NYSE/TRN Trinity Industries Inc - 10-K

Item 1A.  Risk Factors.

Our business is subject to a number of risks, which are discussed below. There are risks and uncertainties that could cause our actual results to be materially different from those mentioned in forward-looking statements that we make from time to time in filings with the SEC, news releases, reports, proxy statements, registration statements, and other written communications, as well as oral forward-looking statements made from time to time by representatives of our Company. All known material risks and uncertainties are described below. You should consider carefully these risks and uncertainties in addition to the other information contained in this report and our other filings with the SEC including our subsequent reports on Forms 10-Q and 8-K, and any amendments thereto before deciding to buy, sell, or hold our securities. If any of the following known risks or uncertainties actually occurs with material adverse effects on us, our business, financial condition, results of operations, and/or liquidity could be harmed. In that event, the market prices for our various securities could decline and you may lose all or part of your investment.

The cautionary statements below discuss important factors that could cause our business, financial condition, operating results, and cash flows to be materially adversely affected. Readers are cautioned not to place undue reliance on the forward-looking statements contained herein. Except as required by federal securities laws, we undertake no obligations to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

Strategic, Business, and Operational Risks

The industries in which our customers operate are cyclical in nature, which can expose our business to unpredictable demand and volatility.

Our business is subject to the demands of our customers and the broader economy, and we have particular exposure to the cyclicality of energy products, agriculture products, and consumer products. Additionally, periodic downturns in economic conditions typically have a significant adverse effect on cyclical industries due to decreased demand for new and replacement products. Decreased demand could result in lower sales volumes, lower prices, and/or a decline in or loss of profits.

While the business cycles of the various end markets we serve may not typically coincide, an economic downturn could affect disparate cycles simultaneously. The railcar industry has previously experienced sharp cyclical downturns and at such times operated with minimal backlog. As a result of the current macroeconomic environment, the North American railcar industry is experiencing reduced order volumes and backlog. The impacts of such an economic downturn may magnify the adverse effect on our business.

Shortages of skilled labor and/or qualified employees could impact our operations.

We depend on skilled labor in the manufacture, maintenance, and repair of railcar products and on other qualified employees in all aspects of our business. We have experienced shortages of qualified employees and/or skilled labor and increased turnover at certain facilities, resulting in increased labor costs from temporary workers and operating inefficiencies. Shortages of, or the inability to attract, train, integrate, and retain, some types of skilled laborers, such as welders, restrict our ability to maintain or increase production rates and increase our labor costs. An overall labor shortage, lack of skilled labor, increased turnover, or higher labor costs could adversely impact our operations and profitability.

A disruption in the movement of rail traffic could impair our ability to deliver railcars and other products to our customers in a timely manner, which could prevent us from meeting customer demand, reduce our sales, and negatively impact our results of operations.

Once a railcar or other product is manufactured in one of our plants, it must be moved by rail to a customer delivery point. In many cases, the manufacturing plant and the delivery point are in different countries. Many different and unrelated factors could cause a delay in our ability to move our goods in a timely manner from the manufacturing plant to the delivery point, including physical disruptions such as armed conflict, natural disasters and power outages; strikes, labor stoppages, border closures, or shortages hindering the operation of railroads and related transportation infrastructure; regulatory and bureaucratic inefficiency and unresponsiveness; railroad embargoes or operational inefficiencies; and other causes. A material disruption in the movement of rail traffic could negatively impact our business and results of operations.

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Fluctuations in the price and supply of materials used in the production of our products, including inflationary pressures, could have a material adverse effect on our ability to cost-effectively manufacture and sell our products. In some instances, we rely on a limited number of suppliers for certain materials required in our production.

A significant portion of our business depends on the adequate supply of numerous specialty and other parts and components at competitive prices, such as brakes, wheels, side frames, bolsters, and bearings for the railcar manufacturing business. Additionally, from time to time, we have experienced volatility in commodity and supply chain costs, including the costs of labor, raw materials, energy, fuel, materials and other inputs necessary for the production of our products. Our manufacturing operations partially depend on our ability to obtain timely deliveries of materials in acceptable quantities and quality from our suppliers. Certain materials for our products are currently available from a limited number of suppliers and, as a result, we may have limited control over pricing, availability, and delivery schedules. The inability to procure a sufficient quantity of materials on a timely basis could create disruptions in our production and result in delays while we attempt to engage alternative suppliers. Worsening economic or commercial conditions could reduce the number of available suppliers, potentially increasing our rejections for poor quality and requiring us to source unknown and distant supply alternatives. Any such disruption or conditions could harm our business and adversely impact our results of operations.

Risks related to our operations outside of the U.S., particularly Mexico, could decrease our profitability.

The majority of our railcars are manufactured in Mexico. Our Mexico operations and other operations outside of the U.S. are subject to the risks associated with cross-border business transactions and activities. Political, legal, trade or economic change or instability, criminal activities or social unrest could limit or curtail our respective foreign business activities and operations, including the ability to hire and retain employees. We cannot predict the likelihood of future effects from such risks or any resulting adverse impact on our business, results of operations or financial condition. Many items manufactured by us in Mexico are sold in the U.S., and the transportation and import of such products may be disrupted. The countries in which we operate, including Canada and Mexico, have regulatory authorities that regulate products sold or used in those countries. If we fail to comply with the applicable regulations within the foreign countries where we operate, we may be unable to market and sell our products in those countries. In addition, with respect to operations in foreign countries, unexpected changes in laws, rules, and regulatory requirements; tariffs and other trade barriers, including regulatory initiatives for buying goods produced in America; more stringent or restrictive laws, rules, and regulations relating to labor or the environment; adverse tax consequences; price exchange controls; and restrictions or regulations affecting cross-border rail and vehicular traffic could limit operations, affecting production throughput and making the manufacture and distribution of our products less timely or more difficult. Furthermore, any material change in the quotas, regulations, tariffs, or duties on imports imposed by the U.S. government and agencies – including, but not limited to, tariffs imposed under Section 232 of the Trade Expansion Act of 1962, Section 301 of the Trade Act of 1974, or the International Emergency Economic Powers Act (IEEPA) – or on exports by the government of Mexico or its agencies, could affect our ability to export products that we manufacture in Mexico. Because we have operations outside the U.S., we could be adversely affected by final judgments of non-compliance with the U.S. Foreign Corrupt Practices Act or import/export rules and regulations and similar anti-corruption, anti-bribery, or import/export laws of other countries.

We operate in highly competitive industries. We may not be able to sustain our market leadership positions, which may impact our financial results.

We face aggressive competition in the end markets we serve. In addition to price, we face competition in respect to product performance and innovation, quality, reliability of delivery, customer service, and other factors. The effects of this competition, which is often intense, could reduce our revenues and operating profits, limit our ability to grow, increase pricing pressure on our products, and otherwise affect our financial results.

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We may be unable to maintain railcar assets on lease at satisfactory lease rates. The composition of our lease fleet may not be optimally aligned with market demand or conditions.

The profitability of our railcar leasing business depends on our ability to lease railcars at satisfactory lease rates, to re-lease railcars at satisfactory lease rates upon the expiration and non-renewal of existing leases, and to sell railcars in the secondary market as part of our ordinary course of business. Our ability to accomplish these objectives is dependent upon several factors, including, among others:

• the cost of and demand for leases or ownership of newer or specific-use railcar types;

• the composition of our lease fleet in relation to market demand for various types of railcars;

• the general availability in the market of competing used or new railcars;

• the degree of obsolescence of leased or unleased railcars, including railcars subject to regulatory obsolescence;

• the prevailing market and economic conditions, including the availability of credit, interest rates, and inflation rates;

• the market demand or governmental mandate for refurbishment; and

• the volume and nature of railcar traffic and loadings.

A downturn in the industries in which our lessees operate and decreased demand for railcars could also increase our exposure to re-marketing risk because lessees may demand shorter lease terms or newer railcars, requiring us to re-market leased railcars more frequently. Furthermore, the resale market for previously leased railcars has a limited number of potential buyers. Our inability to re-lease or sell leased or unleased railcars in a timely manner on favorable terms could result in lower lease rates, lower lease utilization percentages, and reduced revenues and operating profit.

The limited number of customers for certain of our products, the variable purchase patterns of our customers, and the timing of completion, delivery, and customer acceptance of orders may cause our revenues and income from operations to vary substantially each quarter, potentially resulting in significant fluctuations in our quarterly results.

Some of the markets we serve have a limited number of customers. The volumes purchased by customers vary from year to year, and not all customers make purchases every year. As a result, the order levels for our products have varied significantly from quarterly period to quarterly period in the past and may continue to vary significantly in the future. Therefore, our results of operations in any particular quarterly period may also vary. As a result of these quarterly fluctuations, we believe that comparisons of our sales and operating results between quarterly periods may not be meaningful and should not be relied upon as indicators of future performance.

Changes in the availability, price, and demand for steel could lower our margins and profitability.

The principal material used in our manufacturing segment is steel. Market steel prices exhibit periods of volatility. Steel prices may experience further volatility as a result of scrap surcharges assessed by our suppliers and other market factors. We have experienced increases in the costs of steel, components, and certain other inputs that represent a substantial portion 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 mitigate the effect of this volatility on our operating profit. To the extent that we do not have such arrangements in place, an adverse change in steel prices lowers our profitability in the Rail Products Group. In addition, meeting production demands is dependent on our ability to obtain a sufficient amount of steel. An unanticipated interruption in our supply chain could have an adverse impact on both our margins and production schedules.

Reductions in the availability of energy supplies or an increase in energy costs may increase our operating costs.

We use various gases, including natural gas, at our manufacturing facilities. An outbreak or escalation of hostilities between the U.S. and any foreign power or other prolonged conflicts that may disrupt global energy markets could result in a real or perceived shortage of petroleum and/or natural gas, which could result in an increase in the cost of natural gas or energy in general. Extreme weather conditions and natural occurrences, such as hurricanes, tornadoes, and floods, or a pandemic, could result in varying states of disaster and a real or perceived shortage of petroleum and/or natural gas, including rationing thereof, potentially resulting in an increase in natural gas prices or general energy costs. Speculative trading in energy futures in the world markets could also result in an increase in natural gas and general energy costs. Future limitations on the availability (including limitations imposed by increased regulation or restrictions on rail, road, and pipeline transportation of energy supplies) or consumption of petroleum products and/or an increase in energy costs, particularly natural gas for plant operations and diesel fuel for vehicles and plant equipment, could have an adverse effect upon our ability to conduct our business cost effectively.

