UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549--------------- FORMForm 10-Q
--------------- (MARK ONE) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934FOR THE QUARTERLY PERIOD ENDED
SEPTEMBER 30, 2003MARCH 31, 2004OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________ TO ________. COMMISSION FILE NUMBER
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934For the transition period from _______to __________.
Commission File Number 1-6903
TRINITY INDUSTRIES, INC. (ExactTrinity Industries, Inc.
(Exact name of registrant as specified in its charter)DELAWARE 75-0225040 (State of Incorporation) (I.R.S. Employer Identification No.) 2525 STEMMONS FREEWAY DALLAS, TEXAS 75207-2401 (Address of principal executive offices) (Zip Code) Registrant's
Delaware
(State of Incorporation)75-0225040
(I.R.S. Employer Identification No.)2525 Stemmons Freeway Dallas, Texas
(Address of principal executive offices)75207-2401
(Zip Code)Registrant’s telephone number, including area code(214) 631-4420
INDICATE BY CHECK MARK WHETHER THE REGISTRANTIndicate by check mark whether the registrant (1)
HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTIONhas filed all reports required to be filed by section 13ORor15(d)OF THE SECURITIES EXCHANGE ACT OFof the Securities Exchange Act of 1934DURING THE PRECEDINGduring the preceding 12MONTHS ANDmonths and (2)HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PASThas been subject to such filing requirements for the past 90DAYS. YESdays. Yes [X]NONo []. INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS AN ACCELERATED FILER (AS DEFINED IN RULE].Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2
OF THE EXCHANGE ACT)of the Exchange Act).YESYes [X]NONo []AT OCTOBER 31, 2003 THERE WERE 46,348,566 SHARES OF THE REGISTRANT'S COMMON STOCK OUTSTANDING.At April 30, 2004 there were 47,011,368 shares of the Registrant’s common stock outstanding.
TRINITY INDUSTRIES, INC.
FORM 10-Q
TABLE OF CONTENTS
CAPTION PAGE -------------------------------------------------------------- ----Caption Page PART I FINANCIAL INFORMATION 3 14 18 18 19 2ITEM 1. FINANCIAL STATEMENTS TRINITY INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS2
Item 1. Financial Statements
Trinity Industries, Inc. and Subsidiaries
Consolidated Statements of Operations
Three Months Ended March 31, 2004 2003 (unaudited) (in millions except per share amounts) Revenues $ 454.9 $ 289.1 Operating costs: Cost of revenues 425.1 266.4 Selling, engineering and administrative expenses 36.3 34.1
461.4 300.5
Operating loss (6.5 ) (11.4 ) Other (income) expense: Interest income (0.2 ) (0.1 ) Interest expense 10.1 9.5 Other, net 0.1 (0.8 )
10.0 8.6
Loss before income taxes (16.5 ) (20.0 ) Provision (benefit) for income taxes (5.7 ) (5.5 )
Net loss (10.8 ) (14.5 ) Dividends on Series B preferred stock (0.8 ) —
Net loss applicable to common shareholders $ (11.6 ) $ (14.5 )
Net loss applicable to common shareholders per common share: Basic $ (0.25 ) $ (0.32 )
Diluted $ (0.25 ) $ (0.32 )
Weighted average number of shares outstanding: Basic 46.2 45.5 Diluted 46.2 45.5 See accompanying notes to consolidated financial statements.
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TRINITY INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2003 2002 -------- -------- (UNAUDITED) (IN MILLIONS EXCEPT PER SHARE AMOUNTS)Revenues............................................ $1,018.3 $1,137.9 Operating costs: Cost of revenues.................................. 892.1 1,004.9 Selling, engineering and administrative expenses........................................ 117.1 120.3 -------- -------- 1,009.2 1,125.2 -------- -------- Operating profit.................................... 9.1 12.7 Other (income) expense: Interest income................................... (0.4) (0.9) Interest expense.................................. 26.3 26.4 Other, net........................................ (3.6) (2.0) -------- -------- 22.3 23.5 -------- -------- Loss before income taxes............................ (13.2) (10.8) Provision (benefit) for income taxes: Current........................................... (30.6) (42.8) Deferred.......................................... 26.6 40.1 -------- -------- (4.0) (2.7) -------- -------- Net loss............................................ (9.2) (8.1) Dividends on Series B preferred stock............... (0.8) -- -------- -------- Net loss applicable to common shareholders.......... $ (10.0) $ (8.1) ======== ======== Net loss per common share: Basic............................................. $ (0.22) $ (0.18) ======== ======== Diluted........................................... $ (0.22) $ (0.18) ======== ======== Weighted average number of shares outstanding: Basic............................................. 45.6 44.5 Diluted........................................... 45.6 44.5Trinity Industries, Inc. and Subsidiaries
Consolidated Balance Sheets
March 31, December 31, 2004 2003 (unaudited) (in millions) Cash and cash equivalents $ 151.3 $ 46.0 Receivables, net of allowance 235.3 198.1 Inventories: Raw materials and supplies 155.5 158.4 Work in process 76.8 60.0 Finished goods 43.5 39.6
275.8 258.0 Property, plant and equipment, at cost 1,624.2 1,627.1 Less accumulated depreciation (689.8 ) (681.9 )
934.4 945.2 Goodwill 420.2 415.1 Other assets 149.2 145.5
$ 2,166.2 $ 2,007.9
Accounts payable and accrued liabilities $ 444.9 $ 460.2 Debt: Recourse 475.6 298.5 Non-recourse 108.6 96.7
584.2 395.2 Deferred income 30.4 32.2 Other liabilities 52.7 58.7
1,112.2 946.3 Series B redeemable convertible preferred stock, no par value, $0.1 liquidation value 57.9 57.8 Stockholders’ equity: Preferred stock – 1.5 shares authorized and unissued — — Common stock — shares issued and outstanding at March 31, 2004 - 50.9; at December 31, 2003 - 50.9 50.9 50.9 Capital in excess of par value 431.5 434.7 Retained earnings 635.5 649.9 Accumulated other comprehensive loss (27.6 ) (27.3 ) Treasury stock (4.0 shares at March 31, 2004 and 4.3 shares at December 31, 2003) (94.2 ) (104.4 )
996.1 1,003.8
$ 2,166.2 $ 2,007.9
See accompanying notes to consolidated financial statements.
4
TRINITY INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31, 2003 2002 ------------- ------------ (UNAUDITED) (IN MILLIONS)ASSETS Cash and cash equivalents........................... $ 13.6 $ 19.1 Receivables, net of allowance....................... 211.3 168.2 Income tax receivable............................... 26.3 50.0 Inventories: Raw materials and supplies...................... 132.7 115.9 Work in process................................. 54.5 42.3 Finished goods.................................. 38.4 55.1 ---------- --------- 225.6 213.3 Property, plant and equipment, at cost.............. 1,756.7 1,551.8 Less accumulated depreciation....................... (685.3) (604.4) ---------- --------- 1,071.4 947.4 Goodwill............................................ 412.9 411.3 Other assets........................................ 123.9 133.6 ---------- --------- $ 2,085.0 $ 1,942.9 ========== ========= LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable and accrued liabilities............ $ 414.6 $ 396.0 Debt................................................ 537.7 488.9 Other liabilities................................... 82.6 56.4 ---------- --------- 1,034.9 941.3 Series B redeemable convertible preferred stock, no par value, $0.1 liquidation value........ 57.7 -- Stockholders' equity: Preferred stock - 1.5 shares authorized and unissued........................................ -- -- Common stock -- shares issued and outstanding at September 30, 2003 - 50.9; at December 31, 2002 - 50.9.......................................... 50.9 50.9 Capital in excess of par value.................... 436.4 442.1 Retained earnings................................. 654.2 672.6 Accumulated other comprehensive loss.............. (33.7) (34.9) Treasury stock (4.6 shares at September 30, 2003 and 5.0 shares at December 31, 2002)............. (115.4) (129.1) ---------- --------- 992.4 1,001.6 ---------- --------- $ 2,085.0 $ 1,942.9 ========== =========Trinity Industries, Inc. and Subsidiaries
Consolidated Statements Cash Flows
Three Months Ended March 31, 2004 2003 (unaudited) (in millions) Operating activities: Net loss $ (10.8 ) $ (14.5 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 22.1 21.8 Deferred income taxes (5.7 ) (1.8 ) Gain on sale of property, plant, equipment and other assets (0.6 ) (1.4 ) Other 0.5 (0.6 ) Changes in assets and liabilities: (Increase) decrease in receivables (37.5 ) 15.4 Decrease in tax receivable — 46.2 (Increase) decrease in inventories (16.8 ) 5.7 (Increase) decrease in other assets (6.8 ) 10.9 (Decrease) increase in accounts payable and accrued liabilities (15.2 ) 4.8 (Decrease) increase in other liabilities (0.9 ) 1.1
Net cash (required) provided by operating activities (71.7 ) 87.6
Investing activities: Proceeds from sale of property, plant, equipment and other assets 4.1 2.5 Capital expenditures — lease subsidiary (31.8 ) (65.5 ) Capital expenditures — other (5.0 ) (2.9 ) Payment for purchase of acquisitions, net of cash acquired (15.7 ) — Sale of investment in equity trust 8.5 —
Net cash required by investing activities (39.9 ) (65.9 )
Financing activities: Payments to retire debt (177.6 ) (67.5 ) Proceeds from issuance of debt 392.2 74.8 Proceeds from issuance of common stock, net 6.5 — Dividends paid to common shareholders (2.8 ) (2.8 ) Dividends paid to preferred shareholders (1.4 ) —
Net cash provided by financing activities 216.9 4.5
Net increase in cash and cash equivalents 105.3 26.2 Cash and cash equivalents at beginning of period 46.0 19.1
Cash and cash equivalents at end of period $ 151.3 $ 45.3
Interest paid for the three months ended March 31, 2004 and 2003 was $10.7 and $11.5, respectively. Taxes paid, net of refunds received, were $4.0 for the three months ended March 31, 2004 and taxes received, net of payments made were $47.3 for the three months ended March 31, 2003.
See accompanying notes to consolidated financial statements.
5
TRINITY INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2003 2002 -------- --------- (UNAUDITED) (IN MILLIONS)Operating activities: Net loss.................................................................... $ (9.2) $ (8.1) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization........................................... 64.7 67.8 Deferred income taxes................................................... 26.6 40.1 Gain on sale of property, plant, equipment and other assets........................................................ (6.0) (4.7) Other.................................................................. 5.2 2.9 Changes in assets and liabilities: (Increase) decrease in receivables.............................. (43.1) 2.1 Decrease in tax receivable...................................... 23.7 1.7 (Increase) decrease in inventories.............................. (12.3) 31.5 Decrease (increase) in other assets............................. 9.4 (33.5) Increase (decrease) in accounts payable and accrued liabilities. 21.2 (47.7) (Decrease) increase in other liabilities........................ (12.1) 6.0 -------- --------- Total adjustments.............................................. 77.3 66.2 -------- --------- Net cash provided by operating activities................................... 68.1 58.1 -------- --------- Investing activities: Proceeds from sale of property, plant, equipment and other assets........... 33.6 13.9 Capital expenditures - lease subsidiary..................................... (188.5) (97.7) Capital expenditures - other................................................ (16.7) (25.5) Payment for purchase of acquisitions, net of cash acquired.................. -- (1.4) -------- --------- Net cash required by investing activities................................... (171.6) (110.7) -------- --------- Financing activities: Issuance of common stock.................................................... -- 31.2 Issuance of redeemable preferred stock....................................... 57.6 -- Payments to retire debt..................................................... (145.6) (370.2) Proceeds from issuance of debt.............................................. 194.4 397.9 Dividends paid.............................................................. (8.4) (13.6) -------- --------- Net cash provided by financing activities................................... 98.0 45.3 -------- --------- Net increase (decrease) in cash and cash equivalents.......................... (5.5) (7.3) Cash and cash equivalents at beginning of period.............................. 19.1 22.2 -------- --------- Cash and cash equivalents at end of period.................................... $ 13.6 $ 14.9 ======== =========Interest paid for the nine months ended September 30, 2003Trinity Industries, Inc. and
2002 was $26.3 and $21.8, respectively. Taxes received, netSubsidiaries
Consolidated Statement ofpayments made, for the nine months ended September 30, 2003 and 2002 were $43.5 and $6.8, respectively.Stockholders’ Equity
Common Common Capital Accumulated Shares Stock in Excess Other Treasury Total (100,000,000 $1.00 Par of Par Retained Comprehensive Treasury Stock at Stockholders’ Authorized) Value Value Earnings Loss Shares Cost Equity (unaudited) (in millions except share and per share data) Balance at December 31, 2003 50,940,351 $ 50.9 $ 434.7 $ 649.9 $ (27.3 ) (4,260,860 ) $ (104.4 ) $ 1,003.8 Net loss — — — (10.8 ) — — — (10.8 ) Currency translation adjustments — — — — 0.1 — — 0.1 Unrealized loss on derivative financial instruments — — — — (0.4 ) — — (0.4 )
Comprehensive net loss (11.1 ) Cash dividends ($0.06 per common share) — — — (2.8 ) — — — (2.8 ) Dividend on Series B preferred stock — — — (0.8 ) — — — (0.8 ) Restricted shares issued — — (0.1 ) — — 20,800 0.6 0.5 Stock options exercised — — (3.1 ) — — 277,921 9.6 6.5
Balance at March 31, 2004 50,940,351 $ 50.9 $ 431.5 $ 635.5 $ (27.6 ) (3,962,139 ) $ (94.2 ) $ 996.1
See accompanying notes to consolidated financial statements.
