SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30,December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-6903
TRINITY INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
Incorporated Under the Laws 75-0225040
of the State of Delaware (I.R.S. Employer
Identification No.)
2525 Stemmons Freeway
Dallas, Texas 75207-2401
(Address of Principal (Zip Code)
Executive Offices)
214) 631-4420
(Registrant's Telephone Number,
Including Area Code)
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
43,231,58843,304,856
(Number of shares of common stock outstanding as of September 30,December 31, 1997)
Part I
Item 1 - Financial Statements
Trinity Industries, Inc.
Consolidated Balance Sheet
(unaudited)
(in millions except per share data)
September 30December 31 March 31
Assets 1997 1997
(unaudited)
Cash and cash equivalents . . . . . . . . . $ 3.42.8 $ 12.2
Receivables . . . . . . . . . . . . . . . . 292.3303.2 236.9
Inventories:
Raw materials and supplies. . . . . . . . 233.6224.3 216.7
Work in process . . . . . . . . . . . . . 49.041.3 41.9
Finished goods . . . . . . . . . . . . . 58.160.3 55.9
340.7325.9 314.5
Property, plant and equipment, at cost. . . 1,195.21,200.0 1,136.5
Less accumulated depreciation . . . . . . . (451.0)(466.1) (424.9)
744.2733.9 711.6
Other assets. . . . . . . . . . . . . . . . 104.284.4 81.2
$1,484.8$1,450.2 $1,356.4
Liabilities and Stockholders' Equity
Short-term debt . . . . . . . . . . . . . . $ 190.0113.0 $ 64.0
Accounts payable and accrued liabilities. . 262.9283.2 261.2
Long-term debt. . . . . . . . . . . . . . . 162.4152.7 178.6
Deferred income taxes . . . . . . . . . . . 22.223.2 22.8
Other liabilities . . . . . . . . . . . . . 21.422.2 20.3
658.9594.3 546.9
Stockholders' equity:
Common stock - par value $1 per
share; authorized 100.0 shares;
shares issued and outstanding at
September 30,December 31, 1997 - 43.243.3 and
March 31, 1997 - 43.0 . . . . . . . . . . 43.243.3 43.0
Capital in excess of par value. . . . . . 278.2276.6 273.3
Retained earnings . . . . . . . . . . . . 504.5536.0 493.2
825.9855.9 809.5
$1,484.8$1,450.2 $1,356.4
Trinity Industries, Inc.
Consolidated Income Statement
(unaudited)
(in millions except per share data)
SixNine Months
Ended September 30December 31
1997 1996
Revenues. . . . . . . . . . . . . . . . . . . . . . $1,120.4 $1,125.0$1,762.8 $1,705.4
Operating costs:
Cost of revenues. . . . . . . . . . . . . . . . . 917.6 946.81,451.9 1,435.7
Selling, engineering and administrative expenses. 72.1 61.2106.6 92.7
Retirement plans expense. . . . . . . . . . . . . 9.2 8.7
998.9 1,016.714.1 14.4
1,572.6 1,542.8
Operating profit. . . . . . . . . . . . . . . . . . 121.5 108.3190.2 162.6
Other (income) expenses:
Litigation settlement . . . . . . . . . . . . . . 70.0 -
Interest income . . . . . . . . . . . . . . . . . (1.2) (0.5)(1.4) (0.4)
Interest expense. . . . . . . . . . . . . . . . . 10.2 12.415.9 17.3
Other, net. . . . . . . . . . . . . . . . . . . . 1.0 (2.1)
80.0 9.82.1 11.5
86.6 28.4
Income from continuing operations
before income taxes . . . . . . . . . . . . . . . 41.5 98.5103.6 134.2
Provision (benefit) for income taxes:
Current . . . . . . . . . . . . . . . . . . . . . 14.5 38.136.2 53.0
Deferred. . . . . . . . . . . . . . . . . . . . . 1.1 (0.6)
15.6 37.52.7 (1.9)
38.9 51.1
Income from continuing operations . . . . . . . . . 25.9 61.064.7 83.1
Income from discontinued operations (net of income
