================================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 10-Q
---------------
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2002
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
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 [ ].
AT APRIL 30, 2002 THERE WERE 45,899,388 SHARES OF THE REGISTRANT'S COMMON
STOCK OUTSTANDING.
TRINITY INDUSTRIES, INC.
FORM 10-Q
TABLE OF CONTENTS
<Table>
<Caption>
CAPTION PAGE
------- ----
PART I FINANCIAL INFORMATION
Item 1. Financial Statements........................................... 3
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................... 10
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders............ 15
Item 6. Exhibits and Reports on Form 15 8-K............................ 15
</Table>
2
ITEM 1. FINANCIAL STATEMENTS
TRINITY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
<Table>
<Caption>
THREE MONTHS ENDED MARCH 31,
2002 2001
------- -------
(UNAUDITED)
(IN MILLIONS EXPECT PER SHARE AMOUNTS)
--------------------------------------
Revenues ........................................... $ 384.3 $ 418.7
Operating costs:
Cost of revenues .................................. 348.0 425.3
Selling, engineering and administrative
expenses ......................................... 40.5 51.6
------- -------
388.5 476.9
------- -------
Operating loss ..................................... (4.2) (58.2)
Other (income) expense:
Interest income ................................... (0.3) (1.4)
Interest expense .................................. 7.0 7.6
Other, net ........................................ 0.5 (2.3)
------- -------
7.2 3.9
------- -------
Loss before income taxes ........................... (11.4) (62.1)
Provision (benefit) for income taxes:
Current ........................................... (25.0) (14.0)
Deferred .......................................... 22.2 (8.4)
------- -------
(2.8) (22.4)
------- -------
Net loss ........................................... $ (8.6) $ (39.7)
------- -------
Net loss per common share:
Basic ............................................. $ (0.19) $ (1.08)
======= =======
Diluted ........................................... $ (0.19) $ (1.08)
======= =======
Weighted average number of shares outstanding:
Basic ............................................. 44.4 36.9
Diluted ........................................... 44.4 36.9
</Table>
See accompanying notes to consolidated financial statements.
3
TRINITY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<Table>
<Caption>
MARCH 31, DECEMBER 31,
2002 2001
---------- ------------
(UNAUDITED)
(IN MILLIONS)
ASSETS
Cash and cash equivalents .................................... $ 15.6 $ 22.2
Receivables, net of allowance ................................ 202.4 204.3
Inventories:
Raw materials and supplies ................................. 143.5 159.5
Work in process ............................................ 42.9 42.4
Finished goods ............................................. 75.5 73.3
261.9 275.2
Property, plant and equipment, at cost ....................... 1,473.6 1,434.9
Less accumulated depreciation ................................ (587.1) (555.8)
886.5 879.1
Goodwill ..................................................... 416.2 415.7
Other assets ................................................. 142.1 155.5
$1,924.7 $1,952.0
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Revolving bank facility ...................................... $ 270.0 $ --
Accounts payable and accrued liabilities ..................... 379.8 424.9
Long-term debt ............................................... 187.6 476.3
Other liabilities ............................................ 54.7 41.4
892.1 942.6
Stockholders' equity:
Common stock-- shares issued and outstanding at
March 31, 2002-- 51.0; at December 31, 2001 - 51.0 ......... 51.0 51.0
Capital in excess of par value ............................... 442.6 464.7
Retained earnings ............................................ 692.1 703.4
Accumulated other comprehensive loss ......................... (23.8) (26.0)
Treasury stock (5.0 shares at March 31, 2002 and 7.0
shares at December 31, 2001) ................................ (129.3) (183.7)
-------- --------
1,032.6 1,009.4
-------- --------
$1,924.7 $1,952.0
======== ========
</Table>
See accompanying notes to consolidated financial statements.