6
TRINITY INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
COMMON COMMON CAPITAL ACCUMULATED SHARES STOCK IN EXCESS OTHER TREASURY TOTAL (100,000,000 $1.00 PAR OF PAR RETAINED COMPREHENSIVE TREASURY STOCK AT STOCKHOLDERS' AUTHORIZED) VALUE VALUE EARNINGS LOSS SHARES COST EQUITY ---------- ----- ------ -------- ---- ------ ---- ------(IN MILLIONS EXCEPT SHARE AND PER SHARE DATA) Balance at December 31, 2002........................ 50,940,351 $ 50.9 $442.1 $ 672.6 $ (34.9) (5,040,709) $(129.1) $ 1,001.6 Net loss.................... -- -- -- (9.2) -- -- -- (9.2) Currency translation adjustments............... -- -- -- -- 1.1 -- -- 1.1 Unrealized gain on derivative financial instruments............... -- -- -- -- .1 -- -- 0.1 --------- Comprehensive net loss...... (8.0) Cash dividends ($0.18 per common share)......... -- -- -- (8.4) -- -- -- (8.4) Dividend on Series B preferred stock......... -- -- -- (0.8) -- -- -- (0.8) Other....................... -- -- (5.7) -- -- 447,160 13.7 8.0 ---------- ------ ------ ------- -------- ---------- ------- --------- Balance at September 30, 2003. 50,940,351 $ 50.9 $436.4 $ 654.2 $ (33.7) (4,593,549) $(115.4) $ 992.4 ========== ====== ======= ======= ======== ========== ======= =========See accompanying notesTrinity Industries, Inc. and Subsidiaries
Notes toconsolidated financial statements. 7TRINITY INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (IN MILLIONS EXCEPT PER SHARE DATA) NOTEConsolidated Financial Statements
(unaudited)Note 1.
BASIS OF PRESENTATIONSummary of Significant Accounting PoliciesBasis of Presentation
The foregoing consolidated financial statements are unaudited and have been prepared from the books and records of Trinity Industries, Inc.
("Trinity"(“Trinity” or the"Company"“Company”). In the opinion of management, all adjustments, consisting only of normal and recurring adjustments necessary for a fair presentation of the financial position of the Company as ofSeptember 30, 2003March 31, 2004 and the results of operations and cash flows for the three-month period ended March 31, 2004 andnine-month periods ended September 30,2003,and 2002, and cash-flows for the nine month periods ended September 30, 2003 and 2002,in conformity with generally accepted accounting principles, have been made. Because of seasonal and other factors, the results of operations for the three-monthand nine-month periodsperiod endedSeptember 30, 2003March 31, 2004 may not be indicative of expected results of operations for the year ending December 31,2003.2004. These interim financial statements and notes are condensed as permitted by the instructions to Form 10-Q and should be read in conjunction with the audited consolidated financial statements of the Company included in its Form 10-K for the year ended December 31,2002. NOTE 2. UNUSUAL CHARGES Restructuring reserve activity2003.Stock Based Compensation
The Company has elected to apply the accounting provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” (APB No. 25) and its interpretations and, accordingly, no compensation expense has been recorded for the
ninestock options. The effect of computing compensation expense in accordance with Statement of Accounting Standards No. 123, “Accounting for Stock Based Compensation,” using the Black-Scholes option pricing method for the three months endedSeptember 30,March 31, 2004 and 2003was:are shown in the accompanying table (in millions).
RESERVES RESERVES DECEMBER 31, RECLASSIFI- SEPTEMBER 30, 2002 PAYMENTS CATIONS 2003 ------------ -------- ----------- -------------Property, plant & equipment -- shut down costs ..................... $ 4.6 $ 0.3 $ (4.3) $ -- Environmental liabilities................. 10.6 0.5 (10.1) -- Severance costs........................... 0.6 0.4 (0.2) -- Adverse jury verdict...................... 14.8 0.1 (14.7) -- Other..................................... 0.4 -- (0.4) -- ------- ------ ------- ------ $ 31.0 $ 1.3 $ (29.7) $ -- ======= ====== ======= ======
Three Months Ended March 31, 2004 2003 Pro forma Net loss applicable to common shareholders, as reported $ (11.6 ) $ (14.5 ) Add: Stock compensation expense related to restricted stock 0.5 0.5 Deduct: Total stock based employee compensation expense determined under fair value based method for all awards, net of related income tax effects (1.2 ) (1.7 )
Pro forma net loss applicable to common shareholders $ (12.3 ) $ (15.7 )
Pro forma net loss applicable to common shareholders per diluted share $ (0.27 ) $ (0.35 )
Net loss applicable to common shareholders per diluted share - as reported $ (0.25 ) $ (0.32 )
7
Net Loss Applicable to Common Shareholders
Diluted net loss applicable to common shareholders is based on the weighted average shares outstanding plus the dilutive impact of stock options and Series B preferred stock, if any. Basic net loss applicable to common shareholders is based on the weighted average number of common shares outstanding for the period. The
lawsuit representingnumerator for basic net loss applicable to common shareholders is loss adjusted for dividends on theadverse jury verdictSeries B preferred stock in 2004 and net loss in 2003. The numerator for diluted net income loss applicable to common shareholders is net loss, adjusted for dividends on the Series B preferred stock in 2004. Employee stock options were antidilutive for all periods presented. The Series B preferred stock wasresolved duringantidilutive for 2004 and therefore not considered in average shares outstanding in thethree-month period ended June 30, 2003. This amount was paid in July 2003 and the balance of the restructuring reserve was reclassifieddiluted net loss applicable tothe Company's litigation reserves. The restructuring reserves related to environmental liabilities were reclassified to the Company's environmental reserves. Amounts for shut down costs, severance costs, and other have been reclassified to other accrued liabilities. None of the reclassifications impacted operating profit. NOTE 3. SEGMENT INFORMATIONcommon shareholders calculation.Note 2. Segment Information
The Company reports operating results in the following business segments: (1) the
TrinityRail Group, which manufactures and sells railcars and componentparts and provides railcar repair services;parts; (2) the Constructions Products Group, which manufactures and sells highway guardrail and safety products, concrete and aggregate, girders and beams used in the construction of highway and railway bridges, and weld fittings used in pressure piping systems; (3) the Inland Barge Group, which manufactures and sells barges and related products for inland waterway services; (4) the Industrial Products Group, which manufactures and sellscontainertank heads and pressure and non-pressure containers for the storage and transportation of liquefied gases and other liquid and dry products; and (5) theTrinityRailcar Leasing and Management Services Group, which providesservices such asfleet management, maintenance andleasing.leasing services. Finally, All Other includes theCompany'sCompany’s captive insurance and transportation companies, structural towers, and other peripheral businesses.Sales and related profits from
Trinitythe Rail Group toTrinityRailcar Leasing and Management Services Group are recorded inTrinityRail Group and eliminated in consolidation. Sales of railcars from the lease fleet are included in theTrinityRailcar Leasing and Management ServicesGroup segment.Group. Salesamongbetween groups are recorded at prices comparable to those charged to external customers.8THREE MONTHS ENDED SEPTEMBER 30,Three Months Ended March 31, 2004 (in millions)
Revenues Operating
ProfitOutside Intersegment Total (Loss) Rail Group $ 225.2 $ 35.7 $ 260.9 $ (3.6 ) Construction Products Group 120.0 0.1 120.1 2.0 Inland Barge Group 43.3 — 43.3 (5.7 ) Industrial Products Group 30.4 1.4 31.8 0.8 Railcar Leasing and Management Services Group 35.1 — 35.1 9.6 All Other 0.9 6.7 7.6 1.3 Corporate — — — (7.6 ) Eliminations — (43.9 ) (43.9 ) (3.3 )
Consolidated Total $ 454.9 $ — $ 454.9 $ (6.5 )
Three Months Ended March 31, 2003
REVENUES OPERATING --------------------------------------- PROFIT OUTSIDE INTERSEGMENT TOTAL (LOSS) --------- ------------ --------- --------Trinity Rail Group......................... $ 126.4 $ 63.8 $ 190.2 $ 2.9 Construction Products Group................ 133.3 0.4 133.7 11.4 Inland Barge Group......................... 42.5 -- 42.5 0.3 Industrial Products Group.................. 30.1 1.4 31.5 2.7 Trinity Railcar Leasing and Management Services Group................ 29.9 -- 29.9 9.3 All Other.................................. 1.2 6.7 7.9 (2.0) Eliminations & Corporate Items.................................... -- (72.3) (72.3) (14.5) --------- -------- --------- -------- Consolidated Total......................... $ 363.4 $ -- $ 363.4 $ 10.1 ========= ======== ========= ========THREE MONTHS ENDED SEPTEMBER 30, 2002
REVENUES OPERATING --------------------------------------- PROFIT OUTSIDE INTERSEGMENT TOTAL (LOSS) --------- ------------ --------- ---------Trinity Rail Group......................... $ 123.2 $ 34.7 $ 157.9 $ (6.1) Construction Products Group................ 141.4 0.1 141.5 17.2 Inland Barge Group......................... 47.7 -- 47.7 1.3 Industrial Products Group.................. 40.0 1.0 41.0 3.0 Trinity Railcar Leasing and Management Services Group........................... 28.1 -- 28.1 7.2 All Other.................................. 7.2 7.3 14.5 (1.1) Eliminations & Corporate Items............. -- (43.1) (43.1) (7.8) -------- -------- -------- -------- Consolidated Total......................... $ 387.6 $ -- $ 387.6 $ 13.7 ======== ======== ======== ========NINE MONTHS ENDED SEPTEMBER 30, 2003
REVENUES OPERATING --------------------------------------- PROFIT OUTSIDE INTERSEGMENT TOTAL (LOSS) --------- ------------ --------- ---------Trinity Rail Group......................... $ 317.2 $ 176.8 $ 494.0 $ (13.5) Construction Products Group................ 368.9 0.6 369.5 29.8 Inland Barge Group......................... 129.8 -- 129.8 0.5 Industrial Products Group.................. 85.5 3.0 88.5 4.3 Trinity Railcar Leasing and Management Services Group................ 112.7 -- 112.7 30.5 All Other.................................. 4.2 18.7 22.9 (5.0) Eliminations & Corporate Items.................................... -- (199.1) (199.1) (37.5) --------- -------- --------- -------- Consolidated Total......................... $ 1,018.3 $ -- $ 1,018.3 $ 9.1 ========= ======== ========= ========9NINE MONTHS ENDED SEPTEMBER 30, 2002
REVENUES OPERATING -------------------------------------- PROFIT OUTSIDE INTERSEGMENT TOTAL (LOSS) -------- ------------ --------- ---------Trinity Rail Group......................... $ 374.9 $ 93.5 $ 468.4 $ (31.1) Construction Products Group................ 400.0 0.8 400.8 41.9 Inland Barge Group......................... 166.8 -- 166.8 4.3 Industrial Products Group.................. 103.1 2.1 105.2 2.3 Trinity Railcar Leasing and Management Services Group........................... 81.7 -- 81.7 21.4 All Other.................................. 11.4 20.5 31.9 (4.9) Eliminations & Corporate Items............. -- (116.9) (116.9) (21.2) -------- -------- --------- -------- Consolidated Total......................... $1,137.9 $ -- $ 1,137.9 $ 12.7 ======== ======== ========= ========NOTE 4. STOCK BASED COMPENSATION(in millions)
Revenues Operating
ProfitOutside Intersegment Total (Loss) Rail Group $ 84.0 $ 65.1 $ 149.1 $ (10.3 ) Construction Products Group 103.4 0.1 103.5 3.1 Inland Barge Group 44.1 — 44.1 (0.8 ) Industrial Products Group 27.7 0.8 28.5 — Railcar Leasing and Management Services Group 28.5 — 28.5 8.6 All Other 1.4 5.9 7.3 (0.9 ) Corporate — — — (7.2 ) Eliminations — (71.9 ) (71.9 ) (3.9 )
Consolidated Total $ 289.1 $ — $ 289.1 $ (11.4 )
8
Note 3. Property, Plant and Equipment
The
Company has elected to applyfollowing table summarizes theaccounting provisionscomponents ofAccounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," (APB No. 25) and its interpretations and, accordingly, no compensation expense has been recorded for the stock options. The effect of computing compensation expense in accordance with Statement of Accounting Standards No. 123, "Accounting for Stock Based Compensation," and the weighted average fair value of options granted during the three and nine months ended September 30, 2003 and 2002 using the Black-Scholes option pricing method are shown in the accompanying table.
