Download TRINITY INDUSTRIES INC (Form: 10-K, Received

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
 ANNUAL REPORT PURSUANT TO SECTION 13
1934
OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF
For the fiscal year ended December 31, 2014
 TRANSITION REPORT PURSUANT TO
OF 1934
OR
SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT
Commission File Number 1-6903
Trinity Industries, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or Other Jurisdiction of Incorporation or Organization)
75-0225040
(I.R.S. Employer Identification No.)
2525 N. Stemmons Freeway, Dallas, Texas
75207-2401
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code: (214) 631-4420
Securities Registered Pursuant to Section 12(b) of the Act
Name of each exchange
Title of each class
on which registered
Common Stock ($1.00 par value)
New York Stock Exchange, Inc.
Securities registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes 
No 
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes  No 
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes  No 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files). Yes 
No 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer 
Accelerated filer 
Non-accelerated filer 
Smaller reporting company 
(Do not check if a smaller reporting company)
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No 
The aggregate market value of voting and non-voting common equity held by non-affiliates computed by reference to the price at which the
common equity was last sold as of the last business day of the Registrant's most recently completed second fiscal quarter (June 30, 2014) was $6,706.8
million .
At January 31, 2015 the number of shares of common stock outstanding was 155,668,747 .
The information required by Part III of this report, to the extent not set forth herein, is incorporated by reference from the Registrant's definitive
2015 Proxy Statement.
TRINITY INDUSTRIES, INC.
FORM 10-K
TABLE OF CONTENTS
Caption
Page
PART I
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
3
9
16
16
16
16
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
17
20
21
44
45
96
96
98
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services
98
98
99
99
99
PART IV
Item 15. Exhibits and Financial Statement Schedules
100
All share and per share information, including dividends, has been retroactively adjusted to reflect the 2-for-1 stock split. except
for the statement of stockholders' equity which reflects the stock split by reclassifying from "Capital in Excess of Par Value" to "Common
Stock" an amount equal to the par value of the additional shares issued to effect the stock split.
2
Table of Contents
PART I
Item 1. Business.
General Development of Business. Trinity Industries, Inc. and its consolidated subsidiaries, (“Trinity”, “Company”, “we”, or “our”)
headquartered in Dallas, Texas, is a diversified industrial company that owns a variety of market-leading businesses providing products and
services to the energy, transportation, chemical, and construction sectors. Trinity was incorporated in 1933.
Trinity became a Delaware corporation in 1987. Our principal executive offices are located at 2525 N. Stemmons Freeway, Dallas, Texas
75207-2401, our telephone number is 214-631-4420, and our Internet website address is www.trin.net .
Financial Information About Industry Segments. Financial information about our industry segments for the years ended December 31,
2014 , 2013 , and 2012 is presented in Part II, Item 7 “Management's Discussion and Analysis of Financial Condition and Results of
Operations.”
Narrative Description of Business. As a diversified industrial company, we manufacture and sell a variety of products and services
principally including:
•
•
•
•
•
•
•
•
•
railcars and railcar parts;
the leasing, management, and maintenance of railcars;
inland barges;
highway products;
aggregates;
storage and distribution containers;
structural wind towers;
electric utility structures; and
parts and steel components.
We serve our customers through the following five business groups:
Rail Group. Through wholly-owned subsidiaries with manufacturing facilities in the U.S. and Mexico, our Rail Group is a leading
manufacturer of freight and tank railcars in North America used for transporting a wide variety of liquids, gases, and dry cargo (“Trinity Rail
Group” or “Rail Group”).
Trinity Rail Group offers a complete array of railcar solutions to our customers. We are capable of manufacturing a full line of railcars,
including:
Autorack Cars - Autoracks and flatcars transport finished automobiles and light trucks.
Box Cars - Box cars carry a wide variety of bulk cargo such as auto parts, paper, and food products.
Covered Hopper Cars - Covered hopper cars transport commodities such as industrial sand and cement, grain products, dry
fertilizer, and plastics. Pressure differential covered hopper cars carry products such as flour and starch.
Gondola Cars - Rotary gondola cars are primarily used for coal service. Other gondola cars carry bulk commodities such as
scrap metal, aggregate, ores, and finished steel.
Intermodal Cars - Intermodal cars transport shipping containers in single or double stacked configurations as well as truck
trailers.
Open Hopper Cars - Open hopper cars are used to transport coal, aggregates, and other similar products.
Tank Cars - Non-pressurized tank cars transport a wide variety of liquid commodities including chemicals, food products, and
petroleum products. Pressurized tank cars are used to transport liquefied gases.
Our Rail Group is capable of manufacturing a diversified railcar product line, allowing us to capitalize on changing industry trends and
developing opportunities in the construction, agricultural, energy, chemical and automotive markets, among others. We also manufacture and
sell a variety of railcar parts and components used in manufacturing and repairing railcars including couplers, axles, and other equipment. We
have plants in Mexico and the U.S. that manufacture parts and components, primarily for the North American market. We provide railcar
maintenance services at multiple facilities in the U.S.
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Our customers include railroads, leasing companies, and industrial shippers of products, such as utilities, petrochemical companies, grain
shippers, agricultural product companies, and major construction and industrial companies. We compete in the North American market
primarily against five major railcar manufacturers.
For the year ended December 31, 2014 we shipped 30,255 railcars, or 44% of total North American railcar shipments. As of December 31,
2014 , our Rail Group backlog consisted of 61,035 railcars valued at $7.2 billion . This amount included approximately $ 2.0 billion in orders
from our Railcar Leasing and Management Services Group (“Leasing Group”). The total amount of orders in our backlog from the Leasing
Group was supported by lease commitments with external customers. The final amount dedicated to the Leasing Group may vary by the time of
delivery.
We hold patents of varying duration for use in our manufacture of railcars and components. We believe patents offer a marketing advantage
in certain circumstances. No material revenues are received from the licensing of these patents.
Railcar Leasing and Management Services Group. Our Railcar Leasing and Management Services Group is a leading provider in North
America of comprehensive rail industry services. Through wholly-owned subsidiaries, primarily Trinity Industries Leasing Company ("TILC"),
and partially-owned subsidiaries, TRIP Rail Holdings LLC (“TRIP Holdings”) and RIV 2013 Rail Holdings LLC ("RIV 2013"), we offer
operating leases for tank and freight railcars. TILC also offers management, maintenance, and administrative services to railcar investors. By
providing leasing and management, maintenance, and administrative services, in addition to management services for investor-owned funds,
our Leasing Group is an important strategic resource that further links our Rail Group with our customers. Trinity's Rail Group and TILC
coordinate sales and marketing activities under the registered trade name TrinityRail ® , thereby providing a single point of contact for railroads
and shippers seeking rail equipment and services.
The railcars in our lease fleet are leased to industrial shippers and railroads. These companies operate in the chemical, agricultural, and
energy industries, among others. Substantially all of the railcars in our lease fleet were manufactured by our Rail Group. The terms of our
railcar leases generally vary from one to twenty years and provide for fixed monthly rentals. A small percentage of our fleet is leased on a per
diem basis. As of December 31, 2014 , the lease fleet of our subsidiaries included 75,930 owned or leased railcars that were 99.5% utilized. Of
this total, 63,520 railcars were owned by TILC or its affiliates and 12,410 railcars were financed in sale-leaseback transactions.
We also manage railcar fleets on behalf of third parties. Our railcar fleet management services complement our leasing business by
generating stable fee income, strengthening customer relationships, and enhancing the view of Trinity as a leading provider of railcar products
and services.
Our railcar leasing businesses compete against a number of well-established entities that are also in the business of leasing railcars.
Construction Products Group. Through wholly-owned subsidiaries, our Construction Products Group manufactures highway products as
well as other primarily-steel products for infrastructure-related projects; mines and produces aggregates; and provides galvanizing services.
Many of these lines of business are seasonal and revenues are impacted by weather conditions and fluctuations in government spending levels.
Our Highway Products business is a leading U.S. manufacturer of guardrail, crash cushions, and other protective barriers. The Federal
Highway Administration, which determines product eligibility for cost reimbursement using federal funds, has approved many of our products
as eligible for Federal-aid reimbursement based on satisfactory performance testing pursuant to criteria established under either the National
Cooperative Highway Research Program Report 350 or the Manual for Assessing Safety Hardware, as applicable. Our crash cushion,
protective barrier, and guardrail products include multiple proprietary products manufactured under license from certain public and private
research organizations and inventors as well as Company-held patents. We sell highway products in Canada, Mexico, and throughout the U.S.,
and we export highway products, including proprietary products to more than 60 countries. The Company does not perform any installation
services with respect to its highway products, except in Mexico. We compete against several national and regional highway products
manufacturers.
We are a leading producer and distributor of lightweight and natural aggregates, including expanded shale and clay; crushed stone; sand and
gravel; asphalt rock; and various other products in the western and southwestern U.S. Our aggregates customers are concrete producers;
commercial, residential, and highway contractors; manufacturers of masonry products; and state and local municipalities. We compete with
lightweight aggregates producers nationwide and natural aggregates producers located in the regions where we operate.
We provide hot-dip galvanizing services to manufacturers of fabricated steel materials from our service facilities in Texas, Louisiana, and
Mississippi. We also manufacture a line of trench shields and shoring products for the construction industry and a line of construction
equipment for the mining industry.
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Table of Contents
Energy Equipment Group. Through wholly-owned subsidiaries, our Energy Equipment Group manufactures structural wind towers; utility
steel structures for electricity transmission and distribution; ambient and cryogenic storage and distribution containers; and tank heads for
pressure and non-pressure vessels.
We are a leading manufacturer in North America of structural wind towers used in the wind energy market. These towers are manufactured
in the U.S. and Mexico to customer specifications and installed by our customers. Our customers are generally wind turbine producers. Our
structural wind towers backlog as of December 31, 2014 was approximately $473.5 million .
With the acquisition of the assets of Meyer Steel Structures ("Meyer"), the utility steel structures division of Thomas & Betts Corporation, a
member of the ABB Group, in August 2014, we became one of the leading manufacturers of steel structures for electricity transmission and
distribution, which are used principally by municipalities and other local and state governmental entities, as well as by public and private
utilities. These structures are manufactured in the U.S. and Mexico to customer specifications and installed by our customers.
We manufacture storage and distribution containers that support the oil, gas, and chemical industries and are used by industrial plants,
utilities, residences, and small businesses in suburban and rural areas. Additionally, we manufacture fertilizer storage and distribution
containers for bulk storage, farm storage, and the application and distribution of anhydrous ammonia. We also manufacture cryogenic tanks for
the distribution of industrial gases and liquefied natural gas. Our storage and distribution container products range from nine-gallon containers
for motor fuel use to 1.8 million-gallon bulk storage spheres. We sell our storage and distribution containers to dealers and large industrial
users. In the U.S., we generally deliver storage and distribution containers to our customers who install and fill the containers. Our competitors
include large and small manufacturers of storage and distribution containers.
We manufacture tank heads, which are pressed metal components used in the manufacturing of many of our finished products, both pressure
rated and non-pressure rated, depending on their intended use. We use a significant portion of the tank heads we manufacture in the production
of our railcars and storage and distribution containers. We also sell our tank heads to a broad range of other manufacturers. There is strong
competition in the tank heads business.
We are a leading manufacturer in North America of storage and distribution containers and tank heads for pressure and non-pressure vessels.
We manufacture these products in the U.S. and Mexico. We market a portion of our products in Mexico under the brand name of TATSA ® .
In February 2014, we acquired the assets of Platinum Energy Services Corporation ("Platinum"), based in Alberta, Canada, which
manufactures and sells oil and gas process and storage equipment, including various types of containers, separators, and treaters used at the
well-site and in midstream locations.
There are a number of well-established entities that actively compete with us in the business of manufacturing energy equipment .
Inland Barge Group. Through wholly-owned subsidiaries, our Inland Barge Group is a leading U.S. manufacturer of inland barges and
fiberglass barge covers. We manufacture a variety of dry cargo barges, such as deck barges, and open or covered hopper barges that transport
various commodities, such as grain, coal, and aggregates. We also manufacture tank barges used to transport liquids such as crude oil,
chemicals and a variety of petroleum products. Our fiberglass reinforced lift covers are used primarily for grain barges. Our four barge
manufacturing facilities are located along the U.S. inland river systems, allowing for rapid delivery to our customers. Our Inland Barge Group
backlog as of December 31, 2014 was approximately $ 437.9 million .
Our primary Inland Barge customers are commercial marine transportation companies. Many companies have the capability to enter into,
and from time to time do enter into, the inland barge manufacturing business. We strive to compete through operational efficiency, timely
delivery, and quality products. We have a number of competitors for our products in this industry.
All Other. All Other includes our captive insurance and transportation companies; legal, environmental, and maintenance costs associated
with non-operating facilities; and other peripheral businesses.
Foreign Operations. Trinity's foreign operations are primarily located in Mexico. Continuing operations included sales to foreign
customers, primarily in Mexico, which represented 5.8%, 11.7%, and 10.0% of our consolidated revenues for the years ended December 31,
2014 , 2013 , and 2012 , respectively. As of December 31, 2014 and 2013 , we had 3.9% and 3.7%, respectively, of our long-lived assets not
held for sale located outside the U.S. We manufacture railcars, storage and distribution containers, tank heads, structural wind towers, utility
structures, parts and steel components, and other products at our Mexico facilities for local consumption as well as for export to the U.S. and
other countries.
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Table of Contents
Backlog. As of December 31, 2014 and 2013 , our backlog of firm and noncancellable orders was as follows:
December 31,
2014
December 31,
2013
(in millions)
Rail Group
External Customers
Leasing Group
$
$
$
$
Inland Barge Group
Wind towers
5,204.3
2,010.5
7,214.8
437.9
473.5
$
$
$
$
4,189.6
827.0
5,016.6
429.6
553.9
For the twelve months ended December 31, 2014 , our rail manufacturing businesses received orders for 51,395 railcars, including a
multi-year railcar order received in November 2014 from GATX Corporation to deliver 8,950 railcars over a four-year period beginning in
2016. The increase in backlog as of December 31, 2014 reflects the value of orders taken during the year. The orders in our backlog from the
Leasing Group are fully supported by lease commitments with external customers. The final amount dedicated to the Leasing Group may vary
by the time of delivery as directed by our customers. Approximately 55% of our railcar backlog is expected to be delivered in the twelve
months ending December 31, 2015 with the remainder to be delivered from 2016 through 2020. All of our Inland Barge backlog is expected to
be delivered in the twelve months ending December 31, 2015. Deliveries for multi-year barge agreements are included in the backlog when
specific production quantities for future years have been determined. Approximately 57% of our structural wind towers backlog is expected to
be delivered in the twelve months ending December 31, 2015 with the remainder to be delivered in 2016. The Company does not report
backlog from its utility structures business because certain contracts contain partial order cancellation provisions.
Marketing. We sell or lease substantially all of our products and services through our own sales personnel operating from offices in
multiple locations in the U.S. as well as Canada, Mexico, the United Kingdom, Singapore, Sweden, and Peru. We also use independent sales
representatives on a limited basis.
Raw Materials and Suppliers.
Railcar Specialty Components and Steel. Products manufactured at our railcar manufacturing facilities require a significant supply of raw
materials such as steel, as well as numerous specialty components such as brakes, wheels, axles, side frames, bolsters, and bearings. Although
the number of alternative suppliers of specialty components has declined in recent years, at least two suppliers continue to produce most
components.
The principal material used in our manufacturing segments is steel. During 2014, the supply of steel was sufficient to support our
manufacturing requirements. Market steel prices were relatively stable during the year with 2014 prices averaging slightly higher than 2013.
Steel prices may be volatile in the future in part as a result of market conditions. We often use contract-specific purchasing practices, existing
supplier commitments, contractual price escalation provisions, and other arrangements with our customers, to mitigate the effect of steel price
volatility on our operating profits for the year. In general, we believe there is enough capacity in the supply industry to meet current production
levels and that our existing contracts and other relationships we have in place will meet our current production forecasts.
Aggregates. Natural and lightweight aggregates can be found throughout the U.S., and many producers exist nationwide. Shipments of
natural aggregates from an individual quarry are generally limited in geographic scope because the cost of transporting processed aggregates to
customers is high in relation to the value of the product itself. Lightweight aggregates have a much wider, multi-state distribution area due to
their higher value relative to their distribution costs. We currently operate 14 mining facilities strategically located in Texas, Louisiana,
Colorado, and California.
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Table of Contents
Employees. The following table presents the approximate headcount breakdown of employees by business group:
Business Group
Rail Group
Construction Products Group
Inland Barge Group
Energy Equipment Group
Railcar Leasing and Management Services Group
All Other
Corporate
December 31,
2014
10,980
1,670
2,130
6,340
200
420
330
22,070
As of December 31, 2014 , approximately 12,520 employees were employed in the U.S. and 9,430 employees were employed in Mexico.
Acquisitions and Divestitures. See Note 2 of the Notes to Consolidated Financial Statements.
Environmental Matters. We are subject to comprehensive federal, state, local, and foreign environmental laws and regulations relating to
the release or discharge of materials into the environment; the management, use, processing, handling, storage, transport, and disposal of
hazardous and non-hazardous waste and materials; and other activities relating to the protection of human health and the environment.
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. We regularly monitor and review our operations, procedures, and policies for compliance
with our operating permits and related laws and regulations. We believe that our operations and facilities, whether owned, managed, or leased,
are in substantial compliance with applicable environmental laws and regulations and that any non-compliance is not likely to have a material
adverse effect on our operations or financial condition.
Governmental Regulation.
Railcar Industry. The primary regulatory and industry authorities involved in the regulation of the railcar industry are the U.S.
Environmental Protection Agency ("USEPA"); the Research and Special Programs Administration, the Federal Railroad Administration
("FRA"), and the Pipeline and Hazardous Materials Safety Administration ("PHMSA"), all divisions of the U.S. Department of Transportation
("USDOT"); and the Association of American Railroads ("AAR"). These organizations establish rules and regulations for the railcar industry,
rail infrastructure, and rail interchange, including product specifications and standards for the design and manufacture of railcars and railcar
parts; mechanical, maintenance, and related standards for railcars; safety of railroad equipment, tracks, and operations; and packaging and
transportation of hazardous or toxic materials. We believe that our product designs and operations are in compliance with these specifications,
standards and regulations.
Recent derailments in North America of trains transporting crude oil have caused various regulatory agencies and industry organizations,
including but not limited to the USDOT; FRA; PHMSA; Transport Canada ("TC"); AAR and the AAR Tank Car Committee; American
Petroleum Institute; and Railway Supply Institute, as well as community governments, to focus attention on transportation by rail of flammable
materials. In August 2014, PHMSA published a Notice of Proposed Rulemaking seeking interested party comments on potential regulatory
initiatives pertaining to the transportation of flammable materials by rail. A similar rulemaking process and request for comments was initiated
in Canada in July 2014 under the direction of TC - Transport Dangerous Goods. Comment periods for PHMSA and TC have closed and
agency review of comments is in process at both PHMSA and TC. Regulatory certainty from PHMSA and TC is expected in 2015. While the
regulatory process itself and the scope of any potential regulatory change is uncertain, the Company is assessing its position under a variety of
potentially diverse, final rule scenarios. Any final rule may or may not materially impact the rail industry as a whole; railroad operations; older
and newer tank railcars that meet or exceed currently mandated PHMSA and TC standards; future tank railcar specifications; market decisions
relative to capital investment in rail products; and the capability of the nation’s railcar manufacturing, repair and maintenance infrastructure to
implement mandated modification configurations or new construction.
Inland Barge Industry. The primary regulatory and industry authorities involved in the regulation of the inland barge industry are the U.S.
Coast Guard; the U.S. National Transportation Safety Board; the U.S. Customs Service; the Maritime Administration of the U.S. Department of
Transportation; and private industry organizations such as the American Bureau of Shipping. These organizations establish safety criteria,
investigate vessel accidents, and recommend improved safety standards. We believe that our product specifications and operations are in
compliance with applicable laws and regulations.
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Highway Products. The primary regulatory and industry authorities involved in the regulation of highway products manufacturers are the
USDOT, the Federal Highway Administration ("FHWA"), and various state highway departments. These organizations, with participation from
the American Association of State Highway and Transportation Officials, establish certain standards, specifications, and product testing criteria
related to the manufacture of our highway products. If our products were found to be not in compliance with these standards, specifications, or
product testing criteria, we could be required to re-qualify our products for installation on state and national highways, recall products already
in use or installed, or replace products in use or installed with other products manufactured by us or manufactured by our competitors.We
believe that our highway products are in compliance with all applicable standards and specifications.
Occupational Safety and Health Administration and Similar Regulations. Our operations are subject to regulation of health and safety
matters by the U.S. Occupational Safety and Health Administration and the U.S. Mine Safety and Health Administration. We believe that we
employ appropriate precautions to protect our employees and others from workplace injuries and harmful exposure to materials handled and
managed at our facilities. However, claims that may be asserted against us for work-related illnesses or injury and the further adoption of
occupational and mine safety and health regulations in the U.S. or in foreign jurisdictions in which we operate could increase our operating
costs. While we do not anticipate having to make material expenditures in order to remain in substantial compliance with health and safety laws
and regulations, we are unable to predict the ultimate cost of compliance.
See Item 1A for further discussion of risk factors with regard to environmental, governmental, and other matters.
Executive Officers and Other Corporate Officers of the Company.
The following table sets forth the names and ages of all of our executive officers and other corporate officers, their positions and offices
presently held by them, and the year each person first became an officer. All officer terms expire in May 2015.
Name
Timothy R. Wallace*
James E. Perry*
Melendy E. Lovett*
William A. McWhirter II*
D. Stephen Menzies*
S. Theis Rice*
Kathryn A. Collins
Tammy D. Gilbert
Virginia C. Gray, Ph.D.
Mary E. Henderson*
John M. Lee
Steven L. McDowell
Gail M. Peck
Heather Perttula Randall
Jared S. Richardson
Stephen W. Smith
*
Age
61
43
56
50
59
64
51
54
55
56
54
53
47
41
42
65
Office
Chairman, Chief Executive Officer, and President
Senior Vice President and Chief Financial Officer
Senior Vice President and Chief Administrative Officer
Senior Vice President and Group President
Senior Vice President and Group President
Senior Vice President and Chief Legal Officer
Vice President, Human Resources
Vice President, Information Technology
Vice President, Organizational Development
Vice President and Chief Accounting Officer
Vice President, Business Development
Vice President and Chief Audit Executive
Vice President, Finance and Treasurer
Vice President, Legal Affairs and Government Relations
Vice President, Associate General Counsel and Secretary
Vice President and Chief Technical Officer
Officer
Since
1985
2005
2014
2005
2001
2002
2014
2012
2007
2009
1994
2013
2010
2011
2010
2012
Executive officer subject to reporting requirements under Section 16 of the Securities Exchange Act of 1934.
Ms. Collins joined Trinity in 2014 as Vice President, Human Resources. Prior to joining Trinity, she worked for RealPage, Inc. from 2012 to
2014, most recently serving as Vice President, Talent Management and HR Systems. She served as Divisional Vice President, Organization
Effectiveness and Vice President, Associate Recruitment at J.C. Penney Company, Inc. where she held management and executive positions
from 2009 to 2012.
Ms. Gilbert joined Trinity in 2012 as Vice President, Information Technology. Prior to joining Trinity, she worked for Hewlett-Packard from
2006 to 2012, most recently serving as the America's Vice President, Transition, Transformation, and Project/Program Management. She has
also held executive positions with Electronic Data Systems, Sabre Holdings, American Airlines, and Harris Methodist Hospital.
Ms. Henderson joined the Company in 2003 as Director of Financial Reporting. She was named Assistant Controller in 2005 and Controller
in 2009. In 2010, Ms. Henderson was elected Vice President and Chief Accounting Officer.
Ms. Lovett joined the Company in 2014 as Senior Vice President and Chief Administrative Officer. She was a member of the Company's
Board of Directors since 2012 but resigned from her Board position at Trinity in connection with her appointment as an officer of the
Company. Prior to joining Trinity, she worked for Texas Instruments ("TI") from 1993 to 2014 serving as Senior
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Vice President and President of TI's Education Technology business from 2004. She previously served as Vice President in TI's human
resources organization from 1998. Prior to joining TI, she was a senior manager with the consulting firm of Coopers & Lybrand.
Mr. McWhirter joined the Company in 1985 and held various accounting positions until 1992, when he became a business group officer. In
1999, he was elected to a corporate position as Vice President for Mergers and Acquisitions. In 2001, he was named Executive Vice President
of a business group. In March 2005, he became Vice President and Chief Financial Officer and in 2006, Senior Vice President and Chief
Financial Officer. In 2010, Mr. McWhirter was named Senior Vice President and Group President of the Construction Products and Inland
Barge Groups. In 2012, Mr. McWhirter was named Senior Vice President and Group President of the Construction Products, Energy
Equipment, and Inland Barge Groups.
Mr. McDowell joined the Company in 2013 as Vice President and Chief Audit Executive. Prior to joining Trinity, he worked for Dean Foods
from 2007 to 2013, where he held a variety of management positions and most recently served as Vice President, Internal Audit and Risk
Management. Prior to his tenure at Dean Foods, he served as Vice President - Internal Audit at Centex Corporation.
Ms. Peck joined Trinity in 2010 as Treasurer and was appointed Vice President and Treasurer in 2011 and Vice President, Finance and
Treasurer in 2014. Prior to joining Trinity, she worked for Centex Corporation from 2001 to 2009, serving as Vice President and Treasurer
beginning in 2004.
Mr. Perry joined Trinity in 2004 and was appointed Treasurer in April 2005. Mr. Perry was named a Vice President of Trinity in 2006 and
appointed its Vice President, Finance in 2007. In 2010, Mr. Perry was appointed Chief Financial Officer and in 2011 was elected Senior Vice
President and Chief Financial Officer.
Ms. Randall joined the Company in 2005 as Chief Counsel of TrinityRail. In 2006, she became Deputy General Counsel in charge of
litigation for Trinity. In 2011, Ms. Randall was elected Vice President, Legal Affairs and Government Relations.
Mr. Rice joined the Company in 1991 and held various legal and business positions until 2005, when he was elected Vice President and
Chief Legal Officer. He was named Senior Vice President, Human Resources and Chief Legal Officer in 2011 and was named Senior Vice
President and Chief Legal Officer in 2013.
Mr. Richardson joined the Company in 2010 as Associate General Counsel and Secretary. In 2012, Mr. Richardson was elected Vice
President, Associate General Counsel, and Secretary. From 2004 to 2009, he handled legal, corporate governance, and secretary matters for
Energy Future Holdings Corp. (formerly TXU Corp.).
Mr. Smith joined the Company in 1976 and held various engineering positions, advancing to Senior Vice President Engineering for
TrinityRail. In 2008, Mr. Smith was promoted to a corporate position and serving as an engineering and technical advisor to Trinity's Group
Presidents and corporate officers. In 2012, Mr. Smith was elected Vice President and was named Chief Technical Officer in 2013.
Messrs. Wallace, Menzies, and Lee and Dr. Gray have been in full time employment of Trinity or its subsidiaries for more than five years
and have performed essentially the same respective duties during such time.
Item 1A. Risk Factors.
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 Securities and Exchange Commission (“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. The cautionary statements below discuss
important factors that could cause our business, financial condition, operating results, and cash flows to be materially adversely affected.
Accordingly, readers are cautioned not to place undue reliance on the forward-looking statements contained herein. We undertake no
obligations to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.
Many of the industries in which we operate are cyclical, and, accordingly, our business is subject to changes in the economy. We operate in
cyclical industries. Downturns in overall economic conditions usually 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 loss of profits. The
railcar, barge, and wind energy industries have previously experienced sharp cyclical downturns and at such times operated with a minimal
backlog. The business cycles of our different operations may not typically coincide but an economic downturn could impact disparate cycles
contemporaneously. In such cases, the effect of an economic downturn may have a magnified negative effect on our business.
Volatility in the global markets may adversely affect our business and operating results. Instability in the global economy, negative
conditions in the global credit markets, volatility in the industries that our products serve, fluctuations in commodity
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prices that our customers produce and transport, changes in legislative 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 cancel orders in whole or in part or unilaterally terminate firm contracts
resulting in un-remedied contract breaches 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.
Litigation 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. 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 liability,
our reserves may be inadequate to cover our portion of claims or judgments after taking into consideration rights in indemnity and recourse to
third parties. Any such claims or judgments could have a material adverse effect on our business, operations, or overall financial condition.
Increases in the price and demand for steel could lower our margins and profitability. The principal material used in our manufacturing
segments is steel. Market steel prices may exhibit short periods of volatility. Steel prices may experience further volatility as a result of scrap
surcharges assessed by steel mills and other market factors. We often 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 profits for the year. To the extent that we do not have such arrangements in place, an increase in steel prices could materially lower
our profitability. 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.
We have potential exposure to environmental liabilities, which 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 and materials; and (iii) other activities relating to the protection of human health and the environment.
Such laws and regulations not only expose us to liability for our own acts, but also may expose us to liability for the acts of others or for our
actions which were in compliance with all applicable laws at the time these actions were taken. 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, barge, or storage container 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, barge, or storage container, 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.
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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 all geographic markets and each industry sector in which we operate. In addition to price, we face
competition in product performance and technological innovation, quality, reliability of delivery, customer service, and other factors. This
competition is often intense, the effects of which could reduce our revenues and operating profits, limit our ability to grow, increase pricing
pressure on our products, and otherwise affect our financial results.
The limited number of customers in certain of our businesses, the variable purchase patterns of our customers in all our segments, and the
timing of completion, delivery, and customer acceptance of orders may cause our revenues and income from operations to vary substantially
each quarter, which would result in significant fluctuations in our quarterly results. Some of the markets we serve are dominated by a limited
number of customers. Customers in each of our business segments do not purchase a similar volume of products each year nor make purchases
consistently from year-to-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 be
significantly affected. 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.
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 credit ratings. In general, the Company, and more specifically its leasing subsidiaries'
operations, rely in large part upon banks and capital markets to fund its operations and contractual commitments and refinance existing debt.
These markets can experience high levels of volatility and access to capital can be constrained for an extended period 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 to 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 may be unable to maintain railcar assets on lease at satisfactory rates. The profitability of our railcar leasing business depends on our
ability to lease railcars at satisfactory rates, to re-lease railcars 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 lease, re-lease or sell leased or unleased railcars profitably 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 availability in the market generally 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 on favorable terms could result in lower lease rates, lower lease utilization percentages, and reduced revenues.
Fluctuations in the price and supply of specialty and other component parts used in the production of our products 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 components needed 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 business, as well
as flanges for the wind towers business. Our manufacturing operations partially depend on our ability to obtain timely deliveries of materials,
parts, and components in acceptable quantities and quality from our suppliers. Certain parts and components of 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. If
we are unable to purchase a sufficient quantity of parts and components on a timely basis, we could face disruptions in our production and
incur delays while we attempt
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to engage alternative suppliers. Fewer suppliers could result from unimproved or worsening economic or commercial conditions which could
increase our rejections for poor quality and require us to source unknown and distant supply alternatives. Any such disruption or conditions
could harm our business and adversely impact our results of operations.
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 and use diesel fuel in vehicles to transport our products to customers and to operate our
plant equipment. An outbreak or escalation of hostilities between the U.S. and any foreign power and, in particular, prolonged conflicts 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. Hurricanes or other natural disasters could result in a real or perceived shortage of petroleum and/or natural gas 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 cost. 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.
Our manufacturer's warranties expose us to product replacement and repair claims. Depending on the product, we warrant against
manufacturing defects due to our workmanship and certain materials (including surface coatings, primers, sealants, and interior linings), parts,
and components pursuant to express limited contractual warranties. Accordingly, 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 costly
product recalls, significant repair or replacement costs, and damage to our reputation.
Increasing insurance claims and expenses could lower profitability and increase business risk. The nature of our business subjects us to
product liability, property damage, and personal injury claims, especially in connection with products we manufacture that our customers
install along US highways or that our customers use to transport hazardous, flammable, toxic, or explosive materials. Over the last several
years, insurance carriers have raised premiums for many companies operating in our industries. Increased premiums may further increase our
insurance expense as coverage expires or otherwise cause us to raise our self-insured retention. If the number or severity of claims within our
self-insured retention increases, we could suffer costs in excess of the reserves we maintain for the reasonably estimable liability in such claims
or such number. Also the severity of such claims could expose us to uninsured damages if we were unable or elected not to insure against
certain hazards because of high premiums or other reasons. While our liability insurance coverage is at or above levels based on commercial
norms in our industries, an unusually large liability claim or a string of claims coupled with an unusually large damage award could exceed our
liability insurance coverage. In addition, the availability of, and our ability to collect on, insurance coverage is often subject to factors beyond
our control. If any of our third-party insurers fail, cancel our coverage, or otherwise are unable to provide us with adequate insurance coverage,
then our overall risk exposure and our operational expenses would 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.
Many of our products are 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 operated, installed, repaired,
and maintained. When this does not occur, the Company may be subjected to claims or litigation associated with injuries or property damage.
Risks related to our operations outside of the U.S., particularly Mexico, could decrease our profitability. Our operations outside of the U.S.
are subject to the risks associated with cross-border business transactions and activities. Political, legal, trade, economic change or instability,
unrestrained criminal activities, or social unrest could limit or curtail our respective foreign business activities and operations, including the
ability to hire and retain employees. Violence in Mexico associated with drug trafficking has not abated. We have not, to date, been materially
affected by any of these risks, but 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 primarily in the U.S. and the
transportation and import of such products may be disrupted. Some foreign countries where we operate have regulatory authorities that regulate
railroad safety, railcar and railcar component part design, performance, and manufacture of equipment used on their railroad systems. If we fail
to obtain and maintain certifications of our railcars and railcar parts and components within the various foreign countries where we operate, we
may be unable to market and sell our railcars, parts, and components in those countries. In addition, unexpected changes in laws, rules, and
regulatory requirements; tariffs and other trade barriers, including regulatory initiatives for buying goods produced in America;
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more stringent or restrictive laws, rules, and regulations relating to labor or the environment; adverse tax consequences; and price exchange
controls 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, or duties on imports imposed by the U.S. government and agencies,
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 or import/export laws of other countries.
Equipment failures or extensive damage to our facilities, including as might occur as a result of natural disasters, 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 and on navigable waterways in the U.S. An interruption in
production capabilities or maintenance and repair capabilities at our facilities, as a result of equipment failure or acts of nature, including
non-navigation orders resulting from low-water conditions issued from time to time by the U.S. Army Corps of Engineers on one or more U.S.
rivers which serve our facilities, 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
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, cause us to lose future sales, and negatively affect our reputation and our results of operations.
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. Although we have historically been largely successful in retaining the services of our key management, we may not be able
to do so in the future. 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.
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.
Violations of or changes in the regulatory requirements applicable to the industries in which we operate may increase our operating
costs. Our railcar manufacturing and leasing businesses are regulated by multiple governmental regulatory agencies such as the USEPA; the
USDOT and the administrative agencies it oversees, including the FRA, PHMSA, and the Research and Special Programs Administration; and
industry authorities such as the AAR. All such agencies and authorities promulgate rules, regulations, specifications, and 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 or toxic materials. Future regulatory changes in the rail industry, including
rules, regulations, and specifications mandating modified railcar designs, configurations, materials, and equipment could affect compliance
costs and may have a material adverse effect on our financial condition and operations.
Recent derailments in North America of trains transporting crude oil have caused various U.S. and Canadian regulatory agencies
and industry organizations, as well as community governments, to focus attention on transportation by rail of flammable materials. In July and
August of 2014, PHMSA and TC, published notices of proposed rulemakings seeking interested party comments on potential regulatory
initiatives pertaining to the transportation of flammable materials by rail. Regulatory certainty from PHMSA and TC is expected in
2015. While the regulatory process itself and the scope of any potential regulatory change is uncertain, any final rule or rules may or may not
materially impact the rail industry as a whole; railroad operations; older and newer tank railcars that meet or exceed currently mandated
PHMSA and TC standards; future tank railcar specifications; market decisions relative to capital investment in rail products; and the capability
of the nation’s railcar manufacturing, repair and maintenance infrastructure to implement mandated modification configurations or new
construction. The Company cannot assure that costs incurred to comply with standards and regulations emerging from PHMSA’s and TC's
rulemaking processes will not be material to the Company’s financial position or results of operations.
Our Inland Barge operations are subject to regulation by the U.S. Coast Guard; the U.S. National Transportation Safety Board; the U.S.
Customs Service; the Maritime Administration of the U.S. Department of Transportation; and private industry organizations
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such as the American Bureau of Shipping. These organizations establish safety criteria, investigate vessel accidents and recommend improved
safety standards.
Our Construction Products Group is subject to regulation by the USDOT; the FHWA; and state highway departments and administrative
agencies. These organizations establish certain standards, specifications, and product testing criteria related to the manufacture of our highway
products. If our products were found to be not in compliance with these standards, specifications, or product testing criteria, or if additional
testing criteria not previously contemplated by the applicable rules or regulations are required, we could be required to re-qualify our products
for installation on state and national highways, recall products already in use or installed, or replace products in use or installed with other
products manufactured by us or manufactured by our competitors.
Our operations are also subject to regulation of health and safety matters by the U.S. Occupational Safety and Health Administration and the
U.S. Mine Safety and Health Administration. Although 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, claims that may be asserted against us for
work-related illnesses or injury, and the further adoption of occupational and mine safety and health regulations in the U.S. or in foreign
jurisdictions in which we operate could increase our operating costs. We are unable to predict the ultimate cost of compliance with these health
and safety laws and regulations.
Some of our customers place orders for our products in reliance on their ability to utilize tax benefits or tax credits such as accelerated
depreciation or the production tax credit for renewable energy, or to recover the cost of products acquired to comply with federal requirements
or standards. There is no assurance that the U.S. government will reauthorize, modify, or otherwise not allow the expiration of such tax
benefits, tax credits, or reimbursement policies, and in cases where such subsidies and policies are materially modified to reduce the available
benefit, credit, or reimbursement or are otherwise allowed to expire, the demand for our products could decrease, thereby creating the potential
for a material adverse effect on our financial condition or results of operations.
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.
We may incur 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. 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.
Railcars as a significant mode of transporting freight could decline, become more efficient over time, 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 and
become more efficient, the use of railcars may decline in favor of other more economic 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.
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 the current debate over climate change in general, and the related science, policy discussion,
and prospective legislation. Additionally, the potential challenges and opportunities for the Company that climate change policy and legislation
may pose have been reviewed. 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. At this time, the Company cannot predict the ultimate impact of climate
change and climate change legislation on the Company's operations or opportunities. Potential opportunities could include greater demand for
wind towers and certain types of railcars, while potential challenges could include decreased demand for certain types of railcars and higher
energy costs. Further, 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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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 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 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 Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements.
Shortages of skilled labor could adversely impact our operations. We depend on skilled labor in the manufacture, maintenance, and repair
of our products. Some of our facilities are located in areas where demand for skilled laborers may exceed supply. Shortages of some types of
skilled laborers, such as welders, could restrict our ability to maintain or increase production rates and could increase our labor costs.
Some of our employees 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 some of our operations in the U.S. and all of 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 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.
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.
Our inability to produce 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
proprietary needs and expectations and, therefore, our future operations, profitability, and competitive position. Management relies on
information technology infrastructure and architecture, including hardware, network, software, people, and processes to provide useful and
confidential information to conduct our business in the ordinary course, including correspondence and commercial data and information
interchange with customers, suppliers, legal counsel, governmental agencies, and financial institution consultants, and to support assessments
and conclusions about future plans and initiatives pertaining to market demands, operating performance, and competitive positioning. In
addition, any material failure, interruption of service, compromised data security, or cybersecurity threat could adversely affect our relations
with suppliers and customers, place us in violation of confidentiality and data protection laws, rules, and regulations, and result in negative
impacts to our market share, operations, and profitability. Security breaches in our information technology could result in theft, destruction,
loss, misappropriation, or release of confidential data or intellectual property which could adversely impact our future results.
Discord, conflict, and lack of compromise within and amongst the executive and legislative branches of the U.S. government relative to
federal government budgeting, taxation policies, government expenditures, and U.S. borrowing/debt ceiling limits could adversely affect our
business and operating results. The legislative and executive branches of the U.S. government have encountered one or more impasses or
deadlocks relative to federal government budgeting, tax revenue requirements, deficit spending, and management of short and long term U.S.
government borrowing, debt ratings, and debt ceiling adjustments. Continuing impasse or deadlock could negatively impact U.S. domestic and
global financial markets thereby reducing demand by our customers for our products and services and potentially result 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.
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The Company could potentially fail to successfully integrate new businesses or products into its current business. The Company routinely
engages in the search for growth opportunities, including assessment of merger and acquisition prospects in new markets and/or products. Any
merger or acquisition in which the Company becomes involved and ultimately concludes 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 overall financial condition.
Additional Information. Our Internet website address is www.trin.net . Information on the website is available free of charge. We make
available on our website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments
thereto, as soon as reasonably practicable after such material is filed with, or furnished to, the SEC. The contents of our website are not
intended to be incorporated by reference into this report or in any other report or document we file and any reference to our website is intended
to be an inactive textual reference only.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
We principally operate in various locations throughout the U.S. and in Mexico and Canada. Our facilities are considered to be in good
condition, well maintained, and adequate for our purposes.
Approximate Square Feet
Owned
Rail Group
Construction Products Group
Inland Barge Group
Energy Equipment Group
Corporate Offices
Leased
6,586,100
1,859,500
996,700
2,805,800
231,200
12,479,300
129,500
101,900
81,000
554,600
3,100
870,100
Approximate Square Feet Located In
US
Mexico
4,638,800
1,930,300
1,077,700
2,589,100
211,000
10,446,900
2,076,800
31,100
—
687,900
23,300
2,819,100
Canada
—
—
—
83,400
—
83,400
Our estimated weighted average production capacity utilization for the twelve month period ended December 31, 2014 is reflected by the
following percentages:
Production Capacity
Utilized
Rail Group
Construction Products Group
Inland Barge Group
Energy Equipment Group
90%
65%
85%
85%
Item 3. Legal Proceedings.
See Note 18 of the Notes to Consolidated Financial Statements.
Item 4. Mine Safety Disclosures
The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street
Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95 to this Form 10-K.
16
Table of Contents
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Our common stock is traded on the New York Stock Exchange under the ticker symbol “TRN”. The following table shows the closing price
range of our common stock by quarter for the years ended December 31, 2014 and 2013 (1) .
Prices
Year Ended December 31, 2014
Quarter ended March 31, 2014
Quarter ended June 30, 2014
Quarter ended September 30, 2014
Quarter ended December 31, 2014
High
$ 37.32
43.74
50.30
43.12
Year Ended December 31, 2013
High
Quarter ended March 31, 2013
$ 22.70
Quarter ended June 30, 2013
22.31
Quarter ended September 30, 2013
23.09
Quarter ended December 31, 2013
28.33
(1) Stock prices have been adjusted to reflect a 2-for-1 stock split issued in the form of a 100% stock dividend in June 2014.
Low
$ 27.08
33.82
41.56
26.57
Low
$ 18.10
17.65
17.88
21.79
Our transfer agent and registrar as of December 31, 2014 was American Stock Transfer & Trust Company.
Holders
At December 31, 2014 , we had 1,885 record holders of common stock. The par value of the common stock is $1.00 per share.
Dividends
Trinity has paid 203 consecutive quarterly dividends. Quarterly dividends declared by Trinity for the years ended December 31, 2014 and
2013 are as follows (2) :
Year Ended December 31,
2014
Quarter ended March 31,
Quarter ended June 30,
Quarter ended September 30,
Quarter ended December 31,
Total
(2)
$
$
0.075
0.100
0.100
0.100
0.375
2013
$
$
Per share amounts have been adjusted to reflect a 2-for-1 stock split issued in the form of a 100% stock dividend in June 2014.
Recent Sales of Unregistered Securities
None.
17
0.055
0.065
0.075
0.075
0.270
Table of Contents
Performance Graph
The following Performance Graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor
shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934,
each as amended, except to the extent that the Company specifically incorporates it by reference into such filing.
The following graph compares the Company's cumulative total stockholder return (assuming reinvestment of dividends) during the five-year
period ended December 31, 2014 with an overall stock market index (New York Stock Exchange Composite Index) and the Company's peer
group index (Dow Jones US Commercial Vehicles & Trucks Index). The data in the graph assumes $100 was invested on December 31, 2009.
Trinity Industries, Inc.
Dow Jones US Commercial Vehicles & Trucks Index
New York Stock Exchange Composite Index
18
2009
2010
2011
2012
2013
2014
100
100
100
155
165
114
177
145
110
214
162
128
331
194
161
343
201
172
Table of Contents
Issuer Purchases of Equity Securities N EED
This table provides information with respect to purchases by the Company of shares of its common stock during the quarter ended
December 31, 2014 :
Period
October 1, 2014 through October 31, 2014
November 1, 2014 through November 30, 2014
December 1, 2014 through December 31, 2014
Total
Number of
Shares Purchased
(1)
2,358
441
299
3,098
Average Price
Paid per Share (1)
$
$
$
$
36.98
35.01
28.85
35.91
Total Number of Shares
(or Units) Purchased as
Part of Publicly
Announced Plans or
Programs (2)
—
—
—
—
Maximum Number (or
Approximate Dollar Value)
of Shares (or Units) that
May Yet Be Purchased
Under the Plans or
Programs (2)
$
$
$
$
218,529,671
218,529,671
218,529,671
218,529,671
These columns include the following transactions during the three months ended December 31, 2014: (i) the surrender to the Company of
618 shares of common stock to satisfy tax withholding obligations in connection with the vesting of restricted stock issued to employees and
(ii) the purchase of 2,480 shares of common stock by the Trustee for assets held in a non-qualified employee profit-sharing plan trust.
(1)
In March 2014, the Company's Board of Directors authorized a new $250 million share repurchase program that expires on December 31,
2015 and replaced the Company's previously authorized $200 million share repurchase program. Under the new program, no shares were
repurchased during the three months ended December 31, 2014. The approximate dollar value of shares that were eligible to be repurchased
under such share repurchase program is shown as of the end of such month or quarter.
(2)
19
Table of Contents
Item 6. Selected Financial Data.
The following financial information for the five years ended December 31, 2014 has been derived from our audited consolidated financial
statements. This information should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of
Operations and the consolidated financial statements and notes thereto included elsewhere herein.
Year Ended December 31,
2013
2012
2014
2011
2010
(in millions, except percent and per share data)
Statement of Operations Data:
Revenues
Operating profit
Income from continuing operations
Gain on sale of discontinued operations, net of
provision for income taxes of $-, $5.4, $-, $-, and $Income (loss) from discontinued operations, net of
provision (benefit) for income taxes of $-, $(0.8),
$1.1, $(0.4), and $3.6
Net income
Net income attributable to Trinity Industries, Inc.
Net income attributable to Trinity Industries, Inc. per
common share:
Basic:
Continuing operations
Discontinued operations
$
Weighted average number of shares outstanding:
Basic
Diluted
Dividends declared per common share
Balance Sheet Data:
Total assets
Debt - recourse
Debt - non-recourse
Stockholders' equity
Ratio of total debt to total capital
Book value per share
$
—
$
$
—
709.3
678.2
$
$
$
$
$
4.19
—
4.19
$
151.0
156.7
0.375
$
$
$
$
$
$
8,733.8
829.3
2,723.7
3,397.4
51.1%
21.83
4,365.3
772.9
386.1
$
(0.8 )
392.4
375.5
$
$
2.34
0.04
2.38
$
$
$
2.34
0.04
2.38
$
152.8
152.9
0.270
$
$
$
$
$
$
7,313.4
419.0
2,570.8
2,749.1
52.1 %
17.75
3,811.9
574.8
251.9
$
—
7.1
4.35
—
4.35
$
$
Diluted:
Continuing operations
Discontinued operations
6,170.0
1,251.0
709.3
1.8
253.7
255.2
$
$
$
$
$
1.58
0.01
1.59
$
154.7
155.1
0.210
$
$
$
$
$
6,669.9
458.1
2,596.9
2,137.6
58.8 %
13.52
$
1,930.7
294.2
69.4
—
1.59
0.01
1.60
$
2,938.3
426.8
146.8
(1.1)
145.7
142.2
—
0.89
(0.01)
0.88
$
$
$
0.89
(0.01)
0.88
$
154.9
155.4
0.175
$
$
$
$
$
$
6,121.0
455.0
2,517.2
1,948.3
60.4%
12.15
6.0
75.4
67.4
$
$
0.39
0.04
0.43
$
$
0.39
0.04
0.43
$
153.7
154.0
0.160
$
$
$
$
$
5,760.0
449.4
2,457.4
1,845.7
61.2%
11.57
Per share and share amounts have been adjusted to reflect a 2-for-1 stock split issued in the form of a 100% stock dividend in June 2014.
20
Table of Contents
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 a reader of our
financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity, and
certain other factors that may affect our future results. Our MD&A is presented in the following sections:
• Company Overview
• Executive Summary
• Results of Operations
• Liquidity and Capital Resources
• Contractual Obligations and Commercial Commitments
• Critical Accounting Policies and Estimates
• Recent Accounting Pronouncements
• Forward-Looking Statements
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.
Company Overview
Trinity Industries, Inc., headquartered in Dallas, Texas, is a diversified industrial company that owns market-leading businesses providing
products and services to the energy, transportation, chemical, and construction sectors. We operate in five distinct business groups which we
report on a segment basis: the Rail Group, Construction Products Group, Inland Barge Group, Energy Equipment Group, and Railcar Leasing
and Management Services Group. We also report the All Other segment which includes the Company's captive insurance and transportation
companies; legal, environmental, and maintenance costs associated with non-operating facilities; and other peripheral businesses.
Our Rail and Inland Barge Groups and our structural wind towers, utility structures, and storage and distribution containers businesses
operate in cyclical industries. Results in our Construction Products and Energy Equipment Groups are subject to seasonal fluctuations with the
first quarter historically being the weakest quarter. Railcar sales from the lease fleet are the primary driver of fluctuations in results in the
Railcar Leasing and Management Services Group.
Demand conditions and corresponding order levels for new railcars continue to be favorable across a wide variety of industries. While
demand conditions and corresponding order levels for barges serving the oil and gas markets have slowed recently, favorable conditions exist
long term for barges in the chemical and petrochemical markets. In other markets, such as agricultural products, demand has recently been
strong for hopper barges. Budgetary constraints at the Federal and state levels, and pending litigation in our Highway Products business have
negatively impacted the results of our Construction Products Group.
We continually assess our manufacturing capacity and take steps to align our production capacity with demand for our products. Due to
improvements in demand for certain products, we have continued to increase production staff at certain facilities. We expect that facilities on
non-operating status will be available for future operations should demand increase further.
Executive Summary
The Company’s revenues for 2014 were $ 6.2 billion , representing an increase of $ 1.8 billion or 41% over last year. Operating profit
increased to $ 1.3 billion compared to $ 0.8 billion last year for an increase of 61.9% . Operating margin improved to 20.3% in 2014 from
17.7% in 2013 . The increase in revenues for 2014 , when compared to the prior year, resulted primarily from higher shipment volumes and
higher pricing due to increased overall demand and a more favorable product mix in our Rail Group. Additionally, our Leasing Group
experienced significantly higher revenues from external railcar sales along with higher leasing and management revenues related to higher
utilization and rental rates. Revenues in our Energy Equipment Group increased primarily due to higher volumes and acquisitions. Revenues in
our Construction Products Group were higher in our Aggregates business due to acquisitions and higher volumes. Increased deliveries and a
more favorable product mix led to higher revenues for our Inland Barge Group. Overall operating profit and margin grew for the year ended
December 31, 2014 , when compared with the prior year, primarily due to higher shipment levels and the effects of a more favorable product
mix in our Rail Group, higher railcar sales from our Leasing Group, and increased volumes in our Construction Products, Inland Barge, and
Energy Equipment Groups. Selling, engineering, and administrative expenses increased for the year ended December 31, 2014 , primarily due
to increased staffing and higher performance-related compensation costs in addition to increased legal expenses. The Company's headcount,
including both production and non-production personnel, has increased approximately 20% since the end of 2013 primarily due to production
expansion and acquisitions. Net income from continuing operations for the year ended December 31, 2014 was $709.3 million and increased
$323.2 million or 83.7% over the prior year. Net income attributable to Trinity Industries, Inc. common stockholders for the year ended
December 31, 2014 was $678.2 million and increased $302.7 million or 80.6% over the prior year.
21
Table of Contents
As of December 31, 2014 and 2013 our backlog of firm and noncancellable orders was as follows:
December 31,
2014
December 31,
2013
(in millions)
Rail Group
External Customers
Leasing Group
$
Inland Barge Group
Wind towers
$
$
$
5,204.3
2,010.5
7,214.8
437.9
473.5
$
$
$
$
4,189.6
827.0
5,016.6
429.6
553.9
For the twelve months ended December 31, 2014 , our rail manufacturing businesses received orders for 51,395 railcars, including a
multi-year railcar order received in November 2014 from GATX Corporation to deliver 8,950 railcars over a four-year period beginning in
2016. The increase in backlog as of December 31, 2014 reflects the value of orders taken during the year. The orders in our backlog from the
Leasing Group are fully supported by lease commitments with external customers. The final amount dedicated to the Leasing Group may vary
by the time of delivery as directed by our customers. Approximately 55% of our railcar backlog is expected to be delivered in the twelve
months ending December 31, 2015 with the remainder to be delivered from 2016 through 2020. All of our Inland Barge backlog is expected to
be delivered in the twelve months ending December 31, 2015. Deliveries for multi-year barge agreements are included in the backlog when
specific production quantities for future years have been determined. Approximately 57% of our structural wind towers backlog is expected to
be delivered in the twelve months ending December 31, 2015 with the remainder to be delivered in 2016. The Company does not report
backlog from its utility structures business because certain contracts contain partial order cancellation provisions.
Capital expenditures for 2014 were $464.6 million with $245.3 million utilized for net lease fleet additions, net of deferred profit of $133.1
million . Manufacturing and corporate capital expenditures for 2015 are projected to be between $250.0 million and $300.0 million . For 2015 ,
we expect the annual net cash investment in new railcars in our lease fleet to be between $55.0 million and $70.0 million after considering the
expected proceeds received from leased railcar sales during the year.
During the year ended December 31, 2014 , the Company received proceeds of $882.7 million from the sale of leased railcars to Element
Financial Corporation ("Element") under the strategic alliance with Element announced in December 2013, including $200.4 million recorded
as revenue by the Rail Group. From the total proceeds received from Element, the Leasing Group recorded $446.6 million in revenue from the
sale of railcars owned one year or less at the time of sale. The remainder of the proceeds of $235.7 million is attributable to the sale of railcars
owned more than one year at the time of sale and is, consequently, excluded from revenue. Since the inception of our alliance, the Company
has received proceeds of $987.7 million from the sale of leased railcars to Element.
In March 2014 , the Company’s Board of Directors authorized a new $250 million share repurchase program that expires on December 31,
2015 and replaced the Company's previously authorized $200 million share repurchase program. Under the new program, 747,246 shares were
repurchased during the year ended December 31, 2014 , at a cost of $31.5 million .
In May 2014 , the Company's partially-owned leasing subsidiary, TRIP Rail Holdings LLC ("TRIP Holdings"), acquired $388 million in
railcar equipment from Trinity Industries Leasing Company ("TILC"). In connection with this portfolio purchase, TRIP Master Funding issued
$335.7 million in aggregate principal amount of Series 2014-1 Secured Railcar Equipment Notes pursuant to the Master Indenture between
TRIP Master Funding and Wilmington Trust Company, as indenture trustee, with a final maturity date of April 2044 . The TRIP Master
Funding Series 2014-1 Secured Railcar Equipment Notes consist of two classes with the Class A-1 notes bearing interest at 2.86% and the
Class A-2 notes bearing interest at 4.09% . The TRIP Master Funding Secured Railcar Equipment Notes are non-recourse to Trinity, TILC,
TRIP Holdings, and the other equity investors in TRIP Holdings and are secured by TRIP Master Funding's portfolio of railcars and operating
leases thereon, its cash reserves, and all other assets owned by TRIP Master Funding. As of December 31, 2014 , there were $108.7 million and
$220.7 million of Class A-1 and Class A-2 notes outstanding, respectively. The remainder of the purchase price was provided by TILC and the
third-party investors of TRIP Holdings who contributed $21.6 million and $49.6 million, respectively, net of expenses.
In May 2014 , the Company's Board of Directors authorized a 2-for-1 stock split. The stock split was issued in the form of a 100% stock
dividend. The additional shares were distributed on June 19, 2014 , to shareholders of record at the close of business on June 5, 2014 . All share
and per share information, including dividends, has been retroactively adjusted to reflect the 2-for-1 stock split, except for the statement of
stockholders' equity which will reflect the stock split by reclassifying from "Capital in Excess of Par Value" to "Common Stock" in the amount
of $78.0 million which equals the par value of the additional shares issued to effect the stock split.
22
Table of Contents
Additionally, the Company increased its quarterly dividend in May 2014 by 33%. On a stock-split adjusted basis, the Company increased its
quarterly dividend to $0.10 per share compared to the previous, split-adjusted level of $0.075 per share.
In August 2014, Trinity completed its acquisition of the assets of Meyer, the utility steel structures division of Thomas & Betts Corporation,
a member of the ABB Group, for approximately $595.6 million in cash. Meyer is one of North America's leading providers of tubular steel
structures for electricity transmission and distribution. During the year ended December 31, 2014 , we completed the acquisitions of the assets
of WesMor Cryogenic Companies and Alloy Custom Products, Inc., expanding the Company's engineering and manufacturing capabilities to
provide cryogenic storage and distribution products. We also completed the acquisition of the assets of Platinum Energy Services Corporation
in Alberta, Canada, a manufacturer and seller of oil and gas process and storage equipment as well as the acquisition of a galvanizing services
business located in Texas.
In September 2014, the Company issued $400.0 million aggregate principal amount of 4.55% senior notes ("Senior Notes") due October
2024 . Interest on the Senior Notes is payable semiannually commencing April 1, 2015. The Senior Notes rank senior to existing and future
subordinated debt including the Company's Convertible Subordinated Notes and rank equal to existing and future senior indebtedness,
including the Company's revolving credit facility. The Senior Notes are subordinated to all the Company's existing and future secured debt to
the extent of the value of the collateral securing such indebtedness. The Senior Notes could restrict our ability to incur additional debt; make
certain distributions, investments, and other restricted payments; create certain liens; and consolidate, merge, or transfer all or substantially all
of our assets. The Company’s Senior Notes are fully and unconditionally and jointly and severally guaranteed by certain of Trinity’s
100%-owned subsidiaries. See Note 19 of the Notes to the Consolidated Financial Statements for Financial Statements for Guarantors of the
Senior Notes. Proceeds from the note issuance are intended to be used for general corporate purposes.
23
Table of Contents
Results of Operations
Years Ended December 31, 2014 , 2013 , and 2012
Overall Summary for Continuing Operations
Revenues
Year Ended December 31, 2014
Percent Change
2014 versus 2013
Revenues
Intersegment
External
Total
($ in millions)
Rail Group
Construction Products Group
Inland Barge Group
Energy Equipment Group
Railcar Leasing and Management Services Group
All Other
Segment Totals before Eliminations
Eliminations – Lease subsidiary
Eliminations – Other
Consolidated Total
$
$
3,077.6
546.1
638.5
796.0
1,106.4
5.4
6,170.0
—
—
6,170.0
$
$
739.2
5.6
—
196.3
11.9
105.0
1,058.0
(710.1 )
(347.9 )
—
$
$
3,816.8
551.7
638.5
992.3
1,118.3
110.4
7,228.0
(710.1 )
(347.9 )
6,170.0
33.1 %
5.1
10.7
49.1
73.3
27.5
34.7
41.3 %
Year Ended December 31, 2013
Percent Change
2013 versus 2012
Revenues
Intersegment
External
Total
($ in millions)
Rail Group
Construction Products Group
Inland Barge Group
Energy Equipment Group
Railcar Leasing and Management Services Group
All Other
Segment Totals before Eliminations
Eliminations – Lease subsidiary
Eliminations – Other
Consolidated Total
$
$
2,093.5
508.6
576.6
536.5
645.4
4.7
4,365.3
—
—
4,365.3
$
$
774.0
16.4
0.1
128.9
—
81.9
1,001.3
(756.5 )
(244.8 )
—
$
$
Year Ended December 31, 2012
Revenues
External
Intersegment
2,867.5
525.0
576.7
665.4
645.4
86.6
5,366.6
(756.5 )
(244.8 )
4,365.3
Total
($ in millions)
Rail Group
Construction Products Group
Inland Barge Group
Energy Equipment Group
Railcar Leasing and Management Services Group
All Other
Segment Totals before Eliminations
Eliminations – Lease subsidiary
Eliminations – Other
$
1,512.1
461.2
675.2
506.0
644.4
13.0
3,811.9
—
—
$
500.9
22.5
—
52.6
2.7
68.4
647.1
(485.9 )
(161.2 )
$
2,013.0
483.7
675.2
558.6
647.1
81.4
4,459.0
(485.9 )
(161.2 )
42.4 %
8.5
(14.6)
19.1
(0.3)
6.4
20.4
14.5 %
Consolidated Total
$
3,811.9
$
—
$
3,811.9
Our revenues for the year ended December 31, 2014 , increased by 41.3% from the previous year. The increase was primarily due to higher
shipment volumes and pricing due to increased overall demand and a more favorable product mix in our Rail Group combined with the effects
of higher volumes in our Construction Products, Inland Barge, and Energy Equipment Groups. In addition to higher volumes, revenues from
our Inland Barge Group increased as a result of favorable product mix changes while an increase in revenues from our Energy Equipment
Group was primarily due to acquisitions completed in 2014. Our Leasing Group experienced higher leasing and management revenues due to
increased rental rates and higher utilization as well as higher external railcar sales.
24
Table of Contents
Our revenues for the year ended December 31, 2013 , increased by 14.5% from the previous year. The overall increase was primarily due to
higher shipment volumes and a favorable change in product mix in our Rail Group, acquisition-related higher shipment volumes in the
Aggregates and Other product lines of our Construction Products Group, and higher revenues in our Energy Equipment Group resulting
primarily from increased demand for storage and distribution container vessels and other product lines. Lower revenues in our Inland Barge
Group were due to lower volumes and a less favorable product mix while revenues in our Railcar Leasing and Management Services Group
were substantially unchanged as higher revenue from leasing and management were offset by lower revenues from railcar sales.
Operating Costs
Operating costs are comprised of cost of revenues; selling, engineering, and administrative costs; and gains or losses on property disposals.
2014
Year Ended December 31,
2013
2012
(in millions)
Rail Group
Construction Products Group
Inland Barge Group
Energy Equipment Group
Railcar Leasing and Management Services Group
All Other
Segment Totals before Eliminations and Corporate Expenses
Corporate
Eliminations – Lease subsidiary
Eliminations – Other
Consolidated Total
$
$
3,092.7
486.3
524.1
884.2
602.0
136.0
5,725.3
119.0
(577.0)
(348.3)
4,919.0
$
$
2,377.8
472.4
480.7
604.0
348.6
100.3
4,383.8
73.4
(621.1 )
(243.7 )
3,592.4
$
$
1,814.0
438.9
550.5
540.4
346.2
91.6
3,781.6
51.5
(435.1)
(160.9)
3,237.1
Operating costs for the year ended December 31, 2014 , increased by 36.9% over the previous year primarily due to higher shipment levels in
our manufacturing segments and higher railcar sales in our Leasing Group. Selling, engineering, and administrative expenses increased overall
primarily due to higher performance-related compensation costs and increased staffing in addition to increased legal expenses. For 2013 , the
11.0% increase in operating costs over the previous year was primarily due to higher shipment levels in our Rail, Construction Products, and
Energy Equipment Groups. Operating costs from our Inland Barge Group decreased due to lower shipment volumes and a change in the mix of
barge types. As a percentage of revenue, our selling, engineering, and administrative expenses were 6.5% for 2014 as compared to 6.7% for
2013 and 5.9% for 2012 .
Operating Profit (Loss)
2014
Year Ended December 31,
2013
2012
(in millions)
Rail Group
Construction Products Group
Inland Barge Group
Energy Equipment Group
Railcar Leasing and Management Services Group
All Other
Segment Totals before Eliminations and Corporate Expenses
Corporate
Eliminations – Lease subsidiary
Eliminations – Other
Consolidated Total
$
$
724.1
65.4
114.4
108.1
516.3
(25.6 )
1,502.7
(119.0 )
(133.1 )
0.4
1,251.0
$
$
489.7
52.6
96.0
61.4
296.8
(13.7)
982.8
(73.4)
(135.4)
(1.1)
772.9
$
$
199.0
44.8
124.7
18.2
300.9
(10.2)
677.4
(51.5)
(50.8)
(0.3)
574.8
Our operating profit for the year ended December 31, 2014 increased by 61.9% primarily as a result of higher shipments in our
manufacturing segments as well as higher railcar sales in our Leasing Group. Our operating profit for the year ended December 31, 2013
increased by 34.5% primarily as a result of higher shipment levels in our Rail Group in addition to improved efficiencies in our Energy
Equipment Group.
For a further discussion of revenues, costs, and the operating results of individual segments, see Segment Discussion below.
25
Table of Contents
Other Income and Expense . Other income and expense is summarized in the following table:
2014
Year Ended December 31,
2013
2012
(in millions)
Interest income
Interest expense
Other, net
Consolidated Total
$
$
(1.9 )
193.4
(4.6 )
186.9
$
$
(2.1 )
187.3
(2.8 )
182.4
$
$
(1.5 )
194.7
(4.3 )
188.9
Interest expense in 2014 increased $6.1 million over the prior year primarily due to the issuance of the Company's Senior Notes in September
2014. Interest expense in 2013 decreased $7.4 million over the prior year primarily due to the TRIP Holdings debt refinancing completed in
May 2013. The increase in Other, net income for the year ended December 31, 2014 was primarily due to higher foreign currency translation
gains. The decrease in Other, net income for the year ended December 31, 2013 was due to higher foreign currency translation gains in 2012
exceeding the gains recognized in 2013 from the change in fair value of certain equity repurchase agreements.
Income Taxes. The provision for income taxes results in effective tax rates that differ from the statutory rates. The following is a
reconciliation between the statutory U.S. Federal income tax rate and the Company’s effective income tax rate on income from continuing
operations:
Statutory rate
State taxes
Domestic production activities deduction
Noncontrolling interest in partially-owned subsidiaries
Tax assessments and settlements
Changes in valuation allowances and reserves
Other, net
Effective rate
Year Ended December 31,
2014
2013
35.0 %
35.0 %
2.1
1.4
(1.4)
(2.0)
(0.9)
(1.1)
—
—
(0.8)
0.1
0.6
(0.1)
34.6 %
33.3 %
2012
35.0 %
2.0
—
—
(0.6)
(1.4)
(0.3)
34.7 %
Our effective tax rate reflects a current tax benefit available for U.S. manufacturing activity in addition to income attributable to the
noncontrolling interests in TRIP Holdings and RIV 2013. In 2013, TRIP Holdings and RIV 2013 elected to be treated as partnerships for
income tax purposes and, consequently, no income tax expense has been provided with respect to income earned after this election attributable
to the noncontrolling interests. See Note 5 of the Notes to the Consolidated Financial Statements for a further explanation of activities with
respect to TRIP Holdings and RIV 2013. See Note 13 of the Notes to the Consolidated Financial Statements for a further discussion of income
taxes.
Income from continuing operations before income taxes for the years ended December 31, 2014 , 2013 , and 2012 was $1,051.4 million ,
$571.2 million , and $376.3 million , respectively, for U.S. operations, and $12.6 million , $19.3 million , and $9.6 million , respectively, for
foreign operations. The Company provides deferred income taxes on the un-repatriated earnings of its foreign operations where it results in a
deferred tax liability.
At December 31, 2014 , the Company had $33.5 million of Federal consolidated net operating loss carryforwards and $3.6 million of
tax-effected state loss carryforwards remaining. The Federal net operating loss carryforwards were acquired as part of an acquisition of a
company in 2010 and are subject to limitations on the amount that can be utilized in any one tax year. The Federal net operating loss
carryforwards are due to expire in 2028 and 2029 . We have established a valuation allowance for Federal, state, and foreign tax operating
losses and credits which we have estimated may not be realizable.
The IRS field work for our 2006-2008 audit cycle has concluded and all issues, except for transfer pricing, have been agreed upon and
tentatively settled. The transfer pricing issue has been appealed and we are working with both the U.S. and Mexican taxing authorities to
coordinate taxation in a formal mutual agreement process (“MAP”). During 2013, we received the revenue agent report for the 2009-2011 audit
cycle. All issues have been concluded and agreed to except for transfer pricing issues. The transfer pricing issues have been appealed and we
have requested they be addressed in the same MAP as the 2006-2008 cycle. At this time, we cannot determine when the 2006-2008 or the
2009-2011 cycle will close and all issues formally settled.
26
Table of Contents
Income tax payments, net of refunds, compared to our current provision are different based on 1) when estimated tax payments are due as
compared to when the income was earned, 2) changes in our uncertain tax positions that are reflected in current expense, and 3) excess tax
benefits from stock-based compensation that are reflected in stockholders' equity. At December 31, 2014 , the Company's consolidated income
tax position was a net receivable of $48.3 million from Federal, state, and foreign jurisdictions whereas at December 31, 2013 , the Company's
tax position was a net payable of $28.9 million for a net change of $77.2 million. Income taxes paid, net of refunds, during the years ended
December 31, 2014 , 2013 , and 2012 totaled $399.0 million , $110.9 million , and $18.4 million , respectively.
Segment Discussion
Rail Group
Year Ended December 31,
2014
Percent Change
2013
2012
2014 versus 2013
2013 versus 2012
($ in millions)
Revenues:
Rail
Components
Total revenues
Operating costs:
Cost of revenues
Selling, engineering, and administrative costs
Operating profit
Operating profit margin
$
$
3,674.8
142.0
3,816.8
$
3,027.2
65.5
$
724.1
19.0 %
2,736.7
130.8
2,867.5
2,330.8
47.0
489.7
17.1 %
$
$
1,850.5
162.5
2,013.0
34.3%
8.6
33.1
47.9 %
(19.5)
42.4
1,773.9
40.1
199.0
9.9 %
29.9
39.4
47.9
31.4
17.2
146.1
As of December 31, 2014 , 2013 , and 2012 our Rail Group backlog of railcars was as follows:
Year Ended December 31,
2014
External Customers
Leasing Group
Total
$
$
2013
(in millions)
$
5,204.3
2,010.5
7,214.8
$
4,189.6
827.0
5,016.6
2012
$
$
2,867.5
834.7
3,702.2
The changes in the number of railcars in the Rail Group backlog are as follows:
Year Ended December 31,
Beginning balance
Orders received
Shipments
Ending balance
2014
2013
2012
39,895
51,395
(30,255)
61,035
31,990
32,240
(24,335)
39,895
29,000
22,350
(19,360)
31,990
Revenues increased for the year ended December 31, 2014 by 33.1 % when compared with the prior year with approximately three-fourths of
the increase resulting from higher unit deliveries and the remainder of the increase due to improved pricing and product mix changes. Cost of
revenues increased for the year ended December 31, 2014 by 29.9 % when compared with the prior year primarily due to an increase in unit
deliveries.
Revenues increased for the year ended December 31, 2013 by 42.4 % when compared to 2012 with slightly more than half of the increase
resulting from an increase in unit deliveries and the remainder due to improved pricing and product mix changes. Cost of revenues increased
for the year ended December 31, 2013 by 31.4 % when compared with the prior year with approximately 80% of the increase resulting from an
increase in unit deliveries and the remainder arising from product mix changes.
Unit increases and higher prices increased total backlog dollars by 43.8% when comparing December 31, 2014 to the prior year. The average
selling price in the backlog at December 31, 2014 was 6.0% lower as compared to the previous year due to product mix changes. Backlog
increased when comparing 2013 versus 2012 due to unit and price increases, as well as product mix change. The backlog dedicated to the
Leasing Group is fully supported by lease commitments with external customers. The final amount dedicated to the Leasing Group may vary
by the time of delivery as directed by our customers.
27
Table of Contents
For the year ended December 31, 2014 , railcar shipments included sales to the Leasing Group of $ 710.1 million compared to $ 756.5
million in the comparable period in 2013 , with a deferred profit of $ 133.1 million compared to $ 135.4 million for the same period in 2013 .
Results for the year ended December 31, 2012 , included $ 485.9 million in sales to the Leasing Group with a deferred profit of $ 50.8 million .
Sales to the Leasing Group and related profits are included in the operating results of the Rail Group but are eliminated in consolidation.
The Leasing Group purchases a portion of our railcar production, financing a portion of the purchase price through a non-recourse
warehouse loan facility or cash, and periodically refinances those borrowings through equipment financing transactions. In 2014 , the Leasing
Group purchased 22.5% of our railcar production compared to 27.2% in 2013 . On a segment basis, sales to the Leasing Group and related
profits are included in the operating results of our Rail Group but are eliminated in consolidation.
Construction Products Group
Year Ended December 31,
2014
Percent Change
2013
2012
2014 versus 2013
2013 versus 2012
($ in millions)
Revenues:
Highway products
Aggregates
Other
Total revenues
Operating costs:
Cost of revenues
Selling, engineering, and administrative costs
Property disposition gains
Operating profit
Operating profit margin
$
$
317.6
152.1
82.0
551.7
$
430.9
67.8
(12.4)
$
65.4
11.9%
335.9
112.7
76.4
525.0
409.6
63.3
(0.5)
52.6
10.0%
$
$
376.1
65.1
42.5
483.7
387.0
52.0
(0.1 )
44.8
9.3 %
)
(5.4%
35.0
7.3
5.1
(10.7)%
73.1
79.8
8.5
5.2
7.1
5.8
21.7
24.3
17.4
Revenues increased for the year ended December 31, 2014 by 5.1% compared to the same period in 2013 . During the year ended
December 31, 2014 , slightly more than half of the 35.0% increase in revenues in our Aggregates business was due to the timing of acquisitions
and the remainder was due to increased sales volume. The 5.4% decrease in Highway Products revenue resulted from lower sales volumes.
Cost of revenues increased by 5.2% for the year ended December 31, 2014 when compared to the prior year due to higher volumes in our
Aggregates business partially offset by a $2.6 million gain from the settlement of certain liabilities related to Aggregates acquisitions in 2013 .
Selling, engineering, and administrative costs increased by 7.1% for the year ended December 31, 2014 compared to the same period in 2013
primarily due to higher compensation expenses. The property disposition gains for the year ended December 31, 2014 primarily related to the
sale of certain land held by our Aggregates business.
Revenues increased for the year ended December 31, 2013 by 8.5% compared to the same period in 2012 . Increases in revenue in our
Aggregates and Other businesses were due to acquisitions while the 10.7% decrease in our Highway Products business was due to lower sales
volumes. Similarly, cost of revenues increased by 5.8% for the year ended December 31, 2013 , due to acquisition-related increases of
approximately 15.6% offset by lower costs from lower Highway Products volumes of 9.8%. Selling, engineering, and administrative costs
increased by 21.7% in 2013 primarily due to acquisitions.
28
Table of Contents
Inland Barge Group
Year Ended December 31,
2014
Percent Change
2013
2012
2014 versus 2013
2013 versus 2012
($ in millions)
Revenues
Operating costs:
Cost of revenues
Selling, engineering, and administrative costs
Property disposition gains
Operating profit
Operating profit margin
$
$
$
638.5
506.6
17.5
—
$
114.4
17.9%
576.7
461.5
19.2
—
96.0
16.6%
$
$
675.2
10.7 %
(14.6)%
538.9
15.4
(3.8 )
124.7
18.5 %
9.8
(8.9)
(14.4)
24.7
19.2
(23.0)
Revenues increased for the year ended December 31, 2014 by 10.7% compared to the same period in 2013 with two-thirds of the increase
resulting from higher delivery volumes and the remainder due to product mix changes. Cost of revenues increased at a lower rate than the
increase in revenues for the year ended December 31, 2014 when compared to the same period in the prior year due to product mix changes.
Selling, engineering, and administrative costs decreased for the year ended December 31, 2014 compared to the same period in 2013 due to a
legal reserve regarding a matter originating over ten years ago involving a foreign subsidiary recorded during the three months ended March
31, 2013 as well as decreased employee-related and consulting costs.
Revenues decreased for the year ended December 31, 2013 by 14.6% compared to the same period in the prior year with two-thirds of the
decrease resulting from lower delivery volumes and the remainder arising from a change in the mix of barge types. Cost of revenues decreased
primarily due to product mix changes. Selling, engineering, and administrative costs increased by 24.7 % for the year ended December 31,
2013 primarily as a result of increased employee-related and consulting costs as well as a legal reserve recorded during the three month period
ended March 31, 2013 regarding a matter originating over ten years ago involving a foreign subsidiary. Operating costs for the year ended
December 31, 2012 included a $3.4 million net gain from sales of barges previously included in property, plant, and equipment that were under
lease to third-party customers.
As of December 31, 2014 , the backlog for the Inland Barge Group was $ 437.9 million compared to $ 429.6 million as of December 31,
2013 . Deliveries for multi-year barge agreements are included in the backlog when specific production quantities for future years have been
determined.
