--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM 10-K
---------------------
(MARK ONE)
[ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
OR
[X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM APRIL 1, 2001 TO DECEMBER 31, 2001.
COMMISSION FILE NUMBER 1-6903
TRINITY 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 telephone number, including area code (214) 631-4420
Securities Registered Pursuant to Section 12(b) of the Act
Name of each exchange
Title of each class on which registered
------------------- ---------------------
COMMON STOCK, $1.00 PAR VALUE......... NEW YORK STOCK EXCHANGE, INC.
RIGHTS TO PURCHASE SERIES A JUNIOR
PARTICIPATING PREFERRED STOCK, $1.00
PAR VALUE........................... NEW YORK STOCK EXCHANGE, INC.
Securities Registered Pursuant to Section 12(g) of the Act: NONE
---------------------
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES [X] No [ ].
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. [X]
THE AGGREGATE MARKET VALUE OF VOTING STOCK HELD BY NONAFFILIATES OF THE
REGISTRANT WAS $776,996,742 AS OF FEBRUARY 28, 2002.
AT FEBRUARY 28, 2002 THE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING WAS
44,371,946.
THE INFORMATION REQUIRED BY PART III OF THIS REPORT, TO THE EXTENT NOT SET
FORTH HEREIN, IS INCORPORATED BY REFERENCE FROM THE REGISTRANTS DEFINITIVE PROXY
STATEMENT RELATING TO THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 13,
2002.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TRINITY INDUSTRIES, INC.
FORM 10-K
TABLE OF CONTENTS
CAPTION PAGE
------- ----
PART I
Item 1. Business.................................................... 1
Item 2. Properties.................................................. 9
Item 3. Legal Proceedings........................................... 9
Item 4. Submission of Matters to a Vote of Security Holders......... 9
PART II
Item 5. Market for the Company's Common Stock and Related
Stockholder Matters....................................... 10
Item 6. Selected Financial Data..................................... 11
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 12
Item 7a. Quantitative and Qualitative Disclosures About Market
Risk...................................................... 21
Item 8. Financial Statements and Supplementary Data................. 22
Item 9. Changes In and Disagreements with Accountants on Accounting
and Financial Disclosure.................................. 41
PART III
Item 10. Directors and Executive Officers of the Company............. 42
Item 11. Executive Compensation...................................... 42
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................ 42
Item 13. Certain Relationships and Related Transactions.............. 42
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K....................................................... 43
i
PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF BUSINESS. Trinity Industries, Inc., incorporated in
1933, is one of the nation's leading diversified industrial companies providing
a variety of high volume, repetitive products and services for the
transportation, industrial, and construction sectors of the marketplace. We
compete in cyclical markets and are continuously looking for opportunities to
improve our competitive positions.
In September 2001, we changed our year-end from March 31 to December 31.
Unless stated otherwise, all references to fiscal year 2000 shall mean the full
fiscal year ended on March 31, 2000 and fiscal year 2001 shall mean the full
fiscal year ended March 31, 2001. The nine months ended December 31, 2001 covers
the period from April 1, 2001 to December 31, 2001.
In October 2001, we completed our merger transaction with privately owned
Thrall Car Manufacturing Company. This merger combines Trinity's strength in
tank car production, Thrall's strength in auto rack manufacturing and research
and development expertise across the entire spectrum of railcars.
Trinity became a Delaware Corporation in 1987. The Company's principal
executive offices are located at 2525 Stemmons Freeway, Dallas, Texas
75207-2401, and our telephone number is 214-631-4420.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS. Financial information about
our industry segments for the nine months ended December 31, 2001 and fiscal
years 2001 and 2000 is presented in Part II, Item 7 "Management's Discussion and
Analysis of Financial Condition and Results of Operations" on pages 12 through
21.
NARRATIVE DESCRIPTION OF BUSINESS. The Company is engaged in the
manufacture, marketing, and leasing of a variety of products consisting of the
following five business groups:
TRINITY RAIL GROUP. Our railcar group primarily serves two markets: North
America and Europe. We develop and manufacture a comprehensive selection of
railcars used for transporting a wide variety of liquids, gases and dry cargo.
We are the leading railcar manufacturer in North America. Our railcar operations
offer a wide range of car types to take advantage of changing industry trends
and developing market opportunities including:
- Tank Cars -- Tank cars transport products such as liquified petroleum gas,
liquid fertilizer, sulfur, sulfuric acids and corn syrup.
- Auto Carrier Cars -- Auto carrier cars transport automobiles and sport utility
vehicles.
- Hopper Cars -- Covered hopper cars carry cargo such as grain, dry fertilizer,
plastic pellets and cement. Open-top hoppers are most often used to haul coal.
- Box Cars -- Box cars transport products such as food goods, auto parts, wood
products and paper.
- Intermodal Cars -- Intermodal cars transport intermodal containers and
trailers, which are generally interchangeable among railcar, truck and ship,
thus making it possible to move cargo without repeated loading and unloading.
- Gondola Cars -- Rotary gondolas are used for coal service, and top-loading
gondola cars transport a variety of other heavy bulk commodities such as scrap
metals, steel products, machinery and lumber.
- Specialty Cars -- Specialty cars are designed to address the special needs of
a particular industry or customer, such as pressure differential cars used to
haul fine grain food products such as sugar and flour, waste hauling gondolas
and side dump cars.
We also manufacture and sell railcar parts, such as auto carrier doors and
accessories, hatch rings, discharge gates, covers, floors, yokes, couplers,
axles, hitches, bogies, brakes, center plates and chutes. These parts are
ultimately used in manufacturing and repair of railcars.
We have the ability to maintain, repair and modify railcars through our
repair network, Trinity Railcar Repair, Inc. This network consists of five major
repair facilities and fourteen mini/mobile repair shops. The repair network
locations are spread across the United States, including locations in Georgia,
Montana, Pennsylvania and Texas.
Our customers include railroads, leasing companies, and shippers, such as
utilities, petrochemical companies, grain shippers, and major construction
1
and industrial companies. We compete against five major railcar manufacturers.
We hold patents of varying duration for use in our manufacture of railcar
and component products. We cannot quantify the importance of such patents, but
patents are believed to offer a marketing advantage in certain circumstances. No
material revenues are received from licensing of these patents.
CONSTRUCTION PRODUCTS GROUP. Our Construction Products segment is composed
of highway safety products, concrete and aggregates, beams and girders used in
highway construction and weld pipe fittings.
We are one of the largest manufacturers of roadside safety products in
North America. Our products include highway safety guardrails and patented
products such as guardrail end terminals, crash cushions, and other protective
barriers that absorb and dissipate the force of impact in collisions between
vehicles and fixed roadside objects. Our predominantly galvanized steel product
lines use the principles of momentum transfer and kinetic energy absorption to
safely decelerate errant vehicles. The Federal Highway Administration determines
which products are eligible for federal funds for highway projects and has
approved most of our products as acceptable permanent and construction zone
highway hardware according to requirements of the National Cooperation Highway
Research Program.
We hold patents and are a licensee for certain of our guardrail and
end-treatment products that enhance our competitive position for these products.
We sell highway safety products in all 50 U.S. states, Canada, Mexico and
other countries. We compete against several national and regional guardrail
producers.
We supply ready mix concrete and construction aggregates, such as crushed
stone, sand and gravel, asphalt rock and recycled concrete, primarily in Texas.
Our customers are primarily owners, contractors and subcontractors in the
construction and foundation industry who are located near our plant locations.
We compete with ready mix concrete producers and aggregate producers located in
Texas, Louisiana, and Arkansas.
Weld pipe fittings, such as caps, elbows, return bends, tees, concentric
and eccentric reducers and full and reducing outlet tees, are sold primarily to
pipeline, petrochemical, and non-petrochemical process industries. We compete
with numerous companies throughout the United States. Competition for fittings
has been intense during the previous three years.
We manufacture structural steel beams and girders for the construction of
new, restored and/or replacement railroad bridges, county, municipal and state
highway bridges and power generation plants. We sell bridge construction and
support products primarily to owners, general contractors and subcontractors on
highway and railroad construction products. Our competitors primarily include
fabricators with facilities located in Texas, Oklahoma and Arkansas.
INLAND BARGE GROUP. We are the largest producer of inland barges in the
United States and one of the largest producers of fiberglass barge covers. Our
six manufacturing facilities are located along the United States inland river
system allowing for rapid delivery to our customers.
We manufacture a variety of dry-cargo barges, such as deck barges and, open
or covered hopper barges that transport various commodities, such as grain, coal
and aggregates. We also produce tank barges used to transport liquid products at
high or low temperatures. Fiberglass reinforced lift covers are primarily for
grain and rolling covers are for other bulk commodities, such as steel, paper,
salt and cement.
Our Inland Barge segment customers primarily include commercial marine
transportation companies. Many companies have the capability to enter into, and
from time to time do enter into, the inland barge manufacturing business. The
Company strives to compete through efficiency in operations and quality of
product.
INDUSTRIAL PRODUCTS GROUP. We are a leading producer of tank containers
and tank heads for pressure vessels. We manufacture tanks in the United States,
Mexico and Brazil. We market a portion of our industrial products in Mexico
under the brand name of TATSA. The following paragraphs describe the types of
tanks and heads that we purchase.
Pressure liquefied petroleum gas containers are used by industrial plants,
utilities and small businesses and in suburban and rural areas for residential
heating and cooking needs. We manufacture
2
fertilizer containers for highway and railway transport, bulk storage, farm
storage and the application and distribution of anhydrous ammonia. Our tanks
range from 120-gallon tanks for residential use to 120,000-gallon bulk storage
containers. We sell our containers to experienced propane dealers and
technicians. We generally deliver the containers to our customers who install
and fill the containers. Our competitors include large and small manufacturers.
We manufacture container heads, which are pressed metal components used in
the manufacturing of many of our finished products. In addition, we sell
container heads to other manufacturers. We manufacture the container heads in
various shapes, and we produce pressure rated or non-pressure rated container
heads, depending on their intended use. We use a significant portion of the
heads we manufacture in the production of our tank cars and containers. We also
sell our heads to a broad range of other manufacturers. Competition for heads in
recent years has been intense and has resulted in sharply reduced prices for
these products.
TRINITY RAILCAR LEASING AND MANAGEMENT SERVICES GROUP. Through our wholly
owned subsidiaries, primarily Trinity Industries Leasing Company, we lease
specialized types of railcars, both tank cars and freight cars. As of December
31, 2001, we owned or leased approximately 22,000 railcars that were 93.6%
leased. Additionally, we managed another 37,000 railcars on behalf of
independent third parties.
We lease our railcars to industrial companies in the petroleum, chemical,
agricultural, energy and other industries that supply their own railcars to the
railroads. The terms of our railcar leases generally vary from one to twenty
years and provide for fixed monthly rentals, with an additional mileage charge
when usage exceeds a specified maximum.
The leasing business in which we are engaged is very competitive and there
are a number of well-established companies that actively compete with us in the
business of owning and leasing railcars. There are also a number of banks,
investment partnerships and other financial institutions which compete with us
in railcar leasing.
ALL OTHER. All Other includes our captive insurance and transportation
companies, structural towers, and other peripheral businesses.
FOREIGN OPERATIONS. Trinity's foreign operations are primarily in Mexico,
Romania, the United Kingdom, the Czech Republic, Brazil, Switzerland and
Slovakia. Sales to foreign customers, primarily in Europe and Mexico,
represented 7.6%, 5.3% and 2.6% of our consolidated revenues for the nine months
ended December 31, 2001 and for fiscal years 2001 and 2000, respectively. As of
December 31, 2001 and March 31, 2001 and 2000, we had approximately 11.0%,
14.4%, and 13.8% of our long-lived assets located outside the United States.
We manufacture railcars and LP Gas Containers at our Mexico facilities for
export to the United States. Any material change in the quotas, regulations, or
duties on imports imposed by the United States government and its agencies or on
exports by the government of Mexico or its agencies could adversely affect our
operations in Mexico. Our foreign activities are also subject to various other
risks of doing business in foreign countries, including currency fluctuations,
political changes, changes in laws and regulations and economic instability.
Although our operations have not been materially affected by any of such factors
to date, any substantial disruption of business as it is currently conducted
could adversely affect our operations at least in the short term.
BACKLOG. As of December 31, 2001, our backlog for new railcars was $153.7
million and was $133.6 million for Inland Barge products. Included in the
backlog for the railcars is $31.3 million of railcars to be sold to the Rail
Leasing and Management Services Group. All of our backlog is expected to be
delivered in the 12 months ending December 31, 2002.
As of March 31, 2001, our backlog for new railcars was $408.5 million and
was $141.1 million for Inland Barge products. Included in the backlog for the
railcars was $85.3 million of railcars to be sold to the Rail Leasing and
Management Services Group.
MARKETING. We sell substantially all of our products through our own
salesmen operating from offices in the following states and foreign countries:
Alabama, Arkansas, Arizona, Connecticut, Florida, Illinois, Kentucky, Louisiana,
Michigan, Minnesota, Mississippi, Missouri, New Hampshire, New Jersey, New York,
Ohio, Pennsylvania, Tennessee, Texas, Vermont, Utah, Brazil, Mexico, Romania,
Sweden, and Canada. We also use independent sales representatives to a limited
extent. Except in the case of
3
weld fittings, guardrail and standard size LPG containers, we ordinarily
fabricate our products to our customer's specifications contained in a purchase
order.
RAW MATERIALS AND SUPPLIERS.
RAILCAR MANUFACTURING. Products manufactured at our railcar manufacturing
facilities require a significant supply of raw materials such as steel as well
as numerous specialty components such as brakes, wheels and axles. Steel is
available from numerous domestic and foreign sources. Specialty components
purchased from third parties comprise approximately 50% of the cost of the
production of each railcar. Although the number of alternative suppliers of
specialty components has declined in recent years, at least two suppliers
continue to produce most components. We continually monitor supply inventory
levels to ensure adequate support for our production. We maintain good
relationships with our suppliers and have not experienced any significant
interruptions in recent years in the supply of raw materials or specialty
components. Changes in the price of components and raw materials have not had a
material effect on earnings.
AGGREGATES. Aggregates can be found in abundant quantities throughout the
United States, and many producers exist nationwide. However, as a general rule,
shipments from an individual quarry are limited in geographic scope because the
cost of transporting processed aggregates to customers is high in relation to
the value of the product itself. We operate 14 mining facilities strategically
located in Texas and Louisiana to fulfill some of our needs for aggregates. We
have not experienced difficulty fulfilling the rest of our needs from local
suppliers.
OTHER. The principal material used by us in our other operating segments
is steel. We believe that many domestic and foreign sources can provide an
adequate supply of these materials.
EMPLOYEES. As of December 31, 2001, Trinity had approximately 15,300
employees, of which approximately 11,900 were production employees and 3,400
were administrative, sales, supervisory and office employees. In connection with
the Thrall merger, we added approximately 1,700 employees as of December 31,
2001. Of this total 500 were administrative.
ACQUISITIONS. We made certain acquisitions during the nine months ended
December 31, 2001 and during fiscal 2001 and 2000 accounted for by the purchase
method. The acquired operations have been included in the consolidated financial
statements from the effective dates of the acquisitions. See Note 4 to the
consolidated financial statements.
ENVIRONMENTAL MATTERS. We are subject to comprehensive federal, state,
local and foreign environmental laws and regulations relating to the release or
discharge of materials into the environment, the management, use, processing,
handling, storage, transport or disposal of hazardous materials, or otherwise
relating to the protection of human health and the environment. Such laws and
regulations not only expose us to liability for our own negligent acts, but also
may expose us to liability for the conduct of others or for our actions which
were in compliance with all applicable laws at the time these actions were
taken. In addition, such laws may require significant expenditures to achieve
compliance, and are frequently modified or revised to impose new obligations.
Civil and criminal fines and penalties may be imposed for non-compliance with
these environmental laws and regulations. Our operations that involve hazardous
materials also raise potential risks of liability under the common law.
Environmental operating permits are, or may be, required for our operations
under these laws and regulations. These operating permits are subject to
modification, renewal and revocation. We regularly monitor and review our
operations, procedures and policies for compliance with these laws and
regulations. Despite these compliance efforts, risk of environmental liability
is inherent in the operation of our businesses, as it is with other companies
engaged in similar businesses. Therefore, environmental liabilities may have a
material adverse effect on us in the future.
We believe that our operations and facilities, owned, managed, or leased,
are in substantial compliance with applicable laws and regulations and that any
noncompliance is not likely to have a material adverse effect on our operations
or financial condition. However, future events, such as changes in or modified
interpretations of existing laws and regulations or enforcement policies, or
further investigation or evaluation of the potential health hazards of products
or business activities, may give rise to additional compliance and other
4
costs that could have a material adverse effect on our financial conditions and
operations.
In addition to environmental laws, the transportation of commodities by
railcar or barge raises potential risks in the event of a derailment, spill or
other accident. Generally, liability under existing law in the United States for
a derailment, spill or other accident depends on the negligence of the party,
such as the railroad, the shipper or the manufacturer of the railcar. However,
for certain hazardous commodities being shipped, strict liability concepts may
apply.
GOVERNMENTAL REGULATION
Railcar Industry
The primary regulatory and industry authorities involved in the regulation
of the railcar industry are the Environmental Protection Agency; the Research
and Special Programs Administration, a division of the Department of
Transportation; the Federal Railroad Administration, a division of the
Department of Transportation; and the Association of American Railroads.
These organizations establish rules and regulations for the railcar
industry, including construction specifications and standards for the design and
manufacture of railcars; mechanical, maintenance and related standards for
railcars; safety of railroad equipment, tracks and operations; and packaging and
transportation of hazardous materials.
