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Form 8-K TRINITY INDUSTRIES INC For: Jul 21

July 22, 2016 2:44 PM EDT



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported):
 
July 21, 2016

__________________________________________
(Exact name of registrant as specified in its charter)
 
 
 
 
 
Delaware
 
1-6903
 
75-0225040
(State or other jurisdiction
of incorporation
 
(Commission File No.)
 
(I.R.S. Employer
Identification No.)
  
 
 
 
 
2525 N. Stemmons Freeway, Dallas, Texas
 
 
 
75207-2401
(Address of principal executive offices)
 
 
 
(Zip Code)

 
 
 
Registrant's telephone number, including area code:
 
214-631-4420
Not Applicable
______________________________________________
Former name or former address, if changed since last report
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[  ]  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[  ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[  ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[  ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))













Item 2.02 Results of Operations and Financial Condition.

The Registrant hereby furnishes the information set forth in its News Release, dated July 21, 2016, announcing operating results for the three month period ended June 30, 2016, a copy of which is furnished as exhibit 99.1 and incorporated herein by reference. On July 22, 2016, the Registrant held a conference call and web cast with respect to its financial results for the three month period ended June 30, 2016. The conference call scripts of Gail M. Peck, Vice President, Finance and Treasurer; S. Theis Rice, Senior Vice President and Chief Legal Officer; Timothy R. Wallace, Chairman, Chief Executive Officer, and President; William A. McWhirter II, Senior Vice President and Group President of the Construction Products, Energy Equipment and Inland Barge Groups; D. Stephen Menzies, Senior Vice President and Group President of the Rail and Railcar Leasing Groups; and James E. Perry, Senior Vice President and Chief Financial Officer are furnished as exhibits 99.2, 99.3, 99.4, 99.5, 99.6, and 99.7, respectively, and incorporated herein by reference.

This information is not "filed" pursuant to the Securities Exchange Act of 1934 and is not incorporated by reference into any Securities Act of 1933 registration statements. Additionally, the submission of the report on Form 8-K is not an admission of the materiality of any information in this report that is required to be disclosed solely by Regulation FD.

Item 7.01 Regulation FD Disclosure.

See "Item 2.02 — Results of Operations and Financial Condition."

This information is not "filed" pursuant to the Securities Exchange Act of 1934 and is not incorporated by reference into any Securities Act of 1933 registration statements. Additionally, the submission of the report on Form 8-K is not an admission of the materiality of any information in this report that is required to be disclosed solely by Regulation FD.

Item 9.01 Financial Statements and Exhibits.

(a) - (c) Not applicable.

(d) Exhibits:
Exhibit No. / Description
99.1 News Release dated July 21, 2016 with respect to the operating results for the three month period ended June 30, 2016.
99.2 Conference call script of July 22, 2016 of Gail M. Peck, Vice President, Finance and Treasurer.
99.3 Conference call script of July 22, 2016 of S. Theis Rice, Senior Vice President and Chief Legal Officer.
99.4 Conference call script of July 22, 2016 of Timothy R. Wallace, Chairman, Chief Executive Officer, and President.
99.5 Conference call script of July 22, 2016 of William A. McWhirter II, Senior Vice President and Group President of the Construction Products, Energy Equipment and Inland Barge Groups.
99.6 Conference call script of July 22, 2016 of D. Stephen Menzies, Senior Vice President and Group President of the Rail and Railcar Leasing Groups.
99.7 Conference call script of July 22, 2016 of James E. Perry, Senior Vice President and Chief Financial Officer.






SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
Trinity Industries, Inc.
 
 
 
July 22, 2016
By:
/s/ James E. Perry
 
 
Name: James E. Perry
 
 
Title: Senior Vice President and Chief Financial Officer






Exhibit Index
Exhibit No.
 
Description
 
 
 
99.1
 
News Release dated July 21, 2016 with respect to the operating results for the three month period ended March 31, 2016.
99.2
 
Conference call script of July 22, 2016 of Gail M. Peck, Vice President, Finance and Treasurer.
99.3
 
Conference call script of July 22, 2016 of S. Theis Rice, Senior Vice President and Chief Legal Officer.
99.4
 
Conference call script of July 22, 2016 of Timothy R. Wallace, Chairman, Chief Executive Officer, and President.
99.5
 
Conference call script of July 22, 2016 of William A. McWhirter II, Senior Vice President and Group President of the Construction Products, Energy Equipment and Inland Barge Groups.
99.6
 
Conference call script of July 22, 2016 of D. Stephen Menzies, Senior Vice President and Group President of the Rail and Railcar Leasing Groups.
99.7
 
Conference call script of July 22, 2016 of James E. Perry, Senior Vice President and Chief Financial Officer.



Exhibit 99.1
NEWS RELEASE                 
                 

FOR IMMEDIATE RELEASE

Trinity Industries, Inc. Announces Second Quarter 2016 Results

DALLAS, Texas - July 21, 2016 - Trinity Industries, Inc. (NYSE: TRN) today announced earnings results for the three and six months ended June 30, 2016, including the following significant highlights:
Quarterly revenues and net income of $1.2 billion and $94.6 million, respectively
Quarterly earnings per common diluted share of $0.62 per share
Receipt of $940 million order for the manufacture of wind towers expected to deliver during a three-year period beginning in 2017
Anticipated full year 2016 earnings of between $2.00 and $2.30 per common diluted share