taxes of $4.8)$7.4). . . . . . . . . . . . . . . . . . - 7.220.0
Net income. . . . . . . . . . . . . . . . . . . . . $ 25.964.7 $ 68.2103.1
Basic earnings per share:
Income per common share from
continuing operations . . . . . . . . . . . . . $ 1.50 $ 1.97
Income per common share from
discontinued operations . . . . . . . . . . . . - 0.47
Basic net income per common share . . . . . . . . . $ 1.50 $ 2.44
Diluted earnings per share:
Income per common and common equivalent
share from continuing operations. . . . . . . . . . . . $ 0.591.48 $ 1.451.95
Income per common and common equivalent
share from discontinued operations. . . . . . . . . . . - 0.17
Net0.47
Diluted net income per common and
common equivalent share . . . . . . . . . . . . . $ 0.591.48 $ 1.622.42
Weighted average number of common and common
equivalent shares outstanding.outstanding:
Basic . . . . . . . . . . . . . . . . . . . . . 43.0 42.2
Diluted . . . . . . . . . . . . . . . . . . . . 43.8 42.242.6
Trinity Industries, Inc.
Consolidated Income Statement
(unaudited)
(in millions except per share data)
Three Months
Ended September 30December 31
1997 1996
Revenues. . . . . . . . . . . . . . . . . . . . . . $ 560.3642.4 $ 548.5580.4
Operating costs:
Cost of revenues. . . . . . . . . . . . . . . . . 458.3 459.8534.3 488.9
Selling, engineering and administrative expenses. 34.7 30.634.5 31.5
Retirement plans expense. . . . . . . . . . . . . 4.1 3.7
497.1 494.14.9 5.7
573.7 526.1
Operating profit. . . . . . . . . . . . . . . . . . 63.2 54.468.7 54.3
Other (income) expenses:
Litigation settlement . . . . . . . . . . . . . . 70.0 -
Interest income . . . . . . . . . . . . . . . . . (0.6) (0.3)(0.2) -
Interest expense. . . . . . . . . . . . . . . . . 5.2 6.05.7 5.0
Other, net. . . . . . . . . . . . . . . . . . . . (0.3) (0.7)
74.3 5.01.1 13.6
6.6 18.6
Income (loss) from continuing operations
before income taxes . . . . . . . . . . . . . . . (11.1) 49.462.1 35.7
Provision (benefit) for income taxes:
Current . . . . . . . . . . . . . . . . . . . . . (3.8) 17.121.7 14.9
Deferred. . . . . . . . . . . . . . . . . . . . . - 1.8
(3.8) 18.91.6 (1.3)
23.3 13.6
Income (loss) from continuing operations.operations . . . . . (7.3) 30.5. . . . 38.8 22.1
Income from discontinued operations (net of income
taxes of $2.5)$2.6). . . . . . . . . . . . . . . . . . - 3.912.8
Net income (loss)income. . . . . . . . . . . . . . . . . . . . . $ (7.3)38.8 $ 34.434.9
Basic earnings per share:
Income (loss)per common share from
continuing operations . . . . . . . . . . . . . $ 0.90 $ 0.51
Income per common share from
discontinued operations . . . . . . . . . . . . - 0.30
Basic net income per common share . . . . . . . . . $ 0.90 $ 0.81
Diluted earnings per share:
Income per common and common equivalent
share from continuing operations. . . . . . . . . . . . $ (0.17)0.88 $ 0.720.51
Income per common and common equivalent
share from discontinued operations. . . . . . . . . . . - 0.09
Net0.29
Diluted net income (loss) per common and
common equivalent share . . . . . . . . . . . . . $ 0.88 $ 0.80
Weighted average number of common and common
equivalent shares outstanding:
Basic . . . . . . . . . . . . . . . . . . . . . . $ (0.17) $ 0.81
Weighted average number of common and common
equivalent shares outstanding.43.1 43.0
Diluted . . . . . . . . . . 43.2 42.4. . . . . . . . . . 44.0 43.4
Trinity Industries, Inc.
