Before we get started, let me remind you that today's conference call contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995 and includes statements as to estimates, expectations, intentions, and predictions of future financial performances. Statements that are not historical facts are forward-looking. Participants are directed to Trinity's Form 10-K and other SEC filings for a description of certain of the business issues and risks, a change in any of which could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. Good day, and welcome to the First Quarter Results Conference Call. Currently all phone lines are in a listen-only mode. Later there'll be an opportunity to ask questions during a question-and-answer session. [Operator Instructions]. Please be advised today's program may be recorded. It is now my pleasure to turn the program over to Ms. Jessica Greiner; Vice President of Investor Relations and Communications. You may begin.

Thank you, Aaron, and good morning everyone. Thank you for joining us today. I'm Jessica Greiner; Vice President of Investor Relations and Communications. We welcome you to Trinity Industry's first quarter 2019 results conference call. Trinity has now completed its fiscal quarter of operations as a leading provider of Railcar products and services in the North American market. We are pleased to share some highlights with you today. We will begin our earnings conference call with our prepared remarks from Tim Wallace; Chief Executive Officer and President at Trinity, followed by Eric Marchetto; Senior Vice President and Group President at TrinityRail, Melendy Lovett; Senior Vice President and Chief Financial Officer will provide the financial highlights and outlook. Following the prepared remarks from the leadership team we will move to the Q&A session. Brian Madison; President at Trinity Leasing and Management services and Paul Mauer President at TrinityRail Products are also in the room with us today and will be part of the Q&A session. Sarah Teachout; Senior Vice President and Chief Legal Officer and Steve McDowell, Vice President and Chief Accounting Officer are also in the room with us today. It is now my pleasure to turn the call over to Tim.

Thank you, Jessica, and good morning everyone. I'm pleased with how our organization has come together and is performing at a high level as the new Trinity. We have a number of seasoned people and new executive roles and they are providing significant value to our organization. I'm pleased with everything we have accomplished during the first six months as a new company following the Spin-off of Arcosa. I have a high degree of confidence in our organization. We're making good progress in respect to optimizing our balance sheet. During the early part of April, we completed a successful $528 million leased railcar financing at a very competitive coupon rate of 3.82%. Our capital markets and Treasury teams did an excellent job of executing this financing. Melendy will provide more details in her remarks. We have also made progress returning capital to our shareholders. Last November, we announced $350 million accelerated share repurchase program that was completed in the first quarter, following its completion our Board approved another $350 million share repurchase authorization as well as a 31% increase in the company's quarterly dividend. Our commitment to returning capital shareholders through dividends and share repurchase continues to be a priority for us. Our businesses got off to a good start in the first quarter improving our year-over-year EPS and quarterly revenue growth. Our leasing business has a positive momentum it maintained a high level of lease fleet utilization and increased its operating margin during the quarter. Our wholly and partially owned lease fleet grew by 9% during the past year. Our real products team changed over a number of production lines while delivering a higher operating margin relative to the previous quarter. Our highway products business had a good first quarter despite a number of severe weather related events that…

Thank you, Tim, and good morning everyone. I'm very pleased with the performance the TrinityRail team delivered during the quarter. This has started our year with positive momentum. The team achieved improved pricing and operational efficiencies which yielded higher quarter-over-quarter operating segment margins for both the leasing company and a manufacturing business. As Tim mentioned, the general sense of economic uncertainty prevalent in our commercial markets earlier this year has begun to clear an encouraging indicator of the overall health of the business environment. Severe weather negatively impacted railcar loadings during the first quarter and lasting infrastructure damage continues to hinder rail traffic in some parts of North America. Nevertheless inquiry levels continue at a good pace in terms of number of railcars and number of quotations. We expect railcar loadings to recover in the coming months. We believe the various geopolitical events, macroeconomic concerns and the effects of the Federal Government shutdown all of which clouded the market outlook earlier in the year are now having less of an impact on our customers shipping and railcar sourcing decisions. To TrinityRail, commercial and portfolio teams delivered a solid first quarter to start the year, maintaining lease utilization at a healthy level of 98.4% and achieving renewal success in line with our historical averages. Our railcar lease rates for new originations, assignments and renewals and pricing for new equipment purchases exceeded our expectations. As a result, we continue to forecast our average lease rate for the wholly and partially owned railcar portfolio will improve year-over-year. During the first quarter TrinityRail received orders for 3,000 railcars across a broad range of railcar types. This brings our backlog to 26,320 railcars with a value of $3.3 billion. We expect to deliver approximately 60% of the backlog units throughout the remainder of 2019. Those…