Consolidated Results
Trinity Industries, Inc. reported net income attributable to Trinity stockholders of $94.6 million, or $0.62 per common diluted share, for the second quarter ended June 30, 2016. Net income for the same quarter of 2015 was $212.0 million, or $1.33 per common diluted share. Revenues for the second quarter of 2016 totaled $1.18 billion compared to revenues of $1.68 billion for the same quarter of 2015.
"Trinity’s consolidated second quarter financial results are in line with our expectations and continue to reflect the Company’s ability to make orderly transitions when market conditions shift," said Timothy R. Wallace, Trinity's Chairman, CEO, and President. "The current level of uncertainty in the industrial economy is continuing to impact the pace of new order volumes in some of our businesses.  We remain highly focused on repositioning, streamlining, and aligning our manufacturing operations with current demand levels."
Mr. Wallace added, "I am pleased with the $940 million wind tower order we received during the second quarter, which brings our backlog in this business to over $1.1 billion. The level of demand for our wind towers is favorable, and our backlog now extends through 2019, partially offsetting some of the uncertainty in other areas of our business."
Business Group Results
In the second quarter of 2016, the Rail Group reported revenues of $693.2 million compared to revenues of $1,110.3 million in the second quarter of 2015. Operating profit for the Rail Group was $88.8 million in the second quarter of 2016 compared to operating profit of $227.7 million in the second quarter of 2015. The decrease in revenues and profit was primarily due to lower railcar deliveries and changes in product mix. The Rail Group shipped 6,065 railcars and received orders for 2,910 railcars during the second quarter. The Rail Group had a backlog of $4.29 billion as of June 30, 2016, representing 40,205 railcars, compared to a backlog of $4.72 billion as of March 31, 2016, representing 43,360 railcars. At the end of the second quarter, the Rail Group's orders extended into 2020. The order and backlog figures for the second quarter of 2016 reflect a cancellation of 50 railcars resulting from a customer bankruptcy.
The Railcar Leasing and Management Services Group reported total revenues of $296.6 million in the second quarter of 2016 compared to total revenues of $238.1 million in the same quarter of 2015. Included in the total revenues for the Group were leasing and management operating revenues of $178.5 million, which were substantially unchanged from the second quarter of 2015, as well as revenues of $118.1 million from sales of railcars from the lease fleet owned for one year or less compared to $59.9 million in the second quarter

1


of 2015. Total proceeds from the sale of leased railcars from the lease fleet, including the sale of railcars owned for more than one year that are not included in revenue, were $149.1 million for the second quarter compared with $148.8 million in the second quarter of 2015. Operating profit for this Group was $117.7 million in the second quarter of 2016 compared to operating profit of $137.7 million in the second quarter of 2015. The decrease in operating profit was primarily due to higher maintenance expense for the lease fleet and lower profit from the sales of leased railcars. Supplemental information for the Leasing Group is provided in the accompanying tables.
The Inland Barge Group reported revenues of $118.3 million for the second quarter of 2016 compared to revenues of $187.8 million in the second quarter of 2015. Operating profit for this Group was $14.3 million in the second quarter of 2016 compared to $40.7 million in the second quarter of 2015. The decrease in revenues and operating profit compared to the same quarter last year was primarily due to lower tank barge deliveries. As of June 30, 2016, the Inland Barge Group had a backlog of $251.0 million compared to a backlog of $318.7 million as of March 31, 2016.
The Energy Equipment Group reported revenues of $240.6 million in the second quarter of 2016 compared to revenues of $281.9 million in the same quarter of 2015. The decrease in revenues compared to the same quarter last year was due to lower delivery volumes in the utility structures business and other product lines partially offset by higher delivery volumes in the wind towers business. Operating profit for the second quarter of 2016 was $34.9 million compared to $36.3 million in the same quarter last year primarily due to lower profit from our utility structures and other businesses partially offset by higher profit in our wind towers business. With the previously announced wind tower order of $940 million, the backlog for wind towers as of June 30, 2016 was $1.1 billion compared to a backlog of $263.4 million as of March 31, 2016.
The Construction Products Group reported revenues of $145.8 million in the second quarter of 2016 compared to revenues of $151.3 million in the second quarter of 2015. Operating profit for the second quarter of 2016 was $21.5 million compared to operating profit of $21.3 million in the second quarter of 2015. Revenues decreased compared to the same quarter last year primarily as a result of the sale of the assets of the Group's galvanizing business in June 2015. Operating profit for the Group was substantially unchanged in the second quarter of 2016 as improved manufacturing efficiencies in our Highway Products business were primarily offset by the $7.8 million gain from the sale of assets of the Group's galvanizing business reported in the second quarter of 2015.
Cash and Liquidity
At June 30, 2016, the Company had cash, cash equivalents, and short-term marketable securities of $814.0 million. When combined with capacity under committed credit facilities, the Company had approximately $2.1 billion of available liquidity at the end of the second quarter.
Share Repurchase
There were no shares repurchased during the second quarter of 2016 under the Company's current share repurchase authorization. Year to date, the Company repurchased 2,070,600 shares of common stock at a cost of $34.7 million leaving $215.4 million remaining under its current authorization through December 31, 2017.
Earnings Guidance for 2016
For the full year of 2016, the Company anticipates earnings per common diluted share of between $2.00 and $2.30, unchanged from its previous guidance. Actual results in 2016 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; the operating leverage and efficiencies that can be achieved by the Company's manufacturing businesses; the costs associated with aligning manufacturing production capacity with demand; the level of sales and profitability of manufacturing railcars; the level of profitability associated with the sales of leased railcars; the dilutive

2


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 July 22, 2016 to discuss its second 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) 220-0682 until 11:59 p.m. Eastern on July 29, 2016.
Company Description
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,” “assumes,” “believes,” “estimates,” “expects,” “intends,” “forecasts,” “may,” “will,” “should,” “guidance,” “outlook,” 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.

Investor Contact:
Jessica Greiner
Vice President, Investor Relations
Trinity Corporate Services, LLC
214/631-4420
 
Media Contact:
Jack Todd
Vice President, Public Affairs
Trinity Industries, Inc.
214/589-8909

- TABLES TO FOLLOW -

3




Trinity Industries, Inc.
Condensed Consolidated Income Statements
(in millions, except per share amounts)
(unaudited)
 
Three Months Ended
June 30,
 
2016
 
2015
Revenues
$
1,184.9

 
$
1,676.8

Operating costs:
 
 
 
Cost of revenues
897.7

 
1,219.6

Selling, engineering, and administrative expenses
106.7

 
114.4

Losses (gains) on dispositions of property:
 
 
 
Net gains on lease fleet sales
(11.4
)
 
(30.1
)
Other
0.3

 
(10.0
)
 
993.3

 
1,293.9

Operating profit
191.6

 
382.9

Interest expense, net
44.3

 
50.1

Other, net
(4.9
)
 
(0.7
)
Income before income taxes
152.2

 
333.5

Provision for income taxes
53.4

 
112.7

Net income
98.8

 
220.8

Net income attributable to noncontrolling interest
4.2

 
8.8

Net income attributable to Trinity Industries, Inc.
$
94.6

 
$
212.0

 
 
 
 
Net income attributable to Trinity Industries, Inc. per common share:
 
 
Basic
$
0.62

 
$
1.36

Diluted
$
0.62

 
$
1.33

Weighted average number of shares outstanding:
 
 
 
Basic
147.8

 
150.7

Diluted
147.8

 
154.2


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.