Consolidated Statement of Cash Flows
(unaudited)
(in millions)
SixNine Months
Ended September 30December 31
1997 1996
Cash flows from operating activities:
Net income. . . . . . . . . . . . . . . . . . . . . $ 25.9 $ 68.264.7 $103.1
Less: Income from discontinued operations. . . . . - (7.2)20.0
Income from continuing operations. . . . . . . . . 25.9 61.064.7 83.1
Adjustments to reconcile net income to net cash
provided (required) by operating activities:
Depreciation. . . . . . . . . . . . . . . . . . . 40.5 43.462.0 66.7
Deferred provision (benefit) for income taxes . . 1.1 (0.6)2.7 (1.9)
Gain on sale of property, plant and equipment . . (0.7) (1.8)(5.4) (1.6)
Other . . . . . . . . . . . . . . . . . . . . . . 1.5 0.8(5.3) (3.0)
Change in assets and liabilities:
(Increase) decrease in receivables . . . . . . . (51.8) 70.3
(Increase) decrease(35.5) 66.7
Decrease in inventoriesinventories. . . . . . . . (2.2) 4.6. . . . . 12.6 18.8
Increase in other assets . . . . . . . . . . . . (22.1) (27.1)(30.1) (31.7)
Increase (decrease) in accounts payable and
accrued liabilities . . . . . . . . . . . . . . (2.7) 1.317.5 68.2
Increase (decrease) in other liabilities . . . . 1.2 (6.6)1.9 (13.5)
Total adjustments . . . . . . . . . . . . . . . (35.2) 84.320.4 168.7
Net cash provided (required) by operating
activities. . . . . . . . . . . . . . . . . . . (9.3) 145.385.1 251.8
Cash flows from investing activities:
Proceeds from sale of property, plant
and equipment. . . . . . . . . . . . . . . . . . . 15.1 15.951.9 20.4
Capital expenditures. . . . . . . . . . . . . . . . (50.0) (100.8)(88.9) (140.8)
Payment for purchase of acquisitions,
net of cash acquired . . . . . . . . . . . . . . . (57.2) -(8.7)
Cash of acquired subsidiary . . . . . . . . . . . . - 2.3
Net cash required by investing activities . . . . (92.1) (82.6)(94.2) (126.8)
Cash flows from financing activities:
Issuance of common stock. . . . . . . . . . . . . . 0.7 1.41.8 2.2
Net borrowings (repayments) under short-term debt . 126.0 (27.0)49.0 (154.0)
Payments to retire long-term debt . . . . . . . . . (19.5) (19.9)(29.1) (34.4)
Dividends paid. . . . . . . . . . . . . . . . . . . (14.6) (14.1)(22.0) (21.4)
Net cash provided (required)required by
financing activities . . . . . . . . . . . . . . 92.6 (59.6)(0.3) (207.6)
Cash flows provided by discontinued operations . . . - 0.7
______ ______76.6
Net increase (decrease)decrease in cash and cash equivalents (8.8) 3.8equivalents. . . . . . (9.4) (6.0)
Cash and cash equivalents at beginning of periodyear . . . 12.2 14.7
Cash and cash equivalents at end of period . . . . . $ 3.42.8 $ 18.58.7
Trinity Industries, Inc.
