Trinity Industries (TRN) 2 Nov 232023 Q3 Earnings call transcript

Good day, and welcome to the Trinity Industries Third Quarter and 9 months ended September 30, 2023 Results Conference Call. [Operator Instructions] Please note this event is being recorded.

Before we get started, let me remind you that today's conference call contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995 and include statements as to estimates, expectations, intentions and predictions of future financial performance. Statements that are not historical facts are forward-looking.

Participants are directed to Trinity's Form 10-K and other SEC filings for a description of certain business issues and risks, a change in any of which could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements.

to President conference of like Anne to now Vice Mann, Investor would turn over the Leigh I Relations. Please go ahead.

Thank appreciate you Third morning, everyone. for Good Results company's Financial quarter you, the XXXX Call. joining operator. us Conference We

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

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

of supplemental call points the on the today, at Events which the we link. event third metrics the website, metrics. will Investor under www.trin.net. portion of Presentations key Relations discussion the call of the highlighting financial in slides, and the GAAP website are accessible During The and comparable along slides reconciliations are non-GAAP to conference provided These earnings measures non-GAAP certain slides with our quarter reference are of appendix

of A Presentations the website. It Time November my turn midnight call on today's be a.m. under pleasure Jean. is XX:XX over Events will Replay available Eastern replay Investor available to Relations through on is our the XXXX. call X, now after to information page and

differential supply rates of financial to FLRD strength to We and and Thank key we during Leigh fleet performance given continuing we X prepared favorable XX.X% will Slide comments performance to improvement. Anne, utilization the believe a experience with with growth lease of lease XX.X% reflect favorable end our revenue path in confidence start with a future morning, third rise with and ago. on are I'll to you, XXXX everyone. convey segment, quarter to call. Trinity's continued year continue that this my railcar rate stronger that morning's have want we results leasing messages fundamentals. or In good quarter, and significantly our good compared XX% on continued of

deliveries. border rate the lower XX% X,XXX disclosed, quarter than resulted congestion closures in previously forecasted delivery with As and in a

fourth issues to quarter our to the remarks, discuss $X.XX we the will are our adjusted to these prepared deliveries due $X.XX but for later the traffic We to turn to border with graph, in XXXX market account efficiency other guidance lowering Slide EPS overall loss top Starting update and X improving. a commercial left chain and overview. rail supply and for is impacts. Please related

farm will you headwind have most in As has for volumes industry this this volumes. rail utilization improved products but Carload motor products and of intermodal improved petroleum declines storage minerals, volumes covered in volumes from to been weeks. recent recall, year-over-year shrinking grain are hoppers, due up significant offset harvest the The year, and remained solid of to mostly performance season. vehicles, railcars population shipments grain as traffic

of slide. Moving to the the bottom half

I mentioned, our utilization rates the quarter. As remained in FLRD favorable and

to a XX.X% push continue ability of fleet third XX.X% FLRD the in to high upward our maintaining while shows utilization, Our rates quarter.

On our border the deliveries few replacement bottom and level over the consistent congestion expectations years. support closure and next the in Borders with demand right, inquiries impacted the quarter.

in XX% up quarter. talk $X.XX. let's Now volume EPS of adjusted driven of about year-over-year Slide results million of external financial in a is We to $XXX the earned the turn and by X quarter. Revenue an deliveries higher

last quarter railcar XXXX, a benefited we reminder, which sale, of As third a completed EPS the in large year.

for Lease achieve still more and are of net portfolio the railcar fleet for target. but sale targeting gains XXXX we in quarter modest, third to were our sales XXXX the investment meaningful quarter fourth

turn year was adjusted Eric talk continuing operations acquisition-related the revenue $XX segments, prepared by flow our and with more XX% a our cash the later in cash revenues in and improved will million. lease higher Cash Leasing. negative year-over-year, with about was quarter, current flow starting million in Leasing rates, about free talk million driven up utilization from a to $XXX $XX the period. included remarks. Please X was Slide me in our little to quarter,

average Even that lease rates delivered lease closely in power. a rate months quarters, above we rates still for lease XX.X% strong quarter robust continue rate double-digit success have on lessors rate average, noticeable were X reflects conditions, of over trending the we of our well significant have a environment. To with Renewal preserve seeing to term and the to FLRD current these impact are lease the the to was in rates, push consecutive XX%, XX% XX environment, term we average renewal renewal our and lease the above evidence pricing expiring as favorable year-to-date. FLRD. quarter market fleet with Thanks

