Good day and welcome to the Trinity Industries third quarter ended September 30th, 2026 results conference call. All participants will be in a listen-only mode. Should you need assistance, please signal conference specialists by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. And to withdraw your question, please press star then two. Please note that today's event is being recorded. Before we get started, let me remind you that today's conference call contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995 and includes statements as to estimates, expectations, intentions, and predictions of future financial performance. Statements that are not historical facts are forward-looking. Participants are directed to Trinity's Form 10-K and other SEC filings for a description of certain of the business issues and risks. A change in any of which could cause actual results or outcomes to differ materially from those expressed in forward-looking statements. I would now like to turn the conference over to Ms. Leigh Anne Mann, Vice President of Investor Relations. Please go ahead.

Thank you, Operator. Good morning, everyone. We appreciate you joining us for the company's third quarter 2026 Financial Results Conference Call. Our prepared remarks will include comments from Jean Savage, Trinity's Chief Executive Officer and President, and Eric Marchetto, the company's chief financial officer. We will hold a Q&A session following the prepared remarks from our leaders. During the call today, we will reference certain non-GAAP financial metrics. The reconciliations of the non-GAAP metrics to comparable GAAP measures are provided in the appendix of the quarterly investor slides, which are accessible on our investor relations website at www.trin.net. These slides are under the events and presentations portion of the website, along with the third quarter earnings conference call event link. A replay of today's call will be available after 10.30 a.m. Eastern Time through midnight on November 5th, 2026. Replay information is available under the events and presentations page on our investor relations website. It is now my pleasure to turn the call over to Jean. Thank you, Leigh Anne.

And good morning, everyone. We delivered a solid third quarter with momentum building across the business. And Trinity is well positioned as we move toward year end. Our leasing fundamentals remain strong, our manufacturing volumes are improving, and our cash generation continues to support disciplined capital allocation. Our last 12 months adjusted return on equity was 31.8%, helped by transaction gains and operational improvements. I'll start by walking you through what we're seeing in the market. Macrodynamics are very supportive of future growth in railcar orders. We have seen year-over-year carload volume increase by 3%, and this is across a variety of categories. Scrap rates are also elevated, and the industry is on track to scrap approximately 40,000 railcars in 2026, well above expected new railcar production. Rail cars in storage continue to decline and currently stand at 18%, the lowest reading since May 2023. This metric measures the share of rail cars that have not made a revenue move in 60 days or more. October also marked the 17th consecutive month of fleet contraction, a trend that continues across a wide variety of car types. Against that backdrop, it is encouraging to see demand firming, with Trinity order rates up 40% quarter over quarter and inquiries remaining strong. We see the market from both sides, while customers order for new railcar deliveries and about 20,000 lease renewals and 5,000 railcar assignments each year. That insight allows us to adjust rates as conditions evolve and continue to expand our spread over our cost of capital. I'll take you through both segments, starting with leasing and services. Our leasing and services business performed well in the third quarter. Core leasing revenue was down year-over-year, reflecting a smaller consolidated fleet following the rail car partnership transactions we completed over the last year. The decrease was partially offset by higher rents, higher management fees, and the fleet investment we made over the last year. Our lease fleet utilization was 97% and our renewal success rate was 89%. with renewal rates 4.1% above expiring rates. The future lease rate differential, or FLRD, was essentially flat this quarter, driven by higher expiring rates and a less favorable renewal mix, largely the result of having repriced nearly our entire fleet into a higher rate environment. Lease rates have not yet kept pace with asset values and inflation. We are focused on maximizing the yield on our assets, and the environment remains favorable for continued lease rate increases. Our leasing and services segment operating margin of 34.2% reflects a higher percentage of segment activity coming from lower margin businesses, such as maintenance and services, as those areas continue to grow. Over the last few years, we have improved the performance of our maintenance network to navigate the increase in tank car compliance work. As this work moderates, we announced plans to repurpose our Jonesboro maintenance facility to a storage and mobile repair facility. Current and expected volume can be efficiently supported across our remaining four facilities, which allows us to improve utilization across the network. Working with local and state resources, we are supporting our affected employees to help identify alternative opportunities. Net speed investment in the quarter was $115 million, bringing our year-to-date total to $241 million. The secondary market remains very active and strong, and we continue to participate as both a buyer and a seller. I also want to highlight a small acquisition we completed in October. We acquired the assets of Rubber Lining Specialist, LLC, an Orange, Texas-based provider of specialized rubber lining, corrosion and abrasion protection, inspection, and repair services. This acquisition expands our capabilities in supporting and servicing rubber-lined rail cars. In rail products, we are encouraged by the momentum in the market. We increased deliveries by 29% sequentially and still recorded a book-to-bill above one time with orders of 2,190 and deliveries of 2,030 in the quarter. We also completed 355 railcar conversions. Higher steel prices should support more conversions in the future. Segment revenue reflects the higher delivery volumes. Segment margin in the quarter was 9%, which benefited from a gain on the sale of a portion of our Longview facility. Without the $13.4 million gain, segment margin would have been 5.1%, a significant step up from the second quarter. We continue to expect a full-year segment margin between 5 and 6 percent. This business benefits from significant operating leverage, and we would expect to see the margin improve as volumes rise. As we discussed last quarter, we are undertaking a large project to modernize and consolidate our Longview Tank Car Facility. This project is ongoing and progressing well. It reflects our strategic decision made a year ago to expand our U.S. manufacturing footprint, a decision we especially value given today's uncertain trade policy environment. Before turning the call to Eric, I want to address the anti-dumping and countervailing duty petition filed by Union Tank Car, a wholly owned subsidiary of Berkshire Hathaway Incorporated. with the U.S. Department of Commerce and the U.S. International Trade Commission targeting imports of railway tank cars from Mexico. Our Monclova, Mexico facility has been an integral part of our North American Railcar Manufacturing Network since 1998. and Trinity has also produced more than 73,000 tank cars in the United States over the last 15 years. Our U.S. and Mexico facilities produce high-quality tank cars to meet our customers' needs. Trinity is a significant purchaser of American-made steel, which we ship to our facilities in Mexico for incorporation into the tank cars that Union Tank Car alleges to be dumped and subsidized. Our facilities serve customer demand across North America as part of a fully integrated supply chain. We disagree with the petition's allegations and are vigorously defending our position, and we will fully cooperate with Commerce and ITC as they complete their review of the facts. Let me leave you with three points. First, our cash generation has let us grow the fleet, invest in our U.S. manufacturing footprint, and return capital to shareholders. Second, the market is tightening. Orders are up, scrapping is running well ahead of new deliveries, and we believe 2026 is a cyclical low for industry deliveries. Third, We are focused on delivering for our customers across North America. I want to take a moment to thank our team members for their hard work this quarter and for keeping customers first. Now, I'll turn it over to Eric.