4



Trinity Industries, Inc.
Condensed Consolidated Income Statements
(in millions, except per share amounts)
(unaudited)
 
Six Months Ended
June 30,
 
2016
 
2015
Revenues
$
2,372.8

 
$
3,303.5

Operating costs:
 
 
 
Cost of revenues
1,787.6

 
2,430.7

Selling, engineering, and administrative expenses
203.2

 
212.7

Losses (gains) on dispositions of property:
 
 
 
Net gains on lease fleet sales
(13.5
)
 
(45.0
)
Other
0.5

 
(10.9
)
 
1,977.8

 
2,587.5

Operating profit
395.0

 
716.0

Interest expense, net
88.9

 
101.1

Other, net
(5.6
)
 
(3.0
)
Income before income taxes
311.7

 
617.9

Provision for income taxes
110.8

 
208.1

Net income
200.9

 
409.8

Net income attributable to noncontrolling interest
9.1

 
17.6

Net income attributable to Trinity Industries, Inc.
$
191.8

 
$
392.2

 
 
 
 
Net income attributable to Trinity Industries, Inc. per common share:
 
 
Basic
$
1.25

 
$
2.52

Diluted
$
1.25

 
$
2.46

Weighted average number of shares outstanding:
 
 
 
Basic
148.7

 
151.0

Diluted
148.7

 
154.3


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.


5



Trinity Industries, Inc.
Condensed Segment Data
(in millions)
(unaudited)
 
Three Months Ended
June 30,
Revenues:
2016
 
2015
Rail Group
$
693.2

 
$
1,110.3

Construction Products Group
145.8

 
151.3

Inland Barge Group
118.3

 
187.8

Energy Equipment Group
240.6

 
281.9

Railcar Leasing and Management Services Group
296.6

 
238.1

All Other
19.7

 
26.8

Segment Totals before Eliminations
1,514.2

 
1,996.2

Eliminations - lease subsidiary
(252.1
)
 
(215.5
)
Eliminations - other
(77.2
)
 
(103.9
)
Consolidated Total
$
1,184.9

 
$
1,676.8

 
 
 
 
 
Three Months Ended
June 30,
Operating profit (loss):
2016
 
2015
Rail Group
$
88.8

 
$
227.7

Construction Products Group
21.5

 
21.3

Inland Barge Group
14.3

 
40.7

Energy Equipment Group
34.9

 
36.3

Railcar Leasing and Management Services Group
117.7

 
137.7

All Other
(5.2
)
 
(0.1
)
Segment Totals before Eliminations and Corporate Expenses
272.0

 
463.6

Corporate
(34.7
)
 
(32.3
)
Eliminations - lease subsidiary
(45.9
)
 
(49.9
)
Eliminations - other
0.2

 
1.5

Consolidated Total
$
191.6

 
$
382.9



6



Trinity Industries, Inc.
Condensed Segment Data
(in millions)
(unaudited)
 
Six Months Ended
June 30,
Revenues:
2016
 
2015
Rail Group
$
1,540.1

 
$
2,254.8

Construction Products Group
270.7

 
264.1

Inland Barge Group
229.1

 
340.9

Energy Equipment Group
514.0

 
582.0

Railcar Leasing and Management Services Group
475.1

 
482.9

All Other
41.6

 
54.9

Segment Totals before Eliminations
3,070.6

 
3,979.6

Eliminations - lease subsidiary
(535.4
)
 
(474.5
)
Eliminations - other
(162.4
)
 
(201.6
)
Consolidated Total
$
2,372.8

 
$
3,303.5

 
 
 
 
 
Six Months Ended
June 30,
Operating profit (loss):
2016
 
2015
Rail Group
$
246.0

 
$
440.4

Construction Products Group
37.4

 
29.6

Inland Barge Group
26.9

 
68.2

Energy Equipment Group
72.3

 
73.5

Railcar Leasing and Management Services Group
191.9

 
260.5

All Other
(10.3
)
 
(1.6
)
Segment Totals before Eliminations and Corporate Expenses
564.2

 
870.6

Corporate
(59.4
)
 
(59.0
)
Eliminations - lease subsidiary
(111.4
)
 
(98.2
)
Eliminations - other
1.6

 
2.6

Consolidated Total
$
395.0

 
$
716.0



7



Trinity Industries, Inc.
Leasing Group
Condensed Results of Operations
(unaudited)
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2016
 
2015
 
2016
 
2015
 
($ in millions)
Revenues:
 
 
 
 
 
 
 
Leasing and management
$
178.5

 
$
178.2

 
$
349.0

 
$
344.3

Sales of railcars owned one year or less at the time of sale(1)
118.1

 
59.9

 
126.1

 
138.6

Total revenues
$
296.6

 
$
238.1

 
$
475.1

 
$
482.9

Operating profit:
 
 
 
 
 
 
 
Leasing and management
$
74.5

 
$
90.6

 
$
144.3

 
$
172.9

Railcar sales(1):
 
 
 
 
 
 
 
Railcars owned one year or less at the time of sale
31.8

 
17.0

 
34.1

 
42.6

Railcars owned more than one year at the time of sale
11.4

 
30.1

 
13.5

 
45.0

Total operating profit
$
117.7

 
$
137.7

 
$
191.9

 
$
260.5

Operating profit margin:
 
 
 
 
 
 
 
Leasing and management
41.7
%
 
50.8
%
 
41.3
%
 
50.2
%
Railcar sales
*
 
*
 
*
 
*
Total operating profit margin
39.7
%
 
57.8
%
 
40.4
%
 
53.9
%
Selected expense information(2):
 
 
 
 
 
 
 
