Trinity Industries, Inc.

Welcome to the second quarter results conference call. All participants are currently in a listen-only mode. Before we get started, let me remind you that today's conference call contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995 and includes statements as to estimates, exceptions, intentions, and predictions of future financial performance. Statements that are not historical facts are forward-looking. Participants are directed to Trinity's Form 10-K and other SEC filings for a description of the certain business issues and risks, a change in any of which could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. I would now like to turn it over to Jessica Greiner, Vice President of Investor Relations. Please go ahead.

Thank you, Brie, and good morning, everyone. I'm Jessica Greiner, Vice President of Investor Relations and Communications for Trinity. We appreciate you joining us for the company's second quarter 2020 finance results conference call. Our prepared remarks will include comments from both Trinity's chief executive officer and president, Dean Savage, and Eric Marchetto, the company's chief financial officer. We will hold a Q&A session following the prepared remarks from our leaders. During the call today, we will refer to a few slides highlighting key points of discussion. The supplemental materials are accessible on our IR website at www.trends.net. These slides can be found under the events and presentations portion of the site, along with the second quarter earnings call event link. It is now my pleasure to turn the call over to Jean.

Well, thank you, Jessica, and good morning, everyone. The pandemic and economic events of the second quarter created a very challenging operating environment for Trinity. Today, I'd like to share with you Trinity's responses to these challenges and our longer-term plans to become a return-focused company. In these difficult times, Trinity's leadership and employees remain focused on taking the right actions now to best position the company for future success. Our first priority remains the health and safety of our people. including the protocols we implemented to help prevent the spread of COVID-19 in our production facilities and offices, in alignment with CDC and WHO guidance. I want to thank the people of Trinity for their hard work and continued focus on safety. Together, we are ensuring Trinity's high quality rail cars continue to deliver essential goods across North America and the world. We experienced weak railcar demand in the second quarter due to the economic ramifications of the pandemic and the major energy price and demand decline earlier in the year. The major decline in crude oil prices led to a number of bankruptcies for frac sand providers in the second quarter. As a result, Trinity reduced the carrying value of our small tube covered hopper fleet in our lease portfolio. Eric will discuss more details about resulting actions we have taken in his prepared remarks. While rare car loadings have improved somewhat in recent weeks, increasing COVID-19 cases in the U.S. potentially threaten the resurgent economic and rail market activity. We are closely monitoring our supply chain and engaging with our customers to keep our production plans and lease fleet operations aligned with the demand for rail cars and related services. Industry metrics report that approximately 32% of the North American rail car fleet is underutilized. We expect the pricing environment for rail equipment, new and existing, to remain pressured as long as this number is elevated. In this type of environment, our commercial focus is to maintain the utilization of our lease fleet and then meet demand for newly manufactured rail cars as appropriate for our customers. Recently, rail car inquiries from strategic buyers have increased relative to last quarter. and I expect a number of these opportunities will convert to orders or lease contracts soon. I am proud of recent transactions in which we leveraged the full breadth of our platform. In one case, we provided a strategic customer existing railcars within our lease portfolio, modification services, and new rail equipment in one transaction. This carefully crafted solution created a differentiated experience that met the customer's business needs and will create a long-term value for our shareholders. The best near-term opportunity for demand improvement for new and existing equipment, we believe, will be in the agricultural market. Not only has agricultural traffic experienced relatively fewer headwinds during the pandemic, but a significant portion of the existing covered hopper fleet for grain is reaching the end of its useful life. We also see potentially large replacement needs in the boxcar and aggregate open hopper and gondola fleet in the coming years. Managing through a cyclical downturn is very challenging. Our leasing operations delivered a solid second quarter given the environment. Declarings in revenue from lease rate and utilization pressure were offset by effective cost management, among other items. Our lease operations team has continued to experience high levels of customer satisfaction as we've invested in the state-of-the-art tools and technology. These tools are an important element of our focus on customer experience, as well as driving operating efficiencies while maintaining a safe rail car fleet. In our products group, I also commend our plant leadership and employees for their continued