We believe that our operations are in substantial compliance with these
regulations. We cannot predict whether future changes that affect compliance
costs would have a material adverse effect on financial conditions and
operations.
Inland Barge Industry
The primary regulatory and industry authorities involved in the regulation
of the barge industry are the United States Coast Guard; the National
Transportation Safety Board; the United States Customs Service; the Maritime
Administration of the United States Department of Transportation; and private
industry organizations such as the American Bureau of Shipping.
These organizations establish safety criteria, investigate vessel accidents
and recommend improved safety standards. Violations of these regulations and
related laws can result in substantial civil and criminal penalties as well as
injunctions curtailing operations. We believe that our operations are in
substantial compliance with these regulations.
Occupational Safety and Health Administration and similar regulations
Our operations are subject to regulation of health and safety matters by
the United States Occupational Safety and Health Administration. We believe that
we employ appropriate precautions to protect our employees and others from
workplace injuries and harmful exposure to materials handled and managed at our
facilities. However, claims may be asserted against us for work-related
illnesses or injury, and our operations may be adversely affected by the further
adoption of occupational health and safety regulations in the United States or
in foreign jurisdictions in which we operate. While we do not anticipate having
to make material expenditures in order to remain in substantial compliance with
these health and safety laws and regulations, we are unable to predict the
ultimate cost of compliance. 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.
OTHER MATTERS. To date, we have not suffered any material shortages with
respect to obtaining sufficient energy supplies to operate our various plant
facilities or its transportation vehicles. Future limitations on the
availability or consumption of petroleum products, particularly natural gas for
plant operations and diesel fuel for vehicles, could have an adverse effect upon
our ability to conduct our business. The likelihood of such an occurrence or its
duration, and its ultimate effect on our operations, cannot be reasonably
predicted at this time.
5
EXECUTIVE OFFICERS OF THE COMPANY. The following table sets forth the
names and ages of all executive officers of the Company, all positions and
offices with the Company presently held by them, the year each person first
became an executive officer and the term of each person's office:
OFFICER TERM
NAME(1) AGE OFFICE SINCE EXPIRES
------- --- ------ ------- --------
Timothy R. Wallace..................... 48 Chairman, President & Chief 1985 May 2002
Executive Officer
John L. Adams.......................... 57 Executive Vice President 1999 May 2002
Mark W. Stiles......................... 53 Senior Vice President & Group 1993 May 2002
President
Jim S. Ivy............................. 58 Vice President & Chief Financial 1998 May 2002
Officer
Michael E. Flannery.................... 42 Chief Executive Officer of Trinity 2001 May 2002
Rail Group, LLC
Andrea F. Cowan........................ 39 Vice President, Shared Services 2001 May 2002
Jack L. Cunningham, Jr. ............... 57 Vice President, Labor Relations 1982 May 2002
Michael G. Fortado..................... 58 Vice President & Secretary 1997 May 2002
John M. Lee............................ 41 Vice President, Business 1994 May 2002
Development
Charles Michel......................... 48 Controller 2001 May 2002
Joseph F. Piriano...................... 64 Vice President, Purchasing 1992 May 2002
S. Theis Rice.......................... 51 Vice President, Legal Affairs 2002 May 2002
Linda S. Sickels....................... 50 Vice President, Government 1995 May 2002
Relations
Neil O. Shoop.......................... 58 Treasurer 1985 May 2002
---------------
(1) Mr. Adams joined the Company in 1999. Prior to that, Mr. Adams served as
chief executive officer for a national financial institution. Mr. Ivy joined
the Company in 1998. Prior to that, Mr. Ivy was a senior audit partner for a
national public accounting firm. Mr. Flannery joined the Company in 2001.
Prior to that he was Chief Administrative Officer and General Counsel of
Duchossois Industries, Inc. and Vice Chairman of Thrall Car Manufacturing
Company, a railcar manufacturing company that merged with a subsidiary of
the Company in October of 2001. Ms. Cowan joined the Company in January 2000
as a divisional officer. Prior to that she was a consultant to Trinity for
six months having spent fifteen years with the State of Texas in a variety
of positions relating to policy and finance. Mr. Fortado joined the Company
in 1997. Prior to that, Mr. Fortado served one year as senior vice
president, general counsel, and corporate secretary for an oil and gas
exploration company and prior to that as vice president, corporate
secretary, and assistant general counsel for an integrated energy company.
Mr. Michel joined the Company in 2001. Prior to that he served as Vice
President and Chief Financial Officer of a national restaurant/entertainment
company from 1994 to 2001. All of the other above-mentioned executive
officers have been in the full time employment of the Company or its
subsidiaries for more than five years. Although the titles of certain such
officers have changed during the past five years, all have performed
essentially the same duties during such period of time except for Timothy R.
Wallace, Mark W. Stiles and S. Theis Rice. Mr. Wallace became Chairman and
Chief Executive Officer on December 31, 1998. He was previously the
President and Chief Operating Officer. In addition to Group President, Mr.
Stiles became Senior Vice President on June 10, 1999. Mr. Rice was most
recently serving as President of the Company's European operations.
FORWARD LOOKING STATEMENTS. This annual report on Form 10-K 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
6
to differ materially from those in the forward-looking statements include:
- market conditions and demand for our products;
- the cyclical nature of both the railcar and barge industries;
- abnormal periods of inclement weather in areas where construction products are
sold and used;
- the timing of introduction of new products;
- the timing of customer orders;
- price erosion;
- changes in mix of products sold;
- the extent of utilization of manufacturing capacity;
- availability of supplies and raw materials;
- price competition and other competitive factors;
- changing technologies;
- steel prices;
- interest rates and capital costs;
- 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; 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.
ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS. We wish to caution you
that there are risks and uncertainties that could cause our actual results to be
materially different from those indicated by forward-looking statements that we
make from time to time in filings with the Securities and Exchange Commission,
news releases, reports, proxy statements, registration statements and other
written communications, as well as oral forward-looking statements made from
time to time by representatives of our Company. These risks and uncertainties
include, but are not limited to, those risks described below. Additional risks
and uncertainties not presently known to us or that we currently deem immaterial
also may impair our business operations. The cautionary statements below discuss
important factors that could cause our business, financial condition, operating
results and cash flows to be materially adversely effected.
The cyclical nature of our business results in lower revenues during
economic downturns. We operate in cyclical industries. Downturns in overall
economic conditions usually have a significant adverse effect on cyclical
industries due to a decreased demand for new and replacement products. This
decreased demand could continue to result in lower sales volumes, lower prices
and/or a loss of profits. In addition, our recent acquisition of Thrall has
increased our exposure to the effects of the cyclical nature of the railcar
business. The railcar industry is in a deep down cycle and operating with a
minimal backlog. If this down cycle continues, we could experience increased
losses and could make additional plant closures and incur related costs.
We have potential exposure to environmental liabilities, which may increase
costs and lower profitability. Our operations are subject to extensive and
frequently changing federal, state and local environmental laws and regulations,
including those dealing with air quality and the handling and disposal of waste
products, fuel products and hazardous substances. In particular, we may incur
remediation costs and other related expenses because:
- Some of our manufacturing facilities were constructed and operated before the
adoption of current environmental laws and the institution of compliance
practices; and
- Some of the products that we manufacture are used to transport hazardous
materials.
Furthermore, although we intend to conduct appropriate due diligence with
respect to environmental matters in connection with future acquisitions, we may
be unable to identify or be indemnified for all potential environmental
liabilities relating to any acquired business. Environmental liabilities
incurred by us, if not covered by adequate insurance or indemnification, will
increase our respective costs and have a negative impact on our profitability.
7
We compete in highly competitive industries, which may impact our
respective financial results. We face aggressive competition in all geographic
markets and each industry sector in which we operate. As a result, competition
on pricing is often intense. The effect of this competition could reduce our
revenues, limit our ability to grow, increase pricing pressure on our products,
and otherwise affect our financial results.
Risks related to our operations outside of the United States could
adversely impact our respective operating results. Our operations outside of
the United States are subject to the risks associated with cross-border business
transactions and activities. Political, legal, trade or economic changes or
instability could limit or curtail our respective foreign business activities
and operations. Some foreign countries where we operate have regulatory
authorities that regulate railroad safety, railcar design and railcar component
part design, performance and manufacture used on their railroad systems. If we
fail to obtain and maintain certifications of our railcars and railcar parts
within the various foreign countries where we operate, we may be unable to
market and sell our railcars in those countries. In addition, unexpected changes
in regulatory requirements, tariffs and other trade barriers, more stringent
rules relating to labor or the environment, adverse tax consequences and price
exchange controls could limit operations and make the manufacture and
distribution of our products difficult. Furthermore, any material change in the
quotas, regulations or duties on imports imposed by the U.S. government and
agencies or on exports by the government of Mexico or its agencies could affect
our ability to export the railcars and liquefied petroleum gas containers that
we manufacture in Mexico. The uncertainty of the legal environment in these and
other areas could limit our ability to enforce our respective rights
effectively.
Because we do not have employment contracts with our key management
employees, we may not be able to retain their services in the future. Our
success depends on the continued services of our key management employees, none
of whom currently have employment agreements with us. Although we have
historically been successful in retaining the services of our key management, we
may be unable to do so in the future. The loss of the services of one or more
key members of our management team could result in increased costs associated
with attracting and retaining a replacement and could disrupt our operations and
result in a loss of revenues.
Although our businesses were not directly impacted by the recent terrorist
attacks against the United States, the long-term effect of these events, or the
domestic or foreign response to them, could negatively affect our respective
ability to operate profitably in the future. The terrorist attacks that
occurred in the United States on September 11, 2001, the subsequent military
response by the United States, other terrorist attacks and future events
occurring in response to or in connection with these attacks may negatively
impact the economy in general. In particular, the negative impacts of these
events may affect the industries in which we operate. This could result in
delays in or cancellations of the purchase of our products or shortages in raw
materials or component parts. Any of these occurrences could have a significant
adverse impact on our operating results, revenues and costs.
Fluctuations in the supply of component parts used in the production of our
products could have a material adverse effect on our ability to cost-
effectively manufacture and sell our products. A significant portion or our
business depends on the adequate supply of numerous specialty components such as
brakes, wheels, side frames and bolsters at competitive prices. We depend on
outside suppliers for a significant portion of our component part needs. While
we endeavor to be diligent in its contractual relationships with our suppliers,
a significant decrease in the availability of specialty components could
materially increase our cost of goods sold or prevent us from manufacturing our
products on a timely basis.
Our manufacturer's warranties expose us to potentially significant
claims. We warrant the workmanship and materials of many of our products under
limited warranties. Accordingly, we may be subject to significant warranty
claims in the future such as multiple claims based on one defect repeated
throughout our mass production process or claims for which the cost of repairing
the defective part is highly disproportionate to the original cost of the part.
We have never experienced any material losses attributable to warranty claims,
but the possibility exists for these types of warranty claims to result in
costly product recalls, significant repair costs and damage to our reputation.
8
We may be liable for product liability claims that exceed our insurance
coverage. The nature of our business subjects us to product liability claims,
especially in connection with the repair and manufacture of products that carry
hazardous or volatile materials. We maintain reserves and liability insurance
coverage at levels based upon commercial norms in the industries in which we
operate and our historical claims experience. However, an unusually large
product liability claim or a string of claims based on a failure repeated
throughout our mass production process may exceed our insurance coverage or
result in damage to our reputation.
We may incur increased costs due to fluctuations in interest rate and
foreign currency exchange rates. We are exposed to risks associated with
fluctuations in interest rate and changes in foreign currency exchange rates. We
seek to minimize these risks, when considered appropriate, through the use of
currency and interest rate hedges and similar financial instruments and other
activities, although these measures may not be implemented or effective. Any
material and untimely changes in interest rates or exchange rates could result
in significant losses to us.
ITEM 2. PROPERTIES.
We principally operate in various locations throughout the United States
with other facilities in Mexico, Brazil, Romania and Slovakia, all of which are
considered to be in good condition, well maintained and adequate for our
purposes.
APPROXIMATE
SQUARE FEET PRODUCTIVE
---------------------- CAPACITY
OWNED LEASED UTILIZED
---------- --------- ----------
Rail Group............ 6,125,500 1,952,000 20%
Construction Products
Group............... 2,347,000 10,000 85%
Inland Barge Group.... 692,000 45,000 85%
Industrial Products
Group............... 648,500 -- 50%
Executive Offices..... 173,000 -- N/A
All Other............. 35,000 -- 0%
---------- ---------
10,021,000 2,007,000
========== =========
ITEM 3. LEGAL PROCEEDINGS.
In December 1999, a grand jury sitting in the Western District of Louisiana
returned a two-count felony indictment against Trinity Baton Rouge, Inc., a
wholly owned subsidiary of Trinity. The indictment charges Trinity Baton Rouge,
Inc. with transporting hazardous waste without a proper manifest to an
unpermitted facility in violation of the Resource Conservation Recovery Act.
Trinity Baton Rouge, Inc. continues to deny all charges in the indictment and is
defending this matter vigorously.
In September 1999, the United States Environmental Protection Agency filed
a complaint against Trinity seeking penalties of approximately $225,000. The
complaint alleges that Trinity failed to file certain submissions timely to the
United States Environmental Protection Agency in an alleged violation of the
Emergency Planning Community Right to Know Act. Trinity denies all allegations
and is defending this matter vigorously.
We are involved in various other claims and lawsuits incidental to our
business. In the opinion of management, these claims and suits in the aggregate
will not have a material adverse effect on our consolidated financial
statements.
ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
9
PART II
ITEM 5.MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.
The Company's common stock is traded on the New York Stock Exchange with
the ticker symbol "TRN". The following table shows the price range of the
Company's common stock for the nine months ended December 31, 2001 and fiscal
year 2001:
PRICES
---------------
FISCAL YEAR 2001 HIGH LOW
---------------- ------ ------
Quarter ended June 30, 2000........... $23.56 $18.50
Quarter ended September 30, 2000...... 23.38 18.37
Quarter ended December 31, 2000....... 26.63 22.56
Quarter ended March 31, 2001.......... 25.00 18.97
NINE MONTHS ENDED
DECEMBER 31, 2001 HIGH LOW
----------------- ------ ------
Quarter ended June 30, 2001........... $23.80 $17.50
Quarter ended September 30, 2001...... 27.85 20.70
Quarter ended December 31, 2001....... 28.04 21.33
The Company's transfer agent and registrar is The Bank of New York, New
York, NY.
HOLDERS
At December 31, 2001, the Company had approximately 1,991 record holders of
common stock. The par value of the stock is $1.
DIVIDENDS
Since April 1, 2000, Trinity has paid quarterly dividends of $0.18 per
common share and has paid 152 consecutive quarterly dividends. On March 14,
2002, the board of directors declared a quarterly dividend of $0.06 per share.
See Management's Discussion and Analysis of Financial Condition and Results of
Operations.
RECENT SALES OF UNREGISTERED SECURITIES
On October 26, 2001, Trinity completed a merger with Thrall Car
Manufacturing Company, Inc. Pursuant to the terms of the merger agreement,
Trinity issued 7,150,000 shares of common stock to Thrall Car Management
Company, Inc. The 7,150,000 shares issued to Thrall Car Management Company, Inc.
were not registered and were issued pursuant to the exemptions provided by
Regulation D of the Securities Act of 1933, as amended.
On November 9, 2001, Trinity acquired the outstanding interest of Transport
Capital, LLC from a group of individuals for 34,000 shares of common stock. The
34,000 shares were not registered and were issued in reliance on the exemption
provided by Section 4(2) of the Securities Act of 1933, as amended.
10
ITEM 6. SELECTED FINANCIAL DATA.
The following financial information for the nine months ended December 31,
2001 and 2000 and for the four years ended March 31, 2001 has been derived from
the Company's consolidated financial statements. This information should be read
in conjunction with Management's Discussion and Analysis of Financial Condition
and Results of Operations and the consolidated financial statements and notes
thereto included elsewhere herein.
NINE MONTHS ENDED
DECEMBER 31, YEAR ENDED MARCH 31,
---------------------- -----------------------------------------
2001 2000 2001 2000 1999 1998
-------- ----------- -------- -------- -------- --------
(UNAUDITED)
(IN MILLIONS EXCEPT PERCENT AND PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Revenues......................... $1,347.8 $1,485.6 $1,904.3 $2,740.6 $2,926.9 $2,473.0
Operating profit (loss)(1)....... (16.4) (7.9) (66.1) 279.0 284.9 255.9
Net income (loss)(2)............. (34.7) (34.7) (74.4) 165.5 185.3 103.7
Basic net income (loss) per
common share(2)................ (0.90) (0.92) (1.98) 4.17 4.31 2.41
Diluted net income (loss) per
common share(2)................ $ (0.90) $ (0.92) $ (1.98) $ 4.15 $ 4.25 $ 2.36
Weighted average common shares
outstanding:
Basic....................... 38.7 37.6 37.5 39.7 43.0 43.1
Diluted..................... 38.7 37.6 37.5 39.9 43.6 43.9
Dividend per share............... $ 0.54 $ 0.54 $ 0.72 $ 0.72 $ 0.69 $ 0.68
BALANCE SHEET DATA:
Total assets..................... $1,952.0 $1,755.4 $1,825.9 $1,738.5 1,684.9 1,573.9
Long-term debt(3)................ 476.3 44.5 504.0 95.4 120.6 149.6
Stockholders' equity............. $1,009.4 926.0 879.0 1,015.1 959.1 887.5
Ratio of total debt to total
capital........................ 32.1% 32.7% 38.0% 20.7% 23.9% 22.0%
Book value per share............. $ 22.79 $ 25.16 $ 23.89 $ 26.50 $ 23.22 $ 20.40
---------------
(1) Includes charges of:
- $64.3 million for unusual charges for the nine months ended December 31,
2001,
- $85.1 million for unusual charges for the nine months ended December 31,
2000, and
- $140.9 million for unusual charges for fiscal year 2001.