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Our inability to produce, protect and disseminate relevant and/or reliable data and information pertaining to our business in an efficient, cost-effective, secure, and well-controlled fashion may have significant negative impacts on confidentiality requirements and obligations and trade secret or other proprietary needs and expectations and, therefore, our future operations, profitability, and competitive position.

We rely on information technology infrastructure and architecture, including hardware, network, software, people, and processes, provided both internally and by third‑party service providers to deliver the secure, reliable, and confidential information necessary to conduct our business. This includes correspondence and commercial data and information interchange with customers, suppliers, legal counsel, governmental agencies, and consultants, and to support assessments and conclusions about future plans and initiatives pertaining to market demands, operating performance, and competitive positioning. Any material failure or interruption of service, including potential disruption from periodic financial or operating system upgrades, could adversely affect our relations with suppliers and customers, place us in violation of confidentiality and data privacy and protection laws, rules, and regulations, and result in negative impacts to our market share, operations, profitability, and reputation.

We face risks related to cybersecurity attacks and other breaches of our information systems and technology, including those arising from our deployment and use of artificial intelligence ("AI") tools.

We rely on the proper functioning and availability of our information technology systems, some of which are dependent on services provided by third parties, in operating our business. It is important that the data processed by these systems remains confidential, as it often includes sensitive information relating to our business, customers, employees, and vendors. As with most companies, we are subject to attempted cybersecurity disruptions and intrusions, and we expect such attempts to continue. At times, certain of our vendors have suffered cybersecurity breaches. These incidents have not had a material adverse impact on our operations, and, to date, the Company has not experienced a material information security breach itself. However, failure to prevent or mitigate data loss or system intrusions from cybersecurity attacks or other security breaches could expose us, our vendors, or our customers to a risk of loss or misuse of such information, adversely affect our operating and financial results, restrict or prevent operations or financial reporting, result in litigation, potential liability, or regulatory risk and otherwise harm our business. Likewise, data privacy breaches from our systems could expose personally identifiable information of our employees or contractors, sensitive customer data, or vendor data to unauthorized persons, adversely impacting our customer service, employee relationships, and our reputation. Our use of AI tools in our business may introduce new or enhanced cybersecurity and data‑integrity risks, including vulnerabilities related to data inputs, model outputs, and reliance on third‑party AI platforms. Any failure of these AI systems, or any exploitation of AI‑related vulnerabilities, could increase the likelihood or impact of unauthorized access, data loss, or other security incidents. Information technology security threats to network and data security are increasing in frequency and sophistication, and cyberattacks pose a risk to the security of our information technology systems, including those of third-party service providers with whom we have contracted, as well as the confidentiality, integrity, and availability of the data stored on those systems. We maintain an information security program, which consists of safeguards, procedures, and controls to mitigate such risks. Our information systems are protected through physical and software safeguards as well as backup systems considered appropriate by management. However, there can be no guarantee that we, or third-party service providers with whom we have contracted, will be able to prevent or mitigate all such data breaches or cyberattacks. While we have significant security processes and initiatives in place, we may be unable to fully detect, mitigate or protect against a material breach or disruption in the future. In addition, regulatory authorities have increased their focus on how companies collect, process, use, store, share, and transmit personal data. Data we collect, store, and process is subject to a variety of U.S. and international laws and regulations. Any breach in our information technology security systems that results in the disclosure or misuse of sensitive or confidential information or any failure to comply with data privacy laws and regulations could result in significant penalties, fines, legal liability, and reputational harm. Further, we may incur large expenditures to investigate or remediate the impacts of such breaches, to recover data, to repair or replace networks or information systems, or to protect against similar future events.

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Increasing insurance claims and expenses could lower profitability and increase business risk.

We are subject to potential liability for claims alleging property damage and personal and bodily injury or death arising from the use of or exposure to our products, especially in connection with products we historically manufactured that our customers installed along U.S. highways or that our customers use to transport hazardous, flammable, toxic, or explosive materials. As insurance policies expire, premiums for renewed or new coverage may increase and/or require that we increase our self-insured retentions or deductibles. The Company maintains primary coverage and excess coverage policies. If the number of claims or the dollar amounts of such claims rise in any policy year, we could suffer additional costs. Also, an increase in the loss amounts attributable to such claims could expose us to uninsured damages if we were unable or elected not to insure against certain claims because of high premiums or other reasons. While our liability insurance coverage is at or above typical levels for our industries, an unusually large liability claim or a string of claims coupled with an unusually large damage award could exceed our available insurance coverage. In addition, the availability of, and our ability to collect on, insurance coverage is often subject to factors beyond our control, including positions on policy coverage taken by insurers. If any of our third-party insurers fail, cancel, or refuse coverage, or otherwise are unable to provide us with adequate insurance coverage, then our risk exposure and our operational expenses may increase and the management of our business operations would be disrupted. Moreover, any accident or incident involving our industries in general or us or our products specifically, even if we are fully insured, contractually indemnified, or not held to be liable, could negatively affect our reputation among customers and the public, thereby making it more difficult for us to compete effectively, and could significantly affect the cost and availability of insurance in the future.

We have indebtedness, which could have negative consequences on our business or results of operations.

We have indebtedness both at the parent level and at the subsidiary level. Our level of indebtedness could have a material adverse effect on our business and make it more difficult for us to satisfy our obligations under our outstanding indebtedness and notes. As a result of our debt and debt service obligations, we face increased risks regarding, among other things, the following: (i) borrowing additional amounts or refinancing existing indebtedness may be limited or more costly; (ii) our available cash flow after satisfying our debt obligations due to a portion of our cash flow being needed to pay principal and interest on our debt; (iii) being at a competitive disadvantage relative to our competitors that have greater financial resources or more flexible capital structures than us; (iv) our exposure to increased interest rates for our borrowings that are at variable interest rates; (v) restrictive covenants under our indebtedness restricting our financial and operating flexibility; and (vi) although the parent entity has not secured any debt with its assets, our subsidiaries that have issued debt have pledged their specific assets to secure such indebtedness, and such assets could be foreclosed upon in connection with an event of default.

Litigated disputes and other claims could increase our costs and weaken our financial condition.

We are currently, and may from time to time be, involved in various claims or legal proceedings arising out of our operations. We provide a variety of railcar-related products and services, including, among others, leasing, manufacturing, components and parts, maintenance, and digital and logistics products and services. Accidents, including derailments, involving our products or services could lead to litigation and subject us to significant civil, regulatory, or criminal liability. Adverse judgments and outcomes in some or all of these matters could result in significant losses and costs that could weaken our financial condition. Although we maintain reserves for our reasonably estimable liabilities, our reserves may be inadequate to cover our portion of claims or final judgments after taking into consideration rights in indemnity and recourse to third parties. As a result, there could be a material adverse effect on our business, operations, or financial condition. See Note 15 of the Consolidated Financial Statements for more detailed information on any material pending legal proceedings other than ordinary routine litigation incidental to our business.

While state and federal procedural rules exist to curtail the filing of claims against the Company in jurisdictions unrelated to the underlying claims, courts may not enforce these rules, exposing us to a greater likelihood of unfavorable results and increased litigation costs. Whenever our products were sold to or are ultimately owned and/or operated by governments or their authorized agencies, we may be unable to seek redress or recourse to at-fault parties. When litigation arising from the installation, maintenance, replacement, or use of our products is filed against the Company, recourse to such governments or authorized agencies may be subject to sovereign immunity or related defenses thereby exposing the Company to risk of liability and increased costs irrespective of fault.

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Many of our products are or were sold to leasing companies, contractors, distributors, and installers who may misuse, abuse, improperly install or improperly or inadequately maintain or repair such products thereby potentially exposing the Company to claims that could increase our costs and weaken our financial condition.

The products we manufacture are designed to work optimally when properly assembled, operated, installed, repaired, and maintained. When this does not occur, the Company may be subjected to claims or litigation associated with personal or bodily injuries or death and property damage. Although the Company has completed the sale of its highway products business, it has retained responsibility for certain existing litigation and claims and for certain potential future claims related to the ET-Plus® System, a highway guardrail end-terminal system. See Note 15 of the Consolidated Financial Statements for more detailed information on these retained obligations.

Our manufacturer's warranties expose us to product replacement and repair claims.

Depending on the product, we warrant our workmanship and certain materials (including surface coatings, primers, sealants, and interior linings), parts, and components pursuant to express limited contractual warranties. We may be subject to significant warranty claims in the future such as multiple claims based on one defect repeated throughout our production process or claims for which the cost of repairing or replacing the defective part, component or material is highly disproportionate to the original price. These types of warranty claims could result in significant costs associated with product recalls or product repair or replacement, and damage to our reputation.

Equipment failures, a pandemic, or extensive damage to our facilities, including as might occur as a result of natural disasters or fires, could lead to production, delivery, or service curtailments or shutdowns, loss of revenue or higher expenses.

We operate a substantial amount of equipment at our production facilities, several of which are situated in tornado and hurricane zones in the U.S. and Mexico. An interruption in production capabilities or maintenance and repair capabilities at our facilities, as a result of equipment failures, fires, a pandemic, or acts of nature, could reduce or prevent our production, delivery, service, or repair of our products and increase our costs and expenses. A halt of production at any of our manufacturing facilities could severely affect delivery times to our customers. While we maintain emergency response and business recovery plans that are intended to allow us to recover from natural disasters that could disrupt our business, we cannot provide assurances that our plans would fully protect us from the effects of all such disasters. In addition, insurance may not adequately compensate us for any losses incurred as a result of natural or other disasters, which may adversely affect our financial condition. Any significant delay in deliveries not otherwise contractually mitigated by favorable force majeure provisions could result in cancellation of all or a portion of our orders, late delivery penalties, cause us to lose future sales, and negatively affect our reputation and our results of operations.

Climate change and business, regulatory, and legal developments regarding climate change may affect the demand for our products or the ability of our critical suppliers to meet our needs.

