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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
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(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2001
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)
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
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COMMON 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
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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 is $ 798,771,120 as of May 31, 2001.
At May 31, 2001 the Number of Shares of common stock outstanding was
36,968,456
Portions of the Registrant's definitive Proxy Statement (to be filed no
later than 120 days after the end of the Registrant's fiscal year) for the 2001
Annual Meeting of Stockholders to be held July 31, 2001 are incorporated by
reference into Part III hereof.
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PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF BUSINESS. Trinity Industries, Inc. (the
"Company" or "Trinity") was originally incorporated under the laws of the State
of Texas in 1933. On March 27, 1987, Trinity became a Delaware corporation by
merger into a wholly-owned subsidiary of the same name.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS. Various financial
information concerning the Company's segments for each of the last three fiscal
years is presented in Part II, Item 7 "Management's Discussion and Analysis of
Financial Condition and Results of Operations" on pages 8 through 13.
NARRATIVE DESCRIPTION OF BUSINESS. The Company is engaged in the
manufacture, marketing, and leasing of a wide variety of products consisting of
the following five business segments:
RAILCAR SEGMENT. The Company manufactures railroad freight cars,
principally pressure and non-pressure tank cars, hopper cars, box cars,
intermodal cars and gondola cars used for transporting a wide variety of
liquids, gases and dry cargo.
Tank cars transport products such as liquefied petroleum gas, liquid
fertilizer, sulfur, sulfuric acids and corn syrup. Covered hopper cars carry
cargo such as grain, dry fertilizer, plastic pellets and cement. Open-top
hoppers haul coal, and top-loading gondola cars transport a variety of heavy
bulk commodities such as scrap metals, finished flat steel products, machinery
and lumber. Intermodal cars transport various products which have been loaded in
containers to minimize shipping costs.
The Company holds patents of varying duration for use in its
manufacture of railcar and component products. The Company 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.
Seven major manufacturers of one or more of the production lines
manufactured by the Company are presently engaged in the manufacture of railcars
on a large scale. The Company strives to be competitive through improvements in
the efficiency of the manufacturing process and its creative designs to benefit
customers.
INLAND BARGE SEGMENT. The Company produces hopper barges, tank barges,
deck barges, fiberglass barge covers and associated marine parts. Hopper barges
are used to carry coal, grain and other bulk commodities by various barge
transport companies. Tank barges are used to transport liquid products. Deck
barges are used to transport product in the construction related industry. The
Company is North America's leading producer of inland barges and one of the
largest producers of fiberglass barge covers. Many companies have the capability
to enter into, and from time to time do enter into, the inland barge business.
The Company strives to compete through efficiency in operations and quality of
product.
PARTS AND SERVICES SEGMENT. The Company manufactures railcar parts,
such as yokes, couplers, axles, hitches and chutes that are ultimately used in
the manufacturing and repair of railcars. The Company is also engaged in railcar
maintenance, management, and/or leasing to various industries.
A wholly-owned leasing subsidiary, Trinity Industries Leasing Company
("TILC"), incorporated in 1979, is engaged in leasing specialized types of
railcars and locomotives to industrial companies in the petroleum, chemical,
grain, food processing, fertilizer and other industries which supply cars to the
railroads. At March 31, 2001, TILC owned 10,317 railcars.
The volume of equipment purchased and leased by TILC depends upon a
number of factors, including the demand for equipment manufactured by the
Company, the cost and availability of funds to finance the purchase of
equipment, the Company's decision to solicit orders for the purchase or lease of
equipment and factors which may affect the decision of the Company's customers
whether to purchase or lease equipment.
A number of well established companies actively compete with TILC in
the business of owning and leasing railcars, as well as banks, investment
partnerships and other financial and commercial institutions.
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In fiscal 2000, the Company began a business, operating under the name
TEMCO, that produced concrete mixers, concrete batch plants and component parts
for concrete related industries. During fiscal 2001, the Company exited this
business. See notes to consolidated financial statements for further discussion.
CONSTRUCTION PRODUCTS SEGMENT. The construction products manufactured
by the Company include highway guardrail, highway safety devices, and related
barrier products (Highway Products), beams, girders, and concrete and
aggregates. Highway Products, beams, and girders are used in the highway
construction industries. Concrete and aggregates are used in the construction
and foundation industries. Generally, customers for highway guardrail and
highway safety devices are highway departments or subcontractors on highway
projects. Concrete and aggregate customers include primarily owners,
contractors, and sub-contractors. Sales of beams and girders are to general
contractors and subcontractors on highway construction projects.
The Company holds patents and is a licensee for certain of its
guardrail and end-treatment products that enhance its worldwide competitive
position for these products. The Company is the largest producer of highway
guardrail products in North America, with products in use in all 50 states, as
well as Canada, Mexico, the Caribbean and Europe.
The concrete and aggregate business is extremely competitive depending
upon the geographical area. The Company strives to compete through service and
efficiency of operations, primarily in Texas.
INDUSTRIAL PRODUCTS SEGMENT. The Company is engaged in manufacturing
metal containers for the storage and transportation of liquefied petroleum gas
("LPG") and anhydrous ammonia fertilizer. Pressure LPG containers are utilized
at industrial plants, utilities, small businesses, and in suburban and rural
areas for residential heating and cooking needs. Fertilizer containers are
manufactured for highway and rail transport, bulk storage, farm storage, and the
application and distribution of anhydrous ammonia.
The Company manufactures butt weld type fittings. The weld fittings
include caps, elbows, return bends, concentric and eccentric reducers, full and
reducing outlet tees, all of which are pressure rated. The Company manufactures
and stocks, in standard, extra-heavy, and double-extra-heavy weights and in
various diameters and also manufactures to customer specifications. The basic
raw materials for weld fittings are carbon steel, stainless steel, aluminum,
chrome-moly, and other metal tubing or seamless pipe and forgings. The Company
sells its weld fittings to distributors and to other manufacturers of weld
fittings. Prior to fiscal 2001 the Company manufactured a full line of pressure
rated pipe flanges. During fiscal 2001, the Company exited the flange business.
The Company manufactures container heads, which are pressed metal
components used in the further manufacture of a finished product of the Company.
In addition, the Company sells container heads to other manufacturers. Container
heads are manufactured in various shapes and may be pressure rated or
non-pressure, depending on the intended use in further manufacture.
Competitors for LPG containers range from large to small local
companies. Competition for fittings and heads has been intense and has resulted
in sharply reduced prices for these products for the previous three fiscal
years.
ALL OTHER. All Other includes transportation services, the Company's
captive insurance company, structural towers, and other peripheral businesses.
FOREIGN OPERATIONS. The Company's foreign operations are primarily in
Mexico, Romania, Brazil and Slovakia. Sales to foreign customers, primarily in
Europe and Mexico, represented 5.3%, 2.6%, and 1.4% of the Company's
consolidated revenues for fiscal 2001, 2000, and 1999, respectively. As of March
31, 2001, 2000, and 1999, the Company had approximately 14.8%, 13.5%, and 10.9%,
respectively, of its long-lived assets located outside the United States.
The Company manufactures railcars and LP gas containers at its 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
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adversely affect its operations. The Company's 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 the Company's 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 its operations at least in
the short term.
MARKETING, RAW MATERIALS AND EMPLOYEES. As of March 31, 2001, the
Company operated in the continental United States, Mexico, Romania, Argentina,
Brazil, and Slovakia. The Company sells substantially all of its products
through its own salesmen operating from offices in the following states and
foreign countries: Alabama, Illinois, Kentucky, Louisiana, Michigan, Ohio,
Pennsylvania, Texas, Utah, Brazil, Mexico, Romania, Sweden, and Canada.
Independent sales representatives are also used to a limited extent. Except in
the case of weld fittings, guardrail, and standard size LPG containers, the
Company's products are ordinarily fabricated to the customer's specifications
pursuant to a purchase order.
The principal materials used by the Company are steel plate, structural
steel shapes, steel forgings, aluminum and cement and aggregate material. There
are numerous domestic and foreign sources of such steel and most other materials
used by the Company.
The Company currently has approximately 15,300 employees, of which
approximately 12,100 are production employees and 3,200 are administrative,
sales, supervisory, and office employees.
ACQUISITIONS. The Company made certain acquisitions during fiscal 2001,
2000, and 1999 accounted for by the purchase method. The acquired operations
have been included in the consolidated financial statements from the effective
dates of the acquisitions. Information concerning these acquisitions are located
on page 24.
ENVIRONMENTAL MATTERS. The Company is subject to comprehensive and
frequently changing federal, state and local environmental laws and regulations,
including those governing emissions of air pollutants, discharges of wastewater
and storm waters, and the disposal of nonhazardous and hazardous waste. The
Company anticipates that it may incur costs in the future to comply with
currently existing laws and regulations and any new statutory requirements. The
costs of all known environmental matters are not expected to be material to the
Company. However, estimates of future response costs are necessarily imprecise.