(2) Includes after tax charges or credit of:
- $50.4 million ($1.30 per share) for unusual charges for the nine months
ended December 31, 2001,
- $75.2 million ($2.00 per share) for unusual charges for the nine months
ended December 31, 2000,
- $110.9 million ($2.96 per share) for unusual charges for fiscal year
2001,
- $14.0 million ($0.32 per share) for the gain on a sale of an investment
in land in fiscal year 1999, and
- $43.8 million ($1.00 per share) charge for litigation in fiscal year
1998.
(3) Long-term debt as of December 31, 2001 and March 31, 2001 increased from the
levels as of December 31, 2000 due to the Company completing a committed
revolving bank facility in June 2001 which has been classified as long-term
debt. The proceeds of the new facility were used to repay short-term debt.
See note 8 to the consolidated financial statements.
11
ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
GENERAL
Management's Discussion and Analysis of Financial Condition and Results of
Operations discusses our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these consolidated financial statements
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. On an on-going basis,
management evaluates its estimates and judgements, including those related to
bad debts, inventories, property, plant and equipment, goodwill, income taxes,
warranty obligations, insurance restructuring costs, and contingencies and
litigation. Management bases its estimates and judgements on historical
experience and on various other factors that are believed to be reasonable under
the circumstances, the results of which form the basis for making judgements
about the carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates
under different assumptions or conditions.
Management believes the following critical accounting policies, among
others, affect its more significant judgements and estimates used in the
preparation of its consolidated financial statements.
Inventory
We are required to state our inventories at the lower of cost or market. In
assessing the ultimate realization of inventories, we are required to make
judgements as to future demand requirements and compare that with the current or
committed inventory levels. We have recorded significant changes in inventory
carrying values in recent periods due to discontinuances of product lines as
well as changes in market conditions due to changes in demand requirements. It
is possible that changes in required inventory reserves may continue to occur in
the future due to current market conditions in the railcar business.
Goodwill
We periodically evaluate acquired businesses for potential impairment
indicators that are based on legal factors, market conditions in the United
States and Europe and operational performance of our acquired businesses. Future
events could cause us to conclude that impairment indicators exist and that
goodwill associated with our acquired businesses is impaired. Any resulting
impairment loss could have a material adverse impact on our financial condition
and results of operations.
Warranties
We provide for the estimated cost of product warranties at the time we
recognize revenue. We base our estimates on historical product failure rates. We
also provide for specifically identified warranty obligations. Should actual
product failure rates differ from our estimates, revisions to the estimated
warranty liability would be required.
Insurance
We effectively self-insure for workers' compensation claims. A third-party
administrator processes all such claims. We accrue our workers' compensation
liability based upon an independent actuarial study. To the extent actuarial
assumptions change and claims experience rates differs from historical rates,
our liability may change.
Contingencies and Litigation
We are currently involved in certain legal proceedings. As discussed in
Note 15 of our consolidated financial statements, as of December 31, 2001, we
have accrued our estimate of the probable costs for the resolution of these
claims. This estimate has been developed in consultation with outside counsel
handling our defense in these matters and is based upon an analysis of potential
results, assuming a combination of litigation and settlement strategies. We do
not believe these proceedings will have a material adverse effect on our
consolidated financial position. It is possible, however, that future results of
operations for any particular quarterly or annual period could be materially
affected by changes in our assumptions related to these proceedings.
12
BASIS OF PRESENTATION
We are one of the nation's leading diversified industrial manufacturers. As
of December 31, 2001, we modified our segment reporting to align the reportable
segments with current management responsibilities and internal reporting.
The new reporting format includes the following business segments: (1) the
Trinity Rail group, which manufactures and sells railcars and component parts;
(2) the Construction 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 sells container heads and
pressure and non-pressure containers for the storage and transportation of
liquefied gases and other liquid and dry products; and (5) the Trinity Railcar
Leasing and Management Services group, which provides services such as fleet
management and leasing. Finally, All Other includes the Company's captive
insurance and transportation companies, structural towers, and other peripheral
businesses.
Sales from Trinity Rail group to Trinity Railcar Leasing and Management
Services group are recorded in Trinity Rail group and eliminated in
consolidation. Sales of railcars from the lease fleet are included in the
Trinity Railcar Leasing and Management Services group segment.
See notes to the consolidated financial statements for further discussion
of business segments.
13
UNUSUAL CHARGES
During the nine months ended December 31, 2001, Trinity recorded special
pretax charges of approximately $66.4 million, $50.4 million net of tax or $1.30
per share, related primarily to restructuring our Rail group in connection with
the Thrall merger and other matters. Of these charges, $64.3 million were
charged to operating profit. These charges are reflected in the following income
statement categories and segments (in millions).
RAILCAR
LEASING &
CONSTRUCTION INLAND INDUSTRIAL MANAGEMENT CORPORATE
RAIL PRODUCTS BARGE PRODUCTS SERVICES & OTHER TOTAL
------- ------------ ------ ---------- ---------- --------- ------
Cost of revenues......... $ 46.1 $ 0.8 $ -- $ -- $ -- $ 9.9 $ 56.8
Selling, engineering &
administrative......... 4.2 0.1 -- -- -- 3.2 7.5
------ ----- ---- ---- ----- ------ ------
Charged to operating
profit................. 50.3 0.9 -- -- -- 13.1 64.3
Operating profit (loss)
before charges......... (15.5) 46.5 9.8 3.9 30.2 (27.0) 47.9
------ ----- ---- ---- ----- ------ ------
Operating profit (loss)
reported............... $(65.8) $45.6 $9.8 $3.9 $30.2 $(40.1) $(16.4)
====== ===== ==== ==== ===== ====== ======
Unusual charges reported in other expenses amounted to $2.1 million
primarily for the write down of equity investments in nine months ended December
31, 2001.
During fiscal year 2001, we recorded pre-tax charges of approximately
$173.3 million, $110.9 million net of tax or $2.96 per share, primarily related
to the restructuring of our railcar operations, investment and asset write
downs, litigation reserves and other charges. Of these charges, $140.9 million
were charged to operating profit. These charges are reflected in the following
income statement categories and segments (in millions):
RAILCAR
LEASING &
CONSTRUCTION INLAND INDUSTRIAL MANAGEMENT CORPORATE
RAIL PRODUCTS BARGE PRODUCTS SERVICES & OTHER TOTAL
------- ------------ ------ ---------- ---------- --------- ------
Cost of revenues......... $ 73.7 $13.7 $ 4.4 $0.7 $ -- $ 32.8 $125.3
Selling, engineering &
administrative......... 6.7 -- -- -- -- 8.9 15.6
------ ----- ----- ---- ----- ------- ------
Charged to operating
profit................. 80.4 13.7 4.4 0.7 -- 41.7 140.9
Operating profit (loss)
before charges......... 40.3 42.8 16.1 6.1 41.6 (72.1) 74.8
------ ----- ----- ---- ----- ------- ------
Operating profit (loss)
reported............... $(40.1) $29.1 $11.7 $5.4 $41.6 $(113.8) $(66.1)
====== ===== ===== ==== ===== ======= ======
Unusual charges reported in other expenses amounted to $32.4 million
primarily for the write down of equity investments in fiscal year 2001.
NINE MONTHS ENDED DECEMBER 31, 2001 COMPARED WITH THE YEAR ENDED MARCH 31, 2001
-- RESULTS OF OPERATIONS
We changed our year-end in 2001 from March 31 to December 31 and, as a
result, our most recent Statement of Operations is for the nine months ended
December 31, 2001. Compared to the prior twelve month period, revenues and
operating profit declined due to the shorter time period of three months and the
significant downturn in the railcar market. Results of operations were also
affected by the acquisition of Thrall on October 26, 2001, which added $47.3
million in revenue since the acquisition date with corresponding increases in
other costs of our operations of $52.9 million. Interest expense also increased
slightly as a result of increased debt incurred to acquire Thrall. Results of
operations were also affected by the unusual pre-tax charges discussed above
which were $66.4 million in the nine months ended December 31, 2001 compared to
$173.3 million in the fiscal year 2001. Our management discussion and analysis
which follows is based on a comparison of the nine months ended December 31,
2001 to the comparable nine month period in 2000.
14
NINE MONTHS ENDED DECEMBER 31, 2001 COMPARED WITH NINE MONTHS ENDED DECEMBER 31,
2000 -- RESULTS OF OPERATIONS
Revenues decreased $137.8 million to $1,347.8 million for the nine months
ended December 31, 2001 compared to $1,485.6 million for the nine months ended
December 31, 2000, a decrease of 9.3%. The decline in revenues was primarily due
to the reduction in railcar shipments and prices offset by increased revenues of
$47.3 million due to the Thrall acquisition.
The following table reconciles the revenue amounts discussed under each
segment with the consolidated total revenues shown in the Selected Financial
Data (in millions).
NINE MONTHS ENDED DECEMBER 31, 2001 NINE MONTHS ENDED DECEMBER 31, 2000
------------------------------------- -------------------------------------
REVENUES REVENUES
------------------------------------- -------------------------------------
OUTSIDE INTERSEGMENT TOTAL OUTSIDE INTERSEGMENT TOTAL
--------- ------------- --------- --------- ------------- ---------
Rail Group................... $ 521.3 $ 142.8 $ 664.1 $ 639.3 $ 166.9 $ 806.2
Construction Products
Group...................... 427.2 5.0 432.2 432.4 9.6 442.0
Inland Barge Group........... 148.2 -- 148.2 144.5 -- 144.5
Industrial Products Group.... 106.7 2.3 109.0 127.1 4.5 131.6
Railcar Leasing and
Management Services
Group...................... 94.0 -- 94.0 108.6 -- 108.6
All Other.................... 50.4 28.1 78.5 33.7 30.0 63.7
Eliminations & Corporate
Items...................... -- (178.2) (178.2) -- (211.0) (211.0)
-------- ------- -------- -------- ------- --------
Consolidated Total........... $1,347.8 $ -- $1,347.8 $1,485.6 $ -- $1,485.6
======== ======= ======== ======== ======= ========
Operating loss increased $8.5 million to $16.4 million for the nine months
ended December 31, 2001 compared to $7.9 million for the same period in 2000.
The increase was caused by a $29.3 million decrease in operating profits because
of lower revenues, higher cost of revenues and the additional Thrall costs of
$52.9 million offset by lower selling, engineering and administrative expenses.
Additionally, special charges for the nine months ended December 31, 2001 were
$20.8 million lower than the amount recorded for the same period in 2000.
Selling, engineering and administrative expenses decreased $32.4 million to
$129.7 million for the nine months ended December 31, 2001 compared to $162.1
million for the period in 2000, a decrease of 20.0%. The decrease was a result
of lower head counts, cost reduction efforts and a lesser amount of special
charges.
Interest expense, net of interest income, increased $3.4 million to $19.2
million for the nine months ended December 31, 2001 compared to $15.8 million
for the same period in 2000, an increase of 21.5%. The increase was primarily
attributable to lower interest income.
Other, net decreased $25.6 million to $4.9 million for the nine months
ended December 31, 2001 from $30.5 million for the same period in 2000, a 83.9%
decrease. This decrease was due to the write down of equity investments during
the nine months ended December 31, 2000.
The current year effective tax rate of 14.3% is due to lower foreign tax
rates and valuation allowances.
Net loss for the nine months ended December 31, 2001 was $34.7 million, or
$0.90 per diluted share as compared to a net loss of $34.7 million, or $0.92 per
diluted share, the same period in 2000.
TRINITY RAIL GROUP
NINE MONTHS
ENDED
DECEMBER 31,
---------------
2001 2000
------ ------
(IN MILLIONS)
Revenues.............................. $664.1 $806.2
Operating profit (loss) including
unusual charges..................... $(65.8) $ 3.4
Operating profit (loss) before unusual
charges............................. $(15.5) $ 36.6
Operating profit (loss) margin before
unusual charges..................... (2.3)% 4.5%
Revenues declined 17.6% for the nine months ended December 31, 2001
compared to the same period in 2000. This decline is due to the current downturn
in the North American railcar industry
15
offset by increased revenues of $47.3 million due to the Thrall acquisition.
Railcar units shipped dropped 22% compared to the prior year to approximately
7,800 cars. Operating profit margins were impacted by the inefficiencies of
lower production levels, costs associated with more frequent changeovers to
different car types and sizes, price pressures in the current competitive
environment, and additional costs from Thrall. With the current railcar market,
shipments are expected to decline further to 5,000 to 7,000 in fiscal year 2002
resulting in a very competitive market.
In the nine months ended December 31, 2001 railcar sales to Trinity
Industries Leasing Company included in the Rail Group results were $139.2
million compared to $162.8 million in the same period in 2000 with profit of
$6.6 million compared to $12.2 million for the same period in 2000. Sales to
Trinity Industries Leasing Company and related profits are eliminated in
consolidation.
CONSTRUCTION PRODUCTS GROUP
NINE MONTHS
ENDED
DECEMBER 31,
---------------
2001 2000
------ ------
(IN MILLIONS)
Revenues.............................. $432.2 $442.0
Operating profit including unusual
charges............................. $ 45.6 $ 25.8
Operating profit before unusual
charges............................. $ 46.5 $ 39.5
Operating profit margin before unusual
charges............................. 10.8% 8.9%
Revenues declined 2.2% for the nine months ended December 31, 2001 compared
to the same period in 2000. The decrease in revenues was primarily attributable
to exiting the flange and valve business offset by increased revenue and profits
related to improved weather conditions in the concrete and aggregate and bridge
business. Operating profit margins increased as a result of cost reduction
associated with the consolidation of plants and elimination of unprofitable
products.
INLAND BARGE GROUP
NINE MONTHS
ENDED
DECEMBER 31,
---------------
2001 2000
------ ------
(IN MILLIONS)
Revenues.............................. $148.2 $144.5
Operating profit including unusual
charges............................. $ 9.8 $ 9.9
Operating profit before unusual
charges............................. $ 9.8 $ 14.3
Operating profit margin before unusual
charges............................. 6.6% 9.9%
Revenues increased 2.6% for the nine months ended December 31, 2001
compared to the same period in 2000. The increase in revenues was attributable
to increased deliveries of tank barges offset by lower volumes in hopper barge
sales. The decrease in Inland Barge operating profit margin is mainly due to
competitive price pressures for both hopper barges and tank barges.
INDUSTRIAL PRODUCTS GROUP
NINE MONTHS
ENDED
DECEMBER 31,
---------------
2001 2000
------ ------
(IN MILLIONS)
Revenues.............................. $109.0 $131.6
Operating profit including unusual
charges............................. $ 3.9 $ 6.5
Operating profit before unusual
charges............................. $ 3.9 $ 7.2
Operating profit margin before unusual
charges............................. 3.6% 5.5%
Revenues declined 17.2% for the nine months ended December 31, 2001
compared to the same period in 2000. The decline in revenues is primarily
attributable to reduced demand from gas distributors and pricing pressures in
the Mexico liquified petroleum gas market.
Sales of propane cylinders in Mexico have been negatively affected by a
temporary halt in purchasing by Mexican propane distributors related to price
controls and other matters. When these issues will be resolved, and the impact
on Trinity's consolidated profits, cannot be determined.
RAILCAR LEASING AND MANAGEMENT SERVICES GROUP
NINE MONTHS
ENDED
DECEMBER 31,
---------------
2001 2000
------ ------
(IN MILLIONS)
Revenues.............................. $ 94.0 $108.6
Operating profit...................... $ 30.2 $ 34.2
Operating profit margin............... 32.1% 31.5%
Revenues declined 13.4% for the nine months ended December 31, 2001
compared to the same period in 2000. The decrease in revenues was due to a
decline in quantity of railcars sold offset by increases in lease revenues from
net additions to the lease fleet and an increase in the fleet managed under
management agreements. Included in the results of this group are revenues from
the sale of railcars from the lease fleet of $20.9 million in the nine months
ended December 31, 2001 and $48.3 million in the same period in 2000, and
operating profits of $2.6 million in the nine months ended December 31, 2001 and
$8.8 million in the same period in 2000.
16
ALL OTHER
Revenues in All Other increased from $63.7 million in the nine months ended
December 31, 2000 to $78.5 million in the nine months ended December 31, 2001,
due primarily to recording wind tower revenues for the entire period compared to
the prior period start-up year. This increase is partially offset by
discontinuing the operations of TEMCO during the same period in 2000. TEMCO
produced concrete mixers, concrete batch plants and component parts for concrete
related industries.
Operating loss was $21.1 for the nine months ended December 31, 2001, and
$44.4 in the same period in 2000. Restructuring charges included in the nine
months ended December 31, 2000 were $20.9 million primarily related to exiting
the TEMCO business referred to above and environmental liabilities.
Restructuring charges for the nine months ended December 31, 2001 were $13.1
million primarily related to exiting our internet related business and to our
wind tower business which has been affected by the Enron bankruptcy. Excluding
restructuring charges, a larger operating loss was recorded in the same period
in 2000 due primarily to operating losses associated with TEMCO recorded in such
period.
FISCAL YEAR 2001 COMPARED WITH FISCAL YEAR 2000 -- RESULTS OF OPERATIONS
Revenues decreased $836.3 million to $1,904.3 million in fiscal 2001
compared to $2,740.6 million in fiscal 2000, a decrease of 30.5%. The decline
was due to the reduction in railcar shipments and prices, a $13.4 million
decline in liquid petroleum gas container sales and our decision to exit the
flange and valve business.
The following table reconciles the revenue amounts disclosed under each
segment with the consolidated total revenue shown in the Selected Financial Data
(in millions).
