, In improved stands rate ago. X.X% XX.X% call future compared new ago. turned a last quarter has positive year to differential, well. to at lease exciting compared year negative as the and to been the utilization railcars

growth positive. In compared a to on revenue Leasing to the average partially quarter. results legacy place growth, XXXX. be believe remain likely As our let's very line important industry we to Slide car to quarter the we today. Products quarter also impact, that indicators replacement last in by turn trend it's levels segment improved clear, in Revenue results higher based in not On utilization prove. increased with results, dynamics lower To are through contextualize X, we trend forward business, and each should rates impact and of the quarter, noted note That in Trinity was that fleet last To continue new for lease pricing underlying fees. and the XXXX rates said, as by slightly as be our higher quarter and encouraged renewals. combination the lease linear may cycle offset leasing our for segment dynamics servicer positively stronger rates Rail deliveries we will

overall view the the renewal mentioned I than trend FLRD by X% evidenced in rates lease were the as higher remain positive our Specifically, in trend And quarter rate expiration. earlier. on our

compared basis points a Our Services strong, and Leasing XXX ago. to margins also in up quarter Management were

Leasing business the operating in Our by costs. partially quarter, from higher fleet offset servicer fees benefited

We we That had from our my sustainable our long-term successful I'll higher also the returns term given be created later that driven required the segment we a short the a headwind earlier to said, for which the modestly have, the being program, Trinity. the will in in margin headwind to the problem resulting demand lease Leasing good commentary to is for these and demand value year year. rising by this believe increasing remarks. to conversion detail Recall position by depreciation expect expenses fleet

supply disruptions. at looking in was labor Group. Products year-to-date Now as the chain offset results by turnover our Rail progress Margin and well as shortages improvement

be margins we this the dynamics operating the was likely Group labor segment Products the will path remain chain recovery in compared like linear mix, to Specifically, and business. The given quarter negative X a Rail quarter. confident on quarter-to-quarter based in for shortages. delivery X.X% That of the said, less X.X% for last main disruption supply indicators

the and utilization, the as rates demand evidenced for by lease first The continues to quarter. in railcars orders rise is,

The indicator values. second is key railcar

cost our our pipeline. like steel work can values near-term ultimately railcar as deliveries, costs will and margins higher serve input drive confident to that through higher we headwind higher a older remain very While as orders

the our a on to to capital flow our share disposed that Trinity on initiatives continue better cost proceeds over our million important to sheet partnership Trinity's over the shareholders asset and optimize a initiatives equity balance to continues step venture Lastly, commitment joint to balance our Trinity was and $XXX diversified in from update move Trinity's cost and ROE. on $X railcar. drive quarter with the Touching to drive some sheet, note optimization our asset as great overall enterprise the also we optimize We quarter. I'll of expense years. and an benefit gains progress million view, and for with the reduced Group. both X institutional Wafra, Rail we and balance return free made manufacturing, our of drive shareholders a generates venture improvements this strong sheet railcar authorization. busy targets while X The producing it's meaningful other cost announced progress challenged, help returns $X optimization In programs significant repurchase to portfolio for with enterprise. joint in efforts, breakeven investor, of of Trinity cash disposal. commitment make on also that million the initiatives. renewed billion new in to Slide X next our an that $X returns properties Products in reduction on a the In significant were lean our Beginning quarter Trinity a have total is as sales of

sale Clearly, driving also CapEx quarter, million quarter. was lease spent the the to fleet key we a last investment fleet leasing to lease to our portfolio the during in improve Turning proceeds. $XXX busy to optimization. event, add we side on our as $XXX and million Similar Wafra were in

both Looking expect fleet The have to we at is reinvestment the fourth year-to-date. sale and slow and actions for proceeds. that pace here of improved optimize takeaway from as quarter, key would returns we the onboard accretive the mix the taken

comprised totaled sustainable as conversions optimization XXX Trinity portfolio volume or to pivot acquisition. conversions, better to $X the we demand received the important X,XXX third railcars and conversions to our us piece our quarter, of In Through sustainable for which include have orders. to tank allow market a orders addition sustainable meet and by transactions, In of the to tank the This to cars, compared a and million yield mix the fleet. improved challenging XXX the of cars, quarter. market our external freight upgrading secondary we an fleet These existing fleet of fleet quarter, on improve of of third effort. is which internal end the converting small closed our of over last doubled