Accordingly, there can be no assurance that the Company will not become involved
in future litigation or other proceedings or, if the Company were found to be
responsible or liable in any litigation or proceeding, that such costs would not
be material to the Company.
OTHER MATTERS. To date, the Company has not suffered any material
shortages with respect to obtaining sufficient energy supplies to operate its
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 the Company's ability to conduct its business. The likelihood of such an
occurrence or its duration, and its ultimate effect on the Company's operations,
cannot be reasonably predicted at this time.
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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 47 Chairman, 1985 July 2001
President & Chief
Executive Officer
John L. Adams 56 Executive Vice President 1999 July 2001
Mark W. Stiles 52 Senior Vice President 1993 July 2001
& Group President
Jim S. Ivy 58 Vice President & 1998 July 2001
Chief Financial Officer
Douglas H. Schneider 62 Group President 2000 July 2001
Jack L. Cunningham, Jr. 56 Vice President, Labor 1982 July 2001
Relations
Michael G. Fortado 57 Vice President, General 1997 July 2001
Counsel, & Secretary
John M. Lee 40 Vice President, Business 1994 July 2001
Development
Michael J. Lintner 59 Vice President, Human 1999 July 2001
Resources
William A. McWhirter, II 37 Vice President, 2000 July 2001
President Concrete &
Aggregate
Joseph F. Piriano 64 Vice President, Purchasing 1992 July 2001
Linda S. Sickels 50 Vice President, Government 1995 July 2001
Relations
Neil O. Shoop 57 Treasurer 1985 July 2001
Christine S. Stucker 39 Controller 1999 July 2001
(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. Schneider joined the
Company in 1995. Mr. Schneider was designated as an executive officer in
fiscal 2000 and for at least the last five years has held executive
positions in International Development and the Inland Barge segment. 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. Lintner joined the Company in 1999. Prior to that, Mr. Lintner
held executive officer positions with administrative outsourcing and
professional staffing businesses. Mr. McWhirter joined the Company in 1985.
Prior to 2000, he served as President of the Concrete & Aggregate
businesses, a post which he still holds. Ms. Stucker joined the Company in
1985. Prior to 1999, Ms. Stucker served as an officer of various
operational divisions. All of the other above-mentioned executive officers
have been in the full-time employ 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 and Mark W.
Stiles. 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.
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FORWARD LOOKING STATEMENTS. This annual report on Form 10K 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 the Company's actual results
of operations to differ materially from those in the forward-looking statements
include market conditions and demand for the Company's products; the cyclical
nature of both the railcar and barge industries; 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;
technologies; steel prices; interest rates and capital costs; taxes; the
stability of the governments and political and business conditions in certain
foreign countries, particulary 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. The Company undertakes no
obligation to update any foward-looking statement to reflect events or
circumstances after the date on which such statement is made.
ITEM 2. PROPERTIES.
The Company principally operates in various locations throughout the
Unites 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 its purposes.
Approximate
Square Feet Productive
------------- Capacity
Owned Leased Utilized
----------- --------- -----------
Railcar Segment 4,484,500 57,000 30%
Inland Barge Segment 692,000 45,000 80%
Parts & Services Segment 2,537,000 383,000 30%
Construction Products Segment 1,994,000 10,000 85%
Industrial Products Segment 906,500 32,000 50%
Executive Offices 173,000 -- N/A
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10,787,000 527,000
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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 the Company. 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 of 1999 the United States Environmental Protection Agency
filed a complaint against the Company seeking penalties of approximately
$225,000. The complaint alleges that the Company failed to file certain
submissions timely to the United States Environmental Protection Agency in
alleged violation of the Emergency Planning Community Right to Know Act. The
Company denies all allegations and is defending this matter vigorously.
The Company is involved in other various 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 effect on the Company's consolidated
financial statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None
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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 fiscal years 2001 and 2000:
Prices
--------------------------
Year Quarter High Low
---- ------- ---- ---
2000 First $37.38 $28.75
2000 Second 34.06 30.25
2000 Third 30.75 26.44
2000 Fourth 27.56 19.88
2001 First $23.56 $18.50
2001 Second 23.38 18.37
2001 Third 26.63 22.56
2001 Fourth 25.00 18.97
The Company's transfer agent and registrar is The Bank of New York,
New York, N.Y.
HOLDERS
At March 31, 2001 the Company had approximately 2,059 record holders of
common stock. The par value of the stock is $1.
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ITEM 6. SELECTED FINANCIAL DATA.
Year Ended March 31
(in millions except percent and per share data) 2001 2000 1999 1998 1997
---- ---- ---- ---- ----
Revenues $ 1,904.3 2,740.6 2,926.9 2,473.0 2,234.3
Operating profit (loss) $ (66.1) 279.0 284.9 255.9 214.2
Income (loss) from continuing operations $ (74.4) 165.5 185.3 103.7 113.7
Income from discontinued operations, net of
income taxes $ -- -- -- -- 23.8
Net income (loss) $ (74.4) 165.5 185.3 103.7 137.5
Total assets $ 1,825.9 1,738.5 1,684.9 1,573.9 1,356.4
Long-term debt $ 44.0 95.4 120.6 149.6 178.6
Stockholders' equity $ 879.0 1,015.1 959.1 887.5 809.5
Ratio of total debt to total capital % 38.0 20.7 23.9 22.0 23.1
Stock data:
Weighted average number of diluted
shares outstanding 37.5 39.9 43.6 43.9 42.8
Net income (loss) per diluted common share:
continuing operations $ (1.98) 4.15 4.25 2.36 2.66
discontinued operations -- -- -- -- 0.55
--------- --------- --------- --------- ---------
net income (loss) per common share $ (1.98) 4.15 4.25 2.36 3.21
Dividends per share $ 0.72 0.72 0.69 0.68 0.68
Book value per share $ 23.89 26.50 23.22 20.40 18.83
Other Data:
Net income per diluted common share:
Continuing operations before unusual charges in 2001, a
nonrecurring credit in 1999, and a nonrecurring
charge in 1998 (1) $ 0.97 4.15 3.93 3.36 2.66
(1) Income per diluted common share from continuing operations before unusual
charges and credit is not a term which is defined by generally accepted
accounting principles but is defined as income (loss) from continuing operations
less after tax charges or credit of $110.9 million for unusual charges, $14.0
million for the gain on a sale of an investment in land, and a $43.8 million
charge for litigation in 2001, 1999, and 1998, respectively. Income from
continuing operations before unusual charges and credit should not be considered
as a measure of financial performance under generally accepted accounting
principals, nor in isolation or as an alternative to net income, cash flows
generated by operating, investing, or financing activities or other financial
statement data presented in the consolidated financial statement as an indicator
of financial performance or liquidity.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
BASIS OF PRESENTATION
Trinity Industries, Inc. is one of the nation's leading diversified
industrial manufacturers. As of March 31, 2001, the Company modified its segment
reporting to align the reportable segments with current internal reporting. The
Company combined the Highway Construction Products segment and the Concrete and
Aggregate segment into the Construction Products segment, moved its Heads
business into the Industrial Products segment from Parts and Services, and moved
its Deck Fittings and Marine Parts business into the Inland Barge segment from
Parts and Services. Furthermore, the Company changed the definition of operating
profit at the segment level to include corporate shared services charges.
Information for fiscal years 2000 and 1999 has been changed from prior years'
presentation in the fiscal 2000 Annual Report in order to conform to these
changes. The determination of operating segments is based on the types of
products and services provided by the Company and the internal reporting
relationships.
The new reporting format includes the following business segments: (1)
the Railcar segment, which manufactures and sells railcars; (2) the Inland Barge
segment, consisting of barges and related products for inland waterway services;
(3) the Parts and Services segment, which manufactures and sells various parts
to manufacturers of railcars and other industrial products and provides services
such as railcar maintenance, fleet management, and leasing; (4) the Construction
Products segment, consisting primarily of highway guardrail and safety products,
concrete and aggregate, and girders and beams used in the construction of
highway and railway bridges; and (5) the Industrial Products segment, which
manufactures and sells containers, container heads, weld fittings used in
pressure piping systems, and pressure and non-pressure containers for the
storage and transportation of liquefied gases and other liquid and dry products.
Finally, All Other includes transportation services, the Company's captive
insurance company, structural towers, and other peripheral businesses.
See notes to the consolidated financial statements for further
discussion of business segments.
