Trinity 4Q18: Orders, backlog grow

Written by William C. Vantuono, Editor-in-Chief
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Trinity Industries, Inc., in announcing financial results for the fourth quarter and full year ended Dec. 31, 2018, reported that its Rail Products Group posted railcar orders and deliveries of 8,045 and 5,285, respectively, during the fourth quarter, compared to orders and deliveries of 3,180 and 6,150, respectively, during the same period last year. The railcar backlog at year’s end stood at $3.6 billion, compared to $2.2 billion on Dec. 31, 2017.

Trinity reported 4Q18 earnings from continuing operations per common diluted share of $0.19, compared with $3.37 in the same quarter of last year. EPS for 4Q17 included a one-time $3.03 per share benefit related to the effects of the Tax Cuts & Jobs Act. 4Q18 also included a one-time non-cash charge of $12.6 million, or $0.07 per share, associated with the write-off of assets held under capital leases in the Railcar Leasing and Management Services Group.

The Leasing Group improved lease fleet utilization to 98.5% as of Dec. 31, 2018, compared with 97.6% as of Sept. 30, 2018. The lease fleet increased to 99,215 units in the wholly owned and partially owned fleet.

The company in 4Q18 repurchased approximately 12.9 million shares at a cost of $280 million under a previously announced accelerated share repurchase program.

For the full year, Trinity’s Rail Products Group delivered 20,105 railcars, an increase of 9.3% from 2017. The company reported total additions of 10,625 railcars to its wholly owned and partially owned lease fleets, an increase of 12.0%, and increased the loan-to-value ratio of its wholly owned lease fleet to 46.6% at Dec. 31, 2018 as compared to 25.4% one year earlier.

Full-year EPS was $0.70, compared with $3.85 in 2017, which included a one-time $3.06 per share benefit related to of the Tax Cuts & Jobs Act. The company repurchased approximately 17.2 million shares at a cost of $430.1 million.

On Nov. 1, 2018, the company completed the separation of Trinity Industries, Inc. into two public companies: Trinity Industries, Inc., comprised of Trinity’s rail-related businesses; and Arcosa, a new public company focused on infrastructure-related products and services. The separation was effected through a pro-rata dividend to Trinity shareholders of all outstanding Arcosa shares and was structured to qualify as a tax-free distribution for federal income tax purposes. Following the distribution, Arcosa became an independent, publicly traded company on the New York Stock Exchange. Trinity did not retain an ownership interest in Arcosa.

For 2019, Trinity said it expects earnings from continuing operations per common diluted share of $1.15 to $1.35 in 2019, an increase of 64% to 93% as compared to 2018. It expects to make a net lease fleet investment of $1.2 billion to $1.4 billion, and anticipates railcar deliveries of 23,500 to 25,500 units from the Rail Products Group.

“The year 2018 was an exciting and transformative year for Trinity Industries on a number of fronts, and our enthusiasm for long-term growth opportunities continues into 2019,” said Timothy R. Wallace, Chairman, CEO and President. “The successful separation of Trinity into two public companies positions us to focus our resources on serving the railcar industry through the TrinityRail integrated platform of products and services.”

“Railcar fundamentals improved throughout 2018, increasing demand for leased railcars and new railcar equipment,” Wallace noted. “During 2018, our commercial services team was highly successful renewing leases on railcars within our fleet. Our lease fleet utilization at the end of 2018 was 98.5% or 170 basis points above the level at the end of 2017. The commercial services team received orders for 28,795 railcars in 2018, compared to 12,900 railcar orders received in 2017, a 123% increase.

“At the beginning of 2019, our railcar order backlog totaled approximately $3.6 billion compared to approximately $2.2 billion at the start of 2018, a 69% increase. Currently, our customers are providing us inquiries requesting quotes for new railcars, yet they don’t appear to have a strong sense of urgency to issue orders. We have experienced this situation in the past when there are levels of uncertainty within the economy.

“The recurring revenue from our leased railcar portfolio and strong order backlog provide a solid foundation for our operations and support our expectations for improvements in our financial performance this year. Our earnings guidance for 2019 reflects a range of improvement of 64 and 93% year over year. We are enthusiastic about the long-term growth opportunities to enhance shareholder value.”

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