and Lastly, services, number to products of new with we update a on are on initiatives. our pace

goals have for For service. for the reached subscription XXXX we now Trinsight, paying fees customers our

very at conclusion, railcar the continue hit as we in to returns improve day our product have development number last beyond. still we new especially XXXX. Trinity goal into fundamentals for fall. a to confident to enhance plan Additionally, and X-year outlined ongoing will continue our XXXX And initiatives full In of remains

our green This to producing eliminates that, emissions, rail, of the more efficiency great number and moment hand to our our over environmental new financing leader market in Trinity of system our our limit newest strive ton existing designation. detail highway billion leasing in the we positive a vision, car the believe railcar of impact And in and is to this we to chains, and forward promote ideas, Earlier a In as and shift railcars meet To At and We've increase a discuss to deliver Eric our call transportation. has Trinsight. railcar sustainable Eric, this the products committed the like being emissions that reduces to environmental of freight implemented the our XX% different our starts water infrastructure. leads benefits critical of and the enable rail our impact X demand for as goods thinking, debt a good We industry's reduce to hand few also more through with for our I use need let railcar-related more as take to a to waste. enhancing meets supply on transportation shippers end, transition, on programs meeting introduced from less to including their to service less freight $X.X fewer sustainability. to a first and Before promoting we focus move new this rail sustainable this put fewer all, wear on fulfill product of program. facilities, compared reduce Trinity improve purpose of focus to I'd assets of sustainable entirely on-highway approximately our on certain train framework. me markets. to year, With congestion results. sustainable recycle leveraging to and prioritize with which quarter over call people. new carloads. discussed we've conversion moving more

of revenue Slide the from to on and Starting improvement Overall, Thank the lease summary ago. our share you, a with highway year-over-year in by This million, from $X.XX begin the in of Trinity compared higher was of both XX% per strategic to grew year deliveries statement, in a $X.XX demand Jean fundamentals, totaled Group with driven as better Products said, and third quarter. Jean, and our portfolio $X.XX, business. sales combination by as will continues a gains the consolidated earnings external good morning, both everyone. on Rail in steady up income benefit share $XXX and fundamentals I Adjusted continued repurchase activity. railcar leasing initiatives. well from driven as nearly quarter improvement X sequentially our

quarter results sustainable our negatively with depreciation associated program. third accelerated Our were impacted railcar by conversion

a number at related Our excludes the adjusted tornado recoveries $X.XX insurance benefit EPS damage facility. our Cartersville to from

joint RIV gain our on with quarter the our the broadening a Similar market improvement railcar new the XX% portfolio venture the XX%. our owns venture, fundamentals, assets. $XX this is joint to of third earnings discussed, lease our example owns As for transaction. million positively another sale remaining $XXX Trinity of of million In Wafra equity and leased transaction impacted in

lease third quarter before of sales. to quarter our fourth consolidated our relatively expect with we quarter, next to consistent impact margins results be portfolio the forward Looking

the million. Cash collection million, totaled which our from from million in of to was flow $XX third cash cash Year-to-date operations receivable. quarter $XXX statement. operations includes of flow the Turning flow $XX the tax

we Our to remaining is to $XXX receivable from full full $XXX flow $XXX year million, Last flow operations quarter, included guided million in million. is year of our not which cash guidance. cash tax

capital the target. changes cost inventory Given working our as of higher are we plan implement, as to well reducing we