Thank you, Jean, and good morning, everyone. Starting with the income statement, revenues were up 18% year-over-year, driven by an increase in external deliveries and a higher mix of external repairs in our maintenance business, partially offset by the reduction in the size of our consolidated lease fleet following the Napier Park transactions. Operating profit was $96 million, down 19% from prior year. This was driven by lower gains on lease portfolio sales, higher SCNA expense and the reduction in operating profit contribution from the partially owned lease fleets as a result of the rail car partnership transactions. These reductions were partially offset by a $13.4 million gain on the sale of a manufacturing facility in the rail products group. Our tax rate in the third quarter was 29%, which is higher as a result of income taxes from our foreign operations, and third quarter EPS was 27 cents, benefited by higher external rail car deliveries and higher segment margin performance. Our last 12 months adjusted return on equity was 31.8% above our target range. This metric benefited from the gains on the railcar partnership transactions, but it also reflects improving operational performance. Moving to the cash flow statement, cash generation remains strong with $243 million year to date. We continue to prioritize return of capital to our shareholders, and we paid our 250th consecutive dividend in the quarter. We were also opportunistic in the quarter, repurchasing 787,000 shares for $23 million. Year-to-date, we have returned $119 million to shareholders through dividends and share repurchases. Net fleet investment in the third quarter was $115 million, with $169 million of fleet additions, partially offset by proceeds of $54 million of leased rail car sales. We remained very active in the robust secondary market, both as a buyer and a seller. Year-to-date, net fleet investment totals $241 million. We expect to complete the year ahead of our three-year target of $1.2 to $1.4 billion for cash generation, which includes cash from operations and gains on leased railcar sales. With one quarter remaining in the planning period, we have generated $1.4 billion of cash from operations and gains on railcar sales. This significant cash generation demonstrates the capabilities of our platform and a low rail card demand environment and also gives us flexibility in our capital allocation decisions. Turning to our balance sheet, our loan to value on our wholly owned fleet is 71.8%. We're comfortable at this level because the denominator is based on the net book value of our fleet, which is much lower than the market value of our fleet. This is supported by our current lease fleet financing activity. In October, we closed a new $350 million TRL 2026 term loan. Net proceeds from the transaction were used to redeem the outstanding series 2019-2 secured railcar equipment notes of Trinity Rail Leasing 2019 LLC and to repay borrowings under TLC's warehouse loan facility. We were happy with the execution of this refinancing and continue to see support from capital markets and a rising rate environment. Jean mentioned the North American fleet is modestly contracting while rail traffic is growing across most car types, and this sets up an interesting dynamic for the future outlook of our business. Rail cars are long-lived assets that maintain their economic utility throughout the rail car life. Further to that, our fleet of 100,000 rail cars with an average age of 15 years has similar utilities as a fleet of new rail cars. In other words, rail cars are long-lived assets with low obsolescence. Let me turn to lease rates. Since coming out of the COVID pandemic, we've repriced most of our fleet. As we move forward, we see an environment where there continues to be upward pressure on rail asset prices, mainly a result of higher input costs, namely steel. These asset prices, coupled with rising interest rates, will continue to push up lease rates on new rail cars. The combination of all these factors make us very bullish that lease rates will continue to increase from current rates. Now I'd like to share our outlook and guidance for the remainder of the year. We expect the industry to deliver below 25,000 rail cars in 2026. With one quarter remaining, the industry has delivered 16,000 rail cars this year. We're not providing formal guidance for 2027. We expect 2026 to be the cyclical low point for industry deliveries. We expect to complete the year with net fleet investment in the range of $300 to $350 million. Notably, this quarter, we achieved our three-year target for net lease fleet investment of $750 million to $1 billion, which we introduced at our 2024 Investor Day. We expect manufacturing capital expenditures in the range of $55 to $65 million, unchanged from last quarter. And finally, we are holding our full-year EPS guidance of $2.20 to $2.40. We have seen opportunities in the secondary market and are increasing our secondary market railcar gains expectations for the year to a range of $180 million to $200 million. reflecting higher expected cash gains in the fourth quarter than we have seen this year. In the fourth quarter, we expect to see higher external deliveries to meet customer commitments. To summarize, we generated strong cash flow, achieved our three-year net fleet investment in cash flow targets, and continued to strengthen our balance sheet. Our ability to execute in a slow new railcar market gives us conviction that this platform is built to deliver strong performance as the market recovers. Our capital allocation priorities are unchanged. Disciplined fleet investment, active portfolio management, and return of capital to shareholders. Operator, we are now ready for our first question.

Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. And today's first question will come from Andre Tomczyk with Goldman Sachs. Please go ahead.

Hey, good morning. Thanks for taking my question. I just wanted to touch on the gain on sale to start within manufacturing. I think you said $13 million of EBIT and X of that gain. It was a 5.1% margin. I'm curious, one, just from an EPS perspective, is that roughly $0.12 of earnings? And would you back that out of your sort of $0.20 that you reported? Just to clarify that. And then maybe just talk to the sale of that facility, what drove that, and if there are more sales to come in the future or if this is sort of more one-timish. Thanks.

Sure, Andre. I'll start and then let Eric chime in on this one. When you look at Longview, we used to have two plants in the city that we were running. It wasn't efficient to move that product. We actually had to truck it across town to finish the operations. So we decided last year that we were going to go ahead and consolidate it into one location. That would help us overall with efficiency, productivity, and cost. And while we're doing that, we're also doing a lot of automation into that factory. So we're improving the overall process. By doing that, that opened up that other facility. We called it Plant 200 in Longview and allowed us to sell that to a third party. We're not expecting to have that happen again for the Longview operation, but it is very beneficial for us. It allows us to have more flexibility and actually even increase the volume we could produce at Longview when this project completes. And I'll let Eric talk to you about the numbers.

Yeah, in terms of the numbers, Andre, yeah, the 12 cents and then Further, it is included in our EPS guide. We did not adjust that sale. We have had these sales from time to time. Our position is that it's fairly routine for us to sell these things. We call it out so that you can make your own determination on things. But we have a pretty high standard on what we use to adjust for any formal adjustments that we make to our gap earnings.