UNUSUAL CHARGES
During fiscal 2001, the Company recorded pre-tax charges of
approximately $173.3 million primarily related to the restructuring of the
Company's railcar operations, investment and asset write downs, litigation
reserves, and other charges. $140.9 million of these charges were charged to
operating profit. These charges are reflected in the following income statement
categories and segments (in millions):
INLAND PARTS & CONSTRUCTION INDUSTRIAL CORPORATE
RAILCAR BARGE SERVICES PRODUCTS PRODUCTS & OTHER TOTAL
------- ----- -------- -------- -------- ------- -----
Cost of revenues $ 66.2 $ 4.4 $ 26.6 $ -- $ 14.4 $ 13.7 $125.3
Selling, engineering
& administrative 1.8 -- 6.9 -- 0.1 6.8 15.6
------ ------ ------ ------ ------ ------ ------
Charged to $ 68.0 $ 4.4 $ 33.5 $ -- $ 14.5 $ 20.5 $140.9
operating profit
Operating profit (loss)
before charges 36.3 16.1 22.1 38.5 6.3 (44.5) 74.8
------ ------ ------ ------ ------ ------ ------
Operating profit
(loss) reported $(31.7) $ 11.7 $(11.4) $ 38.5 $ (8.2) $(65.0) $(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.
See notes to the consolidated financial statements for further
discussion and description of the unusual charges.
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The following discussion compares results from continuing operations of Trinity
for fiscal 2001, 2000, and 1999.
2001 COMPARED WITH 2000 - RESULTS OF OPERATIONS
Revenues were $1.90 billion in fiscal 2001 compared to $2.74 billion in
fiscal 2000. Excluding the charges discussed above, operating profit decreased
to $74.8 million in fiscal 2001 compared to $279.0 million in fiscal 2000.
Decreased revenues were primarily attributable to the Railcar and Parts &
Services segments as a result of decreased railcar shipments and prices, as well
as a decline in the Industrial Products segment primarily as a result of
declines in LPG sales and the Company's decision to exit the flange and valve
businesses as more fully described below. All segments experienced decreased
operating profit as more fully discussed below. Excluding the unusual charges,
selling, engineering and administrative expenses increased to $198.5 million
compared to $183.4 million in fiscal 2000. This increase is primarily a result
of international expansion and expenses associated with start-up operations and
development activities.
Interest expense, increased $8.5 million in fiscal 2001 primarily due
to a higher level of short-term debt outstanding during the year.
Other income, net changed from income of $2.3 million in fiscal 2000 to
a loss of $28.2 million in fiscal 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 to the unusual charges. The Company
believes that this asset is fully realizable given current tax carryback
availability and existing deferred tax liabilities.
Net loss in fiscal 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
2000. Excluding the charges in fiscal 2001, net income in fiscal 2001 would have
been $0.97 per diluted share. The Company presently expects earnings per share
for fiscal 2002 to be in the range of $0.80 to $1.00 per share.
RAILCAR SEGMENT
(in millions)
2001 2000
---------- --------
Revenues $738.9 $1,515.3
Operating profit before charges $ 36.3 $ 153.2
Operating profit margin before charges 4.9% 10.1%
Revenues declined 51.2% in fiscal 2001 compared to 2000. This decline
is due to the current downturn in the North American railcar industry. Railcar
units shipped dropped 37% to approximately 14,000 cars compared to the prior
year. Operating profit margins were 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.
Including the charges, the railcar segment lost $31.7 million from operations.
With the current weakened railcar market, shipments are expected to decline
further to 6,000 to 9,000 in fiscal 2002 resulting in a very competitive market.
Comparisons to the prior year are also impacted by the level of
railcars delivered to customers of Trinity's leasing company. Sales to Trinity's
leasing subsidiary are eliminated in consolidation and profits are deferred and
generally amortized over the life of the asset or recognized at the time cars
are sold to an unrelated third party. Fiscal 2001 railcar sales to TILC were
$262.5 million compared to $67.5 million in the prior year with deferred profit
of $17.7 million compared to $6.6 million in fiscal 2000.
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INLAND BARGE SEGMENT
(in millions)
2001 2000
---------- ----------
Revenues $202.9 $210.1
Operating profit before charges $ 16.1 $ 25.7
Operating profit margin before charges 7.9% 12.2%
The decrease in Inland Barge 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 segment's customers and reduced grain exports. Fiscal
2001 operating profit was $11.7 million, including the unusual charges.
PARTS & SERVICES SEGMENT
(in millions)
2001 2000
---------- ----------
Revenues $316.7 $373.8
Operating profit before charges $ 22.1 $ 63.4
Operating profit margin before charges 7.0% 17.0%
Revenues decreased by $57.1 million in the Parts & Services segment,
while operating profit before unusual charges declined $41.3 million. Fiscal
2001 and 2000 revenues include intersegment sales of $68.2 million and $110.7
million, respectively. Revenue declines are primarily due to the softness in the
railcar market partially offset by the $29.2 million revenues generated by the
Company's concrete mixers, concrete batch plants and component parts for
concrete related industries business. The operating profit decline is due to the
inefficiencies and cost structure of the Company's railcar parts facilities at
lower volumes, the revenue loss due to the soft market conditions, and operating
losses associated with the Company's concrete mixer, concrete batch plants and
component parts for concrete related industries business which was closed and
certain assets sold in the fourth quarter.
CONSTRUCTION PRODUCTS SEGMENT
(in millions)
2001 2000
---------- ----------
Revenues $441.0 $445.6
Operating profit $ 38.5 $ 56.2
Operating profit margin 8.7% 12.6%
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 2001 in the Texas market
compared to fiscal 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.
INDUSTRIAL PRODUCTS SEGMENT
(in millions)
2001 2000
---------- ----------
Revenues $220.5 $255.4
Operating profit before charges $ 6.3 $ 12.4
Operating profit margin before charges 2.9% 4.9%
The decline in revenues is primarily attributable to the impact of
exiting the flange and valve business, reduced demand in the LPG market and
competitive pricing pressures throughout the segment. Operating profits declined
primarily due to pricing pressures in the container head products market and the
Mexico LPG market.
10
12
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. The reduction in first
quarter fiscal 2002 net income is currently estimated at approximately $1.0
million.
ALL OTHER
Revenues in All Other were stable in 2001 compared to 2000, while
operating results decreased from a profit of $1.9 million in fiscal 2000 to a
$14.5 million loss before charges in fiscal 2001. The decrease in operating
profit is primarily a result of the start-up and development costs associated
with the Company's internet related initiatives.
2000 COMPARED WITH 1999
Revenues were $2.74 billion in fiscal 2000 compared to $2.93 billion in
fiscal 1999, a 6.5% decrease. Operating profit decreased slightly to $279.0
million in fiscal 2000 compared to $284.9 million in fiscal 1999, a 2.1%
decrease. Decreased revenues were primarily attributable to the Railcar and
Parts & Services segments as a result of decreased railcar shipments. These
declines are mostly offset by increased revenues and operating profit in the
Inland Barge and Construction Products segments. Selling, engineering and
administrative expenses increased as a percentage of revenue to 6.7% from 5.8%.
This increase is primarily a result of the Company's global expansion and
investments in technology.
Other income, net changed from $27.4 million income in fiscal 1999 to
$2.3 million in fiscal 2000 due primarily to a net gain on the sale of real
estate and other assets in the first quarter of fiscal 1999 in the amount of
$22.1 million.
Net income in fiscal 2000 decreased 10.7% to $165.5 million, or $ 4.15
per diluted share as compared to $185.3 million, or $4.25 per diluted share, in
fiscal 1999. Excluding the net gain in 1999 discussed above, net income per
diluted share in fiscal 2000 increased $0.22 per share, or 5.6% from fiscal
1999.
RAILCAR SEGMENT
(in millions)
2000 1999
---------- ----------
Revenues $1,515.3 $1,694.0
Operating profit $ 153.2 $ 166.9
Operating profit margin 10.1% 9.9%
While shipments of railcars declined 17.0% in fiscal 2000, revenues
fell only 10.5% due to the product mix of units sold. Operating profit margins
slightly increased due to operating efficiencies and the product mix of railcar
sales.
INLAND BARGE SEGMENT
(in millions)
2000 1999
---------- ----------
Revenues $210.1 $201.6
Operating profit $ 25.7 $ 11.5
Operating profit margin 12.2% 5.7%
Inland Barge segment revenues increased 4.2% while operating profit
increased 123.5% to $25.7
11
13
million. The increase in operating profit is due mainly to cost reductions and
operating efficiencies.
PARTS & SERVICES SEGMENT
(in millions)
2000 1999
---------- ----------
Revenues $373.8 $440.1
Operating profit $ 63.4 $ 77.1
Operating profit margin 17.0% 17.5%
Revenues decreased by $66.3 million in the Parts & Services segment,
from $440.1 million in fiscal 1999 (including intersegment sales of $155.6
million), to $373.8 million in fiscal 2000 (including intersegment sales of
$110.7 million), while operating profit decreased from $77.1 million in fiscal
1999 to $63.4 million in fiscal 2000.