Thank you, Eric, and good morning everyone. Yesterday following market closed the Company reported first quarter revenues of $605 million and earnings per share from continuing operations of $0.24. The earnings improvement resulted in a 167% increase year-over-year and a 26% increase quarter-over-quarter. I echo Tim's and Eric's regard and praised for the teams outstanding performance and strong start for the year. Following this conference call, we will file our quarterly 10-Q with additional information on our financial results. As you all heard from Tim and Eric, we are excited about the positive fundamentals and the opportunities we see in our end markets and our rail businesses. Our capital allocation plans and approach remain consistent with our communications following the spin-off. Investing in value creating business opportunities that transformatively grow the lease fleet and build out our commercial fleet services as well as enhance our manufacturing and maintenance footprint are important elements of our growth strategy and capital allocation plan. Other important elements of our capital allocation approach are to improve returns and return capital to shareholders. We're making progress and accomplishing these goals through optimizing the Company's capital structure and opportunistically leveraging the balance sheet to finance our investments. During the first quarter, we made a net investment of $465 million in our owned leased fleet. Approximately half of this investment was in new railcars for manufacturing while the remainder was primarily the exercise of the sale leaseback early purchase option we disclosed in February. We also built up inventory in preparation for our planned production ramp up and build out of capacity. We expect inventory to decline through the balance of the year. As expected Trinity completed the previously announced $350 million accelerated share repurchase program during the first quarter of which $70 million was settled in March.…

[Operator Instructions]. And we will take our first question from Allison Poliniak with Wells Fargo. Your line is open.

Just going to -- I guess the customer the removal of those cars you talked about it being a leasing customer. I guess one question are they in existing leasing customer today and is there any impact to the current lease fleet as a result of this customer?

Hi, Allison, this is Eric Marchetto, I answer that. The customer that we discussed, yes they are current customer as we will say in our 10-Q is a release earlier or later today we do not anticipate that to have an impact on our earnings for the year with the existing cars that we have in our fleet.

Got it. Thanks. And then on the Rail Products Group margin obviously a lot of line changeovers setting up for production this year? How should we think of the cadence of that margin improvement, I'm assuming those are behind you is it a step up and it's stable from there? Or is it sort of a slow trend up for the year?

Good morning, Allison. This is Melendy, how are you? So you saw our reported margin for the quarter and then our guidance is 9% to 9.5% for the year. And we see that improving over the quarters as we get more leverage from our long production runs.

And we can take our next question from Justin Long with Stephens. Your line is open.

Thanks and good morning. So maybe the start, I wanted to ask about the expected quarterly cadence of railcar production over the remainder of this year and with some of your peak manufacturing capacity going away with Arcosa as part of that's been. Can you also talk about how much Capital you're investing in 2019 to reposition your lines and increase capacity in order to meet the delivery schedule in your backlog?

So, Justin, this is Eric, I'll start and then we can -- I'm sure we can all chime in. So our, if I understand your question the ramp of delivery units will be throughout the year in terms of what we're expecting. When you talk about what we lost with Arcosa, I would push back on that a little bit, I don't think we really lost much of our manufacturing flexibility and certain not any of our capacity with the spin. We retained many of the assets that in our footprint. We continue to invest in our existing footprint to increase our flexibility in order to respond, Paul, you want to add anything to that.