Energy Equipment Group
Year Ended December 31,
2014
Percent Change
2013
2012
2014 versus 2013
2013 versus 2012
($ in millions)
Revenues:
Wind towers and utility structures
$
454.6
$
280.1
$
294.0
62.3%
(4.7)%
Other
Total revenues
537.7
992.3
385.3
665.4
264.6
558.6
39.6
49.1
45.6
19.1
Operating costs:
Cost of revenues
Selling, engineering, and administrative costs
Property disposition gains
Operating profit
Operating profit margin
810.5
74.8
(1.1)
$
108.1
10.9%
559.0
45.0
—
61.4
9.2%
510.3
30.8
(0.7)
18.2
3.3%
45.0
66.2
9.5
46.1
76.1
237.4
$
$
In August 2014, Trinity completed its acquisition of the assets of Meyer for approximately $595.6 million in cash. Meyer is one of North
America's leading providers of tubular steel structures for electricity transmission and distribution. Along with three other acquisitions
completed earlier in the year, the operations of Meyer are included with the Company's Energy Equipment Group. We have combined revenues
from our wind towers and utility structures product lines due to the similarity of the related products and markets. Previously reported amounts
have been restated to reflect this change.
29
Table of Contents
Revenues for the year ended December 31, 2014 increased by 49.1% compared to the same period in 2013 with revenue from acquisitions
completed during 2014 totaling $186.1 million and the remainder of the increase due to higher volumes. Revenues from the wind towers and
utility structures product lines increased by 62.3% while other revenues increased by 39.6% for the year ended December 31, 2014 . Other
revenues includes results primarily from our storage and distribution containers and tank heads product lines. Cost of revenues increased by
45.0% for the year ended December 31, 2014 compared to 2013 . A little less than two-thirds of the increase was due to acquisitions while the
remainder of the increase was due to higher volumes. Selling, engineering, and administrative costs increased by 66.2% for the year ended
December 31, 2014 compared to 2013 primarily due to acquisitions.
Revenues for the year ended December 31, 2013 increased by 19.1 % compared to the same period in 2012 . Other revenues increased by
45.6 %, with two-thirds of the increase due to volume increases and the remainder due to an acquisition. Revenue from wind towers and utility
structures decreased by 4.7% due primarily to a change in the type of wind towers produced. Cost of revenues for the year ended December 31,
2013 increased 9.5 % consisting of a 19.9% increase due to higher volumes in our storage and distribution containers, tank heads, and utility
structures businesses partially offset by a 10.4% decrease due to product mix changes in our structural wind towers business. Selling,
engineering, and administrative costs increased in 2013 by 46.1 % primarily related to an acquisition and additional compensation costs.
As of December 31, 2014 , the backlog for wind towers was $473.5 million compared to $553.9 million as of December 31, 2013 . The
Company does not report backlog from its utility structures business because certain contracts contain partial order cancellation provisions.
30
Table of Contents
Railcar Leasing and Management Services Group
Year Ended December 31,
2014
2013
Percent Change
2012
2014 versus 2013
2013 versus 2012
($ in millions)
Revenues:
Leasing and management
$
Sale of railcars owned one year or less at the time
of sale
Total revenues
$
Operating profit:
Leasing and management
$
Railcar sales:
Railcars owned one year or less at the time of
sale
Railcars owned more than one year at the time of
sale
Total operating profit
$
Operating profit margin:
Leasing and management
Railcar sales
Total operating profit margin
Selected expense information (1) :
Depreciation
Maintenance
Rent
Interest:
External
Intercompany
Total interest expense
$
586.9
486.3
1,118.3
287.9
632.0
$
528.5
$
58.5
645.4
$
118.6
647.1
73.3
(0.3)
$
267.3
$
242.6
7.7
10.2
74.0
(1.4)
136.1
9.1
24.8
92.3
516.3
20.4
296.8
33.5
300.9
$
$
45.5%
*
46.0
45.6 %
*
46.2
7.7 %
11.1 %
45.9%
*
46.5
$
$
$
130.0
78.9
52.9
$
$
$
129.0
71.5
53.3
$
$
$
120.5
59.4
50.9
0.8
10.3
(0.8)
7.1
20.4
4.7
$
153.3
—
153.3
$
153.5
3.8
157.3
$
161.2
13.1
174.3
(2.5)
(9.8)
$
$
$
* Not meaningful
Depreciation, maintenance, and rent expense are components of operating profit. Amortization of deferred profit on railcars sold from the Rail Group to the Leasing Group is
included in the operating profits of the Leasing Group resulting in the recognition of depreciation expense based on the Company's original manufacturing cost of the railcars.
Interest expense is not a component of operating profit and includes the effect of hedges. Intercompany interest expense is eliminated in consolidation and arises from Trinity’s
previous ownership of a portion of TRIP Holdings’ Senior Secured Notes, which notes were retired in full in May 2013. See Note 11 Debt of the Notes to the Consolidated
Financial Statements.
(1)
Total revenues increased by 73.3 % for the year ended December 31, 2014 compared to 2013 due to increased railcar sales. Forty-five
percent of the increase in leasing and management revenues was due to higher average rental rates on renewals and 25% was due to net fleet
additions with the remainder resulting from higher utilization and other fees. Sales of railcars owned one year or less at the time of sale
included $446.6 million in railcar sales to Element for the year ended December 31, 2014 . Additionally, proceeds from the sale of railcars
owned more than one year included $235.7 million in railcar sales to Element for the year ended December 31, 2014 . These transactions were
completed as part of the Company's strategic alliance with Element announced in December 2013.
Total revenues for the year ended December 31, 2013 were substantially unchanged compared to the prior year, reflecting a decrease in
railcar sales from the lease fleet primarily due to lower volumes, offset by an 11.1% increase in leasing and management revenues. Of the
increase in leasing and management revenues, 70% was due to lease fleet additions while the remainder was due primarily to higher rental rates
in our lease fleet.
Operating profit increased by 74.0 % for the year ended December 31, 2014 compared to 2013 due to higher profit from railcar sales.
Leasing and management profits increased primarily due to higher average rental rates in our lease fleet, partially offset by increased
maintenance costs resulting from higher regulatory compliance activity for the year ended December 31, 2014 when compared to 2013 .
Selling, engineering, and administrative costs increased to $49.6 million for the year ended December 31, 2014 from $37.6 million for the year
ended December 31, 2013 primarily due to increased staffing and higher performance-related compensation costs.
31
Table of Contents
Operating profit for the year ended December 31, 2013 was substantially unchanged compared to the prior year with lower profit from railcar
sales offset by higher profit from operations. Increased profit from operations resulting from higher rental rates and additions to the lease fleet
more than offset higher operating costs for the year ended December 31, 2013 when compared to the prior year. Depreciation, maintenance,
and rent expense increased due to lease fleet additions and additional maintenance costs resulting primarily from increased mileage and
regulatory requirements. Interest expense decreased as a result of lower borrowings.
The Leasing Group generally uses its non-recourse $475 million warehouse facility or cash to provide initial financing for a portion of the
purchase price of the railcars. After initial financing, the Leasing Group generally obtains long-term financing for the railcars in the lease fleet
through non-recourse asset-backed securities, long-term non-recourse operating leases pursuant to sales/leaseback transactions; long-term
recourse debt such as equipment trust certificates; or third-party equity. See Other Financing Activities .
Information regarding the Leasing Group’s lease fleet follows:
December 31, 2014
75,930
7.8
3.4
99.5%
Number of railcars
Average age in years
Average remaining lease term in years
Fleet utilization
December 31, 2013
75,685
7.2
3.3
99.5%
December 31, 2012
71,455
6.7
3.3
98.6%
All Other
Year Ended December 31,
2014
Percent Change
2013
2012
2014 versus 2013
2013 versus 2012
($ in millions)
Revenues
Operating costs:
Cost of revenues
Selling, engineering, and administrative costs
Property disposition losses/(gains)
Operating loss
$
110.4
$
125.2
9.4
1.4
(25.6 )
$
86.6
$
94.6
6.0
(0.3)
(13.7 )
$
81.4
$
86.8
5.2
(0.4)
(10.2 )
6.4%
27.5%
9.0
15.4
32.3
56.7
Revenues increased by 27.5% for the year ended December 31, 2014 compared to 2013 due to increased revenues from our transportation
company resulting from higher internal shipments. The increase in operating loss for the year ended December 31, 2014 was due to higher
costs of facility maintenance activities, higher costs related to commodity hedges, and higher reserves.
The increase in revenues for the year ended December 31, 2013 compared to the prior year of 6.4% was primarily due to higher internal
billings related to facility maintenance activities. The increase in operating loss for the year ended December 31, 2013 was primarily due to
certain reserves related to non-operating facilities.
Corporate
Year Ended December 31,
2014
2013
Percent Change
2012
2014 versus 2013
2013 versus 2012
($ in millions)
Operating costs
$
119.0
$
73.4
$
51.5
62.1%
42.5%
The increase in operating costs for the year ended December 31, 2014 compared to 2013 is primarily due to higher performance-related
compensation costs and increased staffing, increased legal expenses and approximately $8.7 million in one-time costs related to the acquisition
of Meyer for the year ended December 31, 2014 .
The increase in operating costs for the year ended December 31, 2013 compared to the prior year is primarily due to higher compensation,
resulting from the Company's higher financial performance, and consulting costs.
32
Table of Contents
Liquidity and Capital Resources
Cash Flows
The following table summarizes our cash flows from operating, investing, and financing activities for each of the last three years:
Year Ended December 31,
2014
Total cash provided by (required by):
Operating activities
Investing activities
Financing activities
Net increase (decrease) in cash and cash equivalents
$
$
819.2
(814.7 )
454.9
459.4
2013
(in millions)
$
$
662.2
(818.0)
11.3
(144.5 )
2012
$
$
527.4
(311.4 )
5.9
221.9
2014 compared with 2013
Operating Activities . Net cash provided by operating activities for the year ended December 31, 2014 was $819.2 million compared to net
cash provided by operating activities of $662.2 million for the year ended December 31, 2013 . Cash flow provided by operating activities
increased primarily due to higher operating profits in 2014 .
Receivables at December 31, 2014 increased by $ 56.4 million or 15.1% from December 31, 2013 , primarily due to an increase in income
taxes receivable. Raw materials inventory at December 31, 2014 increased by $ 108.4 million or 22.7% since December 31, 2013 primarily
attributable to higher levels in our Rail Group required to meet production demands. Finished goods inventory at December 31, 2014 increased
by $ 48.5 million or 35.6% since December 31, 2013 primarily due to higher levels in our Rail and Energy Equipment Groups pending
delivery. Accounts payable increased by $60.7 million to support higher inventory levels, while accrued liabilities increased by $ 82.1 million
from December 31, 2013 due to higher customer advances which totaled $ 193.8 million at December 31, 2014 . We continually review
reserves related to bad debt as well as the adequacy of lower of cost or market valuations related to accounts receivable and inventory.
Investing Activities. Net cash required by investing activities for the year ended December 31, 2014 was $814.7 million compared to $818.0
million for the year ended December 31, 2013 . Capital expenditures for the year ended December 31, 2014 were $ 464.6 million , of which $
245.3 million were for additions to the lease fleet. This compares to $ 731.0 million of capital expenditures for the same period last year, of
which $ 581.1 million were for additions to the lease fleet. Full-year manufacturing and corporate capital expenditures for 2015 are projected to
range between $ 250.0 million and $ 300.0 million . For 2015 , we expect the annual net cash investment in new railcars in our lease fleet to be
between $55.0 million and $70.0 million after considering the expected proceeds received from leased railcar sales during the year. Proceeds
from the sale of property, plant, and equipment and other assets totaled $ 288.8 million for the year ended December 31, 2014 , including
railcar sales from the lease fleet owned more than one year at the time of sale totaling $ 265.8 million . This compares to $ 135.3 million for the
same period in 2013 , including railcar sales from the lease fleet owned more than one year at the time of sale totaling $ 131.6 million . Net
cash required related to acquisitions amounted to $714.4 million and $73.2 million for the years ended December 31, 2014 and 2013 ,
respectively. Short-term marketable securities for the year ended December 31, 2014 decreased $74.7 million .
Financing Activities. Net cash provided by financing activities during the year ended December 31, 2014 was $454.9 million compared to
$11.3 million of net cash provided by financing activities for the same period in 2013 . During the year ended December 31, 2014 , we retired $
186.6 million in debt as scheduled. We borrowed $ 727.3 million , net of debt issuance costs, during the year ended December 31, 2014 , from
the issuance of $400 million in Senior Notes and, the issuance by TRIP Master Funding, of $335.7 million in Secured Equipment Notes. Also,
during the year ended December 31, 2014 , we received $49.6 million in equity contributions from noncontrolling interests in one of the
Company's partially-owned leasing subsidiaries. During the year ended December 31, 2013 , we retired $ 262.1 million in debt principally
consisting of the repayment of the Leasing Group term loan and the TRIP Holdings senior secured notes. During the year ended December 31,
2013 , we borrowed $ 175.0 million , net of debt issuance costs, primarily from the issuance by TRL 2012 of its 2013-1 Secured Railcar
Equipment Notes. During the year ended December 31, 2013 , we received proceeds of $296.7 million related to the sale of equity interests in
certain partially-owned leasing subsidiaries and we received $50.0 million in equity contributions from noncontrolling interests in one of the
Company's partially-owned leasing subsidiaries. During 2013, TRIP Holdings repurchased the equity interests of certain equity investors for
$84.0 million . Additionally, we repurchased shares of the Company’s stock under a share repurchase program as described further below. We
intend to use our cash and committed credit facilities to fund the operations, expansions, and growth initiatives of the Company.
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2013 compared with 2012
Operating Activities. Net cash provided by operating activities for the year ended December 31, 2013 was $662.2 million compared to
$527.4 million of net cash provided by operating activities for the same period in 2012 . Cash flow provided by operating activities increased
primarily due to higher operating profits in 2013 .
Receivables at December 31, 2013 decreased slightly by $ 17.2 million or 4.4% from December 31, 2012 , primarily due to lower
receivables from the Energy Equipment Group. At December 31, 2013 , one customer's net receivable balance in our Energy Equipment
Group, all within terms, accounted for 16% of the consolidated net receivables balance outstanding. Raw materials inventory at December 31,
2013 increased by $ 37.3 million or 8.5% since December 31, 2012 primarily attributable to higher levels in our Rail Group required to meet
production demands. Finished goods inventory at December 31, 2013 increased by $ 14.8 million or 12.2% since December 31, 2012 primarily
due to higher levels in our Rail Group pending delivery. Accounts payable increased by $29.0 million to support higher inventory levels, while
accrued liabilities increased by $ 72.4 million or 12.4% from December 31, 2012 due to higher income taxes payable and certain other
payroll-related accruals. Customer advances totaled $141.7 million at December 31, 2013 .
Investing Activities. Net cash required by investing activities for the year ended December 31, 2013 was $818.0 million compared to $311.4
million for the year ended December 31, 2012 . Capital expenditures for the year ended December 31, 2013 were $ 731.0 million , of which $
581.1 million were for additions to the lease fleet. This compares to $ 469.2 million of capital expenditures for the same period in 2012 , of
which $ 352.6 million were for additions to the lease fleet. Proceeds from the sale of property, plant, and equipment and other assets totaled $
135.3 million for the year ended December 31, 2013 , including railcar sales from the lease fleet owned more than one year at the time of sale
totaling $ 131.6 million . This compares to $ 201.4 million for the year ended December 31, 2012 , including railcar sales from the lease fleet
owned more than one year at the time of sale totaling $ 126.3 million . Net cash required related to acquisitions amounted to $ 73.2 million and
$ 46.2 million for the years ended December 31, 2013 and 2012 , respectively. Short-term marketable securities for the year ended
December 31, 2013 increased $149.7 million .
Financing Activities. Net cash provided by financing activities during the year ended December 31, 2013 was $11.3 million compared to
$5.9 million of net cash provided by financing activities for the year ended December 31, 2012 . During the year ended December 31, 2013 ,
we retired $ 262.1 million in debt principally consisting of the repayment of the Leasing Group term loan and the TRIP Holdings senior
secured notes. During the year ended December 31, 2012 , we retired $378.4 million in debt principally consisting of repayments of the TILC
warehouse loan facility. We borrowed $ 175.0 million , net of debt issuance costs, during the year ended December 31, 2013 , primarily from
the issuance by TRL 2012 of its 2013-1 Secured Railcar Equipment Notes. During the year ended December 31, 2012 , we borrowed $443.8
million, net of $5.2 million of deferred loan costs, primarily from the issuance by TRL 2012 of $333.8 million in Secured Railcar Equipment
Notes, and from advances under our TILC warehouse loan facility. During the year ended December 31, 2013 , we received proceeds of $296.7
million related to the sale of equity interests in certain partially-owned leasing subsidiaries and we received $50.0 million in equity
contributions from noncontrolling interests in one of the Company's partially-owned leasing subsidiaries. During 2013, TRIP Holdings
repurchased the equity interests of certain equity investors for $84.0 million. Additionally, we repurchased shares of the Company's stock under
a share repurchase program as described further below.
Other Investing and Financing Activities
In August 2014, Trinity completed its acquisition of the assets of Meyer for approximately $595.6 million in cash. Meyer is one of North
America's leading providers of tubular steel structures for electricity transmission and distribution. The operations of Meyer are included within
the Company's Energy Equipment Group.
During the year ended December 31, 2014 , we completed the acquisitions of the assets of WesMor Cryogenic Companies and Alloy Custom
Products, Inc., expanding the Company's engineering and manufacturing capabilities to provide cryogenic storage and distribution products.
We also completed the acquisition of the assets of Platinum in Alberta, Canada, a manufacturer and seller of oil and gas process and storage
equipment as well as the acquisition of a galvanizing services business located in Texas.
During the year ended December 31, 2014 , the Company received proceeds of $882.7 million from the sale of leased railcars to Element
under the strategic alliance with Element announced in December 2013, including $200.4 million recorded as revenue by the Rail Group. From
the total proceeds received from Element, the Leasing Group recorded $446.6 million in revenue from the sale of railcars owned one year or
less at the time of sale. The remainder of the proceeds of $235.7 million is attributable to the sale of railcars owned more than one year at the
time of sale and is, consequently, excluded from revenue. Since the inception of our alliance, the Company has received proceeds of $987.7
million from the sale of leased railcars to Element.
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At December 31, 2014 and for the two year period then ended, there were no borrowings under our $425.0 million revolving credit facility
that matures on October 20, 2016 . Interest on the revolving credit facility is calculated at Libor plus 1.50% or prime plus 0.50% . After
subtracting $88.6 million for letters of credit outstanding, $336.4 million was available under the revolving credit facility as of December 31,
2014 .
The $475.0 million TILC warehouse loan facility, established to finance railcars owned by TILC, had $120.6 million outstanding with
$354.4 million unused, of which $334.6 million was available as of December 31, 2014 based on the amount of warehouse-eligible, unpledged
equipment. The warehouse loan is a non-recourse obligation secured by a portfolio of railcars and operating leases, certain cash reserves, and
other assets acquired and owned by the warehouse loan facility trust. The principal and interest of this indebtedness are paid from the cash
flows of the underlying leases. Advances under the facility bear interest at a defined index rate plus a margin, for an all-in interest rate of 1.94%
at December 31, 2014 . The warehouse loan facility has been renewed and extended through June 2015 . Amounts outstanding at maturity,
absent renewal, will be payable in three installments in December 2015 , June 2016 , and December 2016 .
In May 2014 , TRIP Master Funding issued $335.7 million in aggregate principal amount of Series 2014-1 Secured Railcar Equipment Notes
pursuant to the Master Indenture between TRIP Master Funding and Wilmington Trust Company, as indenture trustee, with a final maturity
date of April 2044 . The TRIP Master Funding Series 2014-1 Secured Railcar Equipment Notes consist of two classes with the Class A-1 notes
bearing interest at 2.86% and the Class A-2 notes bearing interest at 4.09% . The TRIP Master Funding Secured Railcar Equipment Notes are
non-recourse to Trinity, TILC, TRIP Holdings, and the other equity investors in TRIP Holdings and are secured by TRIP Master Funding's
portfolio of railcars and operating leases thereon, its cash reserves, and all other assets owned by TRIP Master Funding. As of December 31,
2014 , there were $108.7 million and $220.7 million of Class A-1 and Class A-2 notes outstanding, respectively.
In September 2014, the Company issued $400.0 million aggregate principal amount of 4.55% senior notes due October 2024 . Interest on the
Senior Notes is payable semiannually commencing April 1, 2015. The Senior Notes rank senior to existing and future subordinated debt
including the Company's Convertible Subordinated Notes and rank equal to existing and future senior indebtedness, including the Company's
revolving credit facility. The Senior Notes are subordinated to all the Company's existing and future secured debt to the extent of the value of
the collateral securing such indebtedness. The Senior Notes contain covenants that limit our ability and/or certain subsidiaries' ability to create
or permit to exist certain liens; enter into sale and leaseback transactions; and consolidate, merge, or transfer all or substantially all of our
assets. The Company’s Senior Notes are fully and unconditionally and jointly and severally guaranteed by each of Trinity’s domestic
subsidiaries that is a guarantor under the Company's revolving credit facility.
In March 2014 , the Company’s Board of Directors authorized a new $250 million share repurchase program that expires on December 31,
2015 and replaced the Company's previously authorized $200 million share repurchase program. Under the new program, 747,246 shares were
repurchased during the year ended December 31, 2014 , at a cost of $31.5 million . During the year ended December 31, 2013 , the Company
repurchased 2,473,189 shares under the prior program at a cost of $108.2 million .
In May 2014, the Company's Board of Directors authorized a 2-for-1 stock split. The stock split was issued in the form of a 100% stock
dividend. The additional shares were distributed on June 19, 2014 , to shareholders of record at the close of business on June 5, 2014 . All share
and per share information, including dividends, has been retroactively adjusted to reflect the 2-for-1 stock split, except for the statement of
stockholders' equity which reflects the stock split by reclassifying from "Capital in Excess of Par Value" to "Common Stock" in the amount of
$78.0 million which equals the par value of the additional shares issued to effect the stock split.
Demand conditions and corresponding order levels for new railcars continue to be favorable across a wide variety of industries. While
demand conditions and corresponding order levels for barges serving the oil and gas markets have slowed recently, favorable conditions exist
long term for barges in the chemical and petrochemical markets. In other markets, such as agricultural products, demand has recently been
strong for hopper barges. Budgetary constraints at the Federal and state levels, and pending litigation in our Highway Products business have
negatively impacted the results of our Construction Products Group.
We continually assess our manufacturing capacity and take steps to align our production capacity with demand for our products. Due to
improvements in demand for certain products, we have continued to increase production staff at certain facilities. We expect that facilities on
non-operating status will be available for future operations should demand increase further.
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Equity Investment
See Note 5 of the Notes to the Consolidated Financial Statements for information about the investment in partially-owned subsidiaries.
Future Operating Requirements
We expect to finance future operating requirements with cash, cash equivalents and short-term marketable securities; cash flows from
operations, and, depending on market conditions, short-term and long-term debt; and equity. Debt instruments that the Company has utilized
include its revolving credit facility, the TILC warehouse facility, senior notes, convertible subordinated notes, asset-backed securities, and
sale-leaseback transactions. The Company has also issued equity at various times. As of December 31, 2014 , the Company had unrestricted
cash, cash equivalents and short-term marketable securities balances of $ 962.9 million , $336.4 million available under its revolving credit
facility, and $334.6 million available under its TILC warehouse facility. The Company believes it has access to adequate capital resources to
fund operating requirements and is an active participant in the capital markets.
Off Balance Sheet Arrangements
See Note 6 of the Notes to the Consolidated Financial Statements for information about off balance sheet arrangements.
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Derivative Instruments
We use derivative instruments to mitigate the impact of changes in interest rates, both 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 natural gas and diesel fuel prices and changes in foreign currency exchange rates. For derivative instruments designated as hedges, the
Company formally documents the relationship between the derivative instrument and the hedged item, as well as the risk management
objective and strategy for the use of the derivative instrument. This documentation includes linking the derivatives that are designated as fair
value or cash flow hedges to specific assets or liabilities on the balance sheet, commitments, or forecasted transactions. At the time a derivative
instrument is entered into, and at least quarterly thereafter, the Company assesses whether the derivative instrument is effective in offsetting the
changes in fair value or cash flows of the hedged item. Any change in fair value resulting in ineffectiveness, as defined by accounting standards
issued by the Financial Accounting Standards Board ("FASB"), is recognized in current period earnings. For derivative instruments that are
designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative instrument is recorded in accumulated
other comprehensive loss ("AOCL") as a separate component of stockholders' equity and reclassified into earnings in the period during which
the hedged transaction affects earnings. Trinity monitors its derivative positions and the credit ratings of its counterparties and does not
anticipate losses due to counterparties' non-performance. See Note 3 of the Notes to Consolidated Financial Statements for discussion of how
the Company valued its commodity hedges and interest rate swaps at December 31, 2014 . See Note 11 of the Notes to Consolidated Financial
Statements for a description of the Company's debt instruments.
Interest rate hedges
Notional
Amount
Included in accompanying balance sheet
at December 31, 2014
AOCL –
loss/
Noncontrolling
Liability
(income)
Interest
Interest
Rate (1)
(in millions, except %)
Expired hedges:
2006 secured railcar equipment
notes
$
Promissory notes
$
TRIP Holdings warehouse loan $
Open hedges:
TRIP Master Funding secured
railcar equipment notes
$
Promissory notes
$
(1) Weighted average fixed interest rate
200.0
370.0
788.5
4.87%
5.34%
3.60%
$
$
$
—
—
—
$
$
$
(1.3 )
1.2
10.0
$
$
$
—
—
13.6
56.3
387.6
2.62%
4.13%
$
$
2.0
6.4
$
$
0.8
5.3
$
$
1.1
—
Effect on interest expense-increase/(decrease)
2014
Year Ended December 31,
2013
Expected effect
during next twelve
months (1)
2012
(in millions)
Expired hedges:
2006 secured railcar equipment notes
$
Promissory notes
$
TRIP Holdings warehouse loan
$
Open hedges:
TRIP Master Funding secured railcar equipment notes $
Promissory notes
$
(1) Based on fair value of open hedges as of December 31, 2014
(0.3 )
2.9
5.1
$
$
$
(0.3 )
3.1
6.1
$
$
$
(0.3 )
3.3
6.0
$
$
$
(0.3 )
1.2
4.9
1.5
15.4
$
$
1.8
15.8
$
$
2.0
18.4
$
$
1.2
6.4
During 2005 and 2006 , we entered into interest rate swap derivatives in anticipation of issuing our 2006 Secured Railcar Equipment Notes.
These derivative instruments, with a notional amount of $200.0 million , were settled in 2006 and fixed the interest rate on a portion of the
related debt issuance. These derivative instrument transactions are being accounted for as cash flow hedges with changes in the fair value of the
instruments of $4.5 million in income recorded in AOCL through the date the related debt issuance closed in 2006 . The balance is being
amortized over the term of the related debt. The effect on interest expense is due to amortization of the AOCL balance.
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During 2006 and 2007 , we entered into interest rate swap derivatives in anticipation of issuing our Promissory Notes. These derivative
instruments, with a notional amount of $370.0 million , were settled in 2008 and fixed the interest rate on a portion of the related debt issuance.
These derivative instrument transactions are being accounted for as cash flow hedges with changes in the fair value of the instruments of $24.5
million recorded as a loss in AOCL through the date the related debt issuance closed in 2008 . The balance is being amortized over the term of
the related debt. The effect on interest expense is due to amortization of the AOCL balance.
In 2008 , we entered into an interest rate swap derivative instrument, expiring in 2015 , to fix the variable Libor component of the Promissory
Notes. This derivative instrument transaction is being accounted for as a cash flow hedge. The effect on interest expense results primarily from
monthly interest settlements.
Between 2007 and 2009 , TRIP Holdings, as required by the TRIP Warehouse Loan, entered into interest rate swap derivatives, all of which
qualified as cash flow hedges, to reduce the effect of changes in variable interest rates in the TRIP Warehouse Loan. In July 2011 , these
interest rate hedges were terminated in connection with the refinancing of the TRIP Warehouse Loan. Balances included in AOCL at the date
the hedges were terminated are being amortized over the expected life of the new debt with $4.9 million of additional interest expense expected
to be recognized during the twelve months following December 31, 2014 . Also in July 2011 , TRIP Holdings’ wholly-owned subsidiary, TRIP
Master Funding, entered into an interest rate swap derivative instrument, expiring in 2021 , with a notional amount of $94.1 million to reduce
the effect of changes in variable interest rates associated with the Class A-1b notes of the TRIP Master Funding secured railcar equipment
notes. The effect on interest expense results primarily from monthly interest settlements.
See Note 11 of the Notes to Consolidated Financial Statements regarding the related debt instruments.
Other Derivatives
Effect on operating income - increase/(decrease)
Year Ended December 31,
2014
2013
2012
(in millions)
Fuel hedges (1)
$
(2.3 )
Foreign exchange hedges (2)
$
—
(1) Included in cost of revenues in the accompanying consolidated statement of operations
(2)
$
$
—
—
$
$
0.4
(0.4 )
Included in other, net in the accompanying consolidated statement of operations
Natural gas and diesel fuel
We maintain a program to mitigate the impact of fluctuations in the price of natural gas and diesel fuel purchases. The intent of the program
is to protect our operating profit from adverse price changes by entering into derivative instruments. For those instruments that do not qualify
for hedge accounting treatment, any changes in their valuation are recorded directly to the consolidated statement of operations. The amount
recorded in the consolidated balance sheet as of December 31, 2014 for these instruments was a liability of $2.1 million.
Foreign exchange hedge
We enter into foreign exchange hedges to mitigate the impact on operating profit of unfavorable fluctuations in foreign currency exchange
rates. These instruments are short term with quarterly maturities and no remaining balance in AOCL as of December 31, 2014 .
Stock-Based Compensation
We have a stock-based compensation plan covering our employees and our Board of Directors. See Note 16 of the Notes to the Consolidated
Financial Statements.
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Employee Retirement Plans
As disclosed in Note 14 of the Notes to the Consolidated Financial Statements, the projected benefit obligations of the employee retirement
plans exceeded the plans' assets by $39.4 million as of December 31, 2014 while the assets of the employee retirement plans exceeded the
plans' projected benefit obligations by $7.1 million as of December 31, 2013 . The change was primarily due to an 89 basis point decrease in
the obligation discount rate assumption, a lower return on assets, and lower mortality assumptions. We continue to sponsor an employee
savings plan under the existing 401(k) plan that covers substantially all employees and includes both a company matching contribution and an
annual retirement contribution of up to 3% each of eligible compensation based on our performance, as well as a Supplemental Profit Sharing
Plan. Both the annual retirement contribution and the company matching contribution are discretionary, requiring board approval, and made
annually with the investment of the funds directed by the participants. Finally, with the acquisition of Meyer, the Company contributes to a
multiemployer defined benefit pension plan under the terms of a collective-bargaining agreement that covers certain union-represented
employees at one of Meyer's facilities.
Employer contributions for the year ending December 31, 2015 are expected to be $19.7 million for the defined benefit plans compared to
$15.0 million contributed during 2014 . Employer contributions to the 401(k) plans and the Supplemental Profit Sharing Plan for the year
ending December 31, 2015 are expected to be $16.1 million compared to $14.0 million contributed during 2014 . Employer contributions for
the year ending December 31, 2015 are expected to be $2.7 million for the multiemployer plan compared to $0.6 million contributed during
2014 .
Contractual Obligation and Commercial Commitments
As of December 31, 2014 , we had the following contractual obligations and commercial commitments:
Contractual Obligations and Commercial Commitments
Payments Due by Period
2-3
4-5
Years
Years
1 Year
or Less
Total
After
5 Years
(in millions)
Debt and capital lease obligations:
Debt:
Parent and wholly-owned subsidiaries, excluding unamortized
debt discount
$
Partially-owned subsidiaries
Capital lease obligations
Interest
Operating leases:
Leasing Group
Other
Obligations for purchase of goods and services 1
Letters of credit
Other
Total
$
2,058.0
1,515.9
39.1
1,005.6
4,618.6
511.3
19.4
1,365.8
92.0
8.8
6,615.9
$
$
110.8
69.1
3.2
170.7
353.8
56.0
7.0
1,267.7
91.8
5.4
1,781.7
$
$
505
114.2
7.2
286.0
912.4
106.7
8.5
98.1
0.2
2.8
1,128.7
$
$
88.6
137.2
28.7
226.5
481.0
110.2
3.1
—
—
0.6
594.9
$
$
1,353.6
1,195.4
—
322.4
2,871.4
238.4
0.8
—
—
—
3,110.6
1 Includes $1.2 billion in purchase obligations for raw materials and components principally by the Rail, Inland Barge, and Energy
Equipment Groups.
As of December 31, 2014 and 2013 , we had $73.9 million and $65.8 million , respectively, of tax liabilities, including interest and penalties,
related to uncertain tax positions. Because of the high degree of uncertainty regarding the timing of future cash outflows associated with these
liabilities, we are unable to estimate the years in which settlement will occur with the respective taxing authorities. See Note 13 of the Notes to
the Consolidated Financial Statements.
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Table of Contents
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. On an on-going basis, management evaluates its estimates and judgments, including those related to bad debts,
inventories, property, plant, and equipment, goodwill, income taxes, warranty obligations, insurance, restructuring costs, contingencies, and
litigation. 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.
Inventory
We state all our inventories at the lower of cost or market. Our policy related to excess and obsolete inventory requires an analysis of
inventory at the business unit level on a quarterly basis and the recording of any required adjustments. In assessing the ultimate realization of
inventories, we are required to make judgments as to future demand requirements and compare that with the current or committed inventory
levels. It is possible that changes in required inventory reserves may occur in the future due to then current market conditions.
Long-lived Assets
We periodically evaluate the carrying value of long-lived assets to be held and used for potential impairment. The carrying value of
long-lived assets to be held and used is considered impaired only when the carrying value is not recoverable through undiscounted future cash
flows and the fair value of the assets is less than their 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 by the estimated cost to dispose of the assets.
Goodwill
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. The goodwill impairment test is a two-step process with step one requiring the
comparison of the reporting unit's estimated fair value with the carrying amount of its net assets. Step two of the impairment test is necessary to
determine the amount of goodwill impairment to be recorded when 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 unit with recorded goodwill. The estimates and judgments that
most significantly affect the fair value calculations are assumptions related to revenue and operating profit growth, discount rates and exit
multiples. During the three months ended December 31, 2014 , the Company considered certain state actions with regard to its highway
products litigation as an indicator of possible goodwill impairment. See Note 18 Commitments and Contingencies and in the accompanying
consolidated financial statements for a fuller explanation of this matter. Based on the Company's annual goodwill impairment test, performed at
the reporting unit level as of December 31, 2014 , the Company concluded that 1) no impairment charges were determined to be necessary and
2) none of the reporting units evaluated could reasonably be expected to fail the first step of the goodwill impairment test. See Note 1 of the
Notes to the Consolidated Financial Statements for further explanation.
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, made for the purposes of the long-lived asset and goodwill impairment tests, will
prove to be accurate predictions of the future. If our assumptions regarding forecasted cash flows are not achieved, it is possible that
impairments of remaining goodwill and long-lived assets may be required.
Warranties
The Company provides warranties against materials and manufacturing defects generally ranging from one to five years depending on the
product. The warranty costs are estimated using a two-step approach. First, an engineering estimate is made for the cost of all claims that have
been filed by a customer. Second, based on historical claims experience, a cost is accrued for all products still within a warranty period for
which no claims have been filed. The Company provides for the estimated cost of product
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warranties at the time revenue is recognized related to products covered by warranties and assesses the adequacy of the resulting reserves on a
quarterly basis.
Insurance
We are effectively self-insured for workers' compensation claims. A third-party administrator processes all such claims. We accrue our
workers' compensation liability based upon independent actuarial studies. To the extent actuarial assumptions change and claims experience
rates differ from historical rates, our liability may change.
Contingencies and Litigation
The Company is involved in claims and lawsuits incidental to our business. Based on information currently available with respect to such
claims and lawsuits, including information on claims and lawsuits as to which the Company is aware but for which the Company has not been
served with legal process, it is management's opinion that the ultimate outcome of all such claims and litigation, including settlements, in the
aggregate will not have a material adverse effect on the Company's overall financial condition for purposes of financial reporting. However,
resolution of certain claims or lawsuits by settlement or otherwise, could impact the operating results of the reporting period in which such
resolution occurs.
Environmental
We are involved in various proceedings related to environmental matters. We have provided reserves to cover probable and estimable
liabilities with respect to such proceedings, taking into account currently available information and our contractual rights of indemnification.
However, estimates of future response costs are necessarily imprecise. Accordingly, 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.
Income Taxes
The Company accounts for income taxes under the asset and liability method prescribed by ASC 740. See Note 13 in the Notes to the
Consolidated Financial Statements. 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 tax rates. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the
provision for income taxes in the period that includes the enactment date. 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 law and tax rates for the appropriate tax jurisdictions to determine the amount of such deferred tax assets and liabilities. Changes in
the calculated deferred tax assets and liabilities may occur in certain circumstances, including statutory income tax rate changes, statutory tax
law changes, or changes in the structure or tax status of the Company. The Company assesses whether a valuation allowance should be
established against its 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; the Company's experience with tax attributes expiring unused; and
tax planning alternatives.
At December 31, 2014 , the Company had $33.5 million of Federal consolidated net operating loss carryforwards. The majority of these net
operating loss carryforwards were acquired as part of an acquisition of a company in 2010 and are subject to limitations on the amount that can
be utilized in any one tax year. In addition, the Company had tax-effected $3.6 million of state loss carryforwards. The Federal net operating
loss carryforwards are due to expire in 2028 and 2029 . We have established a valuation allowance for Federal, state, and foreign tax operating
losses and credits which may not be realizable. We believe that it is more likely than not that we will be able to generate sufficient future
taxable income to utilize the remaining deferred tax assets.
At times, we may claim tax benefits that may be challenged by a tax authority. We recognize tax benefits only for tax positions that are more
likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is
greater than 50 percent likely to be realized upon settlement. A liability for “unrecognized tax benefits” is recorded for any tax benefits claimed
in our tax returns that do not meet these recognition and measurement standards.
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Pensions
The Company sponsors defined benefit plans which provide retirement income and death benefits for certain eligible employees. The
Company's pension costs and liabilities are primarily determined using actuarial assumptions regarding the long-term rate of return on plan
assets and the discount rate used to determine the present value of future benefit obligations. The compensation increase rate assumption
pertains solely to the pension plan of the Company's Inland Barge segment which was closed to new participants in 2014. The accrued benefits
of the Company's remaining pension plans were frozen in 2009.
Pension assumptions are reviewed annually by outside actuaries and the Company's management. These actuarial assumptions are
summarized in the following table:
Year Ended December 31,
2014
Assumptions used to determine benefit obligations at the annual measurement date were:
Obligation discount rate
Compensation increase rate
Assumptions used to determine net periodic benefit costs were:
Obligation discount rate
Long-term rate of return on plan assets
Compensation increase rate
2013
2012
4.33%
4.00%
5.22%
4.00%
4.25%
4.00%
5.22%
7.75%
4.00%
4.25%
7.75%
4.00%
5.40%
7.75%
3.00%
The obligation discount rate assumption is determined by deriving a single discount rate from a theoretical settlement portfolio of high
quality corporate bonds sufficient to provide for the plans' projected benefit payments. The expected long-term rate of return on plan assets is
an assumption reflecting the anticipated weighted average rate of earnings on the portfolio over the long-term. To arrive at this rate, we
developed estimates based upon the anticipated performance of the plans' assets. The effect of a change in either of these assumptions on the
net retirement cost for the year ended December 31, 2014 and on the projected benefit obligations at December 31, 2014 is summarized as
follows:
Effect on Net Retirement
Cost for the Year Ended
December 31, 2014
Effect on Projected Benefit
Obligations at December
31, 2014
Increase/(decrease)
(in millions)
Assumptions:
Obligation discount rate:
Increase of 50 basis points
Decrease of 50 basis points
Long-term rate of return on plan assets:
Increase of 50 basis points
Decrease of 50 basis points
$
$
(0.2 )
0.8
$
$
$
$
(2.0 )
2.0
$
$
Recent Accounting Pronouncements
See Note 1 of the Notes to the Consolidated Financial Statements for information about recent accounting pronouncements.
42
(30.7 )
34.2
—
—
Table of Contents
Forward-Looking Statements
This annual report on Form 10-K (or statements otherwise made by the Company or on the Company’s behalf from time to time in other
reports, filings with the Securities and Exchange Commission (“SEC”), news releases, conferences, World Wide Web postings or otherwise)
contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements contained
herein that are not historical facts are forward-looking statements and involve risks and uncertainties. These forward-looking statements include
expectations, beliefs, plans, objectives, future financial performances, estimates, projections, goals, and forecasts. Trinity uses the words
“anticipates,” “believes,” “estimates,” “expects,” “intends,” “forecasts,” “may,” “will,” “should,” and similar expressions to identify these
forward-looking statements. Potential factors, which could cause our actual results of operations to differ materially from those in the
forward-looking statements include, among others:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
market conditions and demand for our business products and services;
the cyclical nature of industries in which we compete;
variations in weather in areas where our construction products are sold, used, or installed;
naturally-occurring events and disasters causing disruption to our manufacturing, product deliveries, and production capacity, thereby
giving rise to an increase in expenses, loss of revenue, and property losses;
the timing of introduction of new products;
the timing and delivery of customer orders or a breach of customer contracts;
the credit worthiness of customers and their access to capital;
product price changes;
changes in mix of products sold;
the extent of utilization of manufacturing capacity;
availability and costs of steel, component parts, supplies, and other raw materials;
competition and other competitive factors;
changing technologies;
surcharges and other fees added to fixed pricing agreements for steel, component parts, supplies and other raw materials;
interest rates and capital costs;
counter-party risks for financial instruments;
long-term funding of our operations;
taxes;
the stability of the governments and political and business conditions in certain foreign countries, particularly Mexico;
changes in import and export quotas and regulations;
business conditions in emerging economies;
costs and results of litigation, including trial and appellate costs and supersedes bonding costs;
changes in accounting standards or inaccurate estimates or assumptions in the application of accounting policies; and
legal, regulatory, and environmental issues, including compliance of our products with mandated specifications, standards, or testing
criteria and obligations to remove and replace our products following installation or to recall our products and install different products
manufactured by us or our competitors.
Any forward-looking statement speaks only as of the date on which such statement is made. Trinity undertakes no obligation to update any
forward-looking statement to reflect events or circumstances after the date on which such statement is made.
43
Table of Contents
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Our earnings could be affected by changes in interest rates due to the impact those changes have on our variable rate debt obligations, which
represented 15.5% of our total debt as of December 31, 2014 . If interest rates average one percentage point more in fiscal year 2015 than they
did during 2014 , our interest expense would increase by $1.4 million, after considering the effects of interest rate hedges. In comparison, at
December 31, 2013 , we estimated that if interest rates averaged one percentage point more in fiscal year 2014 than they did during 2013 , our
interest expense would increase by $1.7 million. The impact of an increase in interest rates was determined based on the impact of the
hypothetical change in interest rates and scheduled principal payments on our variable-rate debt obligations as of December 31, 2014 and 2013
. A one percentage point increase in the interest rate yield would decrease the fair value of the fixed rate debt by approximately $243.7 million.
A one percentage point decrease in the interest rate yield would increase the fair value of the fixed rate debt by approximately $275.7 million.
Trinity uses derivative instruments to mitigate the impact of increases in natural gas and diesel fuel prices. Existing hedge transactions as of
December 31, 2014 are based on the New York Mercantile Exchange for natural gas and heating oil. Hedge transactions are settled with the
counterparty in cash. The effect of these transactions on the consolidated balance sheets was a liability of $2.1 million at December 31, 2014
and was insignificant at December 31, 2013 . The effect on the consolidated statement of operations for the year ended December 31, 2014 was
operating expense of $2.3 million, and for the year ended December 31, 2013 was immaterial. Based on hedge positions at December 31, 2014
we estimate that a hypothetical 10% increase in the price of these commodities would reduce the liability and the related operating expense by
$0.5 million. Similarly, a hypothetical 10% decrease in the price of these commodities would increase the liability and the related operating
expense by $0.5 million.
In addition, we are subject to market risk related to our net investments in our foreign subsidiaries. The net investment in foreign subsidiaries
as of December 31, 2014 was $299.9 million. The impact of such market risk exposures as a result of foreign exchange rate fluctuations has not
been material to us. See Note 12 of the Notes to the Consolidated Financial Statements.
44
Table of Contents
Item 8. Financial Statements
Trinity Industries, Inc.
Index to Financial Statements
Page
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Operations for the years ended December 31, 2014, 2013, and 2012
Consolidated Statements of Comprehensive Income for the years ended December 31, 2014, 2013, and 2012
Consolidated Balance Sheets as of December 31, 2014 and 2013
Consolidated Statements of Cash Flows for the years ended December 31, 2014, 2013, and 2012
Consolidated Statements of Stockholders' Equity for the years ended December 31, 2014, 2013, and 2012
Notes to Consolidated Financial Statements
45
46
47
48
49
50
51
52
Table of Contents
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Trinity Industries, Inc.
We have audited the accompanying consolidated balance sheets of Trinity Industries, Inc. and Subsidiaries as of December 31, 2014 and 2013,
and the related consolidated statements of operations, comprehensive income, cash flows and stockholders' equity for each of the three years in
the period ended December 31, 2014. These financial statements are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Trinity
Industries, Inc. and Subsidiaries at December 31, 2014 and 2013, and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 2014, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Trinity Industries,
Inc. and Subsidiaries' internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report
dated February 19, 2015 expressed an unqualified opinion thereon.
/s/ ERNST &
YOUNG LLP
Dallas, Texas
February 19, 2015
46
Table of Contents
Trinity Industries, Inc. and Subsidiaries
Consolidated Statements of Operations
2014
Year Ended December 31,
2013
2012
(in millions, except per share amounts)
Revenues:
Manufacturing
Leasing
$
Operating costs:
Cost of revenues:
Manufacturing
Leasing
Selling, engineering, and administrative expenses:
Manufacturing
Leasing
Other
Gains on disposition of property, plant, and equipment:
Net gains on railcar lease fleet sales owned more than one year at the time of
sale
Other
Total operating profit
Other (income) expense:
Interest income
Interest expense
Other, net
Income from continuing operations before income taxes
Provision (benefit) for income taxes:
Current
Deferred
Net income from continuing operations
Discontinued operations:
Gain on sale of discontinued operations, net of provision for income taxes of $-,
$5.4, and $Income (loss) from discontinued operations, net of provision (benefit) for income
taxes of $-, $(0.8), and $1.1
Net income
Net income (loss) attributable to noncontrolling interest
Net income attributable to Trinity Industries, Inc.
$
Net income attributable to Trinity Industries, Inc. per common share:
Basic:
Continuing operations
Discontinued operations
$
$
Diluted:
Continuing operations
Discontinued operations
$
$
5,063.6
1,106.4
6,170.0
$
3,719.9
645.4
4,365.3
$
3,167.5
644.4
3,811.9
3,975.1
644.7
4,619.8
2,990.9
331.4
3,322.3
2,701.2
350.3
3,051.5
235.0
49.6
119.0
403.6
180.4
37.6
73.3
291.3
143.4
29.4
51.3
224.1
92.3
12.1
104.4
1,251.0
20.4
0.8
21.2
772.9
33.5
5.0
38.5
574.8
(1.9)
193.4
(4.6)
186.9
1,064.1
(2.1 )
187.3
(2.8 )
182.4
590.5
(1.5)
194.7
(4.3)
188.9
385.9
158.6
45.8
204.4
386.1
7.7
126.3
134.0
251.9
7.1
—
360.6
(5.8)
354.8
709.3
—
—
709.3
31.1
678.2
$
4.35
—
4.35
$
4.19
—
4.19
$
$
$
(0.8 )
392.4
16.9
375.5
$
2.34
0.04
2.38
$
2.34
0.04
2.38
$
$
$
1.8
253.7
(1.5)
255.2
1.59
0.01
1.60
1.58
0.01
1.59
Weighted average number of shares outstanding:
Basic
Diluted
Dividends declared per common share
See accompanying notes to consolidated financial statements.
$
47
151.0
156.7
0.375
$
152.8
152.9
0.270
$
154.7
155.1
0.210
Table of Contents
Trinity Industries, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
2014
Year Ended December 31,
2013
2012
(in millions)
Net income
Other comprehensive income (loss):
Derivative financial instruments:
Unrealized gains/(losses) arising during the period, net of tax expense/
(benefit) of $(0.6), $0.8, and $4.2
Reclassification adjustments for losses included in net income, net of tax
benefit of $8.4, $8.7, and $3.2
Currency translation adjustment
Defined benefit plans:
Unrealized gains/(losses) arising during the period, net of tax expense/
(benefit) of $(26.7), $31.0, and $(17.8)
Amortization of net actuarial losses, net of tax benefit of $0.8, $1.9, and
$1.1
Comprehensive income
Less: comprehensive income attributable to noncontrolling interest
Comprehensive income attributable to Trinity Industries, Inc.
$
$
See accompanying notes to consolidated financial statements.
48
709.3
$
392.4
$
253.7
(1.2)
0.8
7.2
16.0
(2.0)
18.1
—
5.8
0.6
(45.1)
52.7
(30.3)
1.3
(31.0)
678.3
34.1
644.2
3.1
74.7
467.1
21.1
446.0
2.2
(14.5)
239.2
0.1
239.1
$
$
Table of Contents
Trinity Industries, Inc. and Subsidiaries
Consolidated Balance Sheets
December 31,
2014
December 31,
2013
(in millions)
ASSETS
Cash and cash equivalents
Short-term marketable securities
Receivables, net of allowance for doubtful accounts of $4.5 and $3.1
Income tax receivable
Inventories:
Raw materials and supplies
Work in process
Finished goods
$
887.9
75.0
405.3
58.6
$
477.0
201.4
136.3
814.7
260.7
585.4
298.2
184.8
1,068.4
234.7
Restricted cash, including partially-owned subsidiaries of $91.9 and $77.1
Property, plant, and equipment, at cost, including partially-owned subsidiaries of $2,261.2
and $1,887.2
Less accumulated depreciation, including partially-owned subsidiaries of $261.3 and $202.1
Goodwill
Other assets
$
6,586.0
(1,683.1 )
4,902.9
773.2
327.8
8,733.8
428.5
149.7
365.0
7.7
$
6,275.8
(1,505.2 )
4,770.6
278.2
238.3
7,313.4
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable
Accrued liabilities
Debt:
Recourse, net of unamortized discount of $60.0 and $74.1
Non-recourse:
Wholly-owned subsidiaries
Partially-owned subsidiaries
$
Deferred income
Deferred income taxes
Other liabilities
Stockholders’ equity:
Preferred stock – 1.5 shares authorized and unissued
Common stock – 200.0 shares authorized; shares issued and outstanding at December 31,
2014 – 155.7; at December 31, 2013 – 81.7
Capital in excess of par value
Retained earnings
Accumulated other comprehensive loss
Treasury stock – shares at December 31, 2014 – 0.1; at December 31, 2013 – 4.3
Noncontrolling interest
$
See accompanying notes to consolidated financial statements.
49
295.4
709.6
$
216.3
567.4
829.3
419.0
1,207.8
1,515.9
3,553.0
36.4
632.6
109.4
5,336.4
1,314.7
1,256.1
2,989.8
40.8
650.7
99.3
4,564.3
—
—
155.7
463.2
2,489.9
(111.9 )
(1.0 )
2,995.9
401.5
3,397.4
8,733.8
$
81.7
686.6
1,870.0
(78.2 )
(158.0 )
2,402.1
347.0
2,749.1
7,313.4
Table of Contents
Trinity Industries, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Year Ended December 31,
2014
2013
2012
(in millions)
Operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Income from discontinued operations
$
709.3
—
$
392.4
(6.3 )
253.7
(1.8 )
Depreciation and amortization
244.6
Stock-based compensation expense
Excess tax benefits from stock-based compensation
53.3
(24.4)
44.5
(8.5 )
27.7
(0.6 )
Provision (benefit) for deferred income taxes
Net gains on railcar lease fleet sales owned more than one year at the time of sale
Gain on disposition of property, plant, equipment, and other assets
(5.8)
(92.3)
(12.1)
45.8
(20.4 )
(0.8 )
126.3
(33.5 )
(5.0 )
30.7
(4.5)
30.8
(6.4 )
31.2
(3.2 )
(56.4)
(186.3)
17.2
(95.6 )
2.7
(128.0 )
(Increase) decrease in restricted cash
(Increase) decrease in other assets
25.0
(8.3)
(25.0 )
(29.1 )
(41.5 )
Increase (decrease) in accounts payable
60.7
29.0
(16.7 )
Increase (decrease) in accrued liabilities
82.1
72.4
125.5
2.6
8.2
818.2
659.7
526.6
1.0
2.5
0.8
819.2
662.2
527.4
74.7
(149.7 )
265.8
131.6
126.3
—
—
58.3
23.0
3.7
16.8
Non-cash interest expense
Other
Changes in assets and liabilities:
(Increase) decrease in receivables
(Increase) decrease in inventories
Increase (decrease) in other liabilities
Net cash provided by operating activities - continuing operations
Net cash provided by operating activities - discontinued operations
Net cash provided by operating activities
211.5
$
193.7
—
(3.9 )
Investing activities:
(Increase) decrease in short-term marketable securities
Proceeds from railcar lease fleet sales owned more than one year at the time of sale
Proceeds from railcar lease fleet sales – sale and leaseback
Proceeds from disposition of property, plant, equipment, and other assets
Capital expenditures – leasing, net of sold lease fleet railcars owned one year or less with a net cost of $350.2, $49.4
and $93.8
Capital expenditures – manufacturing and other
Acquisitions, net of cash acquired
Other
Net cash required by investing activities - continuing operations
Net cash provided by investing activities - discontinued operations
Net cash required by investing activities
(245.3)
(219.3)
(714.4)
0.8
(814.7)
—
(814.7)
(581.1 )
(149.9 )
(73.2 )
—
(818.6 )
0.6
(818.0 )
—
(352.6 )
(116.6 )
(46.2 )
1.7
(312.3 )
0.9
(311.4 )
Financing activities:
Proceeds from issuance of common stock, net
Excess tax benefits from stock-based compensation
Payments to retire debt
0.6
2.5
4.1
24.4
(186.6)
8.5
(262.1 )
0.6
(378.4 )
Proceeds from issuance of debt
727.3
175.0
443.8
(Increase) decrease in restricted cash
Shares repurchased
Dividends paid to common shareholders
Purchase of shares to satisfy employee tax on vested stock
1.0
(36.5)
(54.4)
(38.3)
(12.5 )
(103.2 )
(39.3 )
(9.6 )
17.1
(45.2 )
(31.7 )
(4.8 )
Proceeds from sale of interests in partially-owned leasing subsidiaries
Repurchase of noncontrolling interests in partially-owned leasing subsidiary
Contributions from noncontrolling interest
Distributions to noncontrolling interest
Other
—
296.7
—
—
(84.0 )
—
49.6
50.0
—
(28.2)
(10.0 )
—
(2.5)
0.8
(0.5 )
Net cash provided by financing activities - continuing operations
456.4
Net cash provided (required) by financing activities - discontinued operations
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
(1.5 )
0.9
11.3
5.9
459.4
(144.5 )
$
887.9
221.9
573.0
428.5
Cash and cash equivalents at end of period
5.0
454.9
(1.5)
Net cash provided by financing activities
12.8
$
428.5
351.1
$
573.0
Interest paid for the years ended December 31, 2014 , 2013 , and 2012 was $158.3 million , $163.6 million , and $174.8 million , respectively.
Income tax payments, net of refunds, made for the years ended December 31, 2014 , 2013 , and 2012 were $399.0 million , $110.9 million ,
and $18.4 million , respectively.
See accompanying notes to consolidated financial statements.
50
Table of Contents
Trinity Industries, Inc. and Subsidiaries
Consolidated Statements of Stockholders’ Equity
Common
Stock
Treasury
Stock
Capital in
Excess of
Par Value
$1 Par
Value
Shares
Accumulated
Other
Comprehensive
Loss
Retained
Earnings
Shares
Trinity
Stockholders’
Equity
Amount
Total
Stockholders’
Equity
Noncontrolling
Interest
(in millions, except par value)
Balances at
December 31, 2011
81.7
$
81.7
$
626.5
$
1,314.7
Net income (loss)
Other comprehensive
income (loss)
Cash dividends on
common stock
—
—
—
255.2
—
—
—
—
—
—
—
Restricted shares, net
—
—
26.4
Stock options exercised
Excess tax benefits from
stock-based
compensation
Stock-based
compensation expense
—
—
(0.7 )
—
—
—
Shares repurchased
—
—
Other
Balances at
December 31, 2012
81.7
$
$
(134.0 )
$
(25.1 )
$
1,863.8
$
84.5
$
1,948.3
—
—
255.2
(1.5 )
253.7
—
—
(16.1 )
1.6
(14.5 )
—
—
—
(33.2 )
—
(33.2 )
—
—
0.4
(1.7 )
24.7
—
24.7
—
—
0.3
4.8
4.1
—
4.1
0.2
—
—
—
—
0.2
—
0.2
—
0.2
—
—
—
0.2
—
0.2
—
—
—
—
(1.8)
(45.2 )
(45.2 )
—
(45.2 )
—
—
—
—
—
(0.7 )
(0.7 )
—
(0.7 )
81.7
$
652.6
—
(1.5)
(16.1 )
(33.2 )
$
1,536.7
$
(150.1 )
(2.6)
—
$
(67.9 )
$
2,053.0
$
84.6
$
2,137.6
Net income
Other comprehensive
income
Cash dividends on
common stock
—
—
—
375.5
—
—
—
375.5
16.9
392.4
—
—
—
—
70.5
—
—
70.5
4.2
74.7
—
—
—
—
—
—
(42.2 )
—
(42.2 )
Restricted shares, net
—
—
23.3
—
—
0.7
13.8
37.1
—
37.1
Shares repurchased
—
—
—
—
—
(2.5)
(108.2 )
(108.2 )
—
(108.2 )
Stock options exercised
Excess tax benefits from
stock-based
compensation
Repurchase of interests
in partially-owned
leasing subsidiary
Sale of interests in
partially-owned
leasing subsidiaries
Contributions from
noncontrolling interest
Distributions to
noncontrolling interest
—
—
(2.0 )
—
—
0.1
4.3
2.3
—
2.3
—
—
8.7
—
—
—
—
8.7
—
8.7
—
—
11.8
—
(11.8 )
—
—
—
(84.2 )
(84.2 )
—
—
(7.3 )
—
13.2
—
—
5.9
285.4
291.3
—
—
—
—
—
—
—
—
50.0
50.0
—
—
—
—
—
—
—
—
(9.9 )
(9.9 )
—
—
(0.5 )
—
—
—
—
(0.5 )
—
(0.5 )
Other
Balances at
December 31, 2013
81.7
$
81.7
$
686.6
(42.2 )
$
1,870.0
$
(78.2 )
Net income
Other comprehensive
income (loss)
Cash dividends on
common stock
—
—
—
678.2
—
—
—
—
—
—
—
Restricted shares, net
0.1
0.1
29.8
—
—
0.6
Shares repurchased
—
—
—
—
—
(0.6)
Stock options exercised
Excess tax benefits from
stock-based
compensation
Contributions from
noncontrolling interest
Distributions to
noncontrolling interest
Retirement of treasury
stock
0.1
0.1
(0.1 )
—
—
—
—
24.2
—
—
—
—
—
—
—
(4.2)
(4.2 )
Stock split
78.0
78.0
—
—
155.7
$ 155.7
Other
Balances at
December 31, 2014
$
$
(158.0 )
$
2,402.1
$
347.0
$
2,749.1
—
—
678.2
31.1
709.3
—
—
(34.0 )
3.0
(31.0 )
—
—
(58.3 )
—
(58.3 )
(15.0 )
14.9
—
14.9
(31.5 )
(31.5 )
—
(31.5 )
0.1
0.6
0.6
—
0.6
—
—
—
24.2
—
24.2
—
—
—
—
—
49.6
49.6
—
—
—
—
—
(28.2 )
(28.2 )
(198.9 )
—
—
4.2
203.1
—
—
—
(78.0 )
—
—
—
—
—
—
—
(0.4 )
—
0.3
(0.1)
(0.2 )
(0.3 )
(1.0 )
(1.3 )
463.2
—
(4.3)
(34.0 )
—
(58.3 )
$
2,489.9
$
(111.9 )
(0.1)
$
(1.0 )
$
2,995.9
$
401.5
$
3,397.4
See accompanying notes to consolidated financial statements.
51
Table of Contents
Trinity Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 1. Summary of Significant Accounting Policies
Principles of Consolidation
The financial statements of Trinity Industries, Inc. and its consolidated subsidiaries (“Trinity”, “Company”, “we” or “our”) include the
accounts of its wholly-owned subsidiaries and its partially-owned subsidiaries, TRIP Rail Holdings LLC ("TRIP Holdings") and RIV 2013 Rail
Holdings LLC ("RIV 2013"), in which the Company has a controlling interest. All significant intercompany accounts and transactions have
been eliminated.
Stockholders' Equity
On May 5, 2014 , the Company's Board of Directors authorized a 2 -for-1 stock split on its common shares. The stock split was issued in the
form of a 100% stock dividend. The additional shares were distributed on June 19, 2014 , to shareholders of record at the close of business on
June 5, 2014 . All share and per share information, including dividends, has been retroactively adjusted to reflect the 2-for-1 stock split, except
for the statement of stockholders' equity which will reflect the stock split by reclassifying $78.0 million from "Capital in Excess of Par Value"
to "Common Stock" representing the par value of the additional shares issued to effect the stock split.
In March 2014 , the Company’s Board of Directors authorized a new $250 million share repurchase program that expires on December 31,
2015 and replaced the Company's previously authorized $200 million share repurchase program. Under the new program, 747,246 shares were
repurchased during the year ended December 31, 2014 , at a cost of $31.5 million . During the year ended December 31, 2013 , the Company
repurchased 2,473,189 shares under the prior program at a cost of $108.2 million .
Revenue Recognition
Revenues for contracts providing for a large number of units and few deliveries are recorded as the individual units are produced, inspected,
and accepted by the customer as the risk of loss passes to the customer upon delivery acceptance on these contracts. This occurs primarily in
the Rail and Inland Barge Groups. Revenue from rentals and operating leases, including contracts which contain non-level fixed rental
payments, is recognized monthly on a straight-line basis. Revenue is recognized from the sales of railcars from the lease fleet on a gross basis
in leasing revenues and cost of revenues if the railcar has been owned for one year or less at the time of sale. Sales of railcars from the lease
fleet that have been owned for more than one year are recognized as a net gain or loss from the disposal of a long-term asset. Fees for shipping
and handling are recorded as revenue. For all other products, we recognize revenue when products are shipped or services are provided.
Income Taxes
The liability method is used to account for income taxes. Deferred income taxes represent the tax effects of temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Valuation
allowances reduce deferred tax assets to an amount that will more likely than not be realized.
The Company regularly evaluates the likelihood of realization of tax benefits derived from positions it has taken in various federal and state
filings after consideration of all relevant facts, circumstances, and available information. For those tax positions that are deemed more likely
than not to be sustained, the Company recognizes the benefit it believes is cumulatively greater than 50% likely to be realized. To the extent the
Company were to prevail in matters for which accruals have been established or be required to pay amounts in excess of recorded reserves, the
effective tax rate in a given financial statement period could be materially impacted.
Financial Instruments
The Company considers all highly liquid debt instruments to be either cash and cash equivalents if purchased with a maturity of three months
or less, or short-term marketable securities if purchased with a maturity of more than three months and less than one year . The Company
intends to hold its short-term marketable securities until they are redeemed at their maturity date and believes that under the "more likely than
not" criteria, the Company will not be required to sell the securities before recovery of their amortized cost bases, which may be maturity.
Financial instruments that potentially subject the Company to a concentration of credit risk are primarily cash investments including
restricted cash, short-term marketable securities, and receivables. The Company places its cash investments and short-term marketable
securities in bank deposits and investment grade, short-term debt instruments and limits the amount of credit exposure to any one commercial
issuer. Concentrations of credit risk with respect to receivables are limited due to control procedures
52
Table of Contents
that monitor the credit worthiness of customers, the large number of customers in the Company's customer base, and their dispersion across
different industries and geographic areas. As receivables are generally unsecured, the Company maintains an allowance for doubtful accounts
based upon the expected collectibility of all receivables. Receivable balances determined to be uncollectible are charged against the allowance.
The carrying values of cash, short-term marketable securities, receivables and accounts payable are considered to be representative of their
respective fair values.
Inventories
Inventories are valued at the lower of cost or market, with cost determined principally on the first in first out method. Market is replacement
cost or net realizable value. Work in process and finished goods include material, labor, and overhead.
Property, Plant, and Equipment
Property, plant, and equipment are stated at cost and depreciated over their estimated useful lives using the straight-line method. The
estimated useful lives are: buildings and improvements - 3 to 30 years ; leasehold improvements - the lesser of the term of the lease or 7 years
; machinery and equipment - 2 to 10 years ; information systems hardware and software - 2 to 5 years ; and railcars in our lease fleet generally 35 years . The costs of ordinary maintenance and repair are charged to operating costs while renewals and major replacements are
capitalized.
Long-lived Assets
The Company periodically evaluates the carrying value of long-lived assets to be held and used for potential impairment. The carrying value
of long-lived assets to be held and used is considered impaired only when their carrying value is not recoverable through undiscounted future
cash flows and the fair value of the assets is less than their 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 by the estimated cost to dispose of the assets. Impairment losses were
not material for the years ended December 31, 2014 , 2013 , and 2012 .
Goodwill and Intangible Assets
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. The goodwill impairment test is a two-step process with step one requiring the
comparison of the reporting unit's estimated fair value with the carrying amount of its net assets. If necessary, step two of the impairment test
determines the amount of goodwill impairment to be recorded when 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 unit with recorded goodwill. The estimates and judgments that
most significantly affect the fair value calculations are assumptions, consisting of level three inputs, related to revenue and operating profit
growth, discount rates and exit multiples. During the three months ended December 31, 2014 , the Company considered certain state actions
with regard to its highway products litigation as an indicator of possible goodwill impairment. See Note 18 Commitments and Contingencies
for a fuller explanation of this matter. As of December 31, 2014 and 2013 , the Company's annual impairment test of goodwill was completed
at the reporting unit level and no impairment charges were determined to be necessary.
Intangible assets with defined useful lives, which as of December 31, 2014 had net book values of $58.8 million , are amortized over their
estimated useful lives, and were also evaluated for potential impairment as of December 31, 2014 .
Restricted Cash
Restricted cash consists of cash and cash equivalents that are held either as collateral for the Company's non-recourse debt and lease
obligations or security for the performance of certain product sales agreements and as such are restricted in use.
Insurance
The Company is effectively self-insured for workers' compensation claims. A third party administrator is used to process claims. We accrue
our workers' compensation liability based upon independent actuarial studies.
Warranties
Depending on the product, the Company provides warranties against materials and manufacturing defects generally ranging from one to five
years. The warranty costs are estimated using a two-step approach. First, an engineering estimate is made for the cost of all claims that have
been asserted by customers. Second, based on historical claims experience, a cost is accrued for all products still within a warranty period for
which no claims have been filed. The Company provides for the estimated cost of product
53
Table of Contents
warranties at the time revenue is recognized related to products covered by warranties, and assesses the adequacy of the resulting reserves on a
quarterly basis.
Foreign Currency Translation
Operations outside the United States prepare financial statements in currencies other than the United States dollar. The income statement
amounts are translated at average exchange rates for the year, while the assets and liabilities are translated at year-end exchange rates.
Translation adjustments are accumulated as a separate component of stockholders' equity and other comprehensive income. The functional
currency of our Mexico operations is considered to be the United States dollar. The functional currency of our Canadian operations is
considered to be the Canadian dollar.
Other Comprehensive Income (Loss)
Other comprehensive net income (loss) consists of foreign currency translation adjustments, the effective unrealized gains and losses on the
Company's derivative financial instruments, and the net actuarial gains and losses of the Company's defined benefit plans, the sum of which,
along with net income (loss), constitutes comprehensive net income (loss). See Note 15 Accumulated Other Comprehensive Loss (“AOCL”).
All components are shown net of tax.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No. 2014-09, "Revenue from
Contracts with Customers," ("ASU 2014-09") providing common revenue recognition guidance for U.S. GAAP. Under ASU 2014-09, an entity
recognizes revenue when it transfers promised goods or services to customers in an amount that reflects what it expects in exchange for the
goods or services. It also requires additional detailed disclosures to enable users of financial statements to understand the nature, amount,
timing, and uncertainty of revenue and cash flows arising from contracts with customers. ASU 2014-09 will become effective for public
companies during interim and annual reporting periods beginning after December 15, 2016. Early application is not permitted. We are currently
evaluating the impact this standard will have on our consolidated financial statements.
Management's Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and 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. Actual results could differ from those
estimates.
Reclassifications
Certain prior year balances have been reclassified in the consolidated financial statements to conform to the 2014 presentation.
54
Table of Contents
Note 2. Acquisitions and Divestitures
The Company's acquisition and divestiture activities are summarized below:
2014
Year Ended December 31,
2013
2012
(in millions)
Acquisitions:
Purchase price
Net cash paid
Goodwill recorded
$
$
$
720.9
714.4
495.0
$
$
$
125.2
73.2
37.0
$
$
$
48.8
46.2
20.9
Divestitures:
Proceeds
Gain recognized
Goodwill charged off
$
$
$
—
—
—
$
$
$
35.6
12.5
4.8
$
$
$
2.1
1.5
0.1
Acquisition of Meyer Steel Structures
On August 18, 2014, Trinity completed its acquisition of the assets of Meyer Steel Structures ("Meyer"), the utility steel structures division
of Thomas & Betts Corporation, a member of the ABB Group, for approximately $595.6 million in cash. Meyer is one of North America's
leading providers of tubular steel structures for electricity transmission and distribution and is included in the Company's Energy Equipment
Group. For the year ended December 31, 2014 , the Company incurred $8.7 million in acquisition-related transaction costs which have been
expensed in our Corporate segment and $1.5 million in non-recurring additional state income tax expense included in our consolidated
provision for income taxes. Due to the size and complexity of Meyer, the purchase price was allocated on a preliminary basis to the assets
acquired and liabilities assumed based on their acquisition date fair value using level three inputs. We expect to complete our purchase price
allocation as soon as reasonably possible not to exceed one year from the acquisition date. Adjustments to the preliminary purchase price
allocation could be material to the purchase price allocation. The following table represents our preliminary purchase price allocation as of
December 31, 2014 :
December 31,
2014
(in millions)
Accounts receivable
Inventories
Property, plant, and equipment
Goodwill
Other assets
Accounts payable
Accrued liabilities
Total net assets acquired
$
$
29.4
36.1
70.5
409.1
76.0
(15.4)
(10.1)
595.6
Level three inputs are those that reflect our estimates about the assumptions market participants would use in determining the fair value of
the asset or liability based on the best information available in the circumstances. Valuation techniques for assets and liabilities measured using
level three inputs may include methodologies such as the market approach, the income approach or the cost approach and may use
unobservable inputs such as projections, estimates, and management’s interpretation of current market data. These unobservable inputs are
utilized only to the extent that observable inputs are not available or cost effective to obtain. Goodwill, all tax-deductible, was primarily related
to the value of Meyer's market position and its existing workforce. Based on our preliminary valuation, other assets include intangibles arising
from the Meyer acquisition as follows:
Preliminary estimated fair
value
Weighted average
useful life
(in millions)
Customer relationships
Trademarks/trade names
Technology
$
$
35.3
34.1
5.6
75.0
10.5 years
Indefinite
5.0 years
55
Table of Contents
In addition to Meyer, during the year ended December 31, 2014 , we completed the acquisition of three businesses in our Energy Equipment
Group located in the U.S. and Canada and one business in our Construction Products Group located in the U.S. These acquisitions were
recorded based on preliminary valuations of the related assets and liabilities at their acquisition date fair value using level three inputs. Such
assets and liabilities were not significant in relation to assets and liabilities at the consolidated or segment level. The valuations of the three
Energy Equipment Group acquisitions were finalized as of September 30, 2014 .
The operating results of our 2014 acquisitions, as summarized in the following table, are included in the Consolidated Statements of
Operations from their date of acquisition, exclude transaction-related acquisition costs that are included in the Corporate segment, and include
additional amortization expense resulting from the preliminary purchase price allocation:
Year Ended
December 31, 2014
(in millions)
Revenues
Operating profit
$
$
187.4
2.4
The following table represents the pro-forma consolidated operating results of the Company as if our 2014 acquisitions had been acquired on
January 1, 2013. The pro-forma information should not be considered indicative of the results that would have occurred if the acquisitions had
been completed on January 1, 2013, nor is such pro-forma information necessarily indicative of future results.
Year Ended
December 31, 2014
Year Ended
December 31, 2013
(in millions)
Revenues
Operating profit
$
$
6,369.8
1,274.4
$
$
4,830.8
834.1
The aggregate purchase price related to our acquisition activity for the years ended December 31, 2014, 2013, and 2012 by segment follows:
2014
Year ended December 31,
2013
2012
(in millions)
Rail Group
Construction Products Group
Energy Equipment Group
$
$
—
6.1
714.8
720.9
$
$
23.1
74.2
27.9
125.2
—
48.8
—
48.8
$
$
Discontinued operation - Ready-Mix Concrete Operations
During the year ended December 31, 2013 , the Company sold its remaining ready-mix concrete operations in exchange for certain
aggregates operations in Texas, Colorado, and California. The fair value of the proceeds received in exchange for the divested operations was
based on the Company’s estimate of fair value of the operations disposed using a discounted cash flow analysis. A gain of $12.5 million was
recognized based on the fair value of the proceeds less the assets’ carrying amounts and certain transaction costs. The divestiture of our
ready-mix concrete operations has been accounted for and reported as a discontinued operation.
Condensed results of operations for the ready-mix concrete operations for the years ended December 31, 2014, 2013, and 2012 are as
follows:
2014
Year Ended December 31,
2013
2012
(in millions)
Revenues
$
—
$
31.6
$
121.4
Income (loss) from discontinued operations before income taxes
Provision (benefit) for income taxes
Net income (loss) from discontinued operations
$
—
—
—
$
(1.6 )
(0.8 )
(0.8 )
$
2.9
1.1
1.8
$
56
$
$
Table of Contents
Note 3. Fair Value Accounting
Assets and liabilities measured at fair value on a recurring basis are summarized below:
Fair Value Measurement as of December 31, 2014
Level 1
Level 2
Level 3
Total
(in millions)
Assets:
Cash equivalents
Restricted cash
Total assets
Liabilities:
Interest rate hedges: (1)
Wholly-owned subsidiaries
Partially-owned subsidiaries
Fuel derivative instruments (1)
Total liabilities
$
$
415.2
234.7
649.9
$
—
—
—
—
$
$
$
$
$
—
—
—
$
6.4
2.0
2.1
10.5
$
$
$
—
—
—
$
—
—
—
—
$
$
415.2
234.7
649.9
6.4
2.0
2.1
10.5
$
Fair Value Measurement as of December 31, 2013
Level 1
Level 2
Level 3
Total
(in millions)
Assets:
Cash equivalents
Restricted cash
Total assets
Liabilities:
Interest rate hedges: (1)
Wholly-owned subsidiaries
Partially-owned subsidiaries
Total liabilities
(1)
$
$
230.6
260.7
491.3
$
—
—
—
$
$
$
$
$
—
—
—
$
21.7
2.1
23.8
$
$
$
—
—
—
$
—
—
—
$
$
$
230.6
260.7
491.3
21.7
2.1
23.8
Included in accrued liabilities on the consolidated balance sheet.
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or
most advantageous market for that asset or liability in an orderly transaction between market participants on the measurement date. An entity is
required to establish a fair value hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs when
measuring fair value. The three levels of inputs that may be used to measure fair values are listed below:
Level 1 – This level is defined as quoted prices in active markets for identical assets or liabilities. The Company’s cash equivalents and
restricted cash are instruments of the U.S. Treasury or highly-rated money market mutual funds.
Level 2 – This level is defined as observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted
prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the
full term of the assets or liabilities. The Company’s fuel derivative instruments, which are commodity swaps, are valued using energy and
commodity market data. Interest rate hedges are valued at exit prices obtained from each counterparty. See Note 7 Derivative Instruments and
Note 11 Debt.
Level 3 – This level is defined as unobservable inputs that are supported by little or no market activity and that are significant to the fair
value of the assets or liabilities.