4
TRINITY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT CASH FLOWS
<Table>
<Caption>
THREE MONTHS ENDED
MARCH 31,
------------------
2002 2001
---- ----
(UNAUDITED)
(IN MILLIONS)
Operating activities:
Net loss ........................................................... $ (8.6) $(39.7)
Adjustments to reconcile net loss to net cash provided
(required) by operating activities:
Depreciation and amortization .................................... 22.0 22.9
Deferred income taxes ............................................ 22.2 (8.4)
Gain on sale of property, plant, equipment and
other assets ................................................... (0.3) (1.4)
Unusual charges .................................................. -- 55.8
Other ............................................................ (0.2) (4.8)
Changes in assets and liabilities, net of effects
from acquisitions and unusual charges:
(Increase) decrease in receivables ........................... 1.7 (30.6)
Decrease in inventories ...................................... 13.3 35.3
Decrease in other assets ..................................... 7.0 20.7
Decrease in accounts payable and accrued liabilities ......... (37.3) (20.0)
Increase (decrease) in other liabilities ..................... (3.1) 5.1
Total adjustments ............................................ 25.3 74.6
------ ------
Net cash provided by operating activities ........................... 16.7 34.9
Investing activities:
Proceeds from sale of property, plant, equipment and
other assets ..................................................... 1.5 7.0
Capital expenditures ............................................... (29.4) (120.9)
Payment for purchase of acquisitions, net of cash acquired ......... -- 0.2
------
Net cash required by investing activities .......................... (27.9) (113.7)
Financing activities:
Issuance of common stock ........................................... 31.3 --
Net borrowings of short-term debt .................................. -- 88.2
Payments to retire long-term debt .................................. (188.7) (4.1)
Proceeds from issuance of long-term debt ........................... 170.0 --
Dividends paid ..................................................... (8.0) (6.6)
Net cash provided by financing activities .......................... 4.6 77.5
Net decrease in cash and cash equivalents ........................... (6.6) (1.3)
Cash and cash equivalents at beginning of period .................... 22.2 14.8
Cash and cash equivalents at end of period .......................... $ 15.6 $ 13.5
------ ------
</Table>
See accompanying notes to consolidated financial statements.
5
TRINITY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<Table>
<Caption>
COMMON COMMON CAPITAL ACCUMULATED
SHARES STOCK IN EXCESS OTHER
(100,000,000 $1.00 PAR OF PAR RETAINED COMPREHENSIVE TREASURY
AUTHORIZED) VALUE VALUE EARNINGS LOSS SHARES
----------- ----------- ----------- ----------- ------------- -----------
(IN MILLIONS EXCEPT SHARE AND PER SHARE DATA)
Balance at December 31, 2000 ......... 43,796,351 $ 43.8 $ 291.9 $ 805.8 $ (20.5) (6,952,626)
Net loss ............................ -- -- -- (39.7) -- --
Currency translation
adjustments ........................ -- -- -- -- (0.6) --
Comprehensive loss ..................
Cash dividends ($0.18 per
share) ............................. -- -- -- (6.7) -- --
Stock repurchases ................... -- -- --
Other ............................... -- -- (0.1) -- -- (760)
----------- ----------- ----------- ----------- ----------- -----------
Balance at March 31, 2001 ............ 43,796,351 $ 43.8 $ 291.8 $ 759.4 $ (21.1) (6,953,386)
=========== =========== =========== =========== =========== ===========
Balance at December 31, 2001 ......... 50,946,351 $ 51.0 $ 464.7 $ 703.4 $ (26.0) (6,608,522)
Net loss ............................ -- -- -- (8.6) -- --
Currency translation
adjustments ........................ -- -- -- -- (0.1) --
Unrealized gain on derivative
financial instruments .............. -- -- -- -- 2.3 --
Comprehensive loss ..................