Revenue and operating profit declines are primarily due to softness in
the railcar market and the sale of three railcar repair plants.
CONSTRUCTION PRODUCTS SEGMENT
(in millions)
2000 1999
---------- ----------
Revenues $445.6 $400.9
Operating profit $ 56.2 $ 50.2
Operating profit margin 12.6% 12.5%
Revenues in the Construction Products segment increased 11.1%, while
operating profit increased 12% due to increased activity across all product
lines, favorable weather conditions, and small acquisitions.
INDUSTRIAL PRODUCTS SEGMENT
(in millions)
2000 1999
---------- ----------
Revenues $255.4 $282.2
Operating profit $ 12.4 $ 13.8
Operating profit margin 4.9% 4.9%
The decline in revenues is primarily due to the sale of Beaird
Industries, Inc. in the quarter ended June 30, 1998.
ALL OTHER
Revenues in the All Other segment decreased from $63.7 million in
fiscal 1999 to $51.1 million in fiscal 2000 while operating profit decreased
from $9.9 million to $1.9 million in fiscal 2000. The decrease in revenues
reflects slightly weaker activity in some small, peripheral businesses.
LIQUIDITY & CAPITAL RESOURCES
Net cash provided by operating activities decreased to $90.9 million
during fiscal 2001 from $268.2 million in fiscal 2000 primarily due to reduced
operating profits and working capital changes. Capital expenditures during
fiscal 2001 were $350.2 million, of which $266.9 million was for additions to
the lease portfolio. This compares to $167.2 million of capital expenditures in
fiscal 2000, of which $71.0 million was for additions to the lease portfolio.
Proceeds from the sale of property, plant and equipment and other assets were
$62.8 million in fiscal 2001, composed primarily of the sale of cars from the
lease fleet, compared to $77.7 million in fiscal 2000. The Company repurchased
1.6 million shares of its common stock for $34.6 million in fiscal 2001. The
Company presently has no intention to repurchase any additional shares. Future
operating requirements are expected to be financed principally with net cash
flow from operations. Internally generated funds, short-term debt and long-term
debt will continue to be used to finance business
12
14
acquisitions. Capital expenditures and additions to Trinity's assets under lease
are anticipated to be financed through internally generated funds, short-term
debt, the issuance of equipment trust certificates, or similar debt instruments.
Subsequent to year-end, the Company received proceeds of approximately
$107.8 million pursuant to an off balance sheet, non-recourse financing program
to fund railcar leasing activities. The net proceeds were utilized to pay down
existing indebtedness. Approximately $43 million of additional railcars are
anticipated to be sold under this program in the second fiscal quarter. In
addition, on June 8, 2001 the Company completed a committed revolving bank
facility for $460 million. Amounts borrowed under the facility bear interest at
LIBOR plus 0.625% or other alternative rates at the Company's option and can be
converted to a one-year term loan on June 6, 2002. The agreement requires
maintenance of ratios related to interest coverage, leverage, and minimum net
worth. The Company is currently in compliance and expects to remain in
compliance. The initial fundings under this facility were utilized to payoff
existing short-term borrowings.
INFLATION
Changes in price levels of products and services did not significantly
affect the Company's operations in fiscal 2001, 2000, or 1999.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company's earnings are affected by changes in interest rates due to
the impact those changes have on the Company's variable-rate debt obligations,
which represented approximately 92% of its total debt as of March 31, 2001. If
interest rates average one percentage point more in fiscal 2002 than they did
during fiscal 2001, the Company's interest expense would increase by
approximately $4.9 million. In comparison, at March 31, 2000, the Company
estimated that if interest rates averaged one percentage point more in fiscal
2001 than they did in fiscal 2000, interest expense would have increased by
approximately $1.7 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 the Company's variable-rate debt obligations as
of March 31, 2001 and 2000.
In addition, the Company is subject to market risk related to its net
investments in its foreign subsidiaries. The net investment in foreign
subsidiaries as of March 31, 2001 is $232.5 million. However, the impact of such
market risk exposures as a result of foreign exchange rate fluctuations has not
been material to the Company.
13
15
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
TRINITY INDUSTRIES, INC.,
INDEX TO FINANCIAL STATEMENTS
PAGE
----
Report of Independent Auditors 15
Consolidated Statement of Operations for the years ended March 31, 2001,
2000, and 1999 16
Consolidated Balance Sheet as of March 31, 2001 and 2000 17
Consolidated Statement of Cash Flows for the years ended March 31,
2001, 2000, and 1999 18
Consolidated Statement of Stockholders' Equity for the years ended
March 31, 2001, 2000, and 1999 19
Notes to Consolidated Financial Statements 20 - 30
Selected Quarterly Financial Data (unaudited) for the years ended
March 31, 2001 and 2000 31
14
16
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 March 31, 2001 and 2000, and the related consolidated
statement of operations, cash flows and stockholders' equity for each of the
three 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 March 31, 2001 and 2000,and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
March 31, 2001, in conformity with accounting principles generally accepted in
the United States.
ERNST & YOUNG LLP
Dallas, Texas
May 21, 2001
15
17
CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended March 31
(in millions except per share data) 2001 2000 1999
--------- --------- ---------
Revenues $ 1,904.3 $ 2,740.6 $ 2,926.9
Operating costs:
Cost of revenues 1,756.7 2,278.2 2,472.8
Selling, engineering and administrative expenses 213.7 183.4 169.2
--------- --------- ---------
1,970.4 2,461.6 2,642.0
--------- --------- ---------
Operating profit (loss) (66.1) 279.0 284.9
Other (income) expense:
Interest income (6.9) (2.0) (4.5)
Interest expense 28.9 20.4 20.4
Other, net 28.2 (2.3) (27.4)
--------- --------- ---------
50.2 16.1 (11.5)
--------- --------- ---------
Income (loss) before income taxes (116.3) 262.9 296.4
Provision (benefit) for income taxes:
Current 3.8 84.4 106.9
Deferred (45.7) 13.0 4.2
--------- --------- ---------
(41.9) 97.4 111.1
--------- --------- ---------
Net income (loss) $ (74.4) $ 165.5 $ 185.3
========= ========= =========
Net income (loss) per common share:
Basic $ (1.98) $ 4.17 $ 4.31
========= ========= =========
Diluted $ (1.98) $ 4.15 $ 4.25
========= ========= =========
Weighted average number of shares outstanding:
Basic 37.5 39.7 43.0
Diluted 37.5 39.9 43.6
See accompanying notes to consolidated financial statements.
16
18
CONSOLIDATED BALANCE SHEET
March 31
(in millions except per share data) 2001 2000
-------- --------
Assets
Cash and equivalents $ 13.5 $ 16.9
Receivables (net of allowance for doubtful accounts of
$4.8 in 2001 and $1.7 in 2000) 245.7 349.8
Inventories:
Raw materials and supplies 235.5 257.0
Work in process 43.5 37.5
Finished goods 73.5 66.1
-------- --------
352.5 360.6
Property, plant and equipment, at cost 1,534.1 1,304.9
Less accumulated depreciation (541.7) (491.7)
-------- --------
992.4 813.2
Other assets 221.8 198.0
-------- --------
$1,825.9 $1,738.5
======== ========
Liabilities and Stockholders' Equity
Short-term debt $ 493.8 $ 170.1
Accounts payable and accrued liabilities 364.2 360.9
Long-term debt 44.0 95.4
Deferred income taxes 7.1 58.5
Other liabilities 37.8 38.5
-------- --------
946.9 723.4
Stockholders' equity:
Common stock - shares issued and outstanding
in 2001 - 43.8; in 2000 - 43.8 43.8 43.8
Capital in excess of par value 291.8 295.1
Retained earnings 759.4 860.6
Accumulated other comprehensive loss (21.1) (19.8)
Treasury stock (7.0 shares in 2001 and 5.5 shares in 2000) (194.9) (164.6)
-------- --------
879.0 1,015.1
-------- --------
$1,825.9 $1,738.5
======== ========
See accompanying notes to consolidated financial statements.