YEAR ENDED MARCH 31, 2001 YEAR ENDED MARCH 31, 2000
REVENUES REVENUES
---------------------------------- ----------------------------------
OUTSIDE INTERSEGMENT TOTAL OUTSIDE INTERSEGMENT TOTAL
-------- ------------ -------- -------- ------------ --------
Rail Group................... $ 818.0 $281.7 $1,099.7 $1,632.0 $ 66.3 $1,698.3
Construction Products
Group...................... 549.0 11.1 560.1 581.4 10.1 591.5
Inland Barge Group........... 202.9 0.1 203.0 210.1 -- 210.1
Industrial Products Group.... 160.3 9.8 170.1 179.2 8.1 187.3
Railcar Leasing and
Management Services
Group...................... 128.7 -- 128.7 131.5 -- 131.5
All Other.................... 45.4 45.8 91.2 6.4 54.4 60.8
Eliminations & Corporate
Items...................... -- (348.5) (348.5) -- (138.9) (138.9)
-------- ------ -------- -------- ------- --------
Consolidated Total........... $1,904.3 $ -- $1,904.3 $2,740.6 $ -- $2,740.6
======== ====== ======== ======== ======= ========
Operating profit decreased to a loss of $66.1 million in fiscal year 2001
compared to an operating profit of $279.0 million for fiscal year 2000. The
decrease was caused by a decrease in operating profits because of lower revenues
and higher cost of revenues and selling, engineering and administrative
expenses. Additionally, we incurred special operating charges of $140.9 million
for fiscal year 2001 primarily due to restructuring and plant closers.
Selling, engineering and administrative expenses increased $30.3 to $213.7
million in fiscal year 2001 compared to $183.4 million in fiscal year 2000, an
increase of 16.5%. This increase is primarily a result of international
expansion and expenses associated with start-up operations and development
activities plus $15.6 million in special charges.
Interest expense, net of interest income, increased $3.6 million to $22.0
million in fiscal year 2001 compared to $18.4 million for fiscal year 2000, an
increase of 19.6%. This increase was primarily due to a higher level of
short-term debt outstanding during fiscal year 2001 offset by higher interest
income.
Other income, net changed from income of $2.3 million in fiscal year 2000
to a loss of
17
$28.2 million in fiscal year 2001 primarily due to the unusual charges from the
write down of equity investments noted above.
The current year benefit for income taxes is primarily related to the
deferred tax deductions attributable for the unusual charges. We believe that
this asset is fully realizable given current tax carry back availability and
existing deferred tax liabilities.
Net loss in fiscal year 2001 was $74.4 million, or $1.98 loss per share as
compared to net income of $165.5 million, or $4.15 per diluted share, in fiscal
year 2000.
TRINITY RAIL GROUP
2001 2000
-------- --------
(IN MILLIONS)
Revenues........................... $1,099.7 $1,698.3
Operating profit (loss) including
unusual charges.................. $ (35.2) $ 174.6
Operating profit before unusual
charges.......................... $ 40.3 $ 174.6
Operating profit margin before
unusual charges.................. 3.7% 10.3%
Revenues declined 35.2% in fiscal year 2001 compared to fiscal year 2000.
This decline is due to the current downturn in the North American railcar
industry. Railcar units shipped dropped 37% compared to the prior year to
approximately 14,000 cars. Operating profit margins were negatively impacted by
the inefficiencies of lower production levels, costs associated with more
frequent changeovers to different car types and sizes, and price pressures in
the current competitive environment.
Fiscal year 2001 railcar sales to Trinity Industries Leasing were $262.5
million compared to $67.5 million in the prior year with profit of $17.7 million
compared to $6.6 million in fiscal year 2000. Sales to Trinity Industries
Leasing and the related profit are eliminated in consolidation.
CONSTRUCTION PRODUCTS GROUP
2001 2000
------ ------
(IN MILLIONS)
Revenues.............................. $560.1 $591.5
Operating profit including unusual
charges............................. $ 29.1 $ 62.1
Operating profit before unusual
charges............................. $ 42.8 $ 62.1
Operating profit margin before unusual
charges............................. 7.6% 10.5%
Revenue declined 5.3% in fiscal year 2001 compared to fiscal year 2000. An
increase in revenues of beam and girders for highway bridges were offset by a
decline in both highway safety products and concrete and aggregate. The decline
in concrete and aggregate was due to the significant increase in adverse weather
conditions experienced in fiscal year 2001 in the Texas market compared to
fiscal year 2000. Operating profit and operating profit margins declined due to
the inefficiencies of lower volumes caused by the poor weather and softer
pricing in selected markets.
INLAND BARGE GROUP
2001 2000
------ ------
(IN MILLIONS)
Revenues.............................. $203.0 $210.1
Operating profit including unusual
charges............................. $ 11.7 $ 25.7
Operating profit before unusual
charges............................. $ 16.1 $ 25.7
Operating profit margin before unusual
charges............................. 7.9% 12.2%
Revenues declined 3.4% for fiscal year 2001 compared to fiscal year 2000.
The decrease in Inland Barge revenues and operating profit is mainly due to
competitive price pressures for both hopper barges and tank barges. These
factors are primarily a result of depressed freight rates, which negatively
impacted the Inland Barge group customers and reduced grain exports.
INDUSTRIAL PRODUCTS GROUP
2001 2000
------ ------
(IN MILLIONS)
Revenues.............................. $170.1 $187.3
Operating profit including unusual
charges............................. $ 5.4 $ 13.0
Operating profit before unusual
charges............................. $ 6.1 $ 13.0
Operating profit margin before unusual
charges............................. 3.6% 6.9%
Revenue declined 9.2% in fiscal 2001 compared to fiscal 2000. The decline
in revenues is primarily attributable to reduced demand in the liquid petroleum
gas market and competitive pricing pressures. Operating profits declined
primarily due to pricing pressures in the container head products market and the
Mexico liquid petroleum gas market.
Sales of propane cylinders in Mexico have been negatively affected by a
temporary halt in purchasing by Mexican propane distributors related to price
controls and other matters.
18
RAILCAR LEASING AND MANAGEMENT SERVICES GROUP
2001 2000
------ ------
(IN MILLIONS)
Revenues.............................. $128.7 $131.5
Operating profit...................... $ 42.0 $ 51.3
Operating profit margin............... 32.3% 39.0%
Operating profit declined in fiscal year 2001 compared to fiscal year 2000
due to lower profits on car sales, higher operating expenses related to leasing
and management fleet expansion and higher lease expenses from leverage lease
transactions.
Included in the results of this group are revenues from the sale of
railcars from the lease fleet of $50.1 million in fiscal year 2001 and $57.9
million in fiscal year 2000, and operating profits of $9.0 million in fiscal
year 2001 and $14.7 million in fiscal year 2000.
ALL OTHER
Revenues in All Other increased from $60.8 million in fiscal year 2000 to
$91.2 million in fiscal year 2001 due primarily to start-up businesses, TEMCO
and wind towers. TEMCO produced concrete mixers, concrete batch plants and
component parts for concrete related industries. This business was closed and
certain assets were sold in the fourth quarter of fiscal year 2001.
Operating loss increased to $59.1 million in fiscal year 2001 from $8.2
million in fiscal year 2000. Operating loss for fiscal year 2001 includes
restructuring charges of $20.9 million primarily related to exiting the TEMCO
business as referred to above and environmental liabilities. This remaining
operating decline was due primarily to operating losses recorded by TEMCO in
fiscal year 2001.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for the nine months ended
December 31, 2001 increased to $200.1 million compared to $56.0 million for the
same period in 2000. The increase was due to working capital changes, primarily
reduced accounts receivable and inventory balances. Capital expenditures for the
nine months ended December 31, 2001 were $133.3 million, of which $86.9 million
were for additions to the lease portfolio. This compares to $229.3 million of
capital expenditures for the same period last year, of which $152.5 million was
for additions to the lease portfolio. Proceeds from the sale of property, plant
and equipment were $188.2 million for the nine months ended December 31, 2001
composed primarily of the sale of cars from the lease fleet, compared to $55.8
million for the same period in 2000.
During the nine months ended December 31, 2001, the Company completed a
committed revolving bank facility for $450 million. Amounts borrowed under the
facility bear interest at LIBOR plus 0.95% or other alternative rates at the
Company's option (3.09% at December 31, 2001) and can be converted to a one-year
term in June 2002. The agreement requires maintenance of ratios related to
interest coverage, leverage, and minimum net worth and restricts the amount of
dividend payments. Accounts receivable and inventory are pledged as collateral
for this facility. At December 31, 2001, $95.4 million was available under the
facility. Proceeds from the facility were used to repay outstanding short-term
debt as of March 31, 2001.
We expect to finance future operating requirements with net cash flow from
operations, long-term and short-term debt, and privately placed equity.
Continued worsening of the railcar market, declines in other businesses, the
need to invest in additions to the railcar lease fleet or other factors could
result in exceeding certain ratios in our debt covenants in the second half of
the year. The debt covenant ratios that could be exceeded are the ratios of debt
to EBITDA and EBITDA to interest expense. Based on discussion with our lead
banks, we expect to renegotiate or replace existing debt agreements including
changes to debt covenants and, if necessary, to take other actions designed to
prevent exceeding debt covenant limitations.
On February 15, 2002, Trinity Industries Leasing sold $170,000,000 of
2002-1 Pass Through Certificates with interest payments at 7.755%, commencing on
August 15, 2002 and due semiannually thereafter. Equipment notes issued by
Trinity Industries Leasing for the benefit of the holders of the Pass Through
Certificates are collateralized by interest in certain railcars owned by Trinity
Industries Leasing and the leases pursuant to which such railcars are leased to
customers. The equipment notes, including the obligations to make payments of
principal and interest thereon are direct obliga-
19
tions of Trinity Industries Leasing and are fully and unconditionally guaranteed
by Trinity as guarantor.
On March 6, 2002, we privately placed a total of 1.5 million unregistered
shares of our common stock for net proceeds of $31.5 million. We are obligated
to register these shares.
SALE/LEASEBACK TRANSACTION
During the nine months ended December 31, 2001, we completed an off balance
sheet financing arrangement for $199.0 million in railcars. We 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 $6.5 million of cash
collateral discussed herein. 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. The debt is repayable by the trust
over 19 years.
Trinity, through a newly formed, wholly owned, qualified subsidiary, leased
the cars from the trust and subleased the railcars to independent third party
customers. Future operating lease obligations of our subsidiary under the lease
agreement are as follows (in millions): 2002 -- $17.0; 2003 -- $16.8;
2004 -- $17.1; 2005 -- $16.3; 2006 -- $15.8; and $225.5 thereafter. Future
minimum rental revenues from subleased railcars as of December 31, 2001 are as
follows (in millions): 2002 -- $19.5; 2003 -- $18.2; 2004 -- $16.8;
2005 -- $14.1; 2006 -- $12.8 and $76.9 thereafter.
Under the terms of the operating lease agreement, Trinity has the option to
purchase the railcars from the trust at the end of sixteen years at a
predetermined, fixed price. Trinity also has an option to purchase the railcars
at the end of the lease agreement at the then fair market value of the railcars.
At the expiration of the operating lease agreement, Trinity has no further
obligation or ownership interest in the assets of the trust.
Included in our accompanying consolidated balance sheet are cash and
railcars totaling $28.4 million which are pledged as collateral for the duration
of the lease obligations to the trust and an additional $6.5 million of cash
which is pledged as collateral for the equity investor's investment. 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 in order for excess cash flow, as defined, from the leases 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 of the trust, amounts due by the trust
under the terms of debt to the financial institutions, or equity of the trust
are reflected on the consolidated balance sheet of Trinity.
20
CONTRACTUAL OBLIGATION AND COMMERCIAL COMMITMENTS.
As of December 31, 2001, we had the following contractual obligations (in
millions):
PAYMENTS DUE BY PERIOD
-------------------------------------
1 YEAR 2-3 4-5 AFTER 5
CONTRACTUAL OBLIGATIONS TOTAL OR LESS YEARS YEARS YEARS
----------------------- ------ ------- ------ ----- -------
Long-term debt.................................. $476.3 $11.5 $291.0 $50.5 $123.3
Operating leases................................ 50.7 10.1 17.4 13.2 10.0
------ ----- ------ ----- ------
Total........................................... $527.0 $21.6 $308.4 $63.7 $133.3
====== ===== ====== ===== ======
As of December 31, 2001, we had the following other commercial commitments
(in millions):
AMOUNT OF COMMITMENT EXPIRATION PER PERIOD
TOTAL --------------------------------------------
AMOUNTS 1 YEAR 2-3 4-5 AFTER 5
OTHER COMMERCIAL COMMITMENTS COMMITTED OR LESS YEARS YEARS YEARS
---------------------------- --------- ------- ------- ------- --------
Letters of Credit.......................... $ 81.2 $16.4 $ 0.2 $ 0.6 $ 64.0
Operating leases under sale/leaseback
transaction.............................. 308.5 17.0 33.9 32.1 225.5
------ ----- ----- ----- ------
$389.7 $33.4 $34.1 $32.7 $289.5
====== ===== ===== ===== ======
INFLATION
Changes in price levels of products and services did not significantly
affect our operations during the nine months ended December 31, 2001 or in
fiscal years 2001 and 2000.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Our earnings are affected by changes in interest rates due to the impact
those changes have on our variable rate debt obligations, which represented
approximately 96% of our total debt as of December 31, 2001. We have hedged a
portion of this exposure with interest rate swaps leaving approximately 49% of
our total debt exposed to fluctuations in interest rates. If interest rates
average one percentage point more in fiscal year 2002 than they did during the
nine months ended December 31, 2001, our interest expense would increase by
approximately $2.3 million. In comparison, at March 31, 2001, we estimated that
if interest rates averaged one percentage point more in fiscal year 2002 than
they did in fiscal year 2001, interest expense would have increased by
approximately $4.9 million. The impact of an increase in interest rates was
determined based on the impact of the hypothetical change in interest rates and
scheduled principal payments on our variable-rate debt obligations as of
December 31, 2001 and March 31, 2001.
In addition, we are subject to market risk related to our net investments
in our foreign subsidiaries. The net investment in foreign subsidiaries as of
December 31, 2001 is $209.8 million. However, the impact of such market risk
exposures as a result of foreign exchange rate fluctuations has not been
material to us.
21
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
TRINITY INDUSTRIES, INC.,
INDEX TO FINANCIAL STATEMENTS
PAGE
----
Report of Independent Auditors.............................. 23
Consolidated Statement of Operations for the nine months
ended December 31, 2001 and 2000 (unaudited) and for the
years ended March 31, 2001 and 2000....................... 24
Consolidated Balance Sheet as of December 31, 2001 and March
31, 2001.................................................. 25
Consolidated Statement of Cash Flows for the nine months
ended December 31, 2001 and 2000 (unaudited) and for the
years ended March 31, 2001 and 2000....................... 26
Consolidated Statement of Stockholders' Equity for the nine
months ended December 31, 2001 and for the years ended
March 31, 2001 and 2000................................... 27
Notes to Consolidated Financial Statements.................. 28
22
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Trinity Industries, Inc.
We have audited the accompanying consolidated balance sheets of Trinity
Industries, Inc. as of December 31, 2001 and March 31, 2001, and the related
consolidated statement of operations, cash flows and stockholders' equity for
the nine months ended December 31, 2001 and for each of the two years in the
period ended March 31, 2001. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. These standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Trinity
Industries, Inc. at December 31, 2001 and March 31, 2001, and the consolidated
results of its operations and its cash flows for the nine months ended December
31, 2001 and for each of the two years in the period ended March 31, 2001, in
conformity with accounting principles generally accepted in the United States.
ERNST & YOUNG LLP
Dallas, Texas
March 13, 2002
23
TRINITY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED
DECEMBER 31, YEAR ENDED MARCH 31,
----------------------- --------------------
2001 2000 2001 2000
-------- ----------- -------- --------
(UNAUDITED)
(IN MILLIONS EXCEPT PER SHARE DATA)
Revenues......................................... $1,347.8 $1,485.6 $1,904.3 $2,740.6
Operating costs:
Cost of revenues............................... 1,234.5 1,331.4 1,756.7 2,278.2
Selling, engineering and administrative
expenses.................................... 129.7 162.1 213.7 183.4
-------- -------- -------- --------
1,364.2 1,493.5 1,970.4 2,461.6
-------- -------- -------- --------
Operating profit (loss).......................... (16.4) (7.9) (66.1) 279.0
Other (income) expense:
Interest income................................ (2.5) (5.5) (6.9) (2.0)
Interest expense............................... 21.7 21.3 28.9 20.4
Other, net..................................... 4.9 30.5 28.2 (2.3)
-------- -------- -------- --------
24.1 46.3 50.2 16.1
-------- -------- -------- --------
Income (loss) before income taxes................ (40.5) (54.2) (116.3) 262.9
Provision (benefit) for income taxes:
Current........................................ 3.3 17.8 3.8 84.4
Deferred....................................... (9.1) (37.3) (45.7) 13.0
-------- -------- -------- --------
(5.8) (19.5) (41.9) 97.4
-------- -------- -------- --------
Net income (loss)................................ $ (34.7) $ (34.7) $ (74.4) $ 165.5
======== ======== ======== ========
Net income (loss) per common share:
Basic.......................................... $ (0.90) $ (0.92) $ (1.98) $ 4.17
======== ======== ======== ========
Diluted........................................ $ (0.90) $ (0.92) $ (1.98) $ 4.15
======== ======== ======== ========
Weighted average number of shares outstanding:
Basic.......................................... 38.7 37.6 37.5 39.7
Diluted........................................ 38.7 37.6 37.5 39.9
See accompanying notes to consolidated financial statements.