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------- ------------- 2003 2002 2003 2002 ---- ---- ---- ----Pro forma Net income (loss) applicable to common shareholders, as reported.............. $ 1.0 $ 6.2 $ (10.0) $ (8.1) Deduct: Total stock based employee compensation expense determined under fair value based method for all awards, net of related income tax effects......................... (0.9) (1.3) (2.9) (3.6) ------- ------- -------- -------- Pro forma net income (loss) applicable to common shareholders ................ $ 0.1 $ 4.9 $ (12.9) $ (11.7) ======= ======= ======== ======== Pro forma diluted share ............... $ 0.00 $ 0.11 $ (0.28) $ (0.26) ======= ======= ======== ======== Net income (loss) applicable to common shareholders per diluted share - as reported............................... $ 0.02 $ 0.14 $ (0.22) $ (0.18) ======= ======= ======== ========10NOTE 5. PROPERTY, PLANT AND EQUIPMENT
SEPTEMBER 30, DECEMBER 31, 2003 2002 ---- ----Manufacturing/Corporate: Property, plant and equipment....... $ 944.7 $ 901.8 Accumulated depreciation............ (560.7) (493.6) ---------- ---------- 384.0 408.2 ---------- ---------- Leasing: Equipment on lease.................. 812.0 650.0 Accumulated depreciation............ (124.6) (110.8) ---------- ---------- 687.4 539.2 ---------- ---------- $ 1,071.4 $ 947.4 ========== ==========NOTE 6. WARRANTIES The Company provides for the estimated cost of product warranties at the time revenue is recognized and assesses the adequacy of the resulting reserves on a quarterly basis. The change in the accruals for warranties for the three months and the nine months ended September 30, 2003 and 2002 was as follows:
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------- ------------- 2003 2002 2003 2002 ---- ---- ---- ----Beginning balance............. $ 21.5 $ 15.8 $ 20.8 $ 18.1 Additions..................... 2.6 8.2 9.6 16.6 Reductions.................... (3.4) (3.6) (9.7) (14.3) -------- -------- -------- -------- Ending balance................ $ 20.7 $ 20.4 $ 20.7 $ 20.4 ======== ======== ======== ========NOTE 7. DEBT
SEPTEMBER 30, DECEMBER 31, 2003 2002 ---- ----Corporate/Manufacturing: Revolving commitment................... $ 20.0 $ 48.0 Term commitment........................ 123.1 149.3 Other.................................. 5.2 6.4 -------- -------- 148.3 203.7 -------- -------- Leasing: Equipment trust certificates........... 170.0 171.4 Warehouse facility..................... 219.4 113.8 -------- -------- 389.4 285.2 -------- -------- $ 537.7 $ 488.9 ======== ========In June 2002, the Company completed a secured credit agreement for $425 million. The agreement includes a $275 million 3-year revolving commitment and a $150 million 5-year term commitment. The agreement calls for quarterly payments of principal on the term debt in the amount of $375 thousand beginning September 30, 2002 through June 30, 2006 and quarterly payments of $36.0 million beginning on September 30, 2006 through the maturity date. Amounts borrowed under the revolving commitment bear interest at LIBOR plus 2.25% or Prime rate plus 0.25% (4.25% at September 30, 2003). Amounts borrowed under the term commitment bear interest at LIBOR plus 3.25% (4.45% at September 30, 2003). The Company's accounts receivable and inventory and a portion of itsproperty, plant and equipmentsecure the agreement. During September 2003, the Company modified the terms of the debt covenants under the agreement to separate the Company's leasing and manufacturing operations for debt compliance purposes and paid off $25.0 million of the 5-year term commitment. The agreement limits the amount of capital expenditures related to the Company's leasing business, requires maintenance of ratios related to interest coverage for both the leasing and manufacturing operations, leverage, asset coverage and minimum net worth, and restricts the amount of dividend payments. At September 30, 2003, 11$143.1 million was borrowed under this agreement. At September 30, 2003, the most restrictive of the debt covenants based on trailing twelve month calculations as defined by the debt agreements allows for approximately $65.4 million additional principal and approximately $6.8 million and $9.0 million additional annual interest expense for leasing and manufacturing operations, respectively. In June 2002 Trinity Industries Leasing Company ("TILC") through a newly formed, wholly owned and consolidated business trust entered into a $200 million non-recourse warehouse facility to finance or refinance railcars acquired or owned by TILC. Specific railcars and the underlying leases secure the facility. Advances under the facility may not exceed 75% of the fair market value of the eligible railcars securing the facility as defined by the agreement. Advances under the facility bear interest at LIBOR plus 1.375% (2.495% at September 30, 2003). In August 2003, TILC expanded this facility to $300 million and extended the term through August 2004. At September 30, 2003, $80.6 million was available under this facility. The Company is currently in discussions with long-term lenders to provide permanent financing for the amount currently outstanding under the facility, which is expected to be completed during the fourth quarter of 2003. Terms and conditions of other debt are described in the Annual Report. The remaining principal payments under the debt agreementsas ofSeptember 30, 2003 are as follows: the remaining three months of 2003 - $2.5;March 31, 2004- $6.7; 2005 - $203.8; 2006 - $154.2; 2007 - $90.6;and$79.9 thereafter. NOTE 8. SALE/LEASEBACK FINANCING During the nine months endedDecember 31,2001, the Company completed a lease arrangement for $199.0 million in railcars. Trinity sold the railcars to an independent trust. The trust financed the purchase of the railcars with $151.3 million in debt and $47.7 million in equity provided by large independent financial institutions. The equity investor in the trust has the risk of ownership of the assets in the trust except for the collateral pledged to support the operating lease. Trinity has made no guarantees with respect to amounts at risk. An independent trustee for the trust has the authority for the appointment of the railcar fleet manager. Trinity, through a newly formed, wholly owned qualified subsidiary, leased railcars from the trust and subleased the railcars to independent third party customers. This subsidiary had a net worth as of September 30,2003of $ 47.3 including cash of $22.8 million, of which $6.5 million was collateral for the equity investor, and company-owned railcars of $23.1 million. The cash (other than the $6.5 million) and railcars are pledged to secure the lease obligation to the trust and are included in the consolidated financial statements of the Company. Trinity does not guarantee the performance of the subsidiary's lease obligation. Under the terms of the operating lease agreement, Trinity has the option to purchase the railcars from the trust in 2017 at a predetermined, fixed price. Trinity also has an option to purchase the railcars at the end of the lease agreement in 2023 at the then fair market value of the railcars as determined by a third party, independent appraisal. At the expiration of the operating lease agreement, Trinity has no further obligation thereunder. Trinity, under the terms of a servicing and remarketing agreement, will endeavor, consistent with customary commercial practice as would be used by a prudent person, to maintain railcars under lease for the benefit of the trust. Trinity also receives management fees under the terms of the agreement. Certain ratios must be maintained by the subsidiary in order for excess cash flow, as defined, from the lease to third parties, to be available to Trinity. The sale of the railcars by Trinity to the trust was accounted for as a sale/leaseback transaction. No revenue or profit was recorded at the time of the transaction and all profit was deferred and is being amortized over the term of the operating lease. Neither the assets, the liabilities, nor equity of the trust are reflected on the balance sheet of Trinity. NOTE 9. DEPOSIT AGREEMENT(in millions).
March 31, December 31, 2004 2003 Corporate/Manufacturing: Property, plant and equipment $ 869.8 $ 868.6 Less accumulated depreciation (572.2 ) (569.0 )
297.6 299.6
Leasing: Property, plant and equipment 754.4 758.5 Less accumulated depreciation (117.6 ) (112.9 )
636.8 645.6
$ 934.4 $ 945.2
Note 4. Deposit Agreement
The Company has a deposit agreement with Altos Hornos de Mexico, SA de C.V.
("AHMSA"(“AHMSA”) that provides for funds to be deposited with AHMSA that are then used along with other funds from the Company to purchase steel from AHMSA. As ofSeptember 30, 2003,March 31, 2004, total funds on deposit including interest due amounted to approximately$25.0$19.1 million. Since May 1999 AHMSA has been operating under a judicial declaration of suspension of payments, which under applicable Mexican law, allows companies in Mexico to (1) seek a debt restructuring agreement with their creditors in an orderly fashion; (2) continue their operations; and (3) avoid declaration of bankruptcy and liquidation of assets. TheCompany'sCompany’s understanding of Mexican law is that all funds on deposit are required to be returned to the Company regardless of whether the supplier is able to operate under the declaration of suspension of payments. Trinity reduced$3.5$5.0 million of this deposit throughinventorypurchases in the quarter endedSeptember 30, 2003.March 31, 2004. The timing of future reductions of the deposit balance will depend on the rate of future steel purchases.12NOTE 10. SERIES B REDEEMABLE CONVERTIBLE PREFERRED STOCKNote 5. Warranties
The Company provides for the estimated cost of product warranties at the time revenue is recognized and assesses the adequacy of the resulting reserves on a quarterly basis. The change in the accruals for warranties for the three months ended March 31, 2004 and 2003 was as follows (in millions):
Three Months Ended March 31, 2004 2003 Beginning balance $ 23.0 $ 20.8 Additions 2.5 4.8 Reductions (5.9 ) (3.6 )
Ending balance $ 19.6 $ 22.0
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Note 6. Debt
The following table summarizes the components of debt as of March 31, 2004 and December 31, 2003 (in millions).
March 31, December 31, 2004 2003 Corporate/Manufacturing — Recourse: Revolving commitment $ — $ — Term commitment — 122.8 Senior Notes 300.0 — Other 5.6 5.7
305.6 128.5
Leasing — Recourse Equipment trust certificates 170.0 170.0
170.0 170.0
475.6 298.5
Leasing — Non-recourse Warehouse facility 108.6 71.1 Trust debt — 25.6
108.6 96.7
Total debt $ 584.2 $ 395.2
In
June 2003March 2004, the Company issued,600 sharesthrough a private offering, $300 million aggregate principal amount 6 1/2% senior notes (Senior Notes) due 2014. Interest on the Senior Notes is payable semiannually commencing September 15, 2004. The Senior Notes rank equally with all ofSeries B Redeemable Convertible Preferred Stock (Series B preferred stock). Each sharethe Company’s existing and future senior debt and are subordinated to all the Company’s existing and future secured debt to the extent ofSeries B preferred stock has an initial liquidationthe value of$100,000 per share.the assets securing such debt. Theliquidation value,Company may redeem some or all of the Senior Notes at any time on or after March 15, 2009 at a redemption price of 103.25% in 2009, 102.167% in 2010, 101.083% in 2011 and 100.0% in 2012 and thereafter plus accruedbutinterest. The Company may also redeem up to 35% of the aggregate principal amount of the Senior Notes using the proceeds from certain public equity offerings completed on or before March 15, 2007 at a redemption price of 106.5% of the principal amount plus accrued and unpaiddividends, is payable on June 25, 2008,interest. The Senior Notes could restrict themandatory redemption date,Company’s ability to incur additional debt, make certain distributions, investments and other restricted payments, sell assets, create certain liens and merge, consolidate or sell substantially all of its assets. The Company applied approximately $163 million of the net proceeds of the offering to repay all indebtedness under its existing bank credit facility.In connection with the issuance of the Senior Notes, the Company extended its secured credit agreement to provide for a three-year, $250 million revolving credit facility. Amounts borrowed under the revolving credit facility during the first quarter of 2004 bear interest at LIBOR plus 1.75%. Amounts borrowed under the
optionrevolving credit facility for periods after the first quarter of 2004 will bear interest at LIBOR plus a margin based upon financial performance. The Company’s accounts receivable and inventory secure the agreement. The agreement limits the amount of capital expenditures related to the Company’s leasing business, requires maintenance of ratios related to interest coverage for the leasing and manufacturing operations, leverage, asset coverage and minimum net worth, and restricts the amount of dividend payments based upon the current credit rating of the Company not to exceed $25 million annually. At March 31, 2004, there were no borrowings under the revolving credit facility.Trinity Industries Leasing Company (“TILC”) through a wholly owned and consolidated business trust has a $300 million non-recourse warehouse facility to finance or refinance railcars acquired or owned by TILC. While the warehouse facility is due August 2004 and unless renewed would be payable in
cash orthree equal installments inshares of common stock valued at 90%February 2005, August 2005, and February 2006, railcars financed by the warehouse facility have historically been refinanced under long-term financing agreements. Specific railcars and the underlying leases secure the facility. Advances under the facility may not exceed 75% of thethen current market price of the Company's common stock. Each share of Series B preferred stock may be converted at any time at the option of the holder into shares of the Company's common stock, based on the initial conversion price of $22.46 per share, which is equivalent to 4,452 shares of common stock for each $100,000 initial liquidation preference. Holders of the Series B preferred stock are entitled to receive dividends payable semi-annually, on July 1 and January 1 of each year, beginning January 1, 2004 at an annual rate of 4.5% of the liquidation preference. The Company may, at its option, pay dividends either in cash or in shares of the Company's common stock at the then current market price. The holders of shares of Series B preferred stock are entitled to vote with the holders of the common stock on an as-if converted basis on all matters brought before the stockholders. The Series B preferred stock has been classified outside the Stockholders' Equity section because there is not absolute assurance that the number of authorized and unissued common shares would be adequate to redeem the Series B preferred stock. At September 30, 2003, the number of shares authorized and unissued would be adequate to redeem the Series B preferred stock as long as thefair market value of theCompany's common stockeligible railcars securing the facility as defined by the agreement. Advances under the facility bear interest at LIBOR plus 1.375% (2.475% at March 31, 2004). At March 31, 2004, $191.4 million wasat least $1.37 per share. NOTE 11. OTHER, NETavailable under this facility.As of December 31, 2003, the Leasing Group has an equity ownership in a trust formed to finance the purchase of railcars. This trust was capitalized with $9.5 million from the Leasing Group and outside debt of $25.6 million. Because this trust is a
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variable interest entity for which the equity investor is the primary beneficiary, the financial statements of the trust were consolidated with the Company’s financial statements as of and for the year end December 31, 2003. In February 2004, the Leasing Group sold its equity ownership in the trust to a third party. Consequently, the trust, including the non-recourse debt of $25.6 million, is no longer consolidated in the Company’s financial statements.