57
Table of Contents
The carrying amounts and estimated fair values of our long-term debt are as follows:
December 31, 2014
Carrying
Estimated
Value
Fair Value
December 31, 2013
Carrying
Estimated
Value
Fair Value
(in millions)
Recourse:
Senior notes
Convertible subordinated notes
Less: unamortized discount
$
Capital lease obligations
Other
Non-recourse:
2006 secured railcar equipment notes
Promissory notes
2009 secured railcar equipment notes
2010 secured railcar equipment notes
TILC warehouse facility
TRL 2012 secured railcar equipment notes
(RIV 2013)
TRIP Master Funding secured railcar equipment notes
Total
$
399.6
449.5
(59.6)
389.9
39.1
0.7
829.3
$
387.0
593.9
$
39.1
0.7
1,020.7
—
450.0
(74.1)
375.9
42.2
0.9
419.0
$
—
593.4
42.2
0.9
636.5
223.0
363.9
188.8
311.5
120.6
245.6
362.7
227.7
344.0
120.6
240.7
396.1
199.0
326.9
152.0
259.2
389.6
229.5
342.7
152.0
472.2
1,043.7
2,723.7
3,553.0
470.3
1,121.4
2,892.3
3,913.0
499.3
756.8
2,570.8
2,989.8
483.4
819.8
2,676.2
3,312.7
$
$
$
The estimated fair value of our senior notes and convertible subordinated notes were based on a quoted market price in a market with little
activity as of December 31, 2014 and 2013 , respectively ( Level 2 input). The estimated fair values of our 2006 , 2009 , 2010 , and 2012
secured railcar equipment notes, promissory notes, and TRIP Rail Master Funding LLC (“TRIP Master Funding”) secured railcar equipment
notes are based on our estimate of their fair value as of December 31, 2014 and 2013 , respectively. These values were determined by
discounting their future cash flows at the current market interest rate ( Level 3 inputs). The carrying value of our Trinity Industries Leasing
Company (“TILC”) warehouse facility approximates fair value because the interest rate adjusts to the market interest rate ( Level 3 input). The
fair values of all other financial instruments are estimated to approximate carrying value. See Note 11 Debt for a description of the Company's
long-term debt.
58
Table of Contents
Note 4. Segment Information
The Company reports operating results in five principal business segments: (1) the Rail Group, which manufactures and sells railcars and
related parts and components; (2) the Construction Products Group, which manufactures and sells highway products and other primarily-steel
products and services for infrastructure-related projects, and produces and sells aggregates; (3) the Inland Barge Group, which manufactures
and sells barges and related products for inland waterway services; (4) the Energy Equipment Group, which manufactures and sells products
for energy-related businesses, including structural wind towers, storage and distribution containers, tank heads for pressure and non-pressure
vessels, and utility structures for electricity transmission and distribution; and (5) the Railcar Leasing and Management Services Group
(“Leasing Group”), which owns and operates a fleet of railcars as well as provides third-party fleet leasing, management, maintenance, and
administrative services. The segment All Other includes our captive insurance and transportation companies; legal, environmental, and
maintenance costs associated with non-operating facilities; and other peripheral businesses. Gains and losses from the sale of property, plant,
and equipment that are related to manufacturing and dedicated to the specific manufacturing operations of a particular segment are included in
operating profit of that respective segment. Gains and losses from the sale of property, plant, and equipment that can be utilized by multiple
segments are included in operating profit of the All Other segment.
Sales and related net profits from the Rail Group to the Leasing Group are recorded in the Rail Group and eliminated in consolidation. Sales
between these groups are recorded at prices comparable to those charged to external customers, taking into consideration quantity, features, and
production demand. Intersegment sales and net profit ("deferred profit") are eliminated in consolidation and reflected in the "Eliminations –
Lease subsidiary" line in the table below. Amortization of deferred profit on railcars sold to the Leasing Group is included in the operating
profit of the Leasing Group, resulting in the recognition of depreciation expense based on the Company's original manufacturing cost of the
railcars. Sales of railcars from the lease fleet are included in the Leasing Group, with related gains and losses computed based on the net book
value of the original manufacturing cost of the railcars.
59
Table of Contents
The financial information from continuing operations for these segments is shown in the tables below. We operate principally in North
America.
Year Ended December 31, 2014
Operating
Profit (Loss)
Revenues
External
Intersegment
Depreciation &
Amortization
Assets
Capital
Expenditures
Total
(in millions)
Rail Group
$
Construction Products
Group
Inland Barge Group
Energy Equipment
Group
Railcar Leasing and
Management
Services Group
All Other
Segment Totals before
Eliminations and
Corporate
Corporate
Eliminations – Lease
subsidiary
Eliminations – Other
Consolidated Total
$
3,077.6
$
739.2
$
3,816.8
$
724.1
$
1,322.4
$
32.7
$
98.3
546.1
638.5
5.6
—
551.7
638.5
65.4
114.4
459.3
177.1
22.7
9.3
37.1
9.7
796.0
196.3
992.3
108.1
1,160.0
33.0
56.0
1,106.4
5.4
11.9
105.0
1,118.3
110.4
516.3
(25.6)
4,972.1
56.3
130.0
9.6
245.3
9.3
6,170.0
—
1,058.0
—
7,228.0
—
1,502.7
(119.0)
8,147.2
1,147.1
237.3
7.4
455.7
8.9
(710.1)
(347.9)
6,170.0
(133.1)
0.4
1,251.0
(557.2)
(3.3)
8,733.8
—
(0.1)
244.6
—
—
464.6
—
—
6,170.0
$
(710.1)
(347.9)
—
$
$
$
$
$
Year Ended December 31, 2013
Operating
Profit (Loss)
Revenues
External
Intersegment
Depreciation &
Amortization
Assets
Capital
Expenditures
Total
(in millions)
Rail Group
$
Construction Products
Group
Inland Barge Group
Energy Equipment Group
Railcar Leasing and
Management Services
Group
All Other
Segment Totals before
Eliminations and
Corporate
Corporate
Eliminations – Lease
subsidiary
Eliminations – Other
Consolidated Total
$
2,093.5
$
774.0
$
2,867.5
$
489.7
508.6
576.6
536.5
16.4
0.1
128.9
525.0
576.7
665.4
52.6
96.0
61.4
645.4
4.7
—
81.9
645.4
86.6
4,365.3
—
1,001.3
—
5,366.6
—
—
—
4,365.3
$
(756.5 )
(244.8 )
—
$
(756.5)
(244.8)
4,365.3
$
1,063.9
$
27.2
$
42.4
459.9
170.3
364.3
20.9
8.1
18.2
17.1
18.4
41.5
296.8
(13.7)
5,026.9
49.8
129.0
3.7
581.1
4.4
982.8
(73.4)
7,135.1
731.0
207.1
4.5
704.9
26.1
(549.7)
(3.0)
7,313.4
—
(0.1 )
211.5
—
—
731.0
(135.4)
(1.1)
$ 772.9
$
$
$
Year Ended December 31, 2012
Operating
Profit (Loss)
Revenues
External
Intersegment
Total
(in millions)
Assets
Depreciation &
Amortization
Capital
Expenditures
Rail Group
$
Construction Products
Group
Inland Barge Group
Energy Equipment Group
Railcar Leasing and
Management Services
Group
All Other
Segment Totals before
Eliminations and
Corporate
Corporate
Eliminations – Lease
subsidiary
Eliminations – Other
Consolidated Total
$
1,512.1
$
500.9
$
2,013.0
$
199.0
461.2
675.2
506.0
22.5
—
52.6
483.7
675.2
558.6
44.8
124.7
18.2
644.4
13.0
2.7
68.4
647.1
81.4
3,811.9
—
647.1
—
—
—
3,811.9
(485.9 )
(161.2 )
—
$
$
$
916.2
$
21.8
$
47.8
415.2
154.4
400.1
16.6
7.6
19.0
15.7
15.0
25.2
300.9
(10.2)
4,538.8
30.9
120.5
4.4
352.6
6.6
4,459.0
—
677.4
(51.5)
6,455.6
744.9
189.9
3.9
462.9
6.3
(485.9)
(161.2)
3,811.9
(50.8)
(0.3)
574.8
(446.2)
(112.3)
6,642.0
—
(0.1 )
193.7
—
—
469.2
60
$
$
$
$
Table of Contents
Corporate assets are composed of cash and cash equivalents, short-term marketable securities, notes receivable, certain property, plant, and
equipment, and other assets. Capital expenditures do not include business acquisitions.
Externally reported revenues and operating profit for our Mexico operations for the years ended December 31, 2014 , 2013 , and 2012 are
presented below. Our Canadian operations were not significant in relation to the consolidated financial statements.
External Revenues
Operating Profit
Year Ended December 31,
Year Ended December 31,
2014
2013
2012
2014
2013
2012
(in millions)
Mexico
$
130.4
$
133.5
$
96.4
$
16.8
$
4.0
$
0.2
Total assets and long-lived assets for our Mexico operations as of December 31, 2014 and 2013 are presented below:
Total Assets
Long-Lived Assets
December 31,
2014
2013
2014
2013
(in millions)
Mexico
$
61
339.0
$
306.9
$
189.4
$
177.7
Table of Contents
Note 5. Partially-Owned Leasing Subsidiaries
The Company, through its wholly-owned subsidiary, TILC, formed two subsidiaries, TRIP Holdings and RIV 2013, for the purpose of
providing railcar leasing in North America. Each of TRIP Holdings and RIV 2013 are direct, partially-owned subsidiaries of TILC and are each
governed by a seven -member board of representatives, two of whom are designated by TILC. TILC is the agent of each of TRIP Holdings and
RIV 2013 and as such, has been delegated the authority, power, and discretion to take certain actions on behalf of the respective companies.
Each of TRIP Holdings and RIV 2013 in turn has wholly-owned subsidiaries which are the owners of railcars. These wholly-owned
subsidiaries are TRIP Master Funding (wholly-owned by TRIP Holdings) and Trinity Rail Leasing 2012 LLC ("TRL 2012", wholly-owned by
RIV 2013). TILC is the contractual servicer for TRIP Master Funding and TRL 2012, with the authority to manage and service each entity's
owned railcars. The Company's controlling interest in each of TRIP Holdings and RIV 2013 results from its combined role as both equity
member and agent/servicer. The noncontrolling interest included in the accompanying consolidated balance sheets represents the non-Trinity
equity interest in these partially-owned subsidiaries. The railcars owned by TRIP Master Funding were originally acquired from the Company's
Rail and Leasing Groups by TRIP Rail Leasing LLC ("TRIP Leasing"), a wholly-owned subsidiary of TRIP Holdings. TRIP Master Funding
acquired the railcars from TRIP Leasing in July 2011. TRIP Leasing currently owns no railcars and is not expected to acquire any railcars.
TRIP Holdings and RIV 2013, through TRIP Leasing and TRL 2012, respectively, acquired railcars from the Company's Rail and Leasing
Groups funded by capital contributions from TILC and third-party equity investors, and from secured borrowings. Railcars purchased from the
Company by TRIP Master Funding and TRL 2012 are required to be purchased at fair value as determined by TILC and approved by the
boards of representatives of TRIP Holdings and RIV 2013, respectively. The assets of each of TRIP Master Funding and TRL 2012 may only
be used to satisfy the particular subsidiary's liabilities, and the creditors of each of TRIP Master Funding and TRL 2012 have recourse only to
the particular subsidiary's assets. Each of TILC and the third-party equity investors receive distributions from TRIP Holdings and RIV 2013,
when allowed, in proportion to its respective equity interests, and has an interest in the net assets of the partially-owned subsidiaries upon a
liquidation event in the same proportion. TILC is paid fees for the services it provides to TRIP Master Funding and TRL 2012 and has the
potential to earn certain incentive fees. With respect to TRIP Holdings as of December 31, 2014 , TILC has a commitment that expires in May
2016 to provide additional equity funding of up to $5.7 million for the purchase of railcars and satisfaction of certain other liabilities of TRIP
Holdings. The third-party equity investors in TRIP Holdings have a similar commitment that expires in May 2016 to provide up to $12.9
million of additional equity funding. TILC and the third-party equity investors may have additional commitments to provide equity funding to
TRIP Holdings that expire in May 2019 contingent upon certain returns on investment in TRIP Holdings and other conditions being met.
Trinity has no obligation to guarantee performance under any of the partially-owned subsidiaries' (or their respective subsidiaries') debt
agreements, guarantee any railcar residual values, shield any parties from losses, or guarantee minimum yields.
In May 2014, TILC and the third-party investors of TRIP Holdings contributed $21.6 million and $49.6 million , respectively, net of
expenses, to TRIP Holdings. These contributions, combined with additional secured borrowings, were used to purchase additional railcar
equipment from TILC. At December 31, 2014 , the Company's carrying value of its investment in TRIP Holdings and RIV 2013 totaled $229.1
million representing the Company's weighted average 39% ownership interest. The Company's investments in its partially-owned leasing
subsidiaries are eliminated in consolidation.
See Note 11 Debt regarding the debt of TRIP Holdings and RIV 2013 and their respective subsidiaries.
62
Table of Contents
Note 6. Railcar Leasing and Management Services Group
The Railcar Leasing and Management Services Group owns and operates a fleet of railcars as well as provides third-party fleet management,
maintenance, and leasing services. Selected consolidating financial information for the Leasing Group is as follows:
December 31, 2014
Leasing Group
WhollyPartiallyOwned
Owned
Manufacturing/
Subsidiaries
Subsidiaries
Corporate
Total
(in millions)
Cash, cash equivalents, and short-term
marketable securities
Property, plant, and equipment, net
Net deferred profit on railcars sold to the
Leasing Group
Consolidated property, plant, and
equipment, net
Restricted cash
Debt:
Recourse
Less: unamortized discount
Non-recourse
Total debt
Net deferred tax liabilities
$
$
11.9
2,599.2
$
$
—
1,999.9
$
$
951.0
861.0
$
$
962.9
5,460.1
(557.2)
$
142.8
$
91.9
$
$
39.1
—
39.1
1,207.8
1,246.9
658.2
$
—
—
—
1,515.9
1,515.9
0.9
$
$
$
$
$
$
$
—
850.2
(60.0 )
790.2
—
790.2
(44.1 )
$
$
4,902.9
234.7
$
889.3
(60.0)
829.3
2,723.7
3,553.0
615.0
$
$
December 31, 2013
Leasing Group
WhollyPartiallyOwned
Owned
Manufacturing/
Subsidiaries
Subsidiaries
Corporate
Total
(in millions)
Cash, cash equivalents, and short-term
marketable securities
Property, plant, and equipment, net
Net deferred profit on railcars sold to the
Leasing Group
Consolidated property, plant, and equipment,
net
Restricted cash
Debt:
Recourse
Less: unamortized discount
Non-recourse
Total debt
Net deferred tax liabilities
$
$
3.5
2,964.6
$
$
—
1,685.1
$
$
574.7
670.6
$
$
578.2
5,320.3
(549.7)
$
183.6
$
77.1
$
$
42.2
—
42.2
1,314.7
1,356.9
671.9
$
—
—
—
1,256.1
1,256.1
—
$
$
$
$
$
$
$
—
450.9
(74.1 )
376.8
—
376.8
(32.5 )
$
$
4,770.6
260.7
$
493.1
(74.1)
419.0
2,570.8
2,989.8
639.4
$
$
Net deferred profit on railcars sold to the Leasing Group consists of intersegment profit that is eliminated in consolidation and is, therefore,
not allocated to an operating segment. See Note 5 Partially-Owned Leasing Subsidiaries and Note 11 Debt for a further discussion regarding
the Company’s investment in its partially-owned leasing subsidiaries and the related indebtedness.
63
Table of Contents
Year Ended December 31,
2014
2013
2012
Percent Change
2014 versus 2013
2013 versus 2012
($ in millions)
Revenues:
Leasing and management
$
Sale of railcars owned one year or less at the time
of sale
Total revenues
$
Operating profit:
Leasing and management
Railcar sales:
Railcars owned one year or less at the time of
sale
Railcars owned more than one year at the time
of sale
Total operating profit
$
$
Operating profit margin:
Leasing and management
Railcar sales
Total operating profit margin
Selected expense information (1) :
Depreciation
Maintenance
Rent
Interest:
External
Intercompany
Total interest expense
$
586.9
486.3
1,118.3
287.9
632.0
$
528.5
$
58.5
645.4
$
118.6
647.1
73.3
(0.3)
$
267.3
$
242.6
7.7
10.2
74.0
(1.4)
136.1
9.1
24.8
92.3
516.3
20.4
296.8
33.5
300.9
$
$
45.5%
*
46.0
45.6 %
*
46.2
7.7 %
11.1 %
45.9 %
*
46.5
$
$
$
130.0
78.9
52.9
$
$
$
129.0
71.5
53.3
$
$
$
120.5
59.4
50.9
0.8
10.3
(0.8)
7.1
20.4
4.7
$
153.3
—
153.3
$
153.5
3.8
157.3
$
161.2
13.1
174.3
(2.5)
(9.8)
$
$
$
* Not meaningful
Depreciation, maintenance, and rent expense are components of operating profit. Amortization of deferred profit on railcars sold from the Rail Group to the Leasing Group is
included in the operating profit of the Leasing Group resulting in the recognition of depreciation expense based on the Company's original manufacturing cost of the railcars.
Interest expense is not a component of operating profit and includes the effect of hedges. Intercompany interest expense is eliminated in consolidation and arises from Trinity’s
previous ownership of a portion of TRIP Holdings’ Senior Secured Notes, which notes were retired in full in May 2013. See Note 11 Debt.
(1)
During the year ended December 31, 2014 , the Company received proceeds of $882.7 million from the sale of leased railcars to Element
Financial Corporation ("Element") under the strategic alliance with Element announced in December 2013, including $200.4 million recorded
as revenue by the Rail Group. From the total proceeds received from Element, the Leasing Group recorded $446.6 million in revenue from the
sale of railcars owned one year or less at the time of sale. The remainder of the proceeds of $235.7 million is attributable to the sale of railcars
owned more than one year at the time of sale and is, consequently, excluded from revenue. Since the inception of our alliance, the Company
has received proceeds of $987.7 million from the sale of leased railcars to Element.
64
Table of Contents
Equipment consists primarily of railcars leased by third parties. The Leasing Group purchases equipment manufactured predominantly by the
Rail Group and enters into lease contracts with third parties with terms generally ranging between one and twenty years. The Leasing Group
primarily enters into operating leases. Future contractual minimum rental revenues on leases are as follows:
2015
2016
2017
2018
2019
Thereafter
Total
(in millions)
Future contractual minimum
rental revenues
$
462.9
$
388.8
$
319.9
$
248.1
$
168.5
$
227.2
$
1,815.4
Debt. The Leasing Group’s debt at December 31, 2014 consisted of both recourse and non-recourse debt. In 2009 , the Company entered into
capital lease obligations totaling $56.6 million . The capital lease obligations are guaranteed by Trinity Industries, Inc. and certain subsidiaries,
and secured by railcar equipment and related leases. As of December 31, 2014 , Trinity’s wholly-owned subsidiaries included in the Leasing
Group held equipment with a net book value of $1,841.9 million which is pledged as collateral for Leasing Group debt held by those
subsidiaries, including equipment with a net book value of $45.6 million securing capital lease obligations. The net book value of unpledged
equipment at December 31, 2014 was $672.8 million . See Note 11 Debt for the form, maturities, and descriptions of Leasing Group debt.
Partially-owned subsidiaries. Debt owed by TRIP Holdings and RIV 2013 and their respective subsidiaries is non-recourse to Trinity and
TILC. Creditors of each of TRIP Holdings and RIV 2013 and their respective subsidiaries have recourse only to the particular subsidiary's
assets. TRIP Master Funding equipment with a net book value of $1,398.1 million is pledged as collateral for the TRIP Master Funding debt.
TRL 2012 equipment with a net book value of $601.7 million is pledged solely as collateral for the TRL 2012 secured railcar equipment notes.
See Note 5 Partially-Owned Leasing Subsidiaries for a description of TRIP Holdings and RIV 2013.
Off Balance Sheet Arrangements. In prior years, the Leasing Group completed a series of financing transactions whereby railcars were sold
to one or more separate independent owner trusts (“Trusts”). Each of the Trusts financed the purchase of the railcars with a combination of debt
and equity. In each transaction, the equity participant in the Trust is considered to be the primary beneficiary of the Trust and therefore, the
debt related to the Trust is not included as part of the consolidated financial statements. The Leasing Group, through wholly-owned, qualified
subsidiaries, leased railcars from the Trusts under operating leases with terms of 22 years, and subleased the railcars to independent third-party
customers under shorter term operating rental agreements. Under the terms of the operating lease agreements between the subsidiaries and the
Trusts, the Leasing Group has the option to purchase at a predetermined fixed price, certain of the railcars from the Trusts in 2016 and other
railcars in 2019 . The Leasing Group also has options to purchase the railcars at the end of the respective lease agreements in 2023 , 2026 , and
2027 at the then fair market value of the railcars as determined by a third party, independent appraisal. At the expiration of the operating lease
agreements, the Company has no further obligations with respect to the leased railcars.
These Leasing Group subsidiaries had total assets as of December 31, 2014 of $195.5 million , including cash of $71.1 million and railcars of
$83.7 million . The subsidiaries' cash, railcars, and an interest in each sublease are pledged to collateralize the lease obligations to the Trusts
and are included in the consolidated financial statements of the Company. Trinity does not guarantee the performance of the subsidiaries’ lease
obligations. Certain ratios and cash deposits must be maintained by the Leasing Group’s subsidiaries in order for excess cash flow, as defined
in the agreements, from the lease to third parties to be available to Trinity. Future operating lease obligations of the Leasing Group’s
subsidiaries as well as future contractual minimum rental revenues related to these leases due to the Leasing Group are as follows:
2015
2016
2017
2018
2019
Thereafter
Total
(in millions)
Future operating lease
obligations of Trusts’
railcars
Future contractual minimum
rental revenues of Trusts’
railcars
$
43.0
$
40.0
$
41.8
$
45.2
$
43.5
$
209.7
$
423.2
$
73.0
$
60.6
$
46.2
$
35.4
$
23.1
$
35.6
$
273.9
In each transaction, the Leasing Group has entered into a servicing and re-marketing agreement with the Trusts that requires the Leasing
Group to endeavor, consistent with customary commercial practice as would be used by a prudent person, to maintain railcars under lease for
the benefit of the Trusts. The Leasing Group also receives management fees under the terms of the agreements. In each transaction, an
independent trustee for the Trusts has authority for appointment of the railcar fleet manager.
65
Table of Contents
Operating Lease Obligations. Future amounts due as well as future contractual minimum rental revenues related to operating leases other
than leases discussed above are as follows:
2015
2016
2017
2018
2019
Thereafter
Total
(in millions)
Future operating lease
obligations
Future contractual
minimum rental
revenues
$
13.0
$
12.8
$
12.1
$
12.0
$
9.5
$
28.7
$
88.1
$
18.7
$
17.4
$
10.6
$
6.2
$
3.4
$
5.8
$
62.1
Operating lease obligations totaling $17.6 million are guaranteed by Trinity Industries, Inc. and certain subsidiaries.
66
Table of Contents
Note 7. Derivative Instruments
We use derivative instruments to mitigate the impact of changes in interest rates, both 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 natural gas and diesel fuel prices and changes in foreign currency exchange rates. For derivative instruments designated as hedges, the
Company formally documents the relationship between the derivative instrument and the hedged item, as well as the risk management
objective and strategy for the use of the derivative instrument. This documentation includes linking the derivatives that are designated as fair
value or cash flow hedges to specific assets or liabilities on the balance sheet, commitments, or forecasted transactions. At the time a derivative
instrument is entered into, and at least quarterly thereafter, the Company assesses whether the derivative instrument is effective in offsetting the
changes in fair value or cash flows of the hedged item. Any change in fair value resulting in ineffectiveness, as defined by accounting standards
issued by the FASB, is recognized in current period earnings. For derivative instruments that are designated and qualify as cash flow hedges,
the effective portion of the gain or loss on the derivative instrument is recorded in AOCL as a separate component of stockholders' equity and
reclassified into earnings in the period during which the hedged transaction affects earnings. Trinity monitors its derivative positions and the
credit ratings of its counterparties and does not anticipate losses due to counterparties' non-performance. See Note 3 Fair Value Accounting for
discussion of how the Company valued its commodity hedges and interest rate swaps at December 31, 2014 . See Note 11 Debt for a
description of the Company's debt instruments.
Interest rate hedges
Notional
Amount
Included in accompanying balance sheet
at December 31, 2014
AOCL –
loss/
Noncontrolling
Liability
(income)
Interest
Interest
Rate (1)
(in millions, except %)
Expired hedges:
2006 secured railcar equipment
notes
$
Promissory notes
$
TRIP Holdings warehouse loan $
Open hedges:
TRIP Master Funding secured
railcar equipment notes
$
Promissory notes
$
(1) Weighted average fixed interest rate
200.0
370.0
788.5
4.87%
5.34%
3.60%
$
$
$
—
—
—
$
$
$
(1.3 )
1.2
10.0
$
$
$
—
—
13.6
56.3
387.6
2.62%
4.13%
$
$
2.0
6.4
$
$
0.8
5.3
$
$
1.1
—
Effect on interest expense-increase/(decrease)
2014
Year Ended December 31,
2013
Expected effect
during next
twelve months (1)
2012
(in millions)
Expired hedges:
2006 secured railcar equipment notes $
$
(0.3 )
Promissory notes
$
$
2.9
TRIP Holdings warehouse loan
$
$
5.1
Open hedges:
TRIP Master Funding secured railcar
equipment notes
$
$
1.5
Promissory notes
$
$
15.4
(1) Based on the fair value of open hedges as of December 31, 2014
(0.3 )
3.1
6.1
$
$
$
(0.3 )
3.3
6.0
$
$
$
(0.3 )
1.2
4.9
1.8
15.8
$
$
2.0
18.4
$
$
1.2
6.4
During 2005 and 2006 , we entered into interest rate swap derivatives in anticipation of issuing our 2006 Secured Railcar Equipment Notes.
These derivative instruments, with a notional amount of $200.0 million , were settled in 2006 and fixed the interest rate on a portion of the
related debt issuance. These derivative instrument transactions are being accounted for as cash flow hedges with changes in the fair value of the
instruments of $4.5 million in income recorded in AOCL through the date the related debt issuance closed in 2006 . The balance is being
amortized over the term of the related debt. The effect on interest expense is due to amortization of the AOCL balance.
67
Table of Contents
During 2006 and 2007 , we entered into interest rate swap derivatives in anticipation of issuing our Promissory Notes. These derivative
instruments, with a notional amount of $370.0 million , were settled in 2008 and fixed the interest rate on a portion of the related debt issuance.
These derivative instrument transactions are being accounted for as cash flow hedges with changes in the fair value of the instruments of $24.5
million recorded as a loss in AOCL through the date the related debt issuance closed in 2008 . The balance is being amortized over the term of
the related debt. The effect on interest expense is due to amortization of the AOCL balance.
In 2008 , we entered into an interest rate swap derivative instrument, expiring in 2015 , to fix the variable Libor component of the Promissory
Notes. This derivative instrument transaction is being accounted for as a cash flow hedge. The effect on interest expense results primarily from
monthly interest settlements.
Between 2007 and 2009 , TRIP Holdings, as required by the TRIP Warehouse Loan, entered into interest rate swap derivatives, all of which
qualified as cash flow hedges, to reduce the effect of changes in variable interest rates in the TRIP Warehouse Loan. In July 2011 , these
interest rate hedges were terminated in connection with the refinancing of the TRIP Warehouse Loan. Balances included in AOCL at the date
the hedges were terminated are being amortized over the expected life of the new debt with $4.9 million of additional interest expense expected
to be recognized during the twelve months following December 31, 2014 . Also in July 2011 , TRIP Holdings’ wholly-owned subsidiary, TRIP
Master Funding, entered into an interest rate swap derivative instrument, expiring in 2021 , with a notional amount of $94.1 million to reduce
the effect of changes in variable interest rates associated with the Class A-1b notes of the TRIP Master Funding secured railcar equipment
notes. The effect on interest expense is primarily a result of monthly interest settlements.
See Note 11 Debt regarding the related debt instruments.
Other Derivatives
Effect on operating income - increase/(decrease)
Year Ended December 31,
2014
2013
2012
(in millions)
Fuel hedges (1)
$
(2.3 )
Foreign exchange hedges (2)
$
—
(1) Included in cost of revenues in the accompanying consolidated statement of operations
(2)
$
$
—
—
$
$
0.4
(0.4 )
Included in other, net in the accompanying consolidated statement of operations
Natural gas and diesel fuel
We maintain a program to mitigate the impact of fluctuations in the price of natural gas and diesel fuel. The intent of the program is to
protect our operating profit from adverse price changes by entering into derivative instruments. For those instruments that do not qualify for
hedge accounting treatment, any changes in their valuation are recorded directly to the consolidated statement of operations. The amount
recorded in the consolidated balance sheet as of December 31, 2014 for these instruments was a liability of $2.1 million .
Foreign exchange hedge
We enter into foreign exchange hedges to mitigate the impact on operating profit of unfavorable fluctuations in foreign currency exchange
rates. The amounts recorded in the consolidated financial statements as of December 31, 2014 for these instruments were not significant. These
instruments are short term with quarterly maturities and no remaining balance in AOCL as of December 31, 2014 .
68
Table of Contents
Note 8. Property, Plant, and Equipment
The following table summarizes the components of property, plant, and equipment as of December 31, 2014 and 2013 .
December 31,
2014
December 31,
2013
(in millions)
Manufacturing/Corporate:
Land
Buildings and improvements
Machinery and other
Construction in progress
$
Less accumulated depreciation
Leasing:
Wholly-owned subsidiaries:
Machinery and other
Equipment on lease
Less accumulated depreciation
Partially-owned subsidiaries:
Equipment on lease
Less accumulated depreciation
Net deferred profit on railcars sold to the Leasing Group
$
81.4
548.2
975.7
76.4
1,681.7
(820.7 )
861.0
$
44.2
463.2
832.5
79.0
1,418.9
(748.3 )
670.6
10.7
3,189.6
3,200.3
(601.1 )
2,599.2
10.3
3,509.1
3,519.4
(554.8 )
2,964.6
2,261.2
(261.3 )
1,999.9
1,887.2
(202.1 )
1,685.1
(557.2 )
4,902.9
(549.7 )
4,770.6
$
We lease certain equipment and facilities under operating leases. Future minimum rent expense on non-Leasing Group leases in each year is
(in millions): 2015 - $7.0 ; 2016 - $5.0 ; 2017 - $3.5 ; 2018 - $2.1 ; 2019 - $1.0 ; and $0.8 thereafter. See Note 6 Railcar Leasing and
Management Services Group for information related to the lease agreements, future operating lease obligations, and future minimum rent
expense associated with the Leasing Group.
We did not capitalize any interest expense as part of the construction of facilities and equipment during 2014 or 2013 .
We estimate the fair market value of properties no longer in use based on the location and condition of the properties, the fair market value of
similar properties in the area, and the Company's experience selling similar properties in the past. As of December 31, 2014 , the Company had
non-operating plants with a net book value of $18.4 million . Our estimated fair value of these assets exceeds their book value.
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Table of Contents
Note 9. Goodwill
Goodwill by segment is as follows:
December 31,
2014
December 31,
2013
(in millions)
Rail Group
Construction Products Group
Energy Equipment Group
Railcar Leasing and Management Services Group
$
134.6
128.3
508.5
1.8
773.2
$
$
134.6
126.9
14.9
1.8
278.2
$
As of December 31, 2014 and 2013 , the Company's annual impairment test of goodwill was completed at the reporting unit level and no
additional impairment charges were determined to be necessary. As of December 31, 2014 and 2013 , Rail Group goodwill is net of a 2009
impairment charge of $325.0 million .
The increase in the Construction Products Group and Energy Equipment Group goodwill as of December 31, 2014 is due to acquisition
activities during the twelve months ended December 31, 2014 , including the acquisition of Meyer. See Note 2 Acquisitions and Divestitures.
Note 10. Warranties
The changes in the accruals for warranties for the years ended December 31, 2014, 2013, and 2012 are as follows:
December 31,
2014
December 31,
2012
December 31, 2013
(in millions)
Beginning balance
Warranty costs incurred
Warranty originations and revisions
Warranty expirations
Ending balance
$
$
70
14.7
(6.1)
12.6
(3.4)
17.8
$
$
12.5
(5.9 )
11.9
(3.8 )
14.7
$
$
13.5
(5.9)
7.7
(2.8)
12.5
Table of Contents
Note 11. Debt
The following table summarizes the components of debt as of December 31, 2014 and 2013 :
December 31,
2014
December 31,
2013
(in millions)
Corporate – Recourse:
Revolving credit facility
Senior notes, net of unamortized discount of $0.4 and $Convertible subordinated notes, net of unamortized discount of $59.6 and $74.1
Other
$
Leasing – Recourse:
Capital lease obligations
Total recourse debt
Leasing – Non-recourse:
Wholly-owned subsidiaries:
2006 secured railcar equipment notes
Promissory notes
2009 secured railcar equipment notes
2010 secured railcar equipment notes
TILC warehouse facility
Partially-owned subsidiaries:
TRL 2012 secured railcar equipment notes (RIV 2013)
TRIP Master Funding secured railcar equipment notes
Total non–recourse debt
Total debt
$
—
399.6
389.9
0.7
790.2
$
—
—
375.9
0.9
376.8
39.1
829.3
42.2
419.0
223.0
363.9
188.8
311.5
120.6
1,207.8
240.7
396.1
199.0
326.9
152.0
1,314.7
472.2
1,043.7
1,515.9
2,723.7
3,553.0
499.3
756.8
1,256.1
2,570.8
2,989.8
$
Corporate
We have a $425.0 million unsecured revolving credit facility that matures on October 20, 2016 . As of December 31, 2014 , we had letters of
credit issued under our revolving credit facility in an aggregate principal amount of $88.6 million , leaving $336.4 million available for
borrowing. Other than these letters of credit, there were no borrowings under our revolving credit facility as of December 31, 2014 , or for the
twelve month period then ended. Of the outstanding letters of credit as of December 31, 2014 , a total of $88.5 million is expected to expire in
2015 and the remainder in 2016 . The majority of our letters of credit obligations support the Company’s various insurance programs and
generally renew each year. Trinity’s revolving credit facility requires the maintenance of ratios related to minimum interest coverage for the
leasing and manufacturing operations and maximum leverage. As of December 31, 2014 , we were in compliance with all such financial
covenants. Borrowings under the credit facility bear interest at Libor plus 1.50% or prime plus 0.50% and are guaranteed by certain
100%-owned subsidiaries of the Company.
The Company's $450.0 million of Convertible Subordinated Notes due 2036 (“Convertible Subordinated Notes”) bear an interest rate of 3
7/8% per annum on the principal amount payable semi-annually in arrears on June 1 and December 1 of each year. In addition, commencing
with the six -month period beginning June 1, 2018 and for each six -month period thereafter, we will pay contingent interest to the holders of
the Convertible Subordinated Notes under certain circumstances. The Convertible Subordinated Notes mature on June 1, 2036 , unless
redeemed, repurchased, or converted earlier. We may not redeem the Convertible Subordinated Notes before June 1, 2018 . On or after that
date, we may redeem all or part of the Convertible Subordinated Notes for cash at 100% of the principal amount of the notes to be redeemed,
plus accrued and unpaid interest (including any contingent interest) up to, but excluding, the redemption date . Holders of the Convertible
Subordinated Notes may require us to purchase all or a portion of their notes on June 1, 2018 or upon a fundamental change. In each case, the
Convertible Subordinated Notes would be purchased for cash at a price equal to 100% of the principal amount of the notes to be purchased plus
any accrued and unpaid interest (including any contingent interest) up to, but excluding, the purchase date.
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The Convertible Subordinated Notes are recorded net of unamortized discount to reflect their underlying economics by capturing the value of
the conversion option as borrowing costs. As of December 31, 2014 and 2013 , capital in excess of par value included $92.5 million and $92.8
million , respectively, related to the estimated value of the Convertible Subordinated Notes’ conversion options, in accordance with ASC
470-20. Debt discount recorded in the consolidated balance sheet is being amortized through June 1, 2018 to yield an effective annual interest
rate of 8.42% based upon the estimated market interest rate for comparable non-convertible debt as of the issuance date of the Convertible
Subordinated Notes. Total interest expense recognized on the Convertible Subordinated Notes for the years ended December 31, 2014 , 2013 ,
and 2012 , is as follows:
2014
Year Ended December 31,
2013
2012
(in millions)
Coupon rate interest
Amortized debt discount
$
$
17.4
14.5
31.9
$
$
17.4
13.4
30.8
$
$
17.4
12.3
29.7
Holders of the Convertible Subordinated Notes may convert their notes under the following circumstances: 1) if the daily closing price of our
common stock is greater than or equal to 130% of the conversion price during 20 of the last 30 trading days of the preceding calendar quarter;
2) upon notice of redemption; or 3) upon the occurrence of specified corporate transactions pursuant to the terms of the applicable indenture.
Upon conversion, the Company is required to pay cash up to the aggregate principal amount of the Convertible Subordinated Notes to be
converted. Any conversion obligation in excess of the aggregate principal amount of the Convertible Subordinated Notes to be converted may
be settled in cash, shares of the Company’s common stock, or a combination of cash and shares of the Company’s common stock, at the
Company’s election. The conversion price, which is subject to adjustment upon the occurrence of certain events, was $25.22 per share as of
December 31, 2014 . The Convertible Subordinated Notes were not subject to conversion as of January 1, 2015. See Note 17 Earnings Per
Common Share for an explanation of the effects of the Convertible Subordinated Notes on earnings per share. The Company has not entered
into any derivatives transactions associated with these notes.
In September 2014, the Company issued $400.0 million aggregate principal amount of 4.55% senior notes ("Senior Notes") due October
2024 . Interest on the Senior Notes is payable semiannually commencing April 1, 2015. The Senior Notes rank senior to existing and future
subordinated debt including the Company's Convertible Subordinated Notes and rank equal to existing and future senior indebtedness,
including the Company's revolving credit facility. The Senior Notes are subordinated to all the Company's existing and future secured debt to
the extent of the value of the collateral securing such indebtedness. The Senior Notes contain covenants that limit our ability and/or certain
subsidiaries' ability to create or permit to exist certain liens; enter into sale and leaseback transactions; and consolidate, merge, or transfer all or
substantially all of our assets. The Company’s Senior Notes are fully and unconditionally and jointly and severally guaranteed by each of
Trinity’s domestic subsidiaries that is a guarantor under the Company's revolving credit facility. See Note 19 Financial Statements for
Guarantors of the Senior Notes.
Wholly-owned leasing subsidiaries
In May 2006 , Trinity Rail Leasing V, L.P., a limited partnership (“TRL V”) and a limited purpose, indirect wholly-owned subsidiary of the
Company owned through TILC issued $355.0 million in aggregate principal amount of Secured Railcar Equipment Notes, Series 2006 -1A
(the “ 2006 Secured Railcar Equipment Notes”), of which $223.0 million was outstanding as of December 31, 2014 . The 2006 Secured Railcar
Equipment Notes were issued pursuant to a Master Indenture, dated May 24, 2006 , between TRL V and Wilmington Trust Company, as
indenture trustee. The 2006 Secured Railcar Equipment Notes bear interest at a fixed rate of 5.90% per annum, are payable monthly, and have a
final maturity of May 14, 2036 . The 2006 Secured Railcar Equipment Notes are obligations of TRL V and are non-recourse to Trinity. The
obligations are secured by a portfolio of railcars and operating leases thereon, certain cash reserves, and other assets acquired and owned by
TRL V.
In May 2008 , Trinity Rail Leasing VI LLC, a Delaware limited liability company (“TRL VI”) and a limited purpose, indirect wholly-owned
subsidiary of the Company owned through TILC issued $572.2 million of 30 -year promissory notes (the “Promissory Notes”) to financial
institutions, of which $363.9 million was outstanding as of December 31, 2014 . The Promissory Notes are secured by a portfolio of railcars
and operating leases thereon, certain cash reserves, and other assets acquired and owned by TRL VI. The Promissory Notes are obligations of
TRL VI and are non-recourse to Trinity. The Promissory Notes bear interest at a floating rate of one -month Libor plus a margin of 1.50% . The
Libor portion of the interest rate on the Promissory Notes is fixed at 4.13% for the first seven years from the date of issuance of the Promissory
Notes through interest rate swaps. The interest rate margin on the Promissory Notes will increase by 0.50% on each of the seventh and eighth
anniversary dates of the issuance of the Promissory Notes, and by an additional 2.00% on the tenth anniversary date of the issuance of the
Promissory Notes. The Promissory Notes may be prepaid at any time.
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In November 2009 , Trinity Rail Leasing VII LLC, a Delaware limited liability company (“TRL VII”) and a limited purpose, indirect
wholly-owned subsidiary of the Company owned through TILC, issued $238.3 million in aggregate principal amount of Secured Railcar
Equipment Notes, Series 2009 -1 (“the 2009 Secured Railcar Equipment Notes”), of which $188.8 million was outstanding as of
December 31, 2014 . The 2009 Secured Railcar Equipment Notes were issued pursuant to a Master Indenture, dated November 5, 2009
between TRL VII and Wilmington Trust Company, as indenture trustee. The 2009 Secured Railcar Equipment Notes bear interest at a fixed
rate of 6.66% per annum, are payable monthly, and have a final maturity date of November 16, 2039 . The 2009 Secured Railcar Equipment
Notes are obligations of TRL VII and are non-recourse to Trinity. The obligations are secured by a portfolio of railcars and operating leases
thereon, certain cash reserves, and other assets acquired and owned by TRL VII.
In October 2010 , Trinity Rail Leasing 2010 LLC, a Delaware limited liability company ("TRL 2010 ") and a limited purpose, indirect
wholly-owned subsidiary of the Company owned through TILC, issued $369.2 million in aggregate principal amount of Secured Railcar
Equipment Notes, Series 2010 -1 (“ 2010 Secured Railcar Equipment Notes"), of which $311.5 million was outstanding as of December 31,
2014 . The 2010 Secured Railcar Equipment Notes were issued pursuant to an Indenture, dated as of October 25, 2010 between TRL 2010 and
Wilmington Trust Company, as indenture trustee. The 2010 Secured Railcar Equipment Notes bear interest at a fixed rate of 5.19% , are
payable monthly, and have a stated final maturity date of October 16, 2040 . The 2010 Secured Railcar Equipment Notes are obligations of
TRL 2010 and are non-recourse to Trinity. The obligations are secured by a portfolio of railcars and operating leases thereon, certain cash
reserves, and other assets acquired and owned by TRL 2010 .
The $475.0 million TILC warehouse loan facility, established to finance railcars owned by TILC, had $120.6 million outstanding with
$354.4 million unused, of which $334.6 million was available as of December 31, 2014 based on the amount of warehouse-eligible, unpledged
equipment. The warehouse loan is a non-recourse obligation secured by a portfolio of railcars and operating leases, certain cash reserves, and
other assets acquired and owned by the warehouse loan facility trust. The principal and interest of this indebtedness are paid from the cash
flows of the underlying leases. Advances under the facility bear interest at a defined index rate plus a margin, for an all-in interest rate of 1.94%
at December 31, 2014 . The warehouse loan facility has been renewed and extended through June 2015 . Amounts outstanding at maturity,
absent renewal, will be payable in three installments in December 2015 , June 2016 , and December 2016 .
In 2009 , the Company entered into capital lease obligations totaling $56.6 million , of which $39.1 million was outstanding as of
December 31, 2014 . The capital lease obligations are guaranteed by the Company and certain subsidiaries and secured by railcar equipment
and related leases.
Partially-owned leasing subsidiaries
In July 2011 , TRIP Holdings issued $175.0 million in Senior Secured Notes (the “TRIP Holdings Senior Secured Notes”) and TRIP Master
Funding, a Delaware limited liability company and limited purpose, wholly-owned subsidiary of TRIP Holdings, issued $857.0 million in
Secured Railcar Equipment Notes (the “TRIP Master Funding Secured Railcar Equipment Notes”). The proceeds from the TRIP Holdings
Senior Secured Notes and the TRIP Master Funding Secured Railcar Equipment Notes were primarily used by TRIP Master Funding to
purchase all of the railcar equipment owned by TRIP Leasing. The TRIP Holdings Senior Secured Notes were repaid in full in May 2013 . See
Note 5 Partially-Owned Leasing Subsidiaries for further explanation.
The TRIP Master Funding Secured Railcar Equipment Notes consist of three classes with the Class A-1a notes bearing interest at 4.37% , the
Class A-1b notes bearing interest at Libor plus 2.50% , and the Class A-2 notes bearing interest at 6.02% , all payable monthly, with a final
maturity date in July 2041 . As of December 31, 2014 , there were $130.8 million , $73.9 million , and $509.6 million of Class A-1a, Class
A-1b, and of Class A-2 notes outstanding, respectively. In May 2014 , TRIP Master Funding issued $335.7 million in aggregate principal
amount of Series 2014-1 Secured Railcar Equipment Notes consisting of two classes with the Class A-1 notes bearing interest at 2.86% and the
Class A-2 notes bearing interest at 4.09% , with a final maturity date of April 2044 . As of December 31, 2014 , there were $108.7 million and
$220.7 million of Class A-1 and Class A-2 notes outstanding, respectively. The TRIP Master Funding Secured Railcar Equipment Notes and
the TRIP Master Funding Series 2014-1 Secured Railcar Equipment Notes are issued pursuant to a Master Indenture dated July 6, 2011
between TRIP Master Funding and Wilmington Trust Company, as indenture trustee; are non-recourse to Trinity, TILC, TRIP Holdings, and
the other equity investors in TRIP Holdings; and are secured by TRIP Master Funding's portfolio of railcars and operating leases thereon, its
cash reserves, and all other assets owned by TRIP Master Funding.
In December 2012 , Trinity Rail Leasing 2012 LLC, a Delaware limited liability company ("TRL 2012 ") and a limited purpose, indirect
wholly-owned subsidiary of the Company owned through TILC, issued $145.4 million in aggregate principal amount of Series 2012 -1 Class
A-1 Secured Railcar Equipment Notes (the " 2012 Class A-1 Notes") and $188.4 million in aggregate principal amount of Series 2012 -1 Class
A-2 Secured Railcar Equipment Notes (the " 2012 Class A-2 Notes") and collectively with the 2012 Class A-1 Notes, the "2012 Secured
Railcar Equipment Notes", of which $111.5 million and $188.4 million , respectively, were outstanding as of December 31, 2014 . The 2012
Class A-1 Notes bear interest at a fixed rate of 2.27% , are payable monthly, and
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have a stated final maturity date of January 15, 2043 . The 2012 Class A-2 Notes bear interest at a fixed rate of 3.53% , are payable monthly,
and have a stated final maturity date of January 15, 2043 . In May 2013, TRL 2012 became a subsidiary of one of the Company's
partially-owned subsidiaries, RIV 2013. See Note 5 Partially-Owned Leasing Subsidiaries for further explanation. In August 2013 , TRL 2012
issued $183.4 million in aggregate principal amount of Series 2013 -1 Secured Railcar Equipment Notes of which $172.3 million was
outstanding as of December 31, 2014 . The 2013 -1 Secured Railcar Equipment Notes bear interest at a fixed rate of 3.9% , are payable
monthly, and have a stated final maturity date of July 15, 2043 .
The 2012 Secured Railcar Equipment Notes and the 2013-1 Secured Railcar Equipment Notes were issued pursuant to a Master Indenture
dated December 19, 2012 between TRL 2012 and Wilmington Trust Company, as indenture trustee; are non-recourse to Trinity, TILC, RIV
2013, and the other equity investors in RIV 2013; and are secured by TRL 2012's portfolio of railcars and operating leases thereon, its cash
reserves, and all other assets owned by TRL 2012 .
TRIP Master Funding and TRL 2012 are wholly-owned subsidiaries of TRIP Holdings and RIV 2013, respectively, which, in turn, are
partially-owned subsidiaries of the Company, through its wholly-owned subsidiary, TILC. The Company's combined weighted average
ownership interest in TRIP Holdings and RIV 2013 is 39% . See Note 5 Partially-Owned Leasing Subsidiaries for further explanation.
The remaining principal payments under existing debt agreements as of December 31, 2014 are as follows:
2015
2016
2017
2018
2019
Thereafter
(in millions)
Recourse:
Corporate
$
Leasing – capital lease obligations (Note 6)
Non-recourse – leasing (Note 6):
2006 secured railcar equipment notes
Promissory notes
2009 secured railcar equipment notes
2010 secured railcar equipment notes
TILC warehouse facility
TRL 2012 secured railcar equipment notes
(RIV 2013)
TRIP Master Funding secured railcar
equipment notes
Facility termination payments - TILC
warehouse facility
Total principal payments
$
0.2
3.2
$
0.2
3.5
$
0.3
3.7
—
28.7
$
—
—
$
$
849.5
—
18.5
25.5
9.6
15.3
4.0
21.8
338.4
6.5
14.9
3.6
24.0
—
6.3
13.7
—
25.3
—
6.5
10.0
—
28.0
—
11.2
7.6
—
105.4
—
148.7
250.0
—
23.2
22.3
22.9
23.1
22.2
358.5
45.9
39.8
29.2
41.8
50.1
836.9
37.7
183.1
75.3
526.3
—
100.1
$
—
135.4
—
119.1
—
2,549.0
2014
Year Ended December 31,
2013
$
$
$
$
Note 12. Other, Net
Other, net (income) expense consists of the following items:
2012
(in millions)
Foreign currency exchange transactions
Gain on equity investments
Other
Other, net
$
$
(1.2 )
(0.8)
(2.6)
(4.6 )
$
$
0.3
(0.3)
(2.8)
(2.8 )
$
$
(2.3 )
(0.4)
(1.6)
(4.3 )
Other for the years ended December 31, 2013 and 2012 includes $1.7 million and $0.3 million in income, respectively, related to the change
in fair value of certain equity repurchase agreements with an investor in TRIP Holdings. These agreements were terminated in March 2013.
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Note 13. Income Taxes
The components of the provision for income taxes from continuing operations are as follows:
2014
Year Ended December 31,
2013
2012
(in millions)
Current:
Federal
State
Foreign
Total current
Deferred:
Federal
State
Foreign
Total deferred
Provision
$
$
322.7
19.4
18.5
360.6
(4.0 )
1.2
(3.0 )
(5.8 )
354.8
$
$
141.8
13.7
3.1
158.6
44.3
2.3
(0.8 )
45.8
204.4
$
$
(5.7 )
7.0
6.4
7.7
126.6
3.2
(3.5 )
126.3
134.0
The provision for income taxes results in effective tax rates that differ from the statutory rates. The following is a reconciliation between the
statutory U.S. Federal income tax rate and the Company’s effective income tax rate on income from continuing operations:
Year Ended December 31,
2014
2013
35.0 %
35.0 %
2.1
1.4
(1.4)
(2.0)
(0.9)
(1.1)
—
—
(0.8)
0.1
0.6
(0.1)
34.6 %
33.3 %
Statutory rate
State taxes
Domestic production activities deduction
Noncontrolling interest in partially-owned subsidiaries
Tax assessments and settlements
Changes in valuation allowances and reserves
Other, net
Effective rate
2012
35.0 %
2.0
—
—
(0.6)
(1.4)
(0.3)
34.7 %
Income from continuing operations before income taxes for the years ended December 31, 2014 , 2013 , and 2012 was $1,051.4 million ,
$571.2 million , and $376.3 million , respectively, for U.S. operations, and $12.6 million , $19.3 million , and $9.6 million , respectively, for
foreign operations, principally Mexico. The Company provides deferred income taxes on the un-repatriated earnings of its foreign operations
where it results in a deferred tax liability. Our effective tax rate reflects the current tax benefit available for U.S. manufacturing activity.
In May 2013, TRIP Holdings and RIV 2013 elected to be treated as partnerships for income tax purposes and consequently no income tax
expense has been provided with respect to income earned after this election attributable to the noncontrolling interests. See Note 5
Partially-Owned Leasing Subsidiaries for a further explanation of activities with respect to TRIP Holdings and RIV 2013.
During 2013, and after the filing of its 2012 Federal income tax return, the Company determined that it would utilize previously reserved
foreign tax credits on its 2013 Federal income tax return which were due to expire in 2014-2016. Accordingly, the related $6.4 million
valuation allowance was reversed and recorded as an income tax benefit during 2013. During the year ended December 31, 2013 , the
Company completed a review of its state tax filing positions based upon the current operational footprint. As a result of this review, we
recorded a charge of $5.1 million in order to adjust our overall net deferred tax liability based upon our current state tax filing responsibilities.
Deferred income taxes represent the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. The components of deferred tax liabilities and assets are as follows:
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Table of Contents
December 31,
2014
2013
(in millions)
Deferred tax liabilities:
Depreciation, depletion, and amortization
Accrued liabilities and other
Convertible debt
Total deferred tax liabilities
Deferred tax assets:
Workers compensation, pensions, and other benefits
Warranties and reserves
Equity items
Tax loss carryforwards and credits
Inventory
Total deferred tax assets
Net deferred tax liabilities before valuation allowances
Valuation allowances
Net deferred tax liabilities before reserve for uncertain tax positions
Deferred tax assets included in reserve for uncertain tax positions
Adjusted net deferred tax liabilities
$
$
627.1
97.6
114.8
839.5
68.6
12.3
53.3
25.1
29.2
188.5
651.0
9.6
660.6
(45.6 )
615.0
$
$
668.9
48.3
105.4
822.6
61.3
13.8
33.4
27.5
18.8
154.8
667.8
10.2
678.0
(38.6 )
639.4
At December 31, 2014 , the Company had $33.5 million of Federal consolidated net operating loss carryforwards and $3.6 million of
tax-effected state loss carryforwards remaining. The Federal net operating loss carryforwards were acquired as part of an acquisition of a
company in 2010 and are subject to limitations on the amount that can be utilized in any one tax year. The Federal net operating loss
carryforwards are due to expire in 2028 and 2029 . We have established a valuation allowance for Federal, state, and foreign tax operating
losses and credits which we have estimated may not be realizable.
Taxing authority examinations
The IRS field work for our 2006-2008 audit cycle has concluded and all issues, except for transfer pricing, have been agreed upon and
tentatively settled. The transfer pricing issue has been appealed and we are working with both the U.S. and Mexican taxing authorities to
coordinate taxation in a formal mutual agreement process (“MAP”). During 2013, we received the revenue agent report for the 2009-2011 audit
cycle. All issues have been concluded and agreed to except for transfer pricing issues. The transfer pricing issues have been appealed and we
have requested they be addressed in the same MAP as the 2006-2008 cycle. At this time, we cannot determine when the 2006-2008 or the
2009-2011 cycle will close and all issues formally settled.
We have various subsidiaries in Mexico that file separate tax returns and are subject to examination by taxing authorities at different times.
The 2007 tax year of one of our Mexican subsidiaries is still under review for transfer pricing purposes only, and its statute of limitations
remains open through the later of the resolution of the MAP or August 2017 . During the third of quarter of 2014, we received notification that
one of our Mexican entities is now under audit for its 2011 tax year. The remaining entities are generally open for their 2009 tax years and
forward.
Our two Swiss subsidiaries, one of which is a holding company and the other of which is dormant, have been audited by the taxing
authorities through 2008 and 2009 , respectively. The statute of limitations in Switzerland is generally five years from the end of the tax year,
but can be extended up to 15 years in certain cases if the audit has commenced during the original five year period. We also currently have
sales offices in Europe, Canada, and South America that are subject to various statutes of limitations with regard to their tax status. Generally,
states’ statutes of limitations in the U.S. are open from 2003 forward due to the use of tax loss carryforwards in certain jurisdictions.
During the year ended December 31, 2012, we settled our audit with the Internal Revenue Service ("IRS") for the 2004-2005 tax years. As a
result of closing this audit, we recognized a $3.5 million tax benefit, primarily related to favorable claims filed and approved by the IRS in the
final audit settlement. Additionally, we recognized a tax benefit of $4.4 million due to the release of net tax reserves primarily as a result of
certain state tax issues where the statute of limitations had lapsed.
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Unrecognized tax benefits
The change in unrecognized tax benefits for the years ended December 31, 2014 , 2013 , and 2012 was as follows:
2014
Year Ended December 31,
2013
2012
(in millions)
Beginning balance
Additions for tax positions related to the current year
Additions for tax positions of prior years
Reductions for tax positions of prior years
Settlements
Expiration of statute of limitations
Ending balance
$
$
55.0
5.0
2.5
(0.1)
—
(0.1)
62.3
$
$
48.7
4.8
2.8
—
(0.3)
(1.0)
55.0
$
$
52.5
4.1
—
(1.1)
(3.4)
(3.4)
48.7
Additions for tax positions related to the current year for 2014 were amounts provided for tax positions that will be taken for Federal and
state income tax purposes when we file the tax return. Additions for tax positions related to the current year for 2013 and 2012 were amounts
provided for tax positions taken for Federal, state, and Mexican income tax purposes.
Additions for tax positions of prior years in the amount of $2.5 million and recorded in the current year related to federal, state, and foreign
tax positions. Additions for tax positions of prior years in the amount of $2.8 million and recorded in 2013 were for Federal, state, and Mexican
tax positions taken on the prior year tax returns which the taxing authorities have previously identified.
The reduction in tax positions of prior years of $1.1 million for the twelve months ended December 31, 2012 , was primarily related to new
guidance issued in March 2012 by the IRS regarding the capitalization of fixed assets as well as state taxes. Settlements during the twelve
months ended December 31, 2013 relate to settled positions with the IRS for one of our subsidiaries as well as settled positions with Mexican
taxing authorities in the settlement of the 2003 exam. Settlements during 2012 primarily related to the settlement of our 2004-2005 IRS audit as
well as the related impact on state tax returns.
The total amount of unrecognized tax benefits including interest and penalties at December 31, 2014 and 2013 , that would affect the
Company’s overall effective tax rate if recognized was $15.0 million and $13.8 million , respectively. There is a reasonable possibility that
unrecognized Federal and state tax benefits will decrease by $0.1 million by December 31, 2015 due to settlements and lapses in statutes of
limitations for assessing tax. During 2013, we entered into an agreement with the IRS to extend the statute of limitations to assess tax on our
2006-2011 tax years. At this time, we are unable to determine when those years will be effectively settled.
Trinity accounts for interest expense and penalties related to income tax issues as income tax expense. Accordingly, interest expense and
penalties associated with an uncertain tax position are included in the income tax provision. The total amount of accrued interest and penalties
as of December 31, 2014 and 2013 was $11.6 million and $10.8 million , respectively. Income tax expense for the years ended December 31,
2014 , 2013 , and 2012 included an increase of $0.8 million , an increase of $0.5 million , and a decrease of $3.0 million , respectively, with
regard to interest expense and penalties related to uncertain tax positions.
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Note 14. Employee Retirement Plans
The Company sponsors defined benefit plans and defined contribution profit sharing plans that provide retirement income and death benefits
for eligible employees. The annual measurement date of the benefit obligations, fair value of plan assets, and funded status is December 31.
Actuarial assumptions
Year Ended December 31,
2014
2013
2012
Assumptions used to determine benefit obligations at the annual measurement date were:
Obligation discount rate
Compensation increase rate
Assumptions used to determine net periodic benefit costs were:
Obligation discount rate
Long-term rate of return on plan assets
Compensation increase rate
4.33%
4.00%
5.22%
4.00%
4.25%
4.00%
5.22%
7.75%
4.00%
4.25%
7.75%
4.00%
5.40%
7.75%
3.00%
The obligation discount rate assumption is determined by deriving a single discount rate from a theoretical settlement portfolio of high
quality corporate bonds sufficient to provide for the plans' projected benefit payments. The expected long-term rate of return on the plans'
assets is an assumption reflecting the anticipated weighted average rate of earnings on the portfolio over the long-term. To arrive at this rate,
estimates were developed based upon the anticipated performance of the plans' assets. The compensation increase rate pertains solely to the
pension plan of the Company's Inland Barge segment, which was closed to new participants in 2014. The accrued benefits of the Company's
remaining pension plans were frozen in 2009.
Components of net retirement cost
2014
Year Ended December 31,
2013
2012
(in millions)
Expense Components
Service cost
Interest
Expected return on plan assets
Amortization of actuarial loss
Prior service cost
Defined benefit expense
Profit sharing
Multiemployer plan
Net expense
$
$
0.5
20.2
(31.0)
2.1
—
(8.2)
17.4
0.8
10.0
$
$
1.1
18.5
(26.6 )
4.9
0.1
(2.0 )
12.3
—
10.3
$
$
0.9
19.4
(22.9)
3.2
0.1
0.7
11.9
—
12.6
The expected return on plan assets is based on the plan assets' fair value. Amortization of actuarial loss is determined using the corridor
method. Under the corridor method, unamortized actuarial gains or losses in excess of 10% of the greater of the projected benefit obligation or
the fair value of plan assets as of the beginning of the plan year, are amortized, for frozen plans, over the average expected remaining lifetime
of frozen and inactive participants. Substantially all of the Company's defined benefit plans were frozen as of December 31, 2014 .
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Table of Contents
Obligations and funded status
Year Ended December 31,
2014
2013
(in millions)
Accumulated Benefit Obligations
Projected Benefit Obligations:
Beginning of year
Service cost
Interest
Benefits paid
Actuarial (gain)/loss
Curtailment
End of year
$
473.8
$
392.1
$
392.1
0.5
20.2
(16.4)
77.6
(0.1)
473.9
$
442.5
1.1
18.5
(15.8)
(54.2)
—
392.1
399.2
36.7
15.0
(16.4)
434.5
$
1.2
(40.4)
(39.4 )
$
$
Plans' Assets:
Beginning of year
Actual return on assets
Employer contributions
Benefits paid
End of year
$
$
Consolidated Balance Sheet Components:
Other assets
Accrued liabilities
Net funded status
$
$
Percent of projected benefit obligations funded
$
$
340.1
56.0
18.9
(15.8)
399.2
17.8
(10.7)
7.1
$
101.8%
91.7%
No ne of the plans' assets are expected to be returned to us during the year ending December 31, 2015 .
Amounts recognized in other comprehensive income (loss)
2014
Year Ended December 31,
2013
2012
(in millions)
Actuarial gain (loss)
Amortization of actuarial loss
Amortization of prior service cost
Curtailment
Total before income taxes
Income tax expense (benefit)
Net amount recognized in other comprehensive income (loss)
$
$
(71.9 )
2.1
—
0.1
(69.7)
(25.9)
(43.8 )
$
$
83.7
4.9
0.1
—
88.7
32.9
55.8
$
$
(48.1 )
3.2
0.1
—
(44.8)
(16.7)
(28.1 )
Included in AOCL at December 31, 2014 were the following amounts that have not been recognized in net periodic pension cost: prior
service cost of $0.1 million ( $0.1 million net of related income taxes) and unrecognized actuarial losses of $138.1 million ( $86.9 million net
of related income taxes).
Actuarial loss included in AOCL and expected to be recognized in net periodic pension cost for the year ended December 31, 2015 is $5.2
million ( $3.3 million net of related income taxes).
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Table of Contents
Plan assets
The Company's pension plan investment strategies have been developed as part of a comprehensive asset/liability management process that
considers the relationship between both the assets and liabilities of the plans for the purpose of providing the capital assets necessary to meet
the financial obligations made to participants of the Company's pension plans. These strategies consider not only the expected risk and returns
on the plans' assets, but also the actuarial projections of liabilities, projected contributions, and funded status. During 2014, the Company
revised its investment policy statement allocating its pension plan assets into two portfolios as follows:
• Liability hedging portfolio - The objective of the liability hedging portfolio is to match the characteristics of the pension plans' liabilities.
This portfolio consists primarily of investment grade long duration bonds.
• Growth portfolio - The objective of the growth portfolio is to focus upon total return with an acceptable level of risk. This portfolio is
heavily weighted toward U.S. equities with a lesser exposure to international equities, domestic real estate investment trusts, U.S. high yield
and emerging market sovereign debt.
The target allocation between these two portfolios varies on a sliding scale based on the pension plans' percentage of projected benefit
obligations funded ("Funding Percentage"), beginning with a 50%/50% target allocation at a Funding Percentage of less than 100% and
increasing to a 100% liability hedging portfolio target allocation at a Funding Percentage exceeding 110%. The range of target asset allocations
has been determined after giving consideration to the expected returns of each asset category within the two portfolios, the expected
performance of each asset category, the volatility of asset returns over time, and the complementary nature of the asset mix within the portfolio.
The principal pension investment strategies include asset allocation and active asset management within approved guidelines. These assets are
managed by an investment advisor.
The target and actual allocations of the plans' assets at December 31, 2014 are as follows:
Target
Allocation
Cash and cash equivalents
Liability hedging portfolio
Growth portfolio
Total
December 31,
2014
1%
47%
52%
100%
50%
50%
The estimated fair value of the plans' assets at December 31, 2014 and 2013 , indicating input levels used to determine fair value are as
follows:
Fair Value Measurement as of December 31, 2014
(in millions)
Level 1
Temporary cash investments
Debt common trust funds
Equity common trust funds
$
Level 2
4.8
—
—
4.8
$
$
$
Level 3
—
275.0
154.7
429.7
Total
—
—
—
—
$
$
$
$
4.8
275.0
154.7
434.5
Fair Value Measurement as of December 31, 2013
(in millions)
Level 1
Temporary cash investments
Debt common trust funds
Equity common trust funds
$
$
Level 2
7.0
—
—
7.0
$
$
—
101.3
290.9
392.2
Level 3
$
$
Total
—
—
—
—
$
$
7.0
101.3
290.9
399.2
The pension plans' assets are valued at fair value. The following is a description of the valuation methodologies used in determining fair
value, including the general classification of such instruments pursuant to the valuation hierarchy as described further in Note 3 Fair Value
Accounting:
Temporary cash investments - These investments consist of U.S. dollars held in master trust accounts with the trustee. These temporary cash
investments are classified as Level 1 instruments.
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Table of Contents
Common trust funds - Common trust funds are comprised of shares or units in commingled funds that are not publicly traded. The
underlying assets in these funds are publicly traded on exchanges and price quotes for the assets held by these funds are readily available.
Holdings of common trust funds are classified as Level 2 investments.
Multiemployer plan
As a result of the acquisition of Meyer, the Company contributes to a multiemployer defined benefit pension plan under the terms of a
collective-bargaining agreement that covers certain union-represented employees at one of Meyer's facilities. The risks of participating in a
multiemployer plan are different from a single-employer plan in the following aspects:
• Assets contributed to a multiemployer plan by one employer may be used to provide benefits to employees of other participating
employers.
• If a participating employer stops contributing to a multiemployer plan, the unfunded obligations of the plan may be borne by the
remaining participating employers.
• If the Company chooses to stop participating in the multiemployer plan, the Company may be required to pay the plan an amount based
on the underfunded status of the plan, referred to as a withdrawal liability.
Our participation in the multiemployer plan for the year ended December 31, 2014 is outlined in the table below. The Pension Protection Act
("PPA") zone status at December 31, 2014 and 2013 is as of the plan years ended December 31, 2013 and 2012, respectively, and is obtained
from the multiemployer plan's regulatory filings available in the public domain and certified by the plan's actuary. Among other factors, plans
in the yellow zone are less than 80% funded while plans in the red zone are less than 65% funded. Federal law requires that plans classified in
the yellow or red zones adopt a funding improvement plan in order to improve the financial health of the plan. The plan utilized an
amortization extension and the funding relief provided under the Internal Revenue Code and under the Preservation of Access to Care for
Medicare Beneficiaries and Pension Relief Act in determining the zone status. The Company's contributions to the multiemployer plan were
less than 5% of total contributions to the plan. The last column in the table lists the expiration date of the collective bargaining agreement to
which the plan is subject.
Contributions for Year
Ended December 31,
PPA Zone Status
Pension Fund
Employer
Identification
Number
2014
2013
Financial
improvement
plan status
2014
2013
2012
Surcharge
imposed
Expiration date
of collective
bargaining
agreement
$ —
No
July 3, 2016
(in millions)
Boilermaker-Blacksmith National
Pension Trust
48-6168020
Yellow
Yellow
Implemented
$ 0.6
$ —
Cash flows
Employer contributions for the year ending December 31, 2015 are expected to be $19.7 million for the defined benefit plans compared to
$15.0 million contributed during 2014 . Employer contributions to the 401(k) plans and the Supplemental Profit Sharing Plan for the year
ending December 31, 2015 are expected to be $16.1 million compared to $14.0 million contributed during 2014 . Employer contributions for
the year ending December 31, 2015 are expected to be $2.7 million for the multiemployer plan compared to $0.6 million contributed during
2014 .
Benefit payments for the Company's defined benefit plans expected to be paid during the next ten years are as follows:
Year Ending December
31,
(in millions)
2015
2016
2017
2018
2019
2020-2024
$
18.5
19.8
20.9
22.0
24.0
133.7
Participants in the pension plans are eligible to receive future retirement benefits through a company-funded annual retirement contribution
provided through the Profit Sharing Plan for Employees of Trinity Industries, Inc. and Certain Affiliates. The contribution ranges from one to
three percent of eligible compensation based on service. Both the annual retirement contribution and the company matching contribution are
discretionary, requiring board approval, and are made annually with the investment of the funds directed by the participants.
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Note 15. Accumulated Other Comprehensive Loss
Changes in accumulated other comprehensive loss for the twelve months ended December 31, 2014 , 2013 , and 2012 are as follows:
Unrealized loss
on derivative
financial
instruments
Currency
translation
adjustments
Accumulated
Other
Comprehensive
Loss
Net actuarial
gains/(losses) of
defined benefit plans
(in millions)
Balances at December 31, 2011
$
Other comprehensive income (loss), net of tax,
before reclassifications
Amounts reclassified from accumulated other
comprehensive loss, net of tax benefit of
$0.4, $3.2, $1.1, and $4.7
Less: noncontrolling interest
Other comprehensive income (loss)
Balances at December 31, 2012
Other comprehensive income, net of tax, before
reclassifications
Amounts reclassified from accumulated other
comprehensive loss, net of tax benefit of $-,
$8.7, $1.9, and $10.6
Less: noncontrolling interest
Other comprehensive income
Sale of interests in partially-owned leasing
subsidiaries
Repurchase of interests in partially-owned
leasing subsidiary
Balances at December 31, 2013
Other comprehensive loss, net of tax, before
reclassifications
Amounts reclassified from accumulated other
comprehensive loss, net of tax benefit of $-,
$8.4, $0.8, and $9.2
Less: noncontrolling interest
Other comprehensive income (loss)
Transfer of interests in partially-owned leasing
subsidiaries
Balances at December 31, 2014
$
(17.1 )
$
—
(46.2 )
$
(70.7 )
$
(134.0 )
7.2
(30.3 )
(23.1)
5.8
(1.6 )
11.4
(34.8 )
2.2
—
(28.1 )
(98.8 )
8.6
(1.6)
(16.1)
(150.1)
—
0.8
52.7
53.5
—
—
—
18.1
(4.2 )
14.7
3.1
—
55.8
21.2
(4.2)
70.5
—
13.2
0.6
—
0.6
(16.5 )
—
13.2
—
(16.5 )
(11.8 )
(18.7 )
—
(43.0 )
(11.8)
(78.2)
(2.0 )
(1.2 )
(45.1 )
(48.3)
—
—
(2.0 )
16.0
(3.0 )
11.8
1.3
—
(43.8 )
17.3
(3.0)
(34.0)
—
(18.5 )
$
0.3
(6.6 )
$
—
(86.8 )
$
0.3
(111.9 )
See Note 7 Derivative Instruments for information on the reclassification of amounts in accumulated other comprehensive loss into earnings.
Reclassifications of unrealized before-tax losses on derivative financial instruments are included in interest expense in the consolidated
statements of operations. Approximately $1.7 million , $4.0 million , and $2.7 million of the before-tax reclassification of net actuarial
gains/(losses) of defined benefit plans are included in cost of revenues with the remainder included in selling, engineering, and administrative
expenses in the consolidated statements of operations for the years ended December 31, 2014 , 2013 , and 2012 , respectively.
Note 16. Stock-Based Compensation
The Company's 2004 Second Amended and Restated Stock Option and Incentive Plan (the "Plan”) provides for awarding 15,200,000
(adjusted for stock splits) shares of common stock plus (i) shares covered by forfeited, expired, and canceled options granted under prior plans;
and (ii) shares tendered as full or partial payment for the purchase price of an award or to satisfy tax withholding obligations. At December 31,
2014 , a total of 2,607,425 shares were available for issuance. The Plan provides for the granting of nonqualified and incentive stock options
having maximum ten -year terms to purchase common stock at its market value on the award date; stock appreciation rights based on common
stock fair market values with settlement in common stock or cash; restricted stock awards; restricted stock units; and performance awards with
settlement in common stock or cash on achievement of specific business objectives. Options become exercisable in various percentages over
periods ranging up to five years.
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Table of Contents
The cost of employee services received in exchange for awards of equity instruments are referred to as share-based payments and are based
on the grant date fair-value of those awards. Stock-based compensation includes compensation expense, recognized over the applicable vesting
periods, for both new share-based awards and share-based awards granted prior to, but not yet vested, as of January 1, 2006. The Company uses
the Black-Scholes-Merton option pricing model to determine the fair value of stock options granted to employees. Stock-based compensation
totaled $53.3 million , $44.5 million , and $28.3 million for the years ended December 31, 2014 , 2013 , and 2012 , respectively.
The income tax benefit related to stock-based compensation expense was $40.1 million , $15.6 million , and $6.4 million for the years ended
December 31, 2014 , 2013 , and 2012 , respectively. The Company has presented excess tax benefits related to stock-based compensation
awards as a financing activity in the consolidated statements of cash flows.
Stock options
Expense related to stock options issued to eligible employees under the Plan is recognized over their vesting period on a straight- line basis.
Stock options generally vest over five years and have contractual terms of ten years. All options outstanding at December 31, 2014 and
December 31, 2013 were exercisable.
Number of Shares
Weighted
Average
Exercise Price
Weighted Average
Remaining
Contractual Terms
(Years)
Aggregate
Intrinsic Value
(in millions)
Options outstanding at December 31, 2013
Granted
Exercised
Cancelled
162,404
—
(67,111)
—
95,293
Options outstanding at December 31, 2014
$
$
$
8.90
—
8.95
—
8.86
3.3
$3.0
3.1
$1.8
At December 31, 2014 , there was no unrecognized compensation expense related to stock options. The intrinsic value of options exercised
totaled $1.8 million , $4.4 million , and $6.6 million during the years ended December 31, 2014 , 2013 , and 2012 , respectively.
Restricted stock
Restricted share awards consist of restricted stock, restricted stock units, and performance units. Restricted stock and restricted stock units
generally vest for periods ranging from one to fifteen years from the date of grant. Certain restricted stock and restricted stock units vest in their
entirety upon the employee's retirement from the Company, the employee's reaching the age of 65 , or when the employee's age plus years of
vested service equal 80 . Restricted stock units issued to non-employee directors under the Plan vest on the grant date or on the first business
day immediately preceding the next Annual Meeting of Stockholders and are released upon completion of the directors' service to the
Company. Expense related to restricted stock and restricted stock units issued to eligible employees under the Plan is recognized ratably over
the vesting period or to the date on which retirement eligibility is achieved, if shorter. Performance units are granted to employees based upon a
target level, however, depending upon the achievement of certain specified goals during the performance period, performance units may be
adjusted to a level ranging between 0% and 200% of the target level. The performance units vest upon certification by the Human Resources
Committee of the Board of Directors of the achievement of the specified performance goals. Expense related to performance units is
recognized ratably from their award date to the end of the performance period, generally three years.
Number of Restricted
Share Awards
Restricted share awards outstanding at December 31, 2013
Granted
Vested
Forfeited
7,810,104
2,364,839
(2,625,396)
(136,578 )
7,412,969
Restricted share awards outstanding at December 31, 2014
Weighted Average
Grant-Date
Fair Value per Award
$
$
16.50
32.35
16.09
22.05
21.60
At December 31, 2014 , unrecognized compensation expense related to restricted share awards totaled $104.8 million which will be
recognized over a weighted average period of 4.0 years. The total vesting-date fair value of shares vested and released during the years ended
December 31, 2014 , 2013 , and 2012 was $105.2 million , $29.9 million , and $16.9 million , respectively.
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Table of Contents
The weighted average grant-date fair value of restricted share awards granted during the years ended December 31, 2014 , 2013 , and 2012 was
$32.35 , $20.76 , and $14.72 per share, respectively.
Note 17. Earnings Per Common Share
Basic net income attributable to Trinity Industries, Inc. per common share is computed by dividing net income attributable to Trinity
remaining after allocation to unvested restricted shares by the weighted average number of basic common shares outstanding for the period.
Except when the effect would be antidilutive, the calculation of diluted net income attributable to Trinity per common share includes 1) the net
impact of unvested restricted shares and shares that could be issued under outstanding stock options and 2) the incremental shares calculated by
dividing the value of the conversion obligation in excess of the Convertible Subordinated Notes' aggregate principal amount by the average
price of the Company's common stock during the period. The effect of the Convertible Subordinated Notes was antidilutive for the years ended
December 31, 2013 and 2012 . See Note 11 Debt for further explanation of the Company's Convertible Subordinated Notes. Total weighted
average restricted shares and antidilutive stock options were 7.4 million shares, 7.0 million shares, and 6.1 million shares, for the years ended
December 31, 2014 , 2013 , and 2012 , respectively.
The computation of basic and diluted net income attributable to Trinity Industries, Inc. follows.
Year Ended
December 31, 2014
(in millions, except per share amounts)
Net income from continuing operations
Less: net income from continuing operations attributable to noncontrolling interest
Net income from continuing operations attributable to Trinity Industries, Inc.
Unvested restricted share participation
Net income from continuing operations attributable to Trinity Industries, Inc. – basic
Effect of dilutive securities:
Stock options
Convertible subordinated notes
Net income from continuing operations attributable to Trinity Industries, Inc. – diluted
Net income from discontinued operations, net of taxes
Unvested restricted share participation
Net income from discontinued operations, net of taxes – basic
Income
(Loss)
$
709.3
31.1
678.2
(22.1)
656.1
$
$
Effect of dilutive securities:
Stock options
Convertible subordinated notes
Net income from discontinued operations, net of taxes – diluted
$
84
Average
Shares
EPS
151.0
$
4.35
—
0.7
656.8
0.1
5.6
156.7
$
4.19
—
—
—
151.0
$
—
—
—
—
0.1
5.6
156.7
$
—
Table of Contents
Year Ended
December 31, 2013
(in millions, except per share amounts)
Net income from continuing operations
Less: net income from continuing operations attributable to noncontrolling interest
Net income from continuing operations attributable to Trinity Industries, Inc.