24
TRINITY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, MARCH 31,
2001 2001
------------ ---------
(IN MILLIONS)
ASSETS
Cash and cash equivalents................................... $ 22.2 $ 13.5
Receivables (net of allowance for doubtful accounts of $9.5
at December 31, 2001 and $4.8 at March 31, 2001).......... 204.3 245.7
Inventories:
Raw materials and supplies................................ 159.5 235.5
Work in process........................................... 42.4 43.5
Finished goods............................................ 73.3 73.5
-------- --------
275.2 352.5
Property, plant and equipment, at cost...................... 1,434.9 1,534.1
Less accumulated depreciation............................... (555.8) (541.7)
-------- --------
879.1 992.4
Goodwill.................................................... 415.7 77.3
Other assets................................................ 155.5 144.5
-------- --------
$1,952.0 $1,825.9
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable............................................... $ -- $ 33.8
Accounts payable and accrued liabilities.................... 424.9 364.2
Long-term debt.............................................. 476.3 504.0
Deferred income taxes....................................... -- 7.1
Other liabilities........................................... 41.4 37.8
-------- --------
942.6 946.9
Stockholders' equity:
Common stock -- shares issued and outstanding at December
31, 2001 -- 51.0; at March 31, 2001 -- 43.8............ 51.0 43.8
Capital in excess of par value............................ 464.7 291.8
Retained earnings......................................... 703.4 759.4
Accumulated other comprehensive loss...................... (26.0) (21.1)
Treasury stock (6.6 shares at December 31, 2001 and 7.0
shares at March 31, 2001).............................. (183.7) (194.9)
-------- --------
1,009.4 879.0
-------- --------
$1,952.0 $1,825.9
======== ========
See accompanying notes to consolidated financial statements.
25
TRINITY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT CASH FLOWS
NINE MONTHS
ENDED YEAR ENDED
DECEMBER 31, MARCH 31,
--------------------- -----------------
2001 2000 2001 2000
------- ----------- ------- -------
(UNAUDITED)
(IN MILLIONS)
Operating activities:
Net income (loss)................................... $ (34.7) $ (34.7) $ (74.4) $ 165.5
Adjustments to reconcile net income (loss) to net
cash provided (required) by operating activities:
Depreciation and amortization.................. 66.2 69.8 89.1 80.3
Deferred income taxes.......................... (9.1) (37.3) (45.7) 13.0
Gain on sale of property, plant, equipment and
other assets................................ (1.1) (9.8) (11.2) (10.5)
Unusual charges................................ 66.4 117.5 173.3 --
Other.......................................... 2.5 1.9 1.0 2.4
Changes in assets and liabilities, net of
effects from acquisitions and unusual
charges:
Decrease in receivables................... 78.9 122.9 92.3 17.4
(Increase) decrease in inventories........ 112.8 (59.6) (24.3) 43.0
(Increase) decrease in other assets....... (5.2) (53.7) (33.3) 2.8
Decrease in accounts payable and accrued
liabilities............................ (80.3) (55.1) (75.1) (60.4)
Increase (decrease) in other
liabilities............................ 3.7 (5.9) (0.8) 14.7
------- ------- ------- -------
Total adjustments...................... 234.8 90.7 165.3 102.7
------- ------- ------- -------
Net cash provided by operating activities............. 200.1 56.0 90.9 268.2
Investing activities:
Proceeds from sale of property, plant, equipment and
other assets..................................... 188.2 55.8 62.8 77.7
Capital expenditures................................ (133.3) (229.3) (350.2) (167.2)
Payment for purchase of acquisitions, net of cash
acquired......................................... (165.0) (13.7) (13.5) (25.6)
------- ------- ------- -------
Net cash required by investing activities........... (110.1) (187.2) (300.9) (115.1)
Financing activities:
Issuance of common stock............................ -- -- -- 2.3
Net borrowings (repayments) of short-term debt...... (35.8) 235.5 323.7 (10.9)
Payments to retire long-term debt................... (25.5) (51.4) (55.5) (27.5)
Stock repurchases................................... -- (34.6) (34.6) (84.9)
Dividends paid...................................... (20.0) (20.4) (27.0) (28.7)
------- ------- ------- -------
Net cash provided (required) by financing
activities....................................... (81.3) 129.1 206.6 (149.7)
------- ------- ------- -------
Net increase (decrease) in cash and equivalents....... 8.7 (2.1) (3.4) 3.4
Cash and equivalents at beginning of period........... 13.5 16.9 16.9 13.5
------- ------- ------- -------
Cash and equivalents at end of period................. $ 22.2 $ 14.8 $ 13.5 $ 16.9
======= ======= ======= =======
Interest paid for the nine months ended December 31, 2001 and 2000 and years
ended March 31, 2001 and 2000 was $22.3, $18.3, $29.0, and $20.7, respectively.
See accompanying notes to consolidated financial statements.
26
TRINITY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
COMMON COMMON CAPITAL
SHARES STOCK IN EXCESS
(100,000,000 $1.00 PAR OF PAR RETAINED
AUTHORIZED) VALUE VALUE EARNINGS
------------ --------- --------- --------
(IN MILLIONS EXCEPT SHARE AND PER SHARE DATA)
Balance at March 31, 1999...... 43,705,636 $43.7 $292.6 $722.9
Net income................... -- -- -- 165.5
Currency translation
adjustments................ -- -- -- --
Comprehensive income.........
Cash dividends ($0.72 per
share)..................... -- -- -- (27.8)
Stock repurchases............ -- -- -- --
Other........................ 90,715 0.1 2.5 --
---------- ----- ------ ------
Balance at March 31, 2000...... 43,796,351 43.8 295.1 860.6
Net loss..................... -- -- -- (74.4)
Currency translation
adjustments................ -- -- -- --
Comprehensive loss...........
Cash dividends ($0.72 per
share)..................... -- -- -- (26.8)
Stock repurchases............ -- -- -- --
Other........................ -- -- (3.3) --
---------- ----- ------ ------
Balance at March 31, 2001...... 43,796,351 43.8 291.8 759.4
Net loss..................... -- -- -- (34.7)
Currency translation
adjustments................ -- -- -- --
Unrealized loss on derivative
financial instruments...... -- -- -- --
Comprehensive loss...........
Cash dividends ($0.54 per
share)..................... -- -- -- (21.3)
Stock issued for mergers and
acquisitions............... 7,150,000 7.2 175.8 --
Other........................ -- -- (2.9) --
---------- ----- ------ ------
Balance at December 31, 2001... 50,946,351 $51.0 $464.7 $703.4
========== ===== ====== ======
ACCUMULATED
OTHER TREASURY TOTAL
COMPREHENSIVE TREASURY STOCK AT STOCKHOLDERS'
LOSS SHARES COST EQUITY
------------- ---------- -------- -------------
(IN MILLIONS EXCEPT SHARE AND PER SHARE DATA)
Balance at March 31, 1999...... $(20.6) (2,363,932) $ (79.5) $ 959.1
Net income................... -- -- -- 165.5
Currency translation
adjustments................ 0.8 -- -- 0.8
--------
Comprehensive income......... 166.3
Cash dividends ($0.72 per
share)..................... -- -- -- (27.8)
Stock repurchases............ -- (2,941,839) (84.9) (84.9)
Other........................ -- (149,972) (0.2) 2.4
------ ---------- ------- --------
Balance at March 31, 2000...... (19.8) (5,455,743) (164.6) 1,015.1
Net loss..................... -- -- -- (74.4)
Currency translation
adjustments................ (1.3) -- -- (1.3)
--------
Comprehensive loss........... (75.7)
Cash dividends ($0.72 per
share)..................... -- -- -- (26.8)
Stock repurchases............ -- (1,618,900) (34.6) (34.6)
Other........................ -- 121,257 4.3 1.0
------ ---------- ------- --------
Balance at March 31, 2001...... (21.1) (6,953,386) (194.9) 879.0
Net loss..................... -- -- -- (34.7)
Currency translation
adjustments................ (0.4) -- -- (0.4)
Unrealized loss on derivative
financial instruments...... (4.5) -- -- (4.5)
--------
Comprehensive loss........... (39.6)
Cash dividends ($0.54 per
share)..................... -- -- -- (21.3)
Stock issued for mergers and
acquisitions............... -- 34,000 1.3 184.3
Other........................ -- 310,864 9.9 7.0
------ ---------- ------- --------
Balance at December 31, 2001... $(26.0) (6,608,522) $(183.7) $1,009.4
====== ========== ======= ========
See accompanying notes to consolidated financial statements.
27
TRINITY INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The financial statements of Trinity Industries, Inc. and its consolidated
subsidiaries ("Trinity" or the "Company") include the accounts of all majority
owned subsidiaries. The equity method of accounting is used for companies in
which the Company has significant influence and less than 50% ownership. All
significant intercompany accounts and transactions have been eliminated.
CHANGE IN YEAR END
In September 2001 the Company changed its year end from March 31 to
December 31. Unless stated otherwise, all references to "fiscal year 2000" shall
mean the full fiscal year ended March 31, 2000 and "fiscal year 2001" shall mean
the full fiscal year ended March 31, 2001.
REVENUE RECOGNITION
The Company generally recognizes revenue when products are shipped or
services are provided. Revenues for contracts providing for a large number of
units and few deliveries are recorded as the individual units are produced,
inspected and accepted by the customer. Revenue from rentals and operating
leases are recorded monthly as the fees accrue.
INCOME TAXES
The liability method is used to account for income taxes. Deferred income
taxes are provided for the temporary effects of differences in the recognition
of revenues and expenses for financial statement and income tax reporting
purposes. Valuation allowances reduce deferred tax assets to an amount that will
more likely than not be realized.
NET INCOME (LOSS) PER SHARE
For fiscal year 2000 diluted net income per common share is based on the
weighted average shares outstanding plus the assumed exercise of dilutive stock
options less the number of treasury shares assumed to be purchased from the
proceeds using the average market price of Trinity's common stock. Basic net
income per common share is based on the weighted average number of common shares
outstanding for the period. The numerator for both basic net income (loss) per
common share and diluted net income per common share is net income (loss). The
difference between the denominator in the basic calculation and the denominator
in the diluted calculation is attributable to the effect of employee stock
options. Diluted loss per common share for the nine months ended December 31,
2001 and for fiscal 2001 is based only on the weighted average number of common
shares outstanding during the period, as the inclusion of stock options would
have been antidilutive. The amounts of antidilutive options for the nine months
ended December 31, 2001 and 2000 and for fiscal years 2001 and 2000 were
173,422, 66,739, 58,019 and 222,745, respectively.
FINANCIAL INSTRUMENTS
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
Financial instruments which potentially subject the Company to
concentration of credit risk are primarily cash investments and receivables. The
Company places its cash investments in investment grade, short-term debt
instruments and limits the amount of credit exposure to any one commercial
issuer. Concentrations of credit risk with respect to receivables are limited
due to control procedures to monitor the credit worthiness of customers, the
large number of customers in the Company's customer base, and their dispersion
across different industries and geographic areas. The Company maintains an
allowance for losses based upon the expected collectibility of all receivables.
Effective April 1, 2001, the Company adopted SFAS 133, Accounting for
Derivative Instruments and Hedging Activities. In accordance with SFAS 133, the
Company formally documents all hedging instruments and assesses on an ongoing
basis whether hedging transactions are highly effective. It is the Company's
policy not to speculate in hedging activities. All hedging instruments
outstanding at December 31, 2001 have been designated as cash flow hedges and
are considered highly effective. The adoption of SFAS 133 did not have a
material impact on the Company's financial statements.
28
Interest rate swap agreements are utilized to reduce the impact of changes
in interest rates on certain debt. During the nine months ended December 31,
2001, the Company entered into eight interest rate swap agreements with a total
notional amount of $225.0 million which expire in 2002 and 2003. The Company
pays an average fixed rate of 4.30% and receives a floating rate based on the
three-month LIBOR rates. As of December 31, 2001, the fair value of these swaps
was recorded as a liability on the Company's books of $4.5 million with the
offset to other comprehensive income.
Foreign operations give rise to risks from changes in foreign currency
exchange rates. Forward exchange contracts with established financial
institutions are utilized to hedge a portion of such risk. Realized and
unrealized gains and losses are deferred and recognized in earnings concurrent
with the hedged transaction. Although forward exchange contracts are entered
into to mitigate the impact of currency fluctuations, certain exposure remains
that may affect operating results. As of December 31, 2001, the fair value of
the forward exchange contracts is not material.
INVENTORIES
Inventories are valued at the lower of cost or market, with cost determined
principally on the specific identification method. Market is replacement cost or
net realizable value.
PROPERTY, PLANT AND EQUIPMENT
Depreciation and amortization are generally computed by the straight-line
method over the estimated useful lives of the assets, generally 2 to 30 years.
The costs of ordinary maintenance and repair are charged to expense while
renewals and major replacements are capitalized.
The Company recognizes an impairment on its long-lived assets if the sum of
the expected future cash flows generated by an asset or group of assets is less
than the carrying amount of the respective asset(s). The Company measures an
impairment loss of its assets to be disposed of by the amount by which the
carrying amount of the asset exceeds the fair value of the asset.
INSURANCE
The Company's insurance for workers' compensation is effectively
self-insured. A third party administrator is used to process claims. The Company
accrues the workers' compensation liability based upon on independent actuarial
study.
WARRANTIES
The Company provides for the estimated cost of product warranties at the
time revenue is recognized.
FOREIGN CURRENCY TRANSLATION
Operations outside the United States prepare financial statements in
currencies other than the United States Dollar; the income statement amounts are
translated at average exchange rates for the year, while the assets and
liabilities are translated at year-end exchange rates. Translation adjustments
are accumulated as a separate component of stockholders' equity and
comprehensive income.
COMPREHENSIVE INCOME (LOSS)
Comprehensive income (loss) is defined as the change in equity of a
business enterprise during a period from transactions and other events and
circumstances from non-owner sources. Comprehensive income (loss) consists of
net income (loss), foreign currency translation adjustments and the effective
unrealized portions of changes in fair value of the Company's derivative
financial instruments.
STOCK-BASED COMPENSATION
Compensation expense for stock-based employee compensation is measured
using the method prescribed by Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees. If material, pro forma disclosures of
net earnings (loss) and earnings (loss) per common share will be made as if the
method prescribed by Statement of Financial Accounting Standards (SFAS) No. 123,
Accounting for stock Based Compensation, had been applied in measuring
compensation expense.
MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
29
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain reclassifications have been made to prior year statements to
conform to the current period presentation primarily related to segment
information.
PROSPECTIVE ACCOUNTING CHANGES
In October 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, which is effective for fiscal years
beginning after December 15, 2001. SFAS 144 addresses accounting and reporting
of long-lived assets, except goodwill, that are held and used or disposed of
through sale or other means. The Company, while currently evaluating the impact
of this statement on the consolidated financial statements, does not believe it
will have a significant impact.
NOTE 2. SEGMENT INFORMATION
As of December 31, 2001, the Company modified its segment reporting to
align the reportable segments with current management responsibilities and
internal reporting.
The new reporting format includes the following business segments: (1) the
Trinity Rail group, which manufactures and sells railcars and component parts;
(2) the Construction 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 sells container heads and pressure and
non-pressure containers for the storage and transportation of liquefied gases
and other liquid and dry products; and (5) the Trinity Railcar Leasing and
Management Services group, which provides services such as fleet management and
leasing. Finally, All Other includes the Company's captive insurance and
transportation companies, structural towers, and other peripheral businesses.
Sales from Trinity Rail group to Trinity Railcar Leasing and Management
Services group are recorded in Trinity Rail group and eliminated in
consolidation. Sales of railcars from the lease fleet are included in the
Trinity Railcar Leasing and Management Services group segment. Sales among
groups are recorded at prices comparable to external customers.
The financial information for these segments is shown in the tables below.
The Company operates principally in the continental United States, Mexico,
Romania, the United Kingdom, the Czech Republic, Brazil, Switzerland and
Slovakia. Intersegmental sales are at market prices.