Cash dividends ($0.06 per
share) ............................. -- -- -- (2.7) -- --
Stock issued ........................ (19.8) -- -- 1,500,000
Other ............................... -- -- (2.3) -- -- 67,825
----------- ----------- ----------- ----------- ----------- -----------
Balance at March 31, 2002 ............ 50,946,351 $ 51.0 $ 442.6 $ 692.1 $ (23.8) (5,040,697)
=========== =========== =========== =========== =========== ===========
<Caption>
TREASURY TOTAL
STOCK AT STOCKHOLDERS'
COST EQUITY
----------- -----------
Balance at December 31, 2000 ......... $ (195.0) $ 926.0
Net loss ............................ -- (39.7)
Currency translation
adjustments ........................ -- (0.6)
-----------
Comprehensive loss .................. (40.3)
Cash dividends ($0.18 per
share) ............................. -- (6.7)
Stock repurchases ................... --
Other ............................... 0.1 --
----------- -----------
Balance at March 31, 2001 ............ $ (194.9) $ 879.0
=========== ===========
Balance at December 31, 2001 ......... $ (183.7) $ 1,009.4
Net loss ............................ -- (8.6)
Currency translation
adjustments ........................ -- (0.1)
Unrealized gain on derivative
financial instruments .............. -- 2.3
-----------
Comprehensive loss .................. (6.4)
Cash dividends ($0.06 per
share) ............................. -- (2.7)
Stock issued ........................ 51.1 31.3
Other ............................... 3.3 1.0
----------- -----------
Balance at March 31, 2002 ............ $ (129.3) $ 1,032.6
=========== ===========
</Table>
See accompanying notes to consolidated financial statements.
6
TRINITY INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The foregoing consolidated financial statements are unaudited and have been
prepared from the books and records of Trinity Industries, Inc. ("Trinity" or
the "Company"). We changed our year-end in 2001 from March 31 to December 31. In
the opinion of management, all adjustments, consisting only of normal and
recurring adjustments necessary for a fair presentation of the financial
position of the Company as of March 31, 2002 and the results of operations and
cash flows for the three months periods ended March 31, 2002 and 2001, in
conformity with generally accepted accounting principles, have been made.
Because of seasonal and other factors, the results of operations for the
three-month period ended March 31, 2002 may not be indicative of expected
results of operations for the year ending December 31, 2002. These interim
financial statements and notes are condensed as permitted by the instructions to
Form 10-Q and should be read in conjunction with the audited consolidated
financial statements of the Company included in its Form 10-K for the nine
months ended December 31, 2001.
NOTE 2. UNUSUAL CHARGES
In the three months ended March 31, 2001, 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.
Restructuring reserve activity for the three months ended March 31, 2002 is:
<Table>
<Caption>
RESERVES RESERVES
DECEMBER 31, RECLASSIFI- MARCH 31,
2001 PAYMENT CATIONS 2002
----------- ------- ----------- --------
(in millions)
Property, plant & equipment
--write-downs to net realizable value to
be disposed of and related shut-down
costs and other asset write downs ................ $18.9 $ 2.1 $ 1.2 $15.6
Environmental liabilities ......................... 11.1 0.1 -- 11.0
Severance costs ................................... 4.9 0.8 -- 4.1
Adverse jury verdict .............................. 14.8 -- -- 14.8
Asset-write downs and exit cost related
to wholly owned businesses ....................... 0.2 -- -- 0.2
Other ............................................. 3.2 0.1 3.1
----- ----- ----- -----
$53.1 $ 3.1 $ 1.2 $48.8
===== ===== ===== =====
</Table>
NOTE 3. SEGMENT INFORMATION
As of December 31, 2001, the Company modified its segment reporting to align
the reportable segments with current management responsibilities and internal
reporting.
The new reporting format includes the following business segments: (1) the
Trinity Rail group, which manufactures and sells railcars and component parts;
(2) the Construction Products group which manufactures and sells highway
guardrail and safety products, concrete and aggregate, girders and beams used in
the construction of highway and railway bridges and weld fittings used in
pressure piping systems; (3) the Inland Barge group which manufactures and sells
barges and related products for inland waterway services; (4) the Industrial
Products group, which manufactures and sells container heads and pressure and
non-pressure containers for the storage and transportation of liquefied gases
and other liquid and dry products; and (5) the Trinity Railcar Leasing and
Management Services group, which provides services such as fleet management and
leasing. Finally, All Other includes the Company's captive insurance and
transportation companies, structural towers, and other peripheral businesses.