Unvested restricted share participation
Net income from continuing operations attributable to Trinity Industries, Inc. – basic
Effect of dilutive securities:
Stock options
Convertible subordinated notes
Net income from continuing operations attributable to Trinity Industries, Inc. – diluted
Net income from discontinued operations, net of taxes
Unvested restricted share participation
Net income from discontinued operations, net of taxes – basic
Income
(Loss)
$
386.1
16.9
369.2
(12.0)
357.2
$
$
Effect of dilutive securities:
Stock options
Convertible subordinated notes
Net income from discontinued operations, net of taxes – diluted
$
Average
Shares
EPS
152.8
$
2.34
0.1
—
152.9
$
2.34
6.3
(0.2)
6.1
152.8
$
0.04
—
—
6.1
0.1
—
152.9
$
0.04
—
—
357.2
Year Ended
December 31, 2012
(in millions, except per share amounts)
Net income from continuing operations
Less: net loss from continuing operations attributable to noncontrolling interest
Net income from continuing operations attributable to Trinity Industries, Inc.
Unvested restricted share participation
Net income from continuing operations attributable to Trinity Industries, Inc. – basic
Effect of dilutive securities:
Stock options
Convertible subordinated notes
Net income from continuing operations attributable to Trinity Industries, Inc. – diluted
Net income from discontinued operations, net of taxes
Unvested restricted share participation
Net income from discontinued operations, net of taxes – basic
Income
(Loss)
$
251.9
(1.5)
253.4
(7.7)
245.7
$
$
Effect of dilutive securities:
Stock options
Convertible subordinated notes
Net income from discontinued operations, net of taxes – diluted
$
85
Average
Shares
EPS
154.7
$
1.59
0.4
—
155.1
$
1.58
1.8
(0.1)
1.7
154.7
$
0.01
—
—
1.7
0.4
—
155.1
$
0.01
—
—
245.7
Table of Contents
Note 18. Commitments and Contingencies
Highway products litigation
We previously reported that on January 28, 2013, the United States filed a “Notice of Election to Decline Intervention” in a False Claims Act
(“Act”) complaint filed under seal on March 6, 2012 in the United States District Court for the Eastern District of Texas, Marshall Division
(“District Court”) styled Joshua Harman, on behalf of the United States of America, Plaintiff/Relator v. Trinity Industries, Inc., Defendant,
Case 2:12-cv-00089-JRG. Mr. Harman alleged the Company knowingly presented or caused to be presented a false or fraudulent claim, record
or statement to purchasers of the Company's ET-Plus® System, a highway guardrail end-terminal (“ET Plus”), in order for such purchasers to
obtain Federal-aid reimbursement for payments made on such purchases. On October 20, 2014 a trial of this case concluded with a jury verdict
stating that the Company and its subsidiary, Trinity Highway Products, LLC, “knowingly made, used or caused to be made or used, a false
record or statement material to a false or fraudulent claim," awarding $175 million in damages based on such finding. The jury's damages
award, to the extent it survives the Company's challenge in post-trial motions or on appeal, is automatically trebled under the Act to $525
million . Additionally, the District Court is required to impose civil penalties for each violation of the Act (which penalties are not
automatically trebled). The District Court has the discretion to establish the civil penalty amount between $5,500 and $11,000 per violation. In
this regard, the Relator contended during trial that certain invoices submitted to purchasers of the ET Plus certified that the product was
accepted by the Federal Highway Administration ("FHWA") and was therefore eligible for Federal-aid reimbursement. Based on Relator’s
damages model in this respect, the range of possible civil penalties is $5,500 (if the District Court determines there has been a single violation)
to $184 million (if the District Court determines that each invoice for the product was a violation).
The District Court has not yet entered a final judgment or determined a civil penalty amount. While the Company believes the District Court
does not have the evidence required under the law to quantify civil penalties, the total range of loss in this case, based on the jury’s verdict and
Mr. Harman's damage model for civil penalties, is $525 million to $709 million , exclusive of attorney's fees, costs, and interest.
The Company maintains that Mr. Harman’s allegations are without merit. Accordingly, the Company intends to challenge the damages
award on the ground of insufficient evidence and to vigorously defend its positions in post-trial motions and on appeal to the United States
Court of Appeals for the Fifth Circuit (“Fifth Circuit”). Such post-trial motions and appellate review will result in certain legal expenses,
including potential costs associated with posting a supersedeas bond upon the District Court’s entry of a final judgment. The face amount of
such bond could equal the amount of the final judgment entered plus twenty (20) percent. The Company has confidence that such bond will be
issued if, when, and to the extent required.
Texas A&M Transportation Institute (“TTI”), a member of The Texas A&M University System, designed the technology employed in the
ET Plus. The Texas A&M University System is the owner of patents issued by the U.S. Patent Office that cover the ET Plus. Trinity Highway
Products manufactures and markets the ET Plus pursuant to an exclusive license granted by The Texas A&M University System of their
intellectual property. Trinity Highway Products contracted with TTI to conduct crash testing of the ET Plus to demonstrate compliance with the
required standards set out in National Cooperative Highway Research Program Report 350 (“Report 350”). In addition, TTI prepared and
provided to Trinity Highway Products the test reports on the performance of the ET Plus for review by the FHWA in their consideration for
accepting the product for use on the national highway system and determining the product’s eligibility for Federal-aid reimbursement. It is our
belief that since its introduction in 2000, including all subsequent improvement modifications recommended by TTI, the ET Plus has been in
compliance with Report 350 and has been, and is currently, accepted by the FHWA for Federal-aid reimbursement eligibility. In a
Memorandum dated June 17, 2014, the FHWA confirmed to its Division Administrators, Directors of Field Services, Federal Lands Division
Engineers, that "The Trinity ET Plus with 4-inch guide channels became eligible for Federal-aid reimbursement under FHWA letter CC-94 on
September 2, 2005. In addition, the device is eligible for reimbursement under FHWA letters CC-94A and CC-120.” In its memorandum, the
FHWA further confirmed the reimbursement eligibility of the device at guardrail heights from 27 3/4 inches to 31 inches, stating that an
“unbroken chain of eligibility for Federal-aid reimbursement has existed since September 2, 2005 and the ET Plus continues to be eligible
today."
A trial in this matter commenced in July 2014, but ended in a mistrial declared by the District Court on its own volition. Preceding the
second trial in this matter, the Company filed a Petition for Writ of Mandamus with the Fifth Circuit based, in part, on the District Court’s
failure to apply Fifth Circuit case law precedent as well as other precedential case law. In its per curiam order denying the Company’s Petition
for Writ of Mandamus, the Fifth Circuit expressed concern regarding the District Court’s failure to issue a reasoned ruling rejecting the
Company’s prior motions for judgment as a matter of law. The Fifth Circuit also stated that the FHWA authoritative memorandum dated June
17, 2014, on its face, appears to compel the conclusion that the FHWA, after due consideration of all the facts, found the ET Plus sufficiently
compliant with federal safety standards and therefore fully eligible, in the past, present and future, for Federal-aid reimbursement claims.
Additionally, the Fifth Circuit noted that a strong argument could be made that the Company’s actions were neither material nor were any false
claims based on false certifications presented
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to the government. Based on the Fifth Circuit’s remarks, the Company re-urged its motions with the District Court for judgment as a matter of
law, which the District Court denied during trial. We believe this reinforces our prospects for a successful outcome.
Revenues from sales of the ET Plus in the United States, included in the Construction Products Group, totaled approximately $35.1 million
and $46.0 million for the years ended December 31, 2014 and 2013 , respectively.
Pending entry of a final judgment and completion of the Company’s post-trial and appellate activities in this matter, we currently do not
believe that a loss is probable, therefore no accrual has been included in the accompanying consolidated financial statements.
At December 31, 2014, the Company had unrestricted cash, cash equivalents, and short-term marketable securities of $962.9 million . When
combined with capacity under committed credit facilities, the Company had approximately $1.6 billion of available liquidity at the end of the
fourth quarter.
On October 21, 2014, in light of the jury’s finding, the FHWA requested that the Company perform eight (8) additional crash tests of the ET
Plus to support the FHWA’s ongoing evaluation of ET Plus performance. The eight tests were comprised of four tests at a guardrail height of
27 3/4" and four tests at a guardrail height of 31". On October 24, 2014, the Company issued a press release stating that it will stop shipments
of the ET Plus until additional crash testing of the ET Plus was completed. The requested tests were conducted in December 2014 and January
2015, in accordance with Report 350 at Southwest Research Institute, an FHWA-approved and independent research facility. Report 350 sets
forth the performance evaluation criteria applicable to the ET Plus and many other roadside safety features used on U.S. highways. The ET
Plus extruder heads tested in all eight tests were randomly selected by the FHWA from inventory at the California Department of
Transportation. These extruder heads were representative of what is in use on U.S. and Canadian highways.
On January 27, 2015, Trinity Highway Products completed the eighth, and final, test. On February 6, 2015, the FHWA released the crash test
results of the first four tests conducted at the 27 3/4" installation height of the ET Plus. This release reports that the ET Plus passed Report 350
crash test criteria at the 27 3/4" guardrail height. The vast majority of guardrails installed on the roadways in the U.S. and Canada are at the 27
3/4" height. These test results validate Trinity Highway Products' long standing position that when installed, maintained and impacted within
the Report 350 standards, the 27 3/4" height ET Plus performs to Report 350 criteria. When all eight test results are reviewed and released by
the FHWA, the Company will perform a thorough analysis before resuming any shipments of the ET Plus to its customers.
As of the date on which the eighth test was concluded, Trinity is aware of 42 states that had removed the ET Plus from their respective
qualified products list. The state of Virginia, in addition to evaluating a potential recall of all ET Plus products installed on Virginia roadways,
has joined Mr. Harman's Virginia state action alleging the same false claims as were alleged in the false claims act case pending in the Eastern
District of Texas. Other states could take similar or different actions regarding recall, and could be considering similar state false claims
litigation against the Company. While the financial impacts of such actions are currently unknown, they could be material.
The Company is aware of two class action lawsuits involving claims pertaining to the ET Plus. The Company has received service of process
in a lawsuit filed November 6, 2014, titled Hamilton County, Illinois and Macon County, Illinois, Individually and on behalf of all Other
Counties in the State of Illinois vs. Trinity Industries, Inc. and Trinity Highway Products, LLC. In this case it is alleged that the Company and
Trinity Highway Products made a series of un-tested modifications to the ET Plus and falsely certified that the modified ET Plus was
acceptable for use on the nation’s highways based on federal testing standards and approval for Federal-aid reimbursement. The Plaintiffs
further allege breach of express and implied warranties, violation of the Uniform Deceptive Trade Practices Act and unjust enrichment, for
which Plaintiffs seek actual damages related to purchases of the ET Plus, compensatory damages for establishing a common fund for class
members, punitive damages, and injunctive relief. The case is filed in the United States District Court for the Southern District of Illinois and is
being brought by Plaintiffs for and on behalf of themselves and the other 101 counties of the State of Illinois. The Company is also aware of,
but has not received service of process in a lawsuit filed February 11, 2015 titled The Corporation of the City of Stratford and Trinity
Industries, Inc., Trinity Highway Products, LLC, and Trinity Industries Canada, Inc. pending in Ontario Superior Court of Justice. The class in
this matter has been identified as persons in Canada who purchased and/or used an ET Plus guardrail end terminal. The Statement of Claim in
this litigation generally alleges that Trinity Industries, Inc., Trinity Highway Products, and Trinity Industries Canada, failed to warn of dangers
associated with undisclosed modifications to the ET Plus guardrail end terminals, breached its implied warranty, breached its duty of care, and
was negligent. Plaintiff is seeking $400 million in compensatory damages and $100 million in punitive damages. In the alternative to damages,
Plaintiff further pleads an entitlement to "waive the tort" and claim an accounting or other such restitution remedy for disgorgement of the
revenues generated by Trinity Industries, Inc., Trinity Highway Products, and Trinity Industries Canada as a result of the sale of the modified
ET Plus guardrail end terminals in Canada, due to the product not being fit for its intended purpose and/or the failure to disclose the
modifications and/or risks associated with the modifications to the ET Plus guardrail end terminals. The Company believes each of these
lawsuits are without merit and intends to vigorously defend these allegations. While the financial impacts of these two actions are currently
unknown, they could be material.
87
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The Company is currently defending a number of product liability lawsuits in several different states that are alleged to involve the ET Plus.
These cases are diverse in light of the randomness of collisions in general and the fact that each accident involving roadside devices such as an
ET Plus, or any other fixed object along the highway has its own unique facts and circumstances. Report 350 recognizes that performance of
even the most carefully researched roadside device is subject to physical laws and the crash worthiness of vehicles. The Company expects the
jury verdict, coupled with the media attention the verdict has generated, will prompt the plaintiff’s bar to seek out vehicle accident victims
involved in collisions with an ET Plus as potential clients, which may result in additional product liability lawsuits being filed against the
Company. The Company carries general liability insurance to mitigate the impact of adverse verdict exposures in these product liability cases.
The Company has received information that several law firms are investigating whether certain officers and directors of the Company
breached their fiduciary duties relating to modifications made to the ET Plus and/or violated federal securities laws. We believe these
investigations will be concluded without substantive results. However, the Company may incur legal expenses and related costs in responding
to these investigations.
Train derailment
As previously reported, the Company was named as a respondent in litigation filed July 15, 2013 in Superior Court, Province of Quebec,
District of Saint-Francois, styled Yannick Gagne and Guy Ouellet vs. Rail World, Inc., et al related to the July 2013 crude oil unit train
derailment in Lac-Mégantic, Quebec. A partially-owned subsidiary of the Company owned and leased to a third party 13 of the railcars
involved in the incident, which lessee is also named as a defendant in the Province of Quebec litigation. As of June 18, 2014, the petitioners in
the Quebec litigation have voluntarily desisted with their claims against the Company resulting in the dismissal of the Company without
prejudice; however the partially-owned subsidiary remains as a respondent in the litigation. The litigation filed in Quebec is seeking “class”
status which, if certified, could lead to multiple individuals and business entities becoming class members.
The Company was also named as a defendant in multiple cases filed by the estates of decedents in the Circuit Court of Cook County, Illinois
seeking damages for alleged wrongful death and property damage arising from the July 2013 crude oil unit train derailment in Lac-Mégantic,
Quebec. The Company’s tank car manufacturing subsidiary manufactured 35 of the 72 tank railcars involved in the derailment. However the
Illinois cases have since been ordered transferred to the United States District Court for the District of Maine. This transfer prompted plaintiffs
to seek dismissal of these actions. Nonetheless, the Maine court has not indicated those dismissals were effectuated and the cases were
transferred to federal court in Maine and have been assigned new case numbers. Certain of the plaintiffs in these transferred cases have
appealed to the U.S. Court of Appeals for the First Circuit seeking to overturn the decision to transfer. This appeal has resulted in a stay of all
proceedings in the transferred cases pending resolution of the appeal. The Company could be named in similar litigation involving other
affected plaintiffs, but the ultimate number of claims and the jurisdiction in which such claims are filed, may vary. The Company has recorded
an accrual of $11.4 million at December 31, 2014 related to this matter of which expected third-party recoveries of $10.2 million are recorded
in other assets at December 31, 2014 . We do not believe at this time that an additional loss is probable nor can a range of additional losses be
determined.
Other matters
The Company is 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. The Company evaluates its exposure to such claims and
suits periodically and establishes accruals for these contingencies when a range of loss can be reasonably estimated. The range of reasonably
possible losses for such matters, taking into consideration our rights in indemnity and recourse to third parties is $3.9 million to $29.3 million .
This range excludes any amount related to the highway products litigation matters described above. At December 31, 2014 , total accruals of
$27.5 million , including environmental and workplace matters described below, are included in accrued liabilities in the accompanying
consolidated balance sheet. The Company believes any additional liability would not be material to its financial position or results of
operations.
Trinity is subject to remedial orders and Federal, state, local, and foreign laws and regulations relating to the environment and the workplace.
The Company has reserved $6.1 million to cover our probable and estimable liabilities with respect to the investigations, assessments, and
remedial responses to such matters, taking into account currently available information and our contractual rights to indemnification and
recourse to third parties. However, estimates of liability arising from future proceedings, assessments, or remediation are inherently imprecise.
Accordingly, there can be no assurance that we will not become involved in future litigation or other proceedings involving the environment
and the workplace or, if we are found to be responsible or liable in any such litigation or proceeding, that such costs would not be material to
the Company. We believe that we are currently in substantial compliance with environmental and workplace laws and regulations.
88
Table of Contents
Other commitments
Non-cancelable purchase obligations amounted to $1.4 billion as of December 31, 2014 , of which $1.2 billion is for the purchase of raw
materials and components, principally by the Rail, Inland Barge, and Energy Equipment Groups.
Note 19. Financial Statements for Guarantors of the Senior Notes
The Company’s Senior Notes are fully and unconditionally and jointly and severally guaranteed by certain of Trinity’s 100%-owned
subsidiaries: Trinity Construction Materials Inc., Trinity Highway Products, LLC, Trinity Industries Leasing Company, Trinity Marine
Products, Inc., Trinity North American Freight Car, Inc., Trinity Parts & Components, LLC, Trinity Rail Group, LLC, Trinity Structural
Towers, Inc., and Trinity Tank Car, Inc. (“Combined Guarantor Subsidiaries”). See Note 11 Debt. The Senior Notes indenture agreement
includes customary provisions for the release of the guarantees by the Combined Guarantor Subsidiaries upon the occurrence of certain allowed
events including the release of one or more of the Combined Guarantor Subsidiaries as guarantor under the Company's revolving credit facility.
The Senior Notes are not guaranteed by any remaining 100%-owned subsidiaries of the Company or partially-owned subsidiaries (“Combined
Non-Guarantor Subsidiaries”).
As of December 31, 2014 , assets held by the Combined Non-Guarantor Subsidiaries included $ 194.4 million of restricted cash that was not
available for distribution to Trinity Industries, Inc. (“Parent”), $ 3,936.8 million of equipment securing certain non-recourse debt, $ 87.5
million of equipment securing certain lease obligations held by the Combined Non-Guarantor Subsidiaries, and $ 395.5 million of assets
located in foreign locations. As of December 31, 2013 , assets held by the Combined Non-Guarantor Subsidiaries included $ 208.3 million of
restricted cash that was not available for distribution to the Parent, $ 3,733.9 million of equipment securing certain non-recourse debt, $ 90.2
million of equipment securing certain lease obligations held by the Combined Non-Guarantor Subsidiaries, and $ 306.9 million of assets
located in foreign locations.
Statement of Operations and Comprehensive
Income
Year Ended December 31, 2014
Combined
Guarantor
Subsidiaries
Parent
Revenues
$
Cost of revenues
Selling, engineering, and administrative
expenses
Gains/(losses) on disposition of property,
plant, and equipment
—
$
$
2,294.2
Eliminations
$
(849.6 )
Consolidated
$
6,170.0
—
3,705.3
1,770.2
115.6
151.5
136.5
—
403.6
41.4
64.4
—
104.4
3,815.4
1,842.3
910.0
451.9
(1.4)
117.0
Operating profit (loss)
4,725.4
Combined
Non-Guarantor
Subsidiaries
(in millions)
(117.0)
(855.7 )
4,619.8
(855.7 )
4,919.0
6.1
1,251.0
—
186.9
Other (income) expense
(60.3)
86.3
160.9
Equity in earnings of subsidiaries, net of taxes
Income (loss) from continuing operations
before income taxes
740.2
228.9
—
(969.1 )
—
683.5
1,052.6
291.0
(963.0 )
1,064.1
5.3
325.4
26.1
(2.0 )
354.8
Income (loss) from continuing operations
Income (loss) from discontinued operations,
net of provision (benefit) for income taxes
678.2
727.2
264.9
(961.0 )
709.3
Net income (loss)
Net income (loss) attributable to
noncontrolling interest
Net income (loss) attributable to controlling
interest
678.2
727.1
265.0
—
—
—
$
678.2
$
727.1
$
265.0
$
(992.1 )
$
678.2
Net income (loss)
$
678.2
$
727.1
$
265.0
$
(961.0 )
$
709.3
Provision (benefit) for income taxes
—
Other comprehensive income (loss)
Comprehensive income
(0.1 )
(32.2)
$
646.0
(10.0 )
$
717.1
—
0.1
276.2
709.3
31.1
31.1
—
11.2
$
—
(961.0 )
$
(961.0 )
(31.0 )
$
678.3
89
Table of Contents
Statement of Operations and Comprehensive
Income
Year Ended December 31, 2013
Combined
Guarantor
Subsidiaries
Parent
Revenues
—
$
3,257.8
$
1,758.2
Eliminations
$
(650.7 )
Consolidated
$
4,365.3
—
2,636.3
1,341.9
(655.9 )
3,322.3
72.8
128.9
90.3
(0.7 )
291.3
0.3
10.9
10.0
—
21.2
72.5
2,754.3
1,422.2
Cost of revenues
Selling, engineering, and administrative expenses
Gains on disposition of property, plant, and
equipment
$
Combined
Non-Guarantor
Subsidiaries
(in millions)
(656.6 )
3,592.4
Operating profit (loss)
(72.5 )
503.5
336.0
5.9
772.9
Other (income) expense
(71.5 )
61.2
192.7
—
182.4
Equity in earnings of subsidiaries, net of taxes
Income (loss) from continuing operations before
income taxes
378.3
97.1
—
(475.4 )
—
377.3
539.4
143.3
(469.5 )
590.5
1.8
167.0
33.5
Income (loss) from continuing operations
Income (loss) from discontinued operations, net
of provision (benefit) for income taxes
375.5
372.4
109.8
—
6.3
—
Net income (loss)
Net income (loss) attributable to noncontrolling
interest
Net income (loss) attributable to controlling
interest
375.5
378.7
109.8
—
—
—
$
375.5
$
378.7
$
109.8
$
(488.5 )
$
375.5
Net income (loss)
$
375.5
$
378.7
$
109.8
$
(471.6 )
$
392.4
$
423.2
$
388.6
$
126.9
$
(471.6 )
$
467.1
Provision (benefit) for income taxes
Other comprehensive income (loss)
Comprehensive income
47.7
9.9
2.1
204.4
(471.6 )
386.1
—
6.3
(471.6 )
392.4
16.9
16.9
—
17.1
74.7
Statement of Operations and Comprehensive
Income
Year Ended December 31, 2012
Combined
Guarantor
Subsidiaries
Parent
Revenues
Cost of revenues
Selling, engineering, and administrative expenses
Gains on disposition of property, plant, and
equipment
$
—
$
2,791.5
Combined
Non-Guarantor
Subsidiaries
(in millions)
$
1,429.0
Eliminations
$
(408.6 )
Consolidated
$
3,811.9
—
2,385.3
1,087.9
50.4
111.4
62.3
—
224.1
0.4
9.4
28.7
—
38.5
50.0
(421.7 )
2,487.3
1,121.5
(50.0 )
304.2
307.5
Other (income) expense
(56.5 )
49.0
196.4
Equity in earnings of subsidiaries, net of taxes
Income (loss) from continuing operations before
income taxes
246.6
88.2
—
(334.8 )
—
253.1
343.4
111.1
(321.7 )
385.9
117.1
14.3
226.3
96.8
Operating profit (loss)
Provision (benefit) for income taxes
(2.1 )
(421.7 )
3,051.5
3,237.1
13.1
574.8
—
188.9
4.7
Income (loss) from continuing operations
Income (loss) from discontinued operations, net
of provision (benefit) for income taxes
255.2
(326.4 )
—
1.4
0.4
Net income (loss)
Net income (loss) attributable to noncontrolling
interest
255.2
227.7
97.2
(326.4 )
—
—
—
(1.5 )
—
134.0
251.9
1.8
253.7
(1.5 )
Net income (loss) attributable to controlling
interest
$
255.2
$
227.7
$
97.2
$
(324.9 )
$
255.2
Net income (loss)
$
255.2
$
227.7
$
97.2
$
(326.4 )
$
253.7
$
235.1
$
221.6
$
108.9
$
(326.4 )
$
239.2
Other comprehensive income (loss)
Comprehensive income
(20.1 )
(6.1 )
90
—
11.7
(14.5 )
Table of Contents
Balance Sheet
December 31, 2014
Combined
Guarantor
Subsidiaries
Parent
Combined
Non-Guarantor
Subsidiaries
(in millions)
Eliminations
Consolidated
Assets:
Cash and cash equivalents
$
Short-term marketable securities
827.7
Investments in and advances to subsidiaries
89.4
—
—
190.0
215.7
$
(40.3 )
$
887.9
—
75.0
(0.4)
405.3
58.6
—
—
—
836.6
249.8
29.3
774.8
4,426.6
4,028.0
—
—
194.4
40.3
180.6
131.6
819.0
(30.2)
Restricted cash
Goodwill and other assets
$
—
Inventory
Property, plant, and equipment, net
11.1
75.0
Receivables, net of allowance
Income tax receivable
$
—
58.6
(18.0)
1,068.4
4,663.1
(564.3)
4,902.9
3.4
(8,458.0)
—
234.7
1,101.0
$
5,597.8
$
5,972.1
$
6,234.8
$
(9,070.9 )
$
8,733.8
$
15.0
$
154.8
$
126.2
$
(0.6 )
$
295.4
Liabilities:
Accounts payable
Accrued liabilities
235.8
286.9
186.9
—
709.6
Debt
789.5
39.1
2,724.4
—
3,553.0
Deferred income
—
34.5
1.9
Deferred income taxes
—
637.5
8.7
(13.6)
1,067.5
—
597.7
(1,665.2)
92.6
13.7
3.1
Advances from subsidiaries
Other liabilities
Total stockholders' equity
3,397.4
$
5,597.8
4,805.6
$
5,972.1
—
6,234.8
—
—
2,585.9
$
36.4
632.6
109.4
(7,391.5)
$
(9,070.9 )
3,397.4
$
8,733.8
Balance Sheet
December 31, 2013
Combined
Guarantor
Subsidiaries
Parent
Combined
Non-Guarantor
Subsidiaries
(in millions)
Eliminations
Consolidated
Assets:
Cash and cash equivalents
$
409.8
$
2.1
$
44.0
$
(27.4 )
$
428.5
149.7
—
—
Receivables, net of allowance
—
223.4
142.2
Income tax receivable
7.7
—
—
Inventory
—
642.1
180.7
44.5
947.2
3,431.7
2,806.5
—
25.0
208.3
27.4
260.7
133.1
144.3
247.8
(8.7)
516.5
Short-term marketable securities
Property, plant, and equipment, net
Investments in and advances to subsidiaries
Restricted cash
Goodwill and other assets
—
149.7
(0.6)
365.0
—
7.7
(8.1)
814.7
4,264.7
(485.8)
4,770.6
79.8
(6,318.0)
—
$
4,176.5
$
4,790.6
$
5,167.5
$
(6,821.2 )
$
7,313.4
$
11.6
$
115.6
$
89.7
$
(0.6 )
$
216.3
Liabilities:
Accounts payable
Accrued liabilities
213.0
202.7
151.7
—
567.4
Debt
375.9
42.2
2,571.7
—
2,989.8
Deferred income
—
38.7
2.1
—
40.8
Deferred income taxes
—
655.9
3.5
(8.7)
650.7
744.5
—
19.2
(763.7)
—
Advances from subsidiaries
Other liabilities
Total stockholders' equity
$
82.4
13.9
3.0
2,749.1
3,721.6
2,326.6
4,176.5
$
4,790.6
91
$
5,167.5
—
99.3
(6,048.2)
$
(6,821.2 )
2,749.1
$
7,313.4
Table of Contents
Statement of Cash Flows
Year Ended December 31, 2014
Combined
Guarantor
Subsidiaries
Parent
Combined
Non-Guarantor
Subsidiaries
Eliminations
Consolidated
(in millions)
Operating activities:
Net income
Adjustments to reconcile net income to net cash:
(Income) loss from discontinued operations
Depreciation and amortization
Stock-based compensation expense
$
678.2
$
727.1
$
265.0
—
0.1
6.1
24.9
213.6
53.3
18.9
13.4
(0.1 )
$
(961.0 )
$
709.3
—
—
—
244.6
(32.3 )
53.3
(24.4)
—
—
—
(24.4)
Provision for deferred income taxes
Net gains on railcar lease fleet sales owned more than
one year
Gains on disposition of property, plant, and
equipment
(4.0)
(8.9)
7.1
—
(5.8)
—
(41.4)
(50.9 )
—
(92.3)
1.4
—
(13.5 )
—
(12.1)
Non-cash interest expense
Changes in assets and liabilities:
15.7
(1.9)
16.9
—
30.7
(50.9)
33.4
(38.7 )
(0.2 )
(56.4)
Excess tax benefits from stock-based compensation
(Increase) decrease in receivables
(Increase) decrease in inventories
—
(194.5)
(1.7 )
9.9
(186.3)
(Increase) decrease in restricted cash
—
25.0
—
—
25.0
(Increase) decrease in other assets
(38.8)
13.2
(4.2 )
Increase (decrease) in accounts payable
3.4
39.2
18.1
—
60.7
Increase (decrease) in accrued liabilities
2.1
72.8
12.1
(4.9 )
82.1
Increase (decrease) in other liabilities
9.2
(0.2)
(6.4 )
—
2.6
Equity in earnings of subsidiaries, net of taxes
Other
Net cash provided (required) by operating activities continuing
(740.2)
(228.9)
(0.4)
(3.5)
969.1
—
(8.3)
—
(4.5)
475.3
430.1
2.1
818.2
1.0
—
—
1.0
476.3
430.1
2.1
819.2
74.7
—
—
—
74.7
Proceeds from railcar lease fleet sales
—
549.2
140.3
Proceeds from disposition of PPE and other assets
0.4
—
22.6
Net cash provided by operating activities - discontinued
Net cash provided (required) by operating activities
(89.3)
—
(0.6 )
21.5
—
(89.3)
Investing activities:
(Increase) decrease in short-term marketable securities
Capital expenditures – leasing
Capital expenditures – manufacturing and other
Acquisitions, net of cash acquired
(Increase) decrease in investment in partially-owned
subsidiaries
(423.7 )
—
265.8
23.0
—
(222.8)
(446.2 )
423.7
(245.3)
(9.2)
(64.0)
(146.1 )
—
(219.3)
(714.4 )
—
(714.4)
—
—
—
(4.5)
—
4.5
—
0.9
(0.8)
0.7
—
0.8
Other
Net cash provided (required) by investing activities continuing
Net cash provided (required) by investing activities discontinued
66.8
257.1
—
—
Net cash provided (required) by investing activities
66.8
257.1
(1,143.1 )
—
(1,143.1 )
4.5
—
4.5
(814.7)
—
(814.7)
Financing activities:
Proceeds from issuance of common stock, net
Excess tax benefits from stock-based compensation
Payments to retire debt
Proceeds from issuance of debt
0.6
—
—
—
0.6
24.4
—
—
—
24.4
(0.5)
(3.1)
(183.0 )
—
(186.6)
395.7
—
331.6
—
727.3
—
—
13.9
Shares repurchased
(36.5)
—
—
—
(36.5)
Dividends paid to common shareholders
(54.4)
—
—
—
(54.4)
(Increase) decrease in restricted cash
(12.9 )
1.0
Purchase of shares to satisfy employee tax on vested
stock
—
—
—
(38.3)
Contributions from noncontrolling interest
—
—
49.6
—
49.6
Distributions to noncontrolling interest
Contributions from controlling interest in
partially-owned subs
—
—
(28.2 )
—
(28.2)
4.5
(4.5 )
—
571.8
(2.1 )
—
—
(2.5)
(38.3)
—
—
Change in intercompany financing between entities
149.4
(719.1)
Other
Net cash provided (required) by financing activities continuing
—
(0.7)
440.4
(722.9)
758.4
—
(1.5)
—
440.4
(724.4)
758.4
(19.5 )
454.9
Net cash required by financing activities - discontinued
Net cash provided (required) by financing activities
(1.8 )
(19.5 )
456.4
—
(1.5)
Net increase (decrease) in cash and cash equivalents
417.9
9.0
45.4
(12.9 )
459.4
Cash and cash equivalents at beginning of period
409.8
2.1
44.0
(27.4 )
428.5
Cash and cash equivalents at end of period
$
827.7
$
11.1
92
$
89.4
$
(40.3 )
$
887.9
Table of Contents
Statement of Cash Flows
Year Ended December 31, 2013
Combined
Guarantor
Subsidiaries
Parent
Combined
Non-Guarantor
Subsidiaries
Eliminations
Consolidated
(in millions)
Operating activities:
Net income
Adjustments to reconcile net income to net cash:
(Income) loss from discontinued operations
Depreciation and amortization
Stock-based compensation expense
$
375.5
$
378.7
$
109.8
—
(6.3 )
—
4.5
31.5
175.5
44.5
15.9
7.5
$
(471.6 )
—
—
(23.4 )
$
392.4
(6.3 )
211.5
44.5
Excess tax benefits from stock-based compensation
(8.5 )
—
—
—
(8.5 )
Provision for deferred income taxes
Net gains on railcar lease fleet sales owned more than
one year
43.3
(5.3 )
7.8
—
45.8
—
(10.9 )
(9.5 )
—
(20.4 )
Gain on disposition of property, plant, and equipment
(0.3 )
—
(0.5 )
—
(0.8 )
Non-cash interest expense
Changes in assets and liabilities:
14.4
(0.9 )
17.3
—
30.8
(Increase) decrease in receivables
1.0
27.6
(12.0 )
0.6
17.2
(Increase) decrease in inventories
—
(103.7 )
6.4
1.7
(95.6 )
—
—
(25.0 )
(25.0 )
—
146.8
9.3
(3.0 )
Increase (decrease) in accounts payable
0.1
15.0
14.4
(0.5 )
29.0
Increase (decrease) in accrued liabilities
61.8
20.5
(9.9 )
—
72.4
(22.7 )
71.6
8.2
475.4
—
(Increase) decrease in restricted cash
(Increase) decrease in other assets
Increase (decrease) in other liabilities
(45.4 )
4.7
Equity in earnings of subsidiaries, net of taxes
(378.3 )
(97.1 )
—
(1.8 )
(4.4 )
(0.2 )
Other
Net cash provided (required) by operating activities continuing
Net cash provided (required) by operating activities discontinued
257.6
—
2.5
—
Net cash provided (required) by operating activities
257.6
252.1
280.9
—
—
249.6
280.9
(182.2 )
—
(128.4 )
—
(128.4 )
(29.1 )
(6.4 )
659.7
2.5
662.2
Investing activities:
(Increase) decrease in short-term marketable securities
(149.7 )
Proceeds from railcar lease fleet sales
—
322.4
57.1
Proceeds from disposition of PPE and other assets
—
0.3
3.4
Capital expenditures – leasing
Capital expenditures – manufacturing and other
Acquisitions, net of cash acquired
(Increase) decrease in investment in partially-owned
subsidiaries
Other
Net cash provided (required) by investing activities continuing
Net cash provided by investing activities - discontinued
Net cash provided (required) by investing activities
—
—
(247.9 )
—
(149.7 )
131.6
3.7
(545.6 )
(283.4 )
247.9
(581.1 )
(34.1 )
(92.1 )
—
(149.9 )
—
35.6
(108.8 )
—
(73.2 )
—
47.3
—
(47.3 )
—
108.8
—
—
(108.8 )
—
(23.7 )
(64.6 )
—
(64.6 )
(174.1 )
0.6
(173.5 )
(423.8 )
—
(423.8 )
(156.1 )
—
(156.1 )
(818.6 )
0.6
(818.0 )
Financing activities:
Proceeds from issuance of common stock, net
2.5
—
—
—
2.5
Excess tax benefits from stock-based compensation
8.5
—
—
—
8.5
Payments to retire debt
—
Proceeds from issuance of debt
—
—
175.0
—
(Increase) decrease in restricted cash
Shares repurchased
Dividends paid to common shareholders
Purchase of shares to satisfy employee tax on vested stock
(52.2 )
(318.7 )
108.8
—
(262.1 )
175.0
—
2.5
(103.2 )
—
—
—
(103.2 )
(39.3 )
—
—
—
(39.3 )
(9.6 )
—
—
—
(9.6 )
(15.0 )
(12.5 )
Proceeds from sale of interests in partially-owned leasing
subs
Repurchase of noncontrolling interest in partially-owned
leasing subs
—
—
—
296.7
—
296.7
—
—
(84.0 )
Contributions from noncontrolling interest
—
—
50.0
50.0
Distributions to noncontrolling interest
Distributions to controlling interest in partially-owned
subsidiaries
—
—
(10.0 )
—
—
—
(47.3 )
47.3
—
56.7
(36.8 )
128.4
—
0.8
—
0.8
(79.5 )
112.2
269.5
12.8
(1.5 )
—
—
(289.4 )
(81.0 )
112.2
269.5
11.3
(96.4 )
(2.4 )
(30.7 )
(15.0 )
(144.5 )
—
Change in intercompany financing between entities
(148.3 )
—
Other
Net cash provided (required) by financing activities continuing
—
(289.4 )
—
Net cash required by financing activities - discontinued
Net cash provided (required) by financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
(84.0 )
506.2
$
409.8
4.5
$
2.1
93
74.7
$
44.0
(10.0 )
(1.5 )
(12.4 )
$
(27.4 )
573.0
$
428.5
Table of Contents
Statement of Cash Flows
Year Ended December 31, 2012
Combined
Guarantor
Subsidiaries
Parent
Combined
Non-Guarantor
Subsidiaries
Eliminations
Consolidated
(in millions)
Operating activities:
Net income
Adjustments to reconcile net income to net cash:
(Income) loss from discontinued operations
Depreciation and amortization
$
255.2
$
227.7
—
(1.4)
$
97.2
(0.4 )
3.9
30.4
159.4
Stock-based compensation expense
27.7
10.2
4.1
Excess tax benefits from stock-based compensation
(0.6)
Provision for deferred income taxes
Net gains on railcar lease fleet sales owned more than
one year
4.9
—
125.5
$
(326.4 )
—
—
(14.3 )
$
253.7
(1.8)
193.7
27.7
—
—
(4.1 )
—
126.3
(24.5 )
—
(33.5)
(0.6)
—
(9.0)
Gain on disposition of PPE and other assets
(0.4)
(0.4)
(4.2 )
—
(5.0)
Non-cash interest expense
Changes in assets and liabilities:
13.3
0.3
17.6
—
31.2
(Increase) decrease in receivables
(7.8)
10.1
0.4
—
(Increase) decrease in inventories
—
(106.3)
(24.9 )
3.2
(128.0)
—
(30.2)
—
(2.7)
—
(3.3 )
—
(5.3 )
—
(41.5)
3.5
(26.0)
5.8
—
(16.7)
125.5
(Increase) decrease in restricted cash
(Increase) decrease in other assets
Increase (decrease) in accounts payable
Increase (decrease) in accrued liabilities
5.9
109.5
6.2
3.9
Increase (decrease) in other liabilities
(12.8)
(33.7)
(1.4 )
44.0
Equity in earnings of subsidiaries, net of taxes
(246.6)
(88.2)
—
334.8
(3.2)
(0.9 )
0.9
—
2.7
(3.9)
—
Other adjustments
Net cash provided by operating activities - continuing
operations
Net cash provided by operating activities - discontinued
operations
(3.2)
16.9
242.8
227.0
39.9
526.6
—
0.8
—
—
0.8
Net cash provided by operating activities
16.9
243.6
227.0
39.9
527.4
Investing activities:
Proceeds from railcar lease fleet sales owned more than
one year
—
527.6
88.7
(490.0 )
126.3
Proceeds from lease fleet sales – sale and leaseback
—
58.3
—
Proceeds from disposition of PPE and other assets
—
13.6
Capital expenditures – leasing subsidiary
—
(380.9)
(461.7 )
490.0
(352.6)
Capital expenditures – manufacturing and other
3.2
—
—
58.3
16.8
(6.6)
(38.8)
(71.2 )
—
(116.6)
Acquisitions, net of cash acquired
—
2.1
(48.3 )
—
(46.2)
Other
—
—
1.7
—
1.7
Net cash required by investing activities - continuing
Net cash provided (required) by investing activities discontinued
(6.6)
Net cash required by investing activities
(6.6)
—
181.9
0.9
182.8
(487.6 )
—
(487.6 )
—
—
—
(312.3)
0.9
(311.4)
Financing activities:
Proceeds from issuance of common stock, net
4.1
—
—
—
4.1
Excess tax benefits from stock-based compensation
0.6
—
—
—
0.6
Payments to retire debt
—
(8.9)
(369.5 )
—
(378.4)
Proceeds from issuance of debt
—
—
443.8
—
443.8
—
—
(6.0 )
Shares repurchased
(45.2)
—
—
—
(45.2)
Dividends paid to common shareholders
Purchase of shares to satisfy employee tax on vested
stock
(31.7)
—
—
—
(31.7)
—
(4.8)
Change in intercompany financing between entities
236.5
(Increase) decrease in restricted cash
(4.8)
—
(415.4)
—
218.8
23.1
(39.9 )
17.1
—
—
Other
Net cash provided by financing activities - continuing
—
159.5
(424.3)
—
Net cash required by financing activities - discontinued
Net cash provided by financing activities
286.6
(423.4)
(0.5)
(16.8 )
—
0.9
159.5
—
(0.5 )
5.0
—
286.6
0.9
(16.8 )
5.9
Net increase (decrease) in cash and cash equivalents
169.8
3.0
26.0
23.1
221.9
Cash and cash equivalents at beginning of period
336.4
1.5
48.7
(35.5 )
351.1
Cash and cash equivalents at end of period
$
506.2
$
4.5
94
$
74.7
$
(12.4 )
$
573.0
Table of Contents
Note 20. Selected Quarterly Financial Data (Unaudited)
Three Months Ended
June 30,
September 30,
2014
2014
March 31,
2014
December 31,
2014
(in millions except per share data)
Revenues:
Manufacturing
Leasing
$
Operating costs:
Costs of revenues:
Manufacturing
Leasing
Selling, engineering, and administrative expenses
Gain on disposition of property, plant, and equipment
Operating profit
Net income from continuing operations
Discontinued operations, net of tax
Net income
Net income attributable to Trinity Industries, Inc.
Net income attributable to Trinity Industries, Inc. per
common share:
Basic:
Continuing operations
$
Discontinued operations
$
Diluted:
Continuing operations
Discontinued operations
$
$
1,018.3
442.2
1,460.5
$
794.7
279.3
1,074.0
83.6
88.4
391.3
233.3
(0.3)
233.0
226.4
1,259.9
225.4
1,485.3
$
970.2
128.1
1,098.3
96.4
11.4
302.0
173.3
(0.2)
173.1
164.2
1.46
—
1.46
$
1.42
—
1.42
$
$
$
1,359.8
203.0
1,562.8
$
1,062.6
109.6
1,172.2
113.0
3.6
281.2
156.3
0.6
156.9
149.4
1.05
—
1.05
$
1.01
—
1.01
$
$
$
1,147.6
127.7
1,275.3
110.6
1.0
276.5
146.4
(0.1)
146.3
138.2
0.95
—
0.95
$
0.90
—
0.90
$
$
$
Three Months Ended
June 30,
September 30,
2013
2013
March 31,
2013
1,425.6
235.8
1,661.4
0.89
—
0.89
0.86
—
0.86
December 31,
2013
(in millions except per share data)
Revenues:
Manufacturing
Leasing
Operating costs:
Costs of revenues:
Manufacturing
Leasing
Selling, engineering, and administrative expenses
Gain on disposition of property, plant, and equipment
Operating profit
Net income from continuing operations
Discontinued operations, net of tax
Net income
Net income attributable to Trinity Industries, Inc.
Net income (loss) attributable to Trinity Industries, Inc.
$
798.5
134.4
932.9
641.2
69.9
711.1
69.0
6.7
159.5
72.2
6.6
78.8
79.1
$
896.5
169.6
1,066.1
726.0
86.2
812.2
71.5
1.0
183.4
89.2
(1.0 )
88.2
84.0
$
959.7
150.6
1,110.3
767.0
69.3
836.3
70.6
2.2
205.6
105.8
0.3
106.1
99.6
$
1,065.2
190.8
1,256.0
856.7
106.0
962.7
80.2
11.3
224.4
118.9
0.4
119.3
112.8
per common share:
Basic:
Continuing operations
Discontinued operations
$
$
Diluted:
Continuing operations
Discontinued operations
$
$
0.46
0.04
0.50
$
0.46
0.04
0.50
$
95
$
$
0.53
(0.01 )
0.52
$
0.53
(0.01 )
0.52
$
$
$
0.63
—
0.63
$
0.63
—
0.63
$
$
$
0.72
—
0.72
0.72
—
0.72
Table of Contents
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Disclosure Controls and Procedures.
The Company maintains disclosure controls and procedures designed to ensure that it is able to collect and record the information it is
required to disclose in the reports it files with the SEC, and to process, summarize, and disclose this information within the time periods
specified in the rules of the SEC. The Company's Chief Executive and Chief Financial Officers are responsible for establishing and maintaining
these procedures and, as required by the rules of the SEC, evaluating their effectiveness. Based on their evaluation of the Company's disclosure
controls and procedures which took place as of the end of the period covered by this report, the Chief Executive and Chief Financial Officers
believe that these procedures are effective to 1) ensure that the Company is able to collect, process, and disclose the information it is required to
disclose in the reports it files with the SEC within the required time periods and 2) accumulate and communicate this information to the
Company's management, including its Chief Executive and Chief Financial Officers, to allow timely decisions regarding this disclosure.
The Company acquired the assets of Meyer on August 18, 2014 and has not yet included Meyer in its assessment of the effectiveness of its
internal control over financial reporting. Accordingly, pursuant to the Securities and Exchange Commission's general guidance that an
assessment of a recently acquired business may be omitted from the scope of an assessment in the year of acquisition, the scope of its
assessment of the effectiveness of its disclosure controls and procedures does not include any disclosure controls and procedures of Meyer that
are also part of Meyer's internal control over financial reporting. For the year ended December 31, 2014, Meyer represented less than 2% of the
Company's consolidated total revenues and as of December 31, 2014 represented less than 8% of its consolidated total assets.
Management's Report on Internal Control over Financial Reporting.
Management of the Company is responsible for establishing and maintaining effective internal control over financial reporting as defined in
Rules 13a-15(f) under the Securities Exchange Act of 1934. The Company's internal control over financial reporting is designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with accounting principles generally accepted in the United States.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those
systems determined to be effective can provide only reasonable assurance, as opposed to absolute assurance, of achieving their internal control
objectives.
During the three months ended December 31, 2014, except as described above regarding the Meyer acquisition, there have been no changes
in the Company’s internal controls over financial reporting that have materially affected or are reasonably likely to materially affect the
Company’s internal controls over financial reporting. Management is currently evaluating the impact of the Meyer acquisition on the
Company's internal control over financial reporting.
Management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2014 . In making this
assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (the 2013
Framework) (COSO) in Internal Control - Integrated Framework. Based on our assessment, except as described above regarding the Meyer
acquisition, we believe that, as of December 31, 2014 , the Company's internal control over financial reporting was effective based on those
criteria.
The effectiveness of internal control over financial reporting as of December 31, 2014 , has been audited by Ernst & Young LLP, the
independent registered public accounting firm who also audited the Company's consolidated financial statements. Ernst & Young LLP's
attestation report on effectiveness of the Company's internal control over financial reporting follows:
96
Table of Contents
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Trinity Industries, Inc.
We have audited Trinity Industries, Inc. and Subsidiaries' internal control over financial reporting as of December 31, 2014, based on criteria
established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(2013 framework) (the COSO criteria). Trinity Industries, Inc. and Subsidiaries' management is responsible for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the
accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the
company's internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for
our opinion.
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A
company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.
As indicated in the accompanying Management’s Report on Internal Control over Financial Reporting, management’s assessment of and
conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Meyer Steel Structures,
which is included in the 2014 consolidated financial statements of Trinity Industries, Inc. and Subsidiaries and constituted less than 8% of
consolidated total assets, as of December 31, 2014 and less than 2% of consolidated total revenues, for the year then ended. Our audit of
internal control over financial reporting of Trinity Industries Inc. and Subsidiaries also did not include an evaluation of the internal control over
financial reporting of Meyer Steel Structures.
In our opinion, Trinity Industries, Inc. and Subsidiaries maintained, in all material respects, effective internal control over financial reporting as
of December 31, 2014, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated
balance sheets of Trinity Industries, Inc. and Subsidiaries as of December 31, 2014 and 2013, and the related consolidated statements of
operations, comprehensive income, cash flows, and stockholders' equity for each of the three years in the period ended December 31, 2014 of
Trinity Industries, Inc. and Subsidiaries and our report dated February 19, 2015 expressed an unqualified opinion thereon.
/s/ ERNST &
YOUNG LLP
Dallas, Texas
February 19, 2015
97
Table of Contents
Item 9B. Other Information.
None.
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Information regarding the directors of the Company is incorporated by reference to the information set forth under the caption “Proposal 1 Election of Directors” in the Company's Proxy Statement for the 2015 Annual Meeting of Stockholders (the “ 2015 Proxy Statement”).
Information relating to the executive officers of the Company is set forth in Part I of this report under the caption “Executive Officers and
Other Corporate Officers of the Company.” Information relating to the Board of Directors' determinations concerning whether at least one of
the members of the Audit Committee is an “audit committee financial expert” as that term is defined under Item 407 (d)(5) of Regulation S-K
is incorporated by reference to the information set forth under the caption “Corporate Governance - Board Committees - Audit Committee” in
the Company's 2015 Proxy Statement. Information regarding the Company's Audit Committee is incorporated by reference to the information
set forth under the caption “Corporate Governance - Board Committees - Audit Committee” in the Company's 2015 Proxy Statement.
Information regarding compliance with Section 16(a) of the Securities and Exchange Act of 1934 is incorporated by reference to the
information set forth under the caption “Additional Information - Section 16(a) Beneficial Ownership Reporting Compliance” in the
Company's 2015 Proxy Statement.
The Company has adopted a Code of Business Conduct and Ethics that applies to all of its directors, officers, and employees. The Code of
Business Conduct and Ethics is on the Company's website at www.trin.net under the caption “Investor Relations/ Governance.” The Company
intends to post any amendments or waivers for its Code of Business Conduct and Ethics to the Company's website at www.trin.net to the extent
applicable to an executive officer or director of the Company.
Item 11. Executive Compensation.
Information regarding compensation of executive officers and directors is incorporated by reference to the information set forth under the
caption “Executive Compensation” in the Company's 2015 Proxy Statement. Information concerning compensation committee interlocks and
insider participation is incorporated by reference to the information set forth under the caption “Corporate Governance - Compensation
Committee Interlocks and Insider Participation” in the Company's 2015 Proxy Statement. Information about the compensation committee
report is incorporated by reference to the information set forth under the caption “Executive Compensation - Human Resources Committee
Report” in the Company's 2015 Proxy Statement.
98
Table of Contents
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Information concerning security ownership of certain beneficial owners and management is incorporated herein by reference from the
Company's 2015 Proxy Statement, under the caption “Security Ownership - Security Ownership of Certain Beneficial Owners and
Management.”
The following table sets forth information about Trinity common stock that may be issued under all of Trinity's existing equity compensation
plans as of December 31, 2014 .
Equity Compensation Plan Information
(a)
(b)
Number of Securities to
be Issued Upon
Exercise of
Outstanding Options,
Warrants and Rights
Weighted-Average Exercise
Price of Outstanding Options,
Warrants and Rights
Plan Category:
Equity compensation plans approved by security holders:
Stock Options
Restricted stock units and performance units
95,293
2,523,025
2,618,318
—
2,618,318
1
2
$
$
(c)
Number of Securities
Remaining Available
for Future Issuance
under Equity
Compensation Plans
(Excluding Securities
Reflected in Column
(a))
8.86
—
2,607,425
—
2,607,425
Equity compensation plans not approved by security holders
Total
____________
1 Includes 811,003 shares of common stock issuable upon the vesting and conversion of restricted stock units and 1,712,022 shares of common
stock issuable upon the vesting and conversion of performance units. The restricted stock units and performance units do not have an exercise
price. The performance units are granted to employees based upon a target level, however, depending upon the achievement of certain specified
goals during the performance period, performance units may be adjusted to a level ranging between 0% and 200% of the target level.
Excludes information regarding the Trinity Deferred Plan for Director Fees. This plan permits the deferral of the payment of the annual
retainer fee and board and committee meeting fees. At the election of the participant, the deferred fees may be converted into phantom stock
units with a fair market value equal to the value of the fees deferred, and such phantom stock units are credited to the director's account (along
with the amount of any dividends or stock distributions). At the time a participant ceases to be a director, cash will be distributed to the
participant. At December 31, 2014 , there were 224,818 phantom stock units credited to the accounts of participants. Also excludes information
regarding the Trinity Industries Supplemental Profit Sharing Plan (“Supplemental Plan”) for certain of its highly compensated employees.
Information about the Supplemental Plan is incorporated herein by reference from the Company's 2015 Proxy Statement, under the caption
“Executive Compensation - Compensation Discussion and Analysis - Components of Compensation - Post-employment Benefits.” At
December 31, 2014 , there were 86,466 stock units credited to the accounts of participants under the Supplemental Plan.
2
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Information regarding certain relationships and related person transactions is incorporated by reference to the information set forth under the
captions “Corporate Governance-Compensation Committee Interlocks and Insider Participation” and “Transactions with Related Persons” in
the Company's 2015 Proxy Statement. Information regarding the independence of directors is incorporated by reference to the information set
forth under the captions “Corporate Governance-Independence of Directors” in the Company's 2015 Proxy Statement.
Item 14. Principal Accountant Fees and Services.
Information regarding principal accountant fees and services is incorporated by reference to the information set forth under the captions
“Fees of Independent Registered Public Accounting Firm for Fiscal Years 2014 and 2013 ” in the Company's 2015 Proxy Statement.
99
Table of Contents
PART IV
Item 15. Exhibits and Financial Statement Schedules.
(a) (1) Financial Statements.
See Item 8.
(2) Financial Statement Schedule.
All schedules are omitted because they are not required, not significant, not applicable or the information is shown in the financial statements
or the notes to consolidated financial statements.
(3) Exhibits.
See Index to Exhibits for a listing of Exhibits which are filed herewith or incorporated herein by reference to the location indicated.
100
Table of Contents
EXHIBIT 23
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the following Registration Statements:
1)
2)
3)
4)
5)
6)
7)
8)
9)
10)
11)
12)
13)
14)
15)
Post-Effective Amendment No. 3 to the Registration Statement (Form S-8, No. 2-64813),
Post-Effective Amendment No. 1 to the Registration Statement (Form S-8, No. 33-10937),
Registration Statement (Form S-8, No. 33-35514),
Registration Statement (Form S-8, No. 33-73026),
Registration Statement (Form S-8, No. 333-77735),
Registration Statement (Form S-8, No. 333-91067),
Registration Statement (Form S-8, No. 333-85588),
Registration Statement (Form S-8, No. 333-85590),
Registration Statement (Form S-8, No. 333-114854),
Registration Statement (Form S-8, No. 333-115376),
Registration Statement (Form S-3, No. 333-134596),
Registration Statement (Form S-8, No. 333-159552),
Registration Statement (Form S-8, No. 333-169452),
Registration Statement (Form S-8, No. 333-183941), and
Registration Statement (Form S-3, No. 333-198744);
of our reports dated February 19, 2015 with respect to the consolidated financial statements of Trinity Industries, Inc. and Subsidiaries and the
effectiveness of internal control over financial reporting of Trinity Industries, Inc. and Subsidiaries included in this Annual Report (Form 10-K)
of Trinity Industries, Inc. and Subsidiaries for the year ended December 31, 2014 .
/s/ ERNST &
YOUNG LLP
Dallas, Texas
February 19, 2015
101
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
TRINITY INDUSTRIES, INC.
Registrant
By /s/ James E. Perry
James E. Perry
Senior Vice President and
Chief Financial Officer
February 19, 2015
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
Directors:
/s/ John L. Adams
John L. Adams
Director
Dated: February 19, 2015
/s/ Douglas L. Rock
Douglas L. Rock
Director
Dated: February 19, 2015
/s/ Rhys J. Best
Rhys J. Best
Director
Dated: February 19, 2015
/s/ Dunia A. Shive
Dunia A. Shive
Director
Dated: February 19, 2015
/s/ David W. Biegler
David W. Biegler
Director
Dated: February 19, 2015
/s/ Antonio Carrillo
Antonio Carrillo
Director
Dated: February 19, 2015
Principal Executive Officer:
/s/ Timothy R. Wallace
Timothy R. Wallace
Chairman, Chief Executive Officer, President, and Director
Dated: February 19, 2015
Principal Financial Officer:
/s/ Leldon E. Echols
Leldon E. Echols
Director
Dated: February 19, 2015
/s/ Ronald J. Gafford
Ronald J. Gafford
Director
Dated: February 19, 2015
/s/ Adrián Lajous
Adrián Lajous
Director
Dated: February 19, 2015
/s/ James E. Perry
James E. Perry
Senior Vice President and Chief Financial Officer
Dated: February 19, 2015
Principal Accounting Officer:
/s/ Mary E. Henderson
Mary E. Henderson
Vice President and Chief Accounting Officer
Dated: February 19, 2015
/s/ Charles W. Matthews
Charles W. Matthews
Director
Dated: February 19, 2015
102
Table of Contents
INDEX TO EXHIBITS
Trinity Industries, Inc.
Index to Exhibits
(Item 15(b))
NO.
DESCRIPTION
(2.1)
Purchase Agreement, dated as of June 26, 2014, by and among McKinley 2014 Acquisition LLC, Thomas & Betts
Corporation and Thomas & Betts International, LLC (incorporated by reference to Exhibit 2.1 to our Form 8-K filed June
30, 2014).
(3.1)
Certificate of Incorporation of Trinity Industries, Inc., as amended May 23, 2007 (incorporated by reference to Exhibit 3.1
to our Annual Report on Form 10-K for the annual period ended December 31, 2012).
Amended and Restated By-Laws of Trinity Industries, Inc., as amended September 10, 2014 (incorporated by reference to
Exhibit 99.2 to our Form 8-K filed September 12, 2014).
Indenture, dated June 7, 2006, between Trinity Industries, Inc. and Wells Fargo Bank, National Association, as trustee
(including the Form of 3 7/8% Convertible Subordinated Note due 2036 as an exhibit thereto) (incorporated by reference to
Exhibit 4.01 to our Annual Report on Form 10-K for the annual period ended December 31, 2011).
Officers' Certificate of Trinity Industries, Inc. pursuant to the Indenture dated June 7, 2006, relating to the Company's 3
7/8% Convertible Subordinated Notes due 2036 (incorporated by reference to Exhibit 4.01.1 to our Annual Report on Form
10-K for the annual period ended December 31, 2011).
Specimen Common Stock Certificate of Trinity Industries, Inc. (incorporated by reference to Exhibit 4.1 of Registration
Statement No. 333-159552 filed May 28, 2009).
Pass Through Trust Agreement dated as of February 15, 2002 among Trinity Industries Leasing Company, Trinity
Industries, Inc. and Wilmington Trust Company, as Trustee (incorporated by reference to Exhibit 4.3 to our Annual Report
on Form 10-K for the annual period ended December 31, 2013).
Trust Indenture and Security Agreement dated as of February 15, 2002 among Trinity Industries Leasing Company, Trinity
Industries, Inc. and The Bank of New York, as Trustee (incorporated by reference to Exhibit 4.3.1 to our Annual Report on
Form 10-K for the annual period ended December 31, 2013).
Trust Indenture and Security Agreement dated as of February 15, 2002 among Trinity Industries Leasing Company, Trinity
Industries, Inc. and The Bank of New York, as Trustee (incorporated by reference to Exhibit 4.3.2 to our Annual Report on
Form 10-K for the annual period ended December 31, 2013).
Trust Indenture and Security Agreement dated as of February 15, 2002 among Trinity Industries Leasing Company, Trinity
Industries, Inc. and The Bank of New York, as Trustee (incorporated by reference to Exhibit 4.3.3 to our Annual Report on
Form 10-K for the annual period ended December 31, 2013).
Indenture dated September 25, 2014, by and among Trinity Industries, Inc., certain of its subsidiaries, as guarantors, and
Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 to our Form 8-K filed
September 25, 2014).
First Supplemental Indenture dated September 25, 2014, by and among Trinity Industries, Inc., certain of its subsidiaries,
as guarantors, and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.2 to our
Form 8-K filed September 25, 2014).
Form of 4.550% Senior Note due 2024 (included in Exhibit 4.4.1 and incorporated by reference to Exhibit 4.3 to our Form
8-K filed September 25, 2014).
Form of Change in Control Agreement entered into between Trinity Industries, Inc. and the Chief Executive Officer, and
each of the Senior Vice Presidents (incorporated by reference to Exhibit 10.1 to our Annual Report on Form 10-K for the
annual period ended December 31, 2013).*
Trinity Industries, Inc. Directors' Retirement Plan, as amended September 10, 1998 (incorporated by reference to Exhibit
10.2 of Registration Statement No. 333-117526 filed July 21, 2004).*
Amendment No. 2 to the Trinity Industries, Inc. Directors' Retirement Plan (incorporated by reference to Exhibit 10.2.1 to
our Annual Report on Form 10-K for the annual period ended December 31, 2010).*
Amendment No. 3 to the Trinity Industries, Inc. Directors' Retirement Plan (incorporated by reference to Exhibit 10.2.2 to
our Annual Report on Form 10-K for the annual period ended December 31, 2011).*
1993 Stock Option and Incentive Plan (incorporated by reference to Exhibit 4.1 of Registration Statement No. 33-73026
filed December 15, 1993).*
Amendment No. 1 to the 1993 Stock Option and Incentive Plan (incorporated by reference to Exhibit 10.3.1 to our Annual
Report on Form 10-K for the annual period ended December 31, 2011).*
Amendment No. 2 to the 1993 Stock Option and Incentive Plan (incorporated by reference to Exhibit 10.3.2 to our Annual
Report on Form 10-K for the annual period ended December 31, 2011).*
Amendment No. 3 to the 1993 Stock Option and Incentive Plan (incorporated by reference to Exhibit 10.3.3 to our Annual
Report on Form 10-K for the annual period ended December 31, 2011).*
(3.2)
(4.1)
(4.1.1)
(4.2)
(4.3)
(4.3.1)
(4.3.2)
(4.3.3)
(4.4)
(4.4.1)
(4.4.2)
(10.1)
(10.2)
(10.2.1)
(10.2.2)
(10.3)
(10.3.1)
(10.3.2)
(10.3.3)
(10.3.4)
Amendment No. 4 to the 1993 Stock Option and Incentive Plan (incorporated by reference to Exhibit 10.3.4 to our Annual
Report on Form 10-K for the annual period ended December 31, 2011).*
103
Table of Contents
INDEX TO EXHIBITS
Trinity Industries, Inc.
Index to Exhibits
(Item 15(b))
NO.
DESCRIPTION
(10.3.5)
(10.4)
(10.5)
(10.6)
(10.7)
(10.7.1)
(10.8)
(10.8.1)
(10.8.2)
(10.9)
(10.9.1)
(10.9.2)
(10.9.3)
(10.9.4)
(10.10)
(10.10.1)
(10.10.2)
(10.10.3)
(10.10.3.1)
(10.10.4)
(10.10.5)
(10.10.5.1)
Amendment No. 5 to the 1993 Stock Option and Incentive Plan (incorporated by reference to Exhibit 10.3.5 to our Annual
Report on Form 10-K for the annual period ended December 31, 2011).*
Supplemental Profit Sharing Plan for Employees of Trinity Industries, Inc. and Certain Affiliates as restated effective
January 1, 2005 (incorporated by reference to Exhibit 10.4 to our Annual Report on Form 10-K for the annual period ended
December 31, 2013).*
Trust Agreement for Trinity Industries, Inc. Deferred Compensation Trust dated December 15, 2011 (incorporated by
reference to Exhibit 10.5 to our Annual Report on Form 10-K for the annual period ended December 31, 2011).*
Trust Agreement for Trinity Industries, Inc. Supplemental Profit Sharing and Directors Fee Trust dated December 15, 2011
(incorporated by reference to Exhibit 10.6 to our Annual Report on Form 10-K for the annual period ended December 31,
2011).*
Supplemental Retirement Plan as Amended and Restated effective January 1, 2009 (incorporated by reference to Exhibit
10.7 to our Annual Report on Form 10-K for the annual period ended December 31, 2013).*
Amendment No. 1 to the Supplemental Retirement Plan as Amended and Restated effective January 1, 2009 (incorporated
by reference to Exhibit 10.7.1 to our Annual Report on Form 10-K for the annual period ended December 31, 2013).*
Trinity Industries, Inc. Deferred Plan for Director Fees, as amended (incorporated by reference to Exhibit 10.9 of
Registration Statement No. 333-117526 filed July 21, 2004).*
Amendment to Trinity Industries, Inc. Deferred Plan for Director Fees dated December 7, 2005 (incorporated by reference
to Exhibit 10.8.1 to our Annual Report on Form 10-K for the annual period ended December 31, 2011).*
Trinity Industries, Inc. 2005 Deferred Plan for Director Fees (incorporated by reference to Exhibit 10.8.2 to our Annual
Report on Form 10-K for the annual period ended December 31, 2011).*
Trinity Industries, Inc. 1998 Stock Option and Incentive Plan (incorporated by reference to Exhibit 4.2 of Registration
Statement No. 333-77735 filed May 4, 1999).*
Amendment No. 1 to the Trinity Industries, Inc. 1998 Stock Option Plan and Incentive Plan (incorporated by reference to
Exhibit 10.9.1 to our Annual Report on Form 10-K for the annual period ended December 31, 2009).*
Amendment No. 2 to the Trinity Industries, Inc. 1998 Stock Option and Incentive Plan (incorporated by reference to
Exhibit 10.9.2 to our Annual Report on Form 10-K for the annual period ended December 31, 2009).*
Amendment No. 3 to the Trinity Industries, Inc. 1998 Stock Option and Incentive Plan (incorporated by reference to
Exhibit 10.9.3 to our Annual Report on Form 10-K for the annual period ended December 31, 2011).*
Amendment No. 4 to the Trinity Industries, Inc. 1998 Stock Option and Incentive Plan (incorporated by reference to
Exhibit 10.9.4 to our Annual Report on Form 10-K for the annual period ended December 31, 2011).*
Second Amended and Restated Trinity Industries, Inc. 2004 Stock Option and Incentive Plan (incorporated by reference to
Exhibit 10.1 to our Form 8-K filed May 8, 2013).*
Form of Notice of Grant of Stock Options and Non-Qualified Option Agreement with Non-Qualified Stock Option Terms
and Conditions as of December 9, 2008 (incorporated by reference to Exhibit 10.10.1 to our Annual Report on Form 10-K
for the annual period ended December 31, 2013).*
Form of Notice of Grant of Stock Options and Incentive Stock Option Agreement with Incentive Stock Option Terms and
Conditions as of December 9, 2008 (incorporated by reference to Exhibit 10.10.2 to our Annual Report on Form 10-K for
the annual period ended December 31, 2013).*
Form of Restricted Stock Grant Agreement for grants issued prior to 2008 (incorporated by reference to Exhibit 10.10.3 to
our Annual Report on Form 10-K for the annual period ended December 31, 2013).*
Form of Restricted Stock Grant Agreement for grants issued commencing 2008 (incorporated by reference to Exhibit
10.10.3.1 to our Annual Report on Form 10-K for the annual period ended December 31, 2013).*
Form of Non-Qualified Stock Option Agreement for Non-Employee Directors (incorporated by reference to Exhibit
10.10.4 to our Annual Report on Form 10-K for the annual period ended December 31, 2010).*
Form of Restricted Stock Unit Agreement for Non-Employee Directors for grants issued prior to 2008 (incorporated by
reference to Exhibit 10.10.5 to our Annual Report on Form 10-K for the annual period ended December 31, 2013).*
Form of Restricted Stock Unit Agreement for Non-Employee Directors for grants issued commencing 2008 (incorporated
by reference to Exhibit 10.10.5.1 to our Annual Report on Form 10-K for the annual period ended December 31, 2013).*
104
Table of Contents
INDEX TO EXHIBITS
Trinity Industries, Inc.
Index to Exhibits
(Item 15(b))
NO.
(10.10.6)
(10.11)
(10.12)
(10.13)
(10.14)
(10.14.1)
(10.14.2)
(10.14.3)
(10.14.4)
(10.14.5)
(10.15)
(10.15.1)
(10.15.2)
(10.15.3)
(10.15.4)
(10.15.5)
(10.16)
(10.16.1)
(10.17)
DESCRIPTION
Form of Performance Restricted Stock Unit Grant Agreement for grants issued commencing 2011 (incorporated by
reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2011).*
Trinity Industries, Inc. Supplemental Retirement Plan Trust (incorporated by reference to Exhibit 10.1 to our Quarterly
Report on Form 10-Q/A for the quarterly period ended March 31, 2012).*
Form of 2008 Deferred Compensation Plan and Agreement as amended and restated entered into between Trinity
Industries, Inc. and certain officers of Trinity Industries, Inc. or its subsidiaries (incorporated by reference to Exhibit 10.12
to our Annual Report on Form 10-K for the annual period ended December 31, 2013).*
Trinity Industries, Inc. Annual Incentive Plan (incorporated by reference to Exhibit 10.2 to our Form 8-K filed May 8,
2013).*
Equipment Lease Agreement (TRL 1 2001-1A) dated as of May 17, 2001 between TRLI-1A Railcar Statutory Trust, lesser,
and Trinity Rail Leasing I L.P., lessee (incorporated by reference to Exhibit 10.14 to our Annual Report on Form 10-K for
the annual period ended December 31, 2013).
Participation Agreement (TRL 1 2001-1A) dated as of May 17, 2001 among Trinity Rail Leasing I L.P., lessee, et. al.
(incorporated by reference to Exhibit 10.14.1 to our Annual Report on Form 10-K for the annual period ended December
31, 2013).
Equipment Lease Agreement (TRL 1 2001-1B) dated as of July 12, 2001 between TRL 1 2001-1B Railcar Statutory Trust,
lessor, and Trinity Rail Leasing I L.P., lessee (incorporated by reference to Exhibit 10.14.2 to our Annual Report on Form
10-K for the annual period ended December 31, 2013).
Participation Agreement (TRL 1 2001-1B) dated as of May 17, 2001 among Trinity Rail Leasing I L.P., lessee, et. al.
(incorporated by reference to Exhibit 10.14.3 to our Annual Report on Form 10-K for the annual period ended December
31, 2013).
Equipment Lease Agreement (TRL 1 2001-1C) dated as of December 28, 2001 between TRL 1 2001-1C Railcar Statutory
Trust, lessor, and Trinity Rail Leasing 1 L.P., lessee (incorporated by reference to Exhibit 10.14.4 to our Annual Report on
Form 10-K for the annual period ended December 31, 2013).
Participation Agreement (TRL 1 2001-1C) dated as of December 28, 2001 among Trinity Rail Leasing 1 L.P., lessee, et. al.
(incorporated by reference to Exhibit 10.14.5 to our Annual Report on Form 10-K for the annual period ended December
31, 2013).
Equipment Lease Agreement (TRL III 2003-1A) dated as of November 12, 2003 between TRL III-1A Railcar Statutory
Trust, lessor, and Trinity Rail Leasing III L.P., lessee (incorporated by reference to Exhibit 10.15 to our Annual Report on
Form 10-K for the annual period ended December 31, 2013).
Participation Agreement (TRL III 2003-1A) dated as of November 12, 2003 between TRL III-1A among Trinity Rail
Leasing III L.P., lessee, et. al. (incorporated by reference to Exhibit 10.15.1 to our Annual Report on Form 10-K for the
annual period ended December 31, 2013).
Equipment Lease Agreement (TRL III 2003-1B) dated as of November 12, 2003 between TRL III-1B Railcar Statutory
Trust, lessor, and Trinity Rail Leasing III L.P., lessee, (incorporated by reference to Exhibit 10.15.2 to our Annual Report
on Form 10-K for the annual period ended December 31, 2013).
Participation Agreement (TRL III 2003-1B) dated as of November 12, 2003 between TRL III-1B among Trinity Rail
Leasing III L.P., lessee, et. al. (incorporated by reference to Exhibit 10.15.3 to our Annual Report on Form 10-K for the
annual period ended December 31, 2013).
Equipment Lease Agreement (TRL III 2003-1C) dated as of November 12, 2003 between TRL III-1C Railcar Statutory
Trust, lessor, and Trinity Rail Leasing III L.P., lessee (incorporated by reference to Exhibit 10.15.4 to our Annual Report
on Form 10-K for the annual period ended December 31, 2013).
Participation Agreement (TRL III 2003-1C) dated as of November 12, 2003 between TRL III-1C among Trinity Rail
Leasing III L.P., lessee, et. al. (incorporated by reference to Exhibit 10.15.5 to our Annual Report on Form 10-K for the
annual period ended December 31, 2013).
Equipment Lease Agreement (TRL IV 2004-1A) between TRL IV 2004-1A Statutory Trust, lessor, and Trinity Rail
Leasing IV L.P., lessee (incorporated by reference to Exhibit 10.16 to our Annual Report on Form 10-K for the annual
period ended December 31, 2013).
Participation Agreement (TRL IV 2004-1A) among Trinity Rail Leasing IV, L.P., lessee, et. al (incorporated by reference
to Exhibit 10.16.1 to our Annual Report on Form 10-K for the annual period ended December 31, 2013).
Third Amended and Restated Credit Agreement dated as of October 20, 2011 among Trinity Industries, Inc, as Borrower,
JP Morgan Chase Bank, N.A., individually and as Administrative Agent, and certain other Lenders party thereto from time
to time (incorporated by reference to Exhibit 10.17 to our Annual Report on Form 10-K for the annual period ended
December 31, 2011).
105
Table of Contents
INDEX TO EXHIBITS
Trinity Industries, Inc.
Index to Exhibits
(Item 15(b))
NO.
DESCRIPTION
(10.18)
(10.19)
(10.19.1)
(10.19.2)
(10.20)
(10.20.1)
(10.21)
(10.22)
(10.22.1)
(10.23)
(10.25)
(10.25.1)
(10.26)
(10.26.1)
(10.27)
(10.28)
(10.28.1)
(12)
(21)
(23)
(31.1)
(31.2)
Third Amended and Restated Warehouse Loan Agreement dated as of June 17, 2013 among Trinity Industries Leasing
Company, Trinity Rail Leasing Warehouse Trust, the banks and other lending institutions from time to time party hereto,
Credit Suisse AG, New York Branch, as Agent, and Wilmington Trust Company, as Collateral Agent and Depositary
(incorporated by reference to Exhibit 10.1 to our Form 8-K filed on June 21, 2013).
Term Loan Agreement dated as of May 9, 2008 among Trinity Rail Leasing VI LLC, the Committed Lenders and the
Conduit Lenders From Time to Time Party Hereto, DVB Bank AG, as Agent, and Wilmington Trust Company; as
Collateral and Depositary (incorporated by reference to Exhibit 10.19 to our Annual Report on Form 10-K for the annual
period ended December 31, 2013).
Purchase and Sale Agreement (TILC) dated as of May 9, 2008 among Trinity Industries Leasing Company, as Seller and
Trinity Rail Leasing VI LLC, as Buyer (incorporated by reference to Exhibit 10.19.1 to our Annual Report on Form 10-K
for the annual period ended December 31, 2013).
Purchase and Sale Agreement (TRLT-II) dated as of May 9, 2008 among Trinity Rail Leasing Trust II, as Seller, Trinity
Rail Leasing VI LLC, as Buyer and Trinity Industries Leasing Company (incorporated by reference to Exhibit 10.19.2 to
our Annual Report on Form 10-K for the annual period ended December 31, 2013).
Master Indenture dated November 5, 2009, between Trinity Rail Leasing VII LLC and Wilmington Trust Company, as
indenture trustee (filed herewith).
Purchase and Contribution Agreement, dated November 5, 2009, among Trinity Industries Leasing Company, Trinity Rail
Leasing Warehouse Trust, and Trinity Rail Leasing VII L.L.C. (filed herewith).
Perquisite Plan beginning January 1, 2004 in which the Company's Executive Officers participate (filed herewith).*
Purchase and Contribution Agreement, dated May 18, 2006, among Trinity Industries Leasing Company, Trinity Leasing
Trust II, and Trinity Rail Leasing V L.P. (incorporated by reference to Exhibit 10.22 to our Annual Report on Form 10-K
for the annual period ended December 31, 2011).
Master Indenture dated May 24, 2006, between Trinity Rail Leasing V L.P. and Wilmington Trust Company, as indenture
trustee (incorporated by reference to Exhibit 10.22.1 to our Annual Report on Form 10-K for the annual period ended
December 31, 2011).
Board Compensation Summary Sheet (filed herewith).*
Indenture dated as of October 25, 2010, between Trinity Rail Leasing 2010 LLC and Wilmington Trust Company, as
indenture trustee (incorporated by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 2010).
Purchase and Contribution Agreement, dated as of October 25, 2010, among Trinity Rail Leasing Warehouse Trust, Trinity
Industries Leasing Company, and Trinity Rail Leasing 2010 LLC (incorporated by reference to Exhibit 10.3 to our
Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2010).
Purchase and Contribution Agreement dated July 6, 2011, among TRIP Rail Leasing, LLC, Trinity Industries Leasing
Company, TRIP Rail Master Funding LLC (incorporated by reference to Exhibit 10.3 to our Quarterly Report on Form
10-Q for the quarterly period ended June 30, 2011).