17
19
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended March 31
(in millions) 2001 2000 1999
------ ------ ------
Operating activities:
Net income (loss) $(74.4) $165.5 $185.3
Adjustments to reconcile net income (loss) to net cash provided
(required) by operating activities:
Depreciation and amortization 89.1 80.3 72.0
Deferred income taxes (45.5) 13.0 4.2
Gain on sale of property, plant and equipment and other assets (11.2) (10.5) (24.6)
Unusual charges 173.3 -- --
Other 0.8 2.4 (7.6)
Changes in assets and liabilities, net of effects from acquisitions
and unusual charges:
Decrease in receivables 92.3 17.4 45.3
(Increase) decrease in inventories (24.3) 43.0 (47.9)
(Increase) decrease in other assets (33.3) 2.8 (13.9)
Decrease in accounts payable and accrued liabilities (75.1) (60.4) (53.0)
Increase (decrease) in other liabilities (0.8) 14.7 1.8
------ ------ ------
Total adjustments 165.3 102.7 (23.7)
------ ------ ------
Net cash provided by operating activities 90.9 268.2 161.6
Investing activities:
Proceeds from sale of property, plant and equipment and other assets 62.8 77.7 178.7
Capital expenditures (350.2) (167.2) (193.5)
Payment for purchase of acquisitions, net of cash acquired (13.5) (25.6) (82.8)
------ ------ ------
Net cash required by investing activities (300.9) (115.1) (97.6)
Financing activities:
Issuance of common stock -- 2.3 4.8
Net borrowings (repayments) of short-term debt 323.7 (10.9) 80.0
Payments to retire long-term debt (55.5) (27.5) (29.5)
Stock repurchases (34.6) (84.9) (79.5)
Dividends paid (27.0) (28.7) (29.4)
------ ------ ------
Net cash provided (required) by financing activities 206.6 (149.7) (53.6)
------ ------ ------
Net increase (decrease) in cash and equivalents (3.4) 3.4 10.4
Cash and equivalents at beginning of period 16.9 13.5 3.1
------ ------ ------
Cash and equivalents at end of period $ 13.5 $ 16.9 $ 13.5
====== ====== ======
Interest paid in fiscal 2001, 2000, and 1999 was $29.0, $20.7 and $20.5,
respectively.
See accompanying notes to consolidated financial statements.
18
20
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Common Common Capital Accumulated
Shares Stock in Other
(in millions except share (100,000,000 $1.00 Excess of Retained Comprehensive Treasury
and per share data) Authorized) Par Value Par Value Earnings Loss Shares
------------ --------- --------- -------- ------------- --------
Balance at March 31, 1998 43,489,276 $ 43.5 $ 287.7 $ 567.5 $ (11.2)
Net income -- -- -- 185.3 -- --
Currency translation
adjustments -- -- -- -- (9.4) --
Comprehensive income
Cash dividends
($0.69 per share) -- -- -- (29.9) -- --
Stock repurchases -- -- -- -- (2,363,932)
Other 216,360 0.2 4.9 -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Balance at March 31, 1999 43,705,636 43.7 292.6 722.9 (20.6) (2,363,932)
Net income -- -- -- 165.5 -- --
Currency translation
adjustments -- -- -- -- 0.8 --
Comprehensive income
Cash dividends
($0.72 per share) -- -- -- (27.8) -- --
Stock repurchases -- -- -- -- -- (2,941,839)
Other 90,715 0.1 2.5 -- -- (149,972)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE AT MARCH 31, 2000 43,796,351 43.8 295.1 860.6 (19.8) (5,455,743)
NET LOSS -- -- -- (74.4) -- --
CURRENCY TRANSLATION
ADJUSTMENTS -- -- -- -- (1.3) --
COMPREHENSIVE LOSS
CASH DIVIDENDS
($0.72 PER SHARE) -- -- -- (26.8) -- --
STOCK REPURCHASES -- -- -- -- -- (1,618,900)
OTHER -- -- (3.3) -- -- 121,257
----------- ----------- ----------- ----------- ----------- -----------
BALANCE AT MARCH 31, 2001 43,796,351 $ 43.8 $ 291.8 $ 759.4 $ (21.1) (6,953,386)
=========== =========== =========== =========== =========== ===========
Treasury Total
(in millions except share Stock Stockholders'
and per share data) At Cost Equity
- ------------------------- ---------- -------------
Balance at March 31, 1998 $ 887.5
Net income -- 185.3
Currency translation
adjustments -- (9.4)
-----------
Comprehensive income 175.9
Cash dividends
($0.69 per share) -- (29.9)
Stock repurchases $ (79.5) (79.5)
Other -- 5.1
----------- -----------
Balance at March 31, 1999 (79.5) 959.1
Net income -- 165.5
Currency translation
adjustments -- 0.8
-----------
Comprehensive income 166.3
Cash dividends
($0.72 per share) -- (27.8)
Stock repurchases (84.9) (84.9)
Other (0.2) 2.4
----------- -----------
BALANCE AT MARCH 31, 2000 (164.6) 1,015.1
NET LOSS -- (74.4)
CURRENCY TRANSLATION
ADJUSTMENTS -- (1.3)
-----------
COMPREHENSIVE LOSS (75.7)
CASH DIVIDENDS
($0.72 PER SHARE) -- (26.8)
STOCK REPURCHASES (34.6) (34.6)
OTHER 4.3 1.0
----------- -----------
BALANCE AT MARCH 31, 2001 $ (194.9) $ 879.0
=========== ===========
The Company has authorized and unissued 1,500,000 shares of no par value voting
preferred stock.
See accompanying notes to consolidated financial statements.
19
21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements of Trinity Industries, Inc. and its
consolidated subsidiaries ("Trinity" or the "Company") include the accounts of
all significant majority-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated.
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 units are produced.
For purposes of the Consolidated Statement of Cash Flows, 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 concentrations 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.
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
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Inventories and investments 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.
Depreciation and amortization are generally computed by the
straight-line method on 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.
For fiscal 2000 and fiscal 1999 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 per common share and diluted net income per common share is net income.
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 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.
Effective April 1, 2001 the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments
and Hedging Activities," and its amendments. SFAS No. 133, as amended, requires
companies to record derivatives on the balance sheet as assets and liabilities,
measured at fair value. Gains and losses resulting from the changes in fair
value of those derivatives are accounted for as either components of earnings or
other comprehensive income depending on the use of the derivative and whether it
qualifies for hedge accounting. The implementation of specific policies and
procedures related to derivative instruments and the issues surrounding SFAS No.
133, as amended, ensures the Company is in compliance with this new standard.
The adoption of SFAS No.133, as amended, will not have a material impact on the
Company's consolidated financial statements.
Certain reclassifications have been made to prior year statements to
conform to the current year presentation.
20
22
SEGMENT INFORMATION
As of March 31, 2001, the Company modified its segment reporting to
align the reportable segments with current internal reporting. The new reporting
format combines the Highway Construction Products segment and the Concrete and
Aggregate segment into one segment called the Construction Products segment.
Other minor reclassifications between segments were also made. Operating profit
amounts are after allocation of corporate shared services charges. All prior
years' amounts have been restated to conform to current presentations.
The new reporting format includes the following business segments (1)
the Railcar segment, which manufactures and sells railcars; (2) the Inland Barge
segment, consisting of barges and related products for inland waterway services;
(3) Parts & Services segment, which manufactures and sells various parts to
manufacturers of railcars and other industrial products and provides services
such as railcar maintenance, fleet management, and leasing; (4) the Construction
Products segment, consisting primarily of highway guardrail and safety products,
concrete and aggregate, and girders and beams used in the construction of
highway and railway bridges; and (5) the Industrial Products segment, which
manufactures and sells containers, container heads, weld fittings used in
pressure piping systems, and pressure and non-pressure containers for the
storage and transportation of liquefied gases and other liquid and dry products.
Finally, All Other includes transportation services, the Company's captive
insurance company, structural towers, and other peripheral businesses.
The financial information for these segments is shown in the tables
below. The Company operates principally in the continental United States,
Mexico, Romania, Brazil and Slovakia. Intersegmental sales are at market prices.
YEAR ENDED MARCH 31, 2001
(in millions) REVENUES
--------------------------------- OPERATING
PROFIT DEPRECIATION & CAPITAL
OUTSIDE INTERSEGMENT TOTAL (LOSS) ASSETS AMORTIZATION EXPENDITURES
-------- ------------ -------- -------- -------- -------------- ------------
RAILCAR SEGMENT $ 738.9 $ 3.3 $ 742.2 $ (31.7) $ 321.9 $ 14.1 $ 38.0
INLAND BARGE SEGMENT 202.9 -- 202.9 11.7 77.2 4.3 1.4
PARTS & SERVICES SEGMENT 248.5 68.2 316.7 (11.4) 716.0 24.3 257.0
CONSTRUCTION PRODUCTS SEGMENT 441.0 1.4 442.4 38.5 240.5 24.0 28.0
INDUSTRIAL PRODUCTS SEGMENT 220.5 9.8 230.3 (8.2) 206.1 9.1 12.4
ALL OTHER 52.5 60.7 113.2 (15.7) 50.9 5.4 11.0
ELIMINATIONS & CORPORATE ITEMS -- -- (143.4) (49.3) 213.3 7.9 2.4
-------- -------- -------- -------- -------- -------- --------
CONSOLIDATED TOTAL $1,904.3 $ (66.1) $1,825.9 $ 89.1 $ 350.2
======== ======== ======== ======== ========
21
23
See pages 23 and 24 for explanation and segment effect of unusual charges
recorded during the year ended March 31, 2001.