We have followed developments related to climate change in general, and the related science, policy discussion, and prospective legislation. Scientific studies have suggested that emissions of certain gases, commonly referred to as greenhouse gases (“GHGs”), which include carbon dioxide and methane, are contributing to warming of the Earth’s atmosphere and other climate changes. Additionally, we periodically review the potential challenges and opportunities for the Company that climate change policy and legislation may pose. However, any such challenges or opportunities are heavily dependent on the nature and degree of climate change legislation and the extent to which it applies to our industries.

In response to scientific and political consensus, legislation and new rules to regulate emission of GHGs have been introduced in numerous state legislatures, the U.S. Congress, and by the USEPA. Some of these proposals would require industries to meet stringent new standards that may require substantial reductions in carbon emissions. While the Company cannot assess the direct impact of these or other potential regulations, we do recognize that climate change and any related protocols could affect demand for our products and/or affect the price of materials, input factors, and manufactured components. Potential opportunities could include greater demand for certain types of railcars, while potential challenges could include decreased demand for certain types of railcars or other products and higher energy costs. Other adverse consequences of climate change could include increased frequency, intensity, and duration of severe weather events and rising sea levels that could affect operations at our manufacturing facilities, the price of insuring company assets, or other unforeseen disruptions of the Company’s operations, systems, property, or equipment. There may be other unforeseen impacts of climate change that could have a material adverse effect on our business, operations, and results. Ultimately, when or if these impacts may occur cannot be assessed until scientific analysis and legislative policy are more developed and specific legislative proposals begin to take shape.

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Repercussions from terrorist activities or armed conflict could harm our business.

Terrorist activities, anti-terrorist efforts, and other armed conflict involving the U.S. or its interests abroad may adversely affect the U.S. and global economies, potentially preventing us from meeting our financial and other obligations. In particular, the negative impacts of these events may affect the industries in which we operate. This could result in delays in or cancellations of the purchase of our products or shortages in raw materials, parts or components. Any of these occurrences could have a material adverse impact on our operating results, revenues, and costs.

We may be required to reduce the value of our long-lived assets and/or goodwill, which would weaken our financial results.

We periodically evaluate for potential impairment the carrying values of our long-lived assets to be held and used. The carrying value of a long-lived asset to be held and used is considered impaired when the carrying value is not recoverable through undiscounted future cash flows and the fair value of the asset is less than the carrying value. Fair value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risks involved or market quotes as available. Impairment losses on long-lived assets held for sale are determined in a similar manner, except that fair values are reduced commensurate with the estimated cost to dispose of the assets. In addition, goodwill is required to be tested for impairment annually or on an interim basis whenever events or circumstances change indicating that the carrying amount of the goodwill might be impaired. Impairment losses related to reductions in the value of our long-lived assets or our goodwill could weaken our financial condition and results of operations.

Railcars as a significant mode of transporting freight could decline, experience a shift in types of modal transportation, and/or certain railcar types could become obsolete.

As the freight transportation markets we serve continue to evolve, the use of railcars may decline in favor of other more economical transportation modalities or the number of railcars needed to transport current or an increasing volume of goods may decline. Features and functionality specific to certain railcar types could result in those railcars becoming obsolete as customer requirements for freight delivery change or as regulatory mandates are promulgated that affect railcar design, configuration, and manufacture.

Because we do not have employment contracts with our key management employees, we may not be able to retain their services in the future.

Our success depends on the continued services of our key management employees, none of whom currently have an employment agreement with us. The loss of the services of one or more key members of our management team could result in increased costs associated with attracting and retaining a replacement and could disrupt our operations and result in a loss of revenues.

Some of our employees or those of our suppliers belong to labor unions, and strikes or work stoppages could adversely affect our operations.

We are a party to collective bargaining agreements with various labor unions at our operations in Mexico. Disputes with regard to the terms of these agreements or our potential inability to negotiate acceptable contracts with these unions in the future could result in, among other things, strikes, work stoppages or other slowdowns by the affected workers. We cannot be assured that our relations with our workforce will remain positive or that union organizers will not be successful in future attempts to organize at some of our U.S. facilities. If our workers were to engage in a strike, work stoppage or other slowdown, or other employees were to become unionized, or the terms and conditions in future labor agreements were renegotiated, we could experience a significant disruption of our operations and higher ongoing labor costs. In addition, we could face higher labor costs in the future as a result of severance or other charges associated with lay-offs, shutdowns, or reductions in the size and scope of our operations or difficulties of restarting our operations that have been temporarily shuttered. Similar risks may exist with respect to our suppliers.

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We may be unable to effectively implement organizational redesigns, cost reductions, and/or restructuring efforts and our business might be adversely affected.

From time to time we engage in organizational redesigns, cost reductions, and/or similar restructuring plans, which may include organizational changes, workforce reductions, facility consolidations or closures, and other cost reduction initiatives. These types of activities are complex and can require a significant amount of management and other employees’ time and focus, which may divert attention from operating and growing our business. If we do not effectively manage and implement these activities, or any future similar activities, expected efficiencies and benefits might be delayed or not realized, and our operations and business could be disrupted. Risks associated with these actions include potential adverse effects on employee morale, loss of accumulated knowledge and/or inefficiency, unfavorable political responses to such actions, unforeseen delays in implementation, unexpected costs, and the failure to meet operational targets, any of which may impair our ability to achieve anticipated benefits, harm our business, or have a material adverse effect on our competitive position, results of operations, cash flows or financial condition.

The Company could potentially fail to successfully integrate new businesses or products into its current business.

The Company routinely searches for growth opportunities, including assessment of merger and acquisition prospects in new markets and/or products. Any merger or acquisition into which the Company enters is subject to integration into the Company's businesses and culture. If such integration is unsuccessful to any material degree, such lack of success could result in unexpected claims or otherwise have a material adverse effect on our business, operations, or financial condition.

Our inability to sufficiently protect our intellectual property rights could adversely affect our business.

Our patents, copyrights, trademarks, service marks, trade secrets, proprietary processes, and other intellectual property are important to our success. We rely on patent, copyright and trademark law, trade secret protection, and confidentiality and/or license agreements with others to protect our intellectual property rights. Our trademarks, service marks, copyrights, patents, and trade secrets may be exposed to market confusion, commercial abuse, infringement, or misappropriation and possibly challenged, invalidated, circumvented, narrowed, or declared unenforceable by countries where our products and services are made available, but where the laws may not protect our intellectual property rights as fully as in the U.S. Such instances could negatively impact our competitive position and adversely affect our business. Additionally, we could be required to incur significant expenses to protect our intellectual property rights.

Risks Related to Market and Economic Factors

Volatility in the global markets or in industries that our products serve may adversely affect our business and operating results.

Instability in the global economy, negative conditions in the global credit markets, high interest or inflation rates, volatility in the industries that our products serve, fluctuations in commodity prices that our customers produce and transport, changes in legislative or trade policy, adverse changes in the availability of raw materials and supplies, or adverse changes in the financial condition of our customers could lead to customers' requests for deferred deliveries of our backlog orders. Additionally, such events could result in our customers' attempts to unilaterally cancel or terminate firm contracts or orders in whole or in part, resulting in contract or purchase order breaches and increased commercial litigation costs. Such occurrences could adversely affect our cash flows and results of operations.

If volatile conditions in the global credit markets prevent our customers' access to credit, product order volumes may decrease or customers may default on payments owed to us. Likewise, if our suppliers face challenges obtaining credit, selling their products to customers that require purchasing credit, or otherwise operating their businesses, the supply of materials we purchase from them to manufacture our products may be interrupted. Any of these conditions or events could result in reductions in our revenues, increased price competition, or increased operating costs, which could adversely affect our business, results of operations, and financial condition.

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Our access to capital may be limited or unavailable due to deterioration of conditions in the global capital markets, weakening of macroeconomic conditions, and negative changes in our credit ratings.

In general, the Company and its leasing subsidiaries rely in large part upon banks and capital markets to fund their operations and contractual commitments and refinance existing debt. These markets can experience high levels of volatility and access to capital can be constrained for extended periods of time. In addition to conditions in the capital markets, a number of other factors could cause the Company to incur increased borrowing costs and have greater difficulty accessing public and private markets for both secured and unsecured debt. These factors include the Company's financial performance and its credit ratings and rating outlook as determined primarily by rating agencies such as Standard & Poor's Financial Services LLC, Moody's Investors Service, Inc., and Fitch Ratings, Inc. If the Company is unable to secure financing on acceptable terms, the Company's other sources of funds, including available cash, bank facilities, and cash flow from operations, may not be adequate to fund its operations and contractual commitments and refinance existing debt.

We are subject to increased costs due to fluctuations in interest rates and foreign currency exchange rates.

We are exposed to risks associated with fluctuations in interest rates and changes in foreign currency exchange rates, particularly the Mexican peso. Under varying circumstances, we may seek to minimize these risks through the use of interest rate hedges and similar financial instruments and other activities, although these measures, if and when implemented, may not be effective. Any material and untimely changes in interest rates or exchange rates could result in significant losses to us.

Risks Related to Laws and Regulations

Violations of or changes in the regulatory requirements applicable to the industries in which we operate may increase our operating costs, reduce the demand for our products and services, or negatively affect our ability to implement our strategic and operational plans.

Our leasing and railcar manufacturing businesses are regulated by multiple governmental regulatory agencies, such as the USEPA; TC; the USDOT and the administrative agencies it oversees, including the FRA, the PHMSA, and the Research and Special Programs Administration; Mexico's Agencia Reguladora del Transporte Ferroviario; Mexico's Secretaria de Comunicaciones y Transportes; and industry authorities such as the AAR. All such agencies and authorities promulgate rules, regulations, specifications, or operating standards affecting railcar design, configuration, and mechanics; maintenance; and rail-related safety standards for railroad equipment, tracks, and operations, including the packaging and transportation of hazardous, flammable, explosive, and toxic materials.

Our operations are also subject to regulation of health and safety matters by the U.S. OSHA and Mexico's STPS. We believe we employ appropriate precautions to protect our employees and others from workplace injuries and harmful exposure to materials handled and managed at our facilities.

Future regulatory changes or the determination that our products or processes are not in compliance with applicable requirements, rules, regulations, specifications, standards, or product testing criteria might result in additional operating expenses, administrative fines or penalties, product recalls, or loss of business that could have a material adverse effect on our financial condition and operations.