NINE MONTHS ENDED DECEMBER 31, 2001
REVENUES OPERATING
---------------------------------- PROFIT DEPRECIATION & CAPITAL
OUTSIDE INTERSEGMENT TOTAL (LOSS) ASSETS AMORTIZATION EXPENDITURES
-------- ------------ -------- --------- -------- -------------- ------------
(IN MILLIONS)
Rail Group................ $ 521.3 $ 142.8 $ 664.1 $(65.8) $ 868.7 $21.3 $ 22.9
Construction Products
Group................... 427.2 5.0 432.2 45.6 250.0 18.7 11.9
Inland Barge Group........ 148.2 -- 148.2 9.8 86.6 2.7 1.8
Industrial Products
Group................... 106.7 2.3 109.0 3.9 104.6 4.7 5.3
Railcar Leasing and
Management Services
Group................... 94.0 -- 94.0 30.2 482.8 11.4 87.6
All Other................. 50.4 28.1 78.5 (21.1) 52.5 3.9 2.3
Eliminations & Corporate
Items................... -- (178.2) (178.2) (19.0) 106.8 3.5 1.5
-------- ------- -------- ------ -------- ----- ------
Consolidated Total........ $1,347.8 $ -- $1,347.8 $(16.4) $1,952.0 $66.2 $133.3
======== ======= ======== ====== ======== ===== ======
30
YEAR ENDED MARCH 31, 2001
REVENUES OPERATING
---------------------------------- PROFIT DEPRECIATION & CAPITAL
OUTSIDE INTERSEGMENT TOTAL (LOSS) ASSETS AMORTIZATION EXPENDITURES
-------- ------------ -------- --------- -------- -------------- ------------
(IN MILLIONS)
Rail Group................ $ 818.0 $ 281.7 $1,099.7 $(35.2) $ 596.7 $24.4 $ 35.2
Construction Products
Group................... 549.0 11.1 560.1 29.1 282.4 27.5 28.0
Inland Barge Group........ 202.9 0.1 203.0 11.7 77.2 4.3 1.7
Industrial Products
Group................... 160.3 9.8 170.1 5.4 155.6 5.2 12.4
Railcar Leasing and
Management Services
Group................... 128.7 -- 128.7 42.0 553.1 14.0 259.8
All Other................. 45.4 45.8 91.2 (59.1) 63.2 7.0 10.7
Eliminations & Corporate
Items................... -- (348.5) (348.5) (60.0) 97.7 6.7 2.4
-------- ------- -------- ------ -------- ----- ------
Consolidated Total........ $1,904.3 $ -- $1,904.3 $(66.1) $1,825.9 $89.1 $350.2
======== ======= ======== ====== ======== ===== ======
YEAR ENDED MARCH 31, 2000
REVENUES OPERATING
---------------------------------- PROFIT DEPRECIATION & CAPITAL
OUTSIDE INTERSEGMENT TOTAL (LOSS) ASSETS AMORTIZATION EXPENDITURES
-------- ------------ -------- --------- -------- -------------- ------------
(IN MILLIONS)
Rail Group................ $1,632.0 $ 66.3 $1,698.3 $174.6 $ 739.5 $23.9 $ 38.1
Construction Products
Group................... 581.4 10.1 591.5 62.1 314.7 25.9 27.8
Inland Barge Group........ 210.1 -- 210.1 25.7 63.6 5.2 1.5
Industrial Products
Group................... 179.2 8.1 187.3 13.0 120.1 4.1 11.4
Railcar Leasing and
Management Services
Group................... 131.5 -- 131.5 51.3 359.2 9.2 64.2
All Other................. 6.4 54.4 60.8 (8.2) 53.5 6.0 7.8
Eliminations & Corporate
Items................... -- (138.9) (138.9) (39.5) 87.9 6.0 16.4
-------- ------- -------- ------ -------- ----- ------
Consolidated Total........ $2,740.6 $ -- $2,740.6 $279.0 $1,738.5 $80.3 $167.2
======== ======= ======== ====== ======== ===== ======
Total revenues from external customers attributed to foreign operations for
the nine months ended December 31, 2001 and for fiscal years 2001 and 2000 are
$102.2 million, $99.5 million, and $71.9 million, respectively. The Rail Group
includes revenues from one customer that accounted for 12.6 percent of
consolidated revenues in fiscal 2000. Long-lived assets located outside the
United States for the nine months ended December 31, 2001 and for fiscal 2001
and 2000 are $159.4 million, $179.2 million, an $136.6 million, respectively.
Corporate assets are composed of cash and equivalents, notes receivable,
land held for investment, certain property, plant and equipment, and other
assets. Capital expenditures do not include business acquisitions.
NOTE 3. UNUSUAL CHARGES
In December 2001, the Company recorded special pretax charges of $66.4
million ($50.4 million after tax), or $1.30 per share, related primarily to
restructuring the Company's Rail Group in connection with the Thrall merger in
North America and in Europe and other matters.
31
COSTS INCLUDED IN THE CHARGES ARE SUMMARIZED AS FOLLOWS:
TOTAL RESERVES AT
CHARGES DECEMBER 31, 2001
------- -----------------
(IN MILLIONS)
Property, plant & equipment -- write-downs to net realizable
value and related plant closing costs..................... $46.5 $ 9.9
Severance costs -- approximately 2,100 employees............ 3.8 3.8
----- -----
Railcar restructuring charges.......................... 50.3 13.7
Asset write-downs and exit costs related to wholly owned
businesses................................................ 15.5 0.2
Non railcar severance -- 11 employees....................... 0.6 0.6
----- -----
Total charges.......................................... $66.4 $14.5
===== =====
The reserves at December 31, 2001 represent future cash requirements.
Classification of the charges by segment and income statement line items are
shown below:
CONSTRUCTION ALL
RAILCAR PRODUCTS OTHER TOTAL
------- ------------ ----- -----
(IN MILLIONS)
Cost of revenues.......................................... $46.1 $0.8 $ 9.9 $56.8
Selling, engineering & administrative..................... 4.2 0.1 3.2 7.5
----- ---- ----- -----
Charged to operating profit............................... 50.3 0.9 13.1 64.3
Other (income) expense.................................... -- -- -- 2.1
----- ---- ----- -----
Total charges........................................... $50.3 $0.9 $13.1 $66.4
===== ==== ===== =====
In fiscal year 2001, the Company recorded pretax charges of $173.3 million
($110.9 million after tax), or $2.96 per share, related primarily to
restructuring the Company's railcar operations, exiting the flange and valve
businesses, writing down certain inventory, curtailing international barge
operations, environmental liabilities associated with previously closed
facilities, litigation reserve for an adverse jury verdict, write-down of
certain equity investments and acquired assets, including a 20% investment in a
Russian transportation company obtained with the acquisition of Transcisco
Industries in the fall of 1996, and other charges.
32
Costs included in the fiscal year 2001 charges are summarized as follows:
RESERVES RESERVES
TOTAL MARCH 31, ADDITIONAL DECEMBER 31,
CHARGES 2001 CHARGES PAYMENTS WRITE-OFFS 2001
------- --------- ---------- -------- ---------- ------------
(IN MILLIONS)
Property, plant & equipment
-- write-downs to net
realizable value to be
disposed of and related
shut-down costs and other
asset write-downs.......... $ 81.7 $24.1 $2.2 $ (2.1) $(15.2) $ 9.0
Inventory write-down......... 14.2 0.4 0.5 -- (0.9) --
Environmental liabilities.... 11.8 11.8 0.1 (0.8) -- 11.1
Severance costs.............. 7.8 2.6 -- (0.7) (0.8)(1) 1.1
Adverse jury verdict......... 14.8 14.8 -- -- -- 14.8
Equity investment
write-downs:
Russian transportation
company................. 17.0 -- -- -- -- --
Other equity investments... 20.5 -- -- -- -- --
------ ----- ---- ------ ------ -----
Total equity investment
write-downs........... 37.5 -- -- -- -- --
Other........................ 5.5 3.7 -- (0.9) (0.2) 2.6
------ ----- ---- ------ ------ -----
$173.3 $57.4 $2.8 $ (4.5) $(17.1) $38.6
====== ===== ==== ====== ====== =====
---------------
(1) Reversal
Classification of the charges by segment are shown below:
RAILCAR
LEASING &
CONSTRUCTION INLAND INDUSTRIAL MANAGEMENT CORPORATE
RAILCAR PRODUCTS BARGE PRODUCTS SERVICES & OTHER TOTAL
------- ------------ ------ ---------- ---------- --------- ------
(IN MILLIONS)
Cost of revenues.................... $73.7 $13.7 $4.4 $0.7 $-- $32.8 $125.3
Selling, engineering
& administrative.................. 6.7 -- -- -- -- 8.9 15.6
----- ----- ---- ---- -- ----- ------
Charged to operating profit......... 80.4 13.7 4.4 0.7 -- 41.7 140.9
Other (income) expense.............. -- -- -- -- -- -- 32.4
----- ----- ---- ---- -- ----- ------
Total charges..................... $80.4 $13.7 $4.4 $0.7 $-- $41.7 $173.3
===== ===== ==== ==== == ===== ======
The Company estimated the fair market value of properties no longer in use
or held for sale based on the location and condition of the properties, the fair
market value of similar properties in the area, and the experience of the
Company in the selling of similar properties in the past.
NOTE 4. ACQUISITIONS AND DIVESTITURES
On October 26, 2001, Trinity completed a merger transaction with privately
owned Thrall Car Manufacturing Company (Thrall). The results of Thrall's
operations have been included in the consolidated financial statements since
that date. Thrall is a leading railcar manufacturer, with operations in both the
United States and Europe. This merger combines Trinity's strength in the tank
car segment, Thrall's strength in auto rack manufacturing, and the Company's
research and development expertise across the entire spectrum of railcars.
Trinity expects to reduce costs through improvements in supply chain
performance, greater plant efficiency, the development of dedicated production
lines, and more flexible production and delivery options. The aggregate purchase
price was $372.5 million including $165.5 million of cash, a working capital
adjustment per the merger agreement of $18.4 million, transaction fees of $5.2
million, and common stock valued at $183.4 million. In addition, Trinity under
certain circumstances has agreed to make additional payments, not to exceed $45
million over five years, based on a formula related to annual railcars industry
production levels.
33
The value of the 7.15 million common shares issued was determined based on the
average market price of Trinity's common shares over the period including two
days before and after the terms of the merger were agreed to and announced.
The following table summarizes the estimated fair values of the assets
acquired and liabilities assumed at the date of acquisition (in millions).
OCTOBER 26, 2001
----------------
Current assets......................... $ 86.2
Property, plant, and equipment......... 37.8
Intangible assets -- patents........... 2.9
Goodwill............................... 336.6
------
Total assets acquired................ 463.5
Current liabilities.................... 91.0
------
Net assets acquired.................... $372.5
======
The $336.6 million of goodwill was assigned to the Rail group and that
amount is expected to be deductible for tax purposes.
The following unaudited pro forma consolidated results of operations are
presented below as if the merger with Thrall had been made at the beginning of
the periods presented. The pro forma consolidated results of operations include
adjustments to give effect to interest expense on acquisition debt and certain
other adjustments, together with related income tax effects. The unaudited pro
forma information is not necessarily indicative of the results of operations
that would have occurred had the merger been made at the beginning of the
periods presented or the future results of the combined operations.
NINE MONTHS ENDED YEAR ENDED
DECEMBER 31, MARCH 31,
2001 2001
----------------- ----------
Revenues................. $1,544.1 $2,562.6
Net loss................. (50.1) (65.9)
Loss per share:
Basic.................. $ (1.13) $ ( 1.47)
Diluted................ $ (1.13) $ ( 1.47)
Results for the nine months ended December 31, 2001 include after-tax
charges of $50.4 million ($1.30 per share) related to restructuring the Rail
Group in connection with the Thrall merger and the down cycle in the railcar
industry and other matters. Results for the fiscal year ended March 31, 2001
included after-tax charges of $110.9 million ($2.96 per share) primarily related
to the restructuring of Trinity's railcar operations, investment and asset
write-downs, litigation reserves and other charges.
On November 9, 2001, Trinity purchased 100% of the outstanding ownership
interests of Transport Capital LLC, a privately held asset management and
advisory services company serving the rail transportation industry owned by a
group of individuals. The aggregate purchase price was $2.1 million including
$1.3 million of cash and 34 thousand shares of common stock held in treasury
valued at $0.8 million. Goodwill amounted to $1.8 million, and none of that
amount is expected to be deductible for tax purposes. Goodwill was assigned to
Railcar Leasing and Management Services group.
The Company made certain acquisitions during fiscal years 2001 and 2000
accounted for by the purchase method. The aggregate purchase price for these
acquisitions was $30.6 million and $87.4 million, respectively. Goodwill of
$14.5 million and $9.3 million was recorded on the 2001 and 2000 acquisitions,
respectively. The acquired operations have been included in the consolidated
financial statements from the effective dates of the acquisitions. Proforma
results would not have been materially different from actual results for any
year presented.
During fiscal year 2001, the Company made the decision to discontinue the
operations of TEMCO, which produced concrete mixers, concrete batch plants and
component parts for concrete related industries. Certain assets associated with
this business were sold in March 2001.
NOTE 5. PROPERTY, PLANT AND EQUIPMENT
DECEMBER 31, MARCH 31,
2001 2001
------------ ---------
(IN MILLIONS)
Land........................... $ 51.5 $ 51.9
Buildings and improvements..... 286.4 280.5
Machinery...................... 539.5 538.4
Equipment on lease............. 536.4 627.9
Construction in progress....... 21.1 35.4
-------- --------
$1,434.9 $1,534.1
======== ========
Equipment on lease consists primarily of railcars leased by third parties.
The Company enters into lease contracts with third parties with terms generally
ranging between one and fifteen years, wherein equipment manufactured by Trinity
is leased for a specified type of service over the term
34
of the contract. The Company enters primarily into operating leases. Future
minimum rental revenues on leases in each fiscal year are (in millions):
2002 -- $44.5; 2003 -- $37.0; 2004 -- $33.7; 2005 -- $30.5; 2006 -- $21.9; and
$160.9 thereafter. Equipment on lease with a net book value of $343.7 million is
pledged as collateral for long-term debt.
The Company leases certain equipment under operating leases. Future minimum
rent expense on these leases in each fiscal year are (in millions):
2002 -- $10.1; 2003 -- $9.6; 2004 -- $7.8; 2005 -- $6.6; 2006 -- $6.6; and $10.0
thereafter.
NOTE 6. GOODWILL
The Company adopted SFAS No. 142, Goodwill and Other Intangible Assets,
effective April 1, 2001. Under SFAS No. 142, goodwill is no longer amortized but
reviewed for impairment annually or more frequently if certain indicators arise.
The Company has completed the impairment test required upon adoption of SFAS No.
142 and determined there is no impairment to its recorded goodwill balances.
Goodwill by segment is as follows (in millions):
DECEMBER 31, MARCH 31,
2001 2001
------------ ---------
Rail........................... $416.5 $79.9
Construction Products.......... 5.2 5.2
Industrial Products............ 1.6 1.6
Railcar Leasing and Management
Services..................... 1.8 --
------ -----
425.1 86.7
Accumulated amortization....... (9.4) (9.4)
------ -----
$415.7 $77.3
====== =====
Had the Company been accounting for its goodwill under SFAS No. 142 for
fiscal 2001 and 2000, the Company's net income (loss) and earning (loss) per
share would have been as follows (in millions except per share amounts):
YEARS ENDED
MARCH 31,
---------------
2001 2000
------ ------
Reported net income (loss)............. $(74.4) $165.5
Add back goodwill amortization, net of
tax.................................. 2.5 1.8
------ ------
Adjusted net income (loss)............. $(71.9) $167.3
====== ======
Basic earnings (loss) per share:
Reported net income (loss)............. $(1.98) $ 4.17
Goodwill amortization, net of tax...... .07 .05
------ ------
Adjusted net income (loss)............. $(1.91) $ 4.22
====== ======
Diluted earnings (loss) per share:
Reported net income (loss)............. $(1.98) $ 4.15
Goodwill amortization, net of tax...... .07 .05
------ ------
Adjusted net income (loss)............. $(1.91) $ 4.20
====== ======
NOTE 7. DEPOSIT AGREEMENT
The Company entered into a deposit agreement with Altos Hornos de Mexico,
SA de C.V. ("AHMSA") which provides for funds to be deposited with AHMSA which
are then used along with other funds from the Company to purchase steel from
AHMSA. As of December 31, 2001, total funds on deposit including interest due
amounted to approximately $45.8 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.
Should AHMSA not be able to operate under the declaration of suspension of
payments because of its financial condition, AHMSA's creditors have no access to
the funds on deposit and all funds on deposit with AHMSA under Mexican law
should be returned to the Company. Trinity recovered $10.4 million of this
deposit through inventory purchases in the nine months ended December 31, 2001.
The timing of future collections of the deposit balance will depend on the rate
of steel purchases.
35
NOTE 8. DEBT
DECEMBER 31, MARCH 31,
2001 2001
------------ ---------
(IN MILLIONS)
Notes payable.................. $ -- $ 33.8
====== ======
Revolving bank facility........ $288.0 $460.0
6.0-9.25 percent industrial
development revenue bonds
payable in varying amounts
through 2005................. 1.0 1.3
3.0-8.0 percent promissory
notes, generally payable
annually through 2015........ 4.0 4.2
6.96-9.44 percent equipment
trust certificates to
institutional investors
generally payable in
semi-annual installments of
varying amounts through
2003......................... 10.5 34.3
7.755 percent equipment trust
certificates to institutional
investors generally payable
in semi-annual installments
of varying amounts through
2009......................... 170.0 --
11.3 percent notes payable
monthly through 2003......... 2.8 4.2
------ ------
$476.3 $504.0
====== ======
During the nine months ended December 31, 2001, the Company completed a
committed revolving bank facility for $450 million. Amounts borrowed under the
facility bear interest at LIBOR plus 0.95% or other alternative rates at the
Company's option (3.09% at December 31, 2001) and can be converted to a one-year
term in June 2002. The agreement requires maintenance of ratios related to
interest coverage, leverage, and minimum net worth and restricts the amount of
dividend payments. Accounts receivable and inventory are pledged as collateral
for this facility. At December 31, 2001, $95.4 million was available under the
facility. Proceeds from the facility were used to repay outstanding short-term
debt as of March 31, 2001. Such amounts have been classified as long-term in the
consolidated financial statements as of December 31, 2001 and March 31, 2001.
Debt covenant ratios related to interest coverage and leverage could be exceeded
in fiscal 2002. Based on discussions with its lead banks, the Company expects to
renegotiate or replace existing debt agreements including changes to debt
covenants and, if necessary, to take other actions designed to prevent exceeding
debt covenant limitations.
On February 15, 2002, Trinity Industries Leasing Company ("TILC") sold
$170,000,000 of 2002-1 Pass Through Certificates with interest at 7.755%,
commencing on August 15, 2002 and due semiannually thereafter. Equipment notes
issued by TILC for the benefit of the holders of the Pass Through Certificate
are collateralized by interest in certain railcars owned by TILC and the leases
pursuant to which such railcars are leased to customers. The equipment notes,
including the obligations to make payments of principal and interest thereon are
direct obligations of TILC and are fully and unconditionally guaranteed by
Trinity Industries, Inc. as guarantor.