YEAR ENDED MARCH 31, 2000
(in millions)
Revenues
----------------------------- Operating
Profit Depreciation & Capital
Outside Intersegment Total (Loss) Assets Amortization Expenditures
------- ------------ ----- --------- ------ ------------ ------------
Railcar Segment $1,515.3 $ 5.9 $1,521.2 $ 153.2 $ 484.1 $ 12.8 $ 19.4
Inland Barge Segment 210.1 -- 210.1 25.7 63.7 5.4 1.5
Parts & Services Segment 263.1 110.7 373.8 63.4 507.4 21.3 82.9
Construction Products Segment 445.6 -- 445.6 56.2 234.1 22.2 27.8
Industrial Products Segment 255.4 1.3 256.7 12.4 148.1 7.1 11.4
All Other 51.1 61.9 113.0 1.9 48.3 6.5 7.8
Eliminations & Corporate Items -- -- (179.8) (33.8) 252.8 5.0 16.4
-------- -------- -------- -------- -------- -------- --------
Consolidated Total $2,740.6 $ 279.0 $1,738.5 $ 80.3 $ 167.2
======== ======== ======== ======== ========
YEAR ENDED MARCH 31, 1999
(in millions)
Revenues
----------------------------- Operating
Profit Depreciation & Capital
Outside Intersegment Total (Loss) Assets Amortization Expenditures
------- ------------ ----- --------- ------ ------------ ------------
Railcar Segment $1,694.0 $ 6.9 $1,700.9 $ 166.9 $ 532.2 $ 12.5 $ 30.0
Inland Barge Segment 201.6 -- 201.6 11.5 75.4 6.4 1.0
Parts & Services Segment 284.5 155.6 440.1 77.1 489.7 18.6 118.6
Construction Products Segment 400.9 -- 400.9 50.2 217.8 21.8 17.7
Industrial Products Segment 282.2 1.4 283.6 13.8 115.7 4.2 8.5
All Other 63.7 64.9 128.6 9.9 31.6 5.5 6.6
Eliminations & Corporate Items -- -- (228.8) (44.5) 222.6 3.0 11.1
-------- -------- -------- -------- -------- -------- --------
Consolidated Total $2,926.9 $ 284.9 $1,685.0 $ 72.0 $ 193.5
======== ======== ======== ======== ========
Total revenues from external customers attributed to foreign operations
for fiscal 2001, 2000, and 1999 are $99.5 million, $72.0 million, and $42.6
million, respectively. The Railcar segment includes revenues from one customer
that accounted for 12.6 percent and 9.9 percent of consolidated revenues in
fiscal 2000 and 1999, respectively. Long-lived assets located outside the United
States in fiscal 2001, 2000, and 1999 are $180.1 million, $136.5 million, and
$100.2 million, respectively.
22
24
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.
UNUSUAL CHARGES
In the second quarter, the Company recorded pretax charges of $51.9
million ($33.2 million after tax), or $0.88 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, disposing of excess assets, staff reductions of corporate employees
and writing down an investment.
Costs included in the charges are summarized as follows:
(in millions)
Total Reserve
Charges March 31, 2001
------- --------------
Property, plant & equipment - write-downs to net
realizable value to be disposed of and related
shut-down costs $28.4 $ 6.9
Inventory writedown 10.3 --
Severance costs - approximately 3,900 employees 4.6 1.5
Investment write off 3.0 --
Other 5.6 3.6
----- -----
$51.9 $12.0
===== =====
In the third quarter, the Company recorded pretax charges of $65.6
million ($42.0 million after tax), or $1.13 per share, related primarily to
environmental liabilities associated with previously closed facilities,
write-downs of certain equity investments and acquired assets, including a 20%
investment in a Russian transportation company obtained with the acquisition of
Transisco Industries in the fall of 1996, and other charges.
Costs included in the charges are summarized as follows:
(in millions)
Total Reserve
Charges March 31, 2001
------- --------------
Equity investment write-downs:
Russian transportation company $17.0 $ --
Other equity investments 17.5 --
-----
Total equity investment write-downs 34.5 --
Asset write-downs related to wholly-owned businesses 18.7 --
Environmental liabilities 6.6 6.6
Railcar Repair contract losses 4.0 3.7
Accounts receivable reserves in Parts & Services segment 2.9 --
Inventory, severance, and other charges 2.8 1.1
Gain on sale of real estate (3.9) --
----- -----
$65.6 $11.4
===== =====
23
25
In the fourth quarter, the Company recorded pretax charges of $55.8 million
($35.7 million after tax), or $0.97 per share, related primarily to additional
plant closings, severance, asset write downs and a litigation reserve for an
adverse jury verdict announced on May 14, 2001.
Costs included in the charges are summarized as follows:
(in millions)
Total Reserve
Charges March 31, 2001
------- --------------
Severance pay, asset write-downs, and plant shutdown
costs related primarily to plant closings and
headcount reductions $32.9 $19.2
Adverse jury verdict 14.8 14.8
Loss on closure and loss on sale of certain
assets of TEMCO 8.1 --
----- -----
$55.8 $34.0
===== =====
Classification of the charges in the income statement are shown below by
quarter:
(in millions)
2nd Qtr 3rd Qtr 4th Qtr
Charges Charges Charges Total
------- ------ ------- -----
Cost of revenues $ 44.1 $ 27.3 $ 53.9 $125.3
Selling, engineering
and administrative
expenses 4.8 8.9 1.9 15.6
------ ------ ------ ------
Charged to operating profit 48.9 36.2 55.8 140.9
Other expenses 3.0 29.4 -- 32.4
------ ------ ------ ------
Total $ 51.9 $ 65.6 $ 55.8 $173.3
------ ------ ------ ------
Classification of the charges by segment are shown below:
(in millions)
INLAND PARTS & CONSTRUCTION INDUSTRIAL CORPORATE &
RAILCAR BARGE SERVICES PRODUCTS PRODUCTS OTHER TOTAL
---------- ---------- ---------- ---------- ---------- ---------- ----------
Cost of revenues $ 66.2 $ 4.4 $ 26.6 $ -- $ 14.4 $ 13.7 $ 125.3
Selling, engineering
& administrative 1.8 -- 6.9 -- 0.1 6.8 15.6
---------- ---------- ---------- ---------- ---------- ---------- ----------
Charged to
operating profit $ 68.0 $ 4.4 $ 33.5 $ -- $ 14.5 $ 20.5 $ 140.9
========== ========== ========== ========== ========== ========== ==========
Provisions to write-down property, plant, and equipment to be disposed
of to estimated fair market value were primarily related to assets that are no
longer in use, have been sold, scrapped, and/or are held for sale at March 31,
2001. 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.
ACQUISITIONS AND DIVESTITURES
The Company made certain acquisitions during fiscal 2001, 2000 and 1999
accounted for by the purchase method. The aggregate purchase price for these
acquisitions was $30.6 million, $87.4 million and
24
26
$104.4 million respectively. Goodwill, which is included in other assets and
amortized over periods ranging from 10 to 30 years of $14.5 million, $9.3
million and $65 million was recorded on the 2001, 2000 and 1999 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 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.
STOCK PLANS
The Company's 1998 Stock Option and Incentive Plan provides for
awarding 2,000,000 shares of common stock plus shares covered by forfeited,
expired, and canceled options granted under prior plans with a maximum of
600,000 shares being available for issuance as restricted stock or in
satisfaction of performance or other awards. At March 31, 2001, a total of
988,233 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 price. Options become exercisable in various
percentages over periods ranging up to eight years.