U.S. government actions relative to the federal budget, taxation policies, government expenditures, U.S. borrowing/debt ceiling limits, and trade policies, including both domestic and foreign tariffs, could adversely affect our business and operating results.

Periods of impasse, deadlock, and last-minute accords may continue to permeate many aspects of U.S. governance, including federal government budgeting and spending, taxation, U.S. deficit spending and debt ceiling adjustments, and international commerce. Such periods could negatively impact U.S. domestic and global financial markets thereby reducing customer demand for our products and services and potentially resulting in reductions in our revenues, increased price competition, or increased operating costs, any of which could adversely affect our business, results of operations, and financial condition. We produce many of our products at our manufacturing facilities in Mexico. Our businesses benefit from free trade agreements such as the U.S.-Mexico-Canada Agreement. Any changes in trade or tax policies by the U.S. or foreign governments in jurisdictions in which we do business, as well as any embargoes, quotas, tariffs, or retaliatory tariffs imposed on our products and services, could adversely and significantly affect our financial condition and results of operations, our costs, the demand for our products and services, and the broader North American industrial economy and rail market.

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We have potential exposure to environmental liabilities that may increase costs and lower profitability.

We are subject to comprehensive federal, state, local, and foreign environmental laws and regulations relating to: (i) the release or discharge of materials into the environment at our facilities or with respect to our products while in operation; (ii) the management, use, processing, handling, storage, transport, and disposal of hazardous and non-hazardous waste, substances, and materials; and (iii) other activities relating to the protection of human health and the environment. Such laws and regulations expose us to liability for our own acts and in certain instances potentially expose us to liability for the acts of others. These laws and regulations also may impose liability on us currently under circumstances where at the time of the action taken, our acts or those of others complied with then-applicable laws and regulations. In addition, such laws may require significant expenditures to achieve compliance and are frequently modified or revised to impose new obligations. Civil and criminal fines and penalties may be imposed for non-compliance with these environmental laws and regulations. Our operations involving hazardous materials also raise potential risks of liability under common law.

Environmental operating permits are, or may be, required for our operations under these laws and regulations. These operating permits are subject to modification, renewal, and revocation. Although we regularly monitor and review our operations, procedures, and policies for compliance with our operating permits and related laws and regulations, the risk of environmental liability is inherent in the operation of our businesses, as it is with other companies operating under environmental permits.

However, future events, such as changes in, or modified interpretations of, existing environmental laws and regulations or enforcement policies, or further investigation or evaluation of the potential health hazards associated with the manufacture of our products and related business activities and properties, may give rise to additional compliance and other costs that could have a material adverse effect on our financial condition and operations.

In addition to environmental laws, the transportation of commodities by railcar raises potential risks in the event of an accident that results in the release of an environmentally sensitive substance. Generally, liability under existing laws for a derailment or other accident depends upon causation analysis and the acts, errors, or omissions, if any, of a party involved in the transportation activity, including, but not limited to, the railroad, the shipper, the buyer and seller of the substances being transported, or the manufacturer of the railcar, or its components. Additionally, the severity of injury or property damage arising from an incident may influence the causation responsibility analysis, exposing the Company to potentially greater liability. Under certain circumstances, strict liability concepts may apply and if we are found liable in any such incident, it could have a material adverse effect on our financial condition, business, and operations. See Note 15 of the Consolidated Financial Statements for further information on our potential exposure to environmental liabilities.

Changes in accounting standards or inaccurate estimates or assumptions in the application of accounting policies could adversely affect our financial results .

Our accounting policies and methods are fundamental to how we record and report our financial condition and results of operations. Some of these policies require the use of estimates and assumptions that may affect the reported value of our assets or liabilities and financial results and are critical because they require management to make difficult, subjective, and complex judgments about matters that are inherently uncertain. Accounting standard setters and those who interpret the accounting standards (such as the Financial Accounting Standards Board, the SEC, and our independent registered public accounting firm) may amend or even reverse their previous interpretations or positions on how these standards should be applied. These changes can be difficult to predict or implement, and can materially impact how we record and report our financial condition and results of operations. In some cases, we could be required to apply a new or revised standard retroactively, resulting in the restatement of prior period financial statements. For a further discussion of some of our critical accounting policies and standards and recent accounting changes, see Critical Accounting Policies and Estimates in Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 1 of the Consolidated Financial Statements.

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Risks Related to our Common Stock

The price for our common stock is subject to volatility, which may result in losses to our stockholders.

Stock price volatility affects the price at which our common stock can be sold and could subject our stockholders to losses. The trading price of our common stock could fluctuate widely in response to, among other things, the risk factors described in this report and other factors including:

• actual or anticipated variations in quarterly and annual results of operations;

• changes in recommendations by securities analysts;

• changes in composition and perception of the investors who own our stock and other securities;

• changes in ratings from national rating agencies on publicly or privately owned debt securities;

• operating and stock price performance of other companies that investors deem comparable to us;

• news reports relating to trends, concerns, and other issues in the industries in which we operate;

• actual or expected economic conditions that are perceived to affect our Company;

• perceptions in the marketplace regarding us and/or our competitors;

• fluctuations in prices of commodities that our customers produce and transport;

• significant acquisitions or business combinations, strategic partnerships, joint ventures, or capital commitments by or involving us or our competitors;

• changes in government regulations and policies and interpretations of those regulations and policies;

• stockholder activism; and

• dissemination of false or misleading statements through the use of social and other media to discredit our Company, disparage our products, or to harm our reputation.

Additionally, in the past, following periods of volatility in the market price of a public company’s securities, securities class action litigation has often been initiated. Any such litigation could result in substantial costs and a diversion of management’s attention and resources. We cannot predict the outcome of any such litigation. The initiation of any such litigation or an unfavorable result could have a material adverse effect on our financial condition and results of operations.

There can be no assurance that we will continue to pay dividends at current levels or will repurchase shares of our common stock.

Although we have paid regular cash dividends for many years and conduct periodic share repurchase programs, the timing, amount, and payment of future dividends to stockholders and repurchases of our common stock fall within the discretion of our Board of Directors (the "Board"). The Board’s decisions regarding the payment of dividends and repurchase of shares depend on many factors such as our financial condition, earnings, capital requirements, debt service obligations, legal requirements, regulatory constraints, and other factors that our Board may deem relevant. We cannot guarantee that we will continue to pay dividends, the amount of any such dividends, or that we will continue to repurchase shares in the future. Any payment of dividends or repurchases of shares could vary from historical practices and our stated expectations.

A small number of stockholders could significantly influence our business.

A small number of stockholders collectively control a significant amount of our outstanding common stock. Accordingly, a small number of stockholders could affect matters that require stockholder approval, such as the election of directors and the approval of significant business transactions.

General Risk Factors

The use of social and other digital media (including websites, blogs and newsletters) to disseminate false, misleading and/or unreliable or inaccurate data and information about our Company could create unwarranted volatility in our stock price and losses to our stockholders and could adversely affect our reputation, products, business, and operating results.

The use of social and other digital media to publish inaccurate, offensive, and disparaging data and information coupled with the frequent use of strong language and hostile expression, may influence the public’s inability to distinguish between what is true and what is false and could obstruct an effective and timely response to correct inaccuracies or falsifications. Such use of social and other digital media could result in unexpected and unsubstantiated claims concerning the Company in general or our products, our leadership or our reputation among customers and the public at large, thereby making it more difficult for us to compete effectively, and potentially having a material adverse effect on our business, operations, or financial condition.

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From time to time we may take tax positions that the Internal Revenue Service or other taxing jurisdictions may contest.

We have in the past and may in the future take tax positions that the Internal Revenue Service (“IRS”) or other taxing jurisdictions may challenge. We are required to disclose to the IRS as part of our tax returns particular tax positions in which we have a reasonable basis for the position but not a "more likely than not" chance of prevailing. If the IRS successfully contests a tax position that we take, we may be required to pay additional taxes or fines which may not have been previously accrued that may adversely affect our results of operations and financial position.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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 our Consolidated Financial Statements and related Notes in Item 8, Financial Statements and Supplementary Data, of this 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.

Company Overview

Trinity Industries, Inc. and its consolidated subsidiaries own businesses that are leading providers of railcar products and services in North America. We market our railcar products and services under the trade name TrinityRail ® . Our platform also includes the brands of RSI Logistics, a provider of software and logistics solutions, and Holden America, a supplier of railcar parts and components. Our platform provides railcar leasing and management services; railcar manufacturing; railcar maintenance and modifications; and other railcar logistics products and services.

We report our operating results in two reportable segments: (1) the Railcar Leasing and Services Group (the "Leasing Group"), which owns and operates a fleet of railcars and provides third-party fleet leasing, management, and administrative services; railcar maintenance and modification services; and other railcar logistics products and services; and (2) the Rail Products Group, which manufactures and sells railcars and related parts and components.

In December 2025, we completed a railcar partnership restructuring involving our partially-owned leasing subsidiaries, TRIP Holdings and RIV 2013. See "Executive Summary – Capital Structure Updates" below for further information regarding this transaction.

Executive Summary

Cyclical, Seasonal and Other Trends Impacting Our Business

General Business Trends

Demand for many of our railcar products and services is correlated to changes in North American industrial production and international trade. We continue to actively monitor evolving tariff and trade developments and the potential impacts to our business. Uncertainty in these areas and in the macroeconomic environment, including the administration of trade policy in the U.S. and Mexico, is negatively impacting and could continue to negatively impact our results of operations and demand for new railcars. We remain focused on mitigating impacts to our business resulting from these evolving developments.

The industries in which our customers operate are cyclical in nature. Although lease rates and lease fleet utilization remain strong, 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 certain commodity prices, 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 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 customers, which could negatively impact our revenues, credit loss expense, and operating profits. We continue to believe that our rail platform is able to respond to cyclical changes in demand and perform throughout the railcar cycle.

We believe that our leasing business provides a natural hedge against inflation and changes in interest rates; however, like many leasing companies, the debt component of our capital structure exposes us to changes in the interest rate environment. A significant portion of the earnings from our leasing business is derived from multi-year full-service leases. We consider changes in interest rates, inflation, and other relevant factors in the pricing of new and renewing leases; however, only a portion of our leased railcar portfolio is repriced each year. Consequently, our earnings could be impacted by timing differences between when interest rate changes and changes in the inflationary environment occur and when we are able to factor these changes into our lease rates.