Terms and conditions of other debt are described in the Annual Report.
The remaining principal payments under existing debt agreements as of March 31, 2004 are as follows (in millions):
Remaining nine months of 2004 2005 2006 2007 2008 Thereafter Recourse: Corporate/Manufacturing $ 0.8 $ 0.8 $ 0.3 $ 0.2 $ 0.1 $ 303.4 Leasing – equipment trust certificates (Note 7) — 39.9 10.3 43.4 14.2 62.2 Non-recourse: Leasing –warehouse facility (Note 7) 1.3 71.5 35.8 — — —
Total principal payments $ 2.1 $ 112.2 $ 46.4 $ 43.6 $ 14.3 $ 365.6
Note 7. Railcar Leasing and Management Services Group
The Railcar Leasing and Management Services Group (“Leasing Group”) provides fleet management, maintenance and leasing services. Selected combined financial information for the Leasing Group is as follows (in millions):
March 31, December 31, 2004 2003 Cash $ 6.5 $ 5.3 Leasing equipment, net Machinery 31.4 31.0 Equipment on lease 722.0 725.8 Construction in progress 1.0 1.7
754.4 758.5 Less accumulated depreciation (117.6 ) (112.9 )
636.8 645.6 Restricted Assets 32.4 39.5 Debt Recourse 170.0 170.0 Non-recourse 108.6 96.7
Three Months Ending March 31, 2004 2003 Revenues $ 35.1 $ 28.5 Operating profit 9.6 8.6 Interest expense 4.6 4.2 Equipment on lease consists primarily of railcars leased to third parties with terms generally ranging between one and twenty years, wherein equipment manufactured by Trinity is leased for a specified type of service over the term of the lease. As lessor, the Company primarily enters into operating leases. Future minimum rental revenues to be received by the Company on such leases as of March 31, 2004 are as follows: the remaining nine months of 2004 — $76.1 million; 2005 — $89.4 million; 2006 — $75.3 million; 2007 — $64.1 million; 2008 - - $52.1 million and $305.3 million thereafter. Leasing Group equipment with a net book value of $397.2 million is pledged as collateral for debt.
The Leasing Group’s debt consists of both recourse and non-recourse debt. See Note 6 for maturities for the debt.
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Note 8. Other, Net
Other (income) expense consists of the following
items:
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------ ----------------- 2003 2002 2003 2002 ------ ------ ------ ------Gain on sale of property, plant and equipment .............. $ (1.6) $ (4.3) $ (6.0) $ (4.7) Foreign exchange transactions ................ 0.8 0.4 0.8 1.4 Loss on equity investments .... 0.6 0.5 1.6 1.5 Other ......................... -- -- -- (0.2) ------ ------ ------ ------ Other, net .................. $ (0.2) $ (3.4) $ (3.6) $ (2.0) ====== ====== ====== ======NOTE 12. CONTINGENCIESitems (in millions):
Three Months Ended March 31, 2004 2003 Gains on sale of property, plant and equipment $ (0.6 ) $ (1.4 ) Foreign currency exchange transactions 0.8 0.1 Loss on equity investments — 0.5 Other (0.1 ) —
Other, net $ 0.1 $ (0.8 )
Note 9. Benefit Plans
The following table summarizes the components of net periodic pension cost for the Company (in millions):
Three Months Ended March 31, 2004 2003 Service cost $ 2.5 $ 2.4 Interest 3.7 4.1 Expected return on assets (3.8 ) (3.6 ) Amortization and deferral 0.3 0.4 Profit sharing 0.9 0.8 Other — 0.2
Net expense $ 3.6 $ 4.3
The Company had no contributions to the Company’s defined benefit pension plan for the three months ended March 31, 2004 and 2003, respectively. Total contributions to the Company’s pension plan in 2004 are currently expected to be approximately $17.5 million.
Note 10. Contingencies
In March 2004, the Company and its wholly owned subsidiary, Trinity Marine Products, Inc.
("TMP"(“TMP”), settled a lawsuit filed by Florida Marine Transporters, Inc. (“FMT”) related to twenty-eight tank barges owned and/or operated by FMT. The settlement involves, among other elements, a joint monitoring of the barge coatings and void compartment maintenance procedures, and a mutual release of all claims against one another.The Company and TMP, and certain material suppliers and others,
have beenare named as co-defendants insixfour separate lawsuits filed by multiple plaintiffs on various dates. InOctober 2003one of thesesix cases was dismissed as a result of a settlement between the Company and TMP and ACF Barge Acceptance I, LLC ("ACF"). The settlement involved the purchase of eleven barges which are leased to a barge operator under long-term lease agreements. The Company's Leasing Subsidiary purchased the barges for $19.1 million and succeeded ACF as lessor. The estimated fair value of the operating leases and residual value of the barges approximated the purchase price. In one of the remaining fivefour cases the plaintiff has petitioned the court for certification of a class which, if certified by the court, couldpotentiallyincrease the total number of barges involved inthe five cases. Absent certification of a class inthatcase, the remaining five separatecase. Such four suits involve3730 tank barges sold at an averagepricesprice of approximately $1.4 million, and 140 hopper barges sold at an average price of approximately $280,000.EachAll four cases allege similar causes ofthe five remaining cases set forth allegations pertainingaction related todamages arising from allegeddefects in coating materials supplied by a co-defendant and coatings application workmanship by TMP. The plaintiffs seek both compensatory and punitive damages and/or recision of the barge purchase contracts. Independent experts investigating the claimson behalf of the Company and TMPhave expressed the opinion that technical arguments presented by the plaintiffs in this litigation are without merit. The Company and TMP are defending these cases vigorously. As ofSeptember 30, 2003, twoMarch 31, 2004, one of the plaintiffsoweowes TMP approximately$11.4$8.7 millionof which $7.9 million is past due,related to contracts for barges not involved in the litigation. TMP has filed suit for collection of the past due amount.In a proceeding unrelated to the foregoing litigation, the Company and TMP filed a declaratory judgment, an action seeking declaration by the Court of the Company’s and TMP’s (i) obligations related to allegations of certain barge owners as to exterior coatings and coatings application on 65 tank barges and (ii) rights and remedies relative to an insurance policy in which TMP was named as an additional insured and which was applicable to the coatings on the 65 barges. On December 9, 2003, the
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barge owners filed a response proceeding to the declaratory judgment claiming actual damages of $6.5 million and punitive damages of $10 million.
A subsidiary of the Company, Transit Mix Concrete and Materials Company, Inc.
("Transit Mix"), was named as a defendant in a case involving the death of an employee of an independent contractorwho diedfollowing an accident that occurred while the decedent was working at a Company owned facility. Following a jury verdict in the favor of the plaintiff, the presiding judge entered a final judgment in the amount of $33.9 million (inclusive of fees, costs, and judgment interest). This case has been appealed by Transit Mix13and its insurers. Management believes liability in this case, if any, exceeding $3.0 million, will be covered by insurance. The Company is also involved in other claims and lawsuits incidental to its business. Based on information currently available, it is
management'smanagement’s opinion that the ultimate outcome of all current litigation and other claims, including settlements, in the aggregate will not have a material adverse effect on theCompany'sCompany’s overall financial condition for purposes of financial reporting. However, resolution of certain claims or lawsuits by settlement or otherwise could have a significant impact on the operating results of the reporting period in which such resolution occurs.The Company is subject to federal, state, local, and foreign laws and regulations relating to the environment and to the workplace. The Company believes that it is currently in substantial compliance with such laws and regulations.
The Company is involved in various proceedings relating to environmental matters. The Company has provided reserves amounting to
$19.3$13.4 million to cover probable and estimable liabilities of the Company with respect to such investigations and cleanup activities, taking into account currently available information and theCompany'sCompany’s contractual rights of indemnification. However, estimates of future response costs are necessarily imprecise. Accordingly, there can be no assurance that the Company will not become involved in future litigation or other proceedings or, if the Company were found to be responsible or liable in any litigation or proceeding, that such costs would not be material to the Company.NOTE 13. NET INCOME (LOSS) PER SHARE Diluted net income per common share is based on the weighted average shares outstanding plus the dilutive impact13
Item 2.Management’s Discussion and Analysis of
stock optionsFinancial Condition andSeries B preferred stock. Basic net income per common share is based on the weighted average numberResults ofcommon shares outstanding for the period. The numerator for basic net income (loss) per common share is net income (loss) adjusted for dividends on the Series B preferred stock in 2003 and net income (loss) in 2002. The numerator for diluted net income (loss) per common share is net income (loss), adjusted for dividends on the Series B preferred stock in 2003. The difference between the denominator in the basic calculation and the denominator in the diluted calculation for the three months ended September 30, 2003 and September 30, 2002 was attributable to the effect of employee stock options. Employee stock options were antidilutive for all other periods presented. The Series B preferred stock was antidilutive for all periods presented and therefore not considered in the diluted net income (loss) per common share calculation. NOTE 14. RECENT ACCOUNTING PRONOUNCEMENTS During January 2003, the FASB issued Interpretation No. 46 "Consolidation of Variable Interest Entities" (FIN 46). The consolidation requirements of FIN 46 apply immediately to variable interest entities created after January 31, 2003 and apply to existing variable interest entities in the first fiscal year or interim periods beginning after June 15, 2003. In October 2003, the FASB agreed to a broad-based deferral of the effective date for public companies until the end of the periods ending after December 15, 2003. Until now, one company generally has included another entity in its consolidated financial statements only if it controlled the entity through voting interests. FIN 46 requires a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity's activities or entitled to receive a majority of the entity's residual returns or both. A company that consolidates a variable interest entity is called the primary beneficiary of that entity. Certain of the disclosure requirements apply in all financial statements issued after January 31, 2003, regardless of when the variable interest entity was established. The Company is not the primary beneficiary for any variable interest entities. In May 2003, the FASB issued Statement No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity" (SFAS 150). SFAS 150 establishes standards for how a company classifies and measures in its statement of financial position certain financial instruments with characteristics of both liabilities and equity. It requires that a company classify a financial instrument that is within its scope as a liability (or an asset in some circumstances) because that financial instrument embodies an obligation of the issuer. SFAS 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first period beginning after June 15, 2003. The provisions of this statement did not have an impact on the Company's statement of financial position. 14ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. GENERALOperations.General
The following discussion should be read in conjunction with the unaudited consolidated financial statements and related notes thereto appearing elsewhere in this document.
THREE MONTHS ENDED SEPTEMBER 30,Three Months Ended March 31, 2004 Compared with Three Months Ended March 31, 2003
COMPARED WITH THREE MONTHS ENDED SEPTEMBER 30, 2002 -- RESULTS OF OPERATIONS— Results of OperationsOur consolidated net loss for the three months ended March 31, 2004 was $10.8 million compared to a net loss of $14.5 million for the same period last year. Net loss applicable to common shareholders for the three months ended March 31, 2004 was $ 11.6 million ($0.25 loss per diluted share) as compared to $14.5 million ($0.32 per diluted share) for the three months ended March 31, 2003. The difference between net loss and net loss applicable to common shares for the three months ended March 31, 2004 is the $0.8 million in accrued dividends and accreted discount costs on the Series B preferred stock.