$XX approximately million. we consisting to investment was now is exceeded $XXX quarter, fleet from by investment $XX continue net of constraints attractive $XX brings CapEx are guidance for mitigate our to the is strategic manufacturing for which This reduction offset chain against deliveries. lease fleet Manufacturing CapEx million between disciplined our million. of year-to-date investments, that the be investments million we by $XXX protect supply of $XXX million of pressures sourcing expected $X make million leasing in to a as full and intentional support we as lease sales revised year for our as Our the investment inflationary focused $XXX lease to Year-to-date lease at increase million, and million. lease quarter range of pace proceeds we net in initiative. the more than optimization returns is a portfolio lease the In $XX sales. to portfolio fleet Trinity's had million, on

manufacturing flow $XXX $XX Our quarter, million million. investments year in and the million. year-to-date $XX now to million dividends and is for brings Total free projected cash $XXX third CapEx which full be to after between was total the

we flexibility the of drive As If to shareholder very has and cash plan approximately value continues in the repurchases, million disciplined million liquidity liquidity position, capitalization. discussed. represents let's turn dividends our through even review of with to billion Jean Trinity highlighted quarter to we our and our a noted, shareholders, shareholders allocation. capital $XX end additional $X.X as platform after to $X.X continues This the Slide returned billion strength capitalization. market provides just by which drive have strong these capital flows Year-to-date, Trinity allows to in return returns-focused return I value $XXX X, of share financial nearly Trinity of through of XX% capital. to to generate

strategy to drive asset unchanged. remains Our over growth returns

to expect we and in make can committed especially in for demand lease of investments return growth, fleet the markets meet our capital. to increasing where we While remain we

flow cash ability affords do from can our to both. you us see actions date, strong our to As the

$XXX $XXX quarter, XXXX. million that completed repurchase we share launched through a previous and This authorization runs million our new program

strategic key long-term which are We we is focus plan. against our progressing our In sheet strategy. well of balance and equity, return continue to our on our improve optimize a closing,

Trinity We proud our goals. that execute against continues to are

of financial of showcases to operating cycle. deliver through challenges position the the the resilience platform our the current immune environment, While Trinity our ability is to and not returns the

to market to recovers, generate power from returns. the platform risk-adjusted now the will Eily, take participants. we demonstrate us you As of may attractive our questions our

[Operator Instructions].

Our first with Cowen. Elkott from question today Matt comes

they're that rail, that by growth crude energy the one more opportunity related of said energy the that peak Alberta's an the presents that for is said much National the you hydrogen something but Canadian Eric, potential projects. sustainable. in to the enthusiastic the Jean, that about is Is thing only carloads most green They guys?

that by for may Yes, approves different have and rail. the by movement that that of Matt, look the to And we It's to at looked the types transferred development radar. you at the question. for be continue thank and be on the continue some fuels hydrogen doing rail able overall, hope hydrogen. on the that, government We're and we'll

time Okay. an you that? before And for car how expect such if have we is granted, an guys lead much appropriate approval should

fit we -- would It depend on would a have that well. really design fairly

would testing the would that that governments put or be the come on rail. to required it down different to So by countries

it. broadly is? anticipation litigation bill? improvement in one level. small you to Got And And just guardrail remaining address about of on the maybe business on the infrastructure Is exposed state And the of risk business. the question can the infrastructure this bill some more talk just how

I'll out to team that quarter did the business the past so The is with able highway Sure. third on, quarter. of pass we're job. cost. a in that is cost best improving of saying ever with -- input history had along a highway our freight start the lot business that the business the because They great this

out. When get portion So likely Yes, buy impact? the later ready to and cycle, the guardrail start closer when the to or be normally have programs construction. approved, so to they're in to construction They the you're the passed. looking then bill, The to but has that they bill will you months have see least X that months revenue. most in it's the at at it an infrastructure XX

going our On that smaller seen litigation, changes would on releases there. happen. what's in you've on So

the follow-up? to less trend years, that I did you Matt, dropping come few and seeing give in. think, we It's over did continue. asking? new you litigation are expect And were been everything Or a I last have We

activity. I I was to know would believe, the least, imagine I would a X- lag could question, immediately imagine X-part business, it some, front but reasonable? before there's of reflected that XX-month it's will bill, to lead in that related the infrastructure bill, that so the a confidence I the the inquiry if passage even demand -- to at the and increase the on after Is

I think is. it

with to out projects puts it I have some, think ahead we'll gets and people prestart go there. what may passed it see or confidence and but some may they when wait

you years when off might understandably now. business And business Arcosa demand? to litigation play of infrastructure out for Okay. as spun Would time, is the guys because an and largely guardrail the you open a at non-railcar especially this which right it's now few in ago, of valuation, you divesting be the way kept the be only the that the business high

best Well, into past not for we business the we for Matt, owner Trinity to right the sell have we have get I to would more on the us able focus long-term dynamics, believe that right in as said rail that. But the be the would that situation to be industry.

the on that and table, is we it So have talked about prior.

