Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to provide management's perspective on our financial condition, results of operations, liquidity, and certain other factors that may affect our future results. Our MD&A should be read in conjunction with the unaudited Consolidated Financial Statements and related Notes in Part I, Item 1 of this Quarterly Report on Form 10-Q and Item 8, Financial Statements and Supplementary Data, of our 2019 Annual Report on Form 10-K. This MD&A includes financial measures compiled in accordance with generally accepted accounting principles ("GAAP") and certain non-GAAP measures. Please refer to the Non-GAAP Financial Measures section herein for information on the non-GAAP measures included in the MD&A, reconciliations to the most directly comparable GAAP financial measure, and the reasons why management believes each measure is useful to management and investors.


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Forward-Looking Statements
This quarterly report on Form 10-Q (or statements otherwise made by the Company
or on the Company's behalf from time to time in other reports, filings with the
Securities and Exchange Commission ("SEC"), news releases, conferences, website
postings or otherwise) contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. Any statements contained
herein that are not historical facts are forward-looking statements and involve
risks and uncertainties. These forward-looking statements include expectations,
beliefs, plans, objectives, future financial performances, estimates,
projections, goals, and forecasts. Trinity uses the words "anticipates,"
"believes," "estimates," "expects," "intends," "forecasts," "may," "will,"
"should," and similar expressions to identify these forward-looking statements.
Potential factors which could cause our actual results of operations to differ
materially from those in the forward-looking statements include, among others:
•market conditions and customer demand for our business products and services;
•the cyclical nature of the industries in which we compete;
•variations in weather in areas where our products are sold, used, or installed;
•naturally-occurring events, pandemics, and/or disasters causing disruption to
our manufacturing, product deliveries, and production capacity, thereby giving
rise to an increase in expenses, loss of revenue, and property losses;
•the impact of the coronavirus pandemic ("COVID-19") and the response thereto,
on, among other things, demand for our products and services, our customers'
ability to pay, disruptions to our supply chain, our liquidity and financial
position, results of operations, stock price, payment of dividends, our ability
to generate new railcar orders, our ability to originate and/or renew leases at
favorable rates, our ability to convert backlog to revenue, and the operational
status of our facilities;
•impacts from asset impairments and related charges;
•the timing of introduction of new products;
•the timing and delivery of customer orders, sales of leased railcars, or a
breach of customer contracts;
•the creditworthiness of customers and their access to capital;
•product price changes;
•changes in mix of products sold;
•the costs incurred to align manufacturing capacity with demand and the extent
of its utilization;
•the operating leverage and efficiencies that can be achieved by our
manufacturing businesses;
•availability and costs of steel, component parts, supplies, and other raw
materials;
•competition and other competitive factors;
•changing technologies;
•surcharges and other fees added to fixed pricing agreements for steel,
component parts, supplies, and other raw materials;
•interest rates and capital costs;
•counter-party risks for financial instruments;
•long-term funding of our operations;
•taxes;
•the stability of the governments and political and business conditions in
certain foreign countries, particularly Mexico;
•changes in import and export quotas and regulations;
•business conditions in emerging economies;
•costs and results of litigation, including trial and appellate costs;
•changes in accounting standards or inaccurate estimates or assumptions in the
application of accounting policies;
•legal, regulatory, and environmental issues, including compliance of our
products with mandated specifications, standards, or testing criteria and
obligations to remove and replace our products following installation or to
recall our products and install different products manufactured by us or our
competitors;
•actions by U.S. and/or foreign governments (particularly Mexico and Canada)
relative to federal government budgeting, taxation policies, government
expenditures, borrowing/debt ceiling limits, tariffs, and trade policies;
•the use of social or digital media to disseminate false, misleading and/or
unreliable or inaccurate information;
•the inability to sufficiently protect our intellectual property rights;
•if the Company does not realize some or all of the benefits expected to result
from the spin-off of Arcosa, Inc. ("Arcosa"), a public company focused on
infrastructure-related products and services, or if such benefits are delayed;
and
•if the 2018 distribution of shares of Arcosa, together with certain related
transactions, does not qualify as a transaction that is generally tax-free for
U.S. federal income tax purposes, the Company's stockholders at the time of the
distribution and the Company could be subject to significant tax liability.
