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Railcar Leasing and Management Services Group | 9 Months Ended
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Sep. 30, 2019
Leases [Abstract] |
Railcar Leasing and Management Services Group | 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 leasing, management, and administrative services. Selected consolidated financial information for the Leasing Group is as follows:
| September 30, 2019
| Leasing Group |  |  |  |
| Wholly- Owned Subsidiaries |  | Partially-Owned Subsidiaries |  | Manufacturing/ Corporate |  | Total
| (in millions)
Cash and cash equivalents | $ | 4.0 |  |  | $ | — |  |  | $ | 93.6 |  |  | $ | 97.6 |
Property, plant, and equipment, net | $ | 5,597.0 |  |  | $ | 1,794.5 |  |  | $ | 396.3 |  |  | $ | 7,787.8 |
Net deferred profit on railcars sold to the Leasing Group |  |  |  |  |  |  | (871.1 | )
Consolidated property, plant, and equipment, net |  |  |  |  |  |  | $ | 6,916.7 |
Restricted cash | $ | 86.5 |  |  | $ | 30.9 |  |  | $ | 0.1 |  |  | $ | 117.5 |
Debt: |  |  |  |  |  |  |
Recourse, net of unamortized discount of $-, $-, $0.2, and $0.2 | $ | — |  |  | $ | — |  |  | $ | 474.8 |  |  | $ | 474.8 |
Less: unamortized debt issuance costs | — |  |  | — |  |  | (2.1 | ) |  | (2.1 | )
| — |  |  | — |  |  | 472.7 |  |  | 472.7 |
Non-recourse, net of unamortized discount of $2.5, $-, $-, and $2.5 | 2,944.7 |  |  | 1,300.6 |  |  | — |  |  | 4,245.3 |
Less: unamortized debt issuance costs | (21.5 | ) |  | (11.3 | ) |  | — |  |  | (32.8 | )
| 2,923.2 |  |  | 1,289.3 |  |  | — |  |  | 4,212.5 |
Total debt | $ | 2,923.2 |  |  | $ | 1,289.3 |  |  | $ | 472.7 |  |  | $ | 4,685.2 |
Net deferred tax liabilities | $ | 833.5 |  |  | $ | 1.0 |  |  | $ | (64.8 | ) |  | $ | 769.7 |
| December 31, 2018
| Leasing Group |  |  |  |
| Wholly- Owned Subsidiaries |  | Partially-Owned Subsidiaries |  | Manufacturing/ Corporate |  | Total
| (in millions)
Cash and cash equivalents | $ | 6.0 |  |  | $ | — |  |  | $ | 173.2 |  |  | $ | 179.2 |
Property, plant, and equipment, net | $ | 4,976.5 |  |  | $ | 1,814.7 |  |  | $ | 370.9 |  |  | $ | 7,162.1 |
Net deferred profit on railcars sold to the Leasing Group |  |  |  |  |  |  | (827.7 | )
Consolidated property, plant, and equipment, net |  |  |  |  |  |  | $ | 6,334.4 |
Restricted cash | $ | 134.9 |  |  | $ | 36.6 |  |  | $ | 0.1 |  |  | $ | 171.6 |
Debt: |  |  |  |  |  |  |
Recourse, net of unamortized discount of $-, $-, $0.3, and $0.3 | $ | — |  |  | $ | — |  |  | $ | 399.7 |  |  | $ | 399.7 |
Less: uamortized debt issuance costs | — |  |  | — |  |  | (2.3 | ) |  | (2.3 | )
| — |  |  | — |  |  | 397.4 |  |  | 397.4 |
Non-recourse, net of unamortized discount of $2.7, $-, $-, and $2.7 | 2,336.3 |  |  | 1,327.9 |  |  | — |  |  | 3,664.2 |
Less: unamortized debt issuance costs | (19.7 | ) |  | (12.7 | ) |  | — |  |  | (32.4 | )
| 2,316.6 |  |  | 1,315.2 |  |  | — |  |  | 3,631.8 |
Total debt | $ | 2,316.6 |  |  | $ | 1,315.2 |  |  | $ | 397.4 |  |  | $ | 4,029.2 |
Net deferred tax liabilities | $ | 797.6 |  |  | $ | 1.0 |  |  | $ | (67.0 | ) |  | $ | 731.6 |
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 and Note 8 for a further discussion regarding our investment in our partially-owned leasing subsidiaries and the related indebtedness. See Note 15 for a discussion of subsidiary guarantees of our 4.55% senior notes due 2024 ("Senior Notes").
