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 2021 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 or used;
•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;
•disruptions in the transportation network used to deliver our products, which
may impact our ability to timely deliver railcars to our customers;
•shortages of labor;
•impacts from asset impairments and related charges;
•the timing of introduction of new products;
•the timing and delivery of customer orders, lease portfolio sales, 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;
•material failure, interruption of service, compromised data security, phishing
emails, or cybersecurity breaches in our information technology (or that of the
third-party vendors who provide information technology or other services);
•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;
•geopolitical events, including armed conflicts, and their impact on supply
chains, pricing, and the global economy;
•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;
•changes in laws and regulations that may have an adverse effect on demand for
our products and services, our results of operations, financial condition or
cash flows;
•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;
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•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; and
•the inability to sufficiently protect our intellectual property rights.

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 2021 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 platform provides railcar leasing and management services, railcar manufacturing, and railcar maintenance and modification services.

In the fourth quarter of 2021, the Company completed the sale of Trinity Highway Products, LLC ("THP"), a wholly-owned subsidiary of the Company, and certain direct and indirect subsidiaries of THP, to Rush Hour Intermediate II, LLC ("Rush Hour"), an entity owned by an affiliated investment fund of Monomoy Capital Partners, for an aggregate purchase price of $375.0 million, subject to certain adjustments.

We concluded that the sale of THP represented a strategic shift that will have a major effect on the Company's operations and financial results. Accordingly, we have presented the operating results and cash flows of THP as discontinued operations for all periods in this Quarterly Report on Form 10-Q. Results of prior periods have been recast to reflect these changes and present results on a comparable basis. In connection with the sale of THP, we agreed to indemnify Rush Hour for certain liabilities related to the ET-Plus® System, a highway guardrail end-terminal system (the "ET Plus"). Consequently, results from discontinued operations include certain legal expenses that were directly attributable to the highway products business, which were previously reported in continuing operations. Similar expenses incurred during the three and nine months ended September 30, 2022 and that may be incurred in the future related to these retained obligations will likewise be reported in discontinued operations. See Note 2 of the Consolidated Financial Statements for further information related to the sale of THP and Note 14 for information regarding the retained liabilities.

Following the sale of THP, we report our operating results in two reportable 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; and (2) the Rail Products Group, which manufactures and sells railcars and related parts and components, and provides railcar maintenance and modification services. Additionally, we have combined the results of the prior Corporate and All Other groupings into a single Corporate and other grouping. The remaining activity previously reported in All Other primarily includes legal, environmental, and maintenance costs associated with non-operating facilities. Results of prior periods have been recast to reflect these changes and present results on a comparable basis.



Executive Summary

Recent Market Developments

Cyclical, Seasonal and Other Trends Impacting Our Business

The industries in which our customers 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, changes in commodity prices, including fluctuations in the crude oil market, or changes in demand for certain commodities, could impact customer demand for various types of railcars. Further, disruptions in the global supply chain have impacted demand for, and the costs of, certain of our products and services. We continuously assess demand for our products and services and take steps to rationalize and diversify our leased railcar portfolio and align our operating capacity appropriately. We diligently evaluate the creditworthiness of our customers and monitor performance of relevant market sectors; however, weaknesses in any of these market sectors could affect the financial viability of our underlying Leasing Group customers, which could negatively impact our recurring leasing revenues and operating profits.

Railcar loading volumes, levels of railcars in storage, and orders for new railcar equipment have improved, and railcar lease rates and utilization continue to improve. We believe that our rail platform is designed to respond to cyclical changes in demand and perform throughout the railcar cycle.

Steel prices and labor costs have increased significantly since the fourth quarter of 2020 and are major components of our cost of revenues. We typically use contract-specific purchasing practices, existing supplier commitments, contractual price escalation provisions, and other arrangements with our customers to reduce the impact of plate and coil steel price volatility on our operating profit. However, higher steel prices have resulted in increases in the cost of certain railcar components and could reduce demand for new railcars. Additionally, although we remain committed to attracting and retaining a highly skilled and diverse workforce, labor shortages, high turnover, and increases in labor costs have negatively impacted our operations. We continue to monitor the impact of potential margin and operating profit headwinds resulting from these factors.



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Table of Contents As a result of disruptions in the global supply chain, we have continued to experience shortages of materials used to manufacture or repair certain railcar types, as well as disruptions in the transportation network used to deliver our products, which have impacted our ability to timely deliver these railcars to our customers. While we believe these challenges will be resolved over time, they may persist over the foreseeable future, which could continue to impact our operations. We will continue to monitor the situation and take appropriate steps within our control to mitigate the potential impacts on our production schedules and delivery timelines.

Due to their transactional nature, lease portfolio sales are the primary driver of fluctuations in results in the Leasing Group.

COVID-19

The COVID-19 pandemic significantly impacted global and North American economic conditions. The social and economic effects of the pandemic have been widespread. We continue to monitor the operational and financial impacts of the pandemic and other economic factors. Although we have not experienced significant interruptions to our daily operations or a material impact to our operating costs, the ongoing economic pressures related to the effects of the pandemic have negatively impacted our results of operations for the three and nine months ended September 30, 2022. While we continue to see gradual reduction of the impacts of the pandemic, we are monitoring the impacts of COVID-19 variants on the economy and our workforce.