Revenues.Revenues were
$363.4$454.9 million for the three months endedSeptember 30, 2003March 31, 2004 compared to$387.6$289.1 million for the three months endedSeptember 30, 2002.March 31, 2003. Thedecrease in revenuesincrease was primarily due tolower demanda significant increase in outside sales by the Rail Group. The increase in revenues forHighway Safetythe Construction Products Group is the result of favorable weather conditions andFittings products, reduced productionacquisitions during the later part of 2003. The increased revenue from the Railcar Leasing and Management Services Group is a result of an increase in theStructural Bridge Group, and reduced Hopper Barge volume, offset by increased railcar sales to third parties and leasing revenues due to the growthsize of thelease fleet.fleet as well as an increase in utilization.The following table reconciles the revenue amounts discussed under
each segmentour operating segments with the consolidated total revenues shown in the Selected Financial Data (in millions).
THREE MONTHS ENDED SEPTEMBER 30, 2003 THREE MONTHS ENDED SEPTEMBER 30, 2002 ------------------------------------- ------------------------------------- REVENUES REVENUES ------------------------------------- ------------------------------------- OUTSIDE INTERSEGMENT TOTAL OUTSIDE INTERSEGMENT TOTAL ------- ------------ ------- -------- ------------ -------Trinity Rail Group .............. $ 126.4 $ 63.8 $ 190.2 $ 123.2 $ 34.7 $ 157.9 Construction Products Group ..... 133.3 0.4 133.7 141.4 0.1 141.5 Inland Barge Group .............. 42.5 -- 42.5 47.7 -- 47.7 Industrial Products Group ....... 30.1 1.4 31.5 40.0 1.0 41.0 Trinity Railcar Leasing and Management Services Group ..... 29.9 -- 29.9 28.1 -- 28.1 All Other ....................... 1.2 6.7 7.9 7.2 7.3 14.5 Eliminations & Corporate Items... -- (72.3) (72.3) -- (43.1) (43.1) ------- ------- ------- ------- ------- ------- Consolidated Total .............. $ 363.4 $ -- $ 363.4 $ 387.6 $ -- $ 387.6 ======= ======= ======= ======= ======= =======
Three Months Ended March 31, 2004 Three Months Ended March 31, 2003 Revenues Revenues Outside Intersegment Total Outside Intersegment Total Rail Group $ 225.2 $ 35.7 $ 260.9 $ 84.0 $ 65.1 $ 149.1 Construction Products Group 120.0 0.1 120.1 103.4 0.1 103.5 Inland Barge Group 43.3 — 43.3 44.1 — 44.1 Industrial Products Group 30.4 1.4 31.8 27.7 0.8 28.5 Railcar Leasing and Management Services Group 35.1 — 35.1 28.5 — 28.5 All Other 0.9 6.7 7.6 1.4 5.9 7.3 Eliminations — (43.9 ) (43.9 ) — (71.9 ) (71.9 )
Consolidated Total $ 454.9 $ — $ 454.9 $ 289.1 $ — $ 289.1
Operating
profitProfit (Loss)
Three Months Ended March 31, 2004 2003 (in millions) Rail Group $ (3.6 ) $ (10.3 ) Construction Products Group 2.0 3.1 Inland Barge Group (5.7 ) (0.8 ) Industrial Products Group 0.8 — Railcar Leasing and Management Services Group 9.6 8.6 All Other 1.3 (0.9 ) Corporate (7.6 ) (7.2 ) Eliminations (3.3 ) (3.9 )
Consolidated Total $ (6.5 ) $ (11.4 )
Operating loss decreased
$3.6$4.9 million to $6.5 million for the three months ended March 31, 2004 compared to $11.4 million for the same period in 2003. This improvement is primarily the result of improved efficiencies due to increased volumes and an increase in our leasing fleet size and utilization, partially offset by losses on sales contracts resulting from increases in the price of steel and other raw materials with steel content.Other Income and Expenses.Other income and expense included interest income, interest expense and other, net. Interest
14
expense increased $0.6 million to $10.1 million for the three months ended
September 30, 2003March 31, 2004 compared to$13.7$9.5 million for the same period in2002. The decline in operating profit was due to reduced volumes and competitive pricing pressures offset by improved efficiencies from2003, an increase of 6.3%. The increase was primarily attributable to the write-off of deferred loans fees of $1.2 million inrailcar sales and lease operations. Duringconnection with early retirement of theyear ended December 31, 2002, the Company signedterm loan in March of 2004.Other, net was a
managed services contract to implement a new financial system and to outsource certain accounting and processing activities. While expected to produce overall savings in future years, this project is expected to result in incremental selling, engineering, and administrative costs in 2003loss ofapproximately $9.6$0.1 millionor $0.15 cents per share. During the quarter ended September 30, 2003 these incremental costs were approximately $2.8 million or $0.04 per share. Interestof expensedecreased $0.7 million to $8.4 millionfor the three months endedSeptember 30, 2003 compared to $9.1 million for the same period in 2002, a decrease of 7.7%. The decrease was primarily attributable to replacing higher cost term commitment debt with lower cost warehouse debt offset by higher average debt levels. Other, net was $0.2 million of income for the three months ended September 30, 2003March 31, 2004 compared to income of$3.4$0.8 million for the comparable period in2002.2003. The decrease was primarily due to a smaller amount of gains onsalesales of property, plant, and equipment and an increase in foreign currency losses in2003.2004.Income Taxes.The current year effective tax rate of
30.2%34.75% was less than the statutory rate of 35% due tothe absence ofhigher foreign income which is at lower effective taxbenefits on certain foreign losses. Net income forrates.Rail Group
Three Months Ended March 31, 2004 2003 (in millions) Revenues: North American Rail $ 172.7 $ 98.1 Europe Rail 55.8 29.5 Components 32.4 21.5
Total revenues $ 260.9 $ 149.1 Operating loss $ (3.6 ) $ (10.3 ) Operating loss margin (1.4 )% (6.9 )% Railcars shipped in North America increased 64.0% to approximately 2,800 cars during the three months ended
September 30, 2003 was $1.8 millionMarch 31, 2004 compared tonet income of $6.2 million forthe same period in2002. Net income applicable to common shares for the three months ended September 30,2003,was $1.0 million or $0.02 per diluted share compared to $6.2 million or $0.14 per diluted share, for the same periodresulting in2002. The difference between net income and net income applicable to common shares for the three months ended September 30, 2003 is the $0.8 million in accrued dividends and accreted offering costs on the Series B preferred stock. 15TRINITY RAIL GROUP
THREE MONTHS ENDED SEPTEMBER 30, ------------------- 2003 2002 -------- -------- (IN MILLIONS)Revenues............................................ $ 190.2 $ 157.9 Operating profit (loss)............................. $ 2.9 $ (6.1) Operating profit (loss) margin...................... 1.5% (3.9)%Revenuesa revenue increase for the North American operationswere $156.6of 76.0% over the same period last year. As of March 31, 2004, the North American backlog increased 109% to approximately 17,200 cars compared to the same period last year.Railcars shipped in Europe increased 65.7% to approximately 800 cars during the three months ended March 31, 2004 compared to the same period last year, while revenues for the European operations increased 89.2% over the same period in 2003. As of March 31, 2004, the European backlog was approximately 2,000 cars compared to 2,400 in the same period last year.
The operating loss for the Rail Group decreased $6.7 million to $3.6 million for the three months ended
September 30, 2003, a 40.7% increase overMarch 31, 2004 compared to the same period last year.Railcars shipped in North AmericaWhile increased88.7% to approximately 2,200 carsvolumes improved manufacturing efficiencies, operating profit was adversely affected by the mix of orders which were completed during thethree monthsquarter, start-up costs related to reopening manufacturing facilities, and increased steel and component costs. During the quarter endedSeptember 30, 2003 comparedMarch 31, 2004, the Rail Group recorded a loss provision of $2.7 million related tothe same period in 2002. The increase in revenues was due to an increase in cars sold as well as an increase in the components business, offset by a change in product mix for the railcars. Revenues for the European operations were $33.6 million for the three months ended September 30, 2003, a 27.9% decrease from the same period last year. Railcars shipped in Europe decreased 8.5% to approximately 510 carssteel and component cost increases on certain contracts which will be completed during thethree months ended September 30, 2003 compared to the same period in 2002. The decrease in revenues is primarily related to the closureremainder ofplants during 2002. The operating profit for the Trinity Rail Group increased $9.0 million to $2.9 million for the three months ended September 30, 2003 compared the same period last year. The operating margin improved primarily due to improved efficiencies from increased volumes in North America.2004.In the three months ended
September 30, 2003March 31, 2004 railcar sales to Trinity Industries Leasing Company included in the Rail Group results were$63.6$34.2 million compared to$31.0$64.3 million in the comparable period in20022003 with profit of$4.9$3.3 million compared to$2.5$3.9 million for the same period in2002.2003. Sales to Trinity Industries Leasing Company and related profits are eliminated in consolidation.CONSTRUCTION PRODUCTS GROUP
THREE MONTHS ENDED SEPTEMBER 30, ------------------ 2003 2002 ------- ------- (IN MILLIONS)Revenues............................................. $ 133.7 $ 141.5 Operating profit..................................... $ 11.4 $ 17.2 Operating profit margin.............................. 8.5% 12.2%Construction Products Group
Three Months Ended March 31, 2004 2003 (in millions) Revenues $ 120.1 $ 103.5 Operating profit $ 2.0 $ 3.1 Operating profit margin 1.7 % 3.0 % Revenues
declined 5.5%increased 16% for the three months endedSeptember 30, 2003March 31, 2004 compared to the same period in2002.2003. Thedecreaseincrease in revenues was primarily attributable toa lower demandan increase in the Highway Safety business andFittings products along with reduced productionthe Concrete and Aggregate business. The Highway Safety business has increased due to favorable weather conditions and an improvement in the market demand for15
our products. The Concrete and Aggregate business has increased due to acquisitions in the later part of 2003 and early 2004. Operating profit percentage for the quarter decreased over the same period last year as a result of the steel price increases in the Structural Bridge
group, partially offset by improvements in the Concrete and Aggregates group due to strong demand and good weather. Operating profit margin decreased as a resultportion ofreduced volumethis segment and competitive pricingpressures. 16INLAND BARGE GROUPpressure in certain markets of our Concrete and Aggregate business as well as the impact of year over year unfavorable weather.
THREE MONTHS ENDED SEPTEMBER 30, ------------------ 2003 2002 ------- ------- (IN MILLIONS)Revenues............................................. $ 42.5 $ 47.7 Operating profit..................................... $ 0.3 $ 1.3 Operating profit margin.............................. 0.7% 2.7%Inland Barge Group
Three Months Ended March 31, 2004 2003 (in millions) Revenues $ 43.3 $ 44.1 Operating loss $ (5.7 ) $ (0.8 ) Operating loss margin (13.2 )% (1.8 )% Revenues decreased
10.9%$0.8 million for the three months endedSeptember 30, 2003March 31, 2004 compared to the same period in2002.2003. This was primarily due to a decrease inhoppertank bargevolume.volume, offset by an increase in deck and specialty barge sales. Operatingprofitloss for the current quarter was$0.3$5.7 million,a decreasean increase of$1.0$4.9 million compared to theprior year's quarter.same period last year. This was primarily due to a $4.6 million loss related to steel price increases on contracts that will be completed during thereduction in hopper barge volumeremainder of 2004 and increased barge litigation costs. Barge litigation costs were$1.1$1.0 and$0.7$0.6 million for the three months endedSeptember 30,March 31, 2004 and 2003,and 2002,respectively.INDUSTRIAL PRODUCTS GROUP
THREE MONTHS ENDED SEPTEMBER 30, ------------------ 2003 2002 ------- ------- (IN MILLIONS)Revenues............................................. $ 31.5 $ 41.0 Operating profit..................................... $ 2.7 $ 3.0 Operating profit margin.............................. 8.6% 7.3%Industrial Products Group
Three Months Ended March 31, 2004 2003 (in millions) Revenues $ 31.8 $ 28.5 Operating profit $ 0.8 $ — Operating profit margin 2.5 % — % Revenues
declined 23.2%increased 11.6% for the three months endedSeptember 30, 2003March 31, 2004 compared to the same period in2002. The decline in revenues2003. This increase of $3.3 million wasprimarilydue toa decline in LPG relatedincreased sales inMexicodomestic tanks in the U.S. and an increase in the sale ofa specialtyheadsproduct line in the United States during 2002. Additionally, operating profit was adversely impactedused for tank car production and other railcar equipment, offset bya decline in LPG relatedlower sales in Mexico.TRINITY RAILCAR LEASING AND MANAGEMENT SERVICES GROUP
THREE MONTHS ENDED SEPTEMBER 30, ------------------ 2003 2002 ------- ------- (IN MILLIONS)Revenues....................................... $ 29.9 $ 28.1 Operating profit............................... $ 9.3 $ 7.2 Operating profit margin........................ 31.1% 25.6% Fleet utilization ............................. 96.8% 95.2%Revenues increased $1.8 million to $29.9 million inThe operating profit margin for the currentquarter.quarter is higher than the same quarter last year due to improved efficiencies based on increased volume and increased sales of tank car heads and other railcar equipment.Railcar Leasing and Management Services Group
Three Months Ended March 31, 2004 2003 (in millions) Revenues: Leasing and management $ 34.6 $ 27.7 Lease fleet sales 0.5 0.8
Total revenues $ 35.1 $ 28.5 Operating Profit: Leasing and management $ 9.4 $ 8.4 Lease fleet sales 0.2 0.2
Total operating profit. $ 9.6 $ 8.6 Operating profit margin 27.4 % 30.2 % Fleet utilization 98.3 % 94.0 % Total revenues increased $6.6 million for the three months ended March 31, 2004 compared to the same period last year. This increase
was primarilyof 23.2% is due to both an increase in rental revenuesfromdue to additions to the leasefleet. Revenues from the sale of railcars from the leasefleetwere $0.5as well as improved fleet utilization. Operating profit increased to $9.6 millioninfor the three months endedSeptember 30, 2003 and $0.4March 31, 2004 compared to $8.6 millioninfor16
the same period in
2002. Operating2003. The increase in operating profitincreased $2.1 million to $9.3 million in the current quarter. This increaseisprimarilydue toan increase inthe increased size of the rental fleet, improved utilization,as well as a decreaseoffset by an increase inlost revenues duelease expense associated with the leveraged lease financing.As of March 31, 2004, the Leasing and Management Services Group’s rental fleet of approximately 19,100 owned or leased railcars has an average age of 5.3 years and an average remaining lease term of 6.26 years.