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

Input Costs

We periodically experience volatility in the costs of steel, components, and certain other inputs that represent a substantial portion 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 the volatility of certain input costs on our operating profit. Further, the cost and volume of lease fleet maintenance and compliance events remain elevated, which we expect to continue in the near term. We continually assess the impact of input costs on our operational efficiency, margins, and overall profitability.

Transportation Network Disruptions

We have, from time to time, been impacted by disruptions in the rail transportation network, including rail traffic closures or congestion in Eagle Pass, Texas, the primary border crossing used for railcar deliveries from our manufacturing facilities in Mexico. We continuously monitor rail traffic at the U.S.-Mexico border, and we take appropriate steps within our control to mitigate the potential impacts on our delivery timelines. However, any future challenges related to transportation network disruptions could negatively impact our operations or our ability to timely deliver railcars to our customers.

Financial and Operational Highlights

• Our revenues for the year ended December 31, 2025 were $2,156.9 million, representing a decrease of 30.0%, compared to the year ended December 31, 2024. Our operating profit for the year ended December 31, 2025 was $649.2 million, representing an increase of 32.1%, compared to $491.5 million for the year ended December 31, 2024.

• The Leasing Group's lease fleet of 101,485 company-owned railcars was 97.1% utilized as of December 31, 2025, compared to a lease fleet utilization of 97.0% on 109,635 company-owned railcars as of December 31, 2024. Our company-owned lease fleet includes wholly-owned railcars, partially-owned railcars, and railcars under leased-in arrangements.

• For the year ended December 31, 2025, we made a net fleet investment of approximately $350.0 million, which primarily includes new railcar additions, railcar modifications, and other betterments, net of deferred profit, as well as secondary market purchases; and is net of proceeds from lease portfolio sales.

• The total value of the railcar backlog at December 31, 2025 was $1.7 billion, compared to $2.1 billion at December 31, 2024. The Rail Products Group received orders for 5,155 railcars and delivered 9,500 railcars in 2025, in comparison to orders for 7,685 railcars and deliveries of 17,570 railcars in 2024.

◦ Deliveries in 2024 included approximately 1,300 railcar shipments that were delayed at the end of 2023 due to the U.S.-Mexico border closure and delivered during the first half of 2024.

See "Consolidated Results of Operations" and "Segment Discussion" below for additional information regarding our operating results for the year ended December 31, 2025. See Part II, Item 7 of our 2024 Annual Report on Form 10-K for a discussion of our results of operations and liquidity and capital resources as of and for the year ended December 31, 2024, including a comparison to the year ended December 31, 2023.

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Long-Term Enterprise Key Performance Indicators

Our key performance indicators for long-term performance are net fleet investment, cash flow from operations with net gains on lease portfolio sales*, and Adjusted Return on Equity* ("Adjusted ROE"). We believe when evaluated over time, these indicators collectively drive long-term sustainable value creation and measure the effectiveness of our value proposition for stockholders.

* Non-GAAP financial measure. See the Non-GAAP Financial Measures section within this Form 10-K for a reconciliation to the most directly comparable GAAP measure and why management believes this measure is useful to management and investors.

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Capital Structure Updates

TRL-2023 Term Loan – In April 2025, Trinity Rail Leasing 2023 LLC (“TRL-2023”), a limited purpose, indirect wholly-owned subsidiary of the Company owned through Trinity Industries Leasing Company (“TILC”), entered into an amended and restated term loan agreement to (i) increase the aggregate amount of the term loan from $320.7 million as of March 31, 2025 to $1.05 billion; (ii) extend the maturity date to April 30, 2030; and (iii) reduce the applicable interest rate to daily simple SOFR plus a facility margin of 1.50%. Net proceeds received from the transaction were used to redeem in full the outstanding borrowings of approximately $616.0 million under Trinity Rail Leasing 2017, LLC (“TRL-2017”); to repay approximately $75.8 million of borrowings under TILC's warehouse loan facility; and for general corporate purposes. The interest rate for the TRL-2017 promissory notes was at one-month term SOFR plus (1) a benchmark adjustment of 11 basis points and (2) a facility margin of 1.50%.

TRL-2025 Secured Railcar Equipment Notes – In October 2025, Trinity Rail Leasing 2025 LLC ("TRL-2025"), a limited purpose, indirect wholly-owned subsidiary of the Company owned through TILC, issued an aggregate principal amount of $535.2 million of its Series 2025-1 Green Secured Railcar Equipment Notes (the "TRL-2025 Notes"). The TRL-2025 Notes bear interest at an all-in interest rate of 5.11%, are payable monthly, and have a stated final maturity date of October 19, 2055. TRL-2025 purchased a portfolio of railcars directly from TILC and from TILC's affiliates, Trinity Rail Leasing Warehouse Trust, and Trinity Rail Leasing 2010 LLC ("TRL-2010"). Net proceeds received from the railcars acquired in connection with the issuance of the TRL-2025 Notes were used to repay approximately $259.0 million of borrowings under TILC's warehouse loan facility; to redeem in full the outstanding debt of approximately $133.8 million under TRL-2010; and for general corporate purposes. The all-in interest rate for the TRL-2010 secured railcar equipment notes ("TRL-2010 Notes") was 5.19% per annum.

See Note 9 of the Consolidated Financial Statements for additional information regarding these debt transactions.

Railcar Partnership Restructuring – In December 2025, TILC completed a Sale and Exchange Agreement (the “Exchange Agreement”) with Napier Park Railcar Lease Fund LLC (“Napier Park”), a subsidiary of Napier Park Global Capital, one of our railcar investment partners since 2013 and a leading alternative credit platform. Pursuant to the Exchange Agreement, TILC exchanged a 42.36% membership interest in Triumph Rail Holdings LLC (“Triumph”) for Napier Park’s 69.45% membership interest in RIV 2013. As a result of this exchange, TILC now owns 100% of the membership interests of RIV 2013 and Napier Park now owns 99.8% of the membership interests of Triumph, with TILC retaining a 0.2% membership interest in Triumph. Previously, Triumph was a wholly-owned subsidiary of TRIP Holdings. As a result of the divestiture of Triumph, the Company recognized a non-cash pre-tax gain of $194.2 million during the year ended December 31, 2025, and Triumph and its related debt are no longer included in our Consolidated Financial Statements. See Note 6 and Note 9 of the Consolidated Financial Statements for additional information regarding these transactions.

Litigation Updates

See Note 15 of the Consolidated Financial Statements for an update on the status of certain litigation.

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Consolidated Results of Operations

The following table summarizes our consolidated results of continuing operations for the years ended December 31, 2025 and 2024:

Year Ended December 31,

(in millions)

Revenues

Cost of revenues

Selling, engineering, and administrative expenses

Gains on dispositions of property and other divestitures (1)

Restructuring activities, net

Total operating profit

Interest expense, net

Other, net

Income from continuing operations before income taxes

Provision (benefit) for income taxes

Income from continuing operations

(1) Includes a $194.2 million gain on the divestiture of Triumph for the year ended December 31, 2025. See Note 6 of the Consolidated Financial Statements for additional information.

Revenues

The tables below present revenues by segment for the years ended December 31, 2025 and 2024:

Year Ended December 31, 2025

Revenues

Percent

External

Intersegment

Total

Change

(in millions)

Railcar Leasing and Services Group

Rail Products Group

Segment Totals

Eliminations

Consolidated Total

Year Ended December 31, 2024

Revenues

External

Intersegment

Total

(in millions)

Railcar Leasing and Services Group

Rail Products Group

Segment Totals

Eliminations

Consolidated Total

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Operating Costs

Operating costs are comprised of cost of revenues; selling, engineering, and administrative costs; gains or losses on property disposals and other divestitures; and restructuring activities. Operating costs by segment for the years ended December 31, 2025 and 2024 were as follows:

Year Ended December 31,

(in millions)

Railcar Leasing and Services Group (1)

Rail Products Group

Segment Totals

Corporate and other

Restructuring activities, net

Eliminations

Consolidated Total

(1) Includes a $194.2 million gain on the divestiture of Triumph for the year ended December 31, 2025, as well as gains on lease portfolio sales of $91.4 million and $57.3 million for the years ended December 31, 2025 and 2024, respectively.

Operating Profit

Operating profit by segment for the years ended December 31, 2025 and 2024 was as follows:

Year Ended December 31,

(in millions)

Railcar Leasing and Services Group

Rail Products Group

Segment Totals

Corporate and other

Restructuring activities, net

Eliminations

Consolidated Total

Discussion of Consolidated Results

Revenues – Our revenues for the year ended December 31, 2025 were $2,156.9 million, representing a decrease of $922.3 million, or 30.0%, over the prior year, primarily due to lower external deliveries in the Rail Products Group.

Cost of revenues – Our cost of revenues for the year ended December 31, 2025 was $1,584.2 million, representing a decrease of $826.8 million, or 34.3%, over the prior year, primarily due to lower external deliveries in the Rail Products Group.

Selling, engineering, and administrative expenses – Selling, engineering, and administrative expenses for the year ended December 31, 2025 were $214.3 million, representing a decrease of $21.4 million, or 9.1%, over the prior year. The decrease was primarily due to lower employee-related and consulting costs as a result of cost reduction efforts taken by management, partially offset by incentive compensation expense related to the gain on the divestiture of Triumph and credit loss expense associated with an aged customer receivable.

Gains on dispositions of property and other divestitures – Gains on dispositions of property and other divestitures increased by $227.5 million for the year ended December 31, 2025, when compared to the prior year primarily due to the $194.2 million gain on the divestiture of Triumph, as well as higher gains on lease portfolio sales.

Operating profit – Operating profit for the year ended December 31, 2025 totaled $649.2 million, representing an increase of $157.7 million, or 32.1%, from the prior year. The increase was primarily due to the $194.2 million gain on the divestiture of Triumph, higher gains on lease portfolio sales, and lower selling, engineering, and administrative expenses, partially offset by lower external deliveries in the Rail Products Group and costs associated with workforce reductions.

For further information regarding the operating results of individual segments, see "Segment Discussion" below.

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Interest expense, net – Interest expense, net for the year ended December 31, 2025 totaled $274.2 million, compared to $273.5 million for the year ended December 31, 2024. Additionally, interest expense, net includes a loss on extinguishment of debt of $1.4 million for the year ended December 31, 2025, compared to $1.5 million for the year ended December 31, 2024.