Leasing up expense, acquisitions and industry slightly maintenance elevated of depreciation increased margin lease the and by expense, due improved with partially in is operating to Management profile Leasing year-over-year is segment. ongoing maintenance the trends. was rates, margin primarily XX.X%. X offset This

fleet. position First, best the for compliance to second, more change scheduled railcars their modifications in in activity service opportunities; more car tank and

we for in influx to was migrants action to in I from the issues border due taken suspended crossing traffic deliveries quarter Eagle This primary briefly. September Products. touch Customs assist Agency rail on to of railcar use U.S. Border Pass, Protection the the the Border the U.S. Mexico. The facilities at Rail to the our cross-border Texas. and Patrol Moving manufacturing border. want border in XX, U.S.-bound On

continue resumed September operations traffic rail XX, and challenges evolve. on traffic to rail congestion While

third delivered XXX was impact expected. railcars than fewer The quarter

of still our While transportation the and completing between available rail railcars We deliveries we year. continue end railcars temporarily evaluate for and before in we started have Mexico of to moving not facilities, storage States. the and truck anticipate alternatives at sitting all and the these again, United have do we

expected, in quarter the benefited sales, financials than the trended in the quarter. heavily which they consolidated were deliveries toward lower While external

operating the loss quarter, year-over-year the efficiency recoveries. the border despite from Additionally, insurance In and sequentially included due segment challenges, we saw to to the X.X%. results margin gains improvement

mitigate an the our with efficiency of hedging average is at to we the margin strong Excluding further $XX.XX, quarter, segment rate gains, risk exchange labor remained program. reflecting and but X.X%, the those meaningful were able improvements. In peso

further of year issues exit to to X% expect operating X% of at margin We year the the in a X%, products segment rail border. rail the service substantial average full X% barring to and with

closures our production. the Additional down will and require congestion suspend border to negatively railcars or may temporarily impact get slow across ability us or to

the We the are working we The of railcar to quarter. $XXX production a rail and conversions, beyond. Turn for few railroads another I'll billion, government X. highlight new both related and to to outbound into the key is accomplishments me and have $X.X and our giving agencies XXXX operations visibility Slide more with we sustainable million smoothly backlog and keep railcar us value running with in do to truck traffic. what inbound can

million of Our our Eric, view XX loan lease one pretax last our net call to is for the want favorably. currently before investment ROE XX.X%, to is to I value highlight our accomplishments. is X.X%. And I the which $XXX in our fleet months we turn sustainability and Year-to-date,

of our As risk a X acknowledgment ratings progress and year, to ESG rating steady demonstrates over peers. of assessment. the our ESG rating received the relative of September this past in to both ability Trinity This of AA manage MSCI years our an

Congratulations Trinity our XXXXX our and our is industry's on shows this is certified the stronger rating rates. improvement to is on emphasis reflected a AA the efforts. employee team safety accomplishment. Nowhere that incident drives this program recognition our improvement, ISO value where safety at of Safety our continuous in than core

to turn the quarter. Eric And and now review the about I'll talk to the statements call financial fourth

quarter in morning, Slide of the everyone. statements. flow on start railcar $XXX and income revenues million I'll of Good comments the the discussion my deliveries improved external reflected rates. Total with X cash lease and higher

After were sales during $X.XX. were lease the million was gains quarter. $X share the our per insurance of Our from GAAP It's $X.X adjusting million adjusted in portfolio earnings $X.XX. that out noting quarter, EPS the worth the recoveries

said quarter, we I year. fourth As of see in expect to higher quarter the last gains the

flow cash to cash Adjusted flow and the $XXX million dividends. is operations is million. cash flow free Moving investments from continued statement. after $XX Year-to-date

debt. of of revolver $XXX As turn Slide Because week, $XX congestion, sales driven Jean our This and this closure XXXX. quarter the is was inventory our warehouse mentioned, higher goods dividend we was with levels modest in consecutive paid our supply free cash, to our final and shareholders. On source capital to higher about positions. net a returns work million. repayments of and in quarter well by of X ended Earlier driven and the adjusted due million X, predominantly process as negative now finished flow XX citizen for the we let's a border other the months quarter challenges. And reflects which talk meaningful railcar as in of liquidity the cash railcar XXXth third by chain Slide

quarter fourth approximately with We railcars, consistent continue of quarter. implies industry to XX,XXX the expect deliveries relatively third deliveries which

our planning investment $XXX of to million to $XXX end of more net $XXX target traditional range XXXX expect million of and quarter, expect is X-year and million fleet internal fourth within to Year-to-date, the million. and external a mix We investment we the expect $XXX in in deliveries. period million, $XXX

million. of manufacturing to million $XX expect general We and CapEx $XX

invested million $XX We year-to-date. have

are and from in guidance congestion. what similar $X.XX represents call, the significant in top lowering as supply a our EPS the the and well fourth and challenges have the XXXX related to run sale continuing revenue quarter improved to results, target expect the fourth growth We year. we mentioned efficiency to as portfolio Products dependent deliveries is for loss quarter our realized lease And third and the large the Rail rate on in as segment. range a resulting the $X.XX in chain strength leasing for of we of a to and border quarter this This closure Jean account at margins

board would many our But We any quarter. impact as possible. the are congestion deliveries efficiently get further fourth hard in or to quickly as closures as the and results across negatively working