Depreciation
$
38.7

 
$
35.8

 
$
76.1

 
$
69.9

Maintenance
$
31.8

 
$
21.4

 
$
63.4

 
$
41.3

Rent
$
9.9

 
$
9.6

 
$
19.4

 
$
21.4

Interest
$
31.4

 
$
36.4

 
$
63.2

 
$
74.3

 
June 30,
2016
 
December 31,
2015
Leasing portfolio information:
 
 
 
Portfolio size (number of railcars)
80,360

 
76,765
Portfolio utilization
96.4
%
 
97.7
%
 
Six Months Ended June 30,
 
2016
 
2015
 
(in millions)
Proceeds from sales of leased railcars:
 
 
 
Leasing Group:
 
 
 
Railcars owned one year or less at the time of sale
$
126.1

 
$
138.6

Railcars owned more than one year at the time of sale
37.7

 
167.4

Rail Group
8.1

 
111.7

 
$
171.9

 
$
417.7

* Not meaningful
(1) The Company recognizes sales of railcars from the lease fleet which have been owned by the lease fleet for one year or less as revenue. Sales of railcars from the lease fleet which have been owned by the lease fleet for more than one year are recognized as a net gain or loss from the disposal of a long-term asset.
(2)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.


8



Trinity Industries, Inc.
Condensed Consolidated Balance Sheets
(in millions)
(unaudited)
 
June 30,
2016
 
December 31,
2015
Cash and cash equivalents
$
614.0

 
$
786.0

Short-term marketable securities
200.0

 
84.9

Receivables, net of allowance
439.3

 
369.9

Income tax receivable
68.9

 
94.9

Inventories
882.6

 
943.1

Restricted cash
183.3

 
195.8

Net property, plant, and equipment
5,606.6

 
5,348.0

Goodwill
754.8

 
753.8

Other assets
285.9

 
309.5

 
$
9,035.4

 
$
8,885.9

 
 
 
 
Accounts payable
$
221.2

 
$
216.8

Accrued liabilities
459.3

 
529.6

Debt, net of unamortized discount of $35.8 and $44.2
3,129.6

 
3,195.4

Deferred income
25.0

 
27.1

Deferred income taxes
902.8

 
752.2

Other liabilities
120.2

 
116.1

Stockholders' equity:
 
 
 
Trinity Industries, Inc.
3,783.1

 
3,653.9

Noncontrolling interest
394.2

 
394.8

 
4,177.3

 
4,048.7

 
$
9,035.4

 
$
8,885.9



9



Trinity Industries, Inc.
Additional Balance Sheet Information
(in millions)
(unaudited)


June 30,
2016
 
December 31,
2015
Property, Plant, and Equipment
 
 
 
Corporate/Manufacturing:
 
 
 
Property, plant, and equipment
$
1,911.0

 
$
1,861.5

Accumulated depreciation
(942.3
)
 
(905.4
)
 
968.7

 
956.1

Leasing:
 
 
 
Wholly-owned subsidiaries:
 
 
 
Machinery and other
10.7

 
10.7

Equipment on lease
4,162.3

 
3,763.5

Accumulated depreciation
(697.7
)
 
(647.9
)
 
3,475.3

 
3,126.3

Partially-owned subsidiaries:
 
 
 
Equipment on lease
2,308.5

 
2,307.7

Accumulated depreciation
(400.4
)
 
(369.1
)
 
1,908.1

 
1,938.6

 
 
 
 
Net deferred profit on railcars sold to the Leasing Group
(745.5
)
 
(673.0
)
 
$
5,606.6

 
$
5,348.0



10



Trinity Industries, Inc.
Additional Balance Sheet Information
(in millions)
(unaudited)
 
June 30,
2016
 
December 31,
2015
Debt
 
 
 
Corporate - Recourse:
 
 
 
Revolving 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 $35.4 and $43.8
414.0

 
405.6

Other
0.5

 
0.5

 
814.1

 
805.7

Less: unamortized debt issuance costs
(4.2
)
 
(4.7
)
 
809.9

 
801.0

Leasing:
 
 
 
Wholly-owned subsidiaries:
 
 
 
Recourse:
 
 
 
Capital lease obligations, net of unamortized debt issuance costs of $0.1 and $0.1
34.0

 
35.7

 
34.0

 
35.7

Non-recourse:
 
 
 
Secured railcar equipment notes
665.1

 
679.5

Warehouse facility
240.5

 
264.3

 
905.6

 
943.8

Less: unamortized debt issuance costs
(13.2
)
 
(15.1
)
 
892.4

 
928.7

Partially-owned subsidiaries - Non-recourse:
 
 
 
Secured railcar equipment notes
1,409.2

 
1,446.9

Less: unamortized debt issuance costs
(15.9
)
 
(16.9
)
 
1,393.3

 
1,430.0

 
$
3,129.6

 
$
3,195.4



11



Trinity Industries, Inc.
Additional Balance Sheet Information
($ in millions)
(unaudited)
 
June 30,
2016
 
December 31,
2015
Leasing Debt Summary
 
 
 
Total Recourse Debt
$
34.0

 
$
35.7

Total Non-Recourse Debt
2,285.7

 
2,358.7

 
$
2,319.7

 
$
2,394.4

Total Leasing Debt
 
 
 
Wholly-owned subsidiaries
$
926.4

 
$
964.4

Partially-owned subsidiaries
1,393.3

 
1,430.0

 
$
2,319.7

 
$
2,394.4

Equipment on Lease(1)
 
 
 
Wholly-owned subsidiaries
$
3,475.3

 
$
3,126.3

Partially-owned subsidiaries
1,908.1

 
1,938.6

 
$
5,383.4

 
$
5,064.9

Total Leasing Debt as a % of Equipment on Lease
 
 
 
Wholly-owned subsidiaries
26.7
%
 
30.8
%
Partially-owned subsidiaries
73.0
%
 
73.8
%
Combined
43.1
%
 
47.3
%

(1) Excludes net deferred profit on railcars sold to the Leasing Group.