Income taxes – The effective tax rate from continuing operations for the year ended December 31, 2025 was an expense of 24.2%, which differs from the U.S. statutory rate of 21.0% primarily due to state and foreign income taxes, partially offset by the benefit of tax credits purchased at a discount and the benefit of noncontrolling interest for which we do not provide income taxes. Our effective tax rate from continuing operations for the year ended December 31, 2024 was an expense of 22.7%, which differs from the U.S. statutory rate of 21.0% primarily due to state and foreign income taxes and other discrete items. See Note 10 of the Consolidated Financial Statements for additional information.

Income tax payments, net of refunds, differ from the current provision primarily based on when estimated tax payments were due as compared to when the related income was earned and taxable. Income tax payments, net of refunds, during the years ended December 31, 2025 and 2024 totaled $51.4 million and $54.6 million, respectively.

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Segment Discussion

Railcar Leasing and Services Group

Year Ended December 31,

Percent Change

($ in millions)

Revenues:

Leasing and management

Maintenance services (1)

Digital and logistics services

Total revenues

Cost of revenues (2)

Selling, engineering, and administrative expenses

Gains on dispositions of property and other divestitures:

Lease portfolio sales

Gain on divestiture of partially-owned leasing subsidiary (3)

Other

Total operating profit

Total operating profit margin

Total operating profit margin, excluding lease portfolio sales and gain on divestiture of partially-owned leasing subsidiary

Selected expense information for Company-owned railcars (4) :

Depreciation and amortization expense (5)

Maintenance and compliance expense (6)

Other fleet operating costs (7)

Interest expense (8)

* Not meaningful

(1) Revenues related to services performed by the maintenance services business on Company-owned railcars under full-service lease agreements are eliminated within the Railcar Leasing and Services Group and are excluded from the totals reported on this line.

(2) Includes depreciation and amortization expense, maintenance and compliance expense, and other fleet operating costs related to our lease fleet, as well as operating costs for our maintenance services and digital and logistics services businesses.

(3) See Note 6 of the Consolidated Financial Statements for additional information regarding this transaction.

(4) Includes wholly-owned railcars, partially-owned railcars, and railcars under leased-in arrangements.

(5) Depreciation and amortization expense includes deferred profit related to new railcar additions, sustainable railcar conversions, railcar modifications, and other betterments, resulting in the recognition of depreciation expense based on the original cost of the railcars and services.

(6) Maintenance and compliance expense is reported at cost with respect to the services performed by our maintenance services business to support the railcars in our lease fleet.

(7) Other fleet operating costs include freight, storage, rent, and ad valorem taxes.

(8) Interest expense is not a component of operating profit and includes the effect of hedges.

Information related to lease portfolio sales is as follows:

Year Ended December 31,

($ in millions)

Lease portfolio sales

Operating profit on lease portfolio sales

Operating profit margin on lease portfolio sales

Total revenues for the Railcar Leasing and Services Group increased by 5.5% for the year ended December 31, 2025 when compared to the year ended December 31, 2024. Leasing and management revenues increased by 5.9% for the year ended December 31, 2025 when compared to the prior year primarily due to higher lease rates and net additions to the lease fleet.

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Our maintenance services business is primarily dedicated to servicing our lease fleet. Revenues related to maintenance services performed on Company-owned railcars under full-service lease agreements are eliminated within the Railcar Leasing and Services Group. Services that are not included in the full-service lease agreement, such as repairs of railcar damage or other customer-specific requirements, as well as maintenance and repair activities on railcars owned by third parties, including our investor-owned fleet, are reflected in the maintenance services revenues line above and are not eliminated in consolidation. Revenues in our maintenance services business increased by 5.7% for the year ended December 31, 2025 when compared to the prior year as a result of favorable pricing, partially offset by a lower volume of external repairs.

Cost of revenues for the Railcar Leasing and Services Group increased by 8.5% for the year ended December 31, 2025 when compared to the year ended December 31, 2024 primarily due to higher maintenance and compliance costs for the lease fleet, increased deprecation, and operational inefficiencies in the maintenance services business.

Leasing Group operating profit for the year ended December 31, 2025 increased by 52.7% primarily due to the gain on the divestiture of Triumph, higher gains on lease portfolio sales, and higher lease rates, partially offset by higher maintenance and compliance costs for the lease fleet.

Operating profit for the year ended December 31, 2024 was favorably impacted by gains of $2.7 million related to insurance recoveries in excess of net book value for assets damaged by a fire at the Company’s facility in Cartersville, Georgia. See Note 15 of the Consolidated Financial Statements for more information.

The Leasing Group generally uses its non-recourse warehouse loan facility or cash to provide initial funding for a portion of the purchase price of the railcars. After initial funding, the Leasing Group may obtain long-term financing for the railcars in the lease fleet through non-recourse asset-backed securities; long-term recourse debt; long-term non-recourse promissory notes and term loans; or third-party equity.

Information regarding the Leasing Group’s lease fleet is as follows:

December 31, 2025

December 31, 2024

Number of railcars:

Wholly-owned (1)(2)

Partially-owned (2)(3)

Investor-owned (3)

Company-owned railcars (4) :

Average age in years

Average remaining lease term in years

Fleet utilization

(1) Includes 2,230 railcars and 2,240 railcars under leased-in arrangements as of December 31, 2025 and 2024, respectively.

(2) Approximately 6,235 railcars were transferred from partially-owned to wholly-owned related to the acquisition of the noncontrolling interest in RIV 2013 as of December 31, 2025.

(3) Approximately 10,850 railcars were transferred from partially-owned to investor-owned related to the divestiture of Triumph as of December 31, 2025.

(4) Includes wholly-owned railcars, partially-owned railcars, and railcars under leased-in arrangements.

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Rail Products Group

Year Ended December 31,

Percent Change

($ in millions)

Revenues:

Rail products (1)

Parts & components

Total revenues

Operating costs:

Cost of revenues

Selling, engineering, and administrative expenses

Gains on dispositions of property

Operating profit

Operating profit margin

* Not meaningful

(1) Includes sustainable railcar conversion revenues of $2.1 million, representing 25 railcars, for the year ended December 31, 2025. Includes sustainable railcar conversion revenues of $82.3 million, representing 1,095 railcars, for the year ended December 31, 2024.

Revenues and cost of revenues for the Rail Products Group decreased for the year ended December 31, 2025 by 41.6% and 40.7%, respectively, when compared to the prior year primarily due to lower deliveries.

Operating profit for the Rail Products Group decreased for the year ended December 31, 2025 by 60.8% when compared to the prior year primarily due to lower deliveries, reduced overhead absorption due to lower production volumes, costs associated with workforce reductions, and higher selling, engineering, and administrative expenses due to credit loss expense associated with an aged customer receivable, partially offset by a higher mix of, and production efficiencies associated with, high-margin specialty railcars.

Information related to our Rail Products Group backlog of new railcars is as follows. In addition to the amounts below, as of December 31, 2025, our backlog related to sustainable railcar conversions totaled $35.2 million, representing 270 railcars.

December 31,

Percent Change

(in millions)

External customers

Leasing Group

Total

Year Ended December 31,

Percent Change

Beginning balance

Orders received

Deliveries (1)

Ending balance

Average selling price in ending backlog

(1) Deliveries for the year ended December 31, 2024 included approximately 1,300 railcar shipments that were delayed at the end of 2023 due to the U.S.-Mexico border closure and delivered during the first half of 2024.

Total backlog dollars for the year ended December 31, 2025 decreased by 22.6% when compared to the prior year. We expect to deliver approximately 49% of our railcar backlog value during 2026, with the remainder to be delivered through 2028. The orders in our backlog from the Leasing Group are fully supported by lease commitments with external customers. The final amount of backlog attributable to the Leasing Group may vary by the time of delivery as customers may elect to modify their procurement decision.

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Transactions between the Rail Products Group and the Leasing Group are as follows:

Year Ended December 31,

($ in millions)

Revenues:

New railcars

Sustainable railcar conversions

Parts & components

Deferred profit

Number of new railcars (in units)

Number of sustainable railcar conversions (in units)

Corporate and other

Year Ended December 31,

Percent Change

(in millions)

Operating costs:

Selling, engineering, and administrative expenses

Gains on dispositions of property

Operating loss

* Not meaningful

Selling, engineering, and administrative expenses for the year ended December 31, 2025 decreased by 9.5% when compared to the prior year primarily from lower employee-related costs and lower consulting costs, partially offset by incentive compensation expense related to the gain on the divestiture of Triumph and costs associated with workforce reductions. Total operating costs during the year ended December 31, 2025 were favorably impacted by gains associated with the disposition of non-operating facilities. As we continue to streamline our operational footprint, we may have additional gains or losses on the disposition of other non-operating facilities.

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Liquidity and Capital Resources

Overview

We expect to finance future operating requirements with cash, cash equivalents, and short-term marketable securities; cash flows from operations; and short-term debt, long-term debt, and equity. Debt instruments that we have utilized include the TILC warehouse loan facility, senior notes, convertible subordinated notes, non-recourse asset-backed securities, non-recourse promissory notes and term loans, and our revolving credit facility.

As of December 31, 2025, we have total committed liquidity of $1.1 billion. Our total available liquidity includes: $201.3 million of unrestricted cash and cash equivalents; $592.7 million unused and available under our revolving credit facility; and $321.5 million unused and available under the TILC warehouse loan facility based on the amount of warehouse-eligible, unpledged equipment. We believe we have access to adequate capital resources to fund operating requirements and are an active participant in the capital markets.

On July 4, 2025, the One Big Beautiful Bill Act (the "Act") was enacted. The Act includes multiple business tax provisions, including the reinstatement of 100% bonus depreciation and a change in the calculation of deductible interest expense. We expect a positive impact on our operating cash flows as a result of the expected refund of estimated tax payments previously made, as well as lower cash tax outlays in both the current and future years.