Poliniak next question comes from Our Wells Fargo. Allison with

contracts to in inflation input about for you're it terms to cost rolled some or of seeing inflation? going to where think most it of into Any input the called I Just forward you And that of out kind I way inflation had one, contracts. guess, there? is some evolves to manufacturing. a deliveries. is there color that want components the guess, start turn older the how actually you that these Is the mentioned steel get

Eric. is things this was you just But gases had related steel it being would specialty nitrogen. components. both and probably than say interrupted, oxygen, more the I surcharge quarter, like in industrial Allison, Yes, also

things those -- diverted COVID. gases all So those to were hospital those switch of -- as usage because to

that So had an impact. certainly

some that. I the probably think specialty road on the specialty pressure on so side, you have there's down components,

in fixed -- it's now. environment it's going whether good to said less price or of her the they times In terms when not escalatable, be the they're through it is were it taken than probably -- work as how through, of some as works linear. be was demand the backlog older contracts, and as just comments, There'll we not as Jean in

And so or you'll have that the coming quarter X. through next over

of it aren't just network hope, mentioned with some extent as some a One from some that is but just Jean, actually with in situation, these demand. a is, bit of really question. kind it. of of stuff just, your challenges Got to that? the replacement there sort as limited then thinking had pushback that terms would of deliveries that how with of operating given you at bigger color they of level. quite about some reverse we're comfort obviously, storage reaching efficiently capacity the some Any that And just not you're replacement to forward Or were getting impact comfort rails could cars throwing level here? kind moving or returning --

Allison. Sure,

this of pace So getting are when number scrapped, have little the of and cars on X that maybe those now. right more scrapped per demand car year, you last look around XX,XXX years. high bit at We're many the getting types scrapped have And the to in do remember, we year. a that

grain So they're box to if or replacement cars need or cars cars those others. going it's

for really of scrapped XX, cars for and next there XX,XXX is years demand are So to couple now. the laid that we our based of out XXX confidence right replacing the the what for industry being off

large increase a not overall it's in demand. So

Our next with question GLJ Research. Johnson from comes Gordon

James This for in Gordon. is Bardowski

that for So X,XXX railcars, about to I is new relates guess the Was the give JV. first one take? or it

we in optimizing and It terms X-K about our railcars joint lot million. bit the $XXX -- the of proceeds our venture, initiatives were those No, railcars lease It it's talk And lot fleet solves our was -- the balance ahead of an sheet. little and and go we we demonstrates is And in we're just There also detail, with really our in August X,XXX has a in doing obviously, I'll think, line filed that Q. X,XXX that there's it's details as about a a more initiatives X,XXX that that have more platform. railcars. it's it all be of that well. about that is there'll something

Right.

your That's your had rate Okay. helpful. Clearly, rate been? as what without secondly, And would that utilization say? utilization that well ratio. fair that Is sale, loan-to-value as the to affects

Okay.

at railcars utilization would we of rate by making it were it does So selling portfolio haven't the that little utilized sold, off it that don't little math. -- lower. railcars done But I tell a XXX%, that all a I does The so a X,XXX slightly -- those make math bit do the a impact to the I is lower. reduce bit you're you hand, X% the have can you but it think what it

In terms of million, certainly, loan-to-value, proceeds of the railcars unencumbered. $XXX some of were those the

of out came those our of of debt facilities. Some some

so day, for owned slightly the quarter. a and our of XX%. leverage lot the the our At went up It's there's of ins outs. wholly about in And end fleet

Yes.