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Table of Contents Any forward-looking statement speaks only as of the date on which such statement is made. Except as required by federal securities laws, Trinity undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made. For a discussion of risks and uncertainties which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in our 2019 Annual Report on Form 10-K, this Form 10-Q and future Forms 10-Q and Current Reports on Forms 8-K.


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Company Overview
Trinity Industries, Inc. and its consolidated subsidiaries ("Trinity,"
"Company," "we," "our," or "us") own businesses that are leading providers of
railcar products and services in North America. Our rail-related businesses
market their railcar products and services under the trade name TrinityRail®.
The TrinityRail integrated platform provides railcar leasing and management
services, railcar manufacturing, and railcar maintenance and modification
services. We also own businesses engaged in the manufacturing of products used
on the nation's roadways and in traffic control.
We report our operating results in three principal business segments: (1) the
Railcar Leasing and Management Services Group (the "Leasing Group"), which owns
and operates a fleet of railcars and provides third-party fleet leasing,
management, and administrative services; (2) the Rail Products Group, which
manufactures and sells railcars and related parts and components, and provides
railcar maintenance and modification services; and (3) All Other, which includes
our highway products business and legal, environmental, and maintenance costs
associated with non-operating facilities. In connection with the implementation
of our rail-focused strategy, in the first quarter of 2020, we realigned certain
activities previously reported in the All Other segment to now be presented
within the Rail Products Group. The prior period results have been recast to
reflect these changes and present results on a comparable basis.
Executive Summary
Recent Market Developments
COVID-19
The COVID-19 pandemic continued to significantly impact global and North
American economic conditions in the third quarter. The social and economic
effects of the pandemic have been widespread and the situation continues to
evolve. Federal, state and local governments continue to modify protective
actions in response to evolving trends related to the spread of the disease.
Authorities continue to encourage or require social distancing and wearing of
masks. Although most states have reopened schools and many businesses, certain
non-essential businesses remain closed, and state and local leaders continue to
encourage many members of the public to work from home when possible.
During the third quarter, our senior leaders returned to the office full time,
and the remainder of the Dallas-based employees began working at our
headquarters facility on a rotating basis, subject to heightened safety
protocols. Our manufacturing businesses within the United States continue to
operate within critical infrastructure sectors as established by the
Cybersecurity & Infrastructure Security Agency of the United States Department
of Homeland Security, and we continue to believe that the majority of our North
American customers and suppliers also operate businesses that are deemed
essential. Consequently, our rail manufacturing, rail maintenance, and highway
products operations in the United States have continued to operate, subject to
significantly enhanced voluntary and government-mandated safety protocols
designed to protect the health of our operations workforce. Our manufacturing
facilities in Mexico have also continued to operate, subject to enhanced health
and safety protocols. These facilities operate within critical infrastructure
sectors as currently established by the Mexico Federal Ministry of Health and
Federal Ministry of Communications and Transportation. Disruptions to our supply
chain have been minimal, and we expect to be able to sustain the operational
capacity required to achieve our manufacturing targets for the remainder of the
year.
We continue to monitor the potential operational and financial impacts of the
pandemic and other economic factors, and have taken appropriate measures to
preserve cash and ensure sufficient liquidity. In addition to cost savings
initiatives already underway, we have eliminated many non-essential expenditures
and streamlined our workforce in response to current operating conditions. As
described in the Liquidity and Capital Resources section below, as of September
30, 2020, we have total committed liquidity of approximately $719 million. We
believe we have sufficient liquidity and capital resources to fund our operating
requirements as well as the other capital allocation and investment activities
planned for 2020. We are currently, and believe we will continue to be, in
compliance with any applicable debt covenants.
As previously reported, we concluded in the second quarter that the decline in
leasing income for small cube covered hopper railcars will continue and recorded
an impairment charge of $369.4 million, which is included in our results for the
nine months ended September 30, 2020. See Note 10 of the Consolidated Financial
Statements for more information. We identified no additional permanent declines
during the third quarter and, accordingly, recorded no additional impairment
charges. To date, the Leasing Group has experienced an insignificant increase in
lease payment delinquencies related to car types other than small cube covered
hoppers and has granted limited rent payment extensions to a relatively small
number of customers.