The proceeds of $170 million from the issuance of the equipment notes were
used to repay outstanding indebtedness of Trinity as of December 31, 2001 and
therefore such amounts are shown as long-term debt in the accompanying
consolidated financial statements.
The fair value of non-traded, fixed-rate outstanding debt, estimated using
discounted cash flow analysis, approximates its carrying value. Principal
payments due during the next five years are 2002 -- $11.5; 2003 -- $290.7; 2004
-- $0.3; 2005 -- $40.2; 2006 -- $10.3; and $123.3 thereafter. As of December 31,
2001, the Company had $81.2 million in outstanding letters of credit.
NOTE 9. SALE/LEASEBACK FINANCING
During the nine months ended December 31, 2001, the Company completed an
off balance sheet financing 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 $6.5 million of
cash collateral discussed herein. 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. The debt is repayable by the trust
over 19 years.
Trinity, through a newly formed, wholly owned, qualified subsidiary, leased
the cars from the trust and subleased the railcars to independent third party
customers. Future operating lease obligations of the Company's subsidiary under
the lease agreement are as follows (in millions): 2002 -- $17.0; 2003 -- $16.8;
2004 -- $17.1; 2005 -- $16.3; 2006 -- $15.8; and $225.5 thereafter. Future
minimum rental revenues from subleased railcars as of December 31, 2001 are as
follows (in millions);
36
2002 -- $19.5; 2003 -- $18.2; 2004 -- $16.8; 2005 -- $14.1; 2006 -- $12.8 and
$76.9 thereafter.
Under the terms of the operating lease agreement, Trinity has the option to
purchase the railcars from the trust at the end of sixteen years at a
predetermined, fixed price. Trinity also has an option to purchase the railcars
at the end of the lease agreement at the then fair market value of the railcars.
At the expiration of the operating lease agreement, Trinity has no further
obligation or ownership interest in the assets of the trust.
Included in the Company's accompanying consolidated balance sheet are cash
and railcars totaling $28.4 million which are pledged as collateral for the
duration of the lease obligations to the trust and an additional $6.5 million of
cash which is pledged as collateral for the equity investor's investment.
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 in order for excess cash flow, as defined, from the
leases 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 of the trust, amounts due by the trust
under the terms of debt to the financial institutions, or equity of the trust
are reflected on the consolidated balance sheet of Trinity.
NOTE 10. OTHER, NET
Other (income) expense consists of the following items (in millions):
NINE MONTHS YEAR ENDED
ENDED MARCH 31,
DECEMBER 31, -------------
2001 2001 2000
------------ ----- -----
Gain on sale of property,
plant and equipment...... $(1.0) $(8.8) $(2.3)
Foreign exchange
transactions............. 1.5 (0.6) 0.6
Investment write-downs..... 1.9 36.2 --
Loss on equity
investments.............. 1.8 2.4 --
Other...................... 0.7 (1.0) (0.6)
----- ----- -----
Other, net............... $ 4.9 $28.2 $(2.3)
===== ===== =====
NOTE 11. INCOME TAXES
The components of the provision (benefit) for income taxes are:
NINE MONTHS YEAR ENDED
ENDED MARCH 31,
DECEMBER 31, --------------
2001 2001 2000
------------ ------ -----
Current:
Federal................. $ 4.6 $ 2.5 $78.5
State................... (0.5) 1.1 5.2
Foreign................. (0.8) 0.2 0.7
----- ------ -----
3.3 3.8 84.4
Deferred.................. (9.1) (45.7) 13.0
----- ------ -----
Provision (benefit)....... $(5.8) $(41.9) $97.4
===== ====== =====
Deferred income taxes represent the tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The components of
deferred tax liabilities and assets are:
DECEMBER 31, MARCH 31,
2001 2001
------------ ---------
Deferred tax liabilities:
Depreciation................. $99.3 $97.4
Deductions related to
inventory of foreign
operations................. 15.7 --
Other foreign deferred
liabilities................ 2.6 11.4
----- -----
117.6 108.8
----- -----
Deferred tax assets:
Pensions and other
benefits................... 42.9 43.1
Accounts receivable,
inventory, and other asset
valuation accounts......... 62.4 48.0
Foreign net operating loss
carryforwards.............. 8.2 6.3
Other foreign deferred
assets..................... 8.4 --
Other........................ 0.8 4.3
----- -----
Total deferred tax assets.... 122.7 101.7
Valuation allowance.......... (3.1) --
----- -----
Deferred tax assets net of
valuation allowance........ 119.6 101.7
----- -----
Net deferred tax (assets)
liabilities.................. $(2.0) $ 7.1
===== =====
The Company has established a valuation allowance for net foreign operating
loss carry forwards due to uncertainty regarding the realizability of these
foreign losses. These net operating losses expire between 2006 and 2010.
The provision (benefit) for income taxes results in effective tax rates
different from the statutory rates. The following is a reconciliation between
the
37
statutory U.S. federal income tax rate and the Company's effective income tax
rate:
NINE MONTHS YEAR ENDED
ENDED MARCH 31,
DECEMBER 31, -----------
2001 2001 2000
------------ ---- ----
Statutory rate............... 35.0% 35.0% 35.0%
State taxes.................. 0.8 1.4 1.3
Valuation allowance.......... (7.6) -- --
Foreign rate differential.... (5.0) -- --
Unutilized prior year tax
credits.................... (3.3) -- --
Other (net).................. (5.6) (0.4) 0.8
---- ---- ----
Effective tax rate........... 14.3% 36.0% 37.1%
==== ==== ====
For the nine months ended December 31, 2001 and in fiscal 2001 and 2000,
income taxes of ($3.9), $11.7, and $85.2, respectively, were paid net of refunds
received. Income (loss) before income taxes for the nine months ended December
31, 2001 and for fiscal 2001 and 2000, was ($23.4), ($124.8) and $252.9,
respectively, for U.S. operations, and ($17.1), $8.5 and $10.0, respectively,
for foreign operations. The Company has not has provided U.S. deferred income
taxes on the undistributed earnings of its foreign subsidiaries based on the
determination that such earnings will be indefinitely reinvested. Undistributed
earnings of the Company's foreign subsidiaries were $19.7 as of December 31,
2001.
NOTE 12. EMPLOYEE RETIREMENT PLANS
The Company sponsors defined benefit pension and defined contribution
profit sharing plans which provide income and death benefits for eligible
employees.
NINE MONTHS YEAR ENDED
ENDED MARCH 31
DECEMBER 31, -----------------
2001 2001 2000
------------- ------- -------
(IN MILLIONS EXCEPT PERCENT DATA)
ACTUARIAL ASSUMPTIONS
Obligation discount
rate................... 7.50% 7.75% 8.25%
Compensation increase
rate................... 4.75% 4.75% 4.75%
Long-term rate of return
on plan assets......... 9% 9% 9%
EXPENSE COMPONENTS
Service cost............. $ 8.2 $ 10.1 $ 13.5
Interest................. 10.7 13.3 12.9
Expected return on
assets................. (11.4) (15.5) (14.3)
Amortization and
deferral............... 0.1 (0.7) (0.1)
Profit sharing........... 3.3 5.5 4.2
------ ------ ------
Net expense.............. $ 10.9 $ 12.7 $ 16.2
====== ====== ======
BENEFIT OBLIGATIONS
Beginning of year........ $188.6 $164.0 $163.2
Service cost............. 8.2 10.1 13.5
Interest................. 10.7 13.3 12.9
Benefits paid............ (6.2) (5.4) (5.0)
Actuarial (gain) loss.... (6.0) 6.6 (20.6)
------ ------ ------
End of year.............. $195.3 $188.6 $164.0
====== ====== ======
Under funded plans....... $182.2 $179.6 $ 6.1
====== ====== ======
Over funded plans........ $ 13.1 $ 9.0 $157.9
====== ====== ======
PLANS' ASSETS
Beginning of year........ $168.8 $169.1 $160.0
Actual return on
assets................. 6.3 (8.8) 11.4
Employer contributions... 7.5 13.9 2.7
Benefits paid............ (6.2) (5.4) (5.0)
------ ------ ------
End of year.............. $176.4 $168.8 $169.1
====== ====== ======
Under funded plans....... $159.3 $158.5 $ --
====== ====== ======
Over funded plans........ $ 17.1 $ 10.3 $169.1
====== ====== ======
CONSOLIDATED BALANCE
SHEET COMPONENTS
Funded status............ $ 19.0 $ 19.9 $ (5.1)
Unamortized transition
obligation............. 0.9 1.1 1.4
Unrecognized prior
service cost........... (0.8) (0.9) (1.1)
Unrecognized gain
(loss)................. (16.5) (17.6) 14.4
------ ------ ------
Net obligation........... $ 2.6 $ 2.5 $ 9.6
====== ====== ======
Accrued.................. $ 12.4 $ 10.0 $ 14.5
Prepaid.................. 9.8 7.5 4.9
------ ------ ------
Net accrued.............. $ 2.6 $ 2.5 $ 9.6
====== ====== ======
38
NOTE 13. STOCK OPTION PLAN
The Company's 1998 Stock Option and Incentive Plan provides for awarding
3,800,000 shares of common stock plus shares covered by forfeited, expired and
canceled options granted under prior plans with a maximum of 1,000,000 shares
being available for issuance as restricted stock or in satisfaction of
performance or other awards. At December 31, 2001, a total of 1,595,503 shares
were available for issuance. The plan provides for the granting of: nonqualified
and incentive stock options having maximum ten-year terms to purchase common
stock at its market value on the award date; stock appreciation rights based on
common stock fair market values with settlement in common stock or cash;
restricted stock; and performance awards with settlement in common stock or cash
on achievement of specific business objectives. Under previous plans,
nonqualified and incentive stock options and restricted shares were granted at
their fair market values. One grant provided for granting reload options for the
remaining term of the original grant at the common stock market value on the
date shares already owned by the optionee are surrendered in payment of the
option exercise.
In connection with the Thrall acquisition, certain employees were granted a
total of 160,000 options to purchase common stock at its market price on the
date of the grant. These stock options, which were approved by the Board of
Directors of the Company, were not granted under the Company's Stock Option and
Incentive Plan.
NINE MONTHS ENDED
DECEMBER 31, YEAR ENDED MARCH 31
-------------------- -------------------------------------------
2001 2001 2000
-------------------- -------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
--------- -------- --------- -------- --------- --------
Outstanding beginning of year....................... 3,065,920 $29.26 2,526,836 $30.33 2,059,983 $29.81
Granted............................................. 1,043,252 20.23 865,200 22.96 636,306 30.06
Exercised........................................... (93,285) 21.85 (186,248) 13.25 (147,309) 21.02
Cancelled........................................... (95,065) 26.49 (139,868) 30.87 (22,144) 36.32
--------- --------- ---------
Outstanding end of year............................. 3,920,822 27.10 3,065,920 29.26 2,526,836 30.33
========= ====== ========= ====== ========= ======
Exercisable......................................... 2,265,996 $29.44 1,589,616 $30.79 1,319,168 $28.32
========= ====== ========= ====== ========= ======
DECEMBER 31, 2001
--------------------------------------------------------------
OUTSTANDING OPTIONS
---------------------------------------
WEIGHTED AVERAGE EXERCISABLE OPTIONS
--------------------------- --------------------
REMAINING WEIGHTED
CONTRACTUAL LIFE EXERCISE AVERAGE
EXERCISE PRICE RANGE SHARES (YEARS) PRICE SHARES PRICE
-------------------- --------- ---------------- -------- --------- --------
$15.94 - $21.25........................................... 1,004,246 7.45 $18.89 270,597 $18.72
22.28 - 23.91........................................... 966,659 6.38 23.17 515,762 23.33
24.67 - 24.67........................................... 160,000 9.82 24.67 160,000 24.67
25.11 - 32.25........................................... 1,072,299 5.59 27.86 732,986 27.74
33.00 - 53.81........................................... 717,618 5.79 43.29 586,651 43.19
--------- ---- ------ --------- ------
$15.94 - $53.81........................................... 3,920,822 6.47 $27.10 2,265,996 $29.44
========= ==== ====== ========= ======
The Company has elected to apply the accounting provisions of Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and
its interpretations and, accordingly, no compensation cost has been recorded for
stock options. The effect of computing compensation cost in accordance with
Statement of Financial Accounting Standards No. 123, "Accounting for Stock Based
Compensation," and the weighted average fair value of options granted during the
nine months ended December 31, 2001 and fiscal year 2001 and 2000 using the
Black-Scholes option
39
pricing method are shown in the accompanying table.
NINE MONTHS YEAR ENDED
ENDED MARCH 31,
DECEMBER 31, ---------------
2001 2001 2000
------------ ------ ------
Estimated fair value per
share of options
granted................ $ 5.99 $ 7.56 $ 9.10
Pro forma:
Net income (loss) (in
millions)............ $(39.7) $(78.7) $162.7
Per diluted share...... $(1.03) $(2.10) $ 4.06
Black-Scholes
assumptions:
Expected option life
(years).............. 6.8 6.8 5.7
Risk-free interest
rate................. 4.8% 4.5% 6.1%
Dividend yield......... 3.7% 3.1% 3.1%
Common stock
volatility........... 0.354 0.328 0.328
The value of the restricted shares at the date of grant is amortized to
expense ratably over the restriction period.
NINE MONTHS YEAR ENDED
ENDED MARCH 31,
DECEMBER 31, ------------------
2001 2001 2000
------------ ------- --------
Shares awarded........ 284,100 -- 50,000
Shares cancelled...... (6,000) (14,000) --
Share restriction
removed............. (10,000) -- --
Outstanding........... 385,600 117,500 131,500
Grant date fair value
per share........... $ 23.04 -- $ 27.94
NOTE 14. STOCKHOLDERS' EQUITY
The Company has adopted a Stockholder's Rights Plan to replace its existing
plan which expired April 27, 1999. On March 11, 1999, the Board of Directors of
the Company declared a dividend distribution of one right for each outstanding
share of the Company's common stock, $1.00 par value, to stockholders of record
at the close of business on April 27, 1999. Each right entitles the registered
holder to purchase from the Company one one-hundredth (1/100) of a share of
Series A Preferred Stock at a purchase price of $200.00 per one one-hundredth
(1/100) of a share, subject to adjustment. The rights are not exercisable or
detachable from the common stock until ten business days after a person or group
acquires beneficial ownership of twelve percent or more of the Company's common
stock or if a person or group commences a tender or exchange offer upon
consummation of which that person or group would beneficially own twelve percent
or more of the common stock. The Company will generally be entitled to redeem
the rights at $0.01 per right at any time until the first public announcement
that a twelve- percent position has been acquired. If any person or group
becomes a beneficial owner of twelve percent or more of the Company's common
stock, each right not owned by that person or related parties enables its holder
to purchase, at the right's purchase price, shares of the Company's common stock
having a calculated value of twice the purchase price of the right.
In connection with the acquisition of Thrall, the Company adopted an
amendment to the Rights Plan which generally permits the former stockholders of
Thrall and its affiliates to beneficially own in excess of twelve percent of the
Company's common stock without triggering the Plan as described above provided
such persons hold the stock in compliance with a stockholders' agreement entered
into in connection with the acquisition.
The Company has authorized and unissued 1.5 million shares of no par value
voting preferred stock.
NOTE 15. CONTINGENCIES
In May of 2001, a judgement in the amount of $14.8 million was entered
against the Company in a lawsuit brought for an alleged breach of contract
involving the proposed production of a composite component for a refrigerated
railcar for the Company. The amount of the judgement was accrued by the Company
in fiscal 2001. The Company intends to appeal this judgement.
The Company is subject to federal, state, local and foreign laws and
regulations relating to the environment and to work places. The Company believes
that it is currently in substantial compliance with such laws and the
regulations promulgated thereunder.
The Company is involved in various proceedings relating to environmental
matters. The Company has provided reserves amounting to $11.6 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 the Company'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
40
litigation or proceeding, that such costs would not be material to the Company.
The Company is involved in various other claims and lawsuits incidental to
its business. In the opinion of management, their claims and suits in the
aggregate will not have a material adverse effect on the Company's consolidated
financial statements.
NOTE 16. SUBSEQUENT EVENT
On March 6, 2002, Trinity privately placed a total of 1.5 million
unregistered shares of its common stock for net proceeds of $31.5 million.
Trinity is obligated to register these shares.
NOTE 17. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
THREE MONTHS THREE MONTHS THREE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
2001 2001 2001 2001
------------ ------------- ------------ ------------
(IN MILLIONS EXCEPT PER SHARE DATA)
Nine months ended December
31, 2001:
Revenues.................... $467.6 $372.9 $507.3 $1,347.8
Operating profit
(loss)(1)................. $ 22.6 18.8 (57.8) (16.4)
Net income (loss)(1)........ $ 9.6 7.9 (52.2) (34.7)
Net income (loss) per common
share(1):
Basic.................. $ 0.26 0.21 (1.23) (0.90)
Diluted................ $ 0.26 0.21 (1.23) (0.90)
THREE MONTHS THREE MONTHS THREE MONTHS NINE MONTHS THREE MONTHS
ENDED ENDED ENDED ENDED ENDED
JUNE 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31, MARCH 31,
2000 2000 2000 2000 2001
------------ ------------- ------------ ------------ ------------
Year ended March 31, 2001:
Revenues.................. $533.7 $550.7 $401.2 $1,485.6 $418.7
Operating profit
(loss)(2).............. $ 37.5 (14.9) (30.5) (7.9) (58.2)
Net income (loss)(3)...... $ 20.9 (13.2) (42.4) (34.7) (39.7)
Net income (loss) per
common share(3):
Basic.................. $ 0.55 (0.35) (1.14) (0.92) (1.08)
Diluted................ $ 0.55 (0.35) (1.14) (0.92) (1.08)
---------------
(1) See notes to consolidated financial statements for a discussion of unusual
charges for the three months ended December 31, 2001.
