Fair Value Accounting

3 Months Ended

Mar. 31, 2016

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



	Fair Value Measurement as of March 31, 2016
	(in millions)
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents	$	137.7	$	—	$	—	$	137.7
Restricted cash	185.6		—		—		185.6
Total assets	$	323.3	$	—	$	—	$	323.3

Liabilities:
Interest rate hedge:⁽¹⁾
Partially-owned subsidiaries	$	—	$	2.0	$	—	$	2.0
Fuel derivative instruments⁽¹⁾	—		0.6		—		0.6
Total liabilities	$	—	$	2.6	$	—	$	2.6

	Fair Value Measurement as of December 31, 2015
	(in millions)
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents	$	174.0	$	—	$	—	$	174.0
Restricted cash	195.8		—		—		195.8
Total assets	$	369.8	$	—	$	—	$	369.8

Liabilities:
Interest rate hedge:⁽¹⁾
Partially-owned subsidiaries	$	—	$	1.6	$	—	$	1.6
Fuel derivative instruments⁽¹⁾	—		0.8		—		0.8
Total liabilities	$	—	$	2.4	$	—	$	2.4

⁽¹⁾Included in accrued 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 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. 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 carrying amounts and estimated fair values of our long-term debt are as follows:



	March 31, 2016					December 31, 2015
	Carrying Value			Estimated Fair Value		Carrying Value			Estimated Fair Value
	(in millions)
Recourse:
Senior notes	$	399.6		$	338.0	$	399.6		$	370.3
Convertible subordinated notes	449.4			480.0		449.4			534.8
Less: unamortized discount	(39.6		)			(43.8		)
	409.8					405.6
Capital lease obligations	35.0			35.0		35.8			35.8
Other	0.5			0.5		0.5			0.5
	844.9			853.5		841.5			941.4
Less: unamortized debt issuance costs	(4.5		)			(4.8		)
	840.4					836.7
Non-recourse:
2006 secured railcar equipment notes	202.8			206.0		204.1			218.2
2009 secured railcar equipment notes	177.4			187.1		179.2			207.2
2010 secured railcar equipment notes	292.1			281.2		296.2			314.2
TILC warehouse facility	259.3			259.3		264.3			264.3
TRL 2012 secured railcar equipment notes (RIV 2013)	443.6			403.3		449.1			436.9
TRIP Master Funding secured railcar equipment notes (TRIP Holdings)	985.9			962.9		997.8			1,039.5
	2,361.1			2,299.8		2,390.7			2,480.3
Less: unamortized debt issuance costs	(30.5		)			(32.0		)
	2,330.6					2,358.7
Total	$	3,171.0		$	3,153.3	$	3,195.4		$	3,421.7

The estimated fair value of our senior notes and convertible subordinated notes were based on a quoted market price in a market with little activity as of March 31, 2016 and December 31, 2015, respectively (Level 2 input). The estimated fair values of our 2006, 2009, 2010, and 2012 secured railcar equipment notes and TRIP Rail Master Funding LLC (“TRIP Master Funding”) secured railcar equipment notes are based on our estimate of their fair value as of March 31, 2016 and December 31, 2015, 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.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details