12



Trinity Industries, Inc.
Condensed Consolidated Cash Flow Statements
(in millions)
(unaudited)
 
Six Months Ended
June 30,
 
2016
 
2015
Operating activities:
 
 
 
Net income
$
200.9

 
$
409.8

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
139.9

 
130.4

Net gains on railcar lease fleet sales owned more than one year at the time of sale
(13.5
)
 
(45.0
)
Other
161.2

 
19.3

Changes in assets and liabilities:
 
 
 
(Increase) decrease in receivables
(43.4
)
 
(128.8
)
(Increase) decrease in inventories
60.5

 
81.7

Increase (decrease) in accounts payable and accrued liabilities
(43.4
)
 
(172.7
)
Other
24.2

 
(12.7
)
Net cash provided by operating activities
486.4

 
282.0

Investing activities:
 
 
 
Proceeds from railcar lease fleet sales owned more than one year at the time of sale
37.7

 
167.4

Proceeds from dispositions of property
4.1

 
4.8

Capital expenditures - leasing, net of sold lease fleet railcars owned one year or less with a net cost of $92.0 and $96.0
(346.0
)
 
(419.4
)
Capital expenditures - manufacturing and other
(79.8
)
 
(100.7
)
(Increase) decrease in short-term marketable securities
(115.1
)
 
75.0

Acquisitions

 
(46.2
)
Divestitures

 
51.3

Other
2.3

 
5.2

Net cash required by investing activities
(496.8
)
 
(262.6
)
Financing activities:
 
 
 
Payments to retire debt
(77.6
)
 
(471.0
)
Proceeds from issuance of debt

 
242.4

Shares repurchased
(34.7
)
 
(75.0
)
Dividends paid to common shareholders
(33.4
)
 
(31.1
)
Purchase of shares to satisfy employee tax on vested stock
(16.1
)
 
(27.2
)
Distributions to noncontrolling interest
(10.9
)
 
(19.9
)
Decrease in restricted cash
12.5

 
46.8

Other
(1.4
)
 
11.5

Net cash required by financing activities
(161.6
)
 
(323.5
)
Net decrease in cash and cash equivalents
(172.0
)
 
(304.1
)
Cash and cash equivalents at beginning of period
786.0

 
887.9

Cash and cash equivalents at end of period
$
614.0

 
$
583.8



13



Trinity Industries, Inc.
Earnings per Share Calculation
(in millions, except per share amounts)
(unaudited)

Basic net income attributable to Trinity Industries, Inc. per common share is computed by dividing net income attributable to Trinity remaining after allocation to unvested restricted shares by the weighted average number of basic common shares outstanding for the period.
 
Three Months Ended
June 30, 2016
 
Three Months Ended
June 30, 2015
 
Income

 
Average Shares

 
EPS

 
Income

 
Average Shares

 
EPS

Net income attributable to Trinity Industries, Inc.
$
94.6

 
 
 
 
 
$
212.0

 
 
 
 
Unvested restricted share participation
(2.9
)
 
 
 
 
 
(6.5
)
 
 
 
 
Net income attributable to Trinity Industries, Inc. - basic
91.7

 
147.8

 
$
0.62

 
205.5

 
150.7

 
$
1.36

Effect of dilutive securities:
 
 
 
 
 
 
 
 
 
 
 
  Convertible subordinated notes

 

 
 
 
0.1

 
3.5

 
 
Net income attributable to Trinity Industries, Inc. - diluted
$
91.7

 
147.8

 
$
0.62

 
$
205.6

 
154.2

 
$
1.33

 
Six Months Ended
June 30, 2016
 
Six Months Ended
June 30, 2015
 
Income

 
Average Shares

 
EPS

 
Income

 
Average Shares

 
EPS

Net income attributable to Trinity Industries, Inc.
$
191.8

 
 
 
 
 
$
392.2

 
 
 
 
Unvested restricted share participation
(5.7
)
 
 
 
 
 
(12.2
)
 
 
 
 
Net income attributable to Trinity Industries, Inc. - basic
186.1

 
148.7

 
$
1.25

 
380.0

 
151.0

 
$
2.52

Effect of dilutive securities:
 
 
 
 
 
 
 
 
 
 
 
  Convertible subordinated notes

 

 
 
 
0.2

 
3.3

 
 
Net income attributable to Trinity Industries, Inc. - diluted
$
186.1

 
148.7

 
$
1.25

 
$
380.2

 
154.3

 
$
2.46









14



Trinity Industries, Inc.
Reconciliation of EBITDA
(in millions)
(unaudited)

“EBITDA” is defined as net income plus interest expense, income taxes, and depreciation and amortization including goodwill impairment charges. EBITDA is not a calculation based on generally accepted accounting principles. The amounts included in the EBITDA calculation are, however, derived from amounts included in the historical consolidated statements of operations data. In addition, EBITDA should not be considered as an alternative to net income or operating income as an indicator of our operating performance, or as an alternative to operating cash flows as a measure of liquidity. We believe EBITDA assists investors in comparing a company’s performance on a consistent basis without regard to depreciation and amortization, which can vary significantly depending upon many factors. However, the EBITDA measure presented in this press release may not always be comparable to similarly titled measures by other companies due to differences in the components of the calculation.

 
Three Months Ended
June 30,
 
2016
 
2015
Net income
$
98.8

 
$
220.8

Add:
 
 
 
Interest expense
45.6

 
50.6

Provision for income taxes
53.4

 
112.7

Depreciation and amortization expense
70.5

 
66.4

Earnings before interest expense, income taxes, and depreciation and amortization expense
$
268.3

 
$
450.5

 
Six Months Ended
June 30,
 
2016
 
2015
Net income
$
200.9

 
$
409.8

Add:
 
 
 
Interest expense
91.4

 
102.1

Provision for income taxes
110.8

 
208.1

Depreciation and amortization expense
139.9

 
130.4

Earnings before interest expense, income taxes, and depreciation and amortization expense
$
543.0

 
$
850.4


- END -

15


Exhibit 99.2
Trinity Industries, Inc.
Earnings Release Conference Call
Comments of Gail M. Peck
Vice President, Finance and Treasurer
July 22, 2016

Thank you, Tanisha. Good morning everyone. Welcome to the Trinity Industries’ second quarter 2016 results conference call. I am Gail Peck, Vice President, Finance and Treasurer of Trinity. Thank you for joining us today.

Similar to the format we have used on our recent earnings call, we will begin with an update on the Highway Products litigation matter. We will then follow with our normal quarterly earnings conference call format.
    