Please refer to the "Forward-Looking Statements" section above and Part I, Item 1A "Risk Factors" of the 2021 Annual Report on Form 10-K for additional information regarding the potential impacts of COVID-19 on our business.

Financial and Operational Highlights

•Our revenues for the nine months ended September 30, 2022 were $1,386.1 million, representing an increase of 32.8%, compared to the nine months ended September 30, 2021. Our operating profit for the nine months ended September 30, 2022 was $220.5 million compared to $187.6 million for the nine months ended September 30, 2021.

•The Leasing Group's lease fleet of 109,195 company-owned railcars was 97.9% utilized as of September 30, 2022, compared to a lease fleet utilization of 95.0% on 105,915 company-owned railcars as of September 30, 2021. Our company-owned lease fleet includes wholly-owned railcars, partially-owned railcars, and railcars under leased-in arrangements.

•For the nine months ended September 30, 2022, we made a net investment in our lease fleet of approximately $176.3 million, which primarily includes new railcar additions, sustainable railcar conversions, railcar modifications, and other betterments, net of deferred profit, and secondary market purchases; and is net of proceeds from lease portfolio sales.

•The total value of the new railcar backlog at September 30, 2022 was $4.1 billion, compared to $1.2 billion at September 30, 2021. The Rail Products Group received orders for 28,890 railcars and delivered 8,915 railcars in the nine months ended September 30, 2022, in comparison to orders for 8,510 railcars and deliveries of 6,070 railcars in the nine months ended September 30, 2021.

•In the third quarter of 2022, we entered into a new long-term railcar supply agreement with GATX Corporation ("GATX") to deliver a mix of 15,000 newly built tank and freight railcars over a six-year period. Our ending backlog at September 30, 2022 includes 15,000 railcars valued at approximately $1.8 billion associated with this agreement.

•The Rail Products Group offers a sustainable railcar conversion program whereby certain tank cars and freight cars are converted or upgraded to better meet changing market demands. During the nine months ended September 30, 2022, sustainable railcar conversion revenues totaled $117.9 million, representing 1,230 railcars.

•For the nine months ended September 30, 2022, operating cash flows from continuing operations was a net use of $52.6 million and Free Cash Flow After Investments and Dividends ("Free Cash Flow") was $0.1 million(1), in comparison to generating operating cash flows from continuing operations and Free Cash Flow of $418.8 million and $510.9 million(1), respectively, for the nine months ended September 30, 2021.

(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-20220930_g2.jpg]] [[Image Removed: trn-20220930_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) In the third quarter of 2021, we completed the existing share repurchase program, and our Board of Directors authorized a new $250.0 million share repurchase program.

(3) In the fourth quarter of 2021, we entered into an additional stock repurchase agreement with ValueAct Capital Master Fund, L.P. ("ValueAct") in a privately negotiated transaction. Additionally, we entered into an accelerated share repurchase agreement (the "ASR") to repurchase $125.0 million of our common stock. See Note 12 of the Consolidated Financial Statements for more information on the ASR.

(4) There were no shares repurchased during the first quarter of 2022 due to the ongoing ASR.

(5) In the second quarter of 2022, we completed the final settlement of the ASR. See Note 12 of the Consolidated Financial Statements for more information on the ASR.

Capital Structure Updates

TRL-2022 - In April 2022, Trinity Rail Leasing 2022 LLC, a Delaware limited liability company ("TRL-2022") and a limited purpose, indirect wholly-owned subsidiary of the Company owned through Trinity Industries Leasing Company ("TILC"), issued $244.8 million of its Series 2022-1 Green Secured Railcar Equipment Notes. These notes bear interest at a fixed rate of 4.55%, are payable monthly, and have a stated final maturity date of 2052. Net proceeds received from the transaction were used to repay borrowings under TILC's warehouse loan facility and for general corporate purposes.

Tribute Rail - In May 2022, Tribute Rail LLC ("Tribute Rail"), an indirect, wholly-owned subsidiary of TRIP Rail Holdings LLC ("TRIP Holdings"), issued $327.0 million of its Series 2022-1 Green Secured Railcar Equipment Notes. These notes bear interest at an all-in interest rate of 4.88% and have a stated final maturity date of 2052. Net proceeds received from the issuance of these notes were used to redeem TRIP Railcar Co. LLC's ("TRIP Railcar Co.") existing term loan agreement, of which $319.4 million was outstanding at the redemption date.

While the stated final maturity date of these debt issuances is in 2052, the cash flows from the encumbered assets of each of TRL-2022 and Tribute Rail will be applied, pursuant to the payment priorities of their respective indentures, so as to amortize their respective notes to achieve monthly targeted principal balances. If the cash flow assumptions used in determining the targeted balances are met, it is anticipated that the notes will be repaid well in advance of their stated final maturity date. There can be no assurance, however, that such cash flow assumptions will be realized. See Note 8 of the Consolidated Financial Statements for more information.

Litigation Updates

See Note 14 of the Consolidated Financial Statements for an update on the status of certain litigation retained in connection with the sale of THP.



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