This is Paul, just a little bit more color, you mentioned $30 million of investment we were putting in place this year in a large part of that is to increase our flexibility within our existing shops and the way to think of it as we're going to do more with less facilities.

And Justin, this is Melendy. As far as the buildout of our CapEx, our overall guidance is the $90 million to $110 million and that also builds fairly normally through the quarters along with our production plans.

Okay. That's helpful. And secondly, we've gotten more details around the lease fleet and that's really helpful and I wanted to ask about the return profile, so last year excluding gains on sale the ROE was around 4%, Melendy you mentioned one of the long term goals is improving returns, but can you help us understand what you view as a reasonable target for ROE for the lease fleet and share any thoughts around the timing of getting returns to a level that exceeds your cost of capital?

Certainly. So as you mentioned we shared where our ROE yesterday for the lease fleet in our investor materials that we shared in March, and that's kind of in the mid-to-high-single digit range. I mentioned in my comments that return-on-equity and improving return-on-equity is a key goal for us over the long term. And when we were setting our goals in that area we studied the history of Trinity post-spin and we compared our performance to our industry peers as well as a broader comparator group and over a five to seven year cycle our historical ROE performance was in the mid-to-high teens. So our goal Justin, it aims to move our returns to that mid-to-high teens level it's going to take us some time to do that, but our goal is to deliver returns above industry or comparator averages you know that, that address your question in terms of exceeding cost of capital our returns on capital exceeding cost of capital and our returns on equity exceeding our cost of equity.

And we will take our next question from Matt Brooklier with Buckingham Research. Your line is now open.

I wanted to get a sense for you know overall orders and just demand you know post first quarter closing it sounds like the environment has improved it's picked up a little bit you know post kind of a slow or maybe disappointing first quarter, but you know I'm trying to gauge you know if that is true the markets improved and you know if you could provide any color in terms of kind of quantify you know orders or inquiries post you know first quarter in closing?

Sure. Matt, this is Eric. Let me start with -- as I mentioned in my prepared remarks we are seeing the inquiry levels both the number of units and the number of actual inquiries, then I'd characterized as good we did get off to a slow start in my opinion which was reflected in our comments in February, and mentioned all the reasons why I think what attributed to that slow start. We have seen the cadence pick up which gives us a high degree of confidence in what we're guiding for the year in terms of deliveries and what we're expecting in terms of lease rates. I'll just go into a little more color on the first quarter. First quarter order activity was probably a little less than some may have expected and I think that's generally a reflection of you know we have a broad view we participated we saw a lot of market opportunities and I would say that we raised our railcar pricing a little bit faster than some others may have done in the market and a result we didn't get as many of the deals as we would bid on. And I think that will catch up as we go through the year.

Definitely helpful. And then, I think last quarter you talked to PSR initiatives at the Class 1 railroads you know we talked about I guess the bad right in the near term, but they also there being potential for good to come out of it for Trinity maybe you can provide us a little bit of an update in terms of how you're thinking about PSR some of those -- some of the railcars that have been night older you know put back to shippers? Or is there still the possibility that those cars could find their way into either your owned or your management lease fleet?

So this is Eric again. A lot there, so in terms of PSR, I think in the quarter as we've gone through the discussion that has dissipated a little bit in terms of the impact and it's probably been offset by the -- what's happened in the weather in the market that's probably had a greater impact on our shippers business than PSR. As we go forward as Tim said, we think PSR we're all -- we're for all things that increase the efficiency and the competitiveness of rail transportation. So from that standpoint, we think long term it's healthy. We do think there will be opportunities for railcars and for the shifting of ownership as the burden of providing railcars may change when you get into the cars and storage the AAR puts out a measure on railcars and storage that's the best measure that we have in the industry. It's just not a great measure. And so, but it's what we have we study that a lot, we have seen I believe there's a lot of rotation in that number month-to-month. In other words there's cars that come in and out of those numbers in the details and the aggregate number may not change a lot. I'll give you an example of that -- cars and shop generally cars that are going into maintenance facilities today for compliance or change of service or anything would end up showing up in that idle fleet count, AR statistics. I don't believe, I wouldn't view those cars as idle personally, but they certainly do show up in those numbers. As we studied the fleet and the idle fleet and we look out we've studied historically and look forward. I believe that a good portion of those cars are in and out of storage when get into how many of those are in long term storage say greater than a year, I think it's a fraction of that total fleet. That's a long answer to your question. I hope that's helpful.