Today’s speakers are:
Theis Rice, Senior Vice President and Chief Legal Officer;
Tim Wallace our Chairman, Chief Executive Officer and President;
Bill McWhirter, Senior Vice President and Group President of the Construction Products, Energy Equipment, and Inland Barge Groups;
Steve Menzies, Senior Vice President and Group President of the Rail and Railcar Leasing Groups; and
James Perry, our Senior Vice President and Chief Financial Officer

Following their comments, we will then move to the Q&A session. Mary Henderson, our Vice President and Chief Accounting Officer, is also in the room with us today. I will now turn the call over to Theis Rice.

Theis
Tim
Bill
Steve
James

Q&A Session

That concludes today's conference call. A replay of this call will be available after one o'clock eastern standard time today through midnight on July 29, 2016. The access number is (402) 220-0682. Also the replay will be available on the website located at www.trin.net. We look forward to visiting with you again on our next conference call. Thank you for joining us this morning.





Exhibit 99.3
Trinity Industries, Inc.
Earnings Release Conference Call
Comments of S. Theis Rice
Senior Vice President and Chief Legal Officer
July 22, 2016

Thank you Gail and good morning everyone.

Today I will provide a brief update on the litigation involving our highway products. As previously reported, we appealed the October 2014 adverse judgment we received in the False Claims Act case filed in the Eastern District of Texas involving our ET Plus guardrail end terminal system to the United States Court of Appeals for the Fifth Circuit. Yesterday we filed our reply brief. This concludes the briefing phase of the appellate process.

We believe our briefs present compelling arguments why this case should not have been brought to trial from the start, and why the judgment should be reversed. For those who are interested in reviewing the briefs we have filed in this case and the amici briefs filed supporting our appeal, the documents can be found at etplusfacts. com. We anticipate that oral arguments, if granted by the Fifth Circuit, will take place this fall followed by a ruling from the Court no earlier than late 2016.

Trinity Industries and Trinity Highway are also named in a number of other suits that we believe are groundless, and represent opportunistic filings that seek to capitalize on the False Claims Act judgment now on appeal.
 

For a more detailed review of these suits, please see Note 18 to the financial statements in Trinity’s Form 10-Q for the period ended June 30, 2016. Please also refer to etplusfacts.com for additional information.

I will now turn the call over to Tim.




Exhibit 99.4
Trinity Industries, Inc.
Earnings Release Conference Call
Comments of Timothy R. Wallace
Chairman, Chief Executive Officer, and President
July 22, 2016

Our 2nd quarter financial results are in line with our expectations. They reflect our ability to make orderly transitions when market conditions shift. Our people are demonstrating operating flexibility as they confront the challenges associated with today’s business environment.

Given the diversity of Trinity’s portfolio of businesses and the uncertainty within various sectors of the industrial economy, I anticipate each quarter will have unique challenges. The oversupply of railcars and barges has continued to keep demand for new equipment at lower than normal levels. I am pleased with the $940 million order we received for wind towers in the 2nd quarter. Our electric transmission towers business is experiencing early signs of improvement in demand for its products, and our construction products businesses are doing well.

Timing plays an important role in today’s market. Strategic buyers of large capital goods historically place orders during markets with low demand levels. They closely monitor economic conditions and look for attractive pricing on orders. Our businesses are highly focused on engaging with customers so they will be positioned to negotiate transactions when customers need our products.

The backlogs our businesses built during the recent upcycle have been instrumental for an orderly transition to lower production levels. In addition, the growth of our railcar leasing business and the diversification of our manufacturing businesses are providing value.

Contractions in business are never pleasant. When we make reductions in the size of our business, we always keep in mind the human aspect associated with these decisions, as well as the long-term effects. Our decisions affect the lives of our employees and their families, as well as the future of our company. We take this responsibility very seriously.

Our businesses know how to operate in fluctuating markets, and I am highly confident of our ability to successfully navigate through the various stages of the business cycle. During my 41 years with the company, we have experienced a number of business cycles. In my opinion,
Trinity is much stronger today, both operationally and financially, than we have been in previous downturns.

In the current market environment, our near term priorities center around cost control, obtaining orders and opportunistic investment. First, we are highly focused on repositioning, streamlining, and aligning our manufacturing operations and cost structure with current market demand. We have historically emerged from a downturn as a stronger Company with new ideas and methods for operating at a lower cost level. Secondly, our team is focused on utilizing our manufacturing flexibility to obtain orders for our products. And finally, we continue to dedicate resources to identify new opportunities that align with our corporate vision of being a premier diversified industrial company. I am confident in our abilities to improve our Company as we successfully navigate the current complexities within our business environments.

Our corporate business model is designed to generate value through our ownership and management of industrial companies that benefit by being part of Trinity. We have a history of accumulating cash during





strong market cycles, so we are positioned to make strategic investments during weaker cycles. Today, our strong balance sheet positions us to be opportunistic.

In the area of acquisitions, we are utilizing an opportunistic approach similar to the strategic buyers of capital goods I mentioned earlier. We continuously search, analyze and discuss acquisition opportunities that fit our criteria. We look at businesses that have products, services, technology and / or competencies that will enrich our industrial manufacturing platform, as well as our railcar leasing business. We are disciplined in our approach, we wait until we believe the timing is right, then move opportunistically. Right now, we do not have anything that we are close to announcing. In the past, when demand for industrial products has stayed at low levels for extended periods of time, interesting opportunities have surfaced. We are closely monitoring this situation.

Overall, I am pleased with our Company’s ability to successfully transition when market conditions shift. We strive to do our best in every market environment, and constantly work at strengthening our Company’s competitive position. Our accomplishments are due to the capabilities and expertise of our dedicated employees, our ability to respond effectively to shifts in demand and our ongoing commitment to provide high quality products and services to our customers. I’ll now turn it over to Bill for his comments.





Exhibit 99.5
Trinity Industries, Inc.
Earnings Release Conference Call
Comments of William A. McWhirter II,
Senior Vice President and Group President
Construction Products, Energy Equipment and Inland Barge Groups
July 22, 2016

Thank you Tim and good morning everyone.     
    