XXXX, XXXX $X.X $X.X for period flow X-year the of And for changes target account a environment. in we billion operating the revised finally, of to to from XXXX through X-year third in our quarter operations set cash billion

navigating of and our challenges, efficiency in the to significant in take worth the year of While a in operations, billion. half we This not reflects team but margins than of XXXX. proud financial to confident continued results are disruption, significant of railcar source forward that any cash I'm of operating leverage see the I'm you lower from advantage a cash work operations, is are to the challenge. with revising first sales expected cash this Trinity. working that solid of billion barring and issues, border strong reflected ability with end supply we results, due border continue to business. of through XXXX. It noting can to the target hard those range chain $X to we We the are our look and sharing further for flow capital elevated $X.X improvement, in

our for ready are we first question. operator, now, And

comes [Operator Instructions] today Wells with The question Fargo. first Allison from Poliniak

thoughts First, Has to start I to stabilized? maintenance to talk talked still elevated. The I how kind as understand want about a it just trend What's Is into sequentially? your leasing. on being we side, know way move 'XX. there that to of you

there. Just any color

Allison, the question. for Thanks,

we've tank XXX,XXX going heightened the to For the level build over required years, XXXX, be the the discussed last of of cars. due through Events to XXXX compliance. built are new years tank several car when industry strong

I to HM-XXX modification this Now is want emphasize, not work.

tank just in we're XX-year required the wave about the right compliance that midst now. cars, Here, of and all for we're talking

Okay.

go expected were in built at numbers still those to into years we that on obviously the that 'XX then. based looking So

Yes.

around your Could Mexico. offset Okay. manufacturing the in that? -- still some don't -- really And challenges of into costs then the manufacturing, you production And about North flexibility. back maybe that. I persisted just that U.S. mean, just thoughts into or mean or can talk any you have

Okay.

new standpoint competitive in being all those now and So would we being a some the industry, in that. of cost that to handle from The Texas, to continue in cars built really in it Mexico possible the do we cars back be not manufacture Longview, do bring are U.S. to right and that.

from the to assembly. We it's the place mitigate But put issues the things we're the issues. our unusual team and bringing these do in to materials Mexico some border across have in into Mexico future border in confident really to

we have use entry different get to points. into that how We -- different through bring different examining the can and points that our product entry these routes in. railcars we U.S. And now we're might then back

looking might are we mitigate in future. at So the this we how

same effect don't third in had quarter. the we have the that So we

next with from Long comes The question Justin Stephens.

way product you to And clarify in rail from said point, XQ. full of at any X%. quarter? Jean, there at I be to exit one you would in for think just Products the to it relates quantify Pass that I is then rate that, what margins margins X% quarter saw you wanted Rail as the that's expect an Eagle the to headwind

look at when do expect quarter. at Justin. rate thanks, that's the be to for full X% When X%. And the exit it Well, we you quarter, the for look to that, you

Some of breaking the effect. me when not tell down the it the close let they border. by But you headwinds, basis we're points what on happens

First, stay, were the are route, that any already in of there, cars sit. any and that cars sitting go

a rates alleviate. right at it congestion for XXX production to while that takes doing cars. So now, And we're our about

And look shut very into not down the you plant property at a if look a XXX so week. when quickly off and you at plant that would that, taking we storage. they're When cars

now dissipate And through up see the there normal very first quickly quarter. that operations started in of that to occurring. more half We So was congestion October. see the lot third a built of

And secondly, one's volatility sales. and it. this railcar seen for a guess, of Okay. probably Got lot We've in I Eric.

go for the you color for impact a That you the of in $X quarter, operating terms in around give the the big additional the know $XX can portfolio in to was million down from is I range came of sale that If there expectations impact second in to back you've fourth third XQ? got income lease quarter. quarter. any the But us million.

you. thank Justin,

some in earnings. right. volatility There is You're the

quarter. quarter, As had car a railcar would be last the we in the recently signaled sales talked of We to to the get normal both certainly talked net say, about level. more the getting modest just quarter. there's -- and in investment number fourth We there. fleet sales our in guidance, it in sale about third the very would we that eliminations to the I be a

we to will you're anything car have but So before. going haven't be we're elevated that seen -- going levels, sales not to

Okay.

expect number? to be closer would XQ the So you to

larger, said, -- they'll larger anything we that be Like I not it's before. seen but haven't

from comes question Bascome Majors with Susquehanna. next The

Good morning.