7
Sales from Trinity Rail group to Trinity Railcar Leasing and Management
Services group are recorded in Trinity Rail group and eliminated in
consolidation. Sales of railcars from the lease fleet are included in the
Trinity Railcar Leasing and Management Services group segment. Sales among
groups are recorded at prices comparable to external customers.
THREE MONTHS ENDED MARCH 31, 2002
<Table>
<Caption>
REVENUES OPERATING
-------------------------------- PROFIT
OUTSIDE INTERSEGMENT TOTAL (LOSS)
------- ------------ ------ ---------
(IN MILLIONS)
Rail Group ............................. $150.6 $ 20.5 $171.1 $(12.2)
Construction Products Group ............ 112.6 0.5 113.1 7.5
Inland Barge Group ..................... 61.2 -- 61.2 1.9
Industrial Products Group .............. 30.7 0.6 31.3 0.9
Railcar Leasing and Management
Services Group ........................ 26.7 -- 26.7 7.1
All Other .............................. 2.5 6.7 9.2 (2.9)
Eliminations & Corporate
Items ................................. -- (28.3) (28.3) (6.5)
------ ------ ------ ------
Consolidated Total ..................... $384.3 $ -- $384.3 $ (4.2)
====== ====== ====== ======
</Table>
THREE MONTHS ENDED MARCH 31, 2001
<Table>
<Caption>
REVENUES OPERATING
-------------------------------- PROFIT
OUTSIDE INTERSEGMENT TOTAL (LOSS)
------- ------------ ------ ---------
(IN MILLIONS)
Rail Group ............................. $178.7 $114.7 $293.4 $(38.6)
Construction Products Group ............ 116.6 1.5 118.1 3.3
Inland Barge Group ..................... 58.4 0.1 58.5 1.8
Industrial Products Group .............. 33.2 5.3 38.5 (1.1)
Railcar Leasing and Management
Services Group ........................ 20.1 -- 20.1 7.8
All Other .............................. 11.7 15.8 27.5 (14.7)
Eliminations & Corporate Items ......... -- (137.4) (137.4) (16.7)
------ ------ ------ ------
Consolidated Total ..................... $418.7 $ -- $418.7 $(58.2)
====== ====== ====== ======
</Table>
8
NOTE 4. GOODWILL
The Company adopted SFAS No. 142, Goodwill and Other Intangible Assets,
effective April 1, 2001. Under SFAS No. 142, goodwill is no longer amortized but
reviewed for impairment annually or more frequently if certain indicators arise.
The Company has completed the impairment test required upon adoption of SFAS No.
142 and determined there is no impairment to its recorded goodwill balances.
Had the Company been accounting for its goodwill under SFAS No. 142 for the
three months ended March 31, 2001, the Company's net loss and loss per share
would have been reduced by $0.6 million and $0.02 per share.
NOTE 5. DEBT
The Company's committed revolving bank facility for $450 million expires in
June 2002. Negotiations are currently underway with the lead banks to replace
this facility with a combination of revolving and term debt with covenants
comparable to the existing facility. The replacement facility is expected to be
in place by the end of June.
On February 15, 2002, the Company's wholly-owned subsidiary, Trinity
Industries Leasing Company ("TILC"), sold $170,000,000 of 2002-1 Pass Through
Certificates with interest at 7.755%, commencing on August 15, 2002 and due
semiannually thereafter. Equipment notes issued by TILC for the benefit of the
holders of the Pass Through Certificate are collateralized by interest in
certain railcars owned by TILC and the leases pursuant to which such railcars
are leased to customers. The equipment notes, including the obligations to make
payments of principal and interest thereon are direct obligations of TILC and
are fully and unconditionally guaranteed by Trinity Industries, Inc. as
guarantor.
The proceeds of $170 million from the issuance of the equipment notes were
used