The continued solid performance in our construction materials business and the positive effects of the federal highway bill that Congress approved last December, favorably impacted the second quarter results of the Construction Products Group. The Group’s operating profit, excluding a gain of $7.8 million from an asset sale in the second quarter of 2015, increased approximately 60% year-over-year on a slight decline in quarterly revenues

Our aggregates business has been positively impacted by increased infrastructure-related work and population growth within our primary markets.

Now moving to the Barge Group. The market for new barges for both dry and liquid cargo remains weak as the supply of available barges continues to out-pace demand. The strength of the U.S. dollar continues to negatively impact the export market for agricultural products, and the decline in domestic oil production has resulted in a significant overhang of tank barges. The Barge Group received approximately $51 million in orders during the second quarter, resulting in a total backlog of $251 million at the end of the quarter. The team is focused on securing orders for the first half of 2017 and beyond.

Our Barge business is planning for a continued decline in production through the balance of the year as we deliver our current backlog. The manufacturing flexibility incorporated into our facilities in recent years has positioned our Barge team to respond quickly to changes in market demand.

The Energy Equipment Group delivered a solid improvement in operating margin during the second quarter compared to last year, primarily as a result of improved efficiencies in the wind towers business. Our containers product lines continue to be impacted by the low price of oil and natural gas.

During the second quarter, we announced the receipt of a $940 million wind tower order that will begin shipments in 2017. At the end of the quarter, our wind tower backlog was more than $1.1 billion. Our manufacturing flexibility positions us to quickly adjust our wind tower production capacity. We are currently in the process of converting a facility to respond to the recent increase in demand.

In our utility structures business we are seeing some early indications of an uptick in demand. Over the long term, investment forecasts for electricity transmission spending remain positive. The recently passed federal tax incentive for wind power is expected to drive the development of additional transmission infrastructure.

In closing, our businesses are responding effectively to mixed demand conditions. Our positive long-term outlook for energy and infrastructure investment in North America underscores the value of the investments we have made in these businesses.

And now, I will turn the presentation over to Steve.





Exhibit 99.6
Trinity Industries, Inc.
Earnings Release Conference Call
Comments of D. Stephen Menzies
Senior Vice President and Group President
Rail and Railcar Leasing Groups
July 22, 2016

Thank you, Bill, good morning!

The second quarter operating results for TrinityRail were in line with our expectations and reflect the transition occurring as our team continues to adjust to weak railcar demand. The Rail Group delivered more than 6,000 railcars and a 12.8% operating margin during the quarter while simultaneously executing a challenging schedule of production line changeovers. The Leasing Group continued to expand our lease fleet and RIV platform by adding new railcars to our wholly-owned portfolio and selling leased railcars to institutional investors. Weak industrial end-user markets, a large overhang of idle North American railcars, and excess railcar industry manufacturing capacity continue to negatively impact new railcar orders and pressure lease fleet utilization and rates. TrinityRail is focused on aligning our production footprint to current demand conditions, implementing cost-reduction initiatives and maintaining lease fleet utilization.

Our Rail Group received orders for 2,910 railcars during the second quarter. We received orders from industrial shippers, lessors and railroads. The orders we received represent a mix of tank cars, open top and covered hoppers, and autoracks serving the chemical, petrochemical, agricultural, construction materials and automotive industries. These orders reflect pockets of demand within these industries and attrition of the aging North American railcar fleet. Our order backlog at the end of the second quarter was approximately 40,205 railcars, valued at $4.3 billion.

Our orders and backlog highlight the breadth of the TrinityRail product line and the manufacturing flexibility of our production footprint. With orders received in the second quarter, our entire planned 2016 production schedule of approximately 27,000 railcars is sold and we are focused on securing additional orders for 2017 production that maximize production continuity and enhance productivity. We do have the capacity to meet customer demand for additional 2016 railcar deliveries.

We have worked with our frac sand customers to defer deliveries of small cube covered hoppers in our backlog. In most cases, we have received economic consideration for deferring deliveries. We are monitoring this market very closely as sand producers are optimistic following the improvement in oil prices over the last quarter. Feedback from frac sand producers suggests that further strengthening of oil prices, in addition to new fracking techniques that require more sand usage per well, may trigger growth in sand demand. Their projections provide an optimistic view for a potential recovery in frac sand demand in late 2017 or early 2018.

Current railcar order inquiries remain consistent with the last few quarters. It is too early to indicate a market turnaround, but demand conditions seem to have stabilized at current levels. It is unlikely that a market turnaround will occur until industrial production levels improve and the overhang of surplus railcars is diminished. The current level of new order inquiries, as well as ongoing weak railcar industry fundamentals, suggest industry railcar production will decline in 2017.

During the second quarter, the Rail Group delivered 6,065 railcars, a 15% decline from the 1st quarter. As expected, our operating and financial performance was heavily impacted by the significant change in product





mix delivered during the quarter and resulting inefficiencies brought on by major production line changeovers. For the second-half of 2016, we anticipate margins to improve slightly from this quarter’s level as our production plan stabilizes in the balance of the year, offset by lower pricing on recently sold 4th quarter production slots.

We are also making adjustments to our production capacity to align with lower railcar demand. Necessary capacity reductions must be implemented carefully to ensure we can deliver our backlog and still maintain the flexibility to pursue orders for a broad range of railcar types.

I am pleased with our maintenance services team’s performance completing our initial round of HM-251 modifications, for our lease fleet, and beginning in the second quarter, for third-parties. Our maintenance services facilities have been extremely busy providing regulatory and compliance services for our owned and managed fleets, as well. With our maintenance capacity expansion over the last two years, we are focused on bringing more of our lease fleet’s service requirements into TrinityRail facilities to better control costs and improve throughput.

Amidst the current railcar market conditions the significant scale of our lease fleet provides a unique platform for growth as well as a stable base of earnings and cash flow that helps mitigate declining manufacturing earnings. Lease fleet utilization at the end of the second quarter declined to 96.4% for our wholly owned fleet. The overhang of existing railcars in the marketplace and weak industrial market demand is placing pressure on renewals and causing declines in lease rates. However, certain markets are more pressured. During railcar market downturns, we typically focus on shorter lease terms on lease renewals in anticipation of repricing the leased railcar in a more favorable market environment.