(2) Unusual charges charged to operating profit (loss) and recorded in the
Company's second, third, and fourth quarters of fiscal 2001 were $48.9
million, $36.2 million, and $55.8 million, respectively.
(3) After tax unusual charges recorded in the Company's second, third, and
fourth quarters of fiscal 2001 were $33.2 million ($0.88 per share), $42.0
million ($1.13 per share), and $35.7 million ($0.97 per share),
respectively.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None
41
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
Information regarding the directors of the Company is incorporated by
reference to the information set forth under the caption "Nominees" in the
Company's proxy statement for the Annual Meeting of Stockholders to be held on
May 13, 2002. Information regarding compliance with Section 16(a) of the
Securities and Exchange Act of 1934 is incorporated by reference to the
information set forth under the caption "Section 16(a) Beneficial Ownership
Reporting Compliance" in the Company's proxy statement for the Annual Meeting of
Stockholders to be held on May 13, 2002.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding compensation of executive officers and directors is
incorporated by reference to the information set forth under the captions
"Compensation for Directors" and "Executive Compensation" in the Company's proxy
statement for the Annual Meeting of Stockholders to be held on May 13, 2002.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information concerning security ownership of certain beneficial owners and
management is incorporated herein by reference from the Company's proxy
statement for the Annual Meeting of Stockholders to be held on May 13, 2002,
under the caption "Security Ownership of Certain Beneficial Owners and
Management."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information regarding certain relationships and related transactions with
director nominees is incorporated by reference to the information set forth
under the captions "Compensation Committee Interlocks and Insider Participation"
and "Certain Relationships and Related Transactions" in the Company's proxy
statement for the Annual Meeting of Stockholders to be held on May 13, 2002.
42
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Financial Statements.
See Item 8.
(b) Financial Statement Schedules.
For the nine months ended December 31, 2001 and the two years ended March
31, 2001 and 2000
II -- Allowance for Doubtful Accounts
(c) Reports on Form 8-K
Trinity filed a Current Report on Form 8-K dated October 29, 2001, amended
by Form 8-K/A filed on December 28, 2001, reporting, under Item 2, the closing
of the transactions pursuant to the agreement and plan of merger with Thrall Car
Manufacturing Company. Pursuant to the Form 8-K/A:
(i) under Item 7, financial statements were filed for Thrall Car
Manufacturing Company as of December 31, 2000 and December 31, 1999, and
pro forma financial statements were filed for the nine month period ended
September 30, 2001 and for the nine month period ended September 30, 2000;
(ii) under Item 5(a), Trinity reported it expected charges related to
restructuring the railcar group in connection with the merger to be in the
range of $50 to $65 million, or $0.75 to $0.97 per share; and
(iii) under Item 5(b), Trinity reported the grant of a valid first and
prior lien on all of Trinity's account's receivable and inventory to JP
Morgan Chase Bank, as Collateral Agent, under the terms of its credit
agreements.
Trinity filed a Current Report on Form 8-K dated February 19, 2002,
reporting, under Item 5, the completion of a $170 million private placement of
secured debt securities. Pursuant to the Form 8-K:
(i) under Item 7, a Pass Through Trust Agreement and Trust Indenture
and Security Agreements were filed.
Trinity filed a Current Report on Form 8-K dated March 6, 2002, reporting
the private placement of 1.5 million shares of its unregistered common stock for
gross proceeds of $31.5 million.
Trinity filed a Current Report on Form 8-K dated March 12, 2002, reporting,
under Item 5, operating results for the three months and nine months ended
December 31, 2001. Pursuant to Form 8-K:
(i) under Item 7, the news release dated February 27, 2002 was filed.
(c) Exhibits
See Index to Exhibits
43
EXHIBIT (23)
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Post-Effective Amendment
No. 3 to the Registration Statement (Form S-8, No. 2-64813), Post-Effective
Amendment No. 1 to the Registration Statement (Form S-8, No. 33-10937),
Registration Statement (Form S-8, No. 33-35514), Registration Statement (Form
S-8, No. 33-73026), Registration Statement (Form S-8, No. 333-77735),
Registration Statement (Form S-8, No. 333-91067), of Trinity Industries, Inc.
and in the related Prospectuses of our reports dated March 13, 2001 with respect
to the consolidated financial statements and schedules of Trinity Industries,
Inc. included in this Annual Report (Form 10-K) for the nine months ended
December 31, 2001.
ERNST & YOUNG LLP
Dallas, Texas
March 19, 2001
44
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Trinity Industries, Inc.
We have audited the consolidated financial statements of Trinity
Industries, Inc. as of December 31, 2001 and March 31, 2001, and for the nine
months ended December 31, 2001 and for each of the two years in the period ended
March 31, 2001, and have issued our report thereon dated March 13, 2002. Our
audits also included the financial statement schedules of Trinity Industries,
Inc. listed in Item 14(a). These schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
ERNST & YOUNG LLP
Dallas, Texas
March 13, 2002
45
SCHEDULE II
TRINITY INDUSTRIES, INC.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
NINE MONTHS ENDED DECEMBER 31, 2001
AND YEARS ENDED MARCH 31, 2001 AND 2000
(IN MILLIONS)
ADDITIONS
BALANCE AT CHARGED TO ACCOUNTS BALANCE
BEGINNING COSTS AND CHARGED AT END
OF PERIOD EXPENSES OFF OF PERIOD
---------- ---------- -------- ---------
Nine Months Ended December 31, 2001.................. $4.8 $10.1 $5.4 $9.5
==== ===== ==== ====
Year Ended March 31, 2001............................ $1.7 $ 5.1 $2.0 $4.8
==== ===== ==== ====
Year Ended March 31, 2000............................ $1.9 $ 0.7 $0.9 $1.7
==== ===== ==== ====
46
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this Annual Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
TRINITY INDUSTRIES, INC. By /s/ JOHN L. ADAMS
Registrant
--------------------------------------------------
John L. Adams
Executive Vice President
March 19, 2002
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons of the Company and in the
capacities and on the dates indicated:
Directors: Directors (continued)
/s/ DAVID W. BIEGLER /s/ DIANA NATALICIO
----------------------------------------- ---------------------------------------------------
David W. Biegler Diana Natalicio
Director Director
March 19, 2002 March 19, 2002
/s/ W. RAY WALLACE
----------------------------------------- ---------------------------------------------------
Craig J. Duchossois W. Ray Wallace
Director Director
March 19, 2002
/s/ RONALD J. GAFFORD
----------------------------------------- Principal Executive Officer:
Ronald J. Gafford
Director /s/ TIMOTHY R. WALLACE
March 19, 2002 ---------------------------------------------------
Timothy R. Wallace
/s/ BARRY J. GALT Chairman, President,
----------------------------------------- Chief Executive Officer and
Barry J. Galt Director
Director March 19, 2002
March 19, 2002
Principal Financial Officer:
/s/ CLIFFORD J. GRUM
----------------------------------------- /s/ JIM S. IVY
Clifford J. Grum ---------------------------------------------------
Director Jim S. Ivy
March 19, 2002 Vice President
March 19, 2002
/s/ JESS T. HAY
----------------------------------------- Principal Accounting Officer
Jess T. Hay
Director /s/ CHARLES MICHEL
March 19, 2002 ---------------------------------------------------
Charles Michel
Controller
March 19, 2002
TRINITY INDUSTRIES, INC.
INDEX TO EXHIBITS
(ITEM 14(A))
NO. DESCRIPTION
--- -----------
(3.1) Certificate of Incorporation of Trinity Industries, Inc., as
amended.
(3.2) By-Laws of Trinity Industries, Inc.
(4.1) Certificate of Incorporation of Trinity Industries, Inc., as
amended (filed as Exhibit 3.1 above).
(4.2) By-Laws of Trinity Industries, Inc. (filed as Exhibit 3.2
above).
(4.3) Specimen Common Stock Certificate of Trinity Industries,
Inc. (incorporated by reference to Exhibit 4.1 to our Annual
Report on Form 10-K for the fiscal year ended March 31,
1999).
(4.4) Rights Agreement dated March 11, 1999 (incorporated by
reference to our Form 8-A filed April 2, 1999).
(4.5) Amendment No. 1 to the Rights Agreement dated as of August
12, 2001, amending the Rights Agreement dated as of March
11, 1999 by and between Trinity Industries, Inc. and the
Bank of New York, as Rights Agent (incorporated by reference
to Exhibit 2 to our Form 8-A/A filed August 22, 2001).
(4.6) Amendment No. 2 to the Rights Agreement dated as of October
26, 2001, amending the Rights Agreement dated as of March
11, 1999 by and between Trinity Industries, Inc. and the
Bank of New York, as Rights Agent, as amended by Amendment
No. 1 to the Rights Agreement, dated August 13, 2001
(incorporated by reference to Exhibit 4 to our Form 8-A/A
filed October 31, 2001).
(4.7) Registration Rights Agreement dated as of October 26, 2001
by and between Trinity Industries, Inc. and Thrall Car
Management, Inc. (filed as an exhibit to Exhibit 10.19
below).
(4.8) Registration Rights Agreement dated as of March 6, 2002 by
and between Trinity Industries, Inc. and Acqua Wellington
Private Placement Fund, Ltd. (incorporated by reference to
Exhibit 4.7 to our Form 8-K filed March 6, 2002).
(4.9) Registration Rights Agreement dated as of March 6, 2002 by
and between Trinity Industries, Inc. and Acqua Wellington
Opportunity I Limited (incorporated by reference to Exhibit
4.8 to our Form 8-K filed March 6, 2002).
(10.1) Fixed Charges Coverage Agreement dated as of January 15,
1980, between Trinity Industries, Inc. and Trinity
Industries Leasing Company (incorporated by reference to
Exhibit 10.1 to Registration Statement No. 2-70378 filed
January 29, 1981).
(10.2) Tax Allocation Agreement dated as of January 22, 1980
between Trinity Industries, Inc. and its subsidiaries
(including Trinity Industries Leasing Company) (incorporated
by reference to Exhibit 10.2 to Registration Statement No.
2-70378 filed January 29, 1981).
(10.3.1) Form of Amended and Restated Executive Severance Agreement,
dated November 7, 2000, entered into between Trinity
Industries, Inc. and Chief Executive Officer, each of the
four most highly paid executive officers other than the
Chief Executive Officer who were serving as executive
officers at the end of the last completed fiscal year, one
other executive officer, and three executive officers of
subsidiaries of Trinity Industries, Inc. (incorporated by
reference to Exhibit 10.1 to our Quarterly Report on Form
10-Q for the quarterly period ended December 31, 2000).*
(10.3.2) Form of Amended and Restated Executive Severance Agreement
dated November 7, 2000, entered into between Trinity
Industries, Inc. and six executive officers and thirteen
subsidiary and divisional officers of Trinity Industries,
Inc. (incorporated by reference to Exhibit 10.1 to our
Quarterly Report on Form 10-Q for the quarterly period ended
December 31, 2000).*
(10.4) Trinity Industries, Inc., Stock Option Plan with Stock
Appreciation Rights (incorporated by reference to
Registration Statement No. 2-64813 filed July 5, 1979, as
amended by Post-Effective Amendment No. 1 dated July 1,
1980, Post-Effective Amendment No. 2 dated August 31, 1984,
and Post-Effective Amendment No. 3 dated July 13, 1990).*
NO. DESCRIPTION
--- -----------
(10.5) Directors' Retirement Plan adopted December 11, 1986, as
amended by Amendment No. 1 dated September 10, 1998
(incorporated by reference to Exhibit 10.5 to our Annual
Report on Form 10-K for the fiscal year ended March 31,
1999).*
(10.6) 1989 Stock Option Plan with Stock Appreciation Rights
(incorporated by reference to Registration Statement No.
33-35514 filed June 20, 1990).*
(10.7) 1993 Stock Option and Incentive Plan (incorporated by
reference to Registration Statement No. 33-73026 filed
December 15, 1993).*
(10.8.1) Supplemental Profit Sharing Plan for Employees of Trinity
Industries, Inc. and Certain Affiliates as restated
effective January 1, 2000 (incorporated by reference to
Exhibit 10.8 to our Annual Report on Form 10-K for the
fiscal year ended March 31, 2000).*
(10.8.2) Amendment dated March 8, 2001 to the Supplemental Profit
Sharing Plan for Employees of Trinity Industries, Inc. and
Certain Affiliates (incorporated by reference to Exhibit
10.8.2 to our Annual Report on Form 10-K for the fiscal year
ended March 31, 2001).*
(10.9) Supplemental Profit Sharing and Deferred Director Fee Trust
dated March 31, 1999 (incorporated by reference to Exhibit
10.10 to our Annual Report on Form 10-K for the fiscal year
ended March 31, 1999).*
(10.10) Supplemental Retirement Plan dated April 1, 1995, as amended
by Amendment No. 1 dated September 14, 1995 and Amendment
No. 2 dated May 6, 1997 (incorporated by reference to
Exhibit 10.11 to our Annual Report on Form 10-K for the
fiscal year ended March 31, 1999).*
(10.11) Deferred Plan for Director Fees dated July 17, 1996, as
amended by Amendment No. 1 dated September 10, 1998
(incorporated by reference to Exhibit 10.12 to our Annual
Report on Form 10-K for the fiscal year ended March 31,
1999).*
(10.11.1) Amendment No. 2 to Defined Plan for Director Fees, dated
December 13, 2001.*
(10.12) Trinity Industries, Inc. 1998 Stock Option and Incentive
Plan (incorporated by reference to Registration Statement
No. 333-77735 filed May 4, 1999).*
(10.12.1) Amendment No. 1 to the Trinity Industries, Inc. 1998 Stock
Option and Incentive Plan.*
(10.12.2) Amendment No. 2 to the Trinity Industries, Inc. 1998 Stock
Option and Incentive Plan (incorporated by reference to
10.12.2 to our Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2001).*
(10.13) Form of Deferred Compensation Plan and Agreement as amended
and restated entered into between Trinity Industries, Inc.
and certain officers of Trinity Industries, Inc. or its
subsidiaries.*
(10.14) Consulting agreement between the Company and W. R. Wallace
effective January 1, 1999 (incorporated by reference to
Exhibit 10.14 to our Annual Report on Form 10-K for the
fiscal year ended March 31, 2000).*
(10.15) Trinity Industries, Inc. Short-Term Management Incentive
Plan (incorporated by reference to Exhibit A to our proxy
statement dated June 19, 2000).*
(10.16) Equipment Lease Agreement (TRL 1 2001-1A) dated as of May
17, 2001 between TRLI-1A Railcar Statutory Trust, lessor,
and Trinity Rail Leasing I L.P., lessee (incorporated by
reference to Exhibit 10.16 to our Form 10-K for the fiscal
year ended March 31, 2001).
(10.16.1) Participation Agreement (TRL 1 2001-1A) dated as of May 17,
2001 among Trinity Rail Leasing I L.P., lessee, et. al.
(10.16.2) Equipment Lease Agreement (TRL 1 2001-1B) dated as of July
12, 2001 between TRL 1 2001-1B Railcar Statutory Trust,
lessor, and Trinity Rail Leasing I L.P., lessee.
(10.16.3) Participation Agreement (TRL 1 2001-1B) dated as of May 17,
2001 among Trinity Rail Leasing I L.P., lessee, et. al.
(10.16.4) Equipment Lease Agreement (TRL 1 2001-1C) dated as of
December 28, 2001 between TRL 1 2001-1C Railcar Statutory
Trust, lessor, and Trinity Rail Leasing 1 L.P., lessee.
(10.16.5) Participation Agreement (TRL 1 2001-1C) dated as of December
28, 2001 among Trinity Rail Leasing I L.P., lessee, et. al.
NO. DESCRIPTION
--- -----------
(10.17) Credit Agreement dated as of June 8, 2001 among Trinity
Industries, Inc, as Borrower, and The Chase Manhattan Bank,
as Administrative Agent, et. al. (incorporated by reference
to Exhibit 10.17 to our Form 10-K for the fiscal year ended
March 31, 2001).
(10.17.1) First Amendment to Credit Agreement dated October 15, 2001
(incorporated by reference to Exhibit 10.17.1 to our
Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 2001).
(10.17.2) Second Amendment to Credit Agreement dated December 10,
2001.
(10.17.3) Third Amendment to Credit Agreement dated February 8, 2002.
(10.18) Term Credit Agreement dated October 15, 2001 among Trinity
Industries, Inc., as borrower, and The Chase Manhattan Bank,
as lender and as administrative agent, et. al. (incorporated
by reference to Exhibit 10.18 to our Quarterly Report on
Form 10-Q for the quarterly period ended September 30,
2001).
(10.18.1) First Amendment to Term Credit Agreement dated December 10,
2001.
(10.18.2) Second Amend to Term Credit Agreement dated February 8,
2002.
(10.19) Agreement and Plan of Merger dated as of August 13, 2001 by
and among Trinity Industries, Inc., TCMC Acquisition Corp.,
Thrall Car Manufacturing Company and Thrall Car Management
Company, Inc. together with the form of Stockholder's
Agreement and Registration Rights Agreement attached thereto
as exhibits (incorporated by reference to Exhibit 2.1 to our
Form 8-K dated August 15, 2001).
(21) Listing of subsidiaries of Trinity Industries, Inc.
(23) Consent of Independent Auditors. (Contained on page 44 of
this document)
---------------
* Management contracts and compensatory plan arrangements.
NOTICE: A copy of Exhibits omitted from the reproduction will be furnished upon
written request to Neil Shoop, Treasurer, Trinity Industries, Inc., P.O. Box
568887, Dallas, Texas 75356-8887. We may impose a reasonable fee for our expense
in connection with providing the above-referenced Exhibits.