focus on safely meeting production requirements. During the second quarter, Trinity delivered just under 3,000 rail cars and reported a 2% margin in the rail product segment. Volumes sell quicker than our ability to reduce costs as we manage the impacts of the coronavirus. The impact of having higher risk and potentially exposed employees shelter in place did have an impact on our ability to align some of the costs to the volumes. Pricing was more aggressive also. Since the beginning of the year, we reduced our manufacturing workforce by 35%, which has resulted in almost $40 million in overhead cost savings. Additional efforts are underway to align our cost structure with production levels for the rest of 2020, while we simultaneously work to move lower value-added fabrication to the supply base. This will allow us to reduce our cyclical risk by reducing the internal labor required through a cycle. For the remainder of my remarks, I want to focus on additional actions Trinity is taking to improve the performance of our platform going forward. Our focus on cash flow in the current environment, our optimization progress to accelerate the company's financial performance, and our longer-term strategic planning to continue creating shareholder value. Trinity's unique rail platform, strong balance sheet, and cash flow generation enable us to manage through the COVID-19 pandemic from a position of strength. The scale of our leasing business and the long-term nature of the lease contract protect the company from short-term market disruptions and are critical to the relative stability. Right now, we are highly focused on managing the effects of the coronavirus to minimize the disruption of our business and maximize our cash flow. Our financial position is sustained by committed future lease payments of $2 billion our products backlog of $1.3 billion, our solid liquidity and approximately $1.6 billion of unencumbered rail assets. I'd also like to highlight our efforts to accelerate the company's longer-term financial performance through platform optimization, which has been a key focus for management and the board in the last year. We are addressing optimization in all areas of our organization, including our operations and our balance sheet. Trinity's business leaders have made difficult people-related decisions in recent months. Organizationally, we have restructured the company from Trinity's former holding company model to a more effective and efficient operating model aligned around our customers and markets. When combined with our actions from the first quarter, the results of these efforts revealed a total annualized cost savings of $30 million in SENA and cost of sales, which achieved the $25 to $30 million target we set at the beginning of 2020. Slide four of the supplemental materials provide a few details of our cost activities. As we work through the process flows for various production and service functions with the implementation of our new organizational model, we are establishing additional structural savings goals that will be part of our near-term focus. The management teams are reviewing aspects of our business operations, including our supply chain costs, idle facility carrying costs, and various service fees. Looking specifically at our balance sheet optimization efforts, we delayed our plans to access the capital markets in the second quarter to allow the pandemic-related volatility around interest rate spreads to slow. Subsequent to quarter end, we are pleased to complete the upsizing of PRL 2017 with an additional 225 million of promissory notes with fair interest at LIBR plus 1.5%. We also maintained our dividend during the second quarter, highlighting our commitment to shareholder returns as part of our capital allocation strategy and our confidence in the strong cash flow generation capability of our platform. In addition to the shorter-term initiatives to accelerate our financial performance, we are actively engaged in our longer-term strategic planning process. We are evaluating both further platform optimization initiatives as well as growth opportunities. These efforts are aimed at improving the performance of our lease fleet, reducing the cyclicality of our platform of businesses, continuing our operational improvements, and evaluating growth into the rail transportation services space. We believe Trinity's position as a provider, servicer, and owner of rail car assets ideally position us to engage with our customers on innovative products, services, and solutions that increase the attractiveness of moving freight by rail. Our analysis is ongoing and we look forward to sharing the results and decisions from this work at Trinity's Investor Day in the near future. We aim to be the premier provider of rail products and services and are motivated to drive freight onto the North American rail network. We see Trinity's purpose as moving goods and commodities by rail for the good of all, an integral part of our commitment to sustainability. We have a strong financial position to weather the current economic storm and be opportunistic when attractive value propositions arise. Trinity's rail platform is built to deliver, to deliver essential goods to society, deliver innovative solutions and high-quality products to our customers, and deliver high-quality earnings and returns to shareholders through the rail car cycle. I'll now turn the call over to Eric to discuss specific financial details for the quarter.