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2019 |  | 2018 |  | Percent |  | 2019 |  | 2018 |  | Percent
| ($ in millions) |  | Change |  | ($ in millions) |  | Change
Revenues: |  |  |  |  |  |  |  |  |  |  |
Leasing and management | $ | 190.1 |  |  | $ | 175.9 |  |  | 8.1 | % |  | $ | 566.6 |  |  | $ | 534.7 |  |  | 6.0 | %
Sales of railcars owned one year or less at the time of sale (1) | 136.3 |  |  | 51.6 |  |  | * |  | 237.3 |  |  | 80.8 |  |  | *
Total revenues | $ | 326.4 |  |  | $ | 227.5 |  |  | 43.5 |  |  | $ | 803.9 |  |  | $ | 615.5 |  |  | 30.6 |
Operating profit(2): |  |  |  |  |  |  |  |  |  |  |  |  |
Leasing and management | $ | 79.8 |  |  | $ | 69.7 |  |  | 14.5 |  |  | $ | 234.6 |  |  | $ | 216.6 |  |  | 8.3 |
Railcar sales: |  |  |  |  |  |  |  |  |  |  |  |  |
Railcars owned one year or less at the time of sale | 17.8 |  |  | 13.1 |  |  | * |  | 27.0 |  |  | 17.5 |  |  | *
Railcars owned more than one year at the time of sale | 18.1 |  |  | 9.4 |  |  | * |  | 44.7 |  |  | 21.0 |  |  | *
Total operating profit | $ | 115.7 |  |  | $ | 92.2 |  |  | 25.5 |  |  | $ | 306.3 |  |  | $ | 255.1 |  |  | 20.1 |
Total operating profit margin | 35.4 | % |  | 40.5 | % |  |  |  |  | 38.1 | % |  | 41.4 | % |  |  |
Leasing and management operating profit margin | 42.0 | % |  | 39.6 | % |  |  |  |  | 41.4 | % |  | 40.5 | % |  |  |
Selected expense information: |  |  |  |  |  |  |  |  |  |  |  |  |
Depreciation | $ | 59.4 |  |  | $ | 48.8 |  |  | 21.7 | % |  | $ | 171.6 |  |  | $ | 140.9 |  |  | 21.8 | %
Maintenance and compliance | $ | 24.9 |  |  | $ | 24.1 |  |  | 3.3 | % |  | $ | 79.2 |  |  | $ | 75.5 |  |  | 4.9 | %
Rent | $ | 3.8 |  |  | $ | 9.7 |  |  | (60.8 | )% |  | $ | 13.6 |  |  | $ | 29.7 |  |  | (54.2 | )%
Selling, engineering, and administrative expenses | $ | 10.7 |  |  | $ | 11.9 |  |  | (10.1 | )% |  | $ | 36.2 |  |  | $ | 36.7 |  |  | (1.4 | )%
Interest | $ | 50.0 |  |  | $ | 37.4 |  |  | 33.7 | % |  | $ | 146.4 |  |  | $ | 101.2 |  |  | 44.7 | %
* Not meaningful (1) Includes revenues associated with sales-type leases of $26.3 million and $60.5 million, respectively, for the three and nine months ended September 30, 2019. (2) Operating profit includes: depreciation; maintenance and compliance; rent; and selling, engineering, and administrative expenses. Amortization of deferred profit on railcars sold from the Rail Products Group to the Leasing Group is included in the operating profit of the Leasing Group, resulting in the recognition of depreciation expense based on our original manufacturing cost of the railcars. Interest expense is not a component of operating profit and includes the effect of hedges. During the nine months ended September 30, 2019 and 2018, the Leasing Group recognized sales of leased railcars as follows:
| Nine Months Ended September 30,
| 2019 |  | 2018
| (in millions)
Railcars owned one year or less at the time of sale (1) | $ | 237.3 |  |  | $ | 80.8 |
Railcars owned more than one year at the time of sale | 175.0 |  |  | 123.4 |
| $ | 412.3 |  |  | $ | 204.2 |
(1) Includes revenues associated with sales-type leases of $60.5 million for the nine months ended September 30, 2019. Equipment consists primarily of railcars leased by third parties. The Leasing Group purchases equipment manufactured predominantly by the Rail Products Group and enters into lease contracts with third parties with terms generally ranging between one year and ten years, although certain leases entered into in prior periods had lease terms of up to twenty years. The Leasing Group primarily enters into operating leases. Future contractual minimum rental revenues on operating leases related to our wholly-owned and partially-owned subsidiaries are as follows:
|  | Remaining three months of 2019 |  | 2020 |  | 2021 |  | 2022 |  | 2023 |  | Thereafter |  | Total
|  | (in millions)
Future contractual minimum rental revenue |  | $ | 146.8 |  |  | $ | 513.4 |  |  | $ | 406.9 |  |  | $ | 310.3 |  |  | $ | 214.9 |  |  | $ | 387.4 |  |  | $ | 1,979.7 |
Debt. Wholly-owned subsidiaries. The Leasing Group’s debt at September 30, 2019 consisted primarily of non-recourse debt. As of September 30, 2019, Trinity’s wholly-owned subsidiaries included in the Leasing Group held equipment with a net book value of $4,296.0 million which is pledged solely as collateral for Leasing Group debt held by those subsidiaries. The net book value of unpledged equipment at September 30, 2019 was $1,289.5 million. See Note 8 for more information regarding the Leasing Group debt. Partially-owned subsidiaries. Debt owed by TRIP Holdings and RIV 2013 and their respective subsidiaries is nonrecourse 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 $1,249.7 million is pledged as collateral for the TRIP Master Funding debt. TRL-2012 equipment with a net book value of $544.8 million is pledged solely as collateral for the TRL-2012 secured railcar equipment notes. See Note 5 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 each of the respective Trusts is considered to be the primary beneficiary of the Trust; and therefore, the accounts of the Trusts, including the debt related to each of the Trusts, are 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 twenty-two years, and subleased the railcars to independent third-party customers under shorter term operating lease agreements. The terms of the operating lease agreements between the subsidiaries and the remaining Trusts provided the Leasing Group with the option to purchase, at a predetermined fixed price, certain railcars from the remaining Trusts in 2019. On January 14, 2019, we completed the purchase for a purchase price of $218.4 million. As a result, 6,779 railcars previously under lease are now wholly-owned by our Leasing Group. The future contractual minimum rental revenues associated with these railcars are included in the table above. Operating Lease Obligations. Future amounts due as well as future contractual minimum rental revenues related to operating leases related to the Leasing Group other than the leases discussed above are as follows:
|  | Remaining three months of 2019 |  | 2020 |  | 2021 |  | 2022 |  | 2023 |  | Thereafter |  | Total
|  | (in millions)
Future operating lease obligations |  | $ | 3.2 |  |  | $ | 9.5 |  |  | $ | 8.2 |  |  | $ | 7.5 |  |  | $ | 5.5 |  |  | $ | 3.3 |  |  | $ | 37.2 |
Future contractual minimum rental revenues |  | $ | 2.6 |  |  | $ | 7.9 |  |  | $ | 6.1 |  |  | $ | 4.5 |  |  | $ | 2.2 |  |  | $ | 0.8 |  |  | $ | 24.1 |
Operating lease obligations totaling $3.0 million are guaranteed by Trinity Industries, Inc. and certain subsidiaries. See Note 6 in our 2018 Annual Report on Form 10-K for a detailed explanation of these financing transactions.

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