Year Ended March 31
----------------------------------------------------------------------------------------
2001 2000 1999
-------------------------- -------------------------- --------------------------
Weighted Weighted
Weighted Average Average
Average Exercise Exercise
Shares Exercise Price Shares Price Shares Price
---------- -------------- ---------- ---------- ---------- ----------
Outstanding beginning of 2,526,836 $ 30.33 2,059,983 $ 29.81 1,982,495 $ 26.01
year
Granted 865,200 22.96 636,306 30.06 414,663 39.76
Exercised (186,248) 13.25 (147,309) 21.02 (314,453) 18.73
Cancelled (139,868) 30.87 (22,144) 36.32 (22,722) 33.26
---------- ---------- ---------- ---------- ---------- ----------
Outstanding end of year 3,065,920 29.26 2,526,836 30.33 2,059,983 29.81
========== ========== ========== ========== ========== ==========
Exercisable 1,589,616 30.79 1,319,168 $ 28.32 961,903 23.92
========== ========== ========== ========== ========== ==========
March 31, 2001
----------------------------------------------------------------------------------------------
Outstanding Options
---------------------------------------------------------
Weighted Average Exercisable Options
---------------- -------------- ---------------------
Remaining Weighted
Contractual Life Average
Exercise Price Range Shares (Years) Exercise Price Shares Price
- -------------------- --------- ---------------- -------------- --------- ---------
$15.94 - $23.00 1,085,975 7.02 $22.06 290,299 $19.90
23.91 - 29.29 670,382 4.63 25.14 579,845 25.07
29.44 - 34.81 663,091 7.49 30.23 282,634 31.06
36.06 - 53.81 646,472 6.74 44.63 436,838 45.46
--------- ---------------- -------------- --------- ---------
$15.94 - $53.81 3,065,920 6.54 $29.26 1,589,616 $30.79
========= ================ ============== ========= =========
25
27
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 2001, 2000, and 1999 using the Black-Scholes option pricing
method is shown in the accompanying table.
2001 2000 1999
-------- -------- --------
Estimated fair value per
share of options granted $ 7.56 $ 9.10 $ 15.49
Pro forma:
Net income (millions) $ (78.7) $ 162.7 $ 183.1
Per diluted share (2.10) $ 4.06 $ 4.20
Black-Scholes assumptions:
Expected option life (years) 6.8 5.7 6.7
Risk-free interest rate 4.5% 6.10% 6.00%
Dividend yield
Common stock volatility 3.10% 3.10% 1.82%
0.328 0.328 0.393
Restricted Stock
2001 2000 1999
-------- -------- --------
Shares awarded -- 50,000 42,000
Shares cancelled (14,000) -- --
Outstanding at March 31 117,500 131,500 81,500
Grant date fair value per share -- $ 27.94 $ 39.04
Certain internet related subsidiaries of the Company have stock based
compensation plans which provide for the granting of stock options and other
awards allowing Company employees to purchase stock of the Company's
subsidiaries. As of March 31, 2001, options are outstanding with an exercise
price of $0.12 per share and a total exercise price of $432,000. The book value
of these subsidiaries is approximately a negative $0.50 per share.
26
28
DEBT
Long-term debt March 31
2001 2000
(in millions) ------- -------
3.0-9.25 percent industrial development revenue bonds
payable in varying amounts through 2005 $ 1.3 $ 1.6
6.0-8.0 percent promissory notes, generally payable
annually through 2015 4.2 28.2
6.96-9.44 percent equipment trust certificates to
institutional investors generally payable in semi-annual
installments of varying amounts through 2003 34.3 57.4
11.3 percent notes payable monthly through 2003 4.2 8.2
------- -------
$ 44.0 $ 95.4
======= =======
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 - $26.0; 2003 - $11.7; 2004 -
$2.1; 2005 - $0.2; and 2006 - $0.2.
The trustees of the equipment trusts have been assigned title to
railcars with a net book value of $126.3 at March 31, 2001 for the life of the
respective equipment trusts. Leases relating to such railcars financed by
equipment trust certificates have been assigned as collateral.
Short-term debt
Short-term debt primarily consists of money market borrowings,
generally due within 30 days, with interest rates ranging from 5.88% to 7.50% in
2001 and 5.21% to 6.74% in 2000.
PROPERTY, PLANT AND EQUIPMENT
March 31
2001 2000
(in millions) ---------- ----------
Land $ 51.9 $ 51.0
Buildings and improvements 280.5 261.0
Machinery 538.4 528.6
Equipment on lease 627.9 429.0
Construction in progress 35.4 35.3
---------- ----------
$ 1,534.1 $ 1,304.9
========== ==========
Equipment on lease consists primarily of railcars leased by the Company
to 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
of the contract. The Company enters primarily into operating leases. Future
minimum rental revenues on leases in each fiscal year are: 2002 - $57.1; 2003 -
$49.2; 2004 - $43.6; 2005 - $40.7; 2006 - $35.2; and $225.0 thereafter.
27
29
INCOME TAXES
(in millions except percent data)
The components of the provision (benefit) for income taxes are:
Year Ended March 31
2001 2000 1999
---------- ---------- ----------
Current:
Federal $ 2.5 $ 78.5 $ 96.2
State 1.1 5.2 10.7
Foreign 0.2 0.7 --
---------- ---------- ----------
3.8 84.4 106.9
Deferred (45.7) 13.0 4.2
---------- ---------- ----------
Total $ (41.9) $ 97.4 $ 111.1
========== ========== ==========
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:
March 31
2001 2000
---------- ----------
Deferred tax liabilities:
Depreciation $ 97.4 $ 78.3
Deductions related to inventory and
other assets of foreign operations 5.1 7.4
Other -- 8.6
---------- ----------
102.5 94.3
Deferred tax assets:
Pensions and other benefits 43.1 34.2
Accounts receivable, inventory, and other
asset valuation accounts 48.0 1.6
Other 4.3 --
---------- ----------
Total deferred tax assets 95.4 35.8
---------- ----------
Net deferred tax liabilities $ 7.1 $ 58.5
========== ==========
The provision (benefit) for income taxes results in effective tax rates
different from the statutory rates. The following is a reconciliation between
the statutory U.S. federal income tax rate and the Company's effective income
tax rate:
Year Ended March 31
2001 2000 1999
---------- ---------- ----------
Statutory rate 35.0% 35.0% 35.0%
State taxes 1.4 1.3 2.4
Other (net) (0.4) 0.8 0.1
---------- ---------- ----------
Effective tax rate 36.0% 37.1% 37.5%
========== ========== ==========
In fiscal 2001, 2000, and 1999, income taxes of $11.7, $85.2, and
$111.6, respectively, were paid net of refunds received. Income (loss) before
income taxes for fiscal 2001, 2000, and 1999 was ($124.8), $252.9, and $287.2,
respectively, for U.S. operations, and $8.5, $10.0, and $9.2, respectively, for
foreign operations. The Company has not 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 $36.9 as of March 31, 2001.
28
30
EMPLOYEE RETIREMENT PLANS
(in millions except percent data)
The Company sponsors defined benefit pension and defined contribution
profit sharing plans which provide income and death benefits for eligible
employees.
Year Ended March 31
2001 2000 1999
---------- ---------- ----------
Actuarial Assumptions
Obligation discount rate 7.75% 8.25% 7.25%
Compensation increase rate 4.75% 4.75% 4.75%
Long-term rate of return on plan assets 9% 9% 9%
Expense Components
Service cost $ 10.1 $ 13.5 $ 11.4
Interest 13.3 12.9 11.2
Expected return on assets (15.5) (14.3) (13.1)
Amortization and deferral (0.7) (0.1) (0.1)
Profit sharing 5.5 4.2 5.3
---------- ---------- ----------
Net expense $ 12.7 $ 16.2 $ 14.7
========== ========== ==========
Benefit Obligations
Beginning of year $ 164.0 $ 163.2 $ 156.1
Service cost 10.1 13.5 11.4
Interest 13.3 12.9 11.2
Benefits paid (5.4) (5.0) (6.1)
Actuarial (gain) loss 6.6 (20.6) (3.5)
Sale of Beaird Industries, Inc. -- -- (5.9)
---------- ---------- ----------
End of year $ 188.6 $ 164.0 $ 163.2
========== ========== ==========
Under funded plans $ 179.6 $ 6.1 $ 147.9
========== ========== ==========
Over funded plans $ 9.0 $ 157.9 $ 15.3
========== ========== ==========
Plans' Assets
Beginning of year $ 169.1 $ 160.0 $ 153.4
Actual return on assets (8.8) 11.4 12.3
Employer contributions 13.9 2.7 5.1
Benefits paid (5.4) (5.0) (6.1)
Sale of Beaird Industries, Inc. -- -- (4.7)
---------- ---------- ----------
End of year $ 168.8 $ 169.1 $ 160.0
========== ========== ==========
Under funded plans $ 158.5 $ -- $ 140.4
Over funded plans 10.3 169.1 19.6
========== ========== ==========
Consolidated Balance Sheet Components
Funded status $ 19.9 $ (5.1) $ 3.2
Unamortized transition obligation 1.1 1.4 1.6
Unrecognized prior service cost (0.9) (1.1) (1.1)
Unrecognized gain (loss) (17.6) 14.4 (3.4)
---------- ---------- ----------
Net obligation $ 2.5 $ 9.6 $ 0.3
========== ========== ==========
Accrued $ 10.0 $ 14.5 $ 5.6
Prepaid 7.5 4.9 5.3
---------- ---------- ----------
Net accrued $ 2.5 $ 9.6 $ 0.3
========== ========== ==========
29
31
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 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
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, these claims and suits in the
aggregate will not have a material adverse effect on the Company's consolidated
financial statements.