Consolidated Statement of Stockholders' Equity
(unaudited)
(in millions except share and per share data)
Common Capital
Common Stock in Total
Shares $1.00 Excess Stock-
(100,000,000) Par of Par Retained holders'
(Authorized) Value Value Earnings Equity
Balance at March 31, 1996 . . . . 41,596,037 $41.6 $239.6 $464.8 $746.0
Other. . . . . . . . . . . . . . 1,386,220 1.4 42.21,472,890 1.5 39.0 - 43.640.5
Net income . . . . . . . . . . . - - - 68.2 68.2103.1 103.1
Cash dividends
($0.340.51 per share) . . . . . . - - - (14.4) (14.4)(21.7) (21.7)
Balance September 30, 1996.December 31, 1996 . . . 42,982,257 $43.0 $281.8 $518.6 $843.4. 43,068,927 $43.1 $278.6 $546.2 $867.9
Balance at March 31, 1997 . . . . 43,046,365 $43.0 $273.3 $493.2 $809.5
Other. . . . . . . . . . . . . . 185,223 0.2 4.9258,491 0.3 3.3 - 5.13.6
Net income . . . . . . . . . . . - - - 25.9 25.964.7 64.7
Cash dividends
($0.340.51 per share) . . . . . . - - - (14.6) (14.6)(21.9) (21.9)
Balance September 30, 1997.December 31, 1997 . . . 43,231,588 $43.2 $278.2 $504.5 $825.9. 43,304,856 $43.3 $276.6 $536.0 $855.9
The foregoing consolidated financial statements are unaudited and have been
prepared from the books and records of the Registrant. In the opinion of
the Registrant, all adjustments, consisting only of normal and recurring
adjustments necessary to a fair presentation of the financial position of
the Registrant as of September 30,December 31, 1997 and March 31, 1997, the results of
operations for the sixnine and three month periods ended September 30,December 31, 1997 and
1996 and cash flows for the sixnine month periods ended September 30,December 31,
1997 and 1996, in conformity with generally accepted accounting
principles, have been made.
Trinity Industries, Inc.
Notes to Consolidated Financial Statements
September 30,December 31, 1997
Acquisitions and
Divestitures
At the close of business on March 31, 1997, the Registrant completed
the divestiture of Halter Marine Group, Inc. ("Halter"), previously
a wholly-owned subsidiary of the Registrant, with the distribution
of its 15 million shares of Halter common stock to its stockholders
in the form of a tax-free property distribution. Prior year's
financial statements have been reclassified to reflect the divestiture
of the Halter business as a discontinued operation.
On August 12, 1997, a wholly-owned subsidiary of the Registrant,
merged with and into Differential Holdings, Inc., a holding company
for Difco, Inc. ("Difco"). Difco manufactures and sells special
purpose rail cars and mine hauling equipment.
On August 22, 1997, an Asset Purchase Agreement was entered into and
by a wholly-owned subsidiary of the Registrant and Buffalo Specialty
Products, Inc. ("Buffalo"). Buffalo manufactures and sells cold
roll formed steel highway safety and industrial products and timber
highway safety products.
Contingencies
In September 1997, the Registrant settled a thirteen year old lawsuit
brought against a former subsidiarywhich resulted in an after tax charge of $43.8 million being
recorded in the Company by Morse/Diesel Inc.
Pursuant to such settlement, the Registrant paid $70 million.second fiscal quarter. The Company has not
participated in the business associated with this matter since 1989.
The Registrant is involved in various other claims and lawsuits
incidental to its business. In the opinion of management, these
claims and suits in the aggregate will not have a material adverse
affect on the Registrant's consolidated financial statements.
New Accounting Standard
In February 1997,The Registrant has adopted Statement of Financial Accounting
Standards No. 128, "Earnings Per Share," was issued. Adoption is required
by the Registrant beginning with the interim financial statements
issued for the third quarter of fiscal 1998. The pro forma effect
of applying this statement to the six and three month periods
ended September 30, 1997 is not material.in
February 1997. Prior period earnings per share amounts
have been restated.
Item 2 - Management's Discussion and Analysis of Consolidated
Financial Condition and Statement of Operations
Financial Condition
The increase in 'Receivables' at September 30,December 31, 1997 compared to
March 31, 1997 is due primarily to increased businesssales in the
Construction Products and Industrial Products segment from
improved seasonal revenues.segments and the
timing of railcar sales.
The increase in 'Property, plant and equipment' at
September 30,December 31, 1997 compared to March 31, 1997 is due primarily
to acquisitions in all three segments finalized in the second quarter.first
two fiscal quarters of 1998.