Our material cash requirements from known contractual or other obligations primarily include principal and interest payments on debt, payments on operating leases, and purchase obligations as part of the normal course of business. See Note 9 of the Consolidated Financial Statements for information regarding scheduled maturities of our debt. We intend to use cash from operations and our available liquidity to repay or refinance our secured railcar equipment notes coming due in the next twelve months. Interest payable associated with our debt due in the next twelve months is approximately $244.8 million, with $572.5 million due thereafter. See Note 1 of the Consolidated Financial Statements for further information on operating leases. Other contractual obligations are enforceable and legally binding and primarily consist of raw materials and components, equipment, and third-party services for which purchase orders have been issued. These contractual obligations due in the next twelve months are approximately $400.3 million, with $19.0 million due thereafter.

Liquidity Highlights

TRL-2023 Term Loan – In April 2025, TRL-2023 entered into an amended and restated term loan agreement to (i) increase the aggregate amount of the term loan from $320.7 million as of March 31, 2025 to $1.05 billion; (ii) extend the maturity date to April 30, 2030; and (iii) reduce the applicable interest rate to daily simple SOFR plus a facility margin of 1.50%. Net proceeds received from the transaction were used to redeem the outstanding borrowings of TRL-2017, to repay borrowings under TILC's warehouse loan facility, and for general corporate purposes.

Redemption of TRL-2017 Promissory Notes – In April 2025, we redeemed in full the TRL-2017 promissory notes, of which $616.0 million was outstanding at the redemption date. The interest rate for the TRL-2017 promissory notes was at one-month term SOFR plus (1) a benchmark adjustment of 11 basis points and (2) a facility margin of 1.50%.

TRL-2025 Secured Railcar Equipment Notes – In October 2025, TRL-2025 issued an aggregate principal amount of $535.2 million of its Series 2025-1 Green Secured Railcar Equipment Notes. These notes bear interest at an all-in interest rate of 5.11% and have a stated final maturity date of 2055. Net proceeds received from the transaction were used to repay borrowings under TILC's warehouse loan facility, to redeem the outstanding debt of TRL-2010, and for general corporate purposes.

Redemption of TRL-2010 Secured Railcar Equipment Notes – In October 2025, we redeemed in full the TRL-2010 secured railcar equipment notes, of which $133.8 million was outstanding at the redemption date. The all-in interest rate for the TRL-2010 Notes was 5.19% per annum.

See Note 9 of the Consolidated Financial Statements for additional information regarding these debt transactions.

Dividend Payments – In December 2025, our Board of Directors declared an increase to our quarterly dividend from $0.30 per share to $0.31 per share.

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Cash Flows

The following table summarizes our cash flows from operating, investing, and financing activities for the years ended December 31, 2025 and 2024:

Year Ended December 31,

(in millions)

Net cash flows from continuing operations:

Operating activities

Investing activities

Financing activities

Net cash flows from discontinued operations

Net increase (decrease) in cash, cash equivalents, and restricted cash

Operating Activities . Net cash provided by operating activities from continuing operations for the year ended December 31, 2025 was $366.9 million compared to $588.1 million net cash provided by operating activities from continuing operations for the year ended December 31, 2024. The changes in our operating assets and liabilities are as follows:

Year Ended December 31,

(in millions)

(Increase) decrease in receivables, inventories, and other assets

(Increase) decrease in income tax receivable

Increase (decrease) in accounts payable, accrued liabilities, and other liabilities

Changes in operating assets and liabilities

The changes in our operating assets and liabilities resulted in a net use of $46.2 million for the year ended December 31, 2025, as compared to a net source of $168.1 million for the year ended December 31, 2024. The changes in operating assets and liabilities were impacted primarily by higher railcar deliveries in the prior year and the purchase of tax credits for $38.4 million in the current year.

Investing Activities. Net cash used in investing activities for the year ended December 31, 2025 was $385.6 million compared to $214.6 million of net cash used in investing activities for the year ended December 31, 2024. Significant investing activities are as follows:

• We had a net fleet investment of $350.0 million during the year ended December 31, 2025, compared to $181.2 million during the year ended December 31, 2024. Our investment in the lease fleet primarily includes new railcar additions, sustainable railcar conversions, railcar modifications, and other betterments, net of deferred profit, as well as secondary market purchases; and is net of proceeds from lease portfolio sales.

Financing Activities. Net cash used in financing activities during the year ended December 31, 2025 was $24.9 million compared to $219.9 million of net cash used in financing activities for the same period in 2024. Significant financing activities are as follows:

• During the year ended December 31, 2025, we had total borrowings of $1,943.7 million and total repayments of $1,763.7 million, for net proceeds of $180.0 million, to support our investment in the lease fleet and for general corporate purposes. During the year ended December 31, 2024, we had total repayments of $2,050.5 million and total borrowings of $1,970.4 million, for net repayments of $80.1 million, primarily from the redemption of corporate debt, partially offset by debt proceeds to support our investment in the lease fleet and for general corporate purposes.

• We paid $98.7 million and $93.2 million in dividends to our common stockholders during the years ended December 31, 2025 and 2024, respectively.

• During the year ended December 31, 2025, we repurchased common stock totaling $71.3 million, resulting in a remaining authorization to repurchase up to $157.7 million of our common stock under the share repurchase program as of December 31, 2025. During the year ended December 31, 2024, we repurchased common stock totaling $20.7 million under the share repurchase program.

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Current Debt Obligations

The revolving credit facility contains several financial covenants that require the maintenance of ratios related to minimum interest coverage for the leasing and manufacturing operations and maximum leverage. A summary of our financial covenants is detailed below:

Ratio

Covenant

Actual at

December 31, 2025

Maximum leverage (1)

No greater than 3.75 to 1.00

Minimum interest coverage (2)

No less than 2.25 to 1.00

(1) Defined as the ratio of consolidated total indebtedness to consolidated earnings before interest, taxes, depreciation and amortization ("EBITDA") for the Borrower and its restricted subsidiaries for the period of four consecutive quarters ending with December 31, 2025.

(2) Defined as the ratio of the difference of (A) consolidated EBITDA less (B) consolidated capital expenditures – operating and administrative to consolidated interest expense to the extent paid in cash, in each case for the Borrower and its restricted subsidiaries for the period of four consecutive quarters ending with December 31, 2025.

As of December 31, 2025, we were in compliance with all such financial covenants. Please refer to Note 9 of the Consolidated Financial Statements for a description of our current debt obligations.

Capital Expenditures

Capital expenditures for 2025 were $794.9 million with $749.3 million utilized for net lease fleet additions, which includes new railcar additions, railcar modifications, and other betterments, net of deferred profit, as well as secondary market purchases. Proceeds from lease portfolio sales totaled $399.3 million, resulting in a net fleet investment of $350.0 million.

For the full year 2026, we anticipate a net fleet investment of between $450 million and $550 million. Capital expenditures related to operating and administrative activities, including supporting automation, technology, and modernization of our facilities and processes, are projected to range between $55 million and $65 million for the full year 2026.

Equity Investments

See Note 6 of the Consolidated Financial Statements for information about our investments in partially-owned subsidiaries.

Off Balance Sheet Arrangements

As of December 31, 2025, we had outstanding letters of credit issued under our revolving credit facility in an aggregate amount of $7.3 million, which support performance bonds related to certain railcar orders. See Note 9 of the Consolidated Financial Statements for further information about our corporate revolving credit facility. Additionally, we had a letter of credit issued outside our revolving credit facility for $8.5 million to satisfy a liquidity reserve requirement associated with our TILC warehouse loan facility, which renews by its terms each year.

Employee Retirement Plans

We sponsor a 401(k) plan that covers substantially all eligible domestic employees, as well as a defined benefit plan that is frozen to new participants. See Note 11 of the Consolidated Financial Statements for further information.

Stock-Based Compensation

We have a stock-based compensation plan covering our employees and our Board of Directors. See Note 13 of the Consolidated Financial Statements for further information.

Derivative Instruments

We use derivative instruments to mitigate interest rate risk, including risks associated with the impact of changes in interest rates in anticipation of future debt issuances and to offset interest rate variability of certain floating rate debt issuances outstanding. We also use derivative instruments to mitigate the impact of changes in foreign currency exchange rates. Derivative instruments are accounted for in accordance with applicable accounting standards. See Note 4 of the Consolidated Financial Statements for discussion of how we utilize our derivative instruments.

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Critical Accounting Policies and Estimates

Management's Discussion and Analysis of Financial Condition and Results of Operations discusses our Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of these Consolidated Financial Statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies, among others, affect our more significant judgments and estimates used in the preparation of our Consolidated Financial Statements.

Deferred Income Taxes

Description of Estimate

We account for income taxes under the asset and liability method prescribed by Accounting Standards Codification ("ASC") 740, Income Taxes . Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amount of existing assets and liabilities and their respective tax bases and other tax attributes using currently enacted laws and tax rates for the appropriate tax jurisdictions. The effect of a change in enacted laws or tax rates on deferred tax assets and liabilities is recognized in the provision for income taxes in the period that includes the enactment date. Our net deferred tax liabilities totaled $1,127.4 million as of December 31, 2025, which includes valuation allowances of $24.3 million.

For further information regarding income taxes, see Note 10 of the Consolidated Financial Statements.

Judgment and/or Uncertainty

Management is required to estimate the timing of the recognition of deferred tax assets and liabilities, make assumptions about the future deductibility of deferred tax assets and assess deferred tax liabilities based on enacted laws and tax rates for the appropriate tax jurisdictions to determine the amount of such deferred tax assets and liabilities. We assess whether a valuation allowance should be established against deferred tax assets based on consideration of all available evidence, both positive and negative, using a more likely than not standard. This assessment considers, among other matters: the nature, frequency, and severity of recent losses; a forecast of future profitability; the duration of statutory carryback and carryforward periods; our experience with tax attributes expiring unused; and tax planning alternatives.

Potential Impact if Results Differ

Changes in recognized deferred tax assets and liabilities may occur in certain circumstances, including statutory income tax rate changes, statutory tax law changes, or changes in our structure or tax status.

If such changes take place, there is a risk that our effective tax rate could increase or decrease in any period, impacting our net earnings.

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Long-lived Assets

Description of Estimate

We routinely assess whether impairment indicators are present by monitoring for the existence of events or changes in circumstances that may indicate that the carrying amount of our long-lived assets, including our leased railcar fleet, might not be recoverable. Factors monitored include actual and forecasted industry-wide asset utilization, pricing indicators, asset attrition rates, and other similar metrics specific to the performance of our leased railcar fleet and other long-lived assets. Whenever an indicator of potential impairment is present, we assess recoverability by comparing the carrying value of the long-lived assets to the undiscounted future net cash flows we expect the assets to generate. If the recoverability test indicates that an impairment exists, we would recognize an impairment charge equal to the amount by which the carrying value exceeds the fair value.