STOCKHOLDER'S RIGHTS PLAN
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 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 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.
30
32
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(in millions except per share data)
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
-------- -------- -------- -------- --------
YEAR ENDED MARCH 31, 2001:
REVENUES $ 533.7 550.7 401.2 418.70 1,904.3
OPERATING PROFIT (LOSS) $ 37.5 (14.9) (30.5) (58.2) (66.1)
NET INCOME (LOSS) (1) $ 20.9 (13.2) (42.4) (39.7) (74.4)
NET INCOME (LOSS) PER COMMON SHARE:
BASIC $ 0.55
(0.35) (1.14) (1.08) (1.98)
DILUTED $ 0.55
(0.35) (1.14) (1.08) (1.98)
Year ended March 31, 2000:
Revenues $ 693.4 700.00 700.8 646.4 2,740.6
Operating profit $ 77.4 76.9 68.8 55.9 279.0
Net income $ 45.0 46.3 40.3 33.9 165.5
Net income per common share:
Basic $ 1.11 1.17 1.03 0.87 4.17
Diluted $ 1.10 1.16 1.02 0.87 4.15
(1) See notes to consolidated financial statements for a discussion of certain
unusual charges recorded in the Company's second, third, and fourth quarters of
fiscal 2001.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
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 2001 Annual Meeting of Stockholders.
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 2001 Annual Meeting of Stockholders.
31
33
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 of Directors" and "Executive Compensation" in the Company's proxy
statement for the 2001 Annual Meeting of Stockholders.
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 2001 Annual Meeting of Stockholders, under the caption
"Security Ownership of Certain Beneficial Owners and Management".
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
During the fourth quarter, the Company filed two Form 8-K's which
reported (i) revised lower North American railcar production volumes for next
fiscal year; (ii) intention to discontinue and sell certain assets of it's TEMCO
business which produced concrete mixers, concrete batch plant and component
parts for concrete related industries and record an $8 million unusual charge
associated with the cost of exiting this business; (iii) announced it expects to
record charges of approximately $17 million primarily for severance and asset
write-downs; (iv) expects fourth quarter earnings, excluding the charges
mentioned above, to be a small loss; and (v) announced it expects earnings for
the next fiscal year to be in the lower end of the $1.20 to $1.50 per share
range.
Subsequent to March 31, 2001 the Company filed form 8K, which (i)
reported earnings for the fourth quarter and fiscal year ended March 31,2001;
(ii) announced additional fourth quarter unusual charges of approximately $16
million related to plant closings and $14.8 million in litigation reserves
related to an adverse jury verdict; and (iii) announced that until more
improvement is seen in the North American rail market, it is reasonable to
expect the Company's net income in fiscal 2002 will be comparable to fiscal 2001
net income before unusual charges.
32
34
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 report dated May 21,
2001 with respect to the consolidated financial statements and schedule of
Trinity Industries, Inc. included in this Annual Report (Form 10-K) for the year
ended March 31, 2001.
ERNST & YOUNG LLP
Dallas, Texas
June 14, 2001
33
35
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 March 31, 2001 and 2000, and for each of the three years
in the period ended March 31, 2001, and have issued our report thereon dated May
21, 2001. Our audits also included the financial statement schedule of Trinity
Industries, Inc. listed in Item 14(a). This schedule is the responsibility of
the Company's management. Our responsibility is to express an opinion based on
our audits.
In our opinion, the financial statement schedule 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
May 21, 2001
34
36
SCHEDULE II
Trinity Industries, Inc.
Allowance for Doubtful Accounts
Years Ended March 31, 2001, 2000, and 1999
(in millions)
Additions
Balance at charged to Accounts Balance
beginning costs and charged at end
of year expenses off of year
------- ------- ------- -------
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
======= ======= ======= =======
Year Ended March 31, 1999 $ 1.7 $ 0.7 $ 0.5 $ 1.9
======= ======= ======= =======
35
37
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/ Michael G. Fortado
- ------------------------ ------------------------
Registrant Michael G. Fortado
Vice President,
General Counsel, and
Secretary
June 14, 2001
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
June 14, 2001 June 14, 2001
/s/ Ronald J. Gafford /s/ W. Ray Wallace
- ---------------------- -------------------
Ronald J. Gafford W. Ray Wallace
Director Director
June 14, 2001 June 14, 2001
- ----------------------
Barry J. Galt
Director
June 14, 2001 Principal Executive Officer:
/s/ Clifford J. Grum /s/ Timothy R. Wallace
- ---------------------- ------------------------
Clifford J. Grum Timothy R. Wallace
Director Chairman, President,
June 14, 2001 Chief Executive Officer and
Director
/s/ Dean P. Guerin June 14, 2001
- --------------------
Dean P. Guerin
Director
June 14, 2001 Principal Financial Officer:
/s/ Jess T. Hay /s/ Jim S. Ivy
- ----------------- ----------------
Jess T. Hay Jim S. Ivy
Director Vice President
June 14, 2001 June 14, 2001
Principal Accounting Officer:
/s/ Edmund M. Hoffman /s/ Christine S Stucker
- ----------------------- -------------------------
Edmund M. Hoffman Christine S. Stucker
Director Controller
June 14, 2001 June 14, 2001
38
June 14, 2001 June 14, 2001
Trinity Industries, Inc.
Index to Exhibits
(Item 14(a))
NO. DESCRIPTION
--- -----------
(3.1) Certificate of Incorporation of the Company (incorporated by reference
to Exhibit 3.A to Registration Statement No. 33-10937 filed April 8,
1987).
(3.2) By-Laws of the Company (incorporated by reference to Exhibit 3.2 to the
Company's Annual Report on Form 10K for the fiscal year ended March 31,
2000.)
(4.1) Specimen Common Stock Certificate of Company (incorporated by reference
to Exhibit 4.1 to the Company's Annual Report on Form 10K for the
fiscal year ended March 31, 1999).
(4.2) Rights Agreement dated March 31, 2000 (incorporated by reference To the
Company's Form 8-K filed March 31, 1999).
(10.1) Fixed Charges Coverage Agreement dated as of January 15, 1980, between
Company 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 Company
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 the Company 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, three other executive
officers, and two executive officers of subsidiaries of the Company.
(incorporated by reference to Exhibit 10.1 to the Company's Quarterly
Report on Form 10Q for the period ended December 31, 2000.*
(10.3.2) Form of Amended and Restated Executive Severance Agreement dated
November 7, 2000, entered into between the Company and eight executive
officers and fourteen divisional officers of the Company( incorporated
by reference to Exhibit 10.1 to the Company's Quarterly Report on Form
10Q for the 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).*
(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 the Company's Annual Report on Form 10K for the fiscal
year ended March 31, 1999).*
39
Index to Exhibits -- (Continued)
(Item 14(a))
NO. DESCRIPTION
--- -----------
(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). Trinity
Industries, Inc.*
(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 the Company's Annual
Report on Form 10K 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.*
(10.9) Supplemental Profit Sharing and Deferred Director Fee Trust dated March
31, 1999 (incorporated by reference to Exhibit 10.10 to the Company's
Annual Report on Form 10K 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 the Company's
Annual Report on Form 10K 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 the Company's Annual Report on Form 10K for the fiscal
year ended March 31, 1999).*
(10.12) Trinity Industries, Inc. 1998 Stock Option and Incentive Plan
(incorporated by reference to Registration Statement No. 333-77735
filed May 4, 1999).*
(10.13) Form of Deferred Compensation Plan and Agreement entered into between
Trinity Industries, Inc. and certain officers of the company
(incorporated by reference to Exhibit 10.14 to the Company's Annual
Report on Form 10K for the fiscal year ended March 31, 1999).*
(10.14) Consulting agreement between the Company and W. R. Wallace effective
January 1, 1999 (incorporated by reference to Exhibit 10.14 to the
Company's Annual Report on Form 10K 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 the Company's proxy
statement dated June 19,2000).*
40
NO. DESCRIPTION
--- -----------
(10.16) Equipment Lease Agreement dated as of May 17, 2001 between TRLI-1A
Railcar Statutory Trust, lessor, and Trinity Rail Leasing I L.P.,
lessee.
(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.
(21) Listing of subsidiaries of the Company.
(23) Consent of Independent Auditors. (Contained on page 33 of this
document)
*Management contracts and compensatory plan arrangements.
NOTICE: Exhibits 10.8.2, 10.16, 10.17, and 21 have been omitted from the
reproduction of this Form 10-K. A copy of the Exhibits will be furnished upon
written request to Neil Shoop, Treasurer, Trinity Industries, Inc., P.O. Box
568887, Dallas, Texas 75356-8887. The Company may impose a reasonable fee for
its expenses in connection with providing the above-referenced Exhibits.