Short-term debt increased due primarily to the litigation settlement
in the second fiscal quarterquarter.
Long-term debt decreased due to normal principal payments
during the third fiscal quarter.
Liquidity & Capital Resources
The Registrant's cash and the acquisition of
assets of Ladish Co., Inc.cash equivalents decreased $5.9 million
in the first nine months of fiscal year 1998, from $8.7 million at
December 31, 1996 to $2.8 million at December 31, 1997. Cash
generated from operations declined to $85.1 million in the current
period, compared to $251.8 million in the prior year. This decrease
is primarily due to an increase in 'Receivables' and the litigation
settlement recorded in the second fiscal quarter.
With the decrease in cash generated from operations, other sources
of cash used by the Registrant in the first nine months ended
December 31, 1997 were proceeds from sale of property, plant &
equipment, $51.9 million, and borrowings under short-term debt
of $49.0 million for the period.
Statement of Operations
SixNine Months Ended September 30,December 31, 1997 vs.
SixNine Months Ended September 30,December 31, 1996
Operating profit from continuing operations in the current sixnine month period increased
$13.2$27.6 million, or 12.2%17.0%, compared to the same period last year
ondue to a slight decreaseincrease in total revenues due toand improved operating
profit margins across allin the Transportation Products and Construction
Products segments.
Operating profit for the Transportation Products segment increased
by $6.2$16.8 million or 7.2%12.7% in the current sixnine month period on a
7.7%2.1% decrease in revenues when compared to the prior year period
as a
result of improving margins attained from cost reduction and production efficiency programs put in place
in prior periods. Revenues decreased primarily dueperiods continue to produce positive results in both the
railcar and marine product lines. In the third fiscal quarter,
railcar orders set a reduction in railcar deliveries.record and inquiries continue to remain at a
high level. The replacement cycle for railcars and barges
coupled with strong traffic on the nation's
rails and rivers continues to drive this segment. The number of
orders on hand in this segment are at record levels and itIt is anticipated that athis
healthy order pattern and replacement demand will continue throughoutin the
fiscal year.immediate future.
Construction Products revenues and operating profit for the current
sixnine month period were higher by 12.5%$44.1 and 24.4%,$7.9 million,
respectively, primarily due to increasedthe continuance of governmental
residential, and commercial construction
thatspending on the nation's transportation infrastructure, which
utilizes the Company's highway guardrail and safety systems
products, and itsthe increasing residential, commercial, industrial
and municipal construction which benefits the Company's ready-mix
concrete and aggregate businesses. Increased revenues are also
attributable to the acquisition of assets of Industrial Companies,
Inc. and Buffalo Specialty Products, Inc. in the second quarter.
The federal government continues to emphasizeCompany is a leading manufacturer of highway guardrail and
proprietary safety-end treatments. With the ongoing emphasis on
roadside safety and the upgrade of America's highway system to
higher standards by the federal government, the activity level
is expected to reflect changes in vehicle mix. In addition the overall economic
outlook across industries has led toremain strong activity levels in construction markets served by the
Registrant. These factors
should continue to provide a favorable market demand for the
Company's Construction Products.
The Industrial Products segment's revenuesCompany.
Revenues and operating profit increased by $26.8$37.1 and $2.8$2.4 million,
respectively, in the Industrial Products segment when comparing
the current sixnine month period as compared to the same period in the prior year.
This segment
continuesincrease is primarily due to benefit froman increase in the domestic
container business and the acquisition of the Industrial Products
Division of Ladish in the first fiscal quarter. With a global
increase in energy and petrochemical demand, as well as the level of housing starts in
markets served byemphasis
on protecting the Company's LPG business.environment, the Industrial Products segment's
future looks positive.
Three Months Ended September 30,December 31, 1997 vs.
Three Months Ended September 30,December 31, 1996
Operating profit from continuing operations in the current quarter increased $8.8$14.4 million,
or 16.2%26.5%, compared to the same period last year on a slightan increase of
revenues due toand improved operating profit margins across allin the Transportation
Products and Construction Products segments.