Master Indenture dated July 6, 2011, among TRIP Rail Master Funding LLC and Wilmington Trust Company, as indenture
trustee (incorporated by reference to Exhibit 10.4 to our Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 2011).
Form of Indemnification Agreement between Trinity Industries, Inc. and certain directors and executive officers
(incorporated by reference to Exhibit 10.28 to our Annual Report on Form 10-K for the annual period ended December 31,
2011).
Master Indenture dated December 19, 2012, between Trinity Rail Leasing 2012 LLC and Wilmington Trust Company, as
Indenture Trustee (incorporated by reference to Exhibit 10.28.1 to our Annual Report on Form 10-K for the annual period
ended December 31, 2012).
Purchase and Contribution Agreement, dated December 19, 2012, among Trinity Rail Leasing Warehouse Trust, Trinity
Industries Leasing Company, and Trinity Rail Leasing 2012 LLC (incorporated by reference to Exhibit 10.28.2 to our
Annual Report on Form 10-K for the annual period ended December 31, 2012).
Computation of Ratio of Earnings to Fixed Charges (filed herewith).
Listing of subsidiaries of Trinity Industries, Inc. (filed herewith).
Consent of Ernst & Young LLP (contained on page 101 of this document and filed herewith).
Rule 13a-15(e) and 15d-15(e) Certification of the Chief Executive Officer (filed herewith).
Rule 13a-15(e) and 15d-15(e) Certification of the Chief Financial Officer (filed herewith).
106
Table of Contents
INDEX TO EXHIBITS
Trinity Industries, Inc.
Index to Exhibits
(Item 15(b))
NO.
DESCRIPTION
(32.1)
Certification pursuant to 18U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(filed herewith).
(32.2) Certification pursuant to 18U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(filed herewith).
(95) Mine Safety Disclosure Exhibit (filed herewith).
101.INS XBRL Instance Document (filed electronically herewith)
101.SCH XBRL Taxonomy Extension Schema Document (filed electronically herewith)
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document (filed electronically herewith)
101.LAB XBRL Taxonomy Extension Label Linkbase Document (filed electronically herewith)
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document (filed electronically herewith)
101.DEF XBRL Taxonomy Extension Definition Linkbase Document (filed electronically herewith)
_________________
* Management contracts and compensatory plan arrangements.
107
Exhibit 10.20
INDENTURE
dated as of November 5, 2009
by and between
TRINITY RAIL LEASING VII LLC,
a Delaware limited liability company,
as the Issuer of the Equipment Notes,
and
WILMINGTON TRUST COMPANY,
as Indenture Trustee for the Equipment Notes
Table of Contents
Page
GRANTING CLAUSES
1
ARTICLE I
DEFINITIONS
Section 1.01
Section 1.02
Section 1.03
Section 1.04
Definitions
Rules of Construction
Compliance Certificates and Opinions
Acts of Noteholders
7
8
9
9
ARTICLE II
THE EQUIPMENT NOTES
Section 2.01
Section 2.02
Section 2.03
Section 2.04
Section 2.05
Section 2.06
Section 2.07
Section 2.08
Section 2.09
Section 2.10
Section 2.11
Section 2.12
Section 2.13
Section 2.14
Section 2.15
Authorization, Issuance and Authentication of the Equipment
Notes; Amount of Outstanding Principal Balance; Terms; Form;
Execution and Delivery
Restrictive Legends
Note Registrar and Paying Agent
Paying Agent to Hold Money in Trust
Method of Payment
Minimum Denomination
Exchange Option
Mutilated, Destroyed, Lost or Stolen Equipment Notes
Payments of Transfer Taxes
Book-Entry Registration
Special Transfer Provisions
Temporary Definitive Notes
Statements to Noteholders
CUSIP, CINS AND ISIN Numbers
Debt Treatment of Equipment Notes
i
11
13
14
16
16
17
17
19
19
19
21
24
24
26
26
Page
ARTICLE III
INDENTURE ACCOUNTS; PRIORITY OF PAYMENTS
Section 3.01
Section 3.02
Section 3.03
Section 3.04
Section 3.05
Section 3.06
Section 3.07
Section 3.08
Section 3.09
Section 3.10
Section 3.11
Section 3.12
Section 3.13
Section 3.14
Collections Account
Withdrawal upon an Event of Default
Liquidity Reserve Account
Optional Reinvestment Account
Expense Account
Equipment Note Account
29
30
30
31
32
32
Mandatory Replacement Account
33
Payment Date Distributions from the Collections Account
Voluntary Redemptions
Procedure for Redemptions
Adjustments in Targeted Principal Balances
36
38
39
40
ARTICLE IV
DEFAULT AND REMEDIES
Section 4.01
Section 4.02
Section 4.03
Section 4.04
Section 4.05
Section 4.06
Section 4.07
Section 4.08
Section 4.09
Section 4.10
Events of Default
Remedies Upon Event of Default
Limitation on Suits
Waiver of Existing Defaults
Restoration of Rights and Remedies
Remedies Cumulative
Authority of Courts Not Required
Rights of Noteholders to Receive Payment
Indenture Trustee May File Proofs of Claim
Undertaking for Costs
40
43
46
46
47
47
47
47
48
48
ARTICLE V
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 5.01
Section 5.02
Representations and Warranties
General Covenants
48
54
ii
Page
Section 5.03
Section 5.04
Portfolio Covenants
Operating Covenants
60
64
ARTICLE VI
THE INDENTURE TRUSTEE
Section 6.01
Section 6.02
Section 6.03
Section 6.04
Section 6.05
Section 6.06
Section 6.07
Section 6.08
Section 6.09
Section 6.10
Section 6.11
Acceptance of Trusts and Duties
Absence of Duties
Representations or Warranties
Reliance; Agents; Advice of Counsel
Not Acting in Individual Capacity
No Compensation from Noteholders
Notice of Defaults
Indenture Trustee May Hold Securities
Corporate Trustee Required; Eligibility
Reports by the Issuer
Certain Rights of the Requisite Majority
72
73
73
73
75
75
75
76
76
76
76
ARTICLE VII
SUCCESSOR TRUSTEES
Section 7.01
Section 7.02
Resignation and Removal of Indenture Trustee
Appointment of Successor
77
77
ARTICLE VIII
INDEMNITY
Section 8.01
Section 8.02
Section 8.03
Indemnity
Noteholders’ Indemnity
Survival
78
79
79
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.01
Section 9.02
Supplemental Indentures Without the Consent of the Noteholders
Supplemental Indentures with the Consent of Noteholders
iii
79
80
Page
ARTICLE X
MODIFICATION AND WAIVER
Section 10.01
Section 10.02
Section 10.03
Section 10.04
Modification and Waiver with Consent of Holders
Modification Without Consent of Holders
Subordination and Priority of Payments
Execution of Amendments by Indenture Trustee
81
82
82
82
ARTICLE XI
SUBORDINATION
Section 11.01
Subordination
83
ARTICLE XII
DISCHARGE OF INDENTURE; DEFEASANCE
Section 12.01
Section 12.02
Section 12.03
Section 12.04
Section 12.05
Section 12.06
Discharge of Liability on the Equipment Notes; Defeasance
Conditions to Defeasance
Application of Trust Money
Repayment to the Issuer
Indemnity for Government Obligations and Corporate Obligations
Reinstatement
84
85
86
86
86
86
ARTICLE XIII
MISCELLANEOUS
Section 13.01
Section 13.02
Section 13.03
Section 13.04
Section 13.05
Section 13.06
Section 13.07
Section 13.08
Section 13.09
Section 13.10
Section 13.11
Right of Indenture Trustee to Perform
Waiver
Severability
Notices
Assignments
Currency Conversion
Application to Court
Governing Law
Jurisdiction
Counterparts
Table of Contents, Headings, Etc.
87
87
87
88
89
89
90
90
91
91
91
iv
Schedule
Description
Schedule 1
Schedule 2
Schedule 3
Schedule 4
Account Information
Description of Initial Railcars
Description of Initial Leases
Amortization Schedule
Exhibit
Description
Exhibit A
Form of Equipment Note
Exhibit B-1
Exhibit B-2
Exhibit B-3
Exhibit B-4
Exhibit B-5
Exhibit B-6
Exhibit B-7
Exhibit B-8
Exhibit C
Exhibit D-1
Exhibit D-2
Exhibit E
Exhibit F
Form of Certificate to be Given by Noteholders
Form of Certificate to be Given by Euroclear or Clearstream
Form of Certificate to Depository Regarding Interest
Form of Depositary Certificate Regarding Interest
Form of Transfer Certificate for Exchange or Transfer from 144A Book-Entry Note to Regulation S Book-Entry Note
Form of Purchaser Exchange Instructions
Form of Certificate to be Given by Transferee of Beneficial Interest in a Regulation S Temporary Book-Entry Note
Form of Transfer Certificate for Exchange or Transfer from Unrestricted Book-Entry Note to 144A Book-Entry Note
Form of Investment Letter to be Delivered in Connection with Transfers to Non-QIB Accredited Investors
Form of Monthly Report
Form of Annual Report
Form of Full Service Lease
Form of Net Lease
v
This INDENTURE, dated as of November 5, 2009 (as amended, supplemented or otherwise modified from time to time, this “ Indenture ”),
by and between TRINITY RAIL LEASING VII LLC, a Delaware limited liability company, as the issuer of the Equipment Notes hereunder (
“TRL-VII” or the “Issuer” ), and WILMINGTON TRUST COMPANY, a Delaware banking corporation, as indenture trustee for the
Equipment Notes (the “ Indenture Trustee ”).
WITNESSETH:
WHEREAS, the Issuer and the Indenture Trustee are executing and delivering this Indenture in order to provide for the issuance by the
Issuer of the Equipment Notes, the terms of which shall be specified in this Indenture; and
WHEREAS, the obligations of the Issuer under the Equipment Notes issued pursuant to this Indenture and the other Secured Obligations
shall be secured by the Collateral further granted and described below;
NOW THEREFORE, in consideration of the mutual agreements herein contained, and of other good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the parties hereto agree as follows:
GRANTING CLAUSES
The Issuer hereby pledges, transfers, assigns, and otherwise conveys to the Indenture Trustee for the benefit and security of the Noteholders
and other Secured Parties, and grants to the Indenture Trustee for the benefit and security of the Noteholders and other Secured Parties a
security interest in and Encumbrance on, all of the Issuer’s assets, whether now existing or hereafter created or acquired and wherever located,
including all right, title and interest, in, to and under the assets and property described below (collectively, the “Collateral” ):
(a) each Issuer Document, in each case, as such agreements may be amended, amended and restated, supplemented or otherwise
modified from time to time (collectively, the “Assigned Agreements” );
(b) (i) all Railcars described on Schedule 2 hereto, together with all other Railcars conveyed to the Issuer from time to time, whether
pursuant to the Asset Transfer Agreement or otherwise, and any and all substitutions and replacements therefor, (ii) all licenses, manufacturer’s
warranties and other warranties, Supporting Obligations (including in respect of any related Lease), Payment Intangibles, Accounts,
Instruments, Chattel Paper (including the Leases described on Schedule 3 hereto and any other related Leases of the Railcars and all related
Lease Payments), General Intangibles and all other rights and obligations related to any such aforementioned Assigned Agreement, Railcars or
Leases, including, without limitation, all rights, powers, privileges, options and other benefits of the Issuer to receive moneys and other
property due and to become due under or pursuant to such Assigned Agreements, such Railcars or Leases, including, without limitation, all
rights, powers, privileges, options and other benefits to receive and collect rental payments, income, revenues, profits and other amounts,
payments, tenders or security (including any cash collateral) from any other party thereto (including, in the case of related Leases, from the
Lessees thereunder), (iii) all rights, powers, privileges, options and other benefits of the Issuer to receive proceeds of any casualty insurance,
condemnation
award, indemnity, warranty or guaranty with respect to such Assigned Agreements, Railcars or Leases, (iv) all claims of the Issuer for damages
arising out of or for breach of or default under any Assigned Agreement or in respect of any related Lease and (v) the rights, powers, privileges,
options and other benefits of the Issuer to perform under each Assigned Agreement and related Lease, to compel performance and otherwise
exercise all remedies thereunder and to terminate each Assigned Agreement and related Lease;
(c) all (i) Railroad Mileage Credits allocable to such Railcars and any payments in respect of such credits, (ii) tort claims or any other
claims of any kind or nature related to such Railcars and any payments in respect of such claims, (iii) SUBI Certificates evidencing a SUBI
interest in the Trinity Marks related to such Railcars and (iv) other payments owing by any Person (including any railroads or similar entities)
in respect of or attributable to such Railcars or the use, loss, damage, casualty, condemnation of such Railcars or the Marks associated
therewith, in each case whether arising by contract, operation of law, course of dealing, industry practice or otherwise;
(d) all Indenture Accounts and all Investment Property therein (including, without limitation, all (i) securities, whether certificated or
uncertificated, (ii) Security Entitlements, (iii) Securities Accounts, (iv) commodity contracts and (v) commodity accounts) in which the Issuer
has now, or acquires from time to time hereafter, any right, title or interest in any manner, and the certificates or instruments, if any,
representing or evidencing such investment property, and all dividends, distributions, return of capital, interest, cash, instruments and other
property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such investment property
with respect thereto, including, without limitation, any Permitted Investments purchased with funds on deposit in any Indenture Accounts, and
all income from the investment of funds therein;
(e) all insurance policies maintained by the Issuer or for its benefit (including, without limitation, all insurance policies maintained by the
Manager or the Insurance Manager for the benefit of the Issuer) covering all or any portion of the Collateral, and all payments thereon or with
respect thereto; and
(f) all Proceeds, accessions, profits, products, income benefits, substitutions and replacements, whether voluntary or involuntary, of and
to any of the property of the Issuer described in the preceding clauses (including, without limitation, the Issuer’s claims for indemnity
thereunder and payments with respect thereto).
Such Security Interests are made in trust and subject to the terms and conditions of this Indenture as collateral security for the payment and
performance in full by the Issuer of all Outstanding Obligations and for the prompt payment in full by the Issuer of the respective amounts due
and the prompt performance in full by the Issuer of all of its other obligations, in each case, under the Issuer Documents, the Equipment Notes
and the Operative Agreements to which the Issuer is a party (collectively, the “ Secured Obligations ”), all as provided in this Indenture.
For avoidance of doubt it is expressly understood and agreed that, to the extent the UCC is revised subsequent to the date hereof such that
the definition of any of the foregoing terms included in the description of Collateral is changed, the parties hereto desire that any property
2
which is included in such changed definitions which would not otherwise be included in the foregoing grant on the date hereof be included in
such grant immediately upon the effective date of such revision.
The Indenture Trustee acknowledges such Security Interests, accepts the duties created hereby in accordance with the provisions hereof and
agrees to hold and administer all Collateral for the use and benefit of all present and future Secured Parties.
The Issuer hereby irrevocably authorizes the Indenture Trustee at any time, and from time to time, to file, without the signature of the Issuer,
in any filing office in any UCC jurisdiction necessary or desirable to perfect the Security Interests granted herein, any initial financing
statements, continuation statements and amendments thereto that (i) indicate or describe the Collateral regardless of whether any particular
asset constituting Collateral falls within the scope of Article 9 of the UCC in the same manner as described herein or in any other manner as the
Indenture Trustee may determine in its sole discretion is necessary or desirable to ensure the perfection of the Security Interests granted herein,
or (ii) provide any other information required by Article 9 of the UCC for the sufficiency or filing office acceptance of any financing statement,
continuation statement or amendment, including whether the Issuer is an organization, the type of organization and any organization
identification number issued to the Issuer. The Issuer agrees to furnish the information described in clause (ii) of the preceding sentence to the
Indenture Trustee promptly upon the Indenture Trustee’s request. Nothing in the foregoing shall be deemed to create an obligation of the
Indenture Trustee to file any financing statement, continuation statements or amendment thereto.
Priority . The Issuer intends the Security Interests in favor of the Indenture Trustee to be prior to all other Encumbrances in respect of the
Collateral, and the Issuer has taken and shall take or cause to be taken all actions necessary to obtain and maintain, in favor of the Indenture
Trustee, for the benefit of the Noteholders and other Secured Parties, a first priority, perfected security interest in the Collateral, to the extent
that perfection can be achieved by the filing of a UCC-1 financing statement in any UCC jurisdiction and/or other similar filings with the STB.
With respect to Leases related to Portfolio Railcars where the Lessee thereunder is a Canadian resident, the Issuer has taken and shall take or
cause to be taken all actions necessary or advisable to obtain and maintain, in favor of the Indenture Trustee, a first priority, perfected security
interest in the related Railcars including, without limitation, making all such filings, registrations and recordings with the Registrar General of
Canada as are necessary or advisable to obtain and maintain a first priority, perfected security interest in such Railcars and taking any actions
that may be required by clause (C) of Section 2.2(e) of the Management Agreement. Notwithstanding the foregoing, the Issuer shall not be
required to make any filings, registrations or recordation in Mexico. The Indenture Trustee shall have all of the rights, remedies and recourses
with respect to the Collateral afforded a secured party under all applicable law in addition to, and not in limitation of, the other rights, remedies
and recourses granted to the Indenture Trustee by this Indenture or any law relating to the creation and perfection of security interests in the
Collateral.
3
Continuance of Security .
(a) Except as otherwise provided under “Releases” below, the Security Interests created under this Indenture shall remain in force as
continuing security to the Indenture Trustee, for the benefit of the Noteholders and other Secured Parties, until the repayment and performance
in full of all Secured Obligations, notwithstanding any intermediate payment or satisfaction of any part of the Secured Obligations or any
settlement of account or any other act, event or matter whatsoever, and shall secure Secured Obligations, including, without limitation, the
ultimate balance of the moneys and liabilities hereby secured.
(b) No assurance, security or payment which may be avoided or adjusted under the law, including under any enactment relating to
bankruptcy or insolvency and no release, settlement or discharge given or made by the Indenture Trustee on the faith of any such assurance,
security or payment, shall prejudice or affect the right of the Indenture Trustee to recover the Secured Obligations from the Issuer (including
any moneys which it may be compelled to pay or refund under the provisions of any applicable insolvency legislation of any applicable
jurisdiction and any costs payable by it pursuant to or otherwise incurred in connection therewith) or to enforce the Security Interests granted
under this Indenture to the full extent of the Secured Obligations and accordingly, if any release, settlement or discharge is or has been given
hereunder and there is subsequently any such avoidance or adjustment under the law, it is expressly acknowledged and agreed that such release,
settlement or discharge shall be void and of no effect whatsoever.
(c) If the Indenture Trustee shall have grounds in its absolute discretion acting in good faith for believing that the Issuer may be insolvent
pursuant to the provisions of any applicable insolvency legislation in any relevant jurisdiction as at the date of any payment made by the Issuer
to the Indenture Trustee ( provided that the Indenture Trustee shall have no duty to inquire or investigate and shall not be deemed to have
knowledge of same absent written notice received by a responsible officer of the Indenture Trustee), the Indenture Trustee shall retain the
Security Interests contained in or created pursuant to this Indenture until the expiration of a period of one month plus such statutory period
within which any assurance, security, guarantee or payment can be avoided or invalidated after the payment and discharge in full of all Secured
Obligations notwithstanding any release, settlement, discharge or arrangement which may be given or made by the Indenture Trustee on, or as a
consequence of, such payment or discharge of liability, provided that, if at any time within such period, the Issuer shall commence a
voluntary winding-up or other voluntary case or other proceeding under any bankruptcy, reorganization, liquidation or insolvency law or statute
now or hereafter in effect in any jurisdiction seeking liquidation, reorganization or other relief with respect to the Issuer or the Issuer’s debts
under any bankruptcy, insolvency or other similar law now or hereafter in effect in any jurisdiction or seeking the appointment of an
administrator, a trustee, receiver, liquidator, custodian or other similar official of the Issuer or any substantial part of its property or if the Issuer
shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding
commenced against the Issuer, or making a general assignment for the benefit of any creditor of the Issuer under any bankruptcy,
reorganization, liquidation or insolvency law or statute now or hereafter in effect in any jurisdiction, the Indenture Trustee shall continue to
retain such Security Interest for such further period as the Indenture Trustee may reasonably determine on advice of counsel and such Security
Interest
4
shall be deemed to have continued to have been held as security for the payment and discharge to the Indenture Trustee of all Secured
Obligations.
No Transfer of Duties . The Security Interests granted hereby are granted as security only and shall not (i) transfer or in any way affect or
modify, or relieve the Issuer from, any obligation to perform or satisfy any term, covenant, condition or agreement to be performed or satisfied
by the Issuer under or in connection with this Indenture or any Issuer Document or any Collateral or (ii) impose any obligation on any of the
Secured Parties or the Indenture Trustee to perform or observe any such term, covenant, condition or agreement or impose any liability on any
of the Secured Parties or the Indenture Trustee for any act or omission on the part of the Issuer relative thereto or for any breach of any
representation or warranty on the part of the Issuer contained therein or made in connection therewith unless otherwise expressly provided
therein.
Collateral .
(a) Generally . On the Closing Date, all Instruments, Chattel Paper, Securities or other documents, including, without limitation, any
Chattel Paper Originals evidencing the initial Leases described on Schedule 3 hereto and SUBI Certificates, representing or evidencing
Collateral shall be delivered to and held by or on behalf of the Indenture Trustee on behalf of the Secured Parties pursuant hereto all in form
and substance reasonably satisfactory to the Indenture Trustee. Subject to subsections (c) and (d) under this heading, until the termination of the
Security Interest granted hereby, if the Issuer shall acquire (by purchase, contribution, substitution, replacement or otherwise) any additional
Collateral evidenced by Instruments or Chattel Paper at any time or from time to time after the date hereof, the Issuer shall promptly pledge and
deposit the Collateral so evidenced as security for the Secured Obligations with the Indenture Trustee and deliver same to the custodial
possession of the Indenture Trustee, and the Indenture Trustee shall accept under this Indenture such delivery.
(b) Safekeeping . The Indenture Trustee agrees to maintain the Collateral received by it (including possession of the Chattel Paper
Originals) and all records and documents relating thereto at such address or addresses as may from time to time be specified by the Indenture
Trustee in writing to each Secured Party and the Issuer. The Indenture Trustee shall keep all Collateral and related documentation in its
possession separate and apart from all other property that it is holding in its possession and from its own general assets and shall maintain
accurate records pertaining to the Permitted Investments and Indenture Accounts included in the Collateral in such a manner as shall enable the
Indenture Trustee, the Secured Parties and the Issuer to verify the accuracy of such record keeping. The Indenture Trustee’s books and records
shall at all times show that to the extent that any Collateral is held by the Indenture Trustee such Collateral shall be held as agent of and
custodian for the Secured Parties and is not the property of the Indenture Trustee. The Indenture Trustee will promptly report to each Secured
Party and the Issuer any failure on its part to hold the Collateral as provided in this subsection and will promptly take appropriate action to
remedy any such failure.
(c) Limitations on Common Schedules and Riders . On and after the date hereof, the Issuer shall use commercially reasonable efforts to
cause all Portfolio Railcars which are subject to a Lease (or become subject to a Lease pursuant to the exercise of any replacement, substitution
or remarketing rights of the Issuer under the Operative Agreements) to be identified
5
in separate executed Schedules or Riders to the related “master lease agreement” with the applicable Lessee such that only Portfolio Railcars
are identified on the applicable Schedules or Riders and no railcars are identified thereon which are owned by any Person other than the Issuer
(such other party, a “Non-Indenture Party” ); provided, however , that to the extent the separateness of such Schedule or Rider cannot be
maintained, (i) in no event shall the percentage of Portfolio Railcars in the aggregate (measured by Adjusted Value) contained on Schedules or
Riders which also include railcars owned by a Non-Indenture Party exceed 20% of the Portfolio Railcars in the aggregate (measured by
Adjusted Value) and (ii) in all cases in which Schedules or Riders contain Portfolio Railcars together with other railcars owned by a
Non-Indenture Party, the applicable Lessee(s) shall have agreed, if requested by the Indenture Trustee acting at the Direction of the Requisite
Majority (which request may only be made in connection with the exercise of remedies against such Portfolio Railcars), to re-execute one or
more separate Schedules or Riders for such Portfolio Railcars and other applicable railcars such that the Schedules and Riders identifying the
Portfolio Railcars do not identify any railcars other than such Portfolio Railcars.
(d) Custody of Leases . Upon the written request of the Issuer, in the event that the separateness of Schedules or Riders cannot be
maintained as aforesaid, the parties hereto agree to implement a custodial arrangement with respect to Leases related to Portfolio Railcars
whereby Wilmington Trust Company, as custodian (or any other financial institution or trust company reasonably satisfactory to the parties
hereto) will maintain custody of the original of such Leases (including all such non-separate Schedules and Riders) for the benefit of the
Secured Parties and any Non-Indenture Party with an interest therein, as their interests may appear. Such custodial arrangement will be
evidenced by a custodial agreement to contain terms and conditions reasonably satisfactory to the Issuer and the Indenture Trustee.
(e) Notifications . The Indenture Trustee at the expense of the Issuer shall promptly forward to the Issuer and the Manager a copy of each
notice, request, report, or other document relating to any Issuer Document included in the Collateral that is received by a Responsible Officer
of the Indenture Trustee from any Person other than the Issuer or the Manager on and after the Closing Date.
Releases . If at any time all or any part of the Collateral is to be sold, transferred, assigned or otherwise disposed of by the Issuer or the
Indenture Trustee or any Person on its or their behalf (but in any such case only as required or permitted by the Operative Agreements), the
Indenture Trustee upon receipt of written notice from the Issuer, which notice shall be delivered at least five (5) Business Days prior to such
sale, transfer, assignment or disposal, on or prior to the date of such sale, transfer, assignment or disposal (but not to be effective until the date
of such sale, transfer, assignment or disposal) (or, in the case of a Lessee’s exercise of a purchase option, on, immediately prior to or after the
date of such purchase, as may be requested by the Issuer), at the expense of the Issuer, execute such instruments of release prepared by the
Issuer, in recordable form, if necessary, in favor of the Issuer or any other Person as the Issuer may reasonably request, deliver the relevant part
of the Collateral in its possession to the Issuer, otherwise release the Security Interest evidenced by this Indenture on such Collateral and
release and deliver such Collateral to the Issuer and issue confirmation, to the relevant purchaser, transferee, assignee, insurer, and such other
Persons as the Issuer may direct, upon being requested to do so by the Issuer, that the relevant Collateral is no longer subject to the Security
6
Interests. Any such release to the Issuer shall be deemed to release or reassign as appropriate in respect of the Collateral such grants and
assignments arising hereunder.
At the request of the Issuer, upon the payment in full of all Secured Obligations, including, without limitation, the payment in full in cash of
all unpaid principal of and accrued interest on the Equipment Notes, the Indenture Trustee shall release the Security Interests in the Portfolio
and the other Collateral hereunder. In connection therewith, the Indenture Trustee agrees, at the expense of the Issuer and without the necessity
of any consent from any Secured Party, to execute such instruments of release, in recordable form if necessary, in favor of the Issuer as the
Issuer may reasonably request in respect of the release of such Portfolio from the Security Interests, and to otherwise release the security
interests evidenced by this Indenture in and with respect to such Collateral to the Issuer and to issue confirmation to such Persons as the Issuer
may direct, upon being requested to do so by the Issuer, that such Collateral is no longer subject to the Security Interests.
No release of any Collateral shall be effected by any Optional Redemption by the Issuer of the Equipment Notes in part and not in whole.
Exercise of the Issuer’s Rights Concerning the Management Agreement . The Issuer hereby agrees that, whether or not an Event of Default
has occurred and is continuing, so long as this Indenture has not been terminated and the Security Interests on the Collateral released, the
Indenture Trustee (acting at the Direction of the Requisite Majority) shall have the exclusive right to exercise and enforce all of the rights of the
Issuer set forth in Sections 8.2, 8.3, 8.5 (other than the right to propose the list of replacement managers pursuant to Section 8.5(b)) and 8.6 of
the Management Agreement (including, without limitation, the rights to deliver all notices, declare a Manager Termination Event, terminate the
Management Agreement, elect to replace the Manager and/or elect to appoint a Successor Manager and select any replacement Manager, and
the right to increase the Management Fee and/or add an incentive fee payable to any such Successor Manager); provided that so long as no
Event of Default has occurred and is continuing, the Issuer shall retain the non-exclusive right to approve the list of proposed replacement
Managers (such approval not to be unreasonably withheld or delayed) and to deliver notices under Section 8.2 of the Management Agreement
and declare a Manager Termination Event thereunder. In furtherance of the foregoing, the Issuer hereby irrevocably appoints the Indenture
Trustee as its attorney-in-fact to exercise all rights described in this Granting Clause provision in its place and stead.
ARTICLE I
DEFINITIONS
Section 1.01 Definitions.
For purposes of this Indenture, the terms set forth on Annex A hereto shall have the meanings indicated on such Annex A.
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Section 1.02 Rules of Construction.
Unless the context otherwise requires:
(a) A term has the meaning assigned to it and an accounting term not otherwise defined has the meaning assigned to it in accordance with
U.S. GAAP.
(b) The terms “herein”, “hereof” and other words of similar import refer to this Indenture as a whole and not to any particular Article,
Section or other subdivision.
(c) Unless otherwise indicated in context, all references to Articles, Sections, Appendices, Exhibits or Annexes refer to an Article or
Section of, or an Appendix, Exhibit or Annex to, this Indenture.
(d) Words of the masculine, feminine or neuter gender shall mean and include the correlative words of other genders, and words in the
singular shall include the plural, and vice versa.
(e) The terms “include”, “including” and similar terms shall be construed as if followed by the phrase “without limitation”.
(f) References in this Indenture to an agreement or other document (including this Indenture) mean the agreement or other document and
all schedules, exhibits, annexes and other materials that are part of such agreement and include references to such agreement or document as
amended, supplemented, restated or otherwise modified in accordance with its terms and the provisions of this Indenture, and the provisions of
this Indenture apply to successive events and transactions.
(g) References in this Indenture to any statute or other legislative provision shall include any statutory or legislative modification or
re-enactment thereof, or any substitution therefor.
(h) References in this Indenture to the Equipment Notes include the terms and conditions applicable to the Equipment Notes; and any
reference to any amount of money due or payable by reference to the Equipment Notes shall include any sum covenanted to be paid by the
Issuer under this Indenture in respect of the Equipment Notes.
(i) References in this Indenture to any action, remedy or method of judicial proceeding for the enforcement of the rights of creditors or of
security shall be deemed to include, in respect of any jurisdiction other than the State of New York, references to such action, remedy or
method of judicial proceeding for the enforcement of the rights of creditors or of security available or appropriate in such jurisdiction as shall
most nearly approximate such action, remedy or method of judicial proceeding described or referred to in this Indenture.
(j) Where any payment is to be made, funds applied or any calculation is to be made hereunder on a day which is not a Business Day,
unless any Operative Agreement otherwise provides, such payment shall be made, funds applied and calculation made on the next succeeding
Business Day, and payments shall be adjusted accordingly.
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(k) For purposes of determining the balance of amounts credited to and/or deposited in an Indenture Account, the “value” of Permitted
Investments deposited in and/or credited to an Indenture Account shall be the lower of the acquisition cost thereof and the then fair market
value thereof and the “value” of Dollars and cash equivalents of Dollars (other than cash equivalents of Dollars included in the definition of
Permitted Investments) shall be the face value thereof.
Section 1.03 Compliance Certificates and Opinions.
Upon any application or request by the Issuer to the Indenture Trustee to take any action under any provision of this Indenture, the Issuer
shall furnish to the Indenture Trustee an Officer’s Certificate stating that, in the opinion of the signers thereof, all conditions precedent, if any,
provided for in this Indenture relating to the proposed action have been complied with, and, if requested by the Indenture Trustee, an Opinion
of Counsel stating that, in the opinion of such counsel, all such conditions precedent, if any, have been complied with, except that in the case of
any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating
to such particular application or request, no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture or any indenture
supplemental hereto shall include:
(a) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions in this
Indenture relating thereto;
(b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based;
(c) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him
to express an informed opinion as to whether or not such covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with.
Section 1.04 Acts of Noteholders.
(a) Any direction, consent, waiver or other action provided by this Indenture in respect of the Equipment Notes or the Collateral to be
given or taken by the Indenture Trustee at the Direction of Noteholders or any Requisite Majority thereof may be embodied in and evidenced
by one or more instruments of substantially similar tenor signed by such Noteholders (or Noteholders evidencing a Requisite Majority, as
applicable) in person or by an agent or proxy duly appointed in writing; and, except as herein otherwise expressly provided, such action shall
become effective when such instrument or instruments are delivered to the Indenture Trustee, to each Rating Agency where it is hereby
expressly required pursuant to this Indenture and to the Issuer. Such instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the “ Act ” of the Noteholders or Requisite Majority thereof
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signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient
for any purpose under this Indenture and conclusive in favor of the Indenture Trustee or the Issuer, if made in the manner provided in this
Section.
(b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the certificate of any notary
public or other officer of any jurisdiction authorized to take acknowledgments of deeds or administer oaths that the Person executing such
instrument acknowledged to him the execution thereof, or by an affidavit of a witness to such execution sworn to before any such notary or
such other officer and where such execution is by an officer of a corporation or association, trustee of a trust or member of a partnership, on
behalf of such corporation, association, trust or partnership, such certificate or affidavit shall also constitute sufficient proof of his authority.
The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in
any other reasonable manner that the Indenture Trustee deems sufficient.
(c) In determining whether Noteholders or any Requisite Majority thereof shall have given any direction, consent, request, demand,
authorization, notice, waiver or other Act (a “ Direction ”) under this Indenture (including without limitation any consent pursuant to
Sections 4.04 or 9.02(a) hereof), Equipment Notes legally or beneficially owned by any Issuer Group Member shall be disregarded and deemed
not to be Outstanding for purposes of any such determination. In determining whether the Indenture Trustee shall be protected in relying upon
any such Direction, only Equipment Notes that a Responsible Officer of the Indenture Trustee actually knows to be so owned shall be so
disregarded. Notwithstanding the foregoing, if any such Persons legally or beneficially own 100% of the Equipment Notes then Outstanding
then such Equipment Notes shall not be so disregarded as aforesaid.
(d) The Issuer may at its option, by delivery of Officers’ Certificates to the Indenture Trustee, set a record date other than the Record
Date to determine the Noteholders in respect of the Equipment Notes entitled to give any Direction in respect of such Equipment Notes. Such
record date shall be the record date specified in such Officer’s Certificate which shall be a date not more than 30 days prior to the first
solicitation of Noteholders in connection therewith. If such a record date is fixed, such Direction may be given before or after such record date,
but only the Noteholders of record of the Equipment Notes at the close of business on such record date shall be deemed to be Noteholders for
the purposes of determining whether Noteholders of the requisite proportion of Outstanding Equipment Notes have authorized or agreed or
consented to such Direction, and for that purpose the Outstanding Equipment Notes shall be computed as of such record date; provided that
no such Direction by the Noteholders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions
of this Indenture not later than one year after the record date.
(e) Any Direction or other action by a Noteholder or a Requisite Majority thereof shall bind the Holder of every Equipment Note issued
upon the transfer thereof or in exchange therefor or in lieu thereof, whether or not notation of such action is made upon such Equipment Note.
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ARTICLE II
THE EQUIPMENT NOTES
Section 2.01 Authorization, Issuance and Authentication of the Equipment Notes; Amount of Outstanding Principal Balance; Terms; Form;
Execution and Delivery.
(a) There is hereby created a series of Equipment Notes designated as set forth in the definition of the term Equipment Notes herein. The
aggregate principal balance of the Equipment Notes as of their date of issuance on the Closing Date is $238,262,640.
(b) The Equipment Notes to be issued on the Closing Date shall be executed by the Issuer and delivered to the Indenture Trustee for
authentication and the Indenture Trustee shall authenticate and deliver the Equipment Notes upon the Issuer’s request and direction set forth in
an Officer’s Certificate of the Issuer signed by one of its authorized signatories, without further action on the part of the Issuer. Any such
authentication may be made on separate counterparts and by facsimile.
(c) There shall be issued, delivered and authenticated on the Closing Date to each of the Noteholders identified on such Equipment
Notes, Equipment Notes in the principal amounts and maturities and bearing the interest rates set forth thereon (or incorporated by reference
therein from this Indenture), in each case in registered form and substantially in the form set forth on Exhibit A, with such appropriate
insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or
other marks of identification and such legends or endorsements printed, lithographed, typewritten or engraved thereon, as may be required to
comply with the rules of any securities exchange on which such Equipment Notes may be listed or to conform to any usage in respect thereof,
or as may, consistently herewith, be prescribed by the Indenture Trustee executing such Equipment Notes, such determination by said Indenture
Trustee to be evidenced by its authentication of such Equipment Notes. Definitive Notes shall be printed, lithographed, typewritten or engraved
or produced by any combination of these methods or may be produced in any other manner permitted by the rules of any securities exchange on
which the Equipment Notes may be listed, all as determined by the Indenture Trustee authenticating such Equipment Notes, as evidenced by
such authentication.
(i) Equipment Notes sold in reliance on Rule 144A shall be represented by a single permanent 144A Book-Entry Note which will be
deposited with DTC or its custodian, the Indenture Trustee or an agent of the Indenture Trustee and registered in the name of Cede as nominee
of DTC.
(ii) Equipment Notes offered and sold outside of the United States in reliance on Regulation S shall be represented by a Regulation S
Temporary Book-Entry Note, which will be deposited with the Indenture Trustee or an agent of the Indenture Trustee as custodian for and
registered in the name of Cede, as nominee of DTC. Beneficial interests in each Regulation S Temporary Book-Entry Note may be held only
through Euroclear or Clearstream; provided, however, that such interests may be
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exchanged for interests in a 144A Book-Entry Note or a Definitive Note in accordance with the certification requirements described in
Section 2.07 hereof.
(iii) A beneficial owner of an interest in a Regulation S Temporary Book-Entry Note may receive payments in respect of such
Regulation S Temporary Book-Entry Notes only after delivery to Euroclear or Clearstream, as the case may be, of a written certification
substantially in the form set forth in Exhibit B-1 to this Indenture, and upon delivery by Euroclear or Clearstream, as the case may be, to the
Indenture Trustee and Note Registrar of a certification or certifications substantially in the form set forth in Exhibit B-2 to this Indenture. The
delivery by a beneficial owner of the certification referred to above shall constitute its irrevocable instruction to Euroclear or Clearstream, as
the case may be, to arrange for the exchange of the beneficial owner’s interest in the Regulation S Temporary Book-Entry Note for a beneficial
interest in the Unrestricted Book-Entry Note after the Exchange Date in accordance with the paragraph below.
(iv) Not earlier than the Exchange Date, interests in each Regulation S Temporary Book-Entry Note will be exchangeable for interests in
the related permanent global note (an “ Unrestricted Book-Entry Note ”). Each Unrestricted Book-Entry Note will be deposited with the
Indenture Trustee and registered in the name of Cede as nominee of DTC. After (1) the Exchange Date and (2) receipt by the Indenture Trustee
and Note Registrar of written instructions from Euroclear or Clearstream, as the case may be, directing the Indenture Trustee and Note
Registrar to credit or cause to be credited to either Euroclear’s or Clearstream’s, as the case may be, depositary account a beneficial interest in
the Unrestricted Book-Entry Note in a principal amount not greater than that of the beneficial interest in the Regulation S Temporary
Book-Entry Note, the Indenture Trustee and Note Registrar shall instruct DTC to reduce the principal amount of the Regulation S Temporary
Book-Entry Note and increase the principal amount of the Unrestricted Book-Entry Note, in each case by the principal amount of the beneficial
interest in the Regulation S Temporary Book-Entry Note to be so transferred, and to credit or cause to be credited to the account of a Direct
Participant a beneficial interest in the Unrestricted Book-Entry Note having a principal amount equal to the reduction in the principal amount
of such Regulation S Temporary Book-Entry Note.
(v) Upon the exchange of the entire principal amount of the Regulation S Temporary Book-Entry Note for beneficial interests in the
Unrestricted Book-Entry Note, the Indenture Trustee shall cancel the Regulation S Temporary Book-Entry Note in accordance with the
Indenture Trustee’s policies in effect from time to time.
(vi) No interest in the Regulation S Book-Entry Notes may be held by or transferred to a United States Person except for exchanges for a
beneficial interest in a 144A Book-Entry Note or a Definitive Note as described below.
(d) The Equipment Notes shall be executed on behalf of the Issuer by the manual or facsimile signature of an Authorized Representative
of the Issuer.
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(e) Each Equipment Note bearing the manual or facsimile signatures of any individual who was at the time such Equipment Note was
executed an Authorized Representative of the Issuer shall bind the Issuer, notwithstanding that any such individual has ceased to hold such
office prior to the authentication and delivery of such Equipment Notes or any payment thereon.
(f) No Equipment Note shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose, unless it shall have
been executed on behalf of the Issuer as provided in clause (c) and (e) above and authenticated by or on behalf of the Indenture Trustee as
provided in clause (c) above. Such signatures shall be conclusive evidence that such Equipment Note has been duly executed and authenticated
under this Indenture. Each Equipment Note shall be dated the date of its authentication.
Section 2.02 Restrictive Legends.
Except as specified in Section 2.11(g) hereof, each 144A Book-Entry Note, each Regulation S Temporary Book-Entry Note, each
Unrestricted Book-Entry Note and each Definitive Note (and all Equipment Notes issued in exchange therefor or upon registration of transfer
or substitution thereof) shall bear the following legend on the face thereof:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”)
OR ANY STATE SECURITIES OR “BLUE SKY” LAWS. THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES FOR THE
BENEFIT OF TRINITY RAIL LEASING VII, LLC (THE “ISSUER”) THAT THIS NOTE IS BEING ACQUIRED FOR ITS OWN
ACCOUNT AND NOT WITH A VIEW TO DISTRIBUTION AND MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED
ONLY (1) TO THE ISSUER (UPON REDEMPTION THEREOF OR OTHERWISE), (2) TO A PERSON WHOM THE TRANSFEROR
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (3) OUTSIDE THE UNITED STATES TO A PERSON
WHO IS NOT A U.S. PERSON (AS SUCH TERM IS DEFINED IN REGULATION S OF THE SECURITIES ACT) IN A TRANSACTION
IN COMPLIANCE WITH REGULATION S OF THE SECURITIES ACT OR (4) IN A TRANSACTION COMPLYING WITH OR
EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (SUBJECT IN THE CASE OF THIS CLAUSE
(4) TO RECEIPT OF AN OPINION OF COUNSEL AND SUCH CERTIFICATES AND OTHER DOCUMENTS AS THE TRUSTEE MAY
REQUIRE UNDER THE INDENTURE), IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES OR ANY OTHER JURISDICTION. THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE RESALE RESTRICTIONS SET FORTH ABOVE.
BY ITS PURCHASE OF ANY NOTE, THE PURCHASER THEREOF WILL BE DEEMED TO HAVE REPRESENTED AND
WARRANTED EITHER THAT (A) IT IS NOT AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF
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THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”)) WHETHER OR NOT SUBJECT TO
THE PROVISIONS OF TITLE I OF ERISA, A PLAN AS COVERED BY SECTION 4975 OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE “CODE”) OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE “PLAN ASSETS” BY REASON OF
AN EMPLOYEE BENEFIT PLAN’S OR OTHER PLAN’S INVESTMENT IN SUCH ENTITY, OR (B) ITS PURCHASE AND HOLDING
OF SUCH NOTE WILL NOT RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR
SECTION 4975 OF THE CODE (OR, IN THE CASE OF A GOVERNMENTAL, NON-U.S. OR CHURCH PLAN, ANY
SUBSTANTIALLY SIMILAR FEDERAL, STATE, LOCAL OR OTHER LAW).
Each Book-Entry Note shall also bear the following legend on the face thereof:
THIS NOTE IS A GLOBAL BOOK-ENTRY NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO
AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS NOTE MAY NOT BE EXCHANGED IN
WHOLE OR IN PART FOR A NOTE REGISTERED, AND NO TRANSFER OF THIS NOTE IN WHOLE OR IN PART MAY BE
REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A
NEW YORK CORPORATION (“DTC”), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
Section 2.03 Note Registrar and Paying Agent.
(a) With respect to the Equipment Notes, there shall at all times be maintained an office or agency in the location set forth in
Section 13.04 hereof where Equipment Notes may be presented or surrendered for registration of transfer or for exchange (each, a “ Note
Registrar ”), and for payment thereof (each, a “ Paying Agent ”) and where notices to or demands upon the Issuer in respect of such Equipment
Notes may be served. For so long as the Equipment Notes are listed on any stock exchange, the Issuer shall appoint and maintain a Paying
Agent and a Note Registrar in the jurisdiction in which such stock exchange is located. The Issuer shall cause each Note Registrar to keep a
register of the Equipment Notes for which it is acting as Note Registrar and of their transfer and exchange (the “ Register ”). Written notice of
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the location of each such other office or agency and of any change of location thereof shall be given by the Indenture Trustee to the Issuer and
the Holders of the Equipment Notes. In the event that no such office or agency shall be maintained or no such notice of location or of change of
location shall be given, presentations and demands may be made and notices may be served at the Corporate Trust Office of the Indenture
Trustee. Notwithstanding anything to the contrary in this Indenture, the entries in the Register shall be conclusive, in the absence of manifest
error, and the Issuer, the Indenture Trustee, and Noteholder shall treat each Person in whose name an Equipment Note is registered as the
beneficial owner thereof for all purposes of this Indenture. No transfer of an Equipment Note shall be effective unless such transfer has been
recorded in the Register as provided in this Section.
(b) Each Authorized Agent in the location set forth in Section 13.04 shall be a bank or trust company, shall be a corporation organized
and doing business under the laws of the United States or any state or territory thereof or of the District of Columbia, with a combined capital
and surplus of at least $75,000,000 (or having a combined capital and surplus in excess of $5,000,000 and the obligations of which, whether
now in existence or hereafter incurred, are fully and unconditionally guaranteed by a corporation organized and doing business under the laws
of the United States, any state or territory thereof or of the District of Columbia and having a combined capital and surplus of at least
$75,000,000) and shall be authorized under the laws of the United States or any state or territory thereof to exercise corporate trust powers,
subject to supervision by Federal or state authorities (such requirements, the “ Eligibility Requirements ”). The Indenture Trustee shall initially
be a Paying Agent and Note Registrar hereunder with respect to the Equipment Notes. Each Note Registrar other than the Indenture Trustee
shall furnish to the Indenture Trustee, at stated intervals of not more than six months, and at such other times as the Indenture Trustee may
request in writing, a copy of the Register maintained by such Note Registrar.
(c) Any corporation into which any Authorized Agent may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, consolidation or conversion to which any Authorized Agent shall be a party, or any corporation
succeeding to the corporate trust business of any Authorized Agent, shall be the successor of such Authorized Agent hereunder, if such
successor corporation is otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the
parties hereto or such Authorized Agent or such successor corporation.
(d) Any Authorized Agent may at any time resign by giving written notice of resignation to the Indenture Trustee and the Issuer. The
Issuer may, and at the request of the Indenture Trustee shall, at any time terminate the agency of any Authorized Agent by giving written notice
of termination to such Authorized Agent and to the Indenture Trustee. Upon the resignation or termination of an Authorized Agent or if at any
time any such Authorized Agent shall cease to be eligible under this Section (when, in either case, no other Authorized Agent performing the
functions of such Authorized Agent shall have been appointed by the Indenture Trustee), the Issuer shall promptly appoint one or more
qualified successor Authorized Agents to perform the functions of the Authorized Agent that has resigned or whose agency has been terminated
or who shall have ceased to be eligible under this Section. The Issuer shall give written notice of any such appointment made by it to the
Indenture Trustee; and in each case the
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Indenture Trustee shall mail notice of such appointment to all Holders of the Equipment Notes as their names and addresses appear on the
Register for the Equipment Notes.
(e) The Issuer agrees to pay, or cause to be paid, from time to time reasonable compensation to each Authorized Agent for its services
and to reimburse it for its reasonable expenses to be agreed to pursuant to separate agreements with each such Authorized Agent.
Section 2.04 Paying Agent to Hold Money in Trust.
The Indenture Trustee shall require each Paying Agent other than the Indenture Trustee to agree in writing that all moneys deposited with
any Paying Agent for the purpose of any payment on the Equipment Notes shall be deposited and held in trust for the benefit of the Holders
entitled to such payment, subject to the provisions of this Section. Moneys so deposited and held in trust shall constitute a separate trust fund
for the benefit of the Holders with respect to which such money was deposited.
The Indenture Trustee may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose,
direct any Paying Agent to pay to the Indenture Trustee all sums held in trust by such Paying Agent; and, upon such payment by any Paying
Agent to the Indenture Trustee, such Paying Agent shall be released from all further liability with respect to such moneys.
Section 2.05 Method of Payment.
(a) On each Payment Date, the Indenture Trustee shall, or shall instruct a Paying Agent to, pay to the Noteholders of the Equipment
Notes all interest, principal and premium, if any, on the Equipment Notes required to be paid on such Payment Date, in each case to the extent
of the Available Collections Amount and pursuant to the Flow of Funds; provided , that in the event and to the extent receipt of any payment
is not confirmed by the Indenture Trustee or such Paying Agent by noon (New York City time) on such Payment Date or any Business Day
thereafter, distribution thereof shall be made on the Business Day following the Business Day such payment is received; and provided further
, that payment on a Regulation S Temporary Book-Entry Note shall be made to the Holder thereof only in conformity with Section 2.05(c)
hereof. Each such payment on any Payment Date other than the final payment with respect to the Equipment Notes shall be made by the
Indenture Trustee or Paying Agent to the Noteholders as of the Record Date for such Payment Date. The final payment with respect to any
Equipment Note, however, shall be made only upon presentation and surrender of such Equipment Note by the Noteholder or its agent at the
Corporate Trust Office or agency of the Indenture Trustee or Paying Agent specified in the notice given by the Indenture Trustee or Paying
Agent with respect to such final payment.
(b) At such time, if any, as the Equipment Notes are issued in the form of Definitive Notes, payments on a Payment Date shall be made
by check mailed to each Noteholder of a Definitive Note on the applicable Record Date at its address appearing on the Register maintained
with respect to the Equipment Notes. Alternatively, upon application in writing to the Indenture Trustee, not later than the applicable Record
Date, by a Noteholder of one or more Definitive Notes having an aggregate original principal amount of not less than
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$1,000,000, any such payments shall be made by wire transfer to an account designated by such Noteholder at a financial institution in New
York, New York; provided that the final payment for the Equipment Notes shall be made only upon presentation and surrender of the
Definitive Notes by the Noteholder or its agent at the Corporate Trust Office or agency of the Indenture Trustee or Paying Agent specified in
the notice of such final payment given by the Indenture Trustee or Paying Agent. The Indenture Trustee or Paying Agent shall mail such notice
of the final payment of the Equipment Notes to each of the Noteholders, specifying the date and amount of such final payment.
(c) The beneficial owner of a Regulation S Temporary Book-Entry Note may arrange to receive interest, principal and premium
payments through Euroclear or Clearstream on such Regulation S Temporary Book-Entry Note only after delivery by such beneficial owner to
Euroclear or Clearstream, as the case may be, of a written certification substantially in the form of Exhibit B-3 hereto, and upon delivery of
Euroclear or Clearstream, as the case may be, to the Paying Agent of a certification or certifications substantially in the form of Exhibit B-4
hereto. No interest, principal or premium shall be paid to any beneficial owner and no interest, principal or premium shall be paid to Euroclear
or Clearstream on such beneficial owner’s interest in a Regulation S Temporary Book-Entry Note unless Euroclear or Clearstream, as the case
may be, has provided such a certification to the Paying Agent with respect to such interest, principal and/or premium.
Section 2.06 Minimum Denomination.
Each Equipment Note shall be issued in minimum denominations of $100,000 and integral multiples of $1,000 in excess thereof; provided
that, notwithstanding anything to the contrary herein, one Equipment Note may be issued with such excess in integral multiples of $10.
Section 2.07 Exchange Option.
If the holder (other than the Purchaser) of a beneficial interest in an Unrestricted Book-Entry Note deposited with DTC wishes at any time to
exchange its interest in the Unrestricted Book-Entry Note, or to transfer its interest in the Unrestricted Book-Entry Note to a Person who wishes
to take delivery thereof in the form of an interest in the 144A Book-Entry Note, the holder may, subject to the rules and procedures of
Euroclear or Clearstream and DTC, as the case may be, give directions for the Indenture Trustee and Note Registrar to exchange or cause the
exchange or transfer or cause the transfer of the interest for an equivalent beneficial interest in the 144A Book-Entry Note. Upon receipt by the
Indenture Trustee and Note Registrar of (a) instructions from Euroclear or Clearstream (based on instructions from depositaries for Euroclear
and Clearstream) or from a DTC Participant, as applicable, or DTC, as the case may be, directing the Indenture Trustee and Note Registrar to
credit or cause to be credited a beneficial interest in the 144A Book-Entry Note equal to the beneficial interest in the Unrestricted Book-Entry
Note to be exchanged or transferred (such instructions to contain information regarding the DTC Participant account to be credited with the
increase, and, with respect to an exchange or transfer of an interest in the Unrestricted Book-Entry Note, information regarding the DTC
Participant account to be debited with the decrease), and (b) a certificate in the form of Exhibit B-8, given by the Noteholder (and the proposed
transferee, if applicable), the Indenture Trustee and Note
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Registrar shall instruct DTC to reduce the Unrestricted Book-Entry Note by the aggregate principal amount of the beneficial interest in the
Unrestricted Book-Entry Note to be exchanged or transferred, and the Indenture Trustee shall instruct DTC, concurrently with the reduction, to
increase the principal amount of the 144A Book-Entry Note by the aggregate principal amount of the beneficial interest in the Unrestricted
Book-Entry Note to be so exchanged or transferred, and to credit or cause to be credited to the account of the Person specified in the
instructions a beneficial interest in the 144A Book-Entry Note equal to the reduction in the principal amount of the Unrestricted Book-Entry
Note.
If a holder (other than the Purchaser) of a beneficial interest in the 144A Book-Entry Note wishes at any time to exchange its interest in the
144A Book-Entry Note for an interest in a Regulation S Book-Entry Note, or to transfer its interest in the 144A Book-Entry Note to a Person
who wishes to take delivery thereof in the form of an interest in the Regulation S Book-Entry Note, the holder may, subject to the rules and
procedures of DTC, give directions for the Indenture Trustee and Note Registrar to exchange or cause the exchange or transfer or cause the
transfer of the interest for an equivalent beneficial interest in the Regulation S Book-Entry Note. Upon receipt by the Indenture Trustee and
Note Registrar of (a) instructions given in accordance with DTC’s procedures from a DTC Participant directing the Indenture Trustee and Note
Registrar to credit or cause to be credited a beneficial interest in the Regulation S Book-Entry Note in an amount equal to the beneficial interest
in the 144A Book-Entry Note to be exchanged or transferred, (b) a written order given in accordance with DTC’s procedures containing
information regarding the account of the depositaries for Euroclear or Clearstream or another Clearing Agency Participant, as the case may be,
to be credited with the increase and the name of the account and (c) certificates in the form of Exhibits B-5 and B-7 hereto, respectively, given
by the Noteholder and the proposed transferee of the interest, the Indenture Trustee and Note Registrar shall instruct DTC to reduce the 144A
Book-Entry Note by the aggregate principal amount of the beneficial interest in the 144A Book-Entry Note to be so exchanged or transferred
and the Indenture Trustee and Note Registrar shall instruct DTC, concurrently with the reduction, to increase the principal amount of the
Regulation S Book-Entry Note by the aggregate principal amount of the beneficial interest in the 144A Book-Entry Note to be so exchanged or
transferred, and to credit or cause to be credited to the account of the Person specified in the instructions a beneficial interest in the
Regulation S Book-Entry Note equal to the reduction in the principal amount of the 144A Book-Entry Note.
Notwithstanding anything to the contrary herein, the Purchaser may exchange beneficial interests in the Regulation S Temporary
Book-Entry Note held by it for interests in the 144A Book-Entry Note only after delivery by the Purchaser of instructions to DTC for the
exchange, substantially in the form of Exhibit B-6 hereto. Upon receipt of the instructions provided in the preceding sentence, the Indenture
Trustee and Note Registrar shall instruct DTC to reduce the principal amount of the Regulation S Temporary Book-Entry Note to be so
transferred and shall instruct DTC to increase the principal amount of the 144A Book-Entry Note and credit or cause to be credited to the
account of the placement agent a beneficial interest in the 144A Book-Entry Note having a principal amount equal to the amount by which the
principal amount of the Regulation S Temporary Book-Entry Note was reduced upon the transfer pursuant to the instructions provided in the
first sentence of this paragraph.
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If a Book-Entry Note is exchanged for a Definitive Note, such Equipment Notes may be exchanged or transferred for one another only in
accordance with such procedures as are substantially consistent with the provisions of the three immediately preceding paragraphs (including
the certification requirements intended to ensure that the exchanges or transfers comply with Rule 144 or Regulation S, as the case may be) and
as may be from time to time adopted by the Indenture Trustee.
Section 2.08 Mutilated, Destroyed, Lost or Stolen Equipment Notes.
If any Equipment Note shall become mutilated, destroyed, lost or stolen, the Issuer shall issue, upon the written request of the Holder
thereof and presentation of the Equipment Note or satisfactory evidence of destruction, loss or theft thereof to the Indenture Trustee or Note
Registrar, and the Indenture Trustee shall authenticate and the Indenture Trustee or Note Registrar shall deliver in exchange therefor or in
replacement thereof, a new Equipment Note, payable to such Holder in the same principal amount, of the same maturity, with the same
payment schedule, bearing the same interest rate and dated the date of its authentication. If the Equipment Note being replaced has become
mutilated, such Equipment Note shall be surrendered to the Indenture Trustee or a Note Registrar and forwarded to the Issuer by the Indenture
Trustee or such Note Registrar. If the Equipment Note being replaced has been destroyed, lost or stolen, the Holder thereof shall furnish to the
Issuer, the Indenture Trustee or a Note Registrar (i) such security or indemnity as may be required by them to save the Issuer, the Indenture
Trustee and such Note Registrar harmless and (ii) evidence satisfactory to the Issuer, the Indenture Trustee and such Note Registrar of the
destruction, loss or theft of such Equipment Note and of the ownership thereof. The Noteholder will be required to pay any tax or other
governmental charge imposed in connection with such exchange or replacement and any other expenses (including the fees and expenses of the
Indenture Trustee and any Note Registrar) connected therewith.
Section 2.09 Payments of Transfer Taxes.
Upon the transfer of any Equipment Note or Equipment Notes pursuant to Section 2.07 hereof, the Issuer or the Indenture Trustee may
require from the party requesting such new Equipment Note or Equipment Notes payment of a sum to reimburse the Issuer or the Indenture
Trustee for, or to provide funds for the payment of, any transfer tax or similar governmental charge payable in connection therewith.
Section 2.10 Book-Entry Registration.
(a) Upon the issuance of any Book-Entry Notes, DTC or its custodian will credit, on its book-entry registration and transfer system, the
respective principal amounts of the individual beneficial interests represented by such Book-Entry Notes to the accounts of a Direct Participant.
Ownership of beneficial interests in a Book-Entry Note will be limited to DTC Participants or Persons who hold interests through DTC
Participants. Ownership of beneficial interests in the Book-Entry Notes will be shown on, and the transfer of that ownership will be effected
only through, records maintained by DTC (with respect to interests of DTC Participants) and the records of DTC Participants (with respect to
interests of Persons other than DTC Participants).
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(b) So long as DTC, or its nominee, is the registered owner or holder of a Book-Entry Note, DTC or such nominee, as the case may be,
will be considered the sole owner or Noteholder represented by such Book-Entry Note for all purposes under this Indenture, and the
Book-Entry Notes. Unless (a) DTC notifies the Issuer that it is unwilling or unable to continue as depository for a Book-Entry Note, (b) the
Issuer elects to terminate the book-entry system for the Book-Entry Notes, or (c) an Event of Default has occurred and the Indenture Trustee
acting at the Direction of a Requisite Majority certifies that continuation of a book-entry system through DTC (or a successor) for the
Equipment Notes is no longer in the best interests of the Noteholders, owners of beneficial interests in a Book-Entry Note will not be entitled to
have any portion of such Book-Entry Note registered in their names, will not receive or be entitled to receive physical delivery of Equipment
Notes in definitive form and will not be considered to be the owners or Noteholders under this Indenture or the Book-Entry Notes. In addition,
no beneficial owner of an interest in a Book-Entry Note will be able to transfer that interest except in accordance with DTC’s applicable
procedures (and in addition, if applicable, those of Clearstream and Euroclear).
(c) Investors may hold their interest in a Regulation S Book-Entry Note through Clearstream or Euroclear, if they are participants in such
systems, or indirectly through organizations that are participants in such systems. After the Exchange Date, investors also may hold such
interests through organizations other than Clearstream and Euroclear that are DTC Participants. Clearstream and Euroclear will hold interests in
a Regulation S Book-Entry Note on behalf of their participants through customers’ securities accounts in their respective names on the books of
their respective depositaries, which in turn will hold such interests in a Regulation S Book-Entry Note in customers’ accounts in the
depositaries’ names on the books of DTC. Citibank, N.A. will initially act as depositary for Clearstream and Morgan Guaranty Trust Company
of New York, Brussels Office, will initially act as depositary for Euroclear. Investors may hold their interests in a 144A Book-Entry Note
directly through DTC, if they are DTC Participants, or indirectly through organizations that are DTC Participants.
(d) All payments of principal and interest will be made by the Paying Agent on behalf of the Issuer in immediately available funds or the
equivalent, so long as DTC continues to make its Same-Day Funds Settlement System available to the Issuer.
None of the Issuer, the Note Registrar, the Paying Agent or the Indenture Trustee shall be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be fully protected in relying on, such registration instructions. Upon the issuance of
Definitive Notes, the Indenture Trustee shall recognize the Persons in whose name the Definitive Notes are registered in the Register as
Noteholders hereunder. Neither the Issuer nor the Indenture Trustee shall be liable if the Indenture Trustee or the Issuer is unable to locate a
qualified successor Noteholder.
Definitive Notes will be transferable and exchangeable for Definitive Notes at the office of the Indenture Trustee or the office of a Note
Registrar upon compliance with the requirements set forth herein. In the case of a transfer of only part of a holding of Definitive Notes, a new
Definitive Note shall be issued to the transferee in respect of the part transferred and a new Definitive Note in respect of the balance of the
holding not transferred shall be issued to the transferor and may be obtained at the office of the applicable Note Registrar.
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(e) Any beneficial interest in one of the Book-Entry Notes as to the Equipment Notes that is transferred to a Person who takes delivery in
the form of an interest in another Book-Entry Note will, upon transfer, cease to be an interest in such Book-Entry Note and become an interest
in such other Book-Entry Note and, accordingly, will thereafter be subject to all transfer restrictions, if any, and other procedures applicable to
beneficial interests in such other Book-Entry Note for as long as it remains such an interest.
(f) Any Definitive Note delivered in exchange for an interest in a 144A Book-Entry Note pursuant to paragraph (b) of this Section shall,
except as otherwise provided by paragraph (f) of Section 2.11, bear the Private Placement Legend applicable to a 144A Book-Entry Note set
forth in Section 2.02 hereof.
(g) Any Definitive Note delivered in exchange for an interest in a Unrestricted Book-Entry Note pursuant to paragraph (b) of this Section
shall, except as otherwise provided by paragraph (f) of Section 2.11, bear the Private Placement Legend applicable to a Unrestricted
Book-Entry Note set forth in Section 2.02 hereof.
Section 2.11 Special Transfer Provisions.
(a) Transfers to Non-QIB InstitutionalAccredited Investors . The following provisions shall apply with respect to the registration of any
proposed transfer of an Equipment Note (other than a Regulation S Temporary Book-Entry Note) or any interest therein to any Institutional
Accredited Investor which is not a QIB (excluding Non-U.S. Persons):
(i) The Note Registrar shall register the transfer of any Equipment Note, whether or not such Equipment Note bears the Private
Placement Legend, if the proposed transferee has delivered to the Note Registrar (A) a certificate substantially in the form of Exhibit C hereto
and (B) an Opinion of Counsel acceptable to the Issuer that such transfer is in compliance with the Securities Act.
(ii) If the proposed transferor is a Direct Participant holding a beneficial interest in the 144A Book-Entry Note, upon receipt by the Note
Registrar of (x) the documents, if any, required by paragraph (i) and (y) instructions given in accordance with the DTC’s and the Note
Registrar’s procedures, the Note Registrar shall reflect on its books and records the date and a decrease in the principal amount of the 144A
Book-Entry Note in an amount equal to the principal amount of the beneficial interest in the 144A Book-Entry Note to be transferred, and the
Issuer shall execute, and the Indenture Trustee shall authenticate and deliver, one or more Definitive Notes of like tenor and amount.
(b) Transfers to QIBs . The following provisions shall apply with respect to the registration of any proposed transfer of an interest in a
144A Book-Entry Note or a Definitive Note issued in exchange for an interest in such 144A Book-Entry Note in accordance with
Section 2.11(b) hereof to a QIB (excluding Non-U.S. Persons):
(i) If the Equipment Note to be transferred consists of (x) Definitive Notes, the Note Registrar shall register the transfer if such transfer is
being made by a proposed transferor who delivers a certificate in the form of Exhibit B-8 hereto to the
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Issuer and the Note Registrar, or has otherwise advised the Issuer and the Note Registrar in writing, that the sale has been made in compliance
with the provisions of Rule 144A to a transferee who has signed the certification provided for on the form of Equipment Note stating, or has
otherwise advised the Issuer and the Note Registrar in writing, that it is purchasing the Equipment Note for its own account or an account with
respect to which it exercises sole investment discretion and that it and any such account are QIBs within the meaning of Rule 144A, are aware
that the sale to it is being made in reliance on Rule 144A and acknowledge that they have received such information regarding the Issuer as
they have requested pursuant to Rule 144A or have determined not to request such information and that they are aware that the transferor is
relying upon their foregoing representations in order to claim the exemption from registration provided by Rule 144A or (y) an interest in a
144A Book-Entry Note, the transfer of such interest may be effected only through the book-entry system maintained by the DTC.
(ii) If the proposed transferee is a Direct Participant, and the Equipment Note to be transferred is a Definitive Note, upon receipt by the
Note Registrar of the documents referred to in clause (i) and instructions given in accordance with the DTC’s and the Note Registrar’s
procedures, the Note Registrar shall reflect on its books and records the date and an increase in the principal amount at maturity of the 144A
Book-Entry Note in an amount equal to the principal amount at maturity of the Definitive Note to be transferred, and the Indenture Trustee
shall cancel the Definitive Note so transferred.
(c) Transfers of Interests in a Regulation S Temporary Book-Entry Note . The following provisions shall apply with respect to
registration of any proposed transfer of interests in a Regulation S Temporary Book-Entry Note:
(i) The Note Registrar shall register the transfer of any interest in a Regulation S Temporary Book-Entry Note (x) if the proposed
transferee is a Non-U.S. Person and the proposed transferor has delivered to the Note Registrar a certificate substantially in the form of
Exhibit B-7 hereto or (y) if the proposed transferee is a QIB and the proposed transferor has checked the box provided for on the form of such
Equipment Note stating, or has otherwise advised the Issuer and the Note Registrar in writing, that the sale has been made in compliance with
the provisions of Rule 144A to a transferee who has signed the certification provided for on the form of such Equipment Note stating, or has
otherwise advised the Issuer and the Note Registrar in writing, that it is purchasing such Equipment Note for its own account or an account
with respect to which it exercises sole investment discretion and that it and any such account are QIBs within the meaning of Rule 144A, are
aware that the sale to them is being made in reliance on Rule 144A and acknowledge that they have received such information regarding the
Issuer as they have requested pursuant to Rule 144A or have determined not to request such information and that they are aware that the
transferor is relying upon their foregoing representations in order to claim the exemption from registration provided by Rule 144A.
(ii) If the proposed transferee is a Direct Participant that provides the documents referred to in clause (i)(y) above, upon receipt by the
Note Registrar of such
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documents and instructions given in accordance with DTC’s and the Note Registrar’s procedures, the Note Registrar shall reflect on its books
and records the date and an increase in the principal amount of the 144A Book-Entry Note, in an amount equal to the principal amount of the
Regulation S Temporary Book-Entry Note to be transferred, and the Indenture Trustee shall decrease the amount of the Regulation S
Temporary Book-Entry Note.
(d) Transfers of Interests in an Unrestricted Book-Entry Note . The Note Registrar shall register any transfer of interests in an
Unrestricted Book-Entry Note, or a Definitive Note issued in exchange for an interest in a Regulation S Temporary Book-Entry Note or
Unrestricted Book-Entry Note in accordance with Section 2.11(b) hereof, to U.S. Persons in accordance with Section 2.07, or to Non-U.S.
Persons in accordance with the applicable procedures of Euroclear or Clearstream and their respective participants.
(e) Transfers to Non-U.S. Persons at any Time . With respect to any transfer of an Equipment Note to a Non-U.S. Person. prior to the
applicable Exchange Date, the Note Registrar shall register any proposed transfer of a Regulation S Temporary Book-Entry Note to a Non-U.S.
Person upon receipt of a certificate substantially in the form of Exhibit B-7 hereto from the proposed transferor.
(f) ERISA Transfer Restrictions . Each purchaser and subsequent transferee of any Equipment Note will be deemed to have represented
and warranted either that (i) it is not an employee benefit plan (as defined in Section 3(3) of ERISA), whether or not subject to the provisions of
Title I of ERISA, a plan as covered by Section 4975 of the Code, or an entity whose underlying assets include “plan assets” by reason of an
employee benefit plan’s or other plan’s investment in such entity, or (ii) its purchase and holding of the Equipment Note will not result in a
non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code (or, in the case of a governmental, non-U.S. or
church plan, any substantially similar federal, state, local or other law).
(g) [Reserved] .
(h) General . By its acceptance of any Equipment Note bearing the Private Placement Legend, each Holder of such Equipment Note
acknowledges the restrictions on transfer of such Equipment Note set forth in this Indenture and in the Private Placement Legend and agrees
that it will transfer such Equipment Note only as provided in this Indenture. The Note Registrar shall not register a transfer of any Equipment
Note unless such transfer complies with the restrictions on transfer of such Equipment Note set forth in this Indenture. In connection with any
transfer of Equipment Notes, each Holder agrees by its acceptance of its Equipment Notes to furnish the Indenture Trustee the certifications
and legal opinions described herein to confirm that such transfer is being made pursuant to an exemption from, or a transaction not subject to,
the registration requirements of the Securities Act; provided that the Indenture Trustee shall not be required to determine (but may rely on a
determination made by the Issuer with respect to) the sufficiency of any such legal opinions.
(i) Issuer Group Member Limitations . Notwithstanding any other provision herein, no Equipment Note shall be transferred to any Issuer
Group Member unless (i) the
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transferor thereof transfers such Equipment Notes to an Issuer Group Member in an arm’s length transaction, (ii) the transferor thereof is not an
Issuer Group Member, (iii) such transfer is made solely for the purpose of retiring such Equipment Notes and (iv) the Issuer delivers to the
Indenture Trustee, prior to the effectiveness of such transfer, an Officer’s Certificate of the Issuer pursuant to which the Issuer covenants and
agrees that it will or will cause such transferred Equipment Notes to be retired within 30 days of such transfer. Notwithstanding any other
provisions of this Indenture to the contrary, no Issuer Group Member shall be entitled to receive any interest on any Equipment Notes held by
it.
Section 2.12 Temporary Definitive Notes.
Pending the preparation of Definitive Notes, the Issuer may execute and the Indenture Trustee may authenticate and deliver temporary
Definitive Notes which are printed, lithographed, typewritten or otherwise produced, in any denomination, containing substantially the same
terms and provisions as are set forth in the applicable exhibit hereto, except for such appropriate insertions, omissions, substitutions and other
variations relating to their temporary nature as the Authorized Representative of the Issuer executing such temporary Definitive Notes may
determine, as evidenced by his execution of such temporary Definitive Notes.
If temporary Definitive Notes are issued, the Issuer will cause Definitive Notes to be prepared without unreasonable delay. After the
preparation of Definitive Notes, the temporary Definitive Notes shall be exchangeable for Definitive Notes upon surrender of such temporary
Definitive Notes at the Corporate Trust Office of the Indenture Trustee, without charge to the Holder thereof. Upon surrender for cancellation
of any one or more temporary Definitive Notes, the Issuer shall execute and the Indenture Trustee shall authenticate and deliver in exchange
therefor Definitive Notes, in authorized denominations and in the same aggregate principal amounts. Until so exchanged, such temporary
Definitive Notes shall in all respects be entitled to the same benefits under this Indenture as Definitive Notes.
Section 2.13 Statements to Noteholders.
(a) With respect to each Collection Period, the Issuer shall, not later than the last Business Day before the Payment Date immediately
following the last day of such Collection Period, cause the Administrator to deliver to the Indenture Trustee, and the Indenture Trustee shall (or
shall instruct any Paying Agent to) promptly thereafter (but not later than such Payment Date) distribute to the Rating Agencies, and to each
Holder of record with respect to such Payment Date, a report, substantially in the form attached as Exhibit D-1 hereto prepared by the
Administrator or Manager and setting forth the information described therein (each, a “ Monthly Report ”). The Issuer shall cause the
Administrator or Manager to deliver to the Indenture Trustee with the Monthly Report for each June, and the Indenture Trustee shall (or shall
instruct any Paying Agent to) distribute with the Monthly Report for each June to the Persons described in the first sentence in this Section
2.13(a), a report, substantially in the form attached as Exhibit D-2 hereto prepared by the Administrator or Manager and setting forth the
information described therein (each, an “ Annual Report ”). The Indenture Trustee shall deliver, promptly upon written request, a copy of each
Monthly Report and Annual Report to any Holder or other Secured Party and, at the written request of any Holder, to any prospective
purchaser of any Equipment Notes from such Holder. If the Equipment Notes are then listed on any stock
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exchange, the Indenture Trustee also shall provide a copy of each Monthly Report and each Annual Report to the applicable listing agent on
behalf of such stock exchange.
(b) After the end of each calendar year but not later than the latest date permitted by law, the Administrator or Manager shall deliver to
the Indenture Trustee, and the Indenture Trustee shall (or shall instruct any Paying Agent to) furnish to each Person who at any time during
such calendar year was a Noteholder of record of any Equipment Notes, a statement (for example, a Form 1099 or any other means required by
law) prepared by the Administrator or Manager containing the sum of the amounts determined pursuant to Exhibit D-1 hereto with respect to
the Equipment Notes for such calendar year or, in the event such Person was a Noteholder of record during only a portion of such calendar
year, for the applicable portion of such calendar year, and such other items as are readily available to the Administrator or Manager and which
a Noteholder shall reasonably request as necessary for the purpose of such Noteholder’s preparation of its U.S. federal income or other tax
returns. So long as any of the Equipment Notes are registered in the name of DTC or its nominee, such report and such other items will be
prepared on the basis of such information supplied to the Administrator by DTC and the Direct Participants, and will be delivered by the
Indenture Trustee, when received from the Administrator or Manager, to DTC for transfer to the applicable beneficial owners in the manner
described above. In the event that any such information has been provided by any Paying Agent directly to such Person through other
tax-related reports or otherwise, the Indenture Trustee in its capacity as Paying Agent shall not be obligated to comply with such request for
information.
(c) At such time, if any, as the Equipment Notes are issued in the form of Definitive Notes, the Indenture Trustee shall prepare and
deliver the information described in Section 2.13(b) to each Holder of record of a Definitive Note for the period of its ownership of such
Definitive Note as the same appears on the records of the Indenture Trustee.
(d) Following each Payment Date and any other date specified herein for distribution of any payments with respect to the Equipment
Notes and prior to a Redemption, the Indenture Trustee shall cause notice thereof to be given (i) by publication in such English language
newspaper or newspapers as the Indenture Trustee shall approve having a general circulation in Europe, (ii) by either of (a) the information
contained in such notice appearing on the relevant page of the Reuters Screen or such other medium for the electronic display of data as may be
approved by the Indenture Trustee and notified to Noteholders or (b) publication in the Financial Times and The Wall Street Journal
(National Edition) or, if either newspaper shall cease to be published or timely publication therein shall not be practicable, in such English
language newspaper or newspapers as the Indenture Trustee shall approve having a general circulation in Europe and the United States and
(iii) until such time as any Definitive Notes are issued and, so long as the Equipment Notes are registered with DTC, Euroclear and/or
Clearstream, delivery of the relevant notice to DTC, Euroclear and/or Clearstream for communication by them to Noteholders of the
Equipment Notes. Notwithstanding the above, any notice to the Noteholders of the Equipment Notes specifying any principal payment or any
payment of premium, if any, shall be validly given by delivery of the relevant notice to DTC, Euroclear and/or Clearstream for communication
by them to such Noteholders, without the need for publication in the in an English language newspaper described in clause (i) of the preceding
sentence. If the Equipment Notes are listed on a stock exchange, notice specifying a Redemption
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of principal of any Equipment Notes must be published in a daily newspaper of general circulation in the jurisdiction in which such stock
exchange is located for so long as the Equipment Notes are listed on such stock exchange. Any such notice shall be deemed to have been given
on the first day on which any of such conditions shall have been met.