And we will take our next question from Gordon Johnson with Vertical Group. Your line is open.

Good morning, with respect to I guess the removal of cars that you guys announced yesterday. I understand that it may not have an impact or is it going to have an impact on earnings this year, but could it potentially have an impact on earnings next year?

Gordon, this is Eric. I'll answer that, so certainly our backlog we expect to realize value and everything that's in our backlog. And as we said we didn't expect that those cars to deliver this year therefore it didn't have an impact, certainly going forward we made the determination that we are going to get more value by taking it out of the backlog now then leaving the backlog and delivering those cars trying to lease into our fleet. So certainly as cars coming in our backlog that can have an impact long term, but we have plenty of time to react to that and to plan accordingly and to fill our production capacity as necessary.

Okay. That's very helpful. And then with respect to orders I guess just that maybe you guys don't give quarterly guidance or maybe you want to talk about it, but. Are you guys seeing anything right now that would suggest that you're going to see a big uptick in orders near-term maybe even in the second quarter?

This is Eric again. I don't -- you know when you look at orders are not being there, would you just look at the industry numbers in the fourth quarter we did 20,000 railcars which I think most would characterize as good. This quarter we did 10,000 which people will find disappointed in that when you average them together it's not bad and I think order activity we don't predict the order activity by quarterly basis, but when you -- as we look out through the year I would expect order activity to end up being good whether it's second quarter, third quarter or fourth quarter in the end I think we expected to be a healthy environment.

Helpful. And then last question. Just looking at loading ex coal, we noticed just on a weekly basis for the last 11 weeks the number has been negative, it got better recently, but is there anything that you guys see that would suggest or help explain that weakness in loadings that we've seen recently and clearly I would assume you guys expect it to get better going forward. Thanks a lot for the questions guys.

Hi, Gordon, this is Eric. I'll answer that, and as I mentioned some of this in my prepared remarks, we do think weather had a dramatic impact on railcar loadings, weather doesn't have a direct impact on our business, but it certainly has an impact on our industry. So I think that has a big piece of it when you do look at the railcar loadings there most of the car types are down you know the bright spot has been crude oil and particularly in products, what's going on there. But generally speaking, I think weather is the bigger impact and demand for the output on railcar loadings.

And we will take our next question from Matt Elkott with Cowen. Your line is now open.

You guys made some commentary about positive market lease rates. Did you actually see a sequential improvement in spot rates from Q4 to Q1? Or did this positive momentum happen after the close of the quarter?

Matt, this is Eric. So when you talk about sequential improvement on lease rates the answer in the quarter we did see sequential improvement on lease rates in many of our car types, when I say many of our car types we're tracking dozens of car types that would include both tank cars and FreightCars and kind of across the board we're seeing increases sequentially. And I've talked about that in the last couple of quarters that sequentially we continue to see lease rates improving. One of the brightest spots has been in the coal market. We've seen lease rates with you know three digit increases where a year ago those lease rates were very, very low and today they're getting and they're not quite good, but there's certainly a lot better. And to put it an example $350 million to low $400 million in terms of lease rates. So we have seen increases not just in the tank car side on the FreightCar side as well. And I extend -- I would extend that to look at the specialty covered hoppers and some the specialty FreightCar types where we have seen continual improvement in pricing.

Very helpful. And my next question is on the mix of deliveries going forward are should we expect a higher percentage of tank cars aggressively as we move throughout the year?

