Trinity Industries Inc (TRN)

[Enterprising Investor]

Trinity Industries, Inc. Announces Strong Fourth Quarter and Record Full Year 2015 Results (2/18/16)

DALLAS--(BUSINESS WIRE)--Trinity Industries, Inc. (NYSE:TRN) today announced earnings results for the fourth quarter ended December 31, 2015, including the following significant highlights:

Fourth Quarter 2015

• Earnings per common diluted share of $1.30, up 51% year-over-year

• Record operating margin for the Rail Group of 23.6% with record deliveries of 8,835 railcars

• Company completes sales of $479.5 million of leased railcars

• New institutional investor fund was formed, expanding the
railcar investment vehicle ("RIV") platform

• Inland Barge Group receives orders with a value of $190.1 million

Full Year 2015

• Record consolidated revenues of $6.4 billion

• Record railcar deliveries of 34,295

• Record earnings per common diluted share of $5.08, up 21% year-over-year

• Backlog commitments in Rail, Inland Barge, and Energy Equipment Groups valued at $6.2 billion

• Company completes sales of $1.2 billion of leased railcars

• Liquidity position of $2.1 billion, including cash, marketable
securities and available credit facilities

Consolidated Results

Trinity Industries, Inc. reported net income attributable to Trinity stockholders of $200.0 million, or $1.30 per common diluted share, for the fourth quarter ended December 31, 2015. Net income for the same quarter of 2014 was $138.2 million, or $0.86 per common diluted share. Revenues for the fourth quarter of 2015 totaled $1.55 billion compared to revenues of $1.66 billion for the same quarter of 2014.

For the year ended December 31, 2015, the Company reported record net income attributable to Trinity stockholders of $796.5 million, or $5.08 per common diluted share. In 2014, the Company reported net income of $678.2 million, or $4.19 per common diluted share. Revenues for the year ended December 31, 2015 were $6.39 billion, a 4% increase compared to revenues of $6.17 billion in 2014.

“During 2015, Trinity reported its third consecutive year of record revenues, operating profit, and earnings per common diluted share. We utilized the strengths of our integrated business model and the capabilities and expertise of our dedicated employees to achieve these impressive results,” said Timothy R. Wallace, Trinity’s Chairman, CEO and President.

Mr. Wallace added, “I am pleased that during the fourth quarter we expanded the RIV platform, selling approximately $335 million of leased railcars to a new institutional investor fund. We believe the RIV platform provides Trinity with a high degree of financial flexibility and contributes additional income through the profits recognized at sale and, in addition, management fees earned over the longer term.”

Mr. Wallace concluded, “Our outlook for 2016 reflects the weakening in the industrial economy that began broadly impacting our businesses late last summer. In this environment, we are placing a high priority on cost containment and various initiatives to enhance our performance. We will continue to reposition and streamline our manufacturing operations as business conditions fluctuate.”

Business Group Results
In the fourth quarter of 2015, the Rail Group reported revenues and record operating profit of approximately $1.13 billion and $267.9 million, respectively, resulting in year-over-year increases compared to the fourth quarter of 2014 of 6% and 38%, respectively. The increases in revenues and profit were due primarily to higher deliveries, improved pricing, and increased operating efficiencies partially offset by product mix changes. The Rail Group shipped a record 8,835 railcars and received orders for 2,455 railcars during the fourth quarter. The Rail Group had a backlog of $5.40 billion as of December 31, 2015, representing 48,885 railcars, compared to a backlog of $6.25 billion as of September 30, 2015, representing 55,265 railcars. At the end of the fourth quarter, the backlog of railcar orders extends into 2020.

The Railcar Leasing and Management Services Group ("Leasing Group") reported leasing and management revenues of $179.0 million in the fourth quarter of 2015 compared to $162.8 million in the fourth quarter of 2014 due to higher average rental rates and net fleet additions. In addition, the Group recognized revenue of $193.7 million during the fourth quarter from sales of railcars from the lease fleet owned for one year or less compared to $75.2 million in the fourth quarter of 2014. Operating profit for this Group was $187.5 million in the fourth quarter of 2015 compared to operating profit of $96.6 million in the fourth quarter of 2014 due to higher leasing and management operating profit and higher operating profit from sales of railcars from the lease fleet.

