Derivative Instruments

We may use derivative instruments to mitigate the impact of changes in interest rates, both in anticipation of future debt issuances and to offset interest rate variability of certain floating rate debt issuances outstanding. We also may use derivative instruments to mitigate the impact of changes in natural gas and diesel fuel prices and changes in foreign currency exchange rates. Derivative instruments that are designated and qualify as cash flow hedges, are accounted for by recording the effective portion of the gain or loss on the derivative instrument in AOCL as a separate component of stockholders' equity and reclassified into earnings in the period during which the hedged transaction affects earnings. We continuously monitor our derivative positions and the credit ratings of our counterparties and do not anticipate losses due to non-performance.

See Note 3 for discussion of how we valued our interest rate swaps at December 31, 2018. See Note 11 for a description of our debt instruments.

Interest rate hedges



					Included in accompanying balance sheet at December 31, 2018
	Notional Amount		Interest Rate⁽¹⁾		Asset/(Liability)			AOCL – loss/ (income)			Noncontrolling Interest
	(in millions, except %)
Expired hedges:
2006 secured railcar equipment notes	$	200.0	4.87	%	$	—		$	(0.3	)	$	—
2018 secured railcar equipment notes	$	249.3	4.41	%	$	—		$	1.3		$	—
TRIP Holdings warehouse loan	$	788.5	3.60	%	$	—		$	3.1		$	4.1
TRIP Master Funding secured railcar equipment notes	$	34.8	2.62	%	$	—		$	0.2		$	0.3
2017 promissory notes - interest rate cap	$	169.3	3.00	%	$	—		$	(0.7	)	$	—
Open hedge:
2017 promissory notes - interest rate swap	$	396.1	3.13	%	$	(12.9	)	$	12.8		$	—


⁽¹⁾	Weighted average fixed interest rate, except for the interest rate cap on the 2017 promissory notes.



	Effect on interest expense-increase/(decrease)
	Year Ended December 31,									Expected effect during next twelve months⁽¹⁾
	2018			2017			2016			Expected effect during next twelve months⁽¹⁾
	(in millions)
Expired hedges:
2006 secured railcar equipment notes	$	(0.2	)	$	(0.3	)	$	(0.4	)	$	0.1
2018 secured railcar equipment notes	$	0.1		$	—		$	—		$	0.2
TRIP Holdings warehouse loan	$	2.2		$	4.5		$	4.8		$	2.1
TRIP Master Funding secured railcar equipment notes	$	0.2		$	0.4		$	0.9		$	0.2
2017 promissory notes - interest rate cap	$	0.1		$	—		$	—		$	0.1
Open hedge:
2017 promissory notes - interest rate swap	$	0.3		$	—		$	—		$	0.1

⁽¹⁾Based on the fair value of open hedges as of December 31, 2018

During 2005 and 2006, we entered into interest rate swap derivatives in anticipation of issuing our 2006 Secured Railcar Equipment Notes. These derivative instruments, with a notional amount of $200.0 million, were settled in 2006 and fixed the interest rate on a portion of the related debt issuance. These derivatives were being accounted for as cash flow hedges with changes in the fair value of the instruments of $4.5 million in income recorded in AOCL through the date the related debt issuance closed in 2006. The balance is being amortized over the term of the related debt. The effect on interest expense is due to amortization of the AOCL balance.

Between 2007 and 2009, TRIP Holdings, as required by the TRIP Warehouse Loan, entered into interest rate swap derivatives, all of which qualified as cash flow hedges, to reduce the effect of changes in variable interest rates in the TRIP Warehouse Loan. In July 2011, these interest rate hedges were terminated in connection with the refinancing of the TRIP Warehouse Loan. Balances included in AOCL at the date the hedges were terminated are being amortized over the expected life of the new debt with $2.1 million of additional interest expense expected to be recognized during the twelve months following December 31, 2018.

In July 2011, TRIP Holdings’ wholly-owned subsidiary, TRIP Master Funding, entered into an interest rate swap derivative instrument, expiring in 2021, with an initial notional amount of $94.1 million to reduce the effect of changes in variable interest rates associated with the Class A-1b notes of the TRIP Master Funding secured railcar equipment notes. The TRIP Master Funding interest rate hedge was terminated in August 2017 in connection with the refinancing of the related indebtedness. The effect on interest expense is primarily a result of monthly interest settlements. The balance included in AOCL at the date the hedge was terminated is being amortized over the life of the terminated hedge with $0.2 million of additional interest expense expected to be recognized during the twelve months following December 31, 2018.

In May 2017, TRL-2017 purchased an interest rate cap derivative, which qualified as a cash flow hedge, to limit the LIBOR component of the interest rate on the 2017 promissory notes to a maximum rate of 3.00%. In November 2018, upon expansion of the aggregate principal amount of the 2017 promissory notes, the existing interest rate cap derivative was terminated. A new interest rate swap derivative was executed and designated as a cash flow hedge to limit the LIBOR component of the interest rate on a portion of the outstanding 2017 promissory notes. The effect on interest expense is primarily the result of amortization of the cost of the derivative with $0.2 million of additional interest expense expected to be recognized during the twelve months following December 31, 2018.

In May 2018, Trinity Rail Leasing 2018 LLC ("TRL-2018") purchased an interest rate swaption derivative for $1.4 million to hedge the risk of potential interest rate increases prior to the TRL-2018 debt issuance. The effect on interest expense is due to amortization of the AOCL balance. The balance included in AOCL is being amortized over the life of the terminated hedge with $0.2 million of additional interest expense expected to be recognized during the twelve months following December 31, 2018.

See Note 11 regarding the related debt instruments.

Other Derivatives

Natural gas and diesel fuel

From time to time, we may enter into derivative instruments to mitigate the impact of increases in natural gas and diesel fuel prices. For any instruments that do not qualify for hedge accounting treatment, changes in their fair values are recorded directly to the Consolidated Statement of Operations. The effect of commodity hedge transactions was immaterial to the Consolidated Financial Statements for all periods presented herein.