(e) The Indenture Trustee shall be at liberty to sanction some other method of giving notice to the Noteholders if, in its opinion, such
other method is reasonable, having regard to the number and identity of the Noteholders and/or to market practice then prevailing, is in the best
interests of the Noteholders and will comply with the rules of any stock exchange on which the Equipment Notes are listed as confirmed by the
listing agent for such stock exchange or such other stock exchange (if any) on which the Equipment Notes are then listed, and any such notice
shall be deemed to have been given on such date as the Indenture Trustee may approve the same; provided that notice of such method is
given to the Noteholders in such manner as the Indenture Trustee shall require.
Section 2.14 CUSIP, CINS AND ISIN Numbers.
The Issuer in issuing the Equipment Notes may use “CUSIP”, “CINS”, “ISIN” or other identification numbers (if then generally in use), and
if so, the Indenture Trustee shall use CUSIP numbers, CINS numbers, ISIN numbers or other identification numbers, as the case may be, in
notices of redemption or exchange as a convenience to Holders; provided that any such notice shall state that no representation is made as to
the correctness of such numbers either as printed on the Equipment Notes or as contained in any notice of redemption or exchange and that
reliance may be placed only on the other identification numbers printed on the Equipment Notes; provided further , that failure to use
“CUSIP”, “CINS”, “ISIN” or other identification numbers in any notice of redemption or exchange shall not affect the validity or sufficiency
of such notice.
Section 2.15 Debt Treatment of Equipment Notes. The parties hereto agree, and the holders of the Equipment Notes and interests therein, by
their purchase thereof shall be deemed to have agreed, to treat the Equipment Notes as debt for U.S. federal income tax purposes.
ARTICLE III
INDENTURE ACCOUNTS; PRIORITY OF PAYMENTS
Section 3.01 Establishment of Indenture Accounts; Investments.
(a) Indenture Accounts . The Administrator, on behalf and at the direction of the Issuer, will establish with the Indenture Trustee on or
before the Closing Date and maintain all of the following accounts: (i) a collections account (the “ Collections Account ”), (ii) a railcar
replacement account (the “ Mandatory Replacement Account ”), (iii) an optional reinvestment account (the “ Optional Reinvestment Account ”),
(iv) an expense account (the “ Expense Account ”), (v) a liquidity reserve account (the “ Liquidity Reserve Account ”), and (vi) for the purpose
of facilitating the Indenture Trustee’s payments to the Noteholders from funds available therefor, the Equipment Note Account. From time to
time thereafter, the Administrator, on behalf and at the direction of the Issuer, will establish with the Indenture Trustee such other
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Indenture Accounts as may be authorized or required by this Indenture and the other Operative Agreements.
(b) All Indenture Accounts to be established on or prior to the Closing Date shall be in the names and bear the account numbers set forth
on Schedule 1 hereto. All amounts from time to time held in each Indenture Account shall be held (a) in the name of the Indenture Trustee, for
the benefit of the Secured Parties, and (b) in the custody and under the “Control” (as such term is defined in the UCC) of the Indenture Trustee,
for the purposes and on the terms set forth in this Indenture, and all such amounts shall constitute a part of the Collateral and shall not
constitute payment of any Secured Obligation or any other obligation of the Issuer until applied as hereinafter provided.
(c) Withdrawals and Transfers . The Indenture Trustee shall have sole dominion and control over the Indenture Accounts (including,
inter alia , the sole power to direct withdrawals or transfers from the Indenture Accounts), and the Issuer shall have no right to withdraw, or to
cause the withdrawal of funds or other investments held in the Indenture Accounts or to direct the investment of such funds or the liquidation of
any Permitted Investments, in each case other than as expressly provided herein.
(d) Investments . For so long as any Equipment Notes remain Outstanding, the Indenture Trustee, at the written direction of the
Administrator, shall invest and reinvest the funds on deposit in the Indenture Accounts (other than the Equipment Note Account, which shall
not be invested) in Permitted Investments; provided , however , that if an Event of Default has occurred and is continuing, the Administrator
shall have no right to direct such reinvestment and the Indenture Trustee shall invest such amount in Indenture Investments from the time of
receipt thereof until such time as such amounts are required to be distributed pursuant to the terms of this Indenture. In the absence of written
direction delivered to the Indenture Trustee from the Administrator, the Indenture Trustee shall invest any funds in Permitted Investments
described in clause (f) of the definition thereof. The Indenture Trustee shall make such investments and reinvestments in accordance with the
terms of the following provisions:
(i) the Permitted Investments shall have maturities and other terms such that sufficient funds shall be available to make required
payments pursuant to this Indenture on the Business Day immediately preceding the first Payment Date after which such investment is made,
in the case of investments of funds on deposit in the Collections Account; and
(ii) if any funds to be invested are not received in the Indenture Accounts by noon, New York City time, on any Business Day, such
funds shall, if possible, be invested in overnight Permitted Investments.
(e) Earnings . Earnings on investments of funds in the Indenture Accounts shall be deposited in the Collections Account when received
and credited as Collections for the Collection Period when so received.
(f) WTC as Securities Intermediary; Control .
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(i) WTC shall act as the “securities intermediary” (within the meaning of the UCC) in respect of all securities and other property credited
to the Indenture Accounts.
(ii) WTC as securities intermediary agrees with the parties hereto that each Indenture Account shall be an account to which financial
assets (within the meaning of the UCC) may be credited and undertake to treat the Indenture Trustee as entitled to exercise rights that comprise
such financial assets. WTC as securities intermediary agrees with the parties hereto that each item of property credited to each Indenture
Account shall be treated as such a financial asset. WTC as securities intermediary acknowledges that the “securities intermediary’s
jurisdiction” as defined in the UCC with respect to the Collateral, shall be the State of New York. WTC as securities intermediary represents
and covenants that it is not and will not be (as long as it is acting as securities intermediary hereunder) a party to any agreement in respect of
the Collateral that is inconsistent with the provisions of this Indenture. WTC as securities intermediary agrees that any item of property
credited to any Indenture Account shall not be subject to any security interest, lien, or right of setoff in favor of the securities intermediary or
anyone claiming through the securities intermediary (other than the Indenture Trustee).
(iii) It is the intent of the Indenture Trustee and the Issuer that each Indenture Account shall be a securities account of the Indenture
Trustee and not an account of the Issuer. Nonetheless, WTC as securities intermediary agrees that it will comply with entitlement orders
originated by the Indenture Trustee without further consent by the Issuer. WTC as securities intermediary hereby further covenants that it will
not agree with any person or entity (other than the Indenture Trustee) that it will comply with entitlement orders originated by such person or
entity.
(iv) Nothing herein shall imply or impose upon WTC as securities intermediary any duty or obligations other than those expressly set
forth herein and those applicable to a securities intermediary under the UCC (and WTC as securities intermediary hereunder shall be entitled to
all of the protections available to a securities intermediary under the UCC). Without limiting the foregoing, nothing herein shall imply or
impose upon WTC as securities intermediary any duties of a fiduciary nature (but not in limitation of any such duties of the Indenture Trustee
hereunder).
(v) WTC as securities intermediary hereby represents and warrants and agrees with the Issuer and for the benefit of the Indenture Trustee
as follows:
(A) With respect to Permitted Investments and Indenture Investments that are book entry securities, such Permitted Investments and
Indenture Investments have been credited to the Indenture Trustee’s securities account by accurate book entry.
(B) The securities intermediary shall not accept entitlement orders from any other person except as authorized by the Indenture Trustee.
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(C) To the extent determined by the actions of WTC as securities intermediary, the Indenture Trustee shall at all times have “control”
(as defined in Section 8-106 of the UCC) over the securities account and the Permitted Investments and Indenture Investments that are book
entry securities.
(D) WTC as securities intermediary has received no notice of, and has no knowledge of any “adverse claim” (as such term is defined in
the UCC) as to the Collateral.
(E) WTC as securities intermediary waives any lien, claim or encumbrance in favor of the securities intermediary in the Collateral.
(F) WTC as securities intermediary is a “securities intermediary” as such term is defined in Section 8-102(a)(14) of the UCC and in the
ordinary course of its business maintains “securities accounts” for others, as such terms are used in Section 8-501 of the UCC and as securities
intermediary will be acting in such capacity hereunder.
(G) WTC as securities intermediary is not a “clearing corporation,” as such term is defined in Section 8-102(a)(5) of the UCC.
(vi) Each of the Issuer and the Indenture Trustee hereby agrees and acknowledges that WTC as securities intermediary, for the benefit of
the Indenture Trustee and the Secured Parties, shall have “control” over each Indenture Account under and for purposes of Section 9-104(a)(1)
of the UCC.
(g) Investment Disclosure . The Issuer and the Noteholders, by their acceptance of the Equipment Notes or their interests therein,
acknowledge that shares or investments in Permitted Investments or Indenture Investments are not obligations of Wilmington Trust Company,
or any parent or affiliate of Wilmington Trust Company, are not deposits and are not insured by the FDIC. The Indenture Trustee or its affiliate
may be compensated by mutual funds or other investments comprising Permitted Investments or Indenture Investments for services rendered in
its capacity as investment advisor, or other service provider, and such compensation is both described in detail in the prospectuses for such
funds or investments, and is in addition to the compensation, if any, paid to Wilmington Trust Company in its capacity as Indenture Trustee
hereunder. The Issuer and Noteholders agree that the Indenture Trustee shall not be responsible for any losses or diminution in the value of the
Indenture Accounts occurring as a result of the investment of funds in the Indenture Accounts in accordance with the terms hereof.
Section 3.02 Collections Account.
(a) Pursuant to and in accordance with the terms of the Account Administration Agreement, the Account Collateral Agent is to, upon
receipt thereof, deposit in the Customer Payment Account the Collections received by it. Pursuant to and subject to the terms of the Account
Administration Agreement, on each Business Day all amounts constituting Collections on deposit in the Customer Payment Account are to be
transferred by the Account Collateral Agent to the Collections Account.
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(b) The Indenture Trustee shall, upon receipt thereof, deposit in the Collections Account all Collections and all other payments received
by it in connection with the Portfolio.
(c) Additional funds may be deposited into the Collections Account from the Liquidity Reserve Account in accordance with
Section 3.04, the Optional Reinvestment Account in accordance with Section 3.05 and the Mandatory Replacement Account in accordance
with Section 3.09.
(d) All or any portion of any Net Disposition Proceeds from an Involuntary Railcar Disposition received in the Collections Account may
be transferred to the Optional Reinvestment Account, to the extent that the Issuer elects to reinvest all or a portion of such Net Disposition
Proceeds in a Replacement Exchange in accordance with Section 3.09 hereof. All of the transfers of funds described in this Section 3.02 will be
made prior to the distribution of the Available Collections Amount pursuant to Section 3.11.
Section 3.03 Withdrawal upon an Event of Default.
After the occurrence of and during the continuance of an Event of Default, at the Direction of the Requisite Majority, the Indenture Trustee
shall withdraw any or all funds then on deposit in any of the Indenture Accounts (other than the Equipment Note Account) and transfer such
funds to the Collections Account for application on the next upcoming Payment Date in accordance with the Flow of Funds.
Section 3.04 Liquidity Reserve Account.
(a) On the Closing Date, the Issuer shall deposit (or cause to be deposited) in the Liquidity Reserve Account, cash in an amount equal to
the Liquidity Reserve Target Amount as of the Closing Date out of the Net Proceeds of the issuance of the Equipment Notes received on the
Closing Date and/or from funds contributed by the Member to the Issuer as equity on or prior to such date.
(b) On each Payment Date on which the Available Collections Amount is to be distributed pursuant to the Flow of Funds, if the Balance
in the Liquidity Reserve Account is less than the Liquidity Reserve Target Amount as of such Payment Date, the Indenture Trustee shall, in
accordance with the Payment Date Schedule delivered pursuant to Section 3.10(e) hereof, deposit funds into the Liquidity Reserve Account in
order to restore the Balance therein to the Liquidity Reserve Target Amount as of such Payment Date, to the extent of the Available Collections
Amount as provided in the Flow of Funds.
(c) For each Payment Date on which there will be a Stated Interest Shortfall (as defined in Section 3.10(d)(i)) in respect of the Equipment
Notes, the Indenture Trustee shall, in accordance with the Payment Date Schedule delivered pursuant to Section 3.10(e) hereof, withdraw from
the Liquidity Reserve Account and deposit in the Collections Account, for allocation as part of Available Collections on the related Payment
Date, an amount equal to the lesser of (i) the aggregate amount of such Stated Interest Shortfall for the Equipment Notes and (ii) the Balance in
the Liquidity Reserve Account. The excess of the Stated Interest Shortfall over the Balance so allocated that remains available to pay Stated
Interest after allocation of the
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Available Collections Amount to items senior to Stated Interest in the Flow of Funds shall be the “ Net Stated Interest Shortfall ” for the
Equipment Notes and shall be added to the Stated Interest Amount for the next succeeding Payment Date.
(d) On each Payment Date on which the Available Collections Amount is to be distributed pursuant to the Flow of Funds, before making
any distributions pursuant thereto, the Indenture Trustee, in accordance with the Payment Date Schedule delivered pursuant to Section 3.10(e)
hereof, shall deposit in the Collections Account the excess, if any, of (A) the Balance in the Liquidity Reserve Account (after giving effect to
any withdrawals therefrom to be made on such Payment Date pursuant to Section 3.04(c)) over (B) the Liquidity Reserve Target Amount
(determined after giving effect to any payments of principal on Equipment Notes to be made on such Payment Date).
(e) On the Final Maturity Date, the Balance in the Liquidity Reserve Account (after giving effect to any withdrawals therefrom on such
date pursuant to Section 3.04(c)) shall be deposited into the Collections Account for allocation pursuant to the Flow of Funds.
(f) The Issuer may attempt to procure a reduction in the amount of the Liquidity Reserve Target Amount from time to time, subject to
obtaining a Rating Agency Confirmation and receiving the prior written consent of the Indenture Trustee (to be given only at the Direction of
the Requisite Majority), following which the Liquidity Reserve Target Amount shall be the amount as so reduced.
Section 3.05 Optional Reinvestment Account.
(a) The Issuer may elect, by notice to the Indenture Trustee in writing, not later than the last Business Day preceding the later of the date
of any Involuntary Railcar Disposition or Purchase Option Disposition and the date on which the Net Disposition Proceeds therefrom are
received, to deposit all or a portion of the Net Disposition Proceeds realized from such Involuntary Railcar Disposition or Purchase Option
Disposition, whether or not initially deposited in the Collections Account, into the Optional Reinvestment Account. The Indenture Trustee shall
deposit in the Collections Account all or any portion of the Net Disposition Proceeds realized from any Involuntary Railcar Disposition or
Purchase Option Disposition as to which the direction described in the preceding sentence is not received by the end of the last Business Day
preceding the later of the date of any such Involuntary Railcar Disposition or Purchase Option Disposition and the date on which such Net
Disposition Proceeds are received.
(b) The Issuer may elect to apply the Net Disposition Proceeds from an Involuntary Railcar Disposition or Purchase Option Disposition
deposited in the Optional Reinvestment Account pursuant to Section 3.05(a) in a Permitted Railcar Acquisition any time during the related
Replacement Period. On each Delivery Date during the Replacement Period on which the Issuer acquires an Additional Railcar from a Seller in
a Permitted Railcar Acquisition, the Indenture Trustee, at the written direction of the Manager accompanied by a written statement of the
Manager that all of the conditions for payment of the Purchase Price for such Additional Railcar specified in the Asset Transfer Agreement
have been satisfied, and that the requirements of Section 5.03(b) or 5.03(c), as applicable, have been satisfied, will transfer
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funds in an amount equal to the Purchase Price for such Additional Railcar from the Optional Reinvestment Account to the applicable Seller.
(c) The Indenture Trustee, without further direction from the Manager or the Administrator, shall transfer any amounts in the Optional
Reinvestment Account at the end of the Replacement Period applicable to the Involuntary Railcar Disposition or Purchase Option Disposition
to the Collections Account on the next Business Day after the end of such Replacement Period (or, if notified by the Manager in writing prior
to such date that the Issuer no longer intends to effect a related Permitted Railcar Acquisition with such funds or only intends to apply a portion
of such funds for such purpose, then the Indenture Trustee shall, as directed in such written notice, transfer the amount of such funds not
intended to be so used to the Collections Account as promptly as practicable following receipt of such written notice). All amounts so
transferred to the Collections Account may not be withdrawn therefrom pursuant to Section 3.09(a) or otherwise, except for distribution in
accordance with the Flow of Funds.
Section 3.06 Expense Account.
(a) On the Closing Date, the Administrator shall direct the Indenture Trustee in writing to (i) pay to such Persons as shall be specified by
the Administrator such Issuance Expenses as shall be due and payable in connection with the issuance and sale of the Equipment Notes on the
Closing Date, and (ii) transfer to the Expense Account the Required Expense Deposit, in each case out of the Net Proceeds of the Equipment
Notes issued on the Closing Date or the proceeds of a capital contribution by the Member to the Issuer or from any combination thereof.
(b) On each Payment Date, the Administrator will, in accordance with the priority of payments set forth in the Flow of Funds, direct the
Indenture Trustee, in writing, to pay any Operating Expenses that are due and payable on such Payment Date and to transfer to the Expense
Account funds in an amount equal to the Required Expense Deposit.
(c) On any Business Day between Payment Dates, the Administrator may direct the Indenture Trustee, in writing, to withdraw funds
from the Expense Account in order to pay any Operating Expenses that the Administrator certifies in such writing are an Operating Expense
then due and payable.
(d) On the Final Maturity Date, after payment of all Operating Expenses due on such Final Maturity Date, the Indenture Trustee shall
transfer the Balance in the Expense Account to the Collections Account for distribution in accordance with the Flow of Funds.
Section 3.07 Equipment Note Account.
(a) Upon the issuance of the Equipment Notes on the Closing Date, the Indenture Trustee shall establish the Equipment Note Account for
the Equipment Notes.
(b) On each Payment Date, amounts will be deposited into the Equipment Note Account in accordance with Section 3.08 and
Section 3.11 hereof.
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(c) All amounts transferred to the Equipment Note Account in accordance with Section 3.08 and Section 3.11 hereof shall be used by the
Indenture Trustee for the payment of the Equipment Notes in accordance with their terms.
Section 3.08 Redemption/Defeasance Account.
(a) Upon the sending of a Redemption Notice in respect of the Equipment Notes, or an election by the Issuer to effect a legal defeasance
or covenant defeasance of the Equipment Notes pursuant to Article XII hereof, the Indenture Trustee will establish a Redemption/Defeasance
Account to retain the proceeds to be used in order to redeem or defease the Equipment Notes.
(b) Amounts shall be deposited into any Redemption/Defeasance Account in accordance with Sections 3.12 and 3.13 hereof.
(c) On each Redemption Date, the Administrator, on behalf of the Indenture Trustee, shall transfer a portion of the proceeds of any
Redemption of the Equipment Notes equal to the Redemption Price of the Equipment Notes from the Redemption/Defeasance Account,
established in respect of such Redemption to the Equipment Note Account in accordance with Sections 3.12 and 3.13 hereof and transfer the
balance of such proceeds to the Expense Account.
(d) On each Payment Date, in respect of Equipment Notes that are the subject of a legal defeasance or covenant defeasance, the
Administrator, on behalf of the Indenture Trustee, shall transfer from the Redemption/Defeasance Account to the Holders of such Equipment
Notes the payments of principal and interest due on such Equipment Notes in accordance with the terms of such defeasance.
Section 3.09 Mandatory Replacement Account.
(a) The Issuer will direct the Manager or Administrator to cause the deposit of all Net Disposition Proceeds realized from a Permitted
Discretionary Sale, whether or not initially deposited into the Collections Account, into the Mandatory Replacement Account.
(b) The Issuer shall use all commercially reasonable efforts to use the funds deposited in the Mandatory Replacement Account to
purchase Additional Railcars from Sellers in Permitted Railcar Acquisitions during the applicable Replacement Periods with respect to the Net
Disposition Proceeds constituting such funds. The Indenture Trustee, at the written direction of the Manager or Administrator accompanied by
a written statement of the Manager or Administrator on behalf of the Issuer that all of the conditions for payment of the Purchase Price for such
Additional Railcar specified in the Asset Transfer Agreement have been satisfied and that the applicable requirements of Section 5.03 have
been satisfied, will transfer funds in an amount equal to the Purchase Price for such Additional Railcar to the applicable Seller.
(c) The Indenture Trustee, without further direction from the Manager or the Administrator, shall transfer any amounts in the Mandatory
Replacement Account at the end of the Replacement Period applicable to the Permitted Discretionary Sale to the Collections Account on the
next Business Day after the end of such Replacement Period. All amounts so
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transferred to the Collections Account may not be withdrawn therefrom pursuant to Section 3.09(a) or otherwise, except for distribution in
accordance with the Flow of Funds.
Section 3.10 Calculations.
(a) As soon as reasonably practicable after each Determination Date, but in no event later than 12:00 noon (New York City time) on the
third Business Day prior to the immediately succeeding Payment Date, the Issuer shall cause the Administrator, based on information known to
it or Relevant Information provided to it, to determine the amount of Collections received during the Collection Period ending immediately
prior to such Determination Date (including the amount of any investment earnings on the Balances in the Collections Account, if any, as of
such Determination Date) and shall calculate the following amounts:
(i) (A) the Balances in each of the Indenture Accounts on such Determination Date, and (B) the amount of investment earnings (net of
losses and investment expenses), if any, on investments of funds on deposit therein during such Collection Period;
(ii) (A) the Required Expense Amount for such Payment Date and (B) the excess, if any, of the Required Expense Reserve for such
Payment Date over the Balance in the Expense Account after payment of all Operating Expenses on such Payment Date (the “ Required
Expense Deposit ”);
(iii) the Available Collections Amount for such Payment Date, net of the amounts described in Section 4.02(c)(i) if an Event of Default
has occurred and is continuing on such Payment Date;
(iv) the Stated Interest Shortfall (if any), the amounts (if any) required to be transferred from the Liquidity Reserve Account to the
Collections Account in respect thereof pursuant to Section 3.04, and the Net Stated Interest Shortfall (if any);
(v) all other amounts required to be reported in the Monthly Report and not included on the Payment Date Schedule to be provided
pursuant to Section 3.10(e); and
(vi) any other information, determinations and calculations reasonably required in order to give effect to the terms of this Indenture and
the Operative Agreements, including the preparation of the Monthly Report and Annual Report.
provided that, if the Administrator has not received all of the Relevant Information for such Payment Date, the Administrator shall make
reasonable assumptions for purposes of the calculations contemplated by this Section 3.10.
(b) Calculation of Interest Amounts, etc. Not later than 12:00 noon (New York City time) on the third Business Day prior to each Payment
Date, the Issuer shall cause the Administrator or the Manager to make the following calculations or determinations with respect to interest
amounts due on such Payment Date:
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(i) the Stated Interest Amount for the Equipment Notes; and
(ii) the Additional Interest Amount, if any .
(c) Calculation of Principal Payments and Distributions to the Issuer . Not later than 12:00 noon (New York City time) on the third
Business Day prior to each Payment Date, the Issuer shall cause the Administrator or the Manager to calculate or determine the following with
respect to principal payments on the Equipment Notes due on such Payment Date and the amounts distributable to the Issuer on such Payment
Date:
(i) the Outstanding Principal Balance of the Equipment Notes on such Payment Date immediately prior to any principal payment on such
date;
(ii) the amounts of the principal payments, if any, to be made in respect of the Equipment Notes on such Payment Date, including, the
Scheduled Principal Payment Amount for such Payment Date; and
(iii) the amounts, if any, distributable to the Issuer on such Payment Date.
(d) Calculation of Payment Date Shortfalls . Not later than 12:00 noon (New York City time) on the third Business Day prior to each
Payment Date, the Issuer shall cause the Administrator or the Manager to perform the calculations necessary to determine the following:
(i) the amount, if any, by which the Stated Interest Amount due in respect of the Equipment Notes on such Payment Date exceeds the
Available Collections Amount for such Payment Date remaining after payment in full of all amounts senior thereto in the Flow of Funds but
prior to giving effect to any transfer of funds to the Collection Account from the Liquidity Reserve Account pursuant to Section 3.04 (a “
Stated Interest Shortfall ” in respect of the Equipment Notes);
(ii) the Net Stated Interest Shortfall in respect of the Equipment Notes;
(iii) the amount, if any, of the Scheduled Principal Payment Amount payable on the Equipment Notes that will not be paid on such
Payment Date out of the Available Collections Amount for such Payment Date; and
(iv) if such Payment Date is the Final Maturity Date, the amount, if any, by which the Outstanding Principal Balance of the Equipment
Notes exceeds the Available Collections Amount after payment in full of amounts senior thereto in the Flow of Funds (such remainder, a “
Final Principal Payment Shortfall ”).
(e) Application of the Available Collections Amount . Not later than 1:00 p.m., New York City time, three Business Days prior to each
Payment Date, the Issuer will cause the Administrator (after consultation with the Manager), to prepare and deliver to the Indenture Trustee the
Payment Date Schedule setting forth the payments, transfers, deposits and
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distributions to be made in respect of the Liquidity Reserve Account pursuant to Section 3.04, and in respect of the Available Collections
Amount (after giving effect to such Liquidity Reserve Account transfers, if any) pursuant to the Flow of Funds, and setting forth separately, in
the case of payments in respect of the Equipment Notes, the amount to be applied on such Payment Date to pay all interest, principal and
premium, if any, on the Equipment Notes, all in accordance with Section 3.11. On each Payment Date, the Indenture Trustee, based on the
Payment Date Schedule provided by the Administrator for such Payment Date, will make payments, transfers, deposits and distributions in an
aggregate amount equal to the Available Collections Amount in accordance with the order of priority set forth in the Flow of Funds. If the
Indenture Trustee shall not have received such Payment Date Schedule by the last Business Day preceding any Payment Date, such Payment
Date shall be deferred until the next Business Day after such Payment Date Schedule is received by the Indenture Trustee.
(f) Relevant Information . The Issuer shall cause each Service Provider having Relevant Information in its possession to make such
Relevant Information available to the Administrator and the Manager not later than 1:00 p.m., New York City time, at least five Business Days
prior to each Payment Date.
Section 3.11 Payment Date Distributions from the Collections Account.
(a) Regular Distributions . On each Payment Date, so long as no Event of Default has occurred and is continuing, after the withdrawals
and transfers provided for in Section 3.02 have been made, the Available Collections Amount will be applied in the following order of priority,
and in each case after the payment of any related Railroad Mileage Credit reimbursements:
(1)
to the payment of the portion of the Required Expense Amount described in clause (i) of the definition thereof to the applicable
payees, and to the Expense Account an amount equal to the Required Expense Deposit;
(2)
to the payment to the Service Providers of the Service Provider Fees;
(3)
to the repayment of any outstanding Manager Advances (together with interest thereon as provided in the Management
Agreement);
(4)
to the Equipment Note Account for further payment by the Indenture Trustee to the Noteholders, the Stated Interest Amount;
(5)
to the Liquidity Reserve Account in an amount equal to the positive difference (if any) between (i) the Liquidity Reserve Target
Amount and (ii) the balance in the Liquidity Reserve Account;
(6)
to the Equipment Note Account for further payment by the Indenture Trustee to the Noteholders, the Scheduled Principal Payment
Amount;
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(7)
to the Equipment Note Account for further payment by the Indenture Trustee to the Noteholders, the Additional Interest Amount;
(8)
to the Equipment Note Account for further payment by the Indenture Trustee to the Noteholders, the amount of any redemption
or early prepayment premium owing to the Holders;
(9)
if an Early Amortization Event shall have occurred and be continuing, to the Equipment Note Account for further payment by the
Indenture Trustee to the Noteholders, an amount equal to the then Outstanding Principal Balance of the Equipment Notes;
(10)
to the payment of any indemnities of the Issuer payable to the Purchaser;
(11)
to pay or reimburse the Issuer (or the Manager on its behalf) for costs of Optional Modifications to the extent not paid from any
other available source of revenues of the Issuer; and
(12)
to the Issuer, all remaining amounts, which may be distributed to the Member.
(b) Event of Default Distributions . On each Payment Date, if an Event of Default has occurred and is then continuing, the Available
Collections Amount will be applied in the following order or priority, after payment of the amounts described in Section 4.02(c)(i), and in each
case after the payment of any related Railroad Mileage Credit reimbursements:
(1)
to the payment of the portion of the Required Expense Amount described in clause (i) of the definition thereof to the applicable
payees, and to the Expense Account an amount equal to the Required Expense Deposit;
(2)
to the payment to the Service Providers of the Service Provider Fees;
(3)
to the repayment of any outstanding Manager Advances (together with interest thereon as provided in the Management
Agreement);
(4)
to the Equipment Note Account for further payment by the Indenture Trustee to the Noteholders, the Stated Interest Amount;
(5)
to the Equipment Note Account for further payment by the Indenture Trustee to the Noteholders, an amount equal to the then
Outstanding Principal Balance of the Equipment Notes;
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(6)
to the Equipment Note Account for further payment by the Indenture Trustee to the Noteholders, the Additional Interest Amount;
(7)
to the Equipment Note Account for further payment by the Indenture Trustee to the Noteholders, the amount of any redemption
or early prepayment premium owing to the Holders;
(8)
to the payment of indemnities of the Issuer payable to the Purchaser;
(9)
to pay or reimburse the Issuer (or the Manager on its behalf) for costs of Optional Modifications to the extent not paid from any
other available source of revenues of the Issuer; and
(10)
to the Issuer, all remaining amounts, which may be distributed to the Member.
(c) Redemption .
On any Payment Date on which the Equipment Notes are to be the subject of a Redemption, the Administrator, on behalf of the Indenture
Trustee, shall distribute the amounts in the applicable Redemption/Defeasance Account to the Holders of the Equipment Notes as provided in
the relevant Redemption Notice.
(d) Payments by Wire Transfer .
All payments to be made pursuant to this Section 3.11 to Persons other than Noteholders shall be made through a direct transfer of funds to
the applicable Person or Indenture Account. All payments to Noteholders shall be governed by Section 2.05.
Section 3.12 Voluntary Redemptions.
If no Event of Default then exists, the Issuer will have the option to prepay, in whole or in part (and if in part, in a minimum amount of at
least $5,000,000 and integral multiples of $1,000,000 in excess thereof), the Outstanding Principal Balance of the Equipment Notes in an
Optional Redemption; provided, that no Optional Redemption other than in whole shall occur once the 15 th anniversary of the Closing Date
has occurred, or if as of the proposed date of any such Optional Redemption, there shall exist any shortfall in the payment of Scheduled
Principal Payment Amount determined as of such date. If an Event of Default then exists, the Issuer will have the option to prepay, in whole
only, the Outstanding Principal Balance of the Equipment Notes. It is understood that Optional Redemptions do not effect a release of
Collateral from the Security Interest of this Indenture, unless resulting in the repayment of all Secured Obligations in full.
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Section 3.13 Procedure for Redemptions.
(a) Method of Redemption . In the case of any Redemption, the Issuer will deposit, or will cause to be deposited, in the
Redemption/Defeasance Account an amount equal to the Redemption Price of the Equipment Notes or portion thereof to be redeemed. Once a
Redemption Notice in respect of a Redemption is published, the applicable outstanding principal amount of the Equipment Notes to which such
Redemption Notice applies will become due and payable on the Redemption Date stated in such Redemption Notice at its Redemption Price.
All Equipment Notes that are redeemed in full will be surrendered to the Indenture Trustee for cancellation and accordingly may not be
reissued or resold.
(b) Deposit of Redemption Amount . On or before any Redemption Date in respect of a Redemption under Section 3.12, the Issuer shall,
to the extent an amount equal to the Redemption Price of the Equipment Notes to be redeemed and any transaction expenses as of the
Redemption Date is not then held by the Issuer or on deposit in the Redemption/Defeasance Account, deposit or cause to be deposited such
amount in the Redemption/Defeasance Account.
(c) Equipment Notes Payable on Redemption Date . After notice has been given under Section 3.13(d) hereof as to the Redemption Date
in respect of any Redemption, the Outstanding Principal Balance of the Equipment Notes to be redeemed on such Redemption Date in the
amount identified in such notice shall become due and payable at the Corporate Trust Office of the Indenture Trustee, and from and after such
Redemption Date (unless there shall be a default in the payment of the applicable amount to be redeemed) such principal amount shall cease to
bear interest. Upon surrender of any Equipment Note for Redemption in accordance with such notice, the Redemption Price of such Equipment
Note shall be paid as provided for in Section 3.11(d). If any Equipment Note to be redeemed shall not be so paid, or shall only be paid in part in
accordance with the terms of such notice, the remaining Outstanding Principal Balance thereof shall continue to bear interest from the
Redemption Date until paid at the interest rate applicable to such Equipment Note.
(d) Redemption Notice . In respect of any Redemption of the Equipment Notes to be made out of amounts available for such purposes,
the Indenture Trustee will give a Redemption Notice to each holder of the Equipment Notes to be redeemed, provided that the Indenture
Trustee shall have determined in advance of giving any such Redemption Notice that funds are or will, on the Redemption Date, be available
therefor. Such Redemption Notice will be given at least twenty (20) days but not more than sixty (60) days before such Redemption Date. Each
Redemption Notice will state (i) the applicable Redemption Date, (ii) if a Redemption in part, the portion of the Outstanding Principal Balance
of the Equipment Notes that is to be redeemed (and in respect thereof, the Redemption Price will be distributed to the Holders pro rata in the
same manner as partial repayments of principal on the Equipment Notes made pursuant to the Flow of Funds and the Indenture Trustee’s notice
shall contain information to that effect), (iii) the Indenture Trustee’s arrangements for making payments due on the Redemption Date, (iv) the
Redemption Price of the Equipment Notes to be redeemed, (v) for an Optional Redemption in whole, that the Equipment Notes to be redeemed
must be surrendered (which action may be taken by any Holder of the Equipment Notes or its authorized agent) to the Indenture Trustee to
collect the Redemption Price on such Equipment Notes and (vi) that, unless the Issuer defaults in the payment of the Redemption Price, if any,
interest on the portion of the
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Outstanding Principal Balance of the Equipment Notes called for Redemption will cease to accrue on and after the Redemption Date.
Section 3.14 Adjustments in Targeted Principal Balances.
(a) Railcar Dispositions . If Net Disposition Proceeds have been included in the Available Collections Amount on any Payment Date,
then the Scheduled Targeted Principal Balance of the Equipment Notes for such Payment Date and for all subsequent Payment Dates will be
equal to the product of (a) the Scheduled Adjustment Fraction for the Equipment Notes as of each such Payment Date and (b) the Scheduled
Targeted Principal Balance of the Equipment Notes for each such Payment Date, as adjusted for Optional Redemptions as provided in
Section 3.14(b) below but without giving effect to any previous adjustments made to such Scheduled Targeted Principal Balance pursuant to
this Section 3.14(a).
(b) Optional Redemption . In connection with any Optional Redemption in part, the Scheduled Targeted Principal Balance for the
Equipment Notes being redeemed on the applicable Redemption Date shall be reduced on the Redemption Date and each subsequent Payment
Date by the product of (i) the Redemption Fraction and (ii) the Scheduled Targeted Principal Balance that existed for the Redemption Date or
such subsequent Payment Date, as the case may be, immediately prior to such Optional Redemption.
As used above:
“ Redemption Fraction ” means, for the Equipment Notes being subjected to an Optional Redemption, a fraction, the numerator of which is
the principal amount of the Equipment Notes that is being prepaid in connection with such Optional Redemption and the denominator of which
is the Outstanding Principal Balance immediately prior to such Optional Redemption.
ARTICLE IV
DEFAULT AND REMEDIES
Section 4.01 Events of Default.
Each of the following events shall constitute an “ Event of Default ” hereunder, and each such Event of Default shall be deemed to exist and
continue so long as, but only so long as, it shall not have been remedied:
(a) failure to pay interest on the Equipment Notes then outstanding (other than Additional Interest, if any), in each case when such
amount becomes due and payable, and such default continues for a period of five (5) or more Business Days;
(b) failure to make payment in full in cash of the then Outstanding Principal Balance of the Equipment Notes thereof by the Final
Maturity Date;
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(c) failure to pay any amount (other than a payment default for which provision is made in clause (a) or (b) of this Section 4.01) when due
and payable in connection with the Equipment Notes, to the extent that there are, on any Payment Date, amounts available in the Collections
Account or the Liquidity Reserve Account therefor, or, with respect to any amounts deposited in the Optional Reinvestment Account or the
Mandatory Replacement Account, the failure to apply such amounts or to transfer such amounts to the Collections Account, as the case may be,
in accordance with Section 3.05 and 3.09, and in any such case such default continues for a period of five (5) or more Business Days after such
Payment Date;
(d) failure by the Issuer, TRLWT or TILC (in the case of TRLWT and TILC, in respect of Operative Agreements to which either is a party
other than any Operative Agreement that is described in clause (k), (n) or (p) below) to comply with any of the other covenants, obligations,
conditions or provisions binding on it under this Indenture, the Equipment Notes or any other Operative Agreement to which it is a party (and
other than a payment default for which provision is made in clause (a), (b) or (c) of this Section 4.01, or a default addressed in clause (m) or (q)
below), if any such failure continues for a period of thirty (30) days or more after written notice thereof has been given to the Issuer (or, if such
failure is capable of remedy and the Administrator has promptly provided the Indenture Trustee with a certificate stating that the Issuer,
TRLWT or TILC (as applicable) has commenced, or will promptly commence, and diligently pursue all reasonable efforts to remedy such
failure or breach, so long as such Person is diligently pursuing such remedy, but in any event no longer than sixty (60) days) after the giving of
such written notice;
(e) any representation or warranty made by the Issuer under this Indenture or any other Operative Agreement to which it is a party or
certificate delivered by it shall prove to be untrue or incorrect in any material respect when made, and such untruth or incorrectness, if curable,
shall continue unremedied for a period of thirty (30) days or more after written notice thereof has been given to the Issuer (or, if such untruth or
incorrectness is capable of remedy and the Administrator has promptly provided the Indenture Trustee with a certificate stating that the Issuer
has commenced, or will promptly commence, and diligently pursue all reasonable efforts to remedy such untruth or incorrectness, so long as
such Person is diligently pursuing such remedy but in any event no longer than sixty (60) days);
(f) a court having jurisdiction in respect of the Issuer enters a decree or order for (i) relief in respect of the Issuer under any Applicable Law
relating to bankruptcy, insolvency, receivership, winding-up, liquidation, reorganization, examination, relief of debtors or other similar law
now or hereafter in effect; (ii) appointment of a receiver, liquidator, examiner, assignee, custodian, trustee, sequestrator or similar official of the
Issuer; or (iii) the winding up or liquidation of the affairs of the Issuer and, in each case, such decree or order shall remain unstayed or such
writ or other process shall not have been stayed or dismissed within sixty (60) days from entry thereof;
(g) the Issuer (i) commences a voluntary case under any Applicable Law relating to bankruptcy, insolvency, receivership, winding-up,
liquidation, reorganization, examination, relief of debtors or other similar law now or hereafter in effect, or consents to the entry of an order for
relief in any involuntary case under any such law; (ii) consents to the appointment of or taking possession by a receiver, liquidator, examiner,
assignee, custodian,
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trustee, sequestrator or similar official of the Issuer or for all or substantially all of the property and assets of the Issuer; or (iii) effects any
general assignment for the benefit of creditors, admits in writing its inability to pay its debts generally as they come due, voluntarily suspends
payment of its obligations or becomes insolvent;
(h) a judgment or order for the payment of money in excess of $1,000,000 shall be rendered against the Issuer and either (i) enforcement
proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be any period of ten (10) consecutive
days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect;
provided , however , that any such judgment or order shall not be an Event of Default under this Section 4.01(h) if and for so long as (x) the
amount of such judgment or order is covered by a valid and binding policy of insurance between the defendant and the insurer covering
payment thereof and (y) such insurer, which shall be rated at least “A” by A.M. Best Company or any similar successor entity, has been
notified of, and has not disputed the claim made for payment of, the amount of such judgment or order;
(i) the Issuer is required to register as an investment company under the Investment Company Act of 1940, as amended;
(j) the Issuer shall have asserted that this Indenture or any of the other Operative Agreements to which it is a party is not valid and
binding on the parties thereto or any court, governmental authority or agency having jurisdiction over any of the parties to such agreements
shall find or rule that any material provision of any of such agreements is not valid or binding on the parties thereto;
(k) the Trustee, acting at the Direction of a Requisite Majority, shall have elected to remove the Manager as a result of a Manager
Termination Event (or to remove the Administrator in accordance with the provisions of the Administrative Services Agreement providing for
such rights of removal), and a replacement Manager (or Administrator, as the case may be) shall not have assumed the duties of the Manager
(or Administrator, as the case may be) within one hundred eighty (180) days after the date of such election;
(l) as of any Payment Date, the Outstanding Principal Balance of the Equipment Notes exceeds the Aggregate Adjusted Borrowing Value
as of such date (and giving effect to repayments of principal to occur on such date);
(m) the Issuer shall use or permit the use of the Portfolio Railcars or any portion thereof in a way that is not permitted by Section 5.04(v)
of this Indenture, provided that such unauthorized use shall not constitute an Event of Default for a period of 45 days after the Issuer’s
obtaining actual knowledge thereof so long as (i) such unauthorized use is not the result of any willful action of the Issuer and (ii) such
unauthorized use is capable of being cured and the Issuer diligently pursues such cure throughout such 45-day period;
(n) TILC (or any successor thereto in its capacity as Servicer) shall have defaulted in any material respect in the performance of any of its
obligations under the Servicing Agreement or a default shall occur under Section 6(a) of the Account Administration Agreement,
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and, in each case, the Issuer shall have failed to exercise its rights thereunder in respect of such default for a period of 30 days after receipt by
the Issuer of written notice from the Indenture Trustee, demanding that such action be taken;
(o) Trinity shall have defaulted (x) in the payment of any amounts required to be paid by it under the Parent Undertaking Agreement, or
(y) in any material respect in the performance of any of its covenants and agreements contained in the Parent Undertaking Agreement other
than as described in clause (x), and in the case of clause (y), such default shall continue unremedied for a period of 30 days; or the Parent
Undertaking Agreement shall cease, for any reason, to be in full force and effect or Trinity, TILC, the Issuer or any of the respective Affiliates
shall so assert;
(p) an Insurance Manager Default shall have occurred and be continuing under the Insurance Agreement, and the Issuer shall have failed
to exercise its rights under the Insurance Agreement in respect of such Insurance Manager Default for a period of 30 days after receipt by the
Issuer of written notice from the Indenture Trustee demanding that such action be taken; and
(q) the Issuer shall have defaulted in any material respect in the performance of any of its covenants and agreements contained in
Section 5.03(a) and such default shall continue unremedied for a period of 30 days.
Section 4.02 Remedies Upon Event of Default.
(a) Upon the occurrence of an Event of Default of the type described in Section 4.01(f) or 4.01(g), the Outstanding Principal Balance of,
and accrued interest on, the Equipment Notes, together with all other amounts then due and owing to the Noteholders, shall become
immediately due and payable without further action by any Person. If any other Event of Default occurs and is continuing, then the Indenture
Trustee, acting at the Direction of the Requisite Majority, may declare the principal of and accrued interest on all Equipment Notes then
Outstanding to be due and payable immediately, by written notice to the Issuer and the Manager (a “ Default Notice ”), and upon any such
declaration such principal and accrued interest shall become immediately due and payable. At any time after the Indenture Trustee has declared
the Outstanding Principal Balance of the Equipment Notes to be due and payable and prior to the exercise of any other remedies pursuant to
this Indenture, the Indenture Trustee (at the Direction of the Requisite Majority), by written notice to the Issuer, the Manager and the
Administrator may, except in the case of (i) a default in the deposit or distribution of any payment required to be made on the Equipment
Notes, (ii) a payment default on the Equipment Notes or (iii) a default in respect of any covenant or provision of this Indenture that cannot by
the terms hereof be modified or amended without the consent of each Noteholder affected thereby, rescind and annul such declaration and
thereby annul its consequences, if (1) there has been paid to or deposited with the Indenture Trustee an amount sufficient to pay all overdue
installments of interest on the Equipment Notes, and the principal of and premium, if any, on the Equipment Notes that would have become due
otherwise than by such declaration of acceleration, (2) the rescission would not conflict with any judgment or decree, and (3) all other defaults
and Events of Default, other than nonpayment of interest and principal on the Equipment Notes that have become due solely because of such
acceleration, have been cured or waived.
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(b) If an Event of Default shall occur and be continuing, the Indenture Trustee may, and shall, if given a Direction in writing by the
Requisite Majority, do any or all of the following, provided that the Indenture Trustee shall dispose of the Portfolio Railcars only if it has
received a Collateral Liquidation Notice:
(i) Institute any Proceedings, in its own name and as trustee of an express trust, for the collection of all amounts then due and payable on
the Equipment Notes or under this Indenture with respect thereto, whether by declaration or otherwise, enforce any judgment obtained, and
collect from the Collateral and any other assets of the Issuer any moneys adjudged due;
(ii) Subject to the quiet enjoyment rights of any Lessee of a Portfolio Railcar, conduct proceedings to sell, hold or lease the Collateral or
any portion thereof or rights or interest therein, at one or more public or private transactions conducted in any manner permitted by law;
provided that, the Indenture Trustee shall incur no liability as a result of the sale of the Collateral or any part thereof at any sale pursuant to
this Section 4.02 conducted in a commercially reasonable manner, and the Issuer hereby waives any claims against the Indenture Trustee
arising by reason of the fact that the price at which the Collateral may have been sold at such sale was less than the price that might have been
obtained, even if the Indenture Trustee accepts the first offer received and does not offer the Collateral to more than one offeree.
(iii) Institute any Proceedings from time to time for the complete or partial foreclosure of the Encumbrance created by this Indenture
with respect to the Collateral;
(iv) Institute such other appropriate Proceedings to protect and enforce any other rights, whether for the specific enforcement of any
covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy;
(v) Exercise any remedies of a secured party under the UCC or any Applicable Law and take any other appropriate action to protect and
enforce the rights and remedies of the Indenture Trustee or the Noteholders under this Indenture;
(vi) Appoint a receiver or a manager over the Issuer or its assets; and
(vii) Exercise its rights under Section 3.03 hereof.
(c) If the Equipment Notes have been declared due and payable following an Event of Default, any money collected by the Indenture
Trustee pursuant to this Indenture or otherwise, and any moneys that may then be held or thereafter received by the Indenture Trustee, shall be
applied to the extent permitted by law in the following order, at the date or dates fixed by the Indenture Trustee;
(i) First, to the payment of all costs and expenses of collection incurred by the Indenture Trustee (including the reasonable fees and
expenses of any
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counsel to the Indenture Trustee), and all other amounts due the Indenture Trustee under this Indenture; and
(ii) Second, as set forth in the applicable provision of the Flow of Funds.
(d) The Indenture Trustee shall provide each Rating Agency with a copy of any Default Notice it receives or delivers pursuant to this
Indenture. Within thirty (30) days after the occurrence of an Event of Default in respect of the Equipment Notes, the Indenture Trustee shall
give notice to the Noteholders, transmitted by mail, of all uncured or unwaived Defaults actually known to a Responsible Officer of the
Indenture Trustee on such date; provided that the Indenture Trustee may withhold such notice with respect to a Default (other than a
payment default with respect to interest, principal or premium, if any) if it determines in good faith that withholding such notice is in the
interest of the affected Noteholders.
(e) The Issuer hereby agrees that if an Event of Default shall have occurred and is continuing, the Indenture Trustee and any permitted
delegee thereof are hereby irrevocably authorized and empowered to act as the attorney-in-fact for the Issuer with respect to the giving of any
instructions or notices under this Indenture.
(f) If an Event of Default shall have occurred and is continuing, upon the written Direction of the Requisite Majority, the Indenture
Trustee shall render an accounting of the current balance of each Indenture Account, and shall direct the Account Collateral Agent to render an
accounting of the current balance of the Customer Payment Account.
(g) If an Event of Default shall have occurred and is continuing, and only in such event, upon the written Direction of the Requisite
Majority, the Indenture Trustee shall be authorized to take any and all actions and to exercise any and all rights, remedies and options which it
may have under this Indenture (which rights and remedies shall include the right to direct the withdrawal and disposition of amounts on deposit
in the Indenture Accounts) and which the Requisite Majority directs it to take under this Indenture, including realization and foreclosure on the
Collateral.
(h) The Indenture Trustee may after the occurrence of and during the continuance of an Event of Default exercise any and all rights and
remedies of the Issuer under or in connection with the Assigned Agreements (including, without limitation, the Management Agreement and
any successor agreement therefor) and otherwise in respect of the Collateral, including, without limitation, any and all rights of the Issuer to
demand or otherwise require payment of any amount under, or performance of any provision of, any Assigned Agreement. In addition, after the
occurrence of and during the continuance of an Event of Default, upon the Direction of the Requisite Majority, the Indenture Trustee may
exercise all rights of the “lessor” under Leases related to Portfolio Railcars, including, without limitation, the right to direct the applicable
Lessees to make rental payments to such account as the Indenture Trustee shall specify, for application to the Collections Account and upon a
Manager Default, or a Manager Replacement Event (as defined in the Management Agreement) in respect of which the Manager has been
replaced, and in each case upon the Direction of the Requisite Majority, the Indenture Trustee may exercise the right of the “lessor” to direct
the applicable Lessees to make rental
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payments to such account as the Indenture Trustee shall specify, for application to the Collections Account.
Section 4.03 Limitation on Suits.
No Holder shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture or the Equipment Notes, or
for the appointment of a receiver or trustee, or for any other remedy hereunder, unless:
(a) such Holder holds Equipment Notes and has previously given written notice to the Indenture Trustee of a continuing Event of
Default;
(b) the Holders of at least 25% of the aggregate Outstanding Principal Balance of the Equipment Notes give a written Direction to the
Indenture Trustee to pursue a remedy hereunder;
(c) such Holder or Holders offer to the Indenture Trustee an indemnity reasonably satisfactory to the Indenture Trustee against any costs,
expenses and liabilities to be incurred in complying with such request;
(d) the Indenture Trustee does not comply with such request within sixty (60) days after receipt of the request and the offer of indemnity;
and
(e) during such sixty (60)-day period, a Requisite Majority does not give the Indenture Trustee a Direction inconsistent with such request.
No one or more Noteholders may use this Indenture to affect, disturb or prejudice the rights of another Holder or to obtain or seek to obtain
any preference or priority not otherwise created by this Indenture and the terms of the Equipment Notes over any other Holder or to enforce any
right under this Indenture, except in the manner herein provided.
Section 4.04 Waiver of Existing Defaults.
(a) The Indenture Trustee acting at the Direction of the Requisite Majority may waive any existing Default or Event of Default hereunder
and its consequences, except any waiver in respect of a covenant or provision hereof which, pursuant to Section 9.02(a), cannot be modified or
amended without the consent of such Persons as are required to amend such covenant or provision in addition to the consent of the Requisite
Majority.
(b) Upon any waiver made in accordance with Section 4.04(a), such Default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured for every purpose of this Indenture, but no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereon. Each such notice of waiver shall also be notified to each Rating Agency.
(c) Any written waiver of a Default or an Event of Default given by Holders of the Equipment Notes to the Indenture Trustee and the
Issuer in accordance with the terms of this Indenture shall be binding upon the Indenture Trustee and the other parties hereto. Unless
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such writing expressly provides to the contrary, any waiver so granted shall extend only to the specific event or occurrence which gave rise to
the Default or Event of Default so waived and not to any other similar event or occurrence which occurs subsequent to the date of such waiver.
Section 4.05 Restoration of Rights and Remedies.
If the Indenture Trustee or any Holder of Equipment Notes has instituted any proceeding to enforce any right or remedy under this
Indenture, and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Indenture Trustee
or such Holder, then in every such case the Issuer, the Indenture Trustee and the Noteholders shall, subject to any determination in such
proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Indenture
Trustee and the Noteholders shall continue as though no such proceeding has been instituted.
Section 4.06 Remedies Cumulative.
Each and every right, power and remedy herein given to the Indenture Trustee (or the Requisite Majority) specifically or otherwise in this
Indenture shall be cumulative and shall be in addition to every other right, power and remedy herein specifically given or now or hereafter
existing at law, in equity or by statute, and each and every right, power and remedy whether specifically herein given or otherwise existing may
be exercised from time to time and as often and in such order as may be deemed expedient by the Indenture Trustee (or the Requisite Majority),
and the exercise or the beginning of the exercise of any power or remedy shall not be construed to be a waiver of the right to exercise at the
same time or thereafter any other right, power or remedy. No delay or omission by the Indenture Trustee (or the Requisite Majority) in the
exercise of any right, remedy or power or in the pursuance of any remedy shall impair any such right, power or remedy or be construed to be a
waiver of any Default on the part of the Issuer or to be an acquiescence.
Section 4.07 Authority of Courts Not Required.
The parties hereto agree that, to the greatest extent permitted by law, the Indenture Trustee shall not be obliged or required to seek or obtain
the authority of, or any judgment or order of, the courts of any jurisdiction in order to exercise any of its rights, powers and remedies under this
Indenture, and the parties hereby waive any such requirement to the greatest extent permitted by law.
Section 4.08 Rights of Noteholders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any Noteholder to receive payment of interest on, principal of, or
premium, if any, on the Equipment Notes on or after the respective due dates therefor, or to bring suit for the enforcement of any such payment
on or after such respective dates, shall not be impaired or affected without the consent of such Noteholder.
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Section 4.09 Indenture Trustee May File Proofs of Claim.
The Indenture Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the
claims of the Indenture Trustee and of any Noteholder allowed in any judicial proceedings relating to the Issuer, its creditors or its property.
Section 4.10 Undertaking for Costs.
All parties to this Indenture agree, and each Noteholder by its acceptance thereof shall be deemed to have agreed, that in any suit for the
enforcement of any right or remedy under this Indenture or in any suit against the Indenture Trustee for any action taken or omitted by it as
Indenture Trustee, a court in its discretion may require the filing by any party litigant in such suit of an undertaking to pay the costs of such
suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in such suit,
having due regard to the merits and good faith of the claims or defense made by the party litigant. This Section 4.10 does not apply to a suit
instituted by the Indenture Trustee, a suit instituted by any Noteholder for the enforcement of the payment of interest, principal, or premium, if
any, on the Equipment Notes on or after the respective due dates expressed in such Equipment Note, or a suit by a Noteholder or Noteholders
of more than 10% of the Outstanding Principal Balance of the Equipment Notes (exclusive of Equipment Notes or interests therein held by any
Issuer Group Member).
ARTICLE V
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 5.01 Representations and Warranties.
The Issuer represents and warrants to the Indenture Trustee as of the Closing Date, and (other than with respect to clauses (c), (d), (e), (m),
(n) or (t) below) each Delivery Date, as follows:
(a) Due Organization .
(i) The Issuer is a limited liability company duly organized, validly existing, and in good standing under the laws of the State of
Delaware, is duly licensed or qualified and in good standing in each jurisdiction in which the failure to so qualify would have a material
adverse effect on its ability to carry on its business as now conducted or to enter into and perform its obligations under the Issuer Documents
and the Operative Agreements to which the Issuer is a party, has the organizational power and authority to carry on its business as now
conducted, has the requisite organizational power and authority to execute, deliver and perform its obligations under the Issuer Documents and
the Operative Agreements to which the Issuer is a party.
(ii) TILC is the sole member of the Issuer.
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(iii) Each of the LLC Agreement and each other organizational document of the Issuer has been duly executed and delivered by each
party thereto and constitutes a legal, valid and binding obligation of each such party enforceable against such party in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of
creditors generally and by general principles of equity.
(iv) Since the date of formation of the Issuer, the Issuer has not conducted business under any other name and does not have any trade
names, or “doing business under” or “doing business as” names. The Issuer has not reorganized in any jurisdiction (whether the United States,
any state therein, the District of Columbia, Puerto Rico, Guam or any possession or territory of the United States, or any foreign country or
state) other than the State of Delaware.
(b) Special Purpose Status .
The Issuer has not engaged in any activities since its organization (other than those incidental to its organization and other appropriate
limited liability company steps and arrangements for the payment of fees to, and director’s and officer’s insurance for, its member, special
member and manager), the execution of the Issuer Documents and the Operative Agreements to which it is a party and the activities referred to
in or contemplated by such agreements.
(c) Non-Contravention .
The Issuer’s acquisition of its Portfolio pursuant to the Asset Transfer Agreement, the other transactions contemplated by the Asset Transfer
Agreement, the creation of the Equipment Notes and the issuance, execution and delivery of, and the compliance by the Issuer with the terms of
each of the Operative Agreements and the Equipment Notes:
(i) do not conflict with, or result in a breach of any of the terms or provisions of, or constitute a default under, the constitutional
documents of the Issuer or with any existing law, rule or regulation applying to or affecting the Issuer or any judgment, order or decree of any
government, governmental body or court having jurisdiction over Issue;
(ii) do not infringe the terms of, or constitute a default under, any deed, indenture, agreement or other instrument or obligation to which
the Issuer is a party or by it or its assets, property or revenues are bound; and
(iii) do not constitute a default by the Issuer under, or result in the creation of any Encumbrance (except for Permitted Encumbrances of
the type described in clause (i), (ii) or (v) of the definition thereof) upon the property of the Issuer under its organizational documents or any
indenture, mortgage, contract or other agreement or instrument to which the Issuer is a party or by which the Issuer or any of its properties may
be bound or affected.
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(d) Due Authorization .
The Issuer’s acquisition of its Portfolio pursuant to the Asset Transfer Agreement, the other transactions contemplated by the Asset Transfer
Agreement, the creation, execution and issuance of the Equipment Notes, the execution and issue or delivery by the Issuer of the Operative
Agreements executed by it and the performance by it of its obligations hereunder and thereunder and the arrangements contemplated hereby
and thereby to be performed by it have been duly authorized by all necessary limited liability company action of the Issuer.
(e) Validity and Enforceability .
This Indenture constitutes, and the Operative Agreements, when executed and delivered and, in the case of the Equipment Notes, when
issued and authenticated, will constitute valid, legally binding and (subject to general equitable principles, insolvency, liquidation,
reorganization and other laws of general application relating to creditors’ rights or claims or to laws of prescription or the concepts of
materiality, reasonableness, good faith and fair dealing) enforceable obligations of the Issuer.
(f) No Event of Default or Early Amortization Event .
No Event of Default or Early Amortization Event has occurred and is continuing and no event has occurred that with the passage of time or
notice or both would become an Event of Default or Early Amortization Event.
(g) No Encumbrances .
Subject to the Security Interests created in favor of the Indenture Trustee and the Flow of Funds, and except for Permitted Encumbrances,
there exists no Encumbrance over the assets of the Issuer that ranks prior to or pari passu with the obligation to make payments on the
Equipment Notes.
(h) No Consents .
No consent, approval or authorization of, or filing, registration or qualification with, or the giving of notice to, any trustee or any holder of
indebtedness of the Issuer or any governmental authority on the part of the Issuer is required in the United States, Canada or Mexico (subject to
the proviso set forth below) in connection with the execution and delivery by the Issuer of the Operative Agreements to which the Issuer is a
party or in order for the Issuer to perform its obligations thereunder in accordance with the terms thereof, other than: (i) notices required to be
filed with the STB and the Registrar General of Canada, which notices shall have been filed on the Closing Date, (ii) as may be required under
existing laws, ordinances, governmental rules and regulations to be obtained, given, accomplished or renewed at any time after the Closing
Date in connection with the operation and maintenance of the Portfolio Railcars and in accordance with the Operative Agreements that are
routine in nature and are not normally applied for prior to the time they are required, and which the Issuer has no reason to believe will not be
timely obtained, (iii) as may be required under the Operative Agreements in consequence of any transfer of ownership of the Portfolio Railcars
and (iv) filing and recording to perfect the
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Security Interests under this Indenture as required hereunder; provided , that the parties hereto agree that the Issuer shall not be required to
make any such filings or recordings in Mexico.
(i) No Litigation .
There is no claim, action, suit, investigation or proceeding pending against, or to the knowledge of the Issuer, threatened against or affecting
the Issuer, before any court or arbitrator or any governmental body, agency or official which in any manner challenges or seeks to prevent,
enjoin, alter or materially delay the transactions contemplated by this Indenture (including the Exhibits and Schedules attached hereto) and/or
the Operative Agreements.
(j) Employees, Subsidiaries .
The Issuer has no employees. The Issuer has no Subsidiaries.
(k) Ownership .
The Issuer is the owner of the Collateral free from all Encumbrances and claims whatsoever other than Permitted Encumbrances.
(l) No Filings .
Under the laws of Delaware, Texas and New York (and including U.S. federal law) in force at the date hereof, it is not necessary or
desirable that this Indenture or any Operative Agreement to which the Issuer is a party be filed, recorded or enrolled with any court or other
authority in any such jurisdictions or that any material stamp, registration or similar tax be paid on or in relation to this Indenture or any of the
other Operative Agreements (other than filings of UCC financing statements and with the STB and in Canada in respect of the Security
Interests in the Portfolio Railcars).
(m) Other Representations . The representations and warranties made by the Issuer in any of the other Operative Agreements are true and
accurate as of the date made.
(n) Other Regulations . The Issuer is not an “investment company,” or an “affiliated person” of, or a “promoter” or “principal
underwriter” for, an “investment company,” as such terms are defined in the Investment Company Act of 1940, as amended.
(o) Insurance . The Portfolio Railcars described on each Delivery Schedule delivered from time to time under the Asset Transfer
Agreement are, at the time of the related Conveyance to the Issuer, covered by the insurance required by Section 5.04(f) hereof, and all
premiums due prior to the applicable Delivery Date in respect of such insurance shall have been paid in full and such insurance as of the
applicable Delivery Date is in full force and effect.
(p) No Event of Default or Total Loss . At the time of each Conveyance of Railcars under the Asset Transfer Agreement, (i) no Event of
Default has occurred and is continuing, (ii) no Manager Default (in the case of Conveyances other than on the Closing Date) or Manager
Termination Event (in the case of Conveyances on the Closing Date) has occurred and is continuing, (iii) to the knowledge of the Issuer, no
Total Loss or event that, with the
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giving of notice, the passage of time or both, would constitute a Total Loss with respect to any of the Railcars so Conveyed, has occurred, and
(iv) to the knowledge of the Issuer, no Railcar being Conveyed under the Asset Transfer Agreement on such date has suffered damage or
contamination which, in the Issuer’s reasonable judgment, makes repair uneconomic or renders such Railcar unfit for commercial use.
(q) Beneficial Title . On each Delivery Date upon which a Conveyance occurs under the Asset Transfer Agreement, (i) the applicable
Seller has, and shall pursuant to its related Bill of Sale have, conveyed all legal and beneficial title of the Issuer to such Railcars being so
Conveyed free and clear of all Encumbrances (other than Permitted Encumbrances) and such Conveyance will not be void or voidable under
any applicable law and (ii) the applicable Seller has, and the Assignment and Assumption to be delivered on the related Delivery Date shall
upon acceptance thereof by the Issuer assign to the Issuer, all legal and beneficial title to the related Leases, free and clear of all Encumbrances
(other than Permitted Encumbrances), and the Assignment and Assumption will not be void or voidable under any applicable law.
(r) Nature of Business . The Issuer is not engaged in the business of extending credit for the purposes of purchasing or carrying margin
stock, and no proceeds of the Equipment Notes will be used by the Issuer for a purpose which violates, or would be inconsistent with, Section 7
of the Securities Exchange Act of 1934, as amended, or Regulations T, U and X of the Federal Reserve System (terms for which meanings are
provided in Regulations T, U and X of the Federal Reserve System or any regulations substituted therefor, as from time to time in effect, being
used in this Section 5.01(r) with such meanings).
(s) No Default under Organizational Documents . The Issuer is not in violation of any term of any of its organizational documents or in
violation or breach of or in default under any other agreement, contract or instrument to which it is a party or by which it or any of its property
may be bound.
(t) Issuer Compliance . The Issuer is in compliance in all material respects with all laws, ordinances, governmental rules, regulations,
orders, judgments, decrees, determinations and awards to which it is subject and the Issuer has obtained all required licenses, permits,
franchises and other governmental authorizations material to the conduct of its business.
(u) Railcar Compliance; Autoracks . Each Railcar Conveyed on a Delivery Date, taken as a whole, and each major component thereof
complies in all material respects with all applicable laws and regulations, all requirements of the manufacturer for maintaining in full force and
effect any applicable warranties and the requirements, if any, of any applicable insurance policies, conforms with the specifications for such
Railcar contained in the related Appraisal (to the extent a copy of such Appraisal or a relevant excerpt therefrom has been delivered to the
Issuer) and is substantially complete such that it is ready and available to operate in commercial service and otherwise perform the function for
which it was designed; and the railcar identification marks shown on the related Bill of Sale are the marks then used on the Portfolio Railcars
set forth on such Bill of Sale. Each Portfolio Railcar that is an autorack qualifies for the National Reload Pool.
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(v) Taxes . On each Delivery Date upon which a Conveyance occurs under the Asset Transfer Agreement, all sales, use or transfer taxes,
if any, due and payable upon the purchase of the Portfolio Railcars by the Issuer from the applicable Seller will have been paid or such
transactions will then be exempt from any such taxes, and the Issuer will cause any required forms or reports in connection with such taxes to
be filed in accordance with applicable laws and regulations.
(w) Lease Terms . Each Railcar Conveyed on the relevant Delivery Date is subject to a Permitted Lease, which Lease (together with the
other Leases that are or have been the subject of such Conveyances) contains rental and other terms which are no different, taken as a whole,
from those for similar railcars in the TILC Fleet.
(x) Eligibility . Each Railcar described on its relevant Delivery Schedule constitutes an Eligible Railcar as of the date of its Conveyance
to the Issuer.
(y) Assignment of Leases . (i) Each Lease conveyed on the relevant Delivery Date is freely assignable from the applicable Seller to the
Issuer and from the Issuer to any other Person (including, without limitation, any transferee in connection with the Indenture Trustee’s exercise
of rights or remedies under this Indenture) or, if any such Lease is not freely assignable, then consents to such assignments determined by the
Manager in good faith to be sufficient for their intended purposes have been obtained prior to the relevant Delivery Date, (ii) no assignment
described in this Section 5.01(y ) is void or voidable or will result in a claim for damages or reduction in rental or other payments, in each
case pursuant to the terms and conditions of any such Lease and (iii) no consent, approval or filing is required under such Lease in connection
with the execution and delivery of the Operative Agreements.
(z) Purchase Options . With respect to any Portfolio Railcars that are subject to a purchase option granted to the Lessee under the relevant
Lease, (i) such purchase option is exercisable by the applicable Lessee for a purchase price not less than (at the time of such purchase) the
greater of (1) an appraiser’s estimate at Lease inception of fair market value at the time of potential exercise under the option provision, and
(2) 105% of the product of the Railcar Advance Rate and the Adjusted Value of the Portfolio Railcars subject to such purchase option and
(ii) the sum of (x) the aggregate Adjusted Values of all Portfolio Railcars subject to such Lease and all Portfolio Railcars subject to any other
Lease containing a purchase option and (y) the aggregate sum of the Adjusted Values of all Portfolio Railcars that the Issuer has sold pursuant
to Permitted Discretionary Sales or Purchase Option Dispositions, does not exceed 35% of the highest aggregate Adjusted Value of all
Portfolio Railcars held by the Issuer at any particular time up to the date this representation is made or deemed made. Any such purchase option
complying with each of the foregoing limitations described in clauses (i) and (ii) above is referred to herein and in the other Operative
Agreements as a “Permitted Purchase Option.”
(aa) No Other Financing of Lease; Permitted Lease . After giving effect to the transfers contemplated under the Operative Agreements,
(i) the Leases being Conveyed to the Issuer on any applicable Delivery Date (as evidenced by the Riders or Schedules with respect thereto) are
not subject to and do not cover railcars financed in, any financing or securitization transaction other than the transactions contemplated by the
Operative Agreements and (ii) such Leases conform to the definition of Permitted Lease.
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(bb) Concentration Limits . After giving effect to the Issuer’s acquisition of Railcars in connection with issuing the Equipment Notes on
the Closing Date, the Portfolio complies with all Concentration Limits.
Section 5.02 General Covenants.
The Issuer covenants with the Indenture Trustee as follows:
(a) No Release of Obligations .
The Issuer will not take any action which would amend, terminate (other than any termination in connection with the replacement of such
agreement on terms substantially no less favorable to the Issuer than the agreement being terminated) or discharge or prejudice the validity or
effectiveness of this Indenture (other than as permitted herein) or any other Operative Agreement or permit any party to any such document to
be released from such obligations, except that; in each case, as permitted or contemplated by the terms of such documents, and provided that,
in any case, (i) the Issuer will not take any action which would result in any amendment or modification to any conflicts standard or duty of
care in such agreements and (ii) there must be at all times an Administrator and a Manager with respect to all Portfolio Railcars.
(b) Encumbrances .
The Issuer will not create, incur, assume or suffer to exist any Encumbrance other than: (i) any Permitted Encumbrance, and (ii) any
other Encumbrance the validity or applicability of which is being contested in good faith in appropriate proceedings by any Issuer Group
Member (and the proceedings related to such Encumbrance or the continued existence of such Encumbrance does not give rise to any
reasonable likelihood of the sale, forfeiture or loss of the asset affected by such Encumbrance) and for which the Issuer maintains adequate
cash reserves to pay such Encumbrance.
(c) Indebtedness .
The Issuer will not incur, create, issue, assume, guarantee or otherwise become liable for or with respect to, or become responsible for
the payment of, contingently or otherwise, whether present or future, Indebtedness, other than Indebtedness in respect of the Equipment Notes
issued in accordance with the terms of this Indenture.
(d) Restricted Payments .
The Issuer will not (i) declare or pay any dividend or make any distribution on its Stock; provided that, so long as no Event of Default
shall have occurred and be continuing and to the extent there are available funds therefor on the applicable Payment Date, the Issuer may make
payments on its limited liability company membership interests to the extent of the aggregate amount of distributions made to the Issuer
pursuant to the Flow of Funds; (ii) purchase, redeem, retire or otherwise acquire for value any membership interest in the Issuer held by or on
behalf of Persons other than any Permitted Holder; (iii) make any interest, principal or premium, if any, payment on the Equipment Notes or
make any voluntary or optional repurchase, defeasance or other acquisition or retirement for value of Indebtedness of
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the Issuer other than in accordance with the Equipment Notes and this Indenture or the Operative Agreements; provided that the Issuer may
repurchase, defease or otherwise acquire or retire any of the Equipment Notes from a source other than from Collections (other than that
portion of Collections that would otherwise be distributable to the Issuer in accordance with the Flow of Funds); or (iv) make any investments,
other than Permitted Investments and investments permitted under Section 5.02(f) hereof.
The term “ investment ” for purposes of the above restriction shall mean any loan or advance to a Person, any purchase or other acquisition
of any Stock or Indebtedness of such Person, any capital contribution to such Person or any other investment in such Person.
(e) Limitation on Dividends and Other Payments .
The Issuer will not create or otherwise suffer to exist any consensual limitation or restriction of any kind on the ability of the Issuer to
declare or pay dividends or make any other distributions permitted by Applicable Law, other than pursuant to the Operative Agreements.
(f) Business Activities .
The Issuer will not engage in any business or activity other than:
(i) purchasing or otherwise acquiring (subject to the limitations on acquisitions of Portfolio Railcars described below), owning, holding,
converting, maintaining, modifying, managing, operating, leasing, re-leasing and (subject to the limitations on sales of Portfolio Railcars
described below) selling or otherwise disposing of its Portfolio Railcars and entering into all contracts and engaging in all related activities
incidental thereto, including from time to time accepting, exchanging, holding promissory notes, contingent payment obligations or equity
interests of Lessees or their Affiliates issued in connection with the bankruptcy, reorganization or other similar process, or in settlement of
delinquent obligations or obligations anticipated to be delinquent of such Lessees or their respective Affiliates in the ordinary course of
business;
(ii) financing or refinancing the business activities described in clause (i) of this Section 5.02(f) through the offer, sale and issuance of
the Equipment Notes;
(iii) purchasing, acquiring, surrendering and assigning policies of insurance and assurances with any insurance company or companies
which the Issuer or the Insurance Manager determines to be necessary or appropriate to comply with this Indenture and to pay the premiums or
the Issuer’s allocable portion thereon; and
(iv) taking any action that is incidental to, or necessary to effect, any of the actions or activities set forth above.
(g) Limitation on Consolidation, Merger and Transfer of Assets .
The Issuer will not consolidate with, merge with or into, or sell, convey, transfer, lease or otherwise dispose of its property and assets (as
an entirety or substantially an entirety in
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one transaction or in a series of related transactions) to, any other Person, or permit any other Person to merge with or into the Issuer (any such
consolidation, merger, sale or disposition, a “ Merger Transaction ”), unless:
(i) the resulting entity is a special purpose entity, the charter of which is substantially similar to the LLC Agreement, and, after such
Merger Transaction, payments from such resulting entity to the Noteholders do not give rise to any withholding tax payments less favorable to
the Noteholders than the amount of any withholding tax payments which would have been required had such Merger Transaction not occurred
and such entity is not subject to taxation as a corporation or an association or a publicly traded partnership taxable as a corporation;
(ii) (A) such Merger Transaction has been unanimously approved by the board of managers of the Issuer and (B) the surviving successor
or transferee entity shall expressly assume all of the obligations of the Issuer under this Indenture, the Equipment Notes and each other
Operative Agreement to which the Issuer is then a party (with the result that, in the case of a transfer only, the Issuer thereupon will be
released);
(iii) both before, and immediately after giving effect to such Merger Transaction, no violation of a Concentration Limit, Event of Default
or Early Amortization Event shall have occurred and be continuing;
(iv) each of (A) a Rating Agency Confirmation and (B) the consent of the Indenture Trustee (acting at the Direction of a Requisite
Majority) has been obtained with respect to such Merger Transaction;
(v) for U.S. Federal income tax purposes, such Merger Transaction does not result in the recognition of gain or loss by any Noteholder;
and
(vi) the Issuer delivers to the Indenture Trustee an Officer’s Certificate and an Opinion of Counsel, in each case stating that such Merger
Transaction complies with the above criteria and, if applicable, Section 5.03(a) hereof and that all conditions precedent provided for herein
relating to such transaction have been complied with;
(h) Limitation on Transactions with Affiliates .
The Issuer will not, directly or indirectly, enter into, renew or extend any transaction (including, without limitation, the purchase, sale,
lease or exchange of property or assets, or the rendering of any service) with any Affiliate of the Issuer, except upon fair and reasonable terms
no less favorable to the Issuer than could be obtained, at the time of such transaction or at the time of the execution of the agreement providing
therefor, in a comparable arm’s-length transaction with a Person that is not such an Affiliate, provided, that the foregoing restriction does not
limit or apply to the following:
(i) any transaction in connection with the establishment of the Issuer, its initial capitalization and the acquisition of its initial Portfolio or
pursuant to the terms of the Operative Agreements;
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(ii) the payment of reasonable and customary regular fees to, and the provision of reasonable and customary liability insurance in respect
of, the managers/members of the Issuer’s;
(iii) any payments on or with respect to the Equipment Notes or otherwise in accordance with the Flow of Funds;
(iv) any acquisition of Additional Railcars or any Permitted Railcar Acquisition complying with Section 5.03(b) hereof;
(v) any payments of the types referred to in clause (i) or (ii) of Section 5.02(d) hereof and not prohibited thereunder; or
(vi) the sale of Portfolio Railcars as part of a single transaction providing for the redemption or defeasance of the Equipment Notes in
whole in accordance with the terms of this Indenture.
(i) Limitation on the Issuance, Delivery and Sale of Equity Interests .
Except as expressly permitted by its LLC Agreement, the Issuer will not (1) issue, deliver or sell any Stock or (2) sell, directly or
indirectly, or issue, deliver or sell, any Stock, except for the following:
(A) issuances or sales of any additional membership interests to the Member (the “Permitted Holder” ) ; or
(B) contributions by the Permitted Holder of funds to the Issuer with which to effect a redemption or discharge of the Equipment Notes
upon any acceleration of the Equipment Notes.
Notwithstanding the foregoing, no issuance, delivery, sale, transfer or other disposition of any equity interest in the Issuer will be effective, and
any such issuance, delivery, sale transfer or other disposition will be void ab initio , if it would result in the Issuer being classified as an
association (or a publicly traded partnership) taxable as a corporation for U.S. federal income tax purposes.
(j) Bankruptcy and Insolvency .
(i) The Issuer will promptly provide the Indenture Trustee and the Rating Agencies with written notice of the institution of any
proceeding by or against the Issuer seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief or composition of its debts under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee or other similar official for either or for any
substantial part of its property. The Issuer will not take any action to waive, repeal, amend, vary, supplement or otherwise modify its charter
documents and including its LLC Agreement (except in accordance with the next sentence) unless receiving the prior written consent of the
Indenture Trustee (acting at the
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Direction of the Requisite Majority) as well as a Rating Agency Confirmation in respect thereof. The Issuer will not, without a Special Rating
Agency Confirmation, take any action to waive, repeal, amend, vary, supplement or otherwise modify the provision of its LLC Agreement
which requires action or consent of its special member or limits actions of the Issuer with respect to voluntary insolvency proceedings or
involuntary insolvency proceedings of the Issuer.