Matt, this is Melendy. In our February call we did share that the mix shift from freight over to tank as we move through the year and that remains that what we're seeing now is consistent with that guidance that we gave in February.

Okay. And just one last question. Your backlog ASP went up. How much of that was attributable to the removal of the frac sand cars and how much of it may be pricing or new orders?

I would say when you look at the change quarter-over-quarter, because we had 3,000 railcars ordered and removed over 3,000 cars it's a combination of both, but the impact of the small cube covered hoppers those are definitely had a lower ASP and so they had a -- those would have had a larger impact in the order activity.

And we will take our next question from Steve Barger with KeyBanc Capital Markets. Your line is now open.

Eric, I get that orders of volatile quarter-to-quarter, but if we don't see booking activity pick up will you hold that price discipline or you're above market stance that you had in 1Q? Or will you adjust to the environment to get back to historical share?

Yes, we're going to be Steve we're always responsive to pricing and I wouldn't say -- you know I would say pricing there's a wide band on pricing in the pricing environment, I wouldn't say necessarily we are above market. I would say that -- it only takes one to be lower so from that standpoint there were some opportunities in the quarter that we participated and that we did not the customers went different directions and I'd say they went different directions based on price. But I wouldn't say that we're above market and our pricing expectations, I do think there is inflationary pressures on railcar pricing and I would expect that to continue.

So, your pricing to your assumed margin profile rather than any kind of share thought?

That we -- we did not handle, we've said this for years, I guess I've never said that -- we do -- we don't run our business on market share and especially as we -- as our lease fleet has grown having a 120,000 railcar lease fleet it's important that we have pricing discipline and we cannot have -- we cannot let the marginal new car deal impact the lease fleet.

Yes, understood. And actually that's a great segway. Melendy, thinking about your comments on narrowing the variability of earnings does that mean if the OEM cycle rolls over you'll accelerate growth in the lease fleet? Or how can you reduce variability understanding the cyclicality of manufacturing ?

Yes. Thanks, Steve. The way that we're thinking about that is over the long term and through the railcar cycle certainly the manufacturing side of our business will continue to be cyclical. So the way we're thinking about that is we've talked about transformatively growing the lease fleet and Tim mentioned doubling the lease fleet while making our earnings and returns more steady and more predictable. So it's more of a long term expectation that as we dramatically increase the size of the lease fleet that will therefore provide steady earnings and returns with our manufacturing business as kind of a upside when the cycle is strong.

So, if we do get into a softer order environment I guess going back to Eric's point about the marginal buyer setting price. How do you grow the lease fleet in that environment when presumably the OE market would be softer because of economic conditions which would certainly affect the leasing market?

Well, certainly our historically our lease fleet growth has been principally through organic lease fleet originations, although when we talked about in our Investor Day presentation last year and as we demonstrated over the last few years we are active participants in the secondary market and so we're always looking at what's the right mix of buying railcars in the secondary market versus organically originating the deals and likewise when we look at what assets we're going to sell out of our portfolio we're looking at where are the right value creation opportunities. So, I don't think that changes. I would probably haven't been given enough credit for that discipline, but that's certainly our approach.

And I would just add to that as Eric mentioned that, you know the down part of the cycle whether that's in manufacturing or in leasing historically has been a good opportunity for Trinity to take a contrarian position and buy at a really attractive valuation.

And we will take our next question from Mike Baudendistel with Stifel. Your line is open.

Thank you. Just want to make sure I understand all the impacts that on the Rail Group margins from the 8.5% this quarter to 9.5% for the year, so it's, the mix shift toward tanks you know greater volume, and I guess you got some changeovers, is there's anything else that I'm sort of leaving out there?

Those are the main drivers is the mix change as we mentioned from freight over to tank and then as we ramp up our production runs we're able to create more leverage.

There's probably a little bit of pricing improvement as we go through the year.

Got it. That's helpful. And then just want to ask you, is the Greenbrier, ARI combination you think that's going to have an impact on pricing in the industry and do you compete you know with both of them you know one more than the other or just how often do you see sort of both of them together competing for business that you're also competing with them in the marketplace?

