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Railcar Leasing and Services Group | 3 Months Ended
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Mar. 31, 2024
Leases [Abstract] |
Railcar Leasing and Management Services Group | Railcar Leasing and Services Group The Railcar Leasing and Services Group owns and operates a fleet of railcars and provides third-party fleet leasing, management, and administrative services; railcar maintenance and modification services; and other railcar logistics products and services. Information related to the Leasing Group is as follows:
|  |  | Three Months Ended March 31,
|  |  |  |  |  |  | 2024 |  | 2023 |  | Percent
|  |  |  |  | ($ in millions) |  | Change
Revenues: |  |  |  |  |  |  |  |  |  |  |
Leasing and management |  |  |  |  |  |  | $ | 209.0 |  |  | $ | 194.7 |  |  | 7.3 | %
Maintenance services (1) |  |  |  |  |  |  | 65.2 |  |  | 29.4 |  |  | 121.8 | %
Digital and logistics services |  |  |  |  |  |  | 11.0 |  |  | 8.8 |  |  | 25.0 | %
Total revenues |  |  |  |  |  |  | $ | 285.2 |  |  | $ | 232.9 |  |  | 22.5 | %
Cost of revenues (2) |  |  |  |  |  |  | 169.6 |  |  | 146.8 |  |  | 15.5 | %
Selling, engineering, and administrative expenses |  |  |  |  |  |  | 18.1 |  |  | 16.9 |  |  | 7.1 | %
Gains on dispositions of property: |  |  |  |  |  |  |  |  |  |  |
Lease portfolio sales |  |  |  |  |  |  | 2.1 |  |  | 13.5 |  |  | *
Other |  |  |  |  |  |  | 0.7 |  |  | 1.9 |  |  | *
Total operating profit |  |  |  |  |  |  | $ | 100.3 |  |  | $ | 84.6 |  |  | 18.6 | %
Total operating profit margin |  |  |  |  |  |  | 35.2 | % |  | 36.3 | % |  |
Total operating profit margin, excluding lease portfolio sales |  |  |  |  |  |  | 34.4 | % |  | 30.5 | % |  |
Selected expense information for Company-owned railcars (3): |  |  |  |  |  |  |  |  |  |  |
Depreciation and amortization expense (4) |  |  |  |  |  |  | $ | 59.9 |  |  | $ | 61.6 |  |  | (2.8) | %
Maintenance and compliance expense (5) |  |  |  |  |  |  | $ | 30.4 |  |  | $ | 34.8 |  |  | (12.6) | %
Other fleet operating costs (6) |  |  |  |  |  |  | $ | 7.7 |  |  | $ | 9.2 |  |  | (16.3) | %
Interest expense (7) |  |  |  |  |  |  | $ | 57.4 |  |  | $ | 54.8 |  |  | 4.7 | %
* Not meaningful (1) Revenues related to services performed by the maintenance services business to support the railcars in our lease fleet are eliminated within the Railcar Leasing & Services Group and are excluded from the totals reported on this line. (2) Includes depreciation and amortization expense, maintenance and compliance expense, and other fleet operating costs related to our lease fleet, as well as cost of revenues for our maintenance services and digital and logistics services businesses. (3) Includes wholly-owned railcars, partially-owned railcars, and railcars under leased-in arrangements. (4) Depreciation and amortization expense includes $4.7 million for the three months ended March 31, 2023 related to the disposal of certain railcar components associated with our sustainable railcar conversion program. Additionally, amortization of deferred profit on railcars sold from the Rail Products Group to the Leasing Group is included in depreciation and amortization expense, resulting in the recognition of depreciation expense based on our original manufacturing cost of the railcars. (5) Maintenance and compliance expense is reported at cost with respect to the work that is completed by our maintenance services business to support the railcars in our lease fleet. (6) Other fleet operating costs include freight, storage, rent, and ad valorem taxes. (7) Interest expense is not a component of operating profit and includes the effect of hedges. Information related to lease portfolio sales is as follows:
|  |  | Three Months Ended March 31,
|  |  |  |  | 2024 |  | 2023
|  |  |  |  | ($ in millions)
Lease portfolio sales |  |  |  |  | $ | 24.2 |  |  | $ | 56.7 |
Operating profit on lease portfolio sales |  |  |  |  | $ | 2.1 |  |  | $ | 13.5 |
Operating profit margin on lease portfolio sales |  |  |  |  | 8.7 | % |  | 23.8 | %
Railcar Leasing Equipment Portfolio. The Leasing Group's 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. 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 nine months of 2024 |  | 2025 |  | 2026 |  | 2027 |  | 2028 |  | Thereafter |  | Total
| (in millions)
Future contractual minimum rental revenues | $ | 523.0 |  |  | $ | 586.3 |  |  | $ | 467.0 |  |  | $ | 349.3 |  |  | $ | 211.1 |  |  | $ | 331.7 |  |  | $ | 2,468.4 |
Debt. Wholly-owned subsidiaries. The Leasing Group’s debt at March 31, 2024 consisted primarily of non-recourse debt. As of March 31, 2024, Trinity’s wholly-owned subsidiaries included in the Leasing Group held equipment with a net book value of $5,634.0 million, which is pledged solely as collateral for Leasing Group debt held by those subsidiaries. The net book value of unpledged equipment at March 31, 2024 was $368.6 million. See Note 8 for more information regarding the Leasing Group’s 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. As of March 31, 2024, TRIP Holdings held equipment with a net book value of $1,035.1 million, which is pledged solely as collateral for the TRIP Holdings' debt held by its subsidiaries. As of March 31, 2024, TRP-2021 equipment with a net book value of $422.9 million is pledged solely as collateral for the TRP-2021 debt. See Note 5 for a description of TRIP Holdings and RIV 2013 and their respective subsidiaries. Operating Lease Obligations. Future amounts due as well as future contractual minimum rental revenues related to the Leasing Group's railcar operating lease obligations are as follows:
| Remaining nine months of 2024 |  | 2025 |  | 2026 |  | 2027 |  | 2028 |  | Thereafter |  | Total
| (in millions)
Future operating lease obligations | $ | 6.6 |  |  | $ | 8.2 |  |  | $ | 7.7 |  |  | $ | 7.2 |  |  | $ | 5.1 |  |  | $ | 6.8 |  |  | $ | 41.6 |
Future contractual minimum rental revenues | $ | 7.2 |  |  | $ | 7.5 |  |  | $ | 5.1 |  |  | $ | 1.1 |  |  | $ | 0.3 |  |  | $ | — |  |  | $ | 21.2 |
Operating lease obligations totaling $0.8 million are guaranteed by Trinity Industries, Inc. and certain subsidiaries.

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