In total, Trinity sold $479.5 million of leased railcars to third parties during the fourth quarter, of which $84.7 million were reported in the Rail Group. Trinity's fourth quarter results included $0.58 per common diluted share related to sales of leased railcars compared to $0.14 per share of leased railcar sales in the same quarter last year. Supplemental information for the Leasing Group is provided in the accompanying tables.

The Inland Barge Group reported revenues of $147.2 million for the fourth quarter of 2015 compared to revenues of $167.8 million in the fourth quarter of 2014. Operating profit for this Group was $20.7 million in the fourth quarter of 2015 compared to $25.8 million in the fourth quarter of 2014. The decrease in revenues compared to the same quarter last year was primarily due to lower tank barge deliveries partially offset by higher delivery volumes of hopper barges. The Inland Barge Group received orders of $190.1 million during the quarter, and as of December 31, 2015 had a backlog of $416.0 million compared to a backlog of $373.1 million as of September 30, 2015.

The Energy Equipment Group reported revenues of $242.2 million in the fourth quarter of 2015 compared to revenues of $284.4 million in the same quarter of 2014. Operating profit for the fourth quarter of 2015 increased to $32.6 million compared to $26.9 million in the same quarter last year. The decrease in revenues compared to the same quarter last year was due to lower delivery volumes while the increase in operating profit was due primarily to improved manufacturing efficiencies. The backlog for structural wind towers as of December 31, 2015 was $371.3 million compared to a backlog of $424.4 million as of September 30, 2015.

Revenues in the Construction Products Group were $113.7 million in the fourth quarter of 2015 compared to revenues of $116.5 million in the fourth quarter of 2014. The Group recorded an operating profit of $5.0 million in the fourth quarter of 2015 compared to an operating loss of $0.3 million in the fourth quarter of 2014. Revenues decreased compared to the same quarter last year primarily as a result of lower delivery volumes in our Highway Products business and the divestiture of our galvanizing business partially offset by higher delivery volumes in our Aggregates business. Operating profit increased compared to the same quarter of 2014 due to improved manufacturing efficiencies.

Cash and Liquidity
At December 31, 2015, the Company had cash, cash equivalents, and short-term marketable securities of $870.9 million. When combined with capacity under committed credit facilities, the Company had approximately $2.12 billion of available liquidity at the end of the fourth quarter.

Share Repurchase
In December 2015, the Company’s Board of Directors renewed its $250 million share repurchase program effective January 1, 2016 through December 31, 2017. The new program replaced the previous program which expired on December 31, 2015. The Company repurchased 3.9 million shares at a cost of $115.0 million during the full year 2015. No shares were repurchased during the fourth quarter of 2015.

Earnings Guidance for 2016
For the full year of 2016, the Company anticipates earnings per common diluted share of between $2.00 and $2.40. The Company’s 2016 earnings guidance assumes the current weak market conditions will continue throughout the year.

For the Rail Group, annual deliveries in 2016 are now expected to be approximately 27,000 railcars, reflecting the delivery of firm backlog and a lower anticipated level of new orders. The Group expects revenues of approximately $3.1 billion with an operating margin of approximately 15% in 2016. This guidance reflects a change in product mix and pricing compared to 2015 for the Group’s 2016 railcar deliveries; a decrease in operating leverage related to an approximate 20% reduction in expected volumes; and costs associated with aligning the Group’s production footprint with demand.

In 2016, the Company expects to record revenue eliminations associated with railcars sold to the Leasing Group of approximately $1.1 billion with profit deferrals of approximately $215 million.

The Leasing Group expects revenues and profit from leasing and management operations in 2016 of approximately $700 million and $300 million, respectively.

The Company expects to continue expanding the RIV platform in 2016. Proceeds from the sale of leased railcars are expected to be approximately $500 million with a profit of approximately $100 million.

In 2016, the Inland Barge Group expects revenues of approximately $445 million with an operating margin of approximately 10%. The expected decrease in revenues and operating margin from 2015 reflects a lower level of demand; a change in product mix; and the competitive pricing environment.

The Company will provide additional details pertaining to its 2016 guidance during its conference call tomorrow.

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 railcars; the level of profitability resulting from sales of leased railcars; the dilutive impact of the convertible notes related to changes in the Company's stock price; and the impact of weather conditions on our operations and delivery schedules.

Conference Call
Trinity will hold a conference call at 11:00 a.m. Eastern on February 19, 2016 to discuss its fourth quarter and full year 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 [phone] until 11:59 p.m. Eastern on February 26, 2016.

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.

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