Okay. This is Tim. We've competed against both companies for decades, we're very close to reaching a contract terms with to acquire ARI over 20 years ago and we just weren't able to reach an agreement with them. And I've admired and respected ARI for a good while and Greenbrier an aggressive -- impressive company and I appreciate their interest in ARI. But my early view is that it really does not change or affect our situation in any way. I really don't have anything else to comment on that subject.

But I would add Mike is that, you know I feel like the transaction announcement really supports attractive valuations and long term value appreciation for railcar products and services businesses. So and this underscores our belief that Trinity is undervalued. So it's nice to see these industry transactions really have the attractive -- the attractive valuation from that perspective.

And we will take our final question from Bascome Majors with Susquehanna. Your line is now open.

Yes, Melendy, I appreciate your sharing, your view to take the Company's returns on equity from call it you know mid-to-high single digits to mid-to-high teens over the cycle. And you've talked a lot about ways to do that. Can you maybe rank order the things in kind of the timeline over them to how we get from point A to point B. I mean clearly you're adding leverage, you just got a good chunk of permanent debt at a pretty attractive fixed price. But you know kind of how that fits into the other things you can do and maybe just a generally better renewal environment you know taking all that detail. Thank you.

Good morning, Bascome, I'm glad that you -- I remembered your question from February and I'm glad that you noticed that I did my best to answer it. Certainly return on equity improvement, you know we're thinking about it in front from all of the different aspects of doing it. So we're looking at of course what can we do to improve our our profit margin. What can we do to improve our asset efficiency. And then as you mentioned the financial leverage that also contributes to hourly improvement. And we're really taking a holistic approach at looking at actions that we can take to move all those levers. And again we know that it's going to take some time it's a bit like moving the Titanic with only 13% of our lease fleet renewing in a given year, for example. So we're expecting it to take some time, but we're excited about the opportunities that we have in front of us to move in the direction of our goals.

So it sounds like positive renewals over time are a big piece of that or am I reading that …?

Bascome, this is Eric. Certainly, in this business we're expecting lease rates to improve over time, that's one of the tenets of investing in railcars and so as we go out over time certainly a big driver of it will be -- increase in lease rates and especially as the fleet ages the fleet, you know we have a relatively young fleet so that has -- that does not have the best return on equity on a book basis profile. So as that fleet ages and the lease rates either hold or increase we would expect there to be some natural benefits on a return on equity measure. So that certainly an impact, but I think in the near term a lot of the balance sheet optimization that Melendy talked about will have a greater impact in the near term.

Thank you. And last one for me. We talked a little about ARI their new owners just sold the railcar manufacturing business to Greenbrier to focus more squarely on leasing and your strategy post spin-off is built around growing both the size of and returns on your leasing business. Is Trinity committed to a vertically integrated manufacturing and leasing platform over the long term? Or is there a period at some point down the road when the lease size it gets to kind of where you want it to be and the returns are there that you might consider selling off that business and focusing straight on leasing?

This is Tim. I covered in some of my remarks the benefits that we see of our integrated model and when it does for our platform having the leasing business and the manufacturing business connected. And we have talked about that subject for more than a decade at our board level and at the management level and we'll probably still continue to talk about it and assess it, we're an opportunistic company and you saw what we did last year in an effort to create shareholder value that's what our focus is. And so we take a lot of different things into consideration.

And this does conclude the Q&A session. I'd like to turn the program back over to the presenters for any additional remarks.

Thank you, Aaron. That concludes today's conference call. A replay of today's call will be available after 1'o clock Eastern Standard Time through midnight on May 2, 2019. The access number is (402) 220-7204. A replay of the webcast will also be available under the events and presentations page on our Investor Relations website located at www.trin.net. We look forward to visiting with you again on our next conference call and thank you for joining us this morning.

Thank you for your participation. This does conclude today's program. You may disconnect at any time.