During the quarter, the Leasing Group completed another sale of a portfolio of railcars to institutional investors within our RIV platform in the amount of $149 million. In the current market, we continue to balance and evaluate the economic returns generated by selling leased railcars to our RIV platform versus maintaining the leased railcars in our wholly owned portfolio. Our total owned and managed lease portfolio now stands at 99,690 railcars after the delivery of 2,470 leased railcars from our Rail Group and the second quarter RIV portfolio sale. Our committed leased railcar backlog of $1.2 billion will spur additional growth of our owned and managed lease portfolio in 2016 and next year.

In summary, TrintyRail’s operating and financial flexibility and leading market position give us confidence we can effectively adapt to rapidly changing market conditions. We are well prepared to execute in the current market environment. The investments we have made in our facilities, manufacturing processes, fleet maintenance capabilities and owned and managed lease fleet position us to elevate TrinityRail’s performance throughout the entire business cycle.

I will now turn it over to James for his remarks.





Exhibit 99.7
Trinity Industries, Inc.
Earnings Release Conference Call
Comments of James E. Perry
Senior Vice President and Chief Financial Officer
July 22, 2016

Thank you, Steve and good morning everyone.

Yesterday, we announced our results for the second quarter of 2016. For the quarter, the Company reported revenues of $1.2 billion and earnings per share of $0.62 compared to revenues of more than $1.6 billion and EPS of $1.33 for the same period last year.

The decline in year-over-year performance was primarily due to three factors: a 61% decrease in operating profit for the Rail Group, resulting from 29% fewer deliveries during the quarter; significant product mix changes in the Rail Group; and lower deliveries and profit from the Inland Barge Group. The Construction Products and Energy Equipment Groups reported historically strong results for the quarter, partially offsetting the lower results in the Rail and Barge Groups.

We remain highly focused on cost reductions. Our SE&A has declined year-over-year and we continue to seek cost reductions at the corporate and operating levels across the Company.

During the second quarter, we invested in new railcars with a value of $252 million that were added to our wholly-owned lease portfolio. This brings our six month total to $535 million and we expect the full-year total to be $1.1 billion, with a cash investment of approximately $880 million due to the embedded deferred profit.

During the second quarter, we invested $54 million of capital expenditures across our manufacturing businesses and at the corporate level. For the first six months, we have invested $80 million in these areas and we expect to invest $140 million to $180 million for the full year.

We did not repurchase any of our shares during the second quarter and have repurchased $35 million during the first six months.

We ended the second quarter with $814 million of cash, cash equivalents and short-term marketable securities. We have access to additional capital through our $600 million corporate revolver, of which $93 million is currently consumed by letters of credit, as well as our $1 billion leasing warehouse facility, of which $241 million is currently outstanding.  At the end of the quarter, our available liquidity position was approximately $2.1 billion.

I want to make a few comments about the economic environment in the markets we serve and our expectations for full-year results. Ongoing weakness in many of the markets we serve continues to make this year more challenging than the last few years. Order levels remain low in some of our lines of business. Product mix changes and costs associated with aligning our production levels with demand will continue to negatively impact margins this year. It is difficult to precisely predict the magnitude and timing of these impacts on each quarter’s results.






Our overall earnings guidance for 2016 of $2.00 to $2.30 is unchanged from last quarter’s guidance. Our earnings guidance assumes that there is no improvement in market conditions for our businesses for the rest of this year. Our annual EPS guidance also includes the following assumptions:
A tax rate of approximately 36%;
Corporate expenses of $120 million to $140 million, which include ongoing litigation-related costs;
The deduction of approximately $15 million of non-controlling earnings due to our partial ownership in TRIP and RIV 2013;
A reduction of approximately 8 cents per share due to the two-class method of accounting, compared to calculating Trinity’s EPS directly from the face of the income statement; and
No dilution from the convertible notes, based on the current stock price.

We continue to expect our Rail Group to deliver approximately 27,000 railcars in 2016. We are maintaining our annual revenue guidance for the Rail Group of approximately $3.1 billion. We expect an operating margin of approximately 14.5% for this Group in 2016.

In 2016, we expect to eliminate approximately $1.1 billion of revenues related to railcar sales to our leasing company. We expect to defer approximately $190 million of operating profit. These revenue eliminations and profit deferrals result from the accounting treatment of sales from our railcar manufacturing company to our railcar leasing company.

For 2016, we continue to project Energy Equipment Group revenues of approximately $1 billion, but are increasing our operating margin guidance from 12% to approximately 13%. We were pleased to announce during the second quarter a three-year order for $940 million of structural wind towers with shipments beginning in 2017. Our 2016 guidance is not impacted by this new order.

As compared to our prior guidance, we now expect lower revenues of approximately $540 million for our Construction Products Group in 2016, but with an improved operating margin of approximately 12%.

Our Inland Barge Group guidance remains unchanged. We expect annual revenues of approximately $420 million in 2016, with an operating margin of approximately 11%.

In 2016, we expect our Leasing Group to record operating revenues, excluding leased railcar sales, of approximately $690 million with profit from operations of approximately $295 million, both of which are down slightly from our prior guidance.

During the second quarter, total proceeds from the sales of leased railcars to the Railcar Investment Vehicle platform were $149 million, with a profit of $43 million. All of these railcars were sold from our wholly-owned lease fleet. In accordance with current industry policy and practice, $118 million of the proceeds was reported as revenues due to the railcars having been in our lease fleet for less than one year. The remaining $31 million is reported on our cash flow statement as proceeds from sales of railcars owned more than one year in our fleet. As we have said, the level of sales of leased railcars will vary on a quarterly basis due to their transactional nature.

Our guidance includes the sale of between $300 million and $400 million of leased railcars sales to the RIV platform in 2016, which results in a range of sales of between $130 million and $230 million during the second half of this year. At this time, we are not providing operating profit guidance associated with these sales or the quarterly cadence due to the fluid nature of these transactions.






In conclusion, we maintain a strong balance sheet and significant liquidity. These factors allow us to be opportunistic and flexible as we continue to seek internal and external investment opportunities to enhance to shareholder value. We are confident that Trinity will continue responding appropriately to market conditions as we pursue our vision to be a premier diversified industrial company.

Our operator will now prepare us for the question and answer session.

-- Q&A Session --






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