Understood. So the sounds like the 220 to 240 includes that 12 cents. It does, yes, to be clear. Okay, cool. Got it. And then, so I just, you mentioned that the demand was firming with the order rates up 40% quarter over quarter. It sounds like a good sign. Could you just speak to the types of customers putting in these orders, whether that's, you know, more lessors or shippers? and then maybe any color on the types of cars being ordered in this environment as well would be helpful.

When you look at it, we are really happy to see inquiries remaining strong. When you look at the customers, it is railroads, it is lessors and it is the end shippers that are ordering. It is more prevalent, widespread in freight car orders. and pretty broad based on what we're seeing. If you look at agriculture and chemical, those two remain the strongest areas that we're seeing it. A lot of it is still replacement demand. This year we're talking about 40,000 cars being scrapped and less than 25,000 new cars being built. So market is staying very tight overall. Tank cars, we are seeing some tank cars, but some of the headwinds we're seeing there. I don't know if you realize steel prices have gone up 63% year over year in the hot roll coil and plate arena. The steel mills are pushing out their lead times. They've doubled them, and they're missing those by still two to four weeks. on delivery. So we're seeing a little bit of strain there, and I think that's across multiple industries from the steel side. But steel prices going up, the interest rates going up, and also when you look at the uncertainty around some of the tariffs, some of the tank car owners and those who would be putting the orders are still delaying some of those decisions.

With your revised industry delivery forecast, I think you mentioned below 25,000 units. Any magnitude for sort of how far below 25,000 and then just what does that imply for Trinity's internal delivery pace here into the fourth quarter? And then maybe sort of thoughts on the run rate into 2027 to start would be appreciated as well.

Okay, so when you look at it, we just took ARCI numbers for the three quarters and projected out fourth quarter and it came in just over 23,000 cars. So that's the number we're using there. We expect to have higher deliveries for arm units in the fourth quarter. and in the past I've said 35,000 units for next year. Based off of the delivery rate and the order rate, I'm now saying between 30 and 35,000 cars we believe will deliver next year. So still up significantly from this year. And I think in our prepared remarks you heard us say we're calling the cyclical low in 26.

Very helpful. Thank you. I just wanted to touch on the tariff situation as well, following the proclamation updates applying tariffs to the full customs value of imported tank cars and the components. Could you just clarify whether Trinity is currently paying cash for the Section 232 tariffs on the rail cars that originate from Mexico? And then maybe just the potential impacts there, if you've looked into that. or is it just the case that shipments are still progressing as normal under your pending ruling and sort of trying to get clarity with the CPP?

And then just following on to that on the commercial side, how receptive are shippers and leasing customers to tariff-related pass-throughs?

Has anything like escalation clauses created any friction in signing new multi-year agreements anything like that color there would be super helpful. Thank you.

Okay. First, we are not paying on 232 currently. We do have a clarification request. We're waiting for that from the CDP to see what happens. Remember, we bring cars under USMCA and we qualify for the entry under that process. If you look at overall what could happen currently, I'm just going to talk about the current situation, don't know if it'll change. Currently, if you use less than 85% melt and pour U.S. steel, the tariff would be 25% on the tank car. If you use 85% or more U.S. steel on the melt and pour, it would drop to 10% tariff. What we are doing currently is talking to customers. We believe we meet the 85% mountain pour, so it would be at the 10% level. And as we talk or take new orders with tank cars, we're talking to the customers and building into the quote a 10% tariff. But most of our contracts do allow for that tariff to be passed on if it wasn't in the contract. That's where we sit overall as far as what customers are doing. Overall, we're still getting orders for tank cars. We're getting orders for both U.S. and Mexico production. And we talk to them about that. They're very open before we take those orders. But it's one of the three things. Remember, steel being up, so the cost of the tank car is up. Interest rates are up. So, again, the cost of a tank car overall for financing is up. and then the uncertainty around tariffs do have some of our customers delaying those decisions.

Understood. And just sort of following on to that related to the anti-dumping and countervailing duty petitions that were filed by UTLX, I'm curious if you could just give us a sense of the timeline. I know you guys are going to be obviously vigorously defending your position there. You know, maybe it's just a timeline around when you expect to hear decisions back. And then, you know, our customers, you know, pausing order commitments, sort of asking, you know, about the backlog and if that could be impacted at all, or is this sort of all up in the air at this point?