go-forward and year the lease next momentum at about unique rate the the into look of on that's today. you metric number expiring from that that to nature have year a lease into issue conditions not are think Is this anything anything FLRD from or this we year As next clearly versus you think the continue us have. and by about maybe directionally help how cars of momentum much and to should there about mix next captured can FLRD? for have Just based where XX% you

sixth a Bascome. Well, see February. not next for a has foreshadows giving we're the our over of at that call, Thanks, at will we're real there. FLRD expires lease guidance the and to to year that a I our But strong until QX XX.X% X changes year, no fleet And we in on which fifth will improvements say rate next renew, typical quarters. that looking happen

you've what for us run businesses done rate you've to And people $X.XX, larger that Justin's when just ton I to of there's for couple this helped for not the a mean, gains year. most tendency recent of than a that were way. like understanding quarter the there's back implied in by much is go a $X.XX like fourth question to maybe another and seasonality quarter quarters yours, in

and pace outside about the being quarter forward gains for certainly, of anything we necessarily the quantitatively unusual fourth is business about not But the that think for we go number, think here. should when else there directionally,

Sure.

where of Trinity at had industry said quarter, the So we when you backlog. at look of about end the the third XX%

we good into beyond. a have and view So 'XX

changeovers. fourth the we're got stabilization. We've quarter, labor fewer Looking better at seeing

seeing supply we less our our is us disruptions less which in helping and the from turnover, So quarter. volume employees FX with efficiency anticipated. fewer headwind the along our chain some We're had increasing, than tenure with of is

had combined all has popped confidence. us. Unfortunately, they So headwinds of been affected those in gave ready. we the us The team that up quarter, third and the

and in quarter. So ready we're set fourth go to the

positive? the one along things you that some been you've things seen below going is than where potential So quarter as fourth to towards your it unusual characterize of have the maybe rather away that the leaning down some fair all dragging

Bascome, to That thanks. is say, fair

I'll on. then one, it Last pass

You or you had maybe year. update long-term your talked thoughts next update early there? quarter the Could doing fourth investor on a in sometime us about

We've that year. sometime yet would but the not expect to set date for it be I Bascome, next

Cowen. comes Elkott from Next question Matt with TD

quarter? It's rates? far think remaining utilization as moved good see and more potential much peak bit. you for near there rates, elevated FLRD the as in absolute the Can we is the And to pretty you about market talk up third ticking absolute lease the they sequentially lease or are a improvement guys if how

Matt. Thanks,

for X% Year-over-year, see the starting up that. to lease the top number. our in rate about average on consolidated are that the flow you're through -- Sorry and revenue fleet line

combine lessors that room majorly market the and raise You the see We which to still we the right to FLRD don't changing of XX.X%. see now, the rates. with conditions, for continue

lease Okay. the relative a but some unit That's industry. wondering the And orders Jean. guess, just number, it the solid the right gotten order how quarter? order on and seems, are you've a light rates given for activity tight helpful, are it's manufacturing third strong to and inquiry I also And bit side, seems now pockets how then railcars X,XXX after if of and what is

for inquiry XX,XXX the it's our we're can supportive orders lumpy that know at you the to backlog. industry sitting XX,XXX still years. of view of Matt, and next few levels, be over XX% industry, expect with that And looking car So of quarter-to-quarter. we builds the

going into been This XX,XXX have year, the only out to we pace industry. for think a we so there's the on And cars we're view good -- on. pretty of what's come

cars XX,XXX to XX,XXX to that expecting still we're And be wise. attrition So built.

Barger Capital comes question from Steve Markets. next KeyBanc with The

Christian on Zyla Barger. Steve This is actually for

normalized give given level your just and the you sense thoughts just on backlog? current demand the deliveries could are, a of us question, environment what on First

normalized be. will So deliveries, the what with match will think for industry build we level up again, the

depending can going So XX,XXX on cars are. and what year. the types be quarter-to-quarter It what's XX,XXX to lumpy on in a car

divide change So by little X, it it does if you you a bit. can but want,

question. is answer have that best you that I the on So probably for

then just for what what percentage that? much backlog Got And slated production, is your it. how is 'XX and beyond of XXXX for

last third large, GATX. a year, So from in of I got quarter multiyear think we order

year, going for we And me least of at at some visibility When the for deliver out to is next now. for next so are that look grabbing X those orders. number our right you years, what they're

next the XX% backlog deliver will year. So of

question-and-answer I turn any closing Jean like session. to our back concludes to This conference Savage would for the over remarks.

thank Well, We're proud in this quarter third morning. our you joining the for seeing us and business. of the improvement results we're

year solid strong We our expect with the momentum forward with to you look financials. to then. We sharing close and progress

concluded. has conference Thank now presentation. attending The today's you for

disconnect. may now You