As of December 31, 2025, our net property, plant, and equipment totaled $6.6 billion, the net book value of our finite-lived intangible assets totaled $99.2 million, and our right-of-use assets totaled $91.2 million.

Judgment and/or Uncertainty

The estimates and judgments that most significantly affect the fair value calculations in our recoverability test include assumptions regarding revenue and operating profit; the remaining useful life over which an asset is expected to generate cash flows; and expectations regarding lease rates, lease renewals, and lease fleet utilization. The measurement of an impairment loss involves a number of management judgments, including the selection of an appropriate discount rate, consideration of market quotes for comparable assets as available, and estimates regarding final disposition proceeds.

Potential Impact if Results Differ

If actual results are not consistent with management's estimates and assumptions used to calculate estimated future cash flows, we could be exposed to impairment losses that may be material. We believe that the assumptions used in our impairment analyses are reasonable; however, given the uncertainties of the economy and its potential impact on our businesses, it is possible that impairments of remaining long-lived assets may be required in future periods as a result of changes in our operating results or our assumptions. We did not identify any impairment indicators during the year ended December 31, 2025.

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Goodwill and Indefinite-lived Intangible Assets

Description of Estimate

Goodwill is required to be tested for impairment at least annually, or on an interim basis if events or circumstances change indicating that the carrying amount of the goodwill might be impaired. Indefinite-lived intangible assets are not subject to amortization but are required to be evaluated for impairment at least annually. We have the option to first assess qualitative factors to determine whether it is necessary to perform the quantitative impairment assessment. If, after assessing the totality of events and circumstances, we determine that it is more likely than not that the fair value of a reporting unit or an individual indefinite-lived asset is less than its carrying value, the Company will perform the quantitative impairment test. We can also elect to forgo the qualitative assessment and perform the quantitative test.

The quantitative goodwill impairment test compares the reporting unit's estimated fair value with the carrying amount of its net assets. An impairment is recognized if the reporting unit's recorded net assets exceed its fair value. Impairment is assessed at the “reporting unit” level by applying a fair value-based test for each reporting unit with recorded goodwill. Goodwill totaled $221.5 million as of December 31, 2025.

If the carrying value of an individual indefinite-lived intangible asset exceeds its fair value, such individual indefinite-lived intangible asset is impaired by the amount of the excess. Indefinite-lived intangible assets, which are comprised of trade names of acquired businesses, totaled $11.2 million as of December 31, 2025.

Judgment and/or Uncertainty

When performing a qualitative assessment, we determine the drivers of fair value for each reporting unit and for each indefinite-lived intangible asset and evaluate whether those drivers have been positively or negatively affected by relevant events and circumstances since the most recent quantitative assessment. Our evaluation includes, but is not limited to, assessment of macroeconomic trends, industry conditions, operating income trends, and capital accessibility.

When performing a quantitative assessment, the estimates and judgments that most significantly affect the fair value calculations are assumptions related to revenue and operating profit results, discount rates, terminal growth rates, royalty rates, and exit multiples. We consider these to be Level 3 inputs in the fair value hierarchy, as they involve unobservable inputs for which there is little or no market data and thus require management to develop its own assumptions. If the carrying value exceeds the estimated fair value, an impairment loss will be recognized.

Potential Impact if Results Differ

If actual results are not consistent with management's estimates and assumptions used to calculate estimated future cash flows, we could be exposed to impairment losses that may be material. We believe that the assumptions used in our impairment assessments are reasonable; however, given the uncertainties of the economy and its potential impact on our businesses, there can be no assurance that our estimates and assumptions regarding the fair value of our reporting units or the fair value of each individual indefinite-lived intangible asset will prove to be accurate predictions of the future.

Based on our annual qualitative assessments performed as of October 1, 2025, we concluded that it was not more likely than not that any of our reporting units or any of our indefinite-lived intangible assets had a fair value that was less than its carrying value.

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Variable Interest Entities

Description of Estimate

We continuously evaluate our investments in, and other contractual arrangements with, third-party entities to determine whether they are considered a variable interest entity ("VIE") and, if so, whether we are considered the primary beneficiary. Consolidation is required for VIEs in which we are the primary beneficiary.

We have determined that we are the primary beneficiary for TRIP Holdings and Trinity Global Ventures Limited. At December 31, 2025, the carrying value of our investments in these entities totaled $39.0 million. Additionally, as a result of a December 2025 railcar partnership restructuring, RIV 2013, which was previously a consolidated variable interest entity in which we were the primary beneficiary, is now a wholly-owned subsidiary of the Company.

We have determined that we are not the primary beneficiary for Signal Rail Holdings LLC or certain other entities in which we have an equity interest. At December 31, 2025, the carrying value of these investments totaled $15.1 million.

For further information regarding our partially-owned subsidiaries and other investments in unconsolidated affiliates, see Note 6 of the Consolidated Financial Statements.

Judgment and/or Uncertainty

The determination of whether an entity is considered a VIE and, if so, if we are the primary beneficiary of the VIE, is subjective and dependent on the specific facts and circumstances of each investment. Factors considered in these assessments include, but are not limited to, the entity's structure and equity ownership, the contractual terms, the key decision-making powers, and the obligation to absorb losses or the right to receive benefits of the VIE.

Potential Impact if Results Differ

Changes in the design or nature of the activities of a VIE, or our involvement with a VIE, could result in a change in conclusion of our status as a primary beneficiary. Such change could result in the consolidation or deconsolidation of the subsidiary, thus impacting financial results.

Contingencies and Litigation

Description of Estimate

We are involved in claims and lawsuits incidental to our business arising from various matters, including product warranty, personal injury, environmental issues, workplace laws, and various governmental regulations. We evaluate our exposure to such matters periodically and establish accruals for these contingencies when a range of loss can be reasonably estimated. As of December 31, 2025, the range of reasonably possible losses for such matters is $8.0 million to $19.7 million.

For further information regarding our contingencies and litigation matters, see Note 15 of the Consolidated Financial Statements.

Judgment and/or Uncertainty

Assessments of contingencies are based on information obtained from internal and external legal counsel, including recent legal decisions and loss experience in similar situations. Based on information currently available with respect to such claims and lawsuits, including information as to which we are aware but for which we have not been served with legal process, it is management's opinion that the ultimate outcome of all such claims and litigation, including settlements, in aggregate will not have a material adverse effect on our results of operations or financial condition.

Potential Impact if Results Differ

Due to the uncertain nature of these matters, there can be no assurance that we will not become involved in future litigation or other proceedings or, if we were found to be responsible or liable in any litigation or proceeding, that such costs would not be material to us. Additionally, changes in claims and lawsuits filed, settled, or dismissed and differences between actual and estimated settlement costs or our rights in indemnity and recourse to third parties could impact operating results.

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Non-GAAP Financial Measures

We have included financial measures compiled in accordance with GAAP and certain non-GAAP measures in this Annual Report on Form 10-K to provide management and investors with additional information regarding our financial results. Non-GAAP measures should not be considered in isolation or as a substitute for our reported results prepared in accordance with GAAP and, as calculated, may not be comparable to other similarly titled measures for other companies. For each non-GAAP financial measure, we provide a reconciliation to the most comparable GAAP measure.

Adjusted Return on Equity

Adjusted ROE is defined as a ratio for which (i) the numerator is calculated as income or loss from continuing operations, adjusted to exclude the effects of net income or loss attributable to noncontrolling interest, and certain other adjustments (net of income taxes), described in the footnotes to the table below, which include certain selling, engineering, and administrative expenses; gains on dispositions of other property; restructuring activities, net; and interest expense, net; and (ii) the denominator is calculated as average Trinity stockholders’ equity (which excludes noncontrolling interest). In the following table, the numerator and denominator of our Adjusted ROE calculation are reconciled to income from continuing operations and total stockholders’ equity, respectively, which are the most directly comparable GAAP financial measures. Management believes that Adjusted ROE is a useful measure to both management and investors as it provides an indication of the economic return on the Company’s investments over time.

December 31, 2025

December 31, 2024

December 31, 2023

($ in millions)

Numerator:

Income from continuing operations

Net income attributable to noncontrolling interest

Net income from continuing operations attributable to Trinity Industries, Inc.

Adjustments (net of income taxes):

Selling, engineering, and administrative expenses (1)

Gains on dispositions of property – other (2)

Restructuring activities, net

Interest expense, net (3)

Adjusted Net Income

Denominator:

Total stockholders' equity

Noncontrolling interest

Trinity stockholders' equity

Average total stockholders' equity

Return on Equity (4)

Average Trinity stockholders' equity

Adjusted Return on Equity (5)

(1) Represents the change in estimated fair value of additional contingent consideration associated with an acquisition.

(2) Represents insurance recoveries in excess of net book value for assets damaged at the Company’s facility in Cartersville, Georgia in two separate events. See Note 15 of the Consolidated Financial Statements for more information.

(3) Represents interest income accretion related to a seller-financing agreement associated with the sale of certain non-operating assets.

(4) Return on Equity is calculated as income from continuing operations divided by average total stockholders' equity.

(5) Adjusted Return on Equity is calculated as adjusted net income divided by average Trinity stockholders' equity, each as defined and reconciled above.

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Cash Flow from Operations with Net Gains on Lease Portfolio Sales

Cash flow from operations with net gains on lease portfolio sales is a non-GAAP financial measure. We believe this measure is useful to both management and investors as it provides a relevant measure of liquidity and a useful basis for assessing the breadth of the cash flow generation capabilities across our operating platform, as well as our ability to fund our operations and repay our debt. This measure is defined as net cash provided by operating activities from continuing operations as computed in accordance with GAAP, plus net gains on lease portfolio sales and is reconciled to net cash provided by operating activities from continuing operations, the most directly comparable GAAP financial measure, in the following table.

Year Ended December 31,

(in millions)

Net cash provided by operating activities – continuing operations

Net gains on lease portfolio sales

Cash flow from operations with net gains on lease portfolio sales

Recent Accounting Pronouncements

See Note 1 of the Consolidated Financial Statements for information about recent accounting pronouncements.

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