All Other
Revenues in All Other increased to
maintenance related downtime. Operating profit on the sale of railcars from the lease fleet, including recognition of deferred manufacturing profit, was $0.2$7.6 million for the three months endedSeptember 30, 2003 and $0.1 million for the same periodMarch 31, 2004. This increase was primarily attributable to an increase in2002. ALL OTHER Revenues in All Other decreased primarily due to a decline in the structural tower business.intersegment sales by our transportation company. Operatinglossprofit was$2.0$1.3 million for the three months endedSeptember 30, 2003 and $1.1March 31, 2004 compared to an operating loss of $0.9 million in the same period in2002.2003.Liquidity and Capital Resources
2004 Financing Activity
In March 2004, we issued, through a private offering, $300 million aggregate principal amount 6 1/2% senior notes (Senior Notes) due 2014. Interest on the Senior Notes is payable semiannually commencing September 15, 2004. The
increaseSenior Notes rank equally with all of our existing and future senior debt and are subordinated to all our existing and future secured debt to the extent of the value of the assets securing such debt. We may redeem some or all of the Senior Notes at any time on or after March 15, 2009 at a redemption price of 103.25% in 2009, 102.167% in 2010, 101.083% in 2011 and 100.0% in 2012 and thereafter plus accrued interest. We may also redeem up to 35% of theoperating loss is primarily dueaggregate principal amount of the Senior Notes using the proceeds from certain public equity offerings completed on or before March 15, 2007 at a redemption price of 106.5% of the principal amount plus accrued and unpaid interest. The Senior Notes could restrict our ability tocosts associated with non-operating plants. 17NINE MONTHS ENDED SEPTEMBER 30, 2003 COMPARED WITH NINE MONTHS ENDED SEPTEMBER 30, 2002 - RESULTS OF OPERATIONS Revenues decreased $119.6incur additional debt, make certain distributions, investments and other restricted payments, sell assets, create certain liens and merge, consolidate or sell substantially all of our assets. We applied approximately $163 million of the net proceeds of the offering to$1,018.3 million for the nine months ended September 30, 2003 compared to $1,137.9 million for the nine months ended September 30, 2002. The decrease in revenues was due to a reduction in demand for hopper barges, Highway Safety products and certain LPG markets in Mexico as well as a reduction in rail car sales to third parties, offset by an increase in railcar sales from the lease fleet and increased leasing revenues due to growth in the lease fleet. The following table reconciles the revenue amounts discussedrepay all indebtedness undereach segmentits existing bank credit facility.In connection with the
consolidated total revenues shown inissuance of our Senior Notes, we extended its secured credit agreement to provide for a three-year, $250 million revolving credit facility and repaid theSelected Financial Data (in millions).
NINE MONTHS ENDED SEPTEMBER 30, 2003 NINE MONTHS ENDED SEPTEMBER 30, 2002 ------------------------------------ ------------------------------------ REVENUES REVENUES ------------------------------------ ------------------------------------ OUTSIDE INTERSEGMENT TOTAL OUTSIDE INTERSEGMENT TOTAL --------- ------------ --------- --------- ------------ ---------Trinity Rail Group............... $ 317.2 $ 176.8 $ 494.0 $ 374.9 $ 93.5 $ 468.4 Construction Products Group...... 368.9 0.6 369.5 400.0 0.8 400.8 Inland Barge Group............... 129.8 -- 129.8 166.8 -- 166.8 Industrial Products Group........ 85.5 3.0 88.5 103.1 2.1 105.2 Trinity Railcar Leasing and Management Services Group........ 112.7 -- 112.7 81.7 -- 81.7 All Other........................ 4.2 18.7 22.9 11.4 20.5 31.9 Eliminations & Corporate Items... -- (199.1) (199.1) -- (116.9) (116.9) --------- -------- --------- --------- -------- --------- Consolidated Total............... $ 1,018.3 $ -- $ 1,018.3 $ 1,137.9 $ -- $ 1,137.9 ========= ======== ========= ========= ======== =========Operating profit was $9.1 million forexisting term loan facility. Amounts borrowed under thenine months ended September 30, 2003 and $12.7 million for the same period in 2002. For the nine months ended September 30, 2003 compared to the same period in 2002, operating profit was impacted by the decrease in revenues as described above for the period, competitive pricing pressures, the implementation of a new financial system, and the impact of under-absorbed overhead costs. During the year ended December 31, 2002, the Company signed a managed services contract to implement a new financial system and to outsource certain accounting and processing activities. During the nine month period ended September 30, 2003 these incremental costs were approximately $8.0 million or $0.12 per share. Interest expense decreased $0.1 million to $26.3 million for the nine months ended September 30, 2003 compared to $26.4 million for the same period in 2002. This decrease was due to higher average debt levels and higher interest ratesrevolving credit facility duringthe nine-month period, offset by the charge of $1.3 million to write off debt issuance costs in the prior year. Other, net was income of $3.6 million for the nine months ended September 30, 2003 compared to income of $2.0 million for the comparable period in 2002. The income in 2003 was primarily due to a larger amount of gains on sale of property, plant, and equipment and smaller foreign currency losses in 2003. The current year effective tax rate of 30.2% was less than the statutory rate of 35% due to the absence of tax benefits on certain foreign losses. Net loss for the nine months ended September 30, 2003 was $9.2 million compared to a net loss of $8.1 million for the same period in 2002. Net loss applicable to common shares for the nine months ended September 30, 2003 was $10.0 million or $0.22 per diluted share compared to $8.1 million or $0.18 per diluted share, for the same period in 2002. The difference between net loss and net loss applicable to common shares for the nine months ended September 30, 2003 is the $0.8 million in accrued dividends and accreted offering costs on the Series B preferred stock. 18TRINITY RAIL GROUP
NINE MONTHS ENDED SEPTEMBER 30, ------------------ 2003 2002 ------ ------- (IN MILLIONS)Revenues............................................ $ 494.0 $ 468.4 Operating loss...................................... $ (13.5) $ (31.1) Operating loss margin............................... (2.7)% (6.6)%Revenues for the North American operations were $389.7 million for the nine months ended September 30, 2003, a 12.6% increase over the same period last year. Railcars shipped in North America increased 60.4% to approximately 5,400 cars during the nine months ended September 30, 2003 compared to the same period in 2002. The increase in revenues was due to an increase in cars sold as well as an increase in the components business, offset by a change in product mix and fewer high-revenue specialty cars in early 2003. Revenues for the European operations were $104.3 million for the nine months ended September 30, 2003, a 14.8% decrease from the same period last year. Railcars shipped in Europe remained constant at approximately 1,600 cars during the nine months ended September 30, 2003 and 2002. The decrease in revenues is primarily related to the closure of plants during 2002. The operating loss for the Trinity Rail Group decreased $17.6 million to a loss of $13.5 million for the nine months ended September 30, 2003 compared to the same period last year. The operating margins for all of Trinity Rail Group improved primarily due to improved efficiencies from increased volumes in North America. As of September 30, 2003, overall backlog increased 95% to approximately 13,500 cars from the same period last year. The North American backlog increased 139% to approximately 11,500 cars and European backlog decreased 5% to approximately 2,000 cars from the same period in 2002. In the nine months ended September 30, 2003 railcar sales to Trinity Industries Leasing Company included in the Rail Group results were $173.8 million compared to $88.4 million in the comparable period in 2002 with profit of $12.5 million compared to $4.8 million for the same period in 2002. Sales to Trinity Industries Leasing Company and related profits are eliminated in consolidation. CONSTRUCTION PRODUCTS GROUP
NINE MONTHS ENDED SEPTEMBER 30, ------------------ 2003 2002 ------ ------- (IN MILLIONS)Revenues............................................. $ 369.5 $ 400.8 Operating profit..................................... $ 29.8 $ 41.9 Operating profit margin.............................. 8.1% 10.5%Revenues declined 7.8% for the nine months ended September 30, 2003 compared to the same period in 2002. The decrease in revenues was primarily attributable to exiting certain non-core product lines sincethe first quarter of2002, lower demand in Highway Safety products, reduced production in2004 bear interest at LIBOR plus 1.75%. Amounts borrowed under theStructural Bridge group,revolving credit facility for periods after the first quarter of 2004 will bear interest at LIBOR plus a margin based upon financial performance. Our accounts receivable andreduced volume and competitive pricing pressures ininventory secure thefittingsagreement. The agreement limits the amount of capital expenditures related to our leasing business,partially offset by an increase in production in the Concrete and Aggregate group duerequires maintenance of ratios related togood weather and strong demand. Operating profit margin decreased as a result of reduced volume and competitive pricing pressures. 19INLAND BARGE GROUP
NINE MONTHS ENDED SEPTEMBER 30, ------------------ 2003 2002 ------ ------- (IN MILLIONS)Revenues.............................................. $ 129.8 $ 166.8 Operating profit...................................... $ 0.5 $ 4.3 Operating profit margin............................... 0.4% 2.6%Revenues decreased 22.2%interest coverage for thenineleasing and manufacturing operations, leverage, asset coverage and minimum net worth, and restricts the amount of dividend payments based upon our current credit rating not to exceed $25 million annually. At March 31, 2004, there were no borrowings under the revolving credit facility.Cash Flows
Operating Activities.Net cash required by operating activities for the three months ended
September 30, 2003March 31, 2004 was $71.7 million compared tothe same period in 2002. This was primarily due to a decrease in hopper barge volume as a result of the downturn in the hopper barge market. Operating profit decreased $3.8$87.6 millionto $0.5 million for the current nine-month period. This change was primarily due to the decline in the hopper barge volumes and increased barge litigation costs. Barge litigation costs were $2.5 and $1.9 million for the nine months ended September 30, 2003 and 2002, respectively. INDUSTRIAL PRODUCTS GROUP
NINE MONTHS ENDED SEPTEMBER 30, ------------------ 2003 2002 ------ ------- (IN MILLIONS)Revenues............................................. $ 88.5 $ 105.2 Operating profit..................................... $ 4.3 $ 2.3 Operating profit margin.............................. 4.9% 2.2%Revenues declined 15.9% for the nine months ended September 30, 2003 compared to the same period in 2002. The decline in revenues was primarily due to the sale of a specialty heads product line in the United States during 2002 and a decline in LPG related sales. Overall, the increase in operating profit was primarily due to the establishment of a $2.2 million allowance for bad debt in the prior year as well as an improvement in margins in the US LPG business, partially offset by a decline in LPG related sales in Mexico. TRINITY RAILCAR LEASING AND MANAGEMENT SERVICES GROUP
NINE MONTHS ENDED SEPTEMBER 30, ------------------ 2003 2002 ------ ------- (IN MILLIONS)Revenues............................................. $ 112.7 $ 81.7 Operating profit..................................... $ 30.5 $ 21.4 Operating profit margin.............................. 27.1% 26.2% Fleet utilization ................................... 96.8% 95.2%Revenues increased $31.0 million to $112.7 million for the nine-month period ended September 30, 2003. This increase was primarily due to railcar sales and an increase in rental revenues due to growth in the lease fleet. Included in the results of this group are revenues from the sale of railcars from the lease fleet of $26.7 million in the nine months ended September 30, 2003 and $1.7 million in the same period in 2002. Operating profit increased $9.1 million to $30.5 million in the current nine-month period. This increase is primarily due to an increase in the size of the rental fleet, improved utilization, as well as a decrease in lost revenues due to maintenance related downtime. Operating profits on the sale of railcars from the lease fleet, including recognition of deferred manufacturing profit, were $3.4 million for the nine months ended September 30, 2003 and $0.3 million for the same period in 2002. ALL OTHER Revenues in All Other decreased primarily due to a decline in the structural tower business. Operating loss remained constant at $5.0 million for the nine months ended September 30, 2003 and 2002. The decrease in the operating loss was primarily due to the sale of inventory in the structural tower business offset by costs associated with the non-operating plants. 20LIQUIDITY AND CAPITAL RESOURCES Netnet cash provided by operating activities for theninesame period in 2003. This was partially due to an increase in working capital related to increased volumes in the Rail Group. In addition, a tax refund of $47.6 million was collected in the three months endedSeptember 30, 2003 increased to $68.1March 31, 2003. The increase in working capital needs is reflective of the gradual upturn in the businesses.Investing Activities.Net cash required by investing activities for the three months ended March 31, 2004 was $39.9 million compared to
$58.1$65.9 million for the same periodin 2002. This was due to the collection of a $48.5 million tax refund, an increase in accounts payable and accrued liabilities of $21.2 million offset by an increase in inventory and accounts receivable of $55.4 million, a decrease in other liabilities of $12.1 million and a net loss in the current period.last year. Capital expenditures for theninethree months endedSeptember 30, 2003March 31, 2004 were$205.2$36.8 million, of which$188.5$31.8 million were for additions to the lease subsidiary. This compares to$123.2$68.4 million of capital expenditures for the same period last year, of which$97.7$65.5 million was for additions to the lease subsidiary. Proceeds from the sale of property, plant and equipment were$33.6$4.1 million for theninethree months endedSeptember 30, 2003March 31, 2004 composed primarily ofthe sale of railcarsrailcar sales from the lease fleet andotherthe sale of non-operating assets, compared to$13.9$2.5 million for the same period in2002.2003 composed primarily of railcar sales from the lease fleet. InJune 2002 TILC,addition, $15.7 million of cash was required for an acquisition by our Construction Products Group and $8.5 million of cash was provided by the sale of the Leasing’s Group equity ownership in a trust.Financing Activities.Net cash provided by financing activities during the three months ended March 31, 2004 was $216.9