OperatingRevenues and operating profit for the Transportation Products
segment increased $2.7by $34.0 and $10.6 million, or 6.3%respectively, in
the current three month period when compared to the prior year
quarter. It is anticipated thatThe driving force behind the increases continues to be
the replacement cycle for railcars and barges will continue to drive this segment
throughout the fiscal year.barges.
Construction Products revenues and operating profit for the
current quarter increased by $21.2$17.7 and $4.4$1.3 million, respectively,
due to the same factors statedemphasis on improving the transportation infrastructure
as well as the acquisitions mentioned above. The overall demand
for the Company's Construction Products continues to look favorable.
The Industrial Products segment's revenues and operating
profit were higher in the
current quarter by $20.8 and
$1.5$10.3 million, respectively,although operating profit
declined slightly, when compared to the prior year quarter.
ThisThe decrease in operating profit is due primarily to the
effects of assimilating the Ladish acquisition and a slight
change in product mix for this quarter. Overall this segment
continues to benefit from a global
increasethe general improvement in energythe
economy. The emphasis on improving the environment increases
the demand for fittings and petrochemical demand as well asflanges and the levelstartup of new
housing starts in markets served bysupports the Company's LPG business.
Year 2000 Issue
Some of the Registrant's computer programs were written using
two digits rather than four to define the applicable year. As a
result, those computer programs have time-sensitive software
that recognize a date using "00" as the year 1900 rather than the
year 2000. This could cause a system failure or miscalculations
causing disruptions of operations and a temporary inability to
process certain transactions.
The Industrial Products segmentRegistrant has also benefited
fromidentified existing systems which require
action and has plans in place to address the addition of assets of Ladish Co., Inc. in the first fiscal
quarter.
Net income for the six and three month periods decreased by $42.3
and $41.7 million, respectively, dueYear 2000 issue
on such systems prior to the litigation settlement
recorded inissue causing any disruption of
normal business activities. The Registrant believes that the
second quartercost of fiscal 1997.addressing the Year 2000 issue is not material to the
financial condition or results of operations.
Additionally, the Registrant has initiated formal communications
with all of its significant suppliers and large customers to
determine the extent to which the Registrant's interface systems
are vulnerable to those third parties' failure to remediate their
own Year 2000 issues. There is no guarantee that the systems of
other companies on which the Registrant's systems rely will be
timely converted and would not have an adverse effect on the
Registrant's systems.
It is management's belief that the potential costs or the
consequences of an incomplete or untimely resolution of the
Year 2000 issue do not represent a material event or uncertainty
which is reasonably likely to affect future financial results.
____________________
Any statements contained herein that are not historical facts are
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995, 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 the Company's actual results of
operations to differ materially from those in the forward-lookingforward-
looking statements include market conditions and demand for the
Company's products; competition; technologies; steel prices;
interest rates and capital costs; taxes; unstable governments
and 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.
The Company undertakes no obligation to update any forward-lookingforward-
looking statement to reflect events or circumstances after
the date on which such statement is made.
Part II
Item 5 - Other Information
On November 11, 1997, the Registrant announced that it had
indefinitely suspended negotiations to acquire the stock of
American Railcar Industries, Inc. (ARI) and certain assets
of ACF Industries, Inc. The Registrant had announced on
August 28, 1997 an agreement in principal to acquire ARI and
certain ACF assets.
Item 6 - Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit
Number Description
27 Financial Data Schedule
(b) No Form 8-K was filed duringon October 6, 1997 that announced
an agreement in principal had been reached to settle
a 13 year old lawsuit brought against a former
subsidiary of the quarter.Registrant by Morse/Diesel, Inc.
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
Trinity Industries, Inc.
By: \S\ John M. Lee
John M. Lee
Vice President
November 14, 1997February 12, 1998
Index to Exhibits
No. Description Page
27 Financial Data Schedule *