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Because we have not experienced significant interruptions to our daily
operations, the pandemic did not materially impact operating costs for our
manufacturing businesses for the three and nine months ended September 30, 2020.
However, in response to declining order volumes, we anticipate that our results
of operations will remain under pressure in the near term as we adjust our
future production plans.
We qualitatively assessed whether it was more likely than not that our goodwill
was impaired during the third quarter and have concluded that no such impairment
charges are necessary at this time. We will continue to monitor business
conditions, including the impact of the pandemic, and will make appropriate
adjustments to our operations and related financial projections and estimates as
necessary. We can provide no assurance that we will not have additional
impairment charges in future periods as a result of changes in market
conditions, our operating results, changes in the assumptions utilized in our
financial projections, or the financial performance of other investments in
emerging technologies.
Please refer to the "Forward-Looking Statements" section above and Part II, Item
1A "Risk Factors" of this Quarterly Report on Form 10-Q for additional
information regarding the potential impacts of COVID-19 on our business.
Other Cyclical and Seasonal Trends Impacting Our Business
The industries in which we operate are cyclical in nature. Weaknesses in certain
sectors of the North American and global economy may make it more difficult to
sell or lease certain types of railcars. Additionally, adverse changes in
commodity prices, including continued depressed prices in the crude oil market,
or lower demand for certain commodities, could result in a decline in customer
demand for various types of railcars. As noted previously, declines in crude oil
prices and production have left the frac sand industry financially vulnerable.
We continuously assess demand for our products and services and take steps to
rationalize and diversify our leased railcar portfolio and align our
manufacturing capacity appropriately. We diligently evaluate the
creditworthiness of our customers and monitor performance of relevant market
sectors, including the crude oil and frac sand markets; however, additional
weaknesses in any of these market sectors could affect the financial viability
of our underlying Leasing Group customers, which could continue to negatively
impact our recurring leasing revenues and operating profits.
Additionally, current economic conditions within the industries in which our
customers operate have resulted in reduced demand for railcars. These factors,
combined with declining railcar loading volumes and a growing supply of
underutilized railcar assets in North America, are pressuring railcar lease
rates and utilization, as well as orders for new railcar equipment. While we
currently expect this trend to continue in the near term, we believe that our
integrated rail platform is designed to respond to cyclical changes in demand
and perform throughout the railcar cycle.
Due to their transactional nature, railcar sales from the lease fleet are the
primary driver of fluctuations in results in the Leasing Group. Results in our
All Other Group are affected by seasonal fluctuations, with the second and third
quarters historically being the quarters with the highest revenues.
Asset Impairments and Restructuring Activities
As described above, we recorded an impairment of long-lived assets of $369.4
million during the nine months ended September 30, 2020 related to our small
cube covered hopper railcars. See Note 10 of the Consolidated Financial
Statements for more information, including a description of the key assumptions
and other significant management judgments utilized in the impairment analysis.
In the nine months ended September 30, 2020, and in connection with our
continued assessment of future needs to support our go-forward business
strategy, we recognized restructuring charges of approximately $10.5 million,
consisting of $7.5 million for severance costs, $5.9 million of non-cash charges
primarily from the write-down of our corporate headquarters campus and certain
other assets, and $0.6 million in contract termination costs, partially offset
by a $3.5 million net gain on the disposition of a non-operating facility and
certain related assets. We expect to identify additional streamlining and cost
savings opportunities in the near term.

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Financial and Operational Highlights
•Our revenues for the nine months ended September 30, 2020 were $1,583.8
million, representing a decrease of 26.5%, compared to the nine months ended
September 30, 2019. Our operating loss for the nine months ended September 30,
2020 was $161.4 million compared to operating profit for the nine months ended
September 30, 2019 of $319.1 million, and includes a $369.4 million impairment
charge recorded in the second quarter of 2020 associated with our small cube
covered hopper railcars.
•The Leasing Group reported additions to the wholly-owned and partially-owned
lease fleet of 3,835 railcars, for a total of 105,925 railcars as of September
30, 2020, an increase of 3.8% compared to September 30, 2019.
•The Leasing Group's lease fleet of 105,925 company-owned rail cars was 94.8%
utilized as of September 30, 2020, in comparison to a lease fleet utilization of
96.7% on 102,090 company-owned railcars as of September 30, 2019. Our
company-owned railcars include wholly-owned, partially-owned, and railcars under
sale-leaseback arrangements.