So in of that change right strategy you any is in within your now allocation? of earlier previously terms terms range capital Is that your there guided.

out James. Sure, is XX%, still was of put range. range We you're the of to range. that in midpoint near put XX% right. and kind our Yes, target That the -- we now midterm and are we

any change is still that that. we But certainly haven't made to flexibility We range. right still now, have but our change,

anticipate going to this shipping just that deliveries. you more. Can Okay. us were backlog let then try you I'll on you But you through Great. year? couple a know And accelerating how much mentioned speak just focus your to them.

about So talked we I ready getting for cars delivery. think

we And activity the in, strong. market year, for go don't But market could know out in with quicker. came the remains they I what percentage. that So

the the delivery that the about our our Q X% backlog this is terms how That's deliver we'll of rating delivering is what much in be XX%, our dollars. Q XX. of what in It's delivery year. will -- in of rail It's in XXXX. of for percentage in this new

seeing rates since I'll it that very way a decipher is a simply higher given upward today the But off are versus loaded much And of costs? I do you're rising costs passing apologize final a improving pressure this is question could the of here we as there question. that. for any factor how lessors seeing, lease it conditions is the in -- on you cut

lot looking we're you're changes that had So a expiring demand. the has versus the supply with increase. on I the and a positive. when at X% have in seeing increase markets where and the seeing, we're of fewer our forward-looking the mentioned renewal cars the to was rate quarter that that that rate rate available, In do FLRD absolutely you rate we

So that that be expiring, rates. off of lease means coming or an the to looking those see at in cars expecting will overall increase we're

it's So trend a for us. positive still

with Our comes Inc. Sellers George Stephens next from question

more talked function higher about just percentage valuations So I'm commodity prices know could I guess much trends? type, pricing car about core a varies my in new first question, of seen but railcar generally increase versus pricing you curious, And railcars? increasing. is just And so talk by I you've you the how then that of

higher. there XX% lot it mix to over that much core translated steel starting XX% cost. some And And depends being steel and on where input have from tripled it We've talked of and is of obviously, probably level, to steel of from the that the is on costs, depends it, a input it the and really, input from. and of -- component car you're and has when doubled prices George, anywhere So have matter amount costs matters. a how types on into is -- pre-pandemic a margin if that you

input XXX,XXX related increase the owner X,XXX, XXX,XXX just much higher would X,XXX on costs that last just of So those this improved pressures railcars as And the the of margins railcars, of the say we existing benefit delivered inflationary over railcars. is new I an from quarters. But couple ties more to that greatly quarter. on have cars the into --

And prices really value -- railcar see so from replacement a room to get of of into railcar get terms give in level. where more valuations new where run and impacted of we in the in both as we railcars depreciated those terms existing rates that's terms valuations lease

about with where really excited we that's So the the future fleet. get lease

talked the fleet you quarter? about say current the how to fourth then be Okay. going could the That's backlog, of backlog to much delivered in is you lease the And helpful. but

I may me minute, to at have I in look our did are company fourth the of the one. not -- a get got into that, deliveries give I'll to the but XX% Q. back to related and leasing I quarter. find that come

Remember, the and past, still some come and railroads right first, or cars told and in-shippers in buying. then third-party occurring majority that will third-party lessors. typically, We're you the But that's the are now. new market the lessors getting first secondary railroads buy we've still in

next question with comes Our Majors Susquehanna. from Bascome

kind with unpack in spring visibility into In had seem of and in were well you regionally you're quarter? to that's last or and choice functionally It does X in maybe about the like into even changed challenging. deeper the regions Mexico. more being as fourth in give And labor of us summer, bit employer having where of manufacturing challenge a you in, has months? how the feel and get we that the you become the Texas an what us labor, the most on Can little positioned East you're trending really how talked

is This Sure, Jean. take Bas. I'll that.

supply past see the during fortunate gotten in, chain issues. this have to as we just to it were and further the And of we that So the we've pandemic labor was not beginning things. started quarter some very

a gases And some where some talked we of short-term transitory valves. is that's in was of think, and going there already the disruption Eric had to then it, that Some we about, be supply.