(ii) The Issuer shall cause each party to any Operative Agreement, and each party to any other agreement incidental or related to any
Operative Agreement, that in either such case renders the Issuer a debtor to such party, to covenant and agree that it shall not, prior to the date
which is one year and one day (or if longer, the applicable preference period then in effect) after the payment in full of the Equipment Notes,
acquiesce, petition or otherwise, directly or indirectly, invoke or cause the Issuer to invoke the process of any governmental authority for the
purpose of commencing or sustaining a case against the Issuer under any federal or state bankruptcy, insolvency or similar law or appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Issuer or any substantial part of its property or
ordering the winding up or liquidation of the affairs of the Issuer. This provision shall survive the termination of this Indenture.
(k) Payment of Principal, Premium, if any, and Interest .
The Issuer will duly and punctually pay the principal, premium, if any, and interest on the Equipment Notes in accordance with the terms
of this Indenture and the Equipment Notes.
(l) Limitation on Employees .
The Issuer will not employ or maintain any employees other than as required by any provisions of local law. Managers, officers and
directors shall not be deemed to be employees for purposes of this Section 5.02(l).
(m) Delivery of Rule 144A Information . To permit compliance with Rule 144A in connection with offers and sales of Equipment
Notes, the Issuer will promptly furnish upon request of a Holder of an Equipment Note to such Holder and a prospective purchaser designated
by such Holder, the information required to be delivered under Rule 144A(d)(4) if at the time of such request the Issuer is not a reporting
company under Section 13 or Section 15(d) of the Exchange Act.
(n) Administrator . If at any time, there is not a Person acting as Administrator, the Issuer shall promptly appoint a qualified Person to
perform any duties under this Indenture that the Administrator is obligated to perform until a replacement Administrator assumes the duties of
the Administrator.
(o) Ratings of Equipment Notes . For so long as any Equipment Notes are Outstanding, the Issuer shall pay all fees of S&P and
Moody’s and take all such other actions as may be necessary from time to time in order to cause S&P and Moody’s to maintain a rating with
respect to the Equipment Notes.
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(p) Separate Entity Characteristics . The Issuer shall at all times:
(i) not commingle its assets with those of any Person, including any Affiliate, except with respect to the Customer Payments Account
and as may occur from time to time due to misdirected payments;
(ii) conduct its business separate from any direct or ultimate parent of the Issuer;
(iii) maintain financial statements susceptible to audit, separate from those of any other Person showing its assets and liabilities separate
and apart from those of any other Person;
(iv) pay its own expenses and liabilities and pay the salaries of its own employees, if any, only from its own funds;
(v) maintain an “arm’s-length relationship” with its Affiliates;
(vi) not guarantee or become obligated for the debts of any other Person and not hold out its credit as being available to satisfy the debts
or any other obligations of any other Person;
(vii) use separate stationery, invoices and checks and hold itself out as a separate and distinct entity from any other Person;
(viii) observe all limited liability company and other organizational formalities required by the law of its jurisdiction of formation;
(ix) not acquire obligations or securities of any Person, except Permitted Investments and as otherwise contemplated in the Operative
Agreements;
(x) allocate fairly and reasonably any overhead expenses shared with any other Person, if any;
(xi) except for the Security Interests and Permitted Encumbrances, not pledge its assets for the benefit of any other Person or make any
loans or advances to any Person (but the Issuer may extend or forbear obligations of any Lessees under the related Leases in the ordinary
course of business and in accordance with the provisions of the Management Agreement);
(xii) correct any known misunderstanding regarding its separate identity from other Persons;
(xiii) maintain adequate capital in light of its contemplated business operations;
(xiv) maintain books and records (in accordance with generally accepted accounting principles in the United States) separate from any
other Person at its principal
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office which show a true and accurate record in United States dollars of all business transactions arising out of and in connection with the
conduct of the Issuer and the operation of its business in sufficient detail to allow preparation of tax returns required to be prepared and the
maintenance of the Indenture Accounts;
(xv) maintain bank and other accounts (other than the Indenture Accounts), if any, separate from any other Person or entity;
(xvi) conduct its business in its own name; and
(xvii) not take any actions that would be inconsistent with maintaining the separate legal identity of the Issuer.
Section 5.03 Portfolio Covenants.
The Issuer covenants with the Indenture Trustee as follows:
(a) Railcar Dispositions . The Issuer will not sell, transfer or otherwise dispose of any Railcar or any interest therein, except that the
Issuer may sell, transfer or otherwise dispose of or part with possession of (i) any Parts, or (ii) one or more Portfolio Railcars, as follows (any
such sale, transfer or disposition described in clause (i), (ii) or (iii) of this Section 5.03(a), a “ Permitted Railcar Disposition” ):
(i) A Railcar Disposition pursuant to a Permitted Purchase Option (a “ Purchase Option Disposition ”);
(ii) A Railcar Disposition pursuant to receipt of insurance or other third party proceeds in connection with the Total Loss of a Portfolio
Railcar (and any consequent later sale of such affected Railcar for scrap or salvage value) (an “Involuntary Railcar Disposition” ); or
(iii) A Railcar Disposition in the ordinary course of business (other than a Railcar Disposition as a result of a Total Loss or a Purchase
Option Disposition) so long as the following conditions are complied with (a “Permitted Discretionary Sale” ):
(A) At the time of such Railcar Disposition, no Event of Default or Early Amortization Event shall have occurred and then be
continuing.
(B) The Issuer (or the Manager on its behalf) prior to such Railcar Disposition, as evidenced by an Officer’s Certificate to be delivered
to the Indenture Trustee, shall have identified replacement Railcars for the Issuer to purchase meeting the criteria set forth in clauses “1”
through “4” of clause (C) below (Railcars meeting such criteria, “Qualifying Replacement Railcars” ), with such purchase expected to be
made within 30 days of the date of the discretionary sale.
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(C) Such Railcars
(1) must be of comparable remaining economic useful life to the Portfolio Railcars being sold,
(2) must have an Appraisal showing an Initial Appraised Value,
(3) must be under Lease to the same extent as the Portfolio Railcars being sold, and
(4) must have been manufactured by Trinity or an Affiliate thereof, and must be purchased pursuant to the Asset Transfer Agreement.
(D) With respect to the Portfolio Railcars to be sold pursuant to a Permitted Discretionary Sale (such Portfolio Railcars being referred to
below as the “ Sold Railcars ”), each of the following conditions shall have been satisfied and the Indenture Trustee shall have received an
Officer’s Certificate of the Issuer (or the Manager on its behalf) certifying as to the satisfaction of such conditions:
(1) The Sold Railcars must be purchased from the Issuer by a third party that is not an Issuer Group Member.
(2) The Net Disposition Proceeds realized in such sale must be at least 105% of the product of the Railcar Advance Rate and the Adjusted
Value of such Sold Railcars.
(3) Sold Railcars that were under Lease at the time of sale, if being replaced, must be replaced by Qualifying Replacement Railcars under
Lease that generate at least the same amount of current monthly lease revenue and have a remaining Lease term at least equal to two-thirds of
the Lease term of such Sold Railcars.
(4) Sold Railcars that were not under Lease at the time of sale, if being replaced, must be replaced by Qualifying Replacement Railcars as to
which, if not then under Lease, the Manager has a reasonable, good faith expectation that such Qualifying Replacement Railcars will generate
at least the same amount of monthly lease revenue (once placed under Lease) as the Manager would have expected for the Sold Railcars.
(E) The Net Disposition Proceeds must be deposited into the Mandatory Replacement Account.
(F) Such Railcar Disposition, after giving effect to the expected reinvestment, will not directly cause noncompliance with any
Concentration Limit.
(G) The Initial Appraised Value of the reinvestment Railcars acquired in connection with a Permitted Discretionary Sale must at least
equal the Adjusted Value of the Sold Railcars at their time of sale (except to a de minimus extent).
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(H) The sum of (x) the Adjusted Value of the Portfolio Railcars to be sold in such Railcar Disposition, (y) the aggregate sum of the
Adjusted Values of all Portfolio Railcars that the Issuer has sold in all Permitted Discretionary Sales and Purchase Option Dispositions and
(z) the aggregate Adjusted Value of all Portfolio Railcars then subject to a Lease containing a purchase option, does not exceed 35% of the
highest aggregate Adjusted Value of all Portfolio Railcars held by the Issuer at any particular time up to the related date of sale.
(I) The Adjusted Value of the Portfolio Railcars to be sold in such Railcar Disposition, in the aggregate with the aggregate sum of the
Adjusted Values of all Portfolio Railcars that the Issuer has sold in any Permitted Discretionary Sales or Purchase Option Dispositions, does
not exceed 15% of the average, for each of the previous twelve Payment Dates, of the aggregate sum of the Adjusted Values of all Portfolio
Railcars for such Payment Dates (or, if fewer than twelve Payment Dates have passed, such average for all such Payment Dates).
(iv) With respect to a Permitted Railcar Disposition constituting a Purchase Option Disposition or Involuntary Disposition, the Issuer
will, if not electing to deposit such proceeds directly into the Collections Account, deposit the related Net Disposition Proceeds into the
Optional Reinvestment Account for application, within the Replacement Period, to a purchase of Qualifying Replacement Railcars in a
Replacement Exchange (as contemplated and provided in Section 3.05).
(b) Railcar Acquisitions . The Issuer will not purchase or otherwise acquire a Railcar (or an interest therein) other than the Initial
Railcars or any interest therein, except that, the Issuer will be permitted to: (i) purchase or otherwise acquire, directly or indirectly, Railcars
constituting Qualifying Replacement Railcars in connection with any Replacement Exchange, or (ii) acquire one or more additional Railcars
pursuant to a capital contribution, so long as, in each case of clause (i) and (ii), each of the following requirements are satisfied on or prior to
such purchase or other acquisition:
(A) no Event of Default or Early Amortization Event shall have occurred and be continuing or would directly result therefrom;
(B) after giving effect to the acquisition, the Portfolio will comply with the Concentration Limits;
(C) the Railcars being acquired have an Appraisal showing an Initial Appraised Value;
(D) the Purchase Price for each such Railcar does not exceed its Initial Appraised Value;
(E) the Railcars being acquired were manufactured by Trinity or an Affiliate, and are acquired pursuant to the Asset Transfer
Agreement;
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(F) except in connection with Railcars being acquired in a Replacement Exchange for Portfolio Railcars that were not subject to a Lease
at the time of the disposition thereof by the Issuer, the Railcars being acquired are each subject to a Permitted Lease; that all actions (including
the applicable UCC, STB or Registrar General of Canada filings) shall have been taken to cause the Railcars being assigned to be subject to a
first priority security interest in favor of the Indenture Trustee for the benefit of the Secured Parties; and
(G) that the Railcars will be free and clear of Encumbrances other than Permitted Encumbrances.
(c) Permitted Railcar Acquisition . A Railcar acquisition by the Issuer complying with the provisions in subsection (b) immediately
above constitutes a “Permitted Railcar Acquisition” .
(d) Modification Payments and Capital Expenditures . The Issuer will not make any capital expenditures for the purpose of effecting any
optional improvement or modification of any Portfolio Railcar or Parts outside of the ordinary course of business, except that the Issuer may
make Optional Modifications and Required Modifications in its discretion and subject to the following limitations on the manner in which such
Required Modifications and Optional Modifications may be funded:
(i) Required Modifications may be funded out of the Expense Account in accordance with Section 3.06; and
(ii) Optional Modifications may be funded from distributions to the Issuer pursuant to the Flow of Funds, or from capital contributions
to the Issuer.
In the case of any Optional Modification, the Issuer prior to undertaking such Optional Modification shall have determined, based upon
consultation with the Manager, that the optional modification is not expected to decrease the value or marketability of the Portfolio Railcar as a
result of the expenditure on such Optional Modification.
(e) Leases .
(i) The Issuer will not surrender possession of any Portfolio Railcar to any Person other than for purposes of maintenance or overhaul or
pursuant to a Permitted Lease or for storage purposes pending the Manager’s procurement of a Permitted Lease thereon.
(ii) The Issuer will, and will cause the Manager in general to use its pro forma lease agreement or agreements, as such pro forma lease
agreement or agreements may be revised for purposes of the Issuer specifically or generally from time to time by the Manager (collectively,
the “ Pro Forma Lease ”), for use by the Manager on behalf of the Issuer as a starting point in the negotiation of Future Leases. However, with
respect to any Future Lease entered into in connection with (x) the renewal or extension of a related Lease, (y) the leasing of a Portfolio Railcar
to a Person that is or was a Lessee under a pre-existing Lease, or (z) the leasing of a Portfolio Railcar to a Person that is or
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was a Lessee under an operating lease of a Railcar that is being managed or serviced by the Manager (such Future Lease, a “ Renewal Lease ”),
a form of lease substantially similar to such pre-existing Lease or operating lease (a “ Precedent Lease ”), as the case may be, may be used by
the Manager, in lieu of the Pro Forma Lease on behalf of the Issuer as a starting point in the negotiation of such Future Lease. The terms of the
Pro Forma Lease may be revised from time to time by the Manager, provided that any such revisions shall be consistent with a Lease
originated thereunder being a Permitted Lease.
(f) Concentration Limits . The Issuer will not sell, purchase, otherwise take any action with respect to any Portfolio Railcar if entering
into such proposed sale, or other action would cause the Portfolio to no longer comply with the Concentration Limits; provided , that the
foregoing restriction shall not apply to the renewal by the Issuer of an Existing Lease. Also, the Issuer will not consummate a Permitted
Discretionary Sale if the effect of such action is or would be to cause noncompliance with any Concentration Limit.
Section 5.04 Operating Covenants.
The Issuer covenants with the Indenture Trustee as follows, provided that any of the following covenants with respect to the Portfolio
Railcars shall not be deemed to have been breached by virtue of any act or omission of a Lessee or sub-lessee, or of any Person which has
possession of a Portfolio Railcar for the purpose of repairs, maintenance, modification or storage, or by virtue of any requisition, seizure, or
confiscation of a Portfolio Railcar (other than seizure or confiscation arising from a breach by the Issuer of such covenant) (each, a “Third
Party Event” ), so long as (i) neither the Issuer nor the Manager has consented to such Third Party Event; and (ii) the Issuer (or the Manager on
its behalf) as the Lessor of such Portfolio Railcar promptly and diligently takes such commercially reasonable actions as a leading railcar
operating lessor would reasonably take in respect of such Third Party Event, including, as deemed appropriate (taking into account, among
other things, the laws of the jurisdiction in which such Portfolio Railcar is located), seeking to compel such Lessee or other relevant Person to
remedy such Third Party Event or seeking to repossess the relevant Portfolio Railcar:
(a) Ownership . The Issuer will (i) on all occasions on which the ownership of each Portfolio Railcar is relevant, make it clear to third
parties that title to the same is held by the Issuer, and (ii) not do, or knowingly permit to be done, or omit, or knowingly permit to be omitted,
any act or thing which might reasonably be expected to jeopardize the rights of the Issuer as owner of each Portfolio Railcar, except as
contemplated by the Operative Agreements.
(b) Compliance with Law; Maintenance of Permits . The Issuer will (i) comply in all material respects with all Applicable Laws,
(ii) obtain all material governmental (including regulatory) registrations, certificates, licenses, permits and authorizations required for the use
and operation of the Portfolio Railcars owned by it, (iii) not cause or knowingly permit, directly or indirectly, any Lessee to operate any
Portfolio Railcar under any related Lease in any material respect contrary to any Applicable Law, and (iv) not knowingly permit, directly or
indirectly, any Lessee not to obtain all material governmental (including regulatory) registrations, certificates, licenses, permits and
authorizations required for such Lessee’s use and operation of any Portfolio Railcar under any related operating Lease.
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(c) Forfeiture . The Issuer will not do anything, and will not knowingly permit, directly or indirectly, any Lessee to do anything, which
may reasonably be expected to expose any Portfolio Railcar to forfeiture, impoundment, detention, appropriation, damage or destruction (other
than any forfeiture, impoundment, detention or appropriation which is being contested in good faith by appropriate proceedings if (i) adequate
resources have been made available by the Issuer or the applicable Lessee for any payment which may arise or be required in connection with
such forfeiture, impounding, detention or appropriation or proceedings taken in respect thereof, and (ii) such forfeiture, impounding, detention
or appropriation or the continued existence thereof does not give rise to any material likelihood of the assets to which such forfeiture,
impounding, detention or appropriation relates or any interest in such assets being sold, permanently forfeited or otherwise lost). In the event of
a forfeiture, impoundment, detention or appropriation of such Portfolio Railcar not constituting a Total Loss, the Issuer will use all
commercially reasonable efforts to obtain the prompt release of such Portfolio Railcar.
(d) Maintenance of Assets . The Issuer will, with respect to each Portfolio Railcar under Lease, cause, directly or indirectly, such
Portfolio Railcar to be maintained in a state of repair and condition consistent with the reasonable commercial practice of leading railcar
operating lessors with respect to similar railcars under lease, taking into consideration, among other things, the identity of the relevant Lessee
(including the credit standing and operating experience thereof), the age and condition of the Portfolio Railcar and the jurisdiction in which the
Portfolio Railcar is or will be operated or in which the Lessee is based. In addition, the Issuer will, with respect to each Portfolio Railcar that is
not subject to a Lease, maintain such Portfolio Railcar in a state of repair and condition consistent with the reasonable commercial practice of
leading railcar operating lessors with respect to railcars not under lease.
(e) Notification of Loss, Theft, Damage or Destruction. The Issuer will notify the Indenture Trustee, the Administrator, and the
Manager, in writing, as soon as the Issuer becomes aware of any loss, theft, damage or destruction to any Portfolio Railcar if the potential cost
of repair or replacement of such asset (without regard to any insurance claim related thereto) may exceed $1,000,000.
(f) Insurance . The Issuer covenants with the Indenture Trustee as follows:
(i) Insurance . The Issuer will at all times after the Closing Date, at its own expense, keep or cause the Insurance Manager under the
Insurance Agreement to keep each Portfolio Railcar insured with insurers of recognized responsibility with a rating of at least A- by A.M. Best
Company (or a comparable rating by a nationally or internationally recognized rating group of comparable stature) or by other insurers
approved in writing by the Requisite Majority, which approval shall not be unreasonably withheld, in amounts and against risks and with
deductibles and terms and conditions not less beneficial to the insured thereunder than the insurance, if any, maintained by the Manager with
respect to similar equipment which it owns or leases, but in no event shall such coverage be for amounts or against risks less than the Prudent
Industry Practice.
(ii) Additional Insurance . In the event that the Issuer shall fail to maintain insurance as herein provided, the Indenture Trustee may at its
option, upon prior written notice to the Issuer, provide such insurance and, in such event, the Issuer shall,
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upon demand from time to time reimburse the Indenture Trustee for the cost thereof together with interest from the date of payment thereof at
the Stated Rate on the Equipment Notes, on the amount of the cost to the Indenture Trustee of such insurance which the Issuer shall have failed
to maintain. If after the Indenture Trustee has provided such insurance, the Issuer then obtains the coverage provided for in Section 5.04(f)
which was replaced by the insurance provided by the Indenture Trustee, and the Issuer provides the Indenture Trustee with evidence of such
coverage reasonably satisfactory to the Indenture Trustee, the Indenture Trustee shall cancel the insurance it has provided pursuant to the first
sentence of this Section 5.04(f)(ii). In such event, the Issuer shall reimburse the Indenture Trustee for all costs to the Indenture Trustee of
cancellation, including without limitation any short rate penalty, together with interest from the date of the Indenture Trustee’s payment thereof
at the Stated Rate on the Equipment Notes. In addition, at any time the Indenture Trustee may at its own expense carry insurance with respect
to its interest in the Portfolio Railcars, provided that such insurance does not interfere with the Issuer’s ability to insure the Portfolio Railcars
as required by this Section 5.04(f) or adversely affect the Issuer’s insurance or the cost thereof, it being understood that all salvage rights to
each Portfolio Railcar shall remain with the Issuer’s insurers at all times. Any insurance payments received from policies maintained by the
Indenture Trustee pursuant to the previous sentence shall be retained by the applicable Person obtaining such insurance without reducing or
otherwise affecting the Issuer’s obligations hereunder, other than with respect to Portfolio Railcars) with respect to which such payments have
been made.
(g) No Accounts . Except as contemplated herein, the Issuer will not have an interest in any deposit account or securities account (other
than the Indenture Accounts and other than any account which may be required to be established as a necessary consequence of or in order to
invest in or otherwise acquire a Permitted Investment) unless (i) any such further account and the Issuer’s interest therein shall be further
charged or otherwise secured in favor of the Indenture Trustee for the benefit of the Secured Parties and (ii) any such further account is held in
the custody of and under the “control” (as such term is defined in the UCC) of the Indenture Trustee.
(h) Notices . If at any time any creditor of the Issuer seeks to enforce any judgment or order of any competent court or other competent
tribunal against any of the Collateral, the Issuer shall (i) promptly give written notice to such creditor and to such court or tribunal of the
Indenture Trustee’s interests in the Collateral, (ii) if at any time an examiner, administrator, administrative receiver, receiver, trustee, custodian,
sequestrator, conservator or other similar appointee (an “ Insolvency Appointee ”) is appointed in respect of any secured creditor or any of their
assets, promptly give notice to such appointee of the Indenture Trustee’s interests in the Collateral and (iii) notify the Indenture Trustee thereof
in either case of clauses (i) and (ii) above. The Issuer will not voluntarily appoint or cause to be appointed or commence any proceeding to
appoint any Insolvency Appointee over all or any of its property.
(i) Compliance with Agreements . The Issuer will comply with and perform all its obligations under the Indenture, the Issuer
Documents and the other Operative Agreements to which the Issuer is a party.
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(j) Information . The Issuer will at all times give to the Indenture Trustee such information as the Indenture Trustee may reasonably
require for the purpose of the discharge of the powers, rights, duties, authorities and discretions vested in it hereunder, under any other Issuer
Document or by operation of Applicable Law.
(k) Further Assurances .
(i) The Issuer will comply with all reasonable directions given to it by the Indenture Trustee to perfect the Security Interests in the
Collateral (except to the extent provided in the Granting Clauses herein). The Issuer will execute such further documents and do all acts and
things as the Indenture Trustee may reasonably require at any time or times to give effect to this Indenture, the Issuer Documents and the
relevant Operative Agreements.
(ii) Without limiting the foregoing, from time to time, the Issuer shall authorize and file such financing statements and cause to be
authorized and filed such continuation statements, and shall make or cause to be made such filings with the STB and with the Registrar
General of Canada and take or cause to be taken such similar actions as are described in the Granting Clauses under “Priority”, all in such
manner and in such places as may be required by law (or deemed desirable by the Indenture Trustee) to fully perfect, preserve, maintain and
protect the security interest of the Indenture Trustee for the benefit of the Secured Parties in the Portfolio Railcars, related Leases and other
Collateral granted hereby (including without limitation any such Portfolio Railcars acquired by the Issuer from time to time after the Closing
Date), including in the proceeds thereof. The Issuer shall deliver (or cause to be delivered) to the Indenture Trustee file-stamped copies of, or
filing receipts for, any document filed as provided above, following such filing in accordance herewith. In the event that the Issuer fails to
perform its obligations under this subsection, the Indenture Trustee may perform such obligations, at the expense of the Issuer, and the Issuer
hereby authorizes the Indenture Trustee and grants to such persons an irrevocable power of attorney to take any and all steps in order to
perform such obligations in the Issuer’s own name and on behalf of the Issuer, as are necessary or desirable, in the determination of the
Indenture Trustee, as applicable.
(l) Stamping of the Leases . Within thirty (30) days of the applicable Delivery Date (or, in the case of a Future Lease, the date of
origination of such Future Lease), the Issuer will cause the Manager to stamp on or otherwise affix to each Rider evidencing the same, the
following legend:
“This Lease is subject to a security interest in favor of Wilmington Trust Company, as Indenture Trustee, pursuant to the Indenture dated as
of November 5, 2009 between Trinity Rail Leasing VII LLC, and Wilmington Trust Company, as Indenture Trustee.”
Without limiting the generality of the foregoing, the Issuer will (i) execute and deliver to the Indenture Trustee, on behalf of the Secured
Parties, such financing or continuation statements or continuation statements in lieu, or amendments thereto, and such other instruments or
notices,
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as may be necessary or desirable, or as the Indenture Trustee may reasonably request, in order to perfect and preserve the pledge, transfer,
assignment, Security Interests granted or purported to be granted hereby, (ii) if any Collateral shall be evidenced by a promissory note or other
instrument, deliver and pledge to the Indenture Trustee, on behalf of the Secured Parties, such note or instrument, duly indorsed or
accompanied by duly executed instruments of transfer or assignment in blank and undated, all in form and substance reasonably satisfactory to
the Indenture Trustee, and (iii) deliver to the Indenture Trustee, on behalf of the Secured Parties, promptly upon receipt thereof all instruments
representing or evidencing any of the Collateral, duly endorsed or accompanied by duly executed instruments of transfer or assignment in blank
and undated, all in form and substance reasonably satisfactory to the Indenture Trustee.
(m) No Effect on Security Interest . Except as otherwise provided in this Indenture or other Operative Agreements, the Issuer will not
agree to the amendment of any Issuer Document unless the Indenture Trustee has confirmed to the Issuer that it has received from legal counsel
reasonably acceptable to it an opinion to the effect that such amendment will not result in the Security Interests being prejudiced (the
reasonable expenses of such opinion to be paid by the Issuer).
(n) Restrictions on Amendments to Assigned Agreements and Certain Other Actions . (i) The Issuer will not take, or knowingly permit
to be taken, any action which would amend, terminate or discharge or prejudice the validity or effectiveness or priority of the Security Interests
or permit any party to any of the Issuer Documents whose obligations form part of the security created by this Indenture to be released from
such obligations except, in each case as permitted or contemplated by this Indenture, or the other Issuer Documents or the Operative
Agreements, (ii) without the prior written consent of the Indenture Trustee (acting at the Direction of the Requisite Majority), the Issuer shall
not, directly or indirectly, (A) cancel or terminate, or consent to or accept any cancellation or termination of, or amend, modify or change in
any manner, any Assigned Agreement or any term or condition thereof or (B) waive any default under, or any breach of or noncompliance with
any term or condition of, any Assigned Agreement or authorize or approve, or consent to, any of the foregoing and (iii) the Issuer will not
knowingly take, or knowingly permit to be taken, any action which, other than the performance of its obligations under the Issuer Documents
and the Operative Agreements, would reasonably be expected to result in the lowering or withdrawal of the then current rating of any
Equipment Note.
(o) Subsidiaries . Except with the consent of the Indenture Trustee (acting at the Direction of the Requisite Majority), the Issuer will not
have or establish any Subsidiaries.
(p) Restriction on Asset Dealings . The Issuer shall not sell, transfer, release or otherwise dispose of any of, or grant options, warrants or
other rights with respect to, any of its assets to any Person other than as expressly permitted in the Operative Agreements.
(q) Organizational Documents . Subject to Section 5.02(j), the Issuer shall not amend, modify or supplement its organizational
documents or change its jurisdiction of organization without the consent of Indenture Trustee (acting at the Direction of the Requisite
Majority), and such consent shall not be unreasonably withheld.
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(r) Management Agreement and Administrative Services Agreement . The Issuer shall at all times be a party to the Management
Agreement and shall, if necessary, take any steps required of it in connection with the appointment of any Successor Manager thereunder. The
Issuer shall at all times be a party to the Administrative Services Agreement or a substitute agreement substantially similar thereto.
(s) Insurance Agreement . The Issuer shall at all times be a party to the Insurance Agreement and shall, if necessary, take any steps
required of it in connection with the appointment of any Successor Insurance Manager thereunder.
(t) Condition . The Issuer, at its own cost and expense, shall maintain, repair and keep each Portfolio Railcar, and cause the Manager
under the Management Agreement to maintain, repair and keep each Portfolio Railcar, (i) according to Prudent Industry Practice and in all
material respects, in good working order, and in good physical condition for railcars of a similar age and usage, normal wear and tear excepted,
(ii) in a manner in all material respects consistent with maintenance practices used by the Manager, in respect of railcars owned, leased or
managed by the Manager similar in type to such Portfolio Railcar or with respect to any Portfolio Railcar that is a Net Lease, maintenance
practices used by the applicable Lessee, in respect of railcars similar in type to such Portfolio Railcar used by such Lessee on its domestic
routes in the United States; ( provided , however that after the return to the Manager of any Portfolio Railcar which was subject to a Net Lease
immediately prior to such return, such Portfolio Railcar shall be maintained and repaired in all material respects in a manner consistent with
maintenance practices used by the Manager in respect of railcars owned, leased or managed by the Manager similar in type to such Portfolio
Railcar), (iii) in accordance with all manufacturer’s warranties in effect but only to the extent that the lack of compliance therewith would
reasonably be expected to adversely affect the coverage thereunder and in accordance with all applicable provisions, if any, of insurance
policies required to be maintained pursuant to Section 5.04 and (iv) in compliance in all material respects with any applicable laws and
regulations from time to time in effect, including, without limitation, the Field Manual of the AAR, FRA rules and regulations and Interchange
Rules as they apply to the maintenance and operation of the Portfolio Railcars in interchange regardless of upon whom such applicable laws
and regulations are nominally imposed; provided , however, that, so long as the Manager or, with respect to any Portfolio Railcar subject to a
Lease which is a Net Lease, the applicable Lessee, is similarly contesting such law or regulation with respect to all other similar equipment
owned or operated by Manager or, with respect to any Portfolio Railcar subject to a Net Lease, the applicable Lessee, the Issuer (or such
Lessee) may, in good faith and by appropriate proceedings diligently conducted, contest the validity or application of any such standard, rule or
regulation in any manner that does not (w) materially interfere with the use, possession, operation or return of any of the Portfolio Railcars,
(x) materially adversely affect the rights or interests of the Indenture Trustee in the Portfolio Railcars, (y) expose any Secured Party or the
Indenture Trustee to criminal sanctions or (z) violate any maintenance requirements contained in any insurance policy required to be
maintained by the Issuer under this Indenture if such violation would reasonably be expected to adversely affect the coverage thereunder;
provided further , that the Issuer shall promptly notify the Indenture Trustee in reasonable detail of any such contest upon its or the Manager’s
becoming aware thereof. In no event shall the Issuer discriminate in any material respect as to the use or maintenance of any Portfolio Railcar
(including the periodicity of maintenance or recordkeeping in respect of such Portfolio Railcar) as compared to
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equipment of a similar nature which the Manager owns or manages. The Issuer will maintain in all material respects all records, logs and other
materials required by relevant industry standards or any governmental authority having jurisdiction over the Portfolio Railcars required to be
maintained in respect of any Portfolio Railcar.
(u) [Reserved] .
(v) Use . The Issuer shall be entitled to the possession of the Portfolio Railcars and to the use of the Portfolio Railcars by it or any
Affiliate in the United States and subject to the remaining provisions of this subsection, Canada and Mexico, only in the manner for which it
was designed and intended and so as to subject it only to ordinary wear and tear. In no event shall the Issuer use, store or permit the use or
storage of any Portfolio Railcar in any jurisdiction not included in the insurance coverage required by Section 5.04(f). The Portfolio Railcars
shall be used primarily on domestic routes in the United States and on routes in Canada, and in no event shall the mileage usage of the Portfolio
Railcars in interchange within Mexico exceed twenty (20)% of the total mileage usage of the Portfolio Railcars in interchange in the aggregate
(as determined by mileage records and measured at the end of each calendar year).
(w) Custody of Portfolio Leases . Promptly after entering into a Future Lease, the Issuer shall deliver a Rider constituting a Chattel
Paper Original to the Indenture Trustee in accordance with the provisions hereof.
(x) Portfolio Railcar Total Loss . In the event that any Portfolio Railcar shall suffer a Total Loss, the Issuer shall (or shall cause the
Manager to) promptly and fully inform the Indenture Trustee of such Total Loss.
(y) Certain Reports . No later than ten Business Days following April 30, 2010 (or December 31, 2009 with respect to clause
(iii) below), and no later than ten Business Days following each April 30 (or each March 31, June 30, September 30 and December 31, with
respect to clause (iii) below) thereafter, the Issuer will furnish (or cause the Manager under the Management Agreement to furnish) to the
Indenture Trustee and each Rating Agency an accurate statement, as of the preceding December 31 (or as of the preceding calendar quarter
with respect to clause (iii) below) (i) showing the amount, description and reporting marks of the Portfolio Railcars, the amount, description
and reporting marks of all Portfolio Railcars that may have suffered a Total Loss during the twelve months ending on such December 31 (or
since the Closing Date, in the case of the first such statement), and such other information regarding the condition or repair of the Portfolio
Railcars as the Indenture Trustee may reasonably request, (ii) stating that in the case of all Portfolio Railcars repainted during the period
covered by such statement, the markings required by Section 2.2(ii) of the Management Agreement shall have been preserved or replaced,
(iii) showing the percentage of use in Canada and Mexico based on the total mileage traveled by the Portfolio Railcars for the prior calendar
quarter as reported to the Manager by railroads (or Lessees in the case of Net Leases, as applicable) and (iv) stating that the Issuer is not aware
of any condition of any Portfolio Railcar which would cause such Portfolio Railcar not to comply in any material respect with the rules and
regulations of the FRA and the interchange rules of the Field Manual of the AAR as they apply to the maintenance and operation of the
Portfolio Railcars in interchange and any other requirements hereunder.
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(z) Inspection .
(i) Upon the occurrence of an Event of Default or a Manager Termination Event, the Indenture Trustee, at the Direction of the Requisite
Majority, together with the agents, representatives, accountants and legal and other advisors of each of the foregoing (collectively, the “
Inspection Representatives ”), shall have the right to (A) conduct a field examination of a reasonable representative sample of the Portfolio
Railcars, which may not in any event in the first instance exceed 100 Portfolio Railcars (each such inspection, a “ Unit Inspection ”), (B)
(I) inspect all documents (the “ Related Documents ”), including, without limitation, all related Leases, insurance policies, warranties or other
agreements, relating to the Portfolio Railcars and the other Collateral (each such inspection, a “ Related Document Inspection ”) and
(II) inspect each of the Issuer’s and the Manager’s books, records and databases (which shall include reasonable access to the Issuer’s and the
Manager’s computers and computer records to the extent necessary to determine compliance with the Operative Agreements) (collectively, the
“ Books and Records ”) with respect to the Portfolio Railcars and the other Collateral and the Related Documents (including without limitation
data supporting all reporting requirements under the Operative Agreements) (each such inspection, a “ Book and Records Inspection ”) and
(C) discuss (I) the affairs, finances and accounts of the Issuer (with respect to itself) and the Manager (with respect to itself and the Issuer) and
(II) the Portfolio Railcars and the other Collateral, the Related Documents and the Books and Records, in each case with the principal
executive officer and the principal financial officer of each of the Issuer and the Manager, as applicable (the foregoing clauses (I) and (II) a “
Company Inspection ”) the Unit Inspections, the Related Documents Inspections, the Books and Records Inspections and the Company
Inspections described in clauses (A), (B) and (C), collectively, the “ Inspections ”).
(ii) All Inspections shall be at the sole cost and expense of the Issuer (including the reasonable legal and accounting fees, costs and
expenses incurred by the Indenture Trustee, and its Inspection Representatives). All Inspections shall be conducted upon reasonable request
and notice to the Issuer (with respect to itself) and the Manager (with respect to itself and the Issuer) and shall (A) be conducted during normal
business hours, (B) be subject to the Issuer’s and the Manager’s customary security procedures, if any, and (C) not unreasonably disrupt the
Issuer’s or the Manager’s business.
(iii) If in connection with or as a result of the initial Railcar Inspection, the Indenture Trustee determines, in its sole discretion, that an
Inspection Issue (as defined below) has occurred, then the Indenture Trustee shall have the right to conduct additional Inspections from time to
time consisting of additional samplings of Railcars in numbers that the Trustee or its Inspection Representative determines to be a reasonable
sampling (each, an “Additional Inspection” and collectively, “Additional Inspections” ) sufficient to confirm the scope of any such
Inspection Issues. “Inspection Issue” means the discovery that a material portion of the Portfolio Railcars inspected are not being used or
maintained in a manner that complies with the requirements of the Indenture.
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Without prejudice to the right to conduct Inspections, all parties granted inspection rights hereunder shall confer with a view toward
coordinating their conduct with respect to the Inspections in order to minimize the costs thereof and business disruption attendant thereto.
(aa) Modifications .
(i) Required Modifications . In the event a Required Modification to a Portfolio Railcar is required, the Issuer agrees to make or cause to
be made such Required Modification at its own expense; provided , that the Issuer (or applicable Lessee) may, in good faith and by
appropriate proceedings diligently conducted, contest the validity or application of the law, rule or regulation requiring such Required
Modification in any manner that does not (w) materially interfere with the use, possession, operation, maintenance or return of any Portfolio
Railcar, (x) materially adversely affect the rights or interests of the Issuer or the Indenture Trustee in the Portfolio Railcars, (y) expose the
Issuer or the Indenture Trustee to criminal sanctions, or (z) violate any maintenance requirements contained in any insurance policy required to
be maintained by the Issuer under this Indenture if such violation would reasonably be expected to adversely affect the coverage thereunder;
provided further , that the Issuer shall notify (or cause to be notified) the Indenture Trustee thereof, which notice shall also set forth the time
period for the making of such Required Modification and the Issuer’s or Manager’s reasonable estimate of the cost thereof.
(ii) Optional Modifications . The Issuer at any time may or may permit a Lessee to, in its discretion and at its own or such Lessee’s cost
and expense, modify, alter or improve any Portfolio Railcar in a manner which is not a Required Modification; provided that (A) no such
optional modification shall diminish the fair market value, utility or remaining economic useful life of such Portfolio Railcar below the fair
market value, utility or remaining economic useful life thereof immediately prior to such optional modification, in more than a de minimis
respect, assuming such Portfolio Railcar was then at least in the condition required to be maintained by the terms of this Indenture and (B) the
Issuer, or the Manager on its behalf, shall conclude in good faith that the proposed optional modification is likely to enhance the marketability
of the Portfolio Railcar (or such optional modification is requested by a Lessee).
ARTICLE VI
THE INDENTURE TRUSTEE
Section 6.01 Acceptance of Trusts and Duties. The duties and responsibilities of the Indenture Trustee shall be as expressly set forth herein,
and no implied covenants or obligations shall be read into this Indenture against the Indenture Trustee. The Indenture Trustee accepts the trusts
hereby created and applicable to it and agrees to perform the same but only upon the terms of this Indenture and agrees to receive and disburse
all moneys received by it in accordance with the terms hereof. The Indenture Trustee in its individual capacity shall not be answerable or
accountable under any circumstances, except for its own willful misconduct or negligence or bad faith or breach of its representations,
warranties and/or covenants and the Indenture Trustee shall
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not be liable for any action or inaction of the Issuer or any other parties to any of the Operative Agreements.
Section 6.02 Absence of Duties. The Indenture Trustee shall have no duty to ascertain or inquire as to the performance or observance of any
covenants, conditions or agreements on the part of any Lessee. Notwithstanding the foregoing, the Indenture Trustee, upon written request,
shall furnish to any Noteholder, promptly upon receipt thereof, duplicates or copies of all reports, Notices, requests, demands, certificates,
financial statements and other instruments furnished to the Indenture Trustee under this Indenture.
Section 6.03 Representations or Warranties. The Indenture Trustee does not make and shall not be deemed to have made any representation
or warranty as to the validity, legality or enforceability of this Indenture, the Equipment Notes, any other securities or any other document or
instrument or as to the correctness of any statement contained in any thereof, except that the Indenture Trustee in its individual capacity hereby
represents and warrants (i) that each such specified document to which it is a party has been or will be duly executed and delivered by one of its
officers who is and will be duly authorized to execute and deliver such document on its behalf, and (ii) this Indenture is the legal, valid and
binding obligation of WTC, enforceable against WTC in accordance with its terms, subject to the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or similar law affecting creditors’ rights generally.
Section 6.04 Reliance; Agents; Advice of Counsel. The Indenture Trustee shall incur no liability to anyone acting upon any signature,
instrument, notice, resolution, request, consent, order, certificate, report, opinion, bond or other document or paper believed by it to be genuine
and believed by it to be signed by the proper party or parties. The Indenture Trustee may accept a copy of a resolution of, in the case of the
Issuer, and in the case of any other party to any Operative Agreement, the governing body of such Person, certified in an accompanying
Officer’s Certificate as duly adopted and in full force and effect, as conclusive evidence that such resolution has been duly adopted and that the
same is in full force and effect. As to any fact or matter the manner of ascertainment of which is not specifically described herein, the Indenture
Trustee shall be entitled to receive and may for all purposes hereof conclusively rely on a certificate, signed by an officer of any duly
authorized Person, as to such fact or matter, and such certificate shall constitute full protection to the Indenture Trustee for any action taken or
omitted to be taken by it in good faith in reliance thereon. The Indenture Trustee shall furnish to the Manager or the Administrator upon written
request such information and copies of such documents as the Indenture Trustee may have and as are necessary for the Manager or the
Administrator to perform its duties under Articles II and III hereof. The Indenture Trustee shall assume, and shall be fully protected in
assuming, that the Issuer is authorized by its constitutional documents to enter into this Indenture and to take all action permitted to be taken by
it pursuant to the provisions hereof, and shall not inquire into the authorization of the Issuer with respect thereto.
The Indenture Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within its
rights or powers or for any action it takes or omits to take in accordance with the Direction of the Holders in accordance herewith relating to the
time, method and place of conducting any proceeding for any remedy available to the
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Indenture Trustee, or exercising any trust or power conferred upon the Indenture Trustee, under this Indenture.
The Indenture Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through
agents or attorneys or a custodian or nominee, and the Indenture Trustee shall not be responsible for any misconduct or negligence on the part
of, or for the supervision of, any such agent, attorney, custodian or nominee appointed with due care by it hereunder.
The Indenture Trustee may consult with counsel as to any matter relating to this Indenture and any Opinion of Counsel or any advice of
such counsel shall be full and complete authorization and protection in respect of any action taken or suffered or omitted by it hereunder in
good faith and in accordance with such advice or Opinion of Counsel.
The Indenture Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture, or to institute,
conduct or defend any litigation hereunder or in relation hereto, at the request, order or Direction of any of the Holders, pursuant to the
provisions of this Indenture, unless such Holders shall have offered to the Indenture Trustee security or indemnity reasonably satisfactory to it
against the costs, expenses and liabilities which may be incurred therein or thereby.
The Indenture Trustee shall not be required to expend or risk its own funds or otherwise incur any financial liability in the performance of
any of its duties hereunder, or in the exercise of any of its rights or powers, if there is reasonable ground for believing that the repayment of
such funds or adequate indemnity against such risk or liability is not reasonably assured to it, and none of the provisions contained in this
Indenture shall in any event require the Indenture Trustee to perform, or be responsible or liable for the manner of performance of, any
obligations of the Issuer or the Administrator under this Indenture or any of the Operative Agreements.
The Indenture Trustee shall not be liable for any losses or Taxes (except for Taxes relating to any compensation, fees or commissions of any
entity acting in its capacity as Indenture Trustee hereunder) or in connection with the selection of Permitted Investments or for any investment
losses resulting from Permitted Investments.
When the Indenture Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 4.01(f) or
4.01(g) hereof, such expenses (including the fees and expenses of its counsel) and the compensation for such services are intended to constitute
expenses of administration under any bankruptcy law or law relating to creditors’ rights generally.
The Indenture Trustee shall not be charged with knowledge of an Event of Default unless a Responsible Officer of the Indenture Trustee
obtains actual knowledge of such event or the Indenture Trustee receives written notice of such event from the Issuer, the Administrator or
Noteholders owning Equipment Notes aggregating not less than 10% of the Outstanding Principal Balance of the Equipment Notes.
The Indenture Trustee shall have no duty to monitor the performance of the Issuer, the Manager, the Administrator or any other party to the
Operative Agreements, nor shall it have any
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liability in connection with the malfeasance or nonfeasance by such parties. The Indenture Trustee shall have no liability in connection with
compliance by the Issuer, the Manager, the Administrator or any Lessee under a Lease with statutory or regulatory requirements related to any
Railcar or any Lease. The Indenture Trustee shall not make or be deemed to have made any representations or warranties with respect to any
Railcar or any Lease or the validity or sufficiency of any assignment or other disposition of any Railcar or any Lease.
The Indenture Trustee shall not be liable for any error of judgment reasonably made in good faith by an officer or officers of the Indenture
Trustee, unless it shall be determined by a court of competent jurisdiction in a non-appealable judgment that the Indenture Trustee was
negligent in making such judgment.
Except as expressly set forth in the Operative Agreements, the Indenture Trustee shall not be bound to make any investigation into the facts
or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, entitlement order, approval or
other paper document, unless any such Operative Agreement directs the Indenture Trustee to make such investigation.
The Indenture Trustee shall have no obligation to invest and reinvest any cash held in the Indenture Accounts in the absence of timely and
specific written investment direction from the Administrator or as expressly provided herein. In no event shall the Indenture Trustee be liable
for the selection of investments or for investment losses incurred thereon in accordance with the Operative Agreements. The Indenture Trustee
shall have no liability in respect of losses incurred as a result of the liquidation of any investment prior to its stated maturity in accordance with
the Operative Agreements or by any other Person or the failure of the Administrator to provide timely written investment direction.
Section 6.05 Not Acting in Individual Capacity. The Indenture Trustee acts hereunder solely as trustee unless otherwise expressly provided;
and all Persons, other than the Noteholders to the extent expressly provided in this Indenture, having any claim against the Indenture Trustee by
reason of the transactions contemplated hereby shall look, subject to the lien and priorities of payment as herein provided, only to the property
of the Issuer for payment or satisfaction thereof.
Section 6.06 No Compensation from Noteholders. The Indenture Trustee agrees that it shall have no right against the Noteholders for any
fee as compensation for its services hereunder.
Section 6.07 Notice of Defaults. As promptly and soon as practicable after, and in any event within thirty (30) days after, the occurrence of
any Default hereunder, the Indenture Trustee shall transmit by mail to the Issuer and the Noteholders holding Equipment Notes, notice of such
Default hereunder actually known to a Responsible Officer of the Indenture Trustee, unless such Default shall have been cured or waived;
provided, however , that, except in the case of a Default on the payment of the interest, principal, or premium, if any, on any Equipment Note,
the Indenture Trustee shall be fully protected in withholding such notice if and so long as a trust committee of Responsible Officers of the
Indenture Trustee in good faith determines that the withholding of such notice is in the interests of the Noteholders .
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Section 6.08 Indenture Trustee May Hold Securities. The Indenture Trustee, any Paying Agent, the Note Registrar or any of their Affiliates
or any other agent in their respective individual or any other capacity, may become the owner or pledgee of securities and, may otherwise deal
with the Issuer with the same rights it would have if it were not the Indenture Trustee, Paying Agent, Note Registrar or such other agent.
Section 6.09 Corporate Trustee Required; Eligibility. There shall at all times be an Indenture Trustee which shall meet the Eligibility
Requirements. If such corporation publishes reports of conditions at least annually, pursuant to law or to the requirements of federal, state,
territorial or District of Columbia supervising or examining authority, then for the purposes of this Section 6.09, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of conditions so
published. In case at any time the Indenture Trustee shall cease to be eligible in accordance with the provisions of this Section 6.09 to act as
Indenture Trustee, the Indenture Trustee shall resign immediately as Indenture Trustee in the manner and with the effect specified in
Section 7.01 hereof.
Section 6.10 Reports by the Issuer. The Issuer shall furnish to the Indenture Trustee, within 120 days after the end of each fiscal year, a brief
certificate from the principal executive officer, principal accounting officer or principal financial officer of the Administrator, as applicable, as
to his or her knowledge of the Issuer’s compliance with all conditions and covenants under this Indenture (it being understood that for purposes
of this Section 6.10, such compliance shall be determined without regard to any period of grace or requirement of notice provided under this
Indenture).
Section 6.11 Compensation. The Issuer covenants and agrees to pay to the Indenture Trustee from time to time, and the Indenture Trustee
shall be entitled to, the fees and expenses separately agreed in writing between the Issuer and the Indenture Trustee, and will further pay or
reimburse the Indenture Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Indenture
Trustee in accordance with any of the provisions hereof or any other documents executed in connection herewith (including the reasonable
compensation and the reasonable expenses and disbursements of its counsel and of all persons not regularly in its employ).
Section 6.11 Certain Rights of the Requisite Majority.
Each of the Indenture Trustee and by its acceptance of the Equipment Notes, the Noteholders, hereby agrees that, if the Indenture Trustee
shall fail to act in accordance with Direction by the Requisite Majority (with respect to the Equipment Notes as a whole) at any time at which it
is so required to act hereunder or under any other Operative Agreement, then the Requisite Majority shall be entitled to take such action
directly in its own capacity or on behalf of the Indenture Trustee. If the Indenture Trustee fails to act in accordance with Direction by the
Requisite Majority when so required to act under any Operative Agreement, then the Indenture Trustee shall, upon the further Direction of the
Requisite Majority, irrevocably appoint the Requisite Majority, or an authorized agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the name of the Indenture Trustee or its own name, to take any and all
actions that the Indenture Trustee is authorized to
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take under any Operative Agreement, to the extent the Indenture Trustee has failed to take such action when and as required under such
Operative Agreement.
ARTICLE VII
SUCCESSOR TRUSTEES
Section 7.01 Resignation and Removal of Indenture Trustee. The Indenture Trustee may resign as Indenture Trustee with respect to the
Equipment Notes at any time without cause by giving at least sixty (60) days’ prior written notice to the Issuer, the Manager, the Administrator
and the Holders, provided that the Indenture Trustee shall continue to serve as Indenture Trustee until a successor has been appointed
pursuant to Section 7.02 hereof. The Requisite Majority may at any time remove the Indenture Trustee without cause by an instrument in
writing delivered to the Issuer, the Manager, the Administrator and the Indenture Trustee being removed. In addition, the Issuer may remove
the Indenture Trustee if: (i) such Indenture Trustee fails to comply with Section 7.02(d) hereof, (ii) such Indenture Trustee is adjudged a
bankrupt or an insolvent, (iii) a receiver or public officer takes charge of such Indenture Trustee or its property or (iv) such Indenture Trustee
becomes incapable of acting. References to the Indenture Trustee in this Indenture include any successor Indenture Trustee appointed in
accordance with this Article VII.
Section 7.02 Appointment of Successor. (a) In the case of the resignation or removal of the Indenture Trustee under Section 7.01 hereof, the
Issuer shall promptly appoint a successor Indenture Trustee; provided that the Requisite Majority may appoint, within one (1) year after such
resignation or removal, a successor Indenture Trustee which may be other than the successor Indenture Trustee appointed by the Issuer, and
such successor Indenture Trustee appointed by the Issuer shall be superseded by the successor Indenture Trustee so appointed by the Requisite
Majority. If a successor Indenture Trustee shall not have been appointed and accepted its appointment hereunder within sixty (60) days after the
Indenture Trustee gives notice of resignation or is removed, the retiring or removed Indenture Trustee, the Issuer, the Administrator, the
Manager or the Requisite Majority may petition any court of competent jurisdiction for the appointment of a successor Indenture Trustee. Any
successor Indenture Trustee so appointed by such court shall immediately and without further act be superseded by any successor Indenture
Trustee appointed as provided in the first sentence of this paragraph within one (1) year from the date of the appointment by such court.
(b) Any successor Indenture Trustee, however appointed, shall promptly execute and deliver to the Issuer, the Manager, the
Administrator and the predecessor Indenture Trustee an instrument accepting such appointment, and thereupon the resignation or removal of
the predecessor Indenture Trustee shall become effective and such successor Indenture Trustee, without further act, shall become vested with
all the estates, properties, rights, powers, duties and trusts of such predecessor Indenture Trustee hereunder in the trusts hereunder applicable to
it with like effect as if originally named the Indenture Trustee herein; provided that, upon the written request of such successor Indenture
Trustee, such predecessor Indenture Trustee shall, upon payment of all amounts due and owing to it, execute and deliver an instrument
transferring to such successor Indenture Trustee, upon the trusts herein expressed applicable to it, all the
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estates, properties, rights, powers and trusts of such predecessor Indenture Trustee, and such predecessor Indenture Trustee shall duly assign,
transfer, deliver and pay over to such successor Indenture Trustee all moneys or other property then held by such predecessor Indenture Trustee
hereunder solely for the benefit of the Equipment Notes.
(c) If a successor Indenture Trustee is to be appointed with respect to only a part of the predecessor Indenture Trustee duties hereunder,
the Issuer, the predecessor Indenture Trustee and the successor Indenture Trustees shall execute and deliver an indenture supplemental hereto
which shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the
predecessor Indenture Trustee as to which the predecessor Indenture Trustee is not retiring shall continue to be vested in the predecessor
Indenture Trustee, and shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the
administration of the Equipment Notes hereunder by more than one Indenture Trustee.
(d) Each Indenture Trustee shall be an Eligible Institution and shall meet the Eligibility Requirements, if there be such an institution
willing, able and legally qualified to perform the duties of an Indenture Trustee hereunder; provided that the Rating Agencies shall receive
notice of any replacement Indenture Trustee.
(e) Any corporation into which the Indenture Trustee may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the Indenture Trustee shall be a party, or any corporation to which
substantially all the business of the Indenture Trustee may be transferred, shall, subject to the terms of paragraph (d) of this Section, be the
Indenture Trustee under this Indenture without further act.
ARTICLE VIII
INDEMNITY
Section 8.01 Indemnity. The Issuer shall indemnify the Indenture Trustee (and its officers, directors, employees and agents) for, and hold it
harmless from and against, any loss, liability, claim, obligation, damage, injury, penalties, actions, suits, judgments or expense (including
attorney’s fees and expenses) incurred by it without negligence or bad faith on its part, arising out of or in connection with the acceptance or
administration of this Indenture and its duties under this Indenture and the Equipment Notes, including the costs and expenses of defending
itself against any claim or liability and of complying with any process served upon it or any of its officers in connection with the exercise or
performance of any of its powers or duties and hold it harmless against, any loss, liability or reasonable expense incurred without negligence or
bad faith on its part, arising out of or in connection with actions taken or omitted to be taken in reliance on any Officer’s Certificate furnished
hereunder, or the failure to furnish any such Officers’ Certificate required to be furnished hereunder. The Indenture Trustee shall notify the
Holders, the Issuer and the Manager and, in the case of any such claim in excess of 5% of the Adjusted Value of the Portfolio Railcars, the
Rating Agencies, promptly of any claim asserted against the Indenture Trustee for which it may seek indemnity; provided , however , that
failure to
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provide such notice shall not invalidate any right to indemnity hereunder except to the extent the Issuer is prejudiced by such delay. The Issuer
shall defend the claim and the Indenture Trustee shall cooperate in the defense (unless the Indenture Trustee determines that an actual or
potential conflict of interest exists, in which case the Indenture Trustee shall be entitled to retain separate counsel and the Issuer shall pay the
reasonable fees and expenses of such counsel). The Issuer need not pay for any settlements made without its consent; provided that such
consent shall not be unreasonably withheld. The Issuer need not reimburse any expense or indemnity against any loss or liability incurred by
the Indenture Trustee through negligence or bad faith.
Section 8.02 Noteholders’ Indemnity. The Indenture Trustee shall be entitled, subject to such Indenture Trustee’s duty during a default to act
with the required standard of care, to be indemnified by the Holders of the Equipment Notes before proceeding to exercise any right or power
under this Indenture or the Management Agreement at the request or Direction of such Holders.
Section 8.03 Survival. The provisions of Sections 8.01 and 8.02 hereof shall survive the termination of this Indenture or the earlier
resignation or removal of the Indenture Trustee.
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.01 Supplemental Indentures Without the Consent of the Noteholders.
(a) Without the consent of any Holder and based on an Opinion of Counsel in form and substance reasonably acceptable to the Indenture
Trustee to the effect that such Supplement is for one of the purposes set forth in clauses (i) through (vi) below, the Issuer and the Indenture
Trustee, at any time and from time to time, may enter into one or more Supplements for any of the following purposes:
(i) to add to the covenants of the Issuer in this Indenture for the benefit of the Holders of the Equipment Notes then Outstanding, or to
surrender any right or power conferred upon the Issuer in this Indenture;
(ii) to cure any ambiguity, to correct or supplement any provision in this Indenture which may be inconsistent with any other provision
in this Indenture;
(iii) to correct or amplify the description of any property at any time subject to the Encumbrance of this Indenture, or to better assure,
convey and confirm unto the Indenture Trustee any property subject or required to be subject to the Encumbrance of this Indenture, or to
subject additional property to the Encumbrance of this Indenture;
(iv) to add additional conditions, limitations and restrictions thereafter to be observed by the Issuer;
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(v) if required, to convey, transfer, assign, mortgage or pledge any additional property to or with the Indenture Trustee; or
(vi) to evidence the succession of the Indenture Trustee.
(b) No Supplement shall be entered into under this Section 9.01 unless each Rating Agency shall have received prior written notice
thereof and, except as set forth in the proviso at the end of this sentence, the Issuer shall have obtained a Rating Agency Confirmation in
respect thereof; provided, that no such Rating Agency Confirmation shall be required if such Supplement shall have been entered into by the
Indenture Trustee at the Direction of a Requisite Majority.
Section 9.02 Supplemental Indentures with the Consent of Noteholders.
(a) With the consent evidenced by a Direction of a Requisite Majority, the Issuer and the Indenture Trustee may enter into a Supplement
hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Noteholders under this Indenture; provided, however , that no such Supplement shall, without the
prior written Direction of the Holders (or beneficial owners) affected thereby and the Direction of a Requisite Majority for the Equipment
Notes then Outstanding:
(i) reduce the principal amount of any Equipment Note or the rate of interest thereon, change the priority of any payments required
pursuant to this Indenture or amend or otherwise modify the Flow of Funds except as permitted pursuant to Section 9.02(b) , or the date on
which, or the amount of which, or the place of payment where, or the coin or currency in which, any Equipment Note or the interest thereon is
payable, or impair the right to institute suit for the enforcement of any such payment on or after the Final Maturity Date thereof;
(ii) reduce the percentage of Holders of Outstanding Equipment Notes required for (x) the consent required for delivery of any
Supplement to this Indenture, (y) the consent required for any waiver of compliance with certain provisions of this Indenture or certain Events
of Default hereunder and their consequences as provided for in this Indenture or (z) the consent required to waive any payment default on the
Equipment Notes;
(iii) modify any provision relating to any Supplement or this Indenture which specifies that such provision cannot be modified or waived
without the Direction of the Holder of each Outstanding Equipment Note affected thereby;
(iv) modify or alter the definition of the term “Requisite Majority” (including, without limitation, the percentages therein);
(v) modify or alter the provisions of this Indenture relating to mandatory prepayments;
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(vi) permit the creation of any Encumbrance ranking prior to or on a parity with the Encumbrance of this Indenture with respect to any
part of the Collateral or terminate the Encumbrance of this Indenture on any property at any time subject hereto or deprive the Holder of any
Equipment Note of the security afforded by the Encumbrance of this Indenture; or
(vii) modify any of the provisions of this Indenture in such a manner as to affect the amount or timing of any payments of interest or
principal due on any Equipment Note.
Prior to the execution of any Supplement issued pursuant to this Section 9.02 , the Issuer shall provide a written notice to each Rating Agency
setting forth in general terms the substance of any such Supplement.
(b) Notwithstanding the foregoing provisions of this Section 9.02 , the Issuer, the Indenture Trustee and, by its acceptance of an
Equipment Note, each Noteholder, hereby irrevocably agrees that, in connection with the appointment and engagement of a Successor Manager
and as contemplated in the last paragraph of the Granting Clauses hereof, the Indenture Trustee acting at the Direction of the Requisite
Majority acting in their sole discretion shall have the right, without the consent of the Issuer, any Noteholder or any other Person, to increase
the Management Fee and/or pay to the Manager an incentive fee, add the payment of such amounts to and/or change the priority of distribution
of such amounts in, the Flow of Funds and amend this Indenture to the extent necessary to effectuate the foregoing.
(c) Promptly after the execution by the Issuer and the Indenture Trustee of any Supplement pursuant to this Section, the Issuer shall mail
to the Administrator, the Indenture Trustee and each Rating Agency, a notice setting forth in general terms the substance of such Supplement,
together with a copy of the text of such Supplement. Any failure of the Issuer to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such Supplement.
ARTICLE X
MODIFICATION AND WAIVER
Section 10.01 Modification and Waiver with Consent of Holders.
In the event that the Indenture Trustee receives a request for its consent to an amendment, modification or waiver under this Indenture, the
Equipment Notes or any Operative Agreement relating to the Equipment Notes, the Indenture Trustee shall mail a notice of such proposed
amendment, modification or waiver to each Noteholder asking whether or not to consent to such amendment, modification or waiver if such
Noteholder’s consent is required pursuant to this Indenture; provided that any amendment, modification or waiver of the provisions
described in Section 9.02 hereof is not permitted without the consent of each Noteholder of any Equipment Notes affected thereby; provided
further, however, that any Event of Default may be waived in accordance with Section 4.04 hereof. The foregoing, however, shall not prevent
the Issuer from
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amending any Lease of a Railcar, provided that such amendment is otherwise permitted by this Indenture and the Management Agreement.
It shall not be necessary for the consent of the Holders under this Section 10.01 to approve the particular form of any proposed amendment,
modification or waiver, but it shall be sufficient if such consent approves the substance thereof. Any such modification approved by the
Direction of a Requisite Majority and as to which Rating Agency Confirmation is given will be binding on all Noteholders.
The Issuer shall give each Rating Agency prior notice of any amendment under this Section 10.01 and any amendments of its constitutive
documents by the Issuer, and, after an amendment under this Section 10.01 becomes effective, the Issuer shall mail to the Holders and the
Rating Agencies a notice briefly describing such amendment. Any failure of the Issuer to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such amendment.
After an amendment under this Section 10.01 becomes effective, it shall bind every Holder, whether or not notation thereof is made on any
Equipment Note held by such Holder.
Section 10.02 Modification Without Consent of Holders.
Subject to Section 9.01 hereof, the Indenture Trustee may agree, without the consent of any Noteholder, to any modification (other than
those referred to in Section 10.01 ) of any provision of any Operative Agreement or of the relevant Equipment Notes to correct a manifest error
or an error which is of a formal, minor or technical nature. Any such modification shall be notified to the Holders as soon as practicable
thereafter and shall be binding on all the Holders.
Section 10.03 Subordination and Priority of Payments.
The subordination provisions contained in the Flow of Funds and Article XI hereof may not be amended or modified without the consent of
each Noteholder of the Equipment Notes. In no event shall the provisions set forth in the Flow of Funds relating to the priority of the Service
Provider Fees and Operating Expenses be amended or modified. The foregoing sentences in each case are subject to the provisions of
Section 9.02(b) .
Section 10.04 Execution of Amendments by Indenture Trustee.
In executing, or accepting the additional trusts created by, any amendment or modification to this Indenture permitted by this Article X or
the modifications thereby of the trusts created by this Indenture, the Indenture Trustee shall be entitled to receive, and shall be fully protected in
relying upon, an Officer’s Certificate and an Opinion of Counsel stating that the execution of such amendment is authorized or permitted by
this Indenture. The Indenture Trustee may, but shall not be obligated to, enter into any such amendment which affects the Indenture Trustee’s
own rights, duties or immunities under this Indenture or otherwise.
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ARTICLE XI
SUBORDINATION
Section 11.01 Subordination.
(a) Each Noteholder and Service Provider agrees that its claims against the Issuer for payment of amounts are subordinate to any claims
ranking in priority thereto as set forth in the Flow of Funds hereof, including any post-petition interest (each such prior claim, a “ Senior Claim
”), which subordination shall continue until the holder of such Senior Claim (a “ Senior Claimant ”), or the Indenture Trustee on its behalf, has
received the full cash amount of such Senior Claim. Each such Person is also obligated to hold for the benefit of the Senior Claimant any
amounts received by such Person which, under the terms of this Indenture, should have been paid to or on behalf of the Senior Claimant and to
pay over such amounts to the Indenture Trustee for application as provided in the Flow of Funds.
(b) If any Senior Claimant receives any payment in respect of any Senior Claim which is subsequently invalidated, declared preferential,
set aside and/or required to be repaid to a trustee, receiver or other party, then, to the extent such payment is so invalidated, declared
preferential, set aside and/or required to be repaid, such Senior Claim shall be revived and continue in full force and effect, and shall be entitled
to the benefits of this Article XI, all as if such payment had not been received.
(c) Each Noteholder, by its acceptance of an Equipment Note, and each other payee pursuant to the Flow of Funds, by entering into the
Operative Agreement to which it is a party, authorizes and expressly directs the Indenture Trustee on its behalf to take such action as may be
necessary or appropriate to effectuate the subordination provided in this Article XI, and appoints the Indenture Trustee its attorney-in-fact for
such purposes, including, in the event of any dissolution, winding up, liquidation or reorganization of the Issuer (whether in bankruptcy,
insolvency, receivership, reorganization or similar proceedings or upon an assignment for the benefit of creditors or otherwise) any actions
tending towards liquidation of the property and assets of the Issuer or the filing of a claim for the unpaid balance of its Equipment Notes in the
form required in those proceedings.
(d) No right of any holder of any Senior Claim to enforce the subordination of any subordinated claim shall be impaired by an act or
failure to act by the Issuer or the Indenture Trustee or by any failure by either the Issuer or the Indenture Trustee to comply with this Indenture,
unless such failure shall materially prejudice the rights of the subordinated claimant.
(e) Each Noteholder, by accepting an Equipment Note, and each other payee pursuant to the Flow of Funds, by entering into the
Operative Agreement to which it is a party, acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an
inducement and a consideration to each holder of any Senior Claim, whether such Senior Claim was created or acquired before or after the
issuance of such holder’s claim, to acquire and continue to hold such Senior Claim and such holder of any Senior Claim shall be deemed
conclusively to have relied on such subordination provisions in acquiring and continuing to hold such Senior Claim.
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(f) The Noteholders of the Equipment Notes shall have the right to receive, to the extent necessary to make the required payments with
respect to the Equipment Notes at the times set forth herein, (i) the portion of Collections allocable to Noteholders of the Equipment Notes
pursuant to this Indenture and (ii) funds on deposit in the Liquidity Reserve Account allocated in accordance with the terms of this Indenture.
Each Noteholder, by acceptance of its Equipment Notes, (x) acknowledges and agrees that except as expressly provided herein, the Noteholders
shall not have any interest in the Equipment Note Account (to the extent amounts were deposited therein in accordance herewith), and
(y) ratifies and confirms the terms of this Indenture and the Operative Agreements executed in connection with such Noteholder’s Equipment
Notes. With respect to each Collection Period, Collections on deposit in the Collections Account will be allocated to the Equipment Notes then
Outstanding in accordance with the Flow of Funds.
ARTICLE XII
DISCHARGE OF INDENTURE; DEFEASANCE
Section 12.01 Discharge of Liability on the Equipment Notes; Defeasance.
(a) When (i) the Issuer delivers to the Indenture Trustee all Outstanding Equipment Notes (other than Equipment Notes replaced pursuant
to Section 2.08 hereof) for cancellation or (ii) all Outstanding Equipment Notes have become due and payable, whether at maturity or as a
result of the mailing of a Redemption Notice pursuant to Section 3.13(a) hereof and the Issuer irrevocably deposits in the
Redemption/Defeasance Account funds sufficient to pay at maturity, or upon Redemption of, all Outstanding Equipment Notes, including
interest thereon to maturity or the Redemption Date (other than Equipment Notes replaced pursuant to Section 2.08), and if in either case the
Issuer pays all other sums payable hereunder by the Issuer including any premium, then this Indenture shall, subject to Section 12.01(c), cease
to be of further effect. The Indenture Trustee shall acknowledge satisfaction and discharge of this Indenture on demand of the Issuer
accompanied by an Officers’ Certificate and an opinion of counsel, at the cost and expense of the Issuer, to the effect that any conditions
precedent to a discharge of this Indenture have been met.
(b) Subject to Sections 12.01(c) and 12.02, the Issuer at any time may terminate (i) all its obligations under the Equipment Notes and this
Indenture (the “legal defeasance” option) or (ii) its obligations under Sections 5.02, 5.03, 5.04 and 4.01 (other than with respect to a failure to
comply with Sections 4.01(a), 4.01(b), 4.01(e) (only with respect to the Issuer) and 4.01(f) (only with respect to the Issuer)) (the “covenant
defeasance” option). The Issuer may exercise its legal defeasance option notwithstanding its prior exercise of its covenant defeasance option.
If the Issuer exercises its legal defeasance option, payment of any Equipment Notes subject to such legal defeasance may not be accelerated
because of an Event of Default. If the Issuer exercises its covenant defeasance option, payment of the Equipment Notes may not be accelerated
because of an Event of Default (other than with respect to a failure to comply with Section 5.02(j), 4.01(a), 4.01(b), 4.01(e) and 4.01(f).
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Upon satisfaction of the conditions set forth herein and upon request of the Issuer, the Indenture Trustee shall acknowledge in writing the
discharge of those obligations that the Issuer terminates.
(c) Notwithstanding clauses (a) and (b) above, the Issuer’s obligations in Sections 2.01, 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 2.09,
5.02(j), Article VI, Sections 8.01, 12.04, 12.05 and 12.06 shall survive until all the Equipment Notes have been paid in full. Thereafter, the
Issuer’s obligations in Sections 8.01, 12.04, 12.05 and 13.07 shall survive.
Section 12.02 Conditions to Defeasance.
The Issuer may exercise its legal defeasance option or its covenant defeasance option only if:
(a) The Issuer irrevocably deposits in trust in the Redemption/Defeasance Account any one or any combination of (A) money,
(B) obligations of, and supported by the full faith and credit of, the U.S. Government (“ U.S. Government Obligations ”) or (C) obligations of
corporate issuers (“ Corporate Obligations ”) (provided that any such Corporate Obligations are rated AA+, or the equivalent, or higher, by the
Rating Agencies at such time and shall not have a maturity of longer than three (3) years from the date of defeasance) for the payment of all
principal, premium, if any, and interest (i) on the Equipment Notes being defeased, in the case of legal defeasance, or (ii) on all of the
Equipment Notes in the case of covenant defeasance, in either case, to maturity or redemption, as the case may be;
(b) the Issuer delivers to the Indenture Trustee a certificate from a nationally recognized firm of independent accountants expressing their
opinion that the payments of principal and interest when due and without reinvestment on the deposited U.S. Government Obligations or the
Corporate Obligations plus any deposited money without investment will provide cash at such times and in such amounts as will be sufficient
to pay principal and interest when due (i) on the Equipment Notes being defeased, in the case of legal defeasance, or (ii) on all of the
Equipment Notes in the case of covenant defeasance, in either case, to maturity or redemption, as the case may be;
(c) 91 days pass after the deposit described in clause (1) above is made and during the 91-day period no Event of Default specified in
Section 4.01(f) or (g) with respect to the Issuer occurs which is continuing at the end of the period;
(d) the deposit described in clause (a) above does not constitute a default under any other agreement binding on the Issuer;
(e) the Issuer delivers to the Indenture Trustee an Opinion of Counsel to the effect that the trust resulting from the deposit described in
clause (a) does not constitute, or is qualified as, a regulated investment company under the Investment Company Act of 1940, as amended;
(f) the Issuer shall have delivered to the Indenture Trustee an Opinion of Counsel to the effect that the Noteholders will not recognize
income, gain or loss for U.S. federal income tax purposes as a result of such defeasance and will be subject to U.S. federal income tax
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on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred;
(g) if the related Equipment Notes are then listed on any securities exchange, the Issuer delivers to the Indenture Trustee an Opinion of
Counsel to the effect that such deposit, defeasance and discharge will not cause such Equipment Notes to be delisted;
(h) the Issuer has obtained a Rating Agency Confirmation relating to the defeasance contemplated by this Section 12.02;
(i) the Issuer delivers to the Indenture Trustee an Officer’s Certificate and an Opinion of Counsel, each stating that all conditions
precedent to the defeasance and discharge of the Equipment Notes as contemplated by this Article XII have been complied with; and
(j) the Issuer shall only defease the Equipment Notes in their entirety, not partially.
Section 12.03 Application of Trust Money.
The Indenture Trustee shall hold in trust in the Redemption/Defeasance Account money, U.S. Government Obligations or Corporate
Obligations deposited with it pursuant to this Article XII. It shall apply the deposited money and the money from U.S. Government Obligations
or Corporate Obligations in accordance with this Indenture to the payment of principal, premium, if any, and interest on the Equipment Notes.
Money and securities so held in trust are not subject to Article X hereof.
Section 12.04 Repayment to the Issuer.
The Indenture Trustee shall promptly turn over to the Issuer upon request any excess money or securities held by it at any time.
Subject to any applicable abandoned property law, the Indenture Trustee shall pay to the Issuer upon written request any money held by it
for the payment of principal or interest that remains unclaimed for two (2) years and, thereafter, Noteholders entitled to the money must look to
the Issuer for payment as general creditors. Such unclaimed funds shall remain uninvested and in no event shall the Indenture Trustee be liable
for interest on such unclaimed funds.
Section 12.05 Indemnity for Government Obligations and Corporate Obligations.
The Issuer shall pay and shall indemnify the Indenture Trustee against any tax, fee or other charge imposed on or assessed against deposited
U.S. Government Obligations or Corporate Obligations, or the principal and interest received on such U.S. Government Obligations or
Corporate Obligations.
Section 12.06 Reinstatement.
If the Indenture Trustee is unable to apply any money or U.S. Government Obligations or Corporate Obligations in accordance with this
Article XII by reason of any legal proceeding or
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by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the
Issuer’s obligations under this Indenture and the Equipment Notes shall be revived and reinstated as though no deposit had occurred pursuant to
this Article XII until such time as the Indenture Trustee is permitted to apply all such money, U.S. Government Obligations or Corporate
Obligations in accordance with this Article XII; provided, however, that, if the Issuer has made any payment of interest on or principal of
any Equipment Notes because of the reinstatement of its obligations, the Issuer shall be subrogated to the rights of the Holders of such
Equipment Notes to receive such payment from the money, U.S. Government Obligations or Corporate Obligations held by the Indenture
Trustee.
ARTICLE XIII
MISCELLANEOUS
Section 13.01 Right of Indenture Trustee to Perform.
If the Issuer for any reason fails to observe or punctually to perform any of its obligations to the Indenture Trustee, whether under this
Indenture or any of the other Operative Agreements or otherwise, the Indenture Trustee shall have power (but shall have no obligation), on
behalf of or in the name of the Issuer or otherwise, to perform such obligations and to take any steps which the Indenture Trustee may, in its
absolute discretion, consider appropriate with a view to remedying, or mitigating the consequences of, such failure by the Issuer; provided
that no exercise or failure to exercise this power by the Indenture Trustee shall in any way prejudice the Indenture Trustee’s other rights under
this Indenture or any of the other Operative Agreements.
Section 13.02 Waiver.
Any waiver by any party of any provision of this Indenture or any right, remedy or option hereunder shall only prevent and estop such party
from thereafter enforcing such provision, right, remedy or option if such waiver is given in writing and only as to the specific instance and for
the specific purpose for which such waiver was given. The failure or refusal of any party hereto to insist in any one or more instances, or in a
course of dealing, upon the strict performance of any of the terms or provisions of this Indenture by any party hereto or the partial exercise of
any right, remedy or option hereunder shall not be construed as a waiver or relinquishment of any such term or provision, but the same shall
continue in full force and effect. No failure on the part of the Indenture Trustee to exercise, and no delay on its part in exercising, any right or
remedy under this Indenture will operate as a waiver thereof, nor will any single or partial exercise of any right or remedy preclude any other or
further exercise thereof or the exercise of any other right or remedy. The rights and remedies provided in this Indenture are cumulative and not
exclusive of any rights or remedies provided by law.
Section 13.03 Severability.
In the event that any provision of this Indenture or the application thereof to any party hereto or to any circumstance or in any jurisdiction
governing this Indenture shall, to any extent, be invalid or unenforceable under any applicable statute, regulation or rule of law, then such
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provision shall be deemed inoperative to the extent that it is invalid or unenforceable and the remainder of this Indenture, and the application of
any such invalid or unenforceable provision to the parties, jurisdictions or circumstances other than to whom or to which it is held invalid or
unenforceable, shall not be affected thereby nor shall the same affect the validity or enforceability of this Indenture. The parties hereto further
agree that the holding by any court of competent jurisdiction that any remedy pursued by the Indenture Trustee hereunder is unavailable or
unenforceable shall not affect in any way the ability of the Indenture Trustee to pursue any other remedy available to it.
Section 13.04 Notices.
All notices, demands, certificates, requests, directions, instructions and communications hereunder ( “Notices” ) shall be in writing and shall
be effective (a) upon receipt when sent through the mails, registered or certified mail, return receipt requested, postage prepaid, with such
receipt to be effective the date of delivery indicated on the return receipt, or (b) one Business Day after delivery to an overnight courier, or
(c) on the date personally delivered to an authorized officer of the party to which sent, or (d) on the date transmitted by legible telecopier
transmission with a confirmation of receipt, in all cases addressed to the recipient as follows:
if to the Issuer, to:
Trinity Rail Leasing VII LLC
2525 Stemmons Freeway
Dallas, TX 75207
with copies to:
Kaye Scholer LLC
3 First National Plaza, Suite 4100
70 West Madison Street
Chicago, IL 60602
Attention: William Fellerhoff, Esq.