17
million compared to $4.5 million for the same period in 2003. During the first quarter of 2004, we issued, through a
newly formed, wholly owned business trust, entered into a $200 million non-recourse warehouse facility to finance railcars owned by TILC. Specific railcars and the underlying leases secure the facility. Advances under the facility may not exceed 75% of the fair market value of the eligible railcars securing the facility as defined by the agreement. Advances under the facility bear interest at LIBOR plus 1.375% (2.495% at September 30, 2003). In August 2003, TILC expanded this facility toprivate offering, $300 millionand extended the term through August 2004. At September 30, 2003, $80.6 million was available under this facility. The Company is currently in discussions with long-term lenders to provide permanent financing for theaggregate principal amountcurrently outstanding under the facility, which is expected to be completed during the fourth quarter of 2003. In June 2002, the Company completed a secured credit agreement for $425 million. The agreement includes a $275 million 3-year revolving commitment and a $150 million 5-year term commitment. The agreement calls for quarterly payments of principal on the term debt in the amount of $375 thousand beginning September 30, 2002 through June 30, 2006 and quarterly payments of $36.0 million beginning on September 30, 2006 through the maturity date. Amounts borrowed under the revolving commitment bear interest at LIBOR plus 2.25% or Prime rate plus 0.25% (4.25% at September 30, 2003)6 ½% senior notes due 2014 (Senior Notes).Amounts borrowed under the term commitment bear interest at LIBOR plus 3.25% (4.45% at September 30, 2003). The Company's accounts receivable and inventory and a portion of its property, plant and equipment secure the entire agreement. During September 2003, the Company modified the terms of these debt covenants to separate the Company's leasing and manufacturing operations and paid off $25.0We applied approximately $163 million of the5-year term commitment. The agreement limits the amount of capital expenditures related to the Company's leasing business, requires maintenance of ratios related to interest coverage for both the leasing and manufacturing operations, leverage, asset coverage and minimumnetworth, and restricts the amount of dividend payments. At September 30, 2003, $143.1 million was borrowed under this agreement. At September 30, 2003, the most restrictiveproceeds of thedebt covenants based on trailing twelve month calculations as defined by the debt agreements allow approximately $65.4 million additional principaloffering to repay all indebtedness under our existing credit facility.Contractual Obligation and
approximately $6.8 million and $9.0 million additional annual interest expense for leasing and manufacturing operations, respectively. In June 2003 the Company issued 600 shares of Series B Redeemable Convertible Preferred Stock. Each share of Series B preferred stock has an initial liquidation value of $100,000 per share. The liquidation value, plus accrued but unpaid dividends, is payable on June 25, 2008, the mandatory redemption date, at our option in cash or in shares of common stock valued at 90% of the then current market price of our common stock. Each share of Series B preferred stock may be converted at any time at the option of the holder into shares of our common stock, based on the initial conversion price of $22.46 per share, which is equivalent to 4,452 shares of common stock for each $100,000 initial liquidation preference. Holders of the Series B preferred stock are entitled to receive dividends payable semi-annually, on July 1 and January 1 of each year, beginning January 1, 2004 at an annual rate of 4.5% of the liquidation preference. The Company may, at our option, pay dividends either in cash or in shares of our common stock at the then current market price. The holders of shares of Series B preferred stock are entitled to vote with the holders of the common stock on an as-if converted basis on all matters brought before the stockholders. The Company expects to finance future operating requirements with cash flows from operations and, depending on market conditions, debt and/or privately or publicly placed equity. CONTRACTUAL OBLIGATION AND COMMERCIAL COMMITMENTSCommercial CommitmentsAs of
September 30, 2003March 31, 2004 other commercial commitments related to letters of credit havedecreasedincreased to$99.8$118.2 million from$110.2$116.4 million as of December 31,2002.2003. Refer to Note 6 in the financial statements for changes to our outstanding debt and maturities. Other commercial commitments that relate to operating leases under sales/leaseback transactions were basically unchanged.21RECENT PRONOUNCEMENTS During January 2003, the FASB issued Interpretation No. 46 "Consolidation of Variable Interest Entities (FIN 46). The consolidation requirements of FIN 46 apply immediately to variable interest entities created after January 31, 2003 and apply to existing variable interest entities in the first fiscal year or interim periods beginning after June 15, 2003. In October 2003, the FASB agreed to a broad-based deferral of the effective date for public companies until the end of periods ending after December 15, 2003. Until now, one company generally has included another entity in its consolidated financial statements only if it controlled the entity through voting interests. FIN 46 requires a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity's activities or entitled to receive a majority of the entity's residual returns or both. A company that consolidates a variable interest entity is called the primary beneficiary of that entity. Certain of the disclosure requirements apply in all financial statements issued after January 31, 2003, regardless of when the variable interest entity was established. The Company has no variable interest entities in which it is the primary beneficiary. In May 2003, the FASB issued Statement No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity" (SFAS 150). SFAS 150 establishes standards for how a company classifies and measures in its statement of financial position certain financial instruments with characteristics of both liabilities and equity. It requires that a company classify a financial instrument that is within its scope as a liability (or an asset in some circumstances) because that financial instrument embodies an obligation of the issuer. SFAS 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first period beginning after June 15, 2003. The provisions of this statement did not have an impact on the Company's statement of financial position. FORWARD-LOOKING STATEMENTS.Forward-Looking Statements.This quarterly report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements contained herein that are not historical facts are forward-looking statements and involve risks and uncertainties. These forward-looking statements include expectations, beliefs, plans, objectives, future financial performance, estimates, projections, goals and forecasts. Potential factors, which could cause our actual results of operations to differ materially from those in the forward-looking statements, include among others:
- -market conditions and demand for our products;- -the cyclical nature of both the railcar and barge industries;- -variations in weather in areas where construction products are sold and used;- -the timing of introduction of new products;- -the timing of customer orders;- -price changes;- -changes in mix of products sold;- -the extent of utilization of manufacturing capacity;- -availability and costs of component parts, supplies, and raw materials;- -competition and other competitive factors;- -changing technologies;- -steel prices;- -surcharges added to fixed pricing agreements for raw materials;interest rates and capital costs;- -long-term funding of our leasing warehouse facility;- -taxes;- -the stability of the governments and political and business conditions in certain foreign countries, particularly Mexico and Romania;- -changes in import and export quotas and regulations;- -business conditions in emerging economies;- -results of litigation; and- -legal, regulatory, and environmental issues.Any forward-looking statement speaks only as of the date on which such statement is made. Trinity undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made.
ITEMItem 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKQuantitative and Qualitative Disclosures about Market RiskThere has been no material change in our market risks since December 31,
2002. 22ITEM2003.Item 4.
CONTROLS AND PROCEDURES DISCLOSURE CONTROLS AND PROCEDURESControls and ProceduresDisclosure Controls and Procedures
The Company maintains controls and procedures designed to ensure that it is able to collect the information it is required to disclose in the reports it files with the SEC, and to process, summarize, and disclose this information within the time periods specified in the rules of the SEC. The
Company'sCompany’s Chief Executive and Chief Financial Officers are responsible for establishing18
and maintaining these procedures and, as required by the rules of the SEC, evaluate their effectiveness. Based on their evaluation of the
Company'sCompany’s disclosure controls and procedures which took place as of the end of the period covered by this report, the Chief Executive and Chief Financial Officers believe that these procedures are effective to ensure that the Company is able to collect, process, and disclose the information it is required to disclose in the reports it files with the SEC within the required time periods.INTERNAL CONTROLSInternal Controls
The Company maintains a system of internal controls designed to provide reasonable assurance that: transactions are executed in accordance with
management'smanagement’s general or specific authorization; transactions are recorded as necessary (1) to permit preparation of financial statements in conformity with generally accepted accounting principles, and (2) to maintain accountability for assets; access to assets is permitted only in accordance withmanagement'smanagement’s general or specific authorization; and the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.Since the date of the most recent evaluation of the
Company'sCompany’s internal controls by the Chief Executive and Chief Financial Officers, there have been no significant changes in such controls or in other factors that could have significantly affected those controls, including any corrective actions with regard to significant deficiencies and material weaknesses.PART II
ITEMItem 1.
LEGAL PROCEEDINGS TheLegal ProceedingsOn March 15, 2004, the Company and its wholly owned subsidiary, Trinity Marine Products, Inc.
("TMP"(“TMP”), settled its claims in a case filed by Florida Marine Transporters, Inc. (“FMT”) related to twenty-eight tank barges owned and/or operated by FMT. The settlement involves, among other elements, a joint monitoring of the barge coatings and void compartment maintenance procedures, and a mutual release of all claims against one another.The Company and TMP, and certain material suppliers and others,
have beenare named as co-defendants insixfour separate lawsuits filed byFlorida Marine Transporters, Inc. ("FMT") on May 15, 2002,J. Russell Flowers, Inc.("Flowers"(“Flowers”) on October 7,2002, ACF Barge Acceptance I, LLC ("ACF") on December 4,2002, Marquette Transportation Company and Iowa Fleeting Services, Inc.("Marquette"(“Marquette”) on March 7, 2003, Waxler Transportation Company, Inc.("Waxler"(“Waxler”) on April 7, 2003 and LeBeouf Bros. Towing("LeBeouf"(“LeBeouf”) on July 3, 2003. TheFMT,MarquetteWaxler,andLeBeoufWaxler cases are pending in the 25th Judicial District Court in Plaquemines Parish, Louisiana, and the Flowers case is pending in the U.S. District Court, Northern District of Mississippi in Greenville,Mississippi. On October 8, 2003, oneMississippi, and the LeBeouf case is pending in the U.S. District Court for the Eastern District ofthe six cases was dismissed as a result of a settlement between the Company and TMP and ACF. The settlement involved the purchase of eleven barges which are leased to a barge operator under long-term lease agreements. The Company's Leasing subsidiary purchased the barges for $ 19.1 million and succeeded ACF as lessor. The estimated fair value of the operating leases and residual value of the barges approximated the purchase price.Louisiana. In the Waxler case, the plaintiff has petitioned the court for certification of a class which if certified by the courts, couldpotentiallyincrease the total number of barges involved in the litigation. Absent certification of a class in the Waxler case,these remaining five separatethe Waxler and LeBeouf suits currently involve3730 tank barges sold at an approximate average price of $1.4 million and the Marquette and Flowers suits involve 140 hopper barges sold at an approximate average price of $280,000. Each of the four cases set forth allegations pertaining to damages arising from alleged defects in coating materials supplied by a co-defendant and coatings application workmanship by TMP. The plaintiffs seek both compensatory and punitive damages and/or recision of the barge purchase contracts. Independent experts investigating the claims on behalf of the Company and TMP have expressed the opinion that technical arguments presented by the plaintiffs in the litigation are without merit. As ofSeptember 30, 2003, twoMarch 31, 2004, one of thefivefour plaintiffsoweowes TMP approximately$11.4$8.7 millionof which $7.9 million is past due,related to contracts for barges not involved in the litigation. TMP has filed suit for collection of the past due amounts.In a proceeding unrelated to the foregoing litigation, the Company and TMP filed a declaratory judgment, an action seeking declaration by the Court, of the Company’s and TMP’s (i) obligations related to allegations of certain barge owners as to exterior coatings and coatings application on 65 tank barges and (ii) rights and remedies relative to an insurance policy in which TMP was named as an additional insured and which was applicable to the coatings on the 65 barges. On December 9, 2003, the barge owners filed a response proceeding to the declaratory judgment claiming actual damages of $6.5 million and punitive damages of $10 million.