leaving other who low it's shortages. experiencing as jobs the people taking as still far higher is some very like retiring think the the has marketplace. low labor, other in are turnover very Mexico, U.S., and of every strong, out But just I very or in for even the themselves of As company labor, turnover,

more in, to for needs again, continue So of to came place quarter best And ourselves something making that respond we're that it's positioning the market. in the else, that third the to sure everyone on, us. the we'll like work

to stabilize? getting started your curious the to Have in the stands you Just points they they're started in versus Do that pain worse? U.S. surprise where feel quarter. the like feel

much pretty up from stabilized little the went less. So it of the a beginning there. it's It quarter, was and

just we the again, in it's, resources all continue to able to the make now So be demand. to sure meet getting place

next there lease on that mean we rate cars, what for, a which a where Is gave are I since you time previous you think, like ground? metric. to first about talked encouraging And escalation are we yet? you the supply-demand of your means that faster Just see dynamic was point Are you've that your just this there? we positively very -- the thoughts into tend on a Can reporting can sense see approaching any differential, new and been upcycles price where quickly? in creating is lease inflect price to sorry, that rates I it the feels there sight? give tied -- rates in and lease new future for that inflation in Is year? and what that on you -- that question, getting inflection move into lease I'm car

turn I'll that over it and start to on Eric. then

different at expire does fleet our that times. remember Now

the of XX% fleet expires to about each year. So XX%

on some change of We that average still to increase So versus headwinds. overall when the for over mentioned X% the rates the the rate through expiring years at is quarter many of renewal it had lease them. for you're work quarter, rate, the but all looking lease

it's So a bit. down still little

And all I supply-demand go supply, think don't up. move Eric, some through, where time take seen more but are add? the We've the than know, metric the markets would I the of it encouraged. will towards in more is to way areas. the we quicker So see that needing you'll renewals other work

Yes, car steady car car newer prices rates to to it up metric. But by which as will rates them. come comments cause existing absolute of Bascome, price XX in allow type it add rates terms, change higher lease I you railcars coming the seen type, to then lead we've railcar that that new storage, Jean's also, car would just existing for is car but to months out does

So railcar both the loadings. fleet continues tighter, attrition to from get from and increased

same to railcars move those So needing the railcar both freight. increase or more things loadings

all to factors to existing those for are improve lead of So new to and assets and opportunities assets tailwinds should pricing. demand

operations, the generally to these as is as see the lease our market large our maintenance we of with points a are one that's of think I company quickly accordingly. respond able of benefits and we platform large see inflection a and manufacturer,

period a is I prepared but month-over-month. renewal hopping just mentioned mean, and put about trending this current remarks, incremental the but that and apologize was there -- -- to to think And know calls, spot that's I how or on word, quarter-over-quarter I maybe in discussion, if I a is rate you way right the not of kind an

that the rate you're average of to renewals that the with and lease a sense the slowly move. understand we the improvement caveat takes seeing, portfolio sequential happen overall the any of while Just

the Sure, market been increasing. has mean absolutely Bas. I activity

And activities come far sequentially increasing, very for so we strong a are assignment us for that that. lot for that. And as of new orders see go through into rates still quotes And to rates renewal cars. we then or very, seeing continuing on as

question KeyBanc from with today Steve comes Our Markets. Barger Capital final

and a volume chain supply how much quantify that I'm for you in Can sense labor operating just versus mix? Rail Group? loss and get the issues trying was the the to of

play them through. of X the going that in a All had results we role

on do fact play to. to to when Then So not to you the into need that supply have having that from of work you shortages at do valve you able that the be have or the on work. able fact also inefficiencies done labor to that example to looking to time the another can't wanted you need or be in turnover come the chain, the do get either put the you that you gases you're that work

of that through So when for combine those think or you're most all not you has We've impact. industrials to to put industries when XX%? But together, XX%, gone you the absolutely talking hear impact that say, them, quarter. is all going about an it I

this talked And -- the being centric. Steve, just car call previous about we've in our order more freight book

call mix. the out the And supply biggest a so from, the second labor say, the why calling out terms to chain I we're change and the in that's the third that as -- It's reason there, of quarter are drivers. but quarter wouldn't because those

I on XQ And look I to like. want sure comment you. make understand Got could what Eric, just your

plus quarter, like If the it's this your Rail the most you JV, seems right? cars loss like sell into more in or the Group. of more look given to XQ, I the don't from going think And sale gain EPS on it minus came XQ then