Facsimile: (312) 583-2360
if to the Administrator, to:
Trinity Industries Leasing Company
2525 Stemmons Freeway
Dallas, TX 75207
Attention: Vice President, Leasing Operations
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if to the Indenture Trustee, the Note Registrar or the Paying Agent, to:
Wilmington Trust Company
1100 North Market Street
Wilmington, Delaware 19890-1605
Facsimile: (302) 636-4140
Telephone: (302) 636-6000
Attention: Corporate Trust Administration Re: Trinity Rail Leasing VII
if to the Manager, to:
Trinity Industries Leasing Company
2525 Stemmons Freeway
Dallas, TX 75207
Attention: Vice President, Leasing Operations
if to the Rating Agencies, to:
Standard & Poor’s
55 Water Street
New York, NY 10041
Attn:
Moody’s Investors Service, Inc.
ABS Monitoring Department
99 Church Street, 4 th Floor
New York, NY 10007
Facsimile: (212) 298-7139
Section 13.05 Assignments.
This Indenture shall be a continuing obligation of the Issuer and shall (i) be binding upon the Issuer and its successors and assigns and
(ii) inure to the benefit of and be enforceable by the Indenture Trustee, and by its successors, transferees and assigns. The Issuer may not assign
any of its obligations under this Indenture, or delegate any of its duties hereunder.
Section 13.06 Currency Conversion.
(a) If any amount is received or recovered by the Administrator, the Manager or the Indenture Trustee in respect of this Indenture or any part
thereof (whether as a result of the enforcement of the security created under this Indenture or pursuant to this Indenture or any judgment or
order of any court or in the liquidation or dissolution of the Issuer or by way of damages for any breach of any obligation to make any payment
under or in respect of the Issuer’s obligations hereunder or any part thereof or otherwise) in a currency (the “ Received Currency ”) other than
the currency in which such amount was expressed to be payable (the “ Agreed Currency ”), then the amount in the Received Currency actually
received or recovered by the Indenture Trustee shall, to the fullest extent permitted by Applicable Law, only constitute
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a discharge to the Issuer to the extent of the amount of the Agreed Currency which the Administrator, the Manager or the Indenture Trustee
was or would have been able in accordance with its normal procedures to purchase on the date of actual receipt or recovery (or, if that is not
practicable, on the next date on which it is so practicable), and, if the amount of the Agreed Currency which the Administrator, the Manager or
the Indenture Trustee is or would have been so able to purchase is less than the amount of the Agreed Currency which was originally payable
by the Issuer, the Issuer shall pay to the Administrator, the Manager or the Indenture Trustee such amount as the Administrator, Manager or the
Indenture Trustee shall determine to be necessary to indemnify such Person against any Loss sustained by it as a result (including the cost of
making any such purchase and any premiums, commissions or other charges paid or incurred in connection therewith) and so that such
indemnity, to the fullest extent permitted by Applicable Law, (i) shall constitute a separate and independent obligation of the Issuer distinct
from its obligation to discharge the amount which was originally payable by the Issuer and (ii) shall give rise to a separate and independent
cause of action and apply irrespective of any indulgence granted by the Administrator, the Manager or the Indenture Trustee and continue in
full force and effect notwithstanding any judgment, order, claim or proof for a liquidated amount in respect of the amount originally payable by
the Issuer or any judgment or order and no proof or evidence of any actual loss shall be required.
(b) For the purpose of or pending the discharge of any of the moneys and liabilities hereby secured the Administrator and the Manager
may convert any moneys received, recovered or realized by the Administrator or the Manager, as the case may be, under this Indenture
(including the proceeds of any previous conversion under this Section 13.06) from their existing currency of denomination into the currency of
denomination (if different) of such moneys and liabilities and any conversion from one currency to another for the purposes of any of the
foregoing shall be made at the Indenture Trustee’s then prevailing spot selling rate at its office by which such conversion is made. If not
otherwise required to be applied in the Received Currency, the Administrator or the Manager, as the case may be, acting on behalf of the
Security Trustee, shall promptly convert any moneys in such Received Currency other than Dollars into Dollars. Each previous reference in this
section to a currency extends to funds of that currency and funds of one currency may be converted into different funds of the same currency.
Section 13.07 Application to Court.
The Indenture Trustee may at any time after the service of a Default Notice apply to any court of competent jurisdiction for an order that the
terms of this Indenture be carried into execution under the direction of such court and for the appointment of a receiver of the Collateral or any
part thereof and for any other order in relation to the administration of this Indenture as the Requisite Majority shall deem fit and it may assent
to or approve any application to any court of competent jurisdiction made at the instigation of any of the Noteholders and shall be indemnified
by the Issuer against all costs, charges and expenses incurred by it in relation to any such application or proceedings.
Section 13.08 Governing Law.
THIS INDENTURE SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK,
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INCLUDING SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAWS BUT OTHERWISE WITHOUT
REGARD TO CONFLICT OF LAWS PRINCIPLES.
Section 13.09 Jurisdiction.
(a) Each of the parties hereto agrees that the United States federal and New York State courts located in The City of New York shall have
jurisdiction to hear and determine any suit, action or proceeding, and to settle any disputes, which may arise out of or in connection with this
Indenture and, for such purposes, submits to the jurisdiction of such courts. Each of the parties hereto waives any objection which it might now
or hereafter have to the United States federal or New York State courts located in The City of New York being nominated as the forum to hear
and determine any suit, action or proceeding, and to settle any disputes, which may arise out of or in connection with this Indenture and agrees
not to claim that any such court is not a convenient or appropriate forum. Each of the parties hereto agrees that the process by which any suit,
action or proceeding is begun may be served on it by being delivered in connection with any suit, action or proceeding in The City of New
York to the Person named as the process agent of such party in Schedule 5 at the address set out therein or at the principal New York City
office of such process agent, if not the same.
(b) The submission to the jurisdiction of the courts referred to in Section 13.09(a) shall not (and shall not be construed so as to) limit the
right of the Indenture Trustee to take proceedings against the Issuer in any other court of competent jurisdiction nor shall the taking of
proceedings in any one or more jurisdictions preclude the taking of proceedings in any other jurisdiction, whether concurrently or not.
(c) Each of the parties hereto hereby consents generally in respect of any legal action or proceeding arising out of or in connection with
this Indenture to the giving of any relief or the issue of any process in connection with such action or proceeding, including the making,
enforcement or execution against any property whatsoever (irrespective of its use or intended use) of any order or judgment which may be
made or given in such action or proceeding.
Section 13.10 Counterparts.
This Indenture may be executed in two or more counterparts by the parties hereto, and each such counterpart shall be considered an original
and all such counterparts shall constitute one and the same instrument.
Section 13.11 Table of Contents, Headings, Etc.
The Table of Contents and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are
not to be considered a part hereof and shall in no way modify or restrict any of the terms and provisions hereof.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, all as of the date first written above.
TRINITY RAIL LEASING VII LLC,
By:
By:
TRINITY INDUSTRIES LEASING
COMPANY, as sole member and manager
/s/ James E. Perry
Name:
James E. Perry
Title:
Vice President, Treasurer and Assistant Secretary
WILMINGTON TRUST COMPANY, not in its individual
capacity but solely as Indenture Trustee (and as
securities intermediary as described herein)
By:
/s/ Jose L. Paredes
Name:
Title:
Signature Page to Indenture
Exhibit 10.20.1
PURCHASE AND CONTRIBUTION AGREEMENT
by and among
TRINITY RAIL LEASING WAREHOUSE TRUST,
TRINITY INDUSTRIES LEASING COMPANY
and
TRINITY RAIL LEASING VII LLC
Dated as of November 5, 2009
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS
SECTION 1.1 General
SECTION 1.2
Specific Terms
1
1
2
ARTICLE II CONVEYANCE OF THE RAILCARS AND LEASES
SECTION 2.1 Conveyance of the Railcars and Leases
4
4
ARTICLE III CONDITIONS OF CONVEYANCE
SECTION 3.1
Conditions Precedent to Conveyance
SECTION 3.2
Conditions Precedent to All Conveyances
6
6
7
ARTICLE IV REPRESENTATIONS AND WARRANTIES
SECTION 4.1
Representations and Warranties of TRLWT Seller-General
SECTION 4.2
Representations and Warranties of TILC Seller-General
SECTION 4.3
Representations and Warranties of Seller-Assets
SECTION 4.4
Representations and Warranties of the Purchaser
SECTION 4.5
Indemnification
SECTION 4.6
Special Indemnification by TILC regarding Exercise of Setoff by Customers
8
8
9
11
13
15
16
ARTICLE V COVENANTS OF SELLER
SECTION 5.1
Protection of Title of the Purchaser
SECTION 5.2
Other Liens or Interests
17
17
18
ARTICLE VI MISCELLANEOUS
SECTION 6.1
Amendment
SECTION 6.2
Notices
SECTION 6.3 Merger and Integration
SECTION 6.4
Severability of Provisions
SECTION 6.5
Governing Law
SECTION 6.6
Counterparts
SECTION 6.7
Binding Effect; Assignability
SECTION 6.8
Third Party Beneficiaries
SECTION 6.9
Term
18
18
18
19
19
19
19
19
20
20
Page
EXHIBIT A
FORM OF BILL OF SALE
Exh. A
EXHIBIT B
FORM OF ASSIGNMENT AND ASSUMPTION
Exh. B
EXHIBIT C
DELIVERY SCHEDULE ON THE CLOSING DATE
ii
Exh. C
PURCHASE AND CONTRIBUTION AGREEMENT
THIS PURCHASE AND CONTRIBUTION AGREEMENT is made as of November 5, 2009 (this “ Agreement ”) by and among Trinity
Rail Leasing Warehouse Trust, a Delaware statutory trust, (“ TRLWT ” or the “ TRLWT Seller ”), Trinity Industries Leasing Company, a
Delaware corporation (“ TILC ” or the “ TILC Seller ”; TRLWT and TILC are sometimes hereinafter collectively referred to as the “ Sellers ”
or individually as a “ Seller ”) and Trinity Rail Leasing VII LLC, a Delaware limited liability company (the “ Purchaser ”).
WITNESSETH:
WHEREAS, the Purchaser has agreed to purchase from TRLWT from time to time, and TRLWT has agreed to Sell (as hereinafter
defined) to the Purchaser from time to time, certain of its Railcars, related Leases and Related Assets (each as hereinafter defined) related
thereto on the terms set forth herein.
WHEREAS, during the period prior to their sale hereunder, TILC has acted as manager and servicing agent for TRLWT, pursuant to the
TRLWT Management Agreement (as hereinafter defined), with respect to the Railcars, related Leases and Related Assets that TRLWT may
Sell from time to time hereunder (TILC in such capacity, the “ TRLWT Manager ”).
WHEREAS, TILC may also wish from time to time, in its individual capacity, to conduct a Sale/Contribution (as hereinafter defined) of
certain of its Railcars, related Leases and Related Assets and the Purchaser may wish to purchase from and accept such contribution to the
capital of the Purchaser on the terms set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual agreements hereinafter contained, and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the Purchaser and each Seller, intending to be legally bound, hereby agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 General . The specific terms defined in this Article include the plural as well as the singular. Words herein importing a
gender include the other gender. References herein to “writing” include printing, typing, lithography, and other means of reproducing words in
visible form. References to agreements and other contractual instruments include all subsequent amendments thereto or changes therein entered
into in accordance with their respective terms. References herein to Persons include their successors and assigns permitted hereunder or under
the Indenture (as defined herein). The terms “include” or “including” mean “include without limitation” or “including without limitation”. The
words “herein”, “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision, and Article, Section, Schedule and Exhibit references, unless otherwise specified, refer to Articles and
Sections of and Schedules and Exhibits to this Agreement. Capitalized terms used herein, including in the
Recitals, but not defined herein shall have the respective meanings assigned to such terms in the Indenture (as defined herein).
SECTION 1.2 Specific Terms . Whenever used in this Agreement, the following words and phrases, unless the context otherwise
requires, shall have the following meanings:
“ Appraised Value ” means the appraised value of a Railcar as set forth in the Appraisal thereof.
“ Assignment and Assumption ” means an Assignment and Assumption executed by the applicable Seller, with countersignature block
set forth thereon for execution by the Purchaser, substantially in the form of Exhibit B attached hereto.
“ Bill of Sale ” means a Bill of Sale executed by the applicable Seller substantially in the form of Exhibit A attached hereto.
“ Contribution ” has the meaning set forth in Section 2.1(a).
“ Convey ” means to Sell and/or conduct a Sale/Contribution of Railcars, related Leases and Related Assets hereunder.
“ Conveyance ” means, collectively, a Sale and/or Sale/Contribution of Railcars, related Leases and Related Assets by a Seller to the
Purchaser.
“ Delivery Schedule ” means a schedule, substantially in the form of the initial schedule delivered on the Closing Date and attached as
Exhibit C hereto, in each case duly executed and delivered by a Seller to the Purchaser on a Delivery Date, which shall identify the Railcars to
be Conveyed on such Delivery Date and identify each Lease relating to any such Railcar.
“ Excluded Amounts ” has the meaning set forth in Section 4.5(a).
“ Indemnified Person ” has the meaning set forth in Section 4.5(a).
“ Indenture ” means the Indenture between the Issuer and the Indenture Trustee dated as of the date hereof.
“ Purchase Price ” means, with respect to any Railcars, related Leases and Related Assets conveyed to Purchaser from time to time
pursuant hereto, an amount equal to the aggregate Appraised Value of the Railcars so Conveyed.
“ Purchaser ” has the meaning specified in the Preamble.
“ Related Assets ” means, with respect to any Railcar or Lease that is Conveyed hereunder on any Delivery Date, all of the applicable
Seller’s right, title and interest in and to the following (as applicable):
2
(a) with respect to such Railcar, (i) all licenses, manufacturer’s warranties and other warranties, Supporting Obligations, Payment Intangibles,
Chattel Paper, General Intangibles and all other rights and obligations related to such Railcar, (ii) all Railroad Mileage Credits allocable to such
Railcar and any payments in respect of such credits accruing on or after the applicable Delivery Date, (iii) all tort claims or any other claims of
any kind or nature related to such Railcar and any payments in respect of such claims, (iv) all Marks attaching to such Railcar (including as
evidenced by any SUBI Certificate issued by the Marks Company) and (v) all other payments owing by any Person (including any railroads or
similar entities) in respect of or attributable to such Railcar or the use, loss, damage, casualty, condemnation of such Railcar or the Marks
associated therewith, in each case whether arising by contract, operation of law, course of dealing, industry practice or otherwise; and
(b) with respect to such Lease, all Supporting Obligations, Payment Intangibles, Chattel Paper, General Intangibles and all other rights
and obligations related to any such Lease, including, without limitation, (i) all rights, powers, privileges, options and other benefits of the
applicable Seller to receive moneys and other property due and to become due under or pursuant to such Lease, including, without limitation,
all rights, powers, privileges, options and other benefits to receive and collect rental payments, income, revenues, profits and other amounts,
payments, tenders or security (including any cash collateral) from any other party thereto, (ii) all rights, powers, privileges, options and other
benefits of the applicable Seller to receive proceeds of any casualty insurance, condemnation award, indemnity, warranty or guaranty with
respect to such Lease, (iii) all claims for damages arising out of or for breach of or default under such Lease and (iv) the rights, powers,
privileges, options and other benefits of the applicable Seller to perform under such Lease, to compel performance and otherwise exercise all
remedies thereunder and to terminate any such Lease.
“ Sale ” means, with respect to any Person, the sale, transfer, assignment or other conveyance, of the assets or property in question by
such Person, and “ Sell ” means that such Person sells, transfers, assigns or otherwise conveys the assets or property in question.
“ Sale/Contribution ” has the meaning specified in Section 2.1(a).
“ TRLWT Manager ” has the meaning specified in the Recitals.
“ TRLWT Management Agreement ” means the Second Amendment and Restatement, dated as of May 29, 2009, of the Operating,
Maintenance, Servicing and Remarketing Agreement dated as of June 27, 2002 between TRLWT and TILC, as manager thereunder.
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ARTICLE II
CONVEYANCE OF THE RAILCARS AND LEASES
SECTION 2.1 Conveyance of the Railcars and Leases .
(a) Subject to the terms and conditions of this Agreement, on and after the date of this Agreement,
(i) TRLWT Seller hereby agrees to Sell to the Purchaser, without recourse (except to the extent specifically provided herein or in the
applicable Bill of Sale and Assignment and Assumption), all right, title and interest of TRLWT Seller in and to certain Railcars, related Leases
and Related Assets as identified from time to time on a Delivery Schedule delivered by TRLWT Seller in accordance with this Agreement, and
(ii) TILC Seller hereby agrees to Sell to the Purchaser, without recourse (except to the extent specifically provided herein or in the
applicable Bill of Sale and Assignment and Assumption), all right, title and interest of TILC Seller in and to certain Railcars, related Leases
and Related Assets as identified from time to time on a Delivery Schedule delivered by TILC Seller in accordance with this Agreement,
provided , that to the extent that the portion of the Purchase Price for such sale paid by the Purchaser to TILC Seller in cash is less than the
total dollar amount of the Purchase Price, the balance shall be deemed to have been contributed (a “ Contribution ”) by TILC Seller as capital
(through the Purchaser’s sole member, which is 100% directly owned by TILC Seller) to the Purchaser (such transaction in the aggregate, a “
Sale/Contribution ”),
(b) The Purchaser in each case hereby agrees to purchase, acquire, accept and assume (including by an assumption of the obligations of
the “lessor” under such Leases), all right, title and interest of each such Seller in and to such Railcars, related Leases and Related Assets. Each
Seller hereby acknowledges that each Conveyance by it to the Purchaser hereunder is absolute and irrevocable, without reservation or retention
of any interest whatsoever by such Seller.
(c) The Sales of Railcars, related Leases and Related Assets by TRLWT Seller to the Purchaser and the Sales or Sales/Contributions (as
the case may be) of Railcars, related Leases and Related Assets by TILC Seller to the Purchaser pursuant to this Agreement are intended to be
absolute assignments (free and clear of any Encumbrances) of all of the applicable Seller’s right, title and interest in, to and under such
Railcars, related Leases and Related Assets for all purposes and, except to the extent specifically provided herein or in the applicable Bill of
Sale and Assignment and Assumption, without recourse.
(d) It is the intention of each Seller and the Purchaser (i) that all Conveyances of Railcars, related Leases and Related Assets be true sales
and/or contributions, as applicable, constituting absolute assignments and “true sales” for bankruptcy law purposes by the applicable Seller to
the Purchaser, that are absolute and irrevocable and that provide the Purchaser with the full benefits of ownership of the assets so Conveyed
and (ii) that the Railcars, related Leases and Related Assets that are Conveyed to the Purchaser pursuant to this Agreement shall not be part of
4
the applicable Seller’s estate in the event of the filing of a bankruptcy petition by or against such Seller under any bankruptcy or similar law.
Neither any Seller nor the Purchaser intends that (x) the transactions contemplated hereunder be, or for any purpose be characterized as, loans
from the Purchaser to the applicable Seller or (y) any Conveyance of Railcars, related Leases and/or Related Assets by any Seller to the
Purchaser be deemed a grant of a security interest in the assets so Conveyed by such Seller to the Purchaser to secure a debt or other obligation
of such Seller (except in the limited circumstance contemplated in subsection (e) immediately below).
(e) In the event that any Conveyances pursuant to this Agreement are deemed to be a secured financing (or are otherwise determined not
to be absolute assignments of all of the applicable Seller’s right, title and interest in, to and under the Railcars, related Leases and Related
Assets so Conveyed, or purportedly so Conveyed hereunder), then (i) the applicable Seller shall be deemed hereunder to have granted to the
Purchaser, and such Seller does hereby grant to the Purchaser, a security interest in all of such Seller’s right, title and interest in, to and under
such Railcars, related Leases and Related Assets so Conveyed or purported to be Conveyed, securing the purported repayment obligation
presumably deemed to exist in respect of such deemed secured financing, and (ii) this Agreement shall constitute a security agreement under
applicable law.
(f) The Sellers shall on the Closing Date, and either or both the TRLWT Seller and/or the TILC Seller shall, as the case may be, on any
other Delivery Date, deliver to the Purchaser a Delivery Schedule identifying the Railcars and Leases to be Conveyed by such Seller to the
Purchaser on such date.
(g) The price paid for Railcars, related Leases and Related Assets which are Conveyed hereunder shall be the Purchase Price with respect
thereto. Such Purchase Price shall be paid
(i) in the case of TRLWT Seller, by means of the Purchaser’s immediate cash payment in the full amount of the Purchase Price to TRLWT
Seller by wire transfer on the Closing Date (or other Delivery Date) in respect of which TRLWT Seller has delivered a Delivery Schedule, and
(ii) in the case of TILC Seller, by means of the Purchaser’s immediate cash payment of the portion of the Purchase Price that the Purchaser
has available to it for such purpose (including from net proceeds derived from its issuance of the Equipment Notes on such Delivery Date, or
from Disposition Proceeds held in the Mandatory Replacement Account or the Optional Reinvestment Account), to TILC Seller by wire
transfer on the Closing Date (or other applicable Delivery Date) in respect of which TILC Seller has delivered a Delivery Schedule, with the
Contributed remainder of such Purchase Price to be reflected by means of proper accounting entries being entered upon the accounts and
records of TILC Seller and Purchaser,
with such wire transfers in each case to be made to an account designated by the applicable Seller to the Purchaser on or before the applicable
Delivery Date.
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(h) On and after each Delivery Date and related Purchase Price payment as aforesaid, the Purchaser shall own the Railcars, related Leases and
Related Assets Conveyed to the Purchaser on such date, and the applicable Seller shall not take any action inconsistent with such ownership
and shall not claim any ownership interest in such assets.
(i) Until the occurrence of a Manager Termination Event and the replacement of TILC as Manager pursuant to the terms of the
Management Agreement, TILC, as Manager, shall conduct the administration, management and collection of the Railcars, related Leases and
Related Assets Conveyed to Purchaser pursuant hereto and shall take, or cause to be taken, all such actions as may be necessary or advisable to
administer, manage and collect such Conveyed Railcars, related Leases and Related Assets, from time to time, all in accordance with the terms
of the Management Agreement.
(j) On each Delivery Date, the applicable Seller shall deliver or cause to be delivered to the Purchaser (or to an assignee thereof, as
directed by the Purchaser) each item required on such date to be delivered by such Seller and any Chattel Paper representing or evidencing, the
Leases being Conveyed on such Delivery Date.
ARTICLE III
CONDITIONS OF CONVEYANCE
SECTION 3.1 Conditions Precedent to Conveyance . Each Conveyance hereunder is subject to the condition precedent that the Purchaser
shall have received and the Indenture Trustee shall have received copies of, all of the following on or before the applicable Delivery Date, in
form and substance satisfactory to the Purchaser and the Requisite Majority:
(i) a Delivery Schedule executed by the applicable Seller and setting forth the Railcars and Leases to be Conveyed on the applicable
Delivery Date pursuant to this Agreement;
(ii) a related Bill of Sale;
(iii) a related Assignment and Assumption;
(iv) an Appraisal of the Railcars to be conveyed, with such Appraisal dated no earlier than 30 days prior to the applicable Delivery Date;
(v) copies of proper UCC financing statements, STB or Registrar General of Canada filings, accurately describing the Conveyed Railcars
and Leases and naming the applicable Seller as the “Debtor/Seller” and Purchaser as “Secured Party/Purchaser”, or applicable filings with the
STB or with the Registrar General of Canada, other similar instruments or documents, all in such manner and in such places as may be
required by law or as may be necessary or, in the opinion of the Purchaser or the Indenture Trustee (acting at the direction of the Requisite
Majority), desirable to perfect the Purchaser’s interest in all Conveyed Railcars, related Leases and Related Assets;
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(vi) copies of proper UCC financing statement terminations or partial terminations, STB or Registrar General of Canada filings, accurately
describing the Conveyed Railcars and Leases, or other similar instruments or documents, in form and substance sufficient for filing under
applicable law of any and all jurisdictions as may be necessary to effect or evidence a release or termination of any pre-existing Encumbrance
evidenced by an existing filing of record against the Conveyed Railcars, related Leases and Related Assets;
(vii) in the case of a Delivery Date occurring in connection with the Closing Date, a confirmation or written advice to similar effect from
counsel to the Purchaser and addressed to the Indenture Trustee, reasonably acceptable to the Indenture Trustee that the conveyance constitutes
a true sale and that the Purchaser would not be consolidated in connection with a bankruptcy of the applicable Seller; and
(viii) in the case of a Delivery Date occurring in connection with the Closing Date, such deliveries, and the satisfaction of such other
conditions, as are set forth in the Note Purchase Agreement or otherwise required for the issuance of the Equipment Notes.
SECTION 3.2 Conditions Precedent to All Conveyances . The Conveyances to take place on any Delivery Date hereunder shall be
subject to the further conditions precedent that:
(a) The following statements shall be true:
(i) the representations and warranties of each applicable Seller contained in Article IV shall be true and correct on and as of such Delivery
Date, both before and after giving effect to the Conveyance to take place on such Delivery Date and to the application of proceeds therefrom,
as though made on and as of such date; and
(ii) such Seller shall be in compliance with all of its covenants and other agreements set forth in this Agreement and the other Operative
Agreements to which it is a party.
(b) Purchaser shall have received a Delivery Schedule, dated the date of the applicable Delivery Date, executed by the applicable Seller,
listing the Railcars and Leases being Conveyed on such date.
(c) The applicable Seller shall have taken such other action, including delivery of approvals, consents, opinions, documents and
instruments to the Purchaser, as the Purchaser or the Indenture Trustee (acting at the direction of the Requisite Majority) may reasonably
request.
(d) The applicable Seller shall have taken all steps necessary under all applicable law in order to Convey to the Purchaser the Railcars
described on the applicable Delivery Schedules, all Leases related to such Railcars and all Related Assets related to such Railcars and/or
Leases, and upon the Conveyance of such Railcars, related Leases and Related Assets from the applicable Seller to the Purchaser pursuant to
the terms hereof, the Purchaser will have acquired on such date good and marketable title to and a valid and perfected ownership
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interest in the Conveyed Railcars, related Leases and Related Assets, free and clear of any Encumbrance (other than Permitted Encumbrances).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1 Representations and Warranties of TRLWT Seller-General . TRLWT Seller makes the following representations and
warranties for the benefit of the Purchaser, the Indenture Trustee, each Noteholder and each other Secured Party, on which the Purchaser relies
in acquiring the Railcars, related Leases and Related Assets Conveyed by it hereunder. Such representations are made as of the Closing Date,
as of each other Delivery Date and at such other times specified below.
(a) TRLWT is a statutory trust duly organized, validly existing, and in good standing under the laws of the State of Delaware, is duly
licensed or qualified and in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on its
ability to carry on its business as now conducted or to execute, deliver and perform its obligations under the TRLWT Agreements, has the
power and authority to carry on its business as now conducted, and has the requisite power and authority to execute, deliver and perform its
obligations under the TRLWT Agreements.
(b) The TRLWT Agreements have been duly authorized by all necessary entity action, executed and delivered by TRLWT, and
(assuming the due authorization, execution and delivery by each other party thereto) constitute the legal, valid and binding obligations of
TRLWT, enforceable against TRLWT in accordance with their respective terms except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity.
(c) The execution, delivery and performance by TRLWT of each TRLWT Agreement and compliance by TRLWT with all of the
provisions thereof do not and will not contravene (i) any law or regulation, or any order of any court or governmental authority or agency
applicable to or binding on TRLWT or any of its properties, or (ii) the provisions of, or constitute a default by TRLWT under, its certificate of
trust or trust agreement or (iii) any indenture, mortgage, contract or other agreement or instrument to which TRLWT is a party or by which
TRLWT or any of its properties may be bound or affected.
(d) There are no proceedings pending or, to the knowledge of TRLWT, threatened against TRLWT in any court or before any
governmental authority or arbitration board or tribunal.
(e) TRLWT is not (x) in violation of any term of any charter instrument or operating agreement or (y) in violation or breach of on in
default under any other agreement or instrument to which it is a party or by which it may be bound except, in the case of clause (y), where such
violation would not reasonably be expected to materially adversely affect TRLWT’s ability to perform its obligations under the TRLWT
Agreements or materially adversely affect its financial condition or business. TRLWT is in compliance with all laws, ordinances,
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governmental rules and regulations to which it is subject, the failure to comply with which would have a material and adverse effect on its
operations or condition, financial or otherwise, or would impair the ability of TRLWT to perform its obligations under the TRLWT
Agreements, and has obtained all licenses, permits, franchises and other governmental authorizations material to the conduct of its business.
(f) No consent, approval or authorization of, or filing, registration or qualification with, or the giving of notice to, any trustee or any
holder of indebtedness of TRLWT or any governmental authority on the part of TRLWT is required (x) in connection with the execution and
delivery by TRLWT of the TRLWT Agreements, or (y) to be obtained in order for TRLWT to perform its obligations thereunder in accordance
with the terms thereof, other than in the case of clause (y) those which are routine in nature and are not normally applied for prior to the time
they are required, and which TRLWT has no reason to believe will not be timely obtained.
(g) The location of TRLWT (within the meaning of Article 9 of the UCC) is in the State of Delaware. TRLWT has not been known by
any name other than Trinity Rail Leasing Warehouse Trust and Trinity Rail Leasing Trust II, and is not known by any trade names.
(h) TRLWT is solvent and will not become insolvent after giving effect to any Conveyance contemplated by this Agreement; after giving
effect to each Conveyance contemplated by this Agreement, TRLWT will have an adequate amount of capital to conduct its business in the
foreseeable future; and TRLWT does not intend to incur, nor believe that it has incurred, debts beyond its ability to pay as they mature.
(i) TRLWT will treat the transactions effected by this Agreement as sales of assets to the Purchaser in accordance with GAAP.
TRLWT’s financial records shall reflect that the Railcars and Leases Conveyed hereunder have been Conveyed to the Purchaser, are no longer
owned by TRLWT and are not intended to be available to the creditors of TRLWT.
SECTION 4.2 Representations and Warranties of TILC Seller-General . TILC Seller makes the following representations and warranties
for the benefit of the Purchaser, the Indenture Trustee, each Noteholder and each other Secured Party, on which the Purchaser relies in
acquiring the Railcars, related Leases and Related Assets Conveyed by it hereunder. Such representations are made as of the Closing Date, as
of each other Delivery Date and at such other times specified below.
(a) TILC is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware, is duly licensed
or qualified and in good standing in each jurisdiction in which the failure to so qualify would reasonably be expected to have a material adverse
effect on its ability to carry on its business as now conducted or as contemplated to be conducted or to execute, deliver and perform its
obligations under the TILC Agreements, has the power and authority to carry on its business as now conducted and as contemplated to be
conducted, and has the requisite power and authority to execute, deliver and perform its obligations under the TILC Agreements.
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(b) The TILC Agreements have been duly authorized by all necessary corporate action, executed and delivered by TILC, and (assuming the due
authorization, execution and delivery by each other party thereto) constitute the legal, valid and binding obligations of TILC, enforceable
against TILC in accordance with their respective terms except as enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the rights of creditors generally and by general principles of equity.
(c) The execution, delivery and performance by TILC of each TILC Agreement and compliance by TILC with all of the provisions
thereof do not and will not contravene or, in the case of clause (iii), constitute (alone or with notice, or lapse of time or both) a default under or
result in any breach of, or result in the creation or imposition of any Encumbrance upon any property of TILC pursuant to, (i) any law or
regulation, or any order, judgment, decree, determination or award of any court or governmental authority or agency applicable to or binding
on TILC or any of its properties, or (ii) the provisions of its certificate of incorporation or bylaws or (iii) any indenture, mortgage, contract or
other agreement or instrument to which TILC is a party or by which TILC or any of its properties may be bound or affected except, with
respect to clause (iii), where such contravention, default or breach would not reasonably be expected to materially adversely affect TILC’s
ability to perform its obligations under the TILC Agreements or materially adversely affect its financial condition or business;
(d) There are no proceedings pending or, to the knowledge of TILC, threatened against TILC in any court or before any governmental
authority or arbitration board or tribunal that, if adversely determined, would reasonably be expected to materially adversely affect TILC’s
ability to perform its obligations under the TILC Agreements or materially adversely affect its financial condition or business.
(e) TILC is not (x) in violation of any term of any charter instrument or bylaw or (y) in violation or breach of or in default under any
other agreement or instrument to which it is a party or by which it or any of its property may be bound except in the case of clause (y) where
such violation, breach or default would not reasonably be expected to materially adversely affect TILC’s ability to perform its obligations
under the TILC Agreements or materially adversely affect its financial condition or business. TILC is in compliance with all laws, ordinances,
governmental rules, regulations, orders, judgments, decrees, determinations and awards to which it is subject, the failure to comply with which
would reasonably be expected to have a material and adverse effect on its operations or condition, financial or otherwise, or would impair the
ability of TILC to perform its obligations under the TILC Agreements, and has obtained all required licenses, permits, franchises and other
governmental authorizations material to the conduct of its business.
(f) No consent, approval or authorization of, or filing, registration or qualification with, or the giving of notice to, any trustee or any
holder of indebtedness of TILC or any governmental authority on the part of TILC is required in the United States in connection with the
execution and delivery by TILC of the TILC Agreements, or is required to be obtained in order for TILC to perform its obligations thereunder
in accordance with the terms thereof, other than (i) as may be required under existing laws, ordinances, governmental rules and regulations to
be obtained, given, accomplished or renewed at any time after the Closing Date or
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other applicable Delivery Date in connection with the performance of its obligations under the TILC Agreements and which are routine in
nature and are not normally applied for prior to the time they are required, and which TILC has no reason to believe will not be timely
obtained, and (ii) as may have been previously obtained in accordance with clause (i) immediately above.
(g) The location of TILC (within the meaning of Article 9 of the UCC) is in the State of Delaware. TILC has not been known by any
name other than Trinity Industries Leasing Company, and is not known by any trade names.
(h) TILC is solvent and will not become insolvent after giving effect to any Conveyance contemplated by this Agreement, and after
giving effect to any Conveyances contemplated by this Agreement, TILC will have an adequate amount of capital to conduct its business in the
foreseeable future, and TILC does not intend to incur, nor believe that it has incurred, debts beyond its ability to pay as they mature.
(i) TILC will treat the transactions effected by this Agreement as sales of assets to, and/or contributions of assets to the capital of, the
Purchaser in accordance with GAAP. TILC’s financial records shall reflect that the Railcars and Leases Conveyed hereunder have been
Conveyed to the Purchaser, are no longer owned by TILC and are not intended to be available to the creditors of TILC.
SECTION 4.3 Representations and Warranties of Seller-Assets . The following representations and warranties are made (i) with respect
to each Delivery Date on which TRLWT is to Convey assets to the Purchaser, by TILC, in its capacity as TRLWT Manager, with respect to
each representation expressed as a representation of TRLWT as “Seller”, and (ii) with respect to each Delivery Date on which TILC is to
Convey assets to the Purchaser, by TILC for its own account, and in each case are made for the benefit of the Purchaser, the Indenture Trustee,
each Noteholder and each other Secured Party as of the date of any Delivery Schedule delivered by the applicable Seller to the Purchaser and
solely with respect to the Railcars and Leases that are referred to in such Delivery Schedule and the Related Assets in respect of such Railcars
and Leases.
(a) To the best knowledge of Seller, no casualty event or other event that may constitute a Total Loss or makes repair of the applicable
Railcar uneconomic or renders such Railcar unfit for commercial use or constitutes theft or disappearance of the applicable Railcar has
occurred with respect to a Railcar being Conveyed.
(b) (i) The Seller has, and the Bill of Sale to be delivered on the Delivery Date shall convey to the Purchaser, all legal and beneficial title
to the Railcars (and Related Assets in respect of such Railcars) that are being Conveyed, free and clear of all Encumbrances (other than
Permitted Encumbrances of the type described in clauses (ii), (iii), (iv), (v) and (viii) of the definition thereof), and such conveyance constitutes
a valid and absolute transfer (each such contribution or sale, as the case may be, constituting a “true sale” for bankruptcy law purposes) of all
right, title and interest of the Seller in, to an under the Railcars (and Related Assets in respect of such Railcars) being Conveyed and will not be
void or voidable under any applicable law; (ii) the Seller has, and the Assignment and Assumption to be delivered on the Delivery Date shall
assign to the Purchaser, all legal and beneficial title to the Leases (and Related Assets in
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respect of such Leases) that are being Conveyed, free and clear of all Encumbrances (other than Permitted Encumbrances of the type described
in clauses (ii), (iii), (iv), (v) and (viii) of the definition thereof), and such assignment constitutes a valid and absolute transfer (each such
contribution or sale, as the case may be, constituting a “true sale” for bankruptcy law purposes) of all right, title and interest of the Seller in, to
an under the Leases (and Related Assets in respect of such Leases) being Conveyed and will not be void or voidable under any applicable law;
(iii) the Railcars being Conveyed on a Delivery Date are subject to Leases to the extent required under the Indenture in respect of such
Conveyance, and (iv) all Leases relating to such Railcars are on rental and other terms that are no different, taken as a whole, from those for
similar Railcars in the rest of the TILC Fleet.
(c) All sales, use or transfer taxes, if any, due and payable upon the Conveyance of the Railcars, related Leases and Related Assets being
Conveyed on the applicable Delivery Date will have been paid or such transactions will then be exempt from any such taxes and the Seller (or
TRLWT Manager, in the case of TRLWT Seller) will cause any required forms or reports in connection with such taxes to be filed in
accordance with applicable laws and regulations.
(d) The Railcars being Conveyed are substantially similar, in terms of objectively identifiable characteristics that are relevant for
purposes of the services to be performed by TILC under the Management Agreement, to the equipment in the TILC Fleet.
(e) In selecting the Railcars to be sold to the Purchaser, the Seller has not discriminated against the Purchaser in a negative fashion when
such Railcars are compared with the other railcars in the TILC Fleet.
(f) The Seller is not in default of its obligations as “lessor” (or other comparable capacity) under any Lease, and, to the best of the
Seller’s knowledge, there are (i) no defaults existing as of the date of Conveyance by any Lessee under any Lease, except such defaults that are
not payment defaults (except to a de minimus extent (but giving effect to any applicable grace periods)) and are not material defaults under the
applicable Lease, and (ii) no claims or liabilities arising as a result of the operation or use of any Railcar prior to the date hereof, as to which the
Purchaser would be or become liable, except for ongoing maintenance and other obligations of the “lessor” provided for under full-service
Leases, which obligations are required to be performed by the Manager pursuant to the Management Agreement.
(g) None of the Railcars being Conveyed are subject to a purchase option under the terms of the related Lease except as described in the
related Delivery Schedule, and each such purchase option is a Permitted Purchase Option.
(h) All written information provided by the Seller or any Affiliate of the Seller to the Appraiser with respect to the Railcars and Leases
being Conveyed is true and correct in all material respects. All written information provided by the Seller or any Affiliate of the Seller to
Deloitte & Touche LLP with respect to the Leases is true and correct in all material respects and accurately reflects the terms of the Leases. To
the extent the written information referred to in this clause (h) was provided to the Appraiser and Deloitte & Touche LLP, in each case for their
use in connection with their services rendered in connection with Conveyances contemplated
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hereby, such entities have been provided with the same written information (or relevant portions thereof).
(i) None of the Leases contain any renewal or extension options except for such options that are described in the Delivery Schedule.
(j) All information provided in the applicable Delivery Schedule, including each schedule thereto, is true and correct on and as of the
Delivery Date, including without limitation, all information provided therein with respect to each Railcar purported to be covered thereby and
all information provided therein with respect to each Lease relating to any such Railcar. All other information concerning the Railcars, related
Leases and Related Assets covered by the applicable Delivery Schedule that was provided to the Issuer or the Indenture Trustee prior to the
related Delivery Date was true and correct in all material respects as of the date it was so provided.
(k) No Default, Event of Default or Manager Termination Event has occurred and is continuing on the Delivery Date, and no event that,
with the giving of notice, the passage of time or both, would constitute a Manager Termination Event has occurred and is continuing on the
Delivery Date.
SECTION 4.4 Representations and Warranties of the Purchaser . The Purchaser makes the following representations and warranties for
the benefit of each Seller, on which Seller relies in Conveying Railcars, related Leases and Related Assets to the Purchaser hereunder. Such
representations are made as of the Closing Date and each other applicable Delivery Date.
(a) Organization and Good Standing . The Purchaser has been duly organized and is validly existing and in good standing as a limited
liability company under the laws of the State of Delaware, with the power and authority to own its properties and to conduct its business as
such properties are currently owned and such business is currently conducted, and had at all relevant times, and has, full power, authority and
legal right to acquire and own the Railcars and Leases Conveyed hereunder.
(b) Due Qualification . The Purchaser is duly qualified (except where the failure to be so qualified would not have a Material Adverse
Effect) to do business as a foreign limited liability company in good standing, and has obtained all necessary licenses (except to the extent that
such failure to obtain such licenses is inconsequential) and approvals in all jurisdictions in which the ownership or lease of its property or the
conduct of its business requires such qualification, licenses and/or approvals.
(c) Power and Authority . The Purchaser has the power, authority and legal right to execute and deliver this Agreement and to carry out
the terms hereof and to acquire the Railcars and Leases Conveyed hereunder; and the execution, delivery and performance of this Agreement
and all of the documents required pursuant hereto have been duly authorized by the Purchaser by all necessary action.
(d) No Consent Required . The Purchaser is not required to obtain the consent of any other Person, or any consent, license (except to the
extent that such failure to obtain such
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licenses is inconsequential), approval or authorization or registration or declaration with, any governmental authority, bureau or agency in
connection with the execution, delivery or performance of this Agreement and the Transaction Documents to which it is a party, except for
such as have been obtained, effected or made.
(e) Binding Obligation . This Agreement constitutes a legal, valid and binding obligation of the Purchaser, enforceable against the
Purchaser in accordance with its terms, subject, as to enforceability, to applicable bankruptcy, insolvency, reorganization, conservatorship,
receivership, liquidation or other similar laws affecting the enforcement of creditors’ rights generally and general principles of equity.
(f) No Violation . The execution, delivery and performance by the Purchaser of this Agreement, the consummation of the transactions
contemplated by this Agreement and the Transaction Documents to which it is a party and the fulfillment of the terms of this Agreement and
the Transaction Documents to which it is a party do not and will not conflict with, result in any breach of any of the terms and provisions of, or
constitute (with or without notice or lapse of time) a default under, the organizational documents of the Purchaser, or conflict with or breach
any of the terms or provisions of, or constitute (with or without notice or lapse of time) a default under, any indenture, agreement, mortgage,
deed of trust or other instrument to which the Purchaser is a party or by which the Purchaser is bound or to which any of its properties are
subject, or result in the creation or imposition of any lien upon any of its properties pursuant to the terms of any such indenture, agreement,
mortgage, deed of trust or other instrument (other than liens created hereunder or under the Indenture), or violate any law or any order, rule or
regulation, applicable to the Purchaser or its properties, of any federal or state regulatory body, any court, administrative agency, or other
governmental instrumentality having jurisdiction over the Purchaser or any of its properties.
(g) No Proceedings . There are no proceedings or investigations pending, or, to the Purchaser’s knowledge, threatened against the
Purchaser before any court, regulatory body, administrative agency, or other tribunal or governmental instrumentality having jurisdiction over
the Purchaser or its properties: (i) asserting the invalidity of this Agreement or any of the Transaction Documents, (ii) seeking to prevent the
consummation of any of the transactions contemplated by this Agreement or any of the Transaction Documents, (iii) seeking any determination
or ruling that could have an adverse effect on the performance by the Purchaser of its obligations under, or the validity or enforceability of, this
Agreement or any of the Transaction Documents, (iv) that may have an adverse effect on the federal or state income tax attributes of, or seek to
impose any excise, franchise, transfer or similar tax upon, the transfer and acquisition of the Railcars and Leases Conveyed hereunder or
(v) that could have an adverse effect on the Railcars and Leases Conveyed to the Purchaser hereunder.
(h) Consideration . The Purchaser has given fair consideration and reasonably equivalent value in exchange for the Conveyance of the
Railcars, related Leases and Related Assets being Conveyed hereunder.
In the event of any breach of a representation and warranty made by the Purchaser hereunder, each Seller covenants and agrees that such Seller
will not take any action to pursue any remedy that it may have hereunder, in law, in equity or otherwise, until a year and a day have passed
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since all Outstanding Obligations under all other Operative Agreements have been paid in full. Each Seller and the Purchaser agree that
damages will not be an adequate remedy for a breach of this covenant and that this covenant may be specifically enforced by the Purchaser or
any third party beneficiary described in Section 6.10.
SECTION 4.5 Indemnification .
(a) TILC Seller, or TRLWT Manager on behalf of TRLWT Seller, shall defend, indemnify and hold harmless the Purchaser, the
Manager, the Indenture Trustee, each Noteholder, each of their respective Affiliates and each of respective directors, officers, employees,
successors and permitted assigns, agents and servants of the foregoing (each an “ Indemnified Person ”) from and against any and all costs,
expenses, losses, obligations, penalties, liabilities, damages, actions, or suits or claims of whatsoever kind or nature (whether or not on the basis
of negligence, strict or absolute liability or liability in tort), that may be imposed upon, incurred by, suffered by or asserted against any
Indemnified Person arising out of or resulting from any breach of Seller’s representations and warranties and covenants contained herein,
except (A) those resulting solely from any gross negligence, bad faith or willful misconduct of the particular Indemnified Person claiming
indemnification hereunder, (B) those in respect of taxes that are otherwise addressed by the provisions of (and subject to the limitations of)
subsection (c) of this Section 4.5 below, or (C) to the extent that providing such indemnity would constitute recourse for losses due to the
uncollectibility of sale proceeds (or any particular amount of sale proceeds) in respect of a Railcar due to a diminution in market value of such
Railcar, or of Lease or other third party payments due to the insolvency, bankruptcy or financial inability to pay of the related Lessee or other
third party (the “ Excluded Amounts ”).
(b) TILC Seller, or TRLWT Manager on behalf of TRLWT Seller, will defend and indemnify and hold harmless each Indemnified
Person against any and all costs, expenses, losses, obligations, penalties, liabilities, damages, actions, or suits or claims of whatsoever kind or
nature (whether or not on the basis of negligence, strict or absolute liability or liability in tort), that may be imposed upon, incurred by, suffered
by or asserted against such Indemnified Person, other than Excluded Amounts, arising out of or resulting from any action taken by Seller, other
than in accordance with this Agreement or the Indenture or other applicable Operative Agreement, in respect of any portion of the Railcars,
related Leases and Related Assets that are Conveyed hereunder.
(c) TILC Seller, or TRLWT Manager on behalf of TRLWT Seller, agrees to pay, and shall defend, indemnify and hold harmless each
Indemnified Person from and against, any taxes (other than taxes based upon the income of an Indemnified Person and taxes that would
constitute Excluded Amounts) that may at any time be asserted against any Indemnified Person with respect to the transactions contemplated in
this Agreement, including, without limitation, any sales, gross receipts, general corporation, tangible or intangible personal property, privilege,
or license taxes and costs and expenses in defending against the same, arising by reason of the acts to be performed by Seller under this
Agreement and imposed against such Person. Without limiting the foregoing, in the event that the Purchaser, the Manager or the Indenture
Trustee receives actual notice of any transfer taxes arising out of the Conveyance of any Railcar or Lease from Seller to the Purchaser under
this Agreement, on written demand by such party, or upon Seller otherwise being given notice thereof, TILC Seller, or TRLWT Manager on
behalf of
15
TRLWT Seller, shall pay, and otherwise indemnify and hold harmless the applicable Indemnified Person, the Manager and the Indenture
Trustee harmless, on an After-Tax Basis, from and against any and all such transfer taxes (it being understood that none of the Purchaser, the
Manager, the Indenture Trustee or any other Indemnified Person shall have any contractual obligation to pay such transfer taxes).
(d) TILC Seller, or TILC, as “Manager” under the TRLWT Management Agreement on behalf of TRLWT Seller, shall defend,
indemnify, and hold harmless each Indemnified Person from and against any and all costs, expenses, losses, obligations, penalties, liabilities,
damages, actions, or suits or claims of whatsoever kind or nature (whether or not on the basis of negligence, strict or absolute liability or
liability in tort), to the extent that any of the foregoing may be imposed upon, incurred by, suffered by or asserted against such Indemnified
Person due to the negligence, willful misfeasance, or bad faith of Seller in the performance of its duties under this Agreement or by reason of
reckless disregard of Seller’s obligations and duties under this Agreement.
(e) TILC Seller, or TRLWT Manager on behalf of TRLWT Seller, shall indemnify, defend and hold harmless each Indemnified Person
from and against any costs, expenses, losses, obligations, penalties, liabilities, damages, actions, or suits or claims of whatsoever kind or nature
(whether or not on the basis of negligence, strict or absolute liability or liability in tort), that may be imposed upon, incurred by, suffered by or
asserted against such Indemnified Person, other than Excluded Amounts, as a result of the failure of any Railcar or Lease Conveyed hereunder
to comply with all requirements of applicable law as of the Closing Date or other applicable Delivery Date.
Indemnification under this Section 4.5 shall include reasonable fees and expenses of counsel and expenses of litigation. The indemnity
obligations hereunder shall be in addition to any obligation that any Seller may otherwise have under applicable law or any other Operative
Agreement.
SECTION 4.6 Special Indemnification by TILC regarding Exercise of Setoff by Customers . TILC hereby agrees, for the benefit of the
Indenture Trustee, the Noteholders and each other Secured Party, that it will, within 45 days after the date on which it has knowledge that any
Lessee shall have reduced any payments made by such Lessee under any Lease in the Portfolio as a result of or in connection with any setoff
exercised by such Lessee (regardless of whether such Lessee actually has any contractual, statutory or other right to exercise such setoff) with
respect to amounts owed or presumed owed to such Lessee pursuant to railcar leases that are not in the Portfolio, and provided that the
applicable Lessee shall not have made payments aggregating the full amount payable by such Lessee under the applicable Lease prior to the
end of such 30-day period, deposit into the Collections Account an amount, in immediately available funds, equal to the amount of such
reduction.
Indemnification under this Section 4.6 shall include reasonable fees and expenses of counsel and expenses of litigation. The indemnity
obligations hereunder shall be in addition to any obligation that TILC may otherwise have under applicable law or any other Operative
Agreement.
16
ARTICLE V
COVENANTS OF SELLER
SECTION 5.1 Protection of Title of the Purchaser .
(a) On or prior to the date hereof, Seller shall have filed or caused to be filed financing statements, STB or Registrar General of Canada
filings (each in form proper for filing in the applicable jurisdiction) naming the Purchaser as purchaser or secured party, naming the Indenture
Trustee as assignee and describing the Railcars, related Leases and Related Assets Conveyed by it to the Purchaser as collateral, with the office
of the Secretary of State of the State of Delaware and in such other locations as the Purchaser or the Indenture Trustee shall have required.
Without limiting the foregoing, Seller hereby authorizes the Purchaser and/or any assignee thereof to prepare and file any such UCC-1
financing statements. From time to time thereafter, Seller shall authorize and file such financing statements and cause to be authorized and filed
such continuation statements, all in such manner and in such places as may be required by law (or deemed desirable by the Purchaser or any
assignee thereof) to fully perfect, preserve, maintain and protect the interest of the Purchaser under this Agreement, and the security interest of
the Indenture Trustee under the Indenture, in the Railcars, related Leases and Related Assets that are Conveyed hereunder and in the proceeds
thereof. Seller shall deliver (or cause to be delivered) to the Purchaser and the Indenture Trustee file-stamped copies of, or filing receipts for,
any document filed as provided above, as following such filing in accordance herewith. In the event that Seller fails to perform its obligations
under this subsection, the Purchaser or the Indenture Trustee may perform such obligations, at the expense of Seller, and Seller hereby
authorizes the Purchaser or the Indenture Trustee and grants to the Purchaser and the Indenture Trustee an irrevocable power of attorney to take
any and all steps in order to perform such obligations in Seller’s or in its own name, as applicable, and on behalf of Seller, as are necessary or
desirable, in the determination of the Purchaser or Indenture Trustee or any assignee thereof.
(b) On or prior to Closing Date and any other applicable Delivery Date hereunder, Seller shall take all steps necessary under all
applicable law in order to transfer and assign to the Purchaser the Railcars and Leases being Conveyed on such date to the Purchaser so that,
upon the Conveyance of such Railcar or Lease from Seller to the Purchaser pursuant to the terms hereof on the applicable Delivery Date, the
Purchaser will have acquired good and marketable title to and a valid and perfected ownership interest in such Railcars and Leases, free and
clear of any Encumbrance (other than Permitted Encumbrances). On or prior to the applicable Delivery Date hereunder, Seller shall take all
steps required under applicable law in order for the Purchaser to grant to the Indenture Trustee a first priority perfected security interest in the
Railcars and Leases being Conveyed to the Purchaser on such Delivery Date and, from time to time thereafter, Seller shall take all such actions
as may be required by applicable law (or deemed desirable by the Purchaser) to fully preserve, maintain and protect the Purchaser’s ownership
interest in, and the Indenture Trustee’s first priority perfected security interest in the Railcars and Leases which have been Conveyed to the
Purchaser hereunder.
(c) Seller shall not change its name, identity, jurisdiction of organization or corporate structure in any manner that would or could make
any financing statement or continuation statement filed by Purchaser in accordance with this Agreement seriously
17
misleading within the meaning of § 9-506 of the UCC (or any similar provision of the UCC), unless Seller shall have given the Purchaser, the
Manager and the Indenture Trustee at least 30 days’ prior written notice thereof, and shall promptly file and hereby authorize the Purchaser or
the Indenture Trustee to file appropriate new financing statements or amendments to all previously filed financing statements and continuation
statements.
(d) Seller shall give the Purchaser, the Manager and the Indenture Trustee at least 30 days’ prior written notice of any relocation of its
jurisdiction of organization if, as a result of such relocation, the applicable provisions of the UCC would require the filing of any amendment of
any previously filed financing or continuation statement or of any new financing statement. Seller shall at all times maintain its jurisdiction of
organization, each office from which it manages or purchases Railcars and Leases and its principal executive office within the United States of
America.
SECTION 5.2 Other Liens or Interests . Except for the Conveyances hereunder, Seller will not sell, pledge, assign, transfer or otherwise
convey to any other Person, or grant, create, incur, assume or suffer to exist any Encumbrance on the Railcars and Leases Conveyed hereunder
or any interest therein (other than Permitted Encumbrances), and TILC Seller, or TRLWT Manager on behalf of TRLWT Seller, shall defend
the right, title, and interest of the Purchaser and the Indenture Trustee in and to such Railcars and Leases against all Encumbrances or claims of
Encumbrances of third parties claiming through or under Seller. To the extent that any Railcar or Lease shall at any time secure any debt of the
related Lessee to Seller or any of its affiliates, Seller agrees that any security interest in its favor arising from such a provision shall be
subordinate to the interest of the Purchaser (and its further assignees) in such Railcars and Leases.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1 Amendment . This Agreement may be amended by the Sellers and the Purchaser only with the prior written consent of the
Indenture Trustee (acting at the direction of the Requisite Majority).
SECTION 6.2 Notices . All demands, notices and communications to Seller or the Purchaser hereunder shall be in writing, personally
delivered, or sent by telecopier (subsequently confirmed in writing), reputable overnight courier or mailed by certified mail, return receipt
requested, and shall be deemed to have been given upon receipt (a) in the case of TRLWT Seller at the following address: c/o Wilmington
Trust Company, Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust
Administration Re: Trinity Rail Leasing VII, Facsimile No.: (302) 636-4140, with a copy to Trinity Industries Leasing Company, 2525
Stemmons Freeway, Dallas, Texas 75207, Attention: Vice President, Leasing Operations, Facsimile No.: (214) 589-8217or such other address
as shall be designated by TRLWT Seller in a written notice delivered to the Purchaser, (b) in the case of TILC Seller at the following address:
Trinity Industries Leasing Company, 2525 Stemmons
18
Freeway, Dallas, Texas 75207, Attention: Vice President, Leasing Operations, Facsimile No.: (214) 589-8217, or such other address as shall be
designated by TILC Seller in a written notice delivered to the Purchaser, and (c) in the case of the Purchaser at the following address: Trinity
Rail Leasing VII LLC., 2525 Stemmons Freeway, Dallas, Texas 75207, Attention: Vice President, Leasing Operations, Facsimile No.:
(214) 589-8217, with a copy to Kaye Scholer LLC at the following address: Three First National Plaza, 70 West Madison Street, Suite 4100,
Chicago, Illinois 60602, and with a copy to the Indenture Trustee at the notice address provided for same in the Indenture, or such other address
as shall be designated by a party in a written notice delivered to the other party.
SECTION 6.3 Merger and Integration . Except as specifically stated otherwise herein, this Agreement and the Transaction Documents
set forth the entire understanding of the parties relating to the subject matter hereof, and all prior understandings, written or oral, are superseded
by this Agreement and the Transaction Documents. This Agreement may not be modified, amended, waived or supplemented except as
provided herein.
SECTION 6.4 Severability of Provisions . If any one or more of the covenants, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, provisions or terms shall be deemed severable from the remaining covenants, provisions
or terms of this Agreement and shall in no way affect the validity or enforceability of the other provisions of this Agreement.
SECTION 6.5 Governing Law . THIS AGREEMENT SHALL, IN ACCORDANCE WITH SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK, BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO ANY CONFLICTS OF LAW PRINCIPLES THEREOF THAT WOULD CALL FOR THE APPLICATION OF THE LAWS
OF ANY OTHER JURISDICTION.
SECTION 6.6 Counterparts . For the purpose of facilitating the execution of this Agreement and for other purposes, this Agreement may
be executed simultaneously in any number of counterparts, each of which counterparts shall be deemed to be an original, and all of which
counterparts shall constitute but one and the same instrument. Delivery of an executed counterpart of a signature page to this Agreement by
facsimile shall be effective as delivery of a manually executed counterpart of this Agreement.
SECTION 6.7 Binding Effect; Assignability .
(a) This Agreement shall be binding upon and inure to the benefit of Seller, the Purchaser and their respective successors and assigns;
provided , however , that Seller may not assign its rights or obligations hereunder or any interest herein without the prior written consent of the
Purchaser and the Indenture Trustee (acting at the direction of the Requisite Majority). The Purchaser may assign all of its rights hereunder to
the Indenture Trustee, and such assignee shall have all rights of the Purchaser under this Agreement (as if such assignee were the Purchaser
hereunder).
19
(b) This Agreement shall create and constitute the continuing obligation of the parties hereto in accordance with its terms, and shall remain in
full force and effect until such time when all Outstanding Obligations are paid in full; provided , however , that rights and remedies with
respect to any breach of any representation and warranty made by Seller pursuant to Article IV hereof shall be continuing and shall survive any
termination of this Agreement.
SECTION 6.8 Third Party Beneficiaries . Each of the parties hereto hereby acknowledges that the Purchaser intends to assign all of its
rights under this Agreement to the Indenture Trustee for the benefit of the Secured Parties under the Indenture, and Seller hereby consents to
such assignment and agrees that upon such assignment, the Indenture Trustee (for the benefit of the Secured Parties) shall be a third party
beneficiary of this Agreement and may exercise the rights of the Purchaser hereunder and shall be entitled to all of the rights and benefits of the
Purchaser hereunder to the same extent as if it were party hereto.
In addition, whether or not otherwise expressly stated herein, all representations, warranties, covenants and agreements of the Issuer,
TRLWT and TILC (whether as a Seller or as TRLWT Manager) in this Agreement or in any document delivered by any of them in connection
with this Agreement (including without limitation, in any Delivery Schedule), shall be for the express benefit of the Indenture Trustee, each
Noteholder and each other Secured Party as express third party beneficiaries, and shall be enforceable by the Indenture Trustee (acting at the
direction of the Requisite Majority) as if such Person were a party hereto. Each of the Purchaser, TRLWT and TILC hereby acknowledges and
agrees that such representations, warranties, covenants and agreements are relied upon by each Noteholder in purchasing the Equipment Notes
issued under the Indenture.
SECTION 6.9 Term . This Agreement shall commence as of the date of execution and delivery hereof and shall continue in full force and
effect until the payment in full of all Outstanding Obligations.
[continues next page]
20
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed by their respective officers as of the day and year first
above written.
TRINITY RAIL LEASING WAREHOUSE TRUST
By:
/s/ James E. Perry
Name:
James E. Perry
Vice President, Treasurer and
Title:
Assistant Secretary
TRINITY INDUSTRIES LEASING COMPANY
By:
/s/ James E. Perry
Name:
James E. Perry
Vice President, Treasurer and
Title:
Assistant Secretary
TRINITY RAIL LEASING VII LLC,
By: TRINITY INDUSTRIES LEASING
COMPANY, as sole member and manager
By:
Exh. C
/s/ James E. Perry
Name:
James E. Perry
Vice President, Treasurer and
Title:
Assistant Secretary
Exhibit 10.21
TRINITY INDUSTRIES, INC.
EXECUTIVE PERQUISITE PROGRAM
(As amended December 11, 2014)
I. PURPOSE
The purpose of this Executive Perquisite Program (the “Program”) is to provide a consistent and competitive level of perquisites and benefits to
top level executives of Trinity Industries, Inc. (the “Company”) by providing a monthly cash perquisite allowance (the “Perquisite
Allowance”). Specifically, the Perquisite Allowance is to be used at the discretion of the executive for (i) expenses related to the use of
executive’s personal automobile for business purposes and for the first 10,000 business miles, (ii) country club, health club, dinner or luncheon
club, or airport club dues and fees, and (iii) other perquisite type expenses such as financial planning, income tax preparation and home
security. The Program does not preclude reimbursement of normal business expenses such as business meals at a club and business use of a
personal automobile beyond 10,000 business miles.
It is intended that the Perquisite Allowance will eliminate charges to the Company of personal benefits for the executives that are not provided
to Company employees generally other than occasional de minimis items such as the use of Company tickets to entertainment events. The
Perquisite Allowance is not intended to cover personal use of the Company’s aircraft.
II. ELIGIBILITY
Corporate officers, operating presidents and certain other executives as approved from time to time will be eligible to participate in the
Program.
III. VALUE
Each participant will receive a Perquisite Allowance of 7.5% of their base pay payable at the end of the month. Subject to the limitations
outlined below, the Perquisite Allowance will increase to 10% of the participant’s base pay when the Company’s annual earnings exceed $1 a
share and it is forecast that annual earnings will remain above that level for the next year. From and after January 1, 2015, the maximum
Perquisite Allowance for participants as of that date will be the lesser of (i) 10% of the participant’s 2015 base pay and (ii) $75,000. For
participants added to the program after January 1, 2015, the maximum Perquisite Allowance will be 10% of the participant’s annualized base
pay for the first calendar year of participation in the Program.
IV. TERMINATION AND AMENDMENT
The Program may be terminated or amended at any time by the Company. Notification of termination or amendment will be given to the then
participants. If the Program is terminated during a Plan Year, payment will be prorated to the date of termination. The Company’s decision
relative to such payment shall be final and binding on all parties.
V. EFFECTIVE DATE
The terms of the Program as described herein are effective commencing January 1, 2004 and will continue until cancelled or changed by the
Company.
VI. NO CONTRACT
Nothing in the Program shall be deemed by implication, conduct of the parties, or otherwise to constitute a contract of employment or
otherwise to impose any limitation on any right of the Company or any of its operating units to terminate an executive’s employment at any
time.
VII. PAYMENTS
Payments made pursuant to the Program will not be considered for purposes of calculating benefits under any Company Retirement Plan.
VIII. AUTOMOBILE ALLOWANCE
It is assumed that the first $6,000 paid under the Program relates to an Automobile Allowance. As a condition of the Automobile Allowance, a
participant will be expected to use his or her personal vehicle for business purposes. Therefore, the Company will require that the following
conditions be met:
1.
Each participant is required to carry auto liability insurance with limits not less than $250,000 for bodily injury to any one person,
$500,000 for bodily injury each accident and $100,000 property damage each accident or $500,000 combined single limit for bodily
injury and property damage. A current certificate of insurance or a copy of the declaration page showing insurance limits must be
provided to Risk Management. If this requires an adjustment in the executive’s existing coverage then the executive must obtain it at
the next renewal.
2.
In order to receive the $500 monthly allowance a participant must have a four door vehicle suitable for business use. This does not
mean the participant must drive a four door vehicle every day. If a participant does not have a four door vehicle available the
participant will forfeit $6,000 of the Perquisite Allowance.
3.
The vehicle must be maintained in good operating condition and kept clean inside and out.
4.
Mileage reimbursement will not be allowed for the first 10,000 business miles driven in a year. If the participant expects to drive over
10,000 business miles in a year, the participant will need to maintain a log of business miles showing point of origin, destination and
business purpose. For business miles driven above 10,000 miles, the participant may claim reimbursement at the standard mileage
rate.
Exhibit 10.23
TRINITY INDUSTRIES, INC.
DIRECTOR COMPENSATION
Summary Sheet as of December 11, 2014
On December 11, 2014, the Board of Directors approved the following compensation for non-employee directors,
effective in 2015:
•
•
•
•
•
•
•
Board member annual retainer - $70,000
Annual equity compensation - $130,000, using a 30-day average share price as the basis for awards
Presiding Director - annual retainer of $15,000
Committee Chairs - annual retainer of $15,000
Board meeting fee - $2,000 for each meeting attended
Committee members - $2,000 for each meeting attended
Ad hoc or special assignment work performed for or at the request of the Chairman, Chief Executive Officer,
and President - $2,000 per day
Exhibit 12
Trinity Industries, Inc. and Subsidiaries
Computation of Ratio of Earnings to Fixed Charges
For the year ended December 31,
2013
2012
2011
2014
2010
($ in millions)
Earnings:
Earnings from continuing operations before provision for income
taxes
$
Add:
Fixed Charges
Amortization of capitalized interest
Total earnings from continuing operations before provision for
income taxes
$
Fixed Charges:
Interest expense
Portion of rental expense representative of interest
$
Capitalized interest
Total Fixed Charges
Ratio of Earnings to Fixed Charges
$
1,064.1
$
221.4
0.1
590.5
$
212.3
0.2
385.9
$
216.6
0.2
239.0
$
205.7
0.2
106.7
202.5
0.2
1,285.6
$
803.0
$
602.7
$
444.9
$
309.4
193.4
28.0
221.4
—
221.4
$
187.3
25.0
212.3
—
212.3
$
194.7
21.9
216.6
—
216.6
$
185.3
20.4
205.7
—
205.7
$
182.1
20.4
202.5
—
202.5
5.81
$
3.78
$
2.78
$
2.16
$
1.53
Exhibit 21
Trinity Industries, Inc.
Active Subsidiaries as of December 31, 2014
Name of Subsidiary
CJB Prime Property, LLC
CJB Canada Mfg. Corp.
Heritage Aviation Services LLC
International Industrial Indemnity Company
Reunion General Agency, Inc.
Trinity Argentina S.R.L.
Trinity Construction Materials, Inc.
Trinity Materials, Inc.
POB Exploration, LLC
Trinity LW, LLC
LWFP, LLC
TRNLWB, LLC
TRNLWS, LLC
Trinity Containers, LLC
Trinity Corporate Services, LLC
Vigilant Systems, Inc.
Trinity Cryogenics, LLC
Alloy Custom Products, LLC
Wesmor Cryogenics, LLC
Trinity Heads, Inc.
Trinity Highway Products, LLC
QEAS, Inc.
Quixote Transportation Safety, Inc.
E-Tech Testing Services, Inc.
Energy Absorption Systems, Inc.
EAS Road Products, Inc.
EAS Road Products (Singapore Branch), Inc.
Energy Absorption Systems (AL) LLC
Energy Absorption Systems (Europe), Inc.
Quixote International Enterprises, LLC
Trinity B, LLC
Trinity Highway Rentals, Inc.
Trinity Industries International, Inc.
Trinity Industries International Holdings AG
Administradora Especializada, S. de R.L. de C.V
Servicios Corporativos Tatsa, S. de R.L. de C.V
Servicios Corporativos Tatsa, S. de R.L. de C.V
Asistencia Profesional Corporativa, S.de R.L. de C.V.
Trinity Industries de México, S. de R.L. de C.V.
Administradora Especializada, S. de R.L. de C.V
Asistencia Profesional Corporativa
OFE, S. de R.L. de C.V.
Servicios Corporativos Tatsa, S. de R.L. de C.V
OFE, S. de R.L. de C.V.
Trinity Industries de México
Trinity Servicos, S. de R.L. de C.V.
Trinity Servicos, S. de R.L. de C.V.
Trinity Industries do Brasil, Ltda.
Trinity Canada Holding 1 ULC
Trinity Industries Canada LLP
Trinity Industries Canada ULC
Domicile
Delaware
Canada
Nevada
Vermont
Texas
Argentina
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Texas
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Switzerland
Mexico
Mexico
Mexico
Mexico
Mexico
Mexico
Mexico
Mexico
Mexico
Mexico
Mexico
Mexico
Mexico
Brazil
Canada
Delaware
Canada
Ownership
Percentage
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
50.0%
25.0%
50.0%
50.0%
66.7%
50.0%
50.0%
66.7%
25.0%
33.3%
33.3%
50.0%
50.0%
100.0%
100.0%
1.0%
100.0%
Trinity Industries, Inc.
Active Subsidiaries as of December 31, 2014
Name of Subsidiary
Trinity Industries Canada Distribution Inc.
Platinum Energy Services ULC
Trinity Canada Holding 2 ULC
Trinity Industries Canada LLP
Trinity Industries Canada ULC
Platinum Energy Services ULC
Trinity Industries Leasing Company
RIV 2013 Rail Holdings LLC
Trinity Rail Leasing 2012 LLC
TILX GP III, LLC
Trinity Rail Leasing III LP
TILX LP III, LLC
Trinity Rail Leasing III LP
TILX GP IV, LLC
Trinity Rail Leasing IV LP
TILX LP IV, LLC
Trinity Rail Leasing IV LP
TILX GP V, LLC
Trinity Rail Leasing V LP
TILX LP V, LLC
Trinity Rail Leasing V LP
Trinity Marks Company
Trinity Rail, Inc.
Trinity Rail Management, Inc.
Rail Pipeline Group, LLC
TILX GP I, LLC
Trinity Rail Leasing I LP
TILX LP I, LLC
Trinity Rail Leasing I LP
TrinityRail Canada Inc.
Trinity Rail Leasing 2010 LLC
Trinity Rail Leasing VI LLC
Trinity Rail Leasing VII LLC
Trinity Rail Leasing Warehouse Trust
TRIP Rail Holdings LLC
TRIP Rail Leasing LLC
TRIP Rail Master Funding LLC
Trinity Industries Metals Laboratory, Inc.
Trinity Industries Railcar Corporation
Trinity Logistics Group, Inc.
Trinity Central Maintenance, LLC
Trinity Marine Products, Inc.
Trinity Composites, LLC
Trinity Marine Leasing, Inc.
Trinity Meyer Utility Structures, LLC
Trinity Mining and Construction Equipment, Inc.
Trinity Shoring Products, Inc.
Trinity Rail Group, LLC
Thrall International Holdings, LLC
Trinity Rail de Mexico, S. de R.L. de C.V.
Trinity Rail Sabinas, S. de R.L. de C.V.
Trinity North American Freight Car, Inc.
Trinity Parts & Components, LLC
McConway & Torley, LLC
Domicile
Canada
Canada
Canada
Delaware
Canada
Canada
Delaware
Delaware
Delaware
Delaware
Texas
Delaware
Texas
Delaware
Texas
Delaware
Texas
Delaware
Texas
Delaware
Texas
Delaware
Delaware
Delaware
Delaware
Delaware
Texas
Delaware
Texas
Canada
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Texas
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Illinois
Mexico
Mexico
Delaware
Delaware
Delaware
Ownership
Percentage
100.0%
100.0%
100.0%
99.0%
100.0%
100.0%
100.0%
30.6%
100.0%
100.0%
1.0%
100.0%
99.0%
100.0%
1.0%
100.0%
99.0%
100.0%
1.0%
100.0%
99.0%
100.0%
100.0%
100.0%
100.0%
100.0%
1.0%
100.0%
99.0%
100.0%
100.0%
100.0%
100.0%
100.0%
42.6%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
33.3%
33.3%
100.0%
100.0%
100.0%
*
*
Trinity Industries, Inc.
Active Subsidiaries as of December 31, 2014
Ownership
Domicile
Percentage
Standard Forged Products, LLC
Delaware
100.0%
TrinityRail Maintenance Services, Inc.
Delaware
100.0%
MCM Railyard, LLC
Delaware
100.0%
Trinity Rail de Mexico, S. de R.L. de C.V.
Mexico
66.7%
Trinity Rail Sabinas, S. de R.L. de C.V.
Mexico
66.7%
Trinity Rail GmbH
Switzerland
100.0%
Trinity Tank Car, Inc.
Delaware
100.0%
TrinityRail Products, LLC
Delaware
100.0%
TrinityRail Asset Management Company, LLC
Delaware
100.0%
Trinity Structural Towers, Inc.
Delaware
100.0%
Trinity Traffic and Lighting Structures, LLC
Delaware
100.0%
TRN Services, LLC
Delaware
100.0%
U.S. Galvanizing, LLC
Delaware
100.0%
Waldorf Properties, Inc.
Delaware
100.0%
Gambles, Inc.
Alabama
100.0%
McConway & Torley - Anniston, Inc.
Delaware
100.0%
Mosher Steel Company
Texas
100.0%
Platzer Shipyard, Inc.
Delaware
100.0%
Standard Forgings Corporation
Delaware
100.0%
Trinity Equipment Co., Inc.
Delaware
100.0%
Trinity Financial Services, Inc.
Delaware
100.0%
Trinity Q, Inc.
Delaware
100.0%
* Trinity Industries Leasing Company (TILC) is also the managing member of TRIP Rail Holdings, LLC and RIV 2013 Rail Holdings, LLC.
Name of Subsidiary
Exhibit 31.1
CERTIFICATION
I, Timothy R. Wallace, certify that:
1. I have reviewed this annual report on Form 10-K of Trinity Industries, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the
period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this
report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the
equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: February 19, 2015
/s/ Timothy R. Wallace
Timothy R. Wallace
Chairman, Chief Executive Officer, and President
Exhibit 31.2
CERTIFICATION
I, James E. Perry, certify that:
1. I have reviewed this annual report on Form 10-K of Trinity Industries, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the
period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this
report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the
equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: February 19, 2015
/s/ James E. Perry
James E. Perry
Senior Vice President and Chief Financial Officer
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Trinity Industries, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2014 as
filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Timothy R. Wallace, Chairman, Chief Executive
Officer, and President of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the
Company, as of, and for, the periods presented in the Report.
/s/ Timothy R. Wallace
Timothy R. Wallace
Chairman, Chief Executive Officer, and President
February 19, 2015
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and
furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Trinity Industries, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2014 as
filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James E. Perry, Senior Vice President and Chief
Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the
Company, as of, and for, the periods presented in the Report.
/s/ James E. Perry
James E. Perry
Senior Vice President and Chief Financial Officer
February 19, 2015
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and
furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 95
Mine Safety Disclosures
The Company owned or operated sand, gravel, shale, clay, and aggregate quarries during the year ended December 31, 2014. The Financial
Reform Act ("Dodd-Frank") requires us to disclose in our periodic reports filed with the SEC, specific information about each of our quarries
comprised of notices, violations, and orders 1 made by the Federal Mine Safety and Health Administration pursuant to the Federal Mine Safety
and Health Act of 1977.
The following table is a summary of the reportable information required for our quarries that operated during the year ended December 31,
2014:
Mine or Operating
Name/MSHA
Identification
Number
Rye
(4102547)
Belton
(4101043)
Malloy Bridge
(4102946)
Cottonwood
(4104553)
Wills Point
(4104113)
Indian Village
(1600348)
Lockesburg
(0301681)
Kopperl
(4104450)
Wills Point II
(4104071)
Asa
(4104399)
Paradise
(4103253)
Anacoco
(1600543)
Streetman
(4101628)
Boulder
(0504415)
Frazier Park
(0400555)
Section 104
S&S Citations
(#)
Section
104(b)
Orders (#)
Section
104(d)
Citations and
Orders (#)
Section
110(b)(2)
Violations (#)
Section
107(a)
Orders (#)
Total Dollar Value of
MSHA Assessments
Proposed
($)
Total Number
of Mining
Related
Fatalities (#)
Received
Notice of
Pattern of
Violation
Under
Section
104(e)
(yes/no)
Received
Notice of
Potential to
Have Pattern
under Section
104(e)
(yes/no)
Legal
Actions
Pending as
of Last
Day of
Period (#)
Legal
Actions
Initiated
During
Period
(#)
Legal
Actions
Resolved
During
Period (#)
—
—
—
—
—
$
100
—
No
No
—
—
—
—
—
—
—
—
$
200
—
No
No
—
—
—
—
—
—
—
—
$
200
—
No
No
—
—
—
—
—
—
—
—
$
200
—
No
No
—
—
—
—
—
—
—
—
$
—
—
No
No
—
—
—
—
—
—
—
—
$
100
—
No
No
—
—
—
—
—
—
—
—
$
200
—
No
No
—
—
—
—
—
—
—
—
$
200
—
No
No
—
—
—
—
—
—
—
—
$
200
—
No
No
—
—
—
—
—
—
—
—
$
—
—
No
No
—
—
—
1
—
—
—
—
$
699
—
No
No
—
—
—
—
—
—
—
—
$
200
—
No
No
—
—
—
—
—
—
—
—
$
763
—
No
No
—
—
—
2
—
—
—
—
$
3,824
—
No
No
—
—
—
—
—
—
—
—
$
100
—
No
No
—
—
—
2
1
Significant and Substantial (S&S) citations are reported on this form. Non-S&S citations are not reported on this form but any assessments resulting from non-S&S citations
are reported.
2
Two non-S&S citations issued. Proposed penalty amount still pending for one non-S&S citation.