Fair Value Accounting

6 Months Ended

Jun. 30, 2013

Fair Value Disclosures [Abstract]

Fair Value Accounting

Fair Value Accounting

Assets and liabilities measured at fair value on a recurring basis are summarized below:

	Fair Value Measurement as of June 30, 2013
	(in millions)
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents	$	137.0	$	—	$	—	$	137.0
Restricted cash	227.0		—		—		227.0
Total assets	$	364.0	$	—	$	—	$	364.0
Liabilities:
Interest rate hedges:(1)
Wholly-owned subsidiary	$	—	$	28.9	$	—	$	28.9
Partially-owned subsidiary	—		2.8		—		2.8
Total liabilities	$	—	$	31.7	$	—	$	31.7
	Fair Value Measurement as of December 31, 2012
	(in millions)
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents	$	246.6	$	155.0	$	—	$	401.6
Restricted cash	223.2		—		—		223.2
Equity call agreement with TRIP Holdings equity investor(2)	—		—		0.8		0.8
Fuel derivative instruments(2)	—		0.1		—		0.1
Total assets	$	469.8	$	155.1	$	0.8	$	625.7
Liabilities:
Interest rate hedges:(1)
Wholly-owned subsidiary	$	—	$	37.6	$	—	$	37.6
Partially-owned subsidiary	—		5.2		—		5.2
Equity put agreement with TRIP Holdings equity investor(3)	—		—		2.9		2.9
Total liabilities	$	—	$	42.8	$	2.9	$	45.7

⁽¹⁾ Included in accrued liabilities on the consolidated balance sheet.

⁽²⁾ Included in other assets on the consolidated balance sheet.

⁽³⁾ Included in other liabilities on the consolidated balance sheet.

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for that asset or liability in an orderly transaction between market participants on the measurement date. An entity is required to establish a fair value hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. The three levels of inputs that may be used to measure fair values are listed below:

Level 1 – This level is defined as quoted prices in active markets for identical assets or liabilities. The Company’s cash equivalents, excluding commercial paper, and restricted cash are instruments of the U.S. Treasury or highly-rated money market mutual funds.

Level 2 – This level is defined as observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Cash equivalents include commercial paper valued using quoted prices in secondary markets. The Company’s fuel derivative instruments, which are commodity swaps, are valued using energy and commodity market data. Interest rate hedges are valued at exit prices obtained from each counterparty. See Note 7 Derivative Instruments and Note 11 Debt.

Level 3 – This level is defined as unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The equity put and call agreements with the TRIP equity investor are valued based on cash flow projections and certain assumptions regarding the likelihood of exercising the option under the related agreement. See Note 5 Partially-Owned Leasing Subsidiaries.

The carrying amounts and estimated fair values of our long-term debt are as follows:

	June 30, 2013					December 31, 2012
	Carrying Value			Estimated Fair Value		Carrying Value			Estimated Fair Value
	(in millions)
Recourse:
Convertible subordinated notes	$	450.0		$	524.4	$	450.0		$	506.6
Less: unamortized discount	(81.0		)			(87.5		)
	369.0					362.5
Capital lease obligations	43.7			43.7		45.8			45.8
Term loan	—			—		48.6			53.3
Other	1.0			1.0		1.2			1.2
	413.7			569.1		458.1			606.9
Non-recourse:
2006 secured railcar equipment notes	248.5			268.7		255.8			292.0
Promissory notes	411.8			403.7		424.1			414.6
2009 secured railcar equipment notes	204.2			235.2		209.2			260.4
2010 secured railcar equipment notes	334.2			349.4		341.5			387.2
TILC warehouse facility	167.4			167.4		173.6			173.6
2012 secured railcar equipment notes - RIV 2013	327.0			306.0		333.8			321.7
TRIP Holdings senior secured notes	—			—		61.2			62.5
TRIP Master Funding secured railcar equipment notes	777.4			836.6		797.7			952.0
	2,470.5			2,567.0		2,596.9			2,864.0
Total	$	2,884.2		$	3,136.1	$	3,055.0		$	3,470.9

The estimated fair value of our convertible subordinated notes was based on a quoted market price in a market with little activity as of June 30, 2013 and December 31, 2012, respectively (Level 2 input). The estimated fair values of our 2006, 2009, 2010, and 2012 secured railcar equipment notes, promissory notes, TRIP Holdings senior secured notes, TRIP Rail Master Funding LLC (“TRIP Master Funding”) secured railcar equipment notes, and term loan are based on our estimate of their fair value as of June 30, 2013 and December 31, 2012, respectively. These values were determined by discounting their future cash flows at the current market interest rate (Level 3 inputs). The carrying value of our Trinity Industries Leasing Company (“TILC”) warehouse facility approximates fair value because the interest rate adjusts to the market interest rate (Level 3 input). The fair values of all other financial instruments are estimated to approximate carrying value. See Note 11 Debt for a description of the Company's long-term debt.