So margin my margins you comments quarter sales. before the around were was fourth on take in percentages. the car impact It of

just look revenue you we So when that that. said you margin percentages similar exclude when the take the would

those to that's from way about good think numbers. think I So a it

car sales, $XXX -- to car wouldn't this -- of did terms in quarter. In of sales million we third Wafra I the

planning -- As next wouldn't of years. we talk a large quarter. fourth -- not X we about, don't more that's I in the the programmatic Wafra transaction we're the over expect those

Is the about part first it… How Okay. year? next of

$X billion. deal It's X-year a with

So you think time. that ratably about over it

Got it.

the part XQ business And first XQ for recent Rail going tempering Group income ASPs then Or like Rail we for of should is year. OEM for think be to for our the not so will you XQ looks margins? if be Do orders, the this new contribute to Group trough expectations Group, for 'XX? the Rail given operating

be a linear Remember, trajectory Rail I Group. said won't Products for the it

see going just through expect it depend be are really going it's would linear. not improvement. and the the on I that. I'm may to So volume that saying mix to

a of through that laid do still are Day. see going full of lot those we that flow out the optimization results. occur And in Investor our different on have as improvements period the types and initiatives of X-year so each through And lean you'll we complete, initiatives that

to it rebound last that that to the of that going that you've quarters But the sharply over taken in fair first not given couple expect, you ASPs of and is the half margins are 'XX? the say volumes

too ASP margin into than of about more the That's mix. mix the a the reflect the think I read from ASPs standpoint. the really profile more margins. much I wouldn't

talked As improving I that the about, it's new railcars on during the than of because did better a height what we're are pandemic. environment think we demand I margins say, taking back, the

from noise chain in of in to as well. generally getting and that manufacturing the ourselves cetera, as ahead With backlog expectations so being then side, supply standpoint, a of margins stabilize, expand labor, disruptions we're of of you the start as terms extend, to about start just the lot because backlog there's cautious all see results. And on et

-- leads so speaking, improvement. generally the environment is but demand improving, which pricing to And profile the

railcar them And make the you last little for them talk program? sustainable are just to X converting conversion Can How a more more Okay. about me. you sustainable?

car have and utilization yield. a you have look better could and the market you markets and a put as So type change, we that see maybe into different higher

that putting So utilization different overall that, yield. on, we to improved and reposition like rethinking, some in can modification improve and work be do hopper it ahead things our a car go to that and

railcar. price.” this a to a make you suitable don't want pay that purposes?” Are work way to your or creative basis "I it doing to some on in and a a railcar speculative car can maybe “Well, customer response do finding want I the for new saying, say, And I you full to

choice having older put the as railcars a a and market maybe from existing a making Great to in we're to return convert first, we we longer and say it standpoint building existing need that's that utilize new here. Instead car not to higher doing that when assets the to to and or financially sitting utilized, want And use time. of what may sense run there, a either question. continue our and car a have we're it at that makes the assets,

response that proactively you're to doing But or customer requests? in

to It's we from customers fleet. customer lease our fill anything either need in proactively. to like not requests. from that that have doing response external have we or We're We orders orders

to do in the lend conversion? one, cars think fleet last you how many your fleet just or themselves And in total

as of be Steve, mean going each fleet the to some in have some the the the owner going have fleet -- been lower small demand of other have owner. And where is When you to slower I as carloadings -- about softer eye cube of changed, types itself think covered or different the that car that's changed. of you where recently you got think were ahead things. hoppers that utilization, when of

cetera, some the same underlying impact. of the had tank and make age et can all young that -- fit. And goes cars owner those it on to things decision. sustainable the -- So assets, and you've so conversions the tank on an do, a have We've made those tank where of retank, cars is railcar. those think so are going depends Each you are of cars, relatively

our the to platform goes strength it And again. of

of capability our in the have doing those We shops. own maintenance conversions

demand does for it the a help overall. us meet more product the So and sustainable customers provide

over question-and-answer I'd concludes Leigh for our This remarks. to Mann to back turn the some call session. Anne closing like

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