A subsidiary of the Company, Transit Mix Concrete and Materials Company, Inc.
("Transit Mix"), was named as a defendant in a case involving the death of an employee of an independent contractorwho diedfollowing an accident that occurred while the decedent was working at a Company owned facility. Following a jury verdict in the favor of the plaintiff, the presiding judge entered a final judgment in the amount of $33.9 million (inclusive of fees, costs, and judgment interest). This case has been appealed by Transit Mix and its insurers. Management believes liability in this case, if any, exceeding $3.0 million, will be covered by insurance.As previously reported, a wholly owned subsidiary of the Company, Trinity Marine Baton Rouge, Inc. ("TMBR") was named in a two-count felony indictment charging TMBR with transporting hazardous waste without a proper manifest to a non-permitted facility 23in violation of the Resource Conservation and Recovery Act. Following four (4) years of investigation, on September 17, 2003 the United States government voluntarily dismissed all charges against TMBR and no further enforcement will take place in this matter.19
The Company is also involved in other claims and lawsuits incidental to its business. Based on information currently available, it is
management'smanagement’s opinion that the ultimate outcome of all current litigation and other claims, including settlements, in the aggregate will not have a material adverse effect on theCompany'sCompany’s overall financial condition for purposes of financial reporting. However, resolution of certain claims or lawsuits by settlement or otherwise could have a significant impact on the operating results of the reporting period in which such resolution occurs.ITEM20
Item 6.
EXHIBITS AND REPORTS ON FORMExhibits and Reports on Form 8-K.(a) Exhibits.
Exhibit Number Description 10.17.1 First Amendment to the Credit Agreement dated as of October 16, 2002, amending the Credit Agreement dated June 4, 2002, among Trinity Industries, Inc., as Borrower, JPMorgan Chase Bank, individually as a Lender and Issuing Bank and Administrative Agent, and Dresdner Bank AG New York and Grand Cayman Branches and The Royal Bank of Scotland plc., each individually as a Lender and collectively as Syndication Agents, and certain other Lenders party thereto from time to time. 10.17.2 Second Amendment to the Credit Agreement dated as of September 26, 2003, amending the Credit Agreement dated June 4, 2002, among Trinity Industries, Inc., as Borrower, JPMorgan Chase Bank, individually as a Lender and Issuing Bank and Administrative Agent, and Dresdner Bank AG New York and Grand Cayman Branches and The Royal Bank of Scotland plc., each individually as a Lender and collectively as Syndication Agents, and certain other Lenders party thereto from time to time. 10.18.1 Amendment No. 1 to the Warehouse Loan Agreement dated as of June 27, 2003, amending the Warehouse Loan Agreement dated as of June 27, 2002. 10.18.2 Amendment No. 2 to the Warehouse Loan Agreement dated as of July 29, 2003, amending the Warehouse Loan Agreement dated as of June 27, 2002. 10.18.3 Amendment No. 3 to the Warehouse Loan Agreement dated as of August 29, 2003, amending the Warehouse Loan Agreement dated as of June 27, 2002. 31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification by Chief Executive Officer pursuant to 18 U.S.C., Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2
Exhibit Number Description 10.1 Amendment No. 3 to the Supplemental Profit Sharing Plan of Trinity Industries and Certain Affiliates. * 10.2 Amendment No. 3 to the Supplemental Retirement Plan of Trinity Industries and Certain Affiliates. * 10.3 Amendment No. 4 to the Supplemental Retirement Plan of Trinity Industries and Certain Affiliates. * 10.4 Supplemental Retirement and Director Retirement Trust. * 10.5 Amended and Restated Credit Agreement dated as of March 10, 2004 among Trinity Industries, Inc., as Borrower, JP Morgan Chase Bank, individually as a Lender and Issuing Banks and as Administrative Agent, and Dresdner Bank AG, New York and Grand Cayman Branches and The Royal Bank of Scotland plc., each individually as a Lender and collectively as Syndication Agents, and certain other Lenders party thereto from time to time. 10.6 Purchase Agreement dated as of March 5, 2004 by and among Trinity Industries, Inc., certain subsidiary guarantors party thereto and J.P. Morgan Securities Inc., as Representative of the Initial Purchasers. 10.7 Amendment No.1 to Purchase Agreement dated as of March 9, 2004 by and among Trinity Industries, Inc., certain subsidiary guarantors party thereto and J.P. Morgan Securities Inc., as Representative of the Initial Purchasers, amending the Purchase Agreement dated as of March 5, 2004. 10.8 Registration Rights Agreement dated as of March 10, 2004 by and among Trinity Industries, Inc., certain subsidiary guarantors party thereto and J.P. Morgan Securities Inc., as Representative of the Initial Purchasers. 10.9 Indenture dated as of March 10, 2004 by and between Trinity Industries, Inc., certain subsidiary guarantors party thereto and Wells Fargo Bank, National Association, as Trustee. 10.10 Equipment Lease Agreement (TRL III 2003-1A) between TRL III-1A Railcar Statutory Trust, lessor, and Trinity Rail Leasing III L.P., lessee. 10.10.1 Participation Agreement (TRL III 2003-1A) between TRL III-1A among Trinity Rail Leasing III L.P., lessee, et. al. 10.10.2 Equipment Lease Agreement (TRL III 2003-1B) between TRL III-1B Railcar Statutory Trust, lessor, and Trinity Rail Leasing III L.P., lessee. 10.10.3 Participation Agreement (TRL III 2003-1B) between TRL III-1B among Trinity Rail Leasing III L.P., lessee, et. al. 10.10.4 Equipment Lease Agreement (TRL III 2003-1C) between TRL III-1C Railcar Statutory Trust, lessor, and Trinity Rail Leasing III L.P., lessee. 10.10.5 Participation Agreement (TRL III 2003-1C) between TRL III-1C among Trinity Rail Leasing III L.P., lessee, et. al. 21
Exhibit Number Description 31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification by Chief Executive Officer pursuant to 18 U.S.C., Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2 Certification by Chief Financial Officer pursuant to 18 U.S.C., Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
* Management contracts and compensatory plan arrangements. (b) Reports on Form 8-K during the quarter ended
September 30, 2003 (1) A Current Report on Form 8-K was filed on August 11, 2003, under Item 9, reporting operating results for the second quarter of 2003, and attaching a news release dated August 6, 2003 and script of conference call of August 7, 2003. (2) A Current Report on Form 8-K was filed on October 9, 2003, under Item 5, announcing litigation settlement with ACF Barge Acceptance I LLC, and attaching a news release dated October 8, 2003. 24March 31, 2004
(1) Trinity filed a current Report on Form 8-K dated February 26, 2004, reporting, under Item 9 and Item 12, operating results for the fourth quarter of 2004, and attaching a news release dated February 25, 2004 and script of the conference call dated February 26, 2003. In addition, Trinity reported the announcement of an agreement with The Burlington Northern and Santa Fe Railway Company to build hopper cars, and attaching a news release dated February 26, 2004. (2) Trinity filed a current report on Form 8-K dated February 27, 2004, reporting, under Item 5, the offering of up to $300 million aggregate principal amount of senior notes due 2014, and attaching a news release dated February 27, 2004. (3) Trinity filed a current report on Form 8-K dated March 10, 2004, reporting, under Item 5, the issuance of $300 million aggregate principal amount of 6 ½% senior notes due 2014 in a private offering, and attaching a news release dated March 10, 2004. (4) Trinity filed a current report on Form 8-K dated March 15, 2004, reporting, under Item 5, the litigation settlement with Florida Marine Transporters, Inc., and attaching a news release dated March 15, 2004. 22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
TRINITY INDUSTRIES, INC. By /s/ JIM S. IVY Registrant Jim S. Ivy Senior Vice President and Chief Financial Officer November 6, 2003 25
TRINITY INDUSTRIES, INC. By /s/ JIM S. IVY Registrant Jim S. Ivy Senior Vice President and Chief Financial Officer May 6, 2004 23
INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION 10.17.1 First Amendment to the Credit Agreement dated as of October 16, 2002, amending the Credit Agreement dated June 4, 2002. 10.17.2 Second Amendment to the Credit Agreement dated as of September 26, 2003, amending the Credit Agreement dated June 4, 2002. 10.18.1 Amendment No. 1 to the Warehouse Loan Agreement dated as of June 27, 2003, amending the Warehouse Loan Agreement dated as of June 27, 2002. 10.18.2 Amendment No. 2 to the Warehouse Loan Agreement dated as of July 29, 2003, amending the Warehouse Loan Agreement dated as of June 27, 2002. 10.18.3 Amendment No. 3 to the Warehouse Loan Agreement dated as of August 29, 2003, amending the Warehouse Loan Agreement dated as of June 27, 2002. 31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification pursuant to 18 U.S.C., Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2 Certification pursuant to 18 U.S.C., Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit Number Description 10.1 Amendment No. 3 to the Supplemental Profit Sharing Plan of Trinity Industries and Certain Affiliates. * 10.2 Amendment No. 3 to the Supplemental Retirement Plan of Trinity Industries and Certain Affiliates. * 10.3 Amendment No. 4 to the Supplemental Profit Sharing Plan of Trinity Industries and Certain Affiliates. * 10.4 Supplemental Retirement and Director Retirement Trust. * 10.5 Amended as Restated Credit Agreement dated as of March 10, 2004 among Trinity Industries, Inc., as Borrower, JP Morgan Chase Bank, individually as a Lender and Issuing Bank and as Administrative Agent, and Dresdner Bank AG, New York and Grand Cayman Branches and The Royal Bank of Scotland plc., each individually as a Lender as collectively as Syndication Agents, and certain other Lenders party thereto from time to time. 10.6 Purchase Agreement dated as of March 5, 2004 by and among Trinity Industries, Inc. certain subsidiary guarantors party thereto and J.P. Morgan Securities Inc., as Representative of the Initial Purchasers. 10.7 Amendment No. 1 to the Purchase Agreement dated as of March 9, 2004 by and among Trinity Industries, Inc., certain subsidiary guarantors party thereto and J.P. Morgan Securities Inc., as Representative of the Initial Purchasers, amending the Purchase Agreement dated as of March 5, 2004. 10.8 Registration Rights Agreement dated as of March 10, 2004 by and among Trinity Industries, Inc., certain subsidiary guarantors party thereto and J.P. Morgan Securities Inc., as Representative of the Initial Purchasers. 10.9 Indenture dated as of March 10, 2004 by and between Trinity Industries, Inc., certain subsidiary guarantors party thereto and Wells Fargo Bank, National Association, as Trustee 10.10 Equipment Lease Agreement (TRL III 2003-1A) between TRL III-1A Railcar Statutory Trust, lessor, and Trinity Rail Leasing III L.P., lessee. 10.10.1 Participation Agreement (TRL III 2003-1A) between TRL III-1A among Trinity Rail Leasing III L.P., lessee, et. al. 10.10.2 Equipment Lease Agreement (TRL III 2003-1B) between TRL III-1B Railcar Statutory Trust, lessor, and Trinity Rail Leasing III L.P., lessee. 10.10.3 Participation Agreement (TRL III 2003-1B) between TRL III-1B among Trinity Rail Leasing III L.P., lessee, et. al. 10.10.4 Equipment Lease Agreement (TRL III 2003-1C) between TRL III-1C Railcar Statutory Trust, lessor, and Trinity Rail Leasing III L.P., lessee. 10.10.5 Participation Agreement (TRL III 2003-1C) between TRL III-1C among Trinity Rail Leasing III L.P., lessee, et. al. 31.1 Rule 13a-15(e) and 15d-15(e) Certification of Chief Executive Officer. 31.2 Rule 13a-15(e) and 15d-15(e) Certification of Chief Financial Officer. 32.1 Certification pursuant to 18 U.S.C., Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2 Certification pursuant to 18 U.S.C., Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
* Management contracts and compensatory arrangements.