•For the nine months ended September 30, 2020, we made a net investment in our
lease fleet of approximately $310.1 million, which primarily includes new
railcar additions and railcar modifications, net of deferred profit, and
secondary market purchases; and is net of proceeds from the sales of leased
railcars owned more than one year at the time of sale.
•The total value of the railcar backlog at September 30, 2020 was $1.2 billion,
compared to $2.4 billion at September 30, 2019. The Rail Products Group received
orders for 4,810 railcars and delivered 9,295 railcars in the nine months ended
September 30, 2020, in comparison to orders for 7,635 railcars and deliveries of
15,080 railcars in the nine months ended September 30, 2019.
•For the nine months ended September 30, 2020, we generated operating cash flows
and Free Cash Flow before Capital expenditures - leasing ("Free Cash Flow") of
$456.8 million and $457.0 million(1), respectively, in comparison to $166.3
million and $217.2 million(1), respectively, for the nine months ended September
30, 2019.
(1) Non-GAAP financial measure. See the Non-GAAP Financial Measures section
within this Form 10-Q for a reconciliation to the most directly comparable GAAP
measure and why management believes this measure is useful to management and
investors.
See "Consolidated Results of Operations" and "Segment Discussion" below for
additional information regarding our operating results.

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Returns of Capital to Shareholders
Returns of capital to shareholders in the form of dividends and share
repurchases are summarized below:
[[Image Removed: trn-20200930_g2.jpg]] [[Image Removed: trn-20200930_g3.jpg]]
(1) Dividend yield is calculated as dividends paid for the four previous
quarters divided by the closing stock price on the last trading day of each
respective quarter.
(2) Shares repurchased during Q1 2019 exclude 2.6 million shares, at a cost of
approximately $70.0 million, representing the final settlement of an accelerated
share repurchase program. The shares remained outstanding as of December 31,
2018 but were funded in November 2018.
(3) There were no shares repurchased during the second quarter of 2020.
(4) In the third quarter of 2020, we completed the existing share repurchase
program.
Capital Structure Updates
Early Redemption of TRL V - In March 2020, Trinity Rail Leasing V, L.P., a
limited partnership ("TRL V") and a limited purpose, indirect wholly-owned
subsidiary of the Company owned through TILC, redeemed its 2006 Secured Railcar
Equipment Notes due May 2036, of which $104.7 million was outstanding at the
redemption date. The fixed interest rate for these notes was at 5.90% per annum.
The net book value of the assets securing TRL V at the time of redemption was
$303.3 million.
TRL-2017 - In July 2020, Trinity Rail Leasing 2017 LLC ("TRL-2017"), a
wholly-owned subsidiary of the Company, issued an additional $225.0 million of
promissory notes pursuant to a provision in its existing loan agreement. The
promissory notes bear interest at LIBOR plus 1.50%. Net proceeds received from
the transaction were used to repay borrowings under TILC's secured warehouse
credit facility and under the Company's revolving credit facility, and for
general corporate purposes.
See "Liquidity and Capital Resources" below for further information regarding
these activities.
Litigation Updates
See Note 14 of the Consolidated Financial Statements for an update on the status
of our Highway Products litigation.
Subsequent Events
TRL-2018 - In October 2020, Trinity Rail Leasing 2018 LLC ("TRL-2018"), a
wholly-owned subsidiary of the Company, issued $155.5 million of Series 2020-1
Class A Secured Railcar Equipment Notes (the "2020-1 Notes") under an existing
indenture. The 2020-1 Notes bear interest at a fixed rate of 1.96% per annum and
have a stated final maturity date of 2050. In a separate transaction during
October 2020, TRL-2018 redeemed its Series 2018-1 Class A-1 Secured Railcar
Equipment Notes, of which $153.1 million was outstanding at the redemption date.
The fixed interest rate for these notes was 3.82% per annum.
New Share Repurchase Program - In October 2020, our Board of Directors
authorized a new share repurchase program effective October 23, 2020 through
December 31, 2021. The new share repurchase program authorizes the Company to
repurchase up to $250.0 million of its common stock.
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