Okay. So, yeah, the proceedings are still very early. We're not predicting the outcome of those or the amounts and timing of any of the duties. but we believe it will be late next year before that is finalized. That has not caused anyone to delay orders that we already have in our backlog or ask us to delay. It's also uncertainty, so it could fall into the 232 bucket, but overall, that's why I said freight car pickup in orders is higher than tank car right now. I think a little of that uncertainty is weighing out there, but we've not seen any changes to orders we already have or delays, excuse me, asking for delays in production of what we've got in our backlog.

Maybe just switching here to leasing, you guys did up the gains forecast. Maybe just talk about that. Is that just a reflection of the secondary market strength ongoing? And if you could just speak to absolute lease rates in the quarter, how they've been progressing, if they've been elevated at high levels, if they're increasing, maybe any color there would be helpful and appreciated as well.

Yeah, Andre, this is Eric. I'll talk about that. We are seeing the secondary market remain quite healthy, quite strong. We did increase our guidance on gains by roughly $20 million at the midpoint for the year, and that's just the activity that we're seeing. We have line of sight on executing on those transactions. In terms of just a little bit of color on the market, My prepared remarks, I talked about the inflationary pressures that we're seeing on new rail cars. I talked about how that's impacting lease rates on new rail cars as well. When you look at the secondary market, it's pretty clear to me that buyers in the secondary market are also underwriting higher lease rates in the future. We have seen higher interest rates, and we have not seen that impact valuations. And the conclusion from that is investors are underwriting higher rates in the future to offset that, which makes sense. That's what should happen. And I think we're seeing a lot of discipline in the secondary market in terms of underwriting decisions and how they price in the secondary market activity.

Got it. And relatedly, your future lease rate differential, can you talk about just sort of, I think, some moderation there versus last quarter? Is that just a reflection of, you know, is that timing of the renewal comparisons rolling off? Or should we read into that, you know, related to any, you know, major card types that are starting to plateau? Any thoughts there as well would be appreciated.

Sure. As you know, we've repriced the majority of our fleet into the higher rate environment, so we're lapping there. When you also look at the mix of cars, that does affect it from quarter to quarter. We're encouraged by what we're seeing in October. One month doesn't make a quarter at all, but we're encouraged to start seeing some of the improvements on that and look forward, as we keep saying, we've got high utilization, high renewal rates. We're scrapping more cars than are being built to replace that. Market is continuing to tighten. All the input costs are going up along with those interest rates. So we fully expect, we can't call the exact timing, but fully expect those lease rates to continue to go up.

And rail traffic's improving. Yeah. Pretty maturely.

Yeah, no, that's certainly a good sign there as well. Maybe just lastly for me to close off, you mentioned the small acquisition in October, the Texas-based provider. Can you speak to, is that a move to get sort of more domestic exposure, or was that something, you know, already in the works? Just curious, you know, if you could talk how that adds value to the platform and the strategy, and if there are any synergies there to think about. Thanks for all the time.

Sure, Andre, I'll take it. Andre, I'll take that. So there are about 11,000 rubber line tank cars in the fleets across North America right now. And we have a large portion of those. Getting this allows us to service the market better. So it gives us more opportunity to address not only our fleet, but third party fleets that have that type of lining in their tank cars. It's not a material move. It just goes along with our servicing options that we talk about, our maintenance options, and expands our capability to take care of those fleets. There's one thing I also want to add in from an earlier question. and that was to do with a cell of Longview 200. We had built that cell into the 220 to 240 that we gave you at the beginning of the year. So we had some proceeds already built into that number. So I don't want you to think that that's on top of numbers we'd already built.

Thanks for the clarification and appreciate all the time everybody.

This will conclude our question and answer session. I would like to turn the conference back over to Jean Savage for any closing remarks. Please go ahead.

Well, thank you for joining us today. As you've heard from our comments, our third quarter reflects a business position for growth with momentum building, our leasing platform continues to perform, our manufacturing volumes are improving, and we believe 2026 will mark the cyclical low for industry deliveries. We appreciate your support and look forward to updating you next quarter where we will provide guidance for 2027.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.