TRINITY INDUSTRIES INC

Segment Performance

I will now highlight segment performance for the quarter, beginning with the Railcar Leasing and Services segment, which includes leasing, maintenance, and digital and logistics services.

Leasing and Services

Leasing and Services segment revenue grew year over year, driven by higher fleet pricing and strong utilization of 96.8%, which continues to represent a balanced and well-utilized fleet. Renewal rates were 25.1% above expiring rates in the quarter with an 82% renewal success rate. The Future Lease Rate Differential was 8.7% in the quarter driven by higher expiring rates and some lease rate moderation on certain railcar types. Despite this moderation, we remain optimistic about the leasing market.

Furthermore, the secondary market remains very active, and we have capitalized on good opportunities to optimize and monetize our fleet. We added over $100 million of railcars into our fleet from the secondary market and sold $80 million of railcars in the quarter. We find value in utilizing the secondary market as both a buyer and a seller and remain pleased with the performance and yield on our fleet. We expect secondary market activity to accelerate in the fourth quarter, and we plan to end the year within our guidance range for our overall net lease fleet investment.

Trinity’s maintenance business continues to benefit from industry-leading turn times, which allows us to lower the cost per maintenance event for our lease fleet.

Rail Products

Turning to the Rail Products segment, which includes our manufacturing and parts businesses, market conditions remain challenged. Industry railcar orders remained depressed in the third quarter. By proactively adjusting production, together with a favorable mix of railcars, we improved efficiency and achieved 7.1% operating margin in Rail Products despite lower deliveries of 1,680 railcars. 46% of our deliveries in the quarter went into our lease fleet, and we expect the full year number to be between 30% and 35%.

In the quarter, we received orders for 350 railcars. This order number reflects the broader market conditions. Industry orders in the quarter were 3,071, well below expectations in a replacement cycle. While industry orders remain below expectations, our conversations with customers indicate potential for future growth. With these conversations and the replacement demand, we have not changed our longer-term outlook for the industry. Our backlog stands at $1.8 billion, with approximately 21% expected to deliver by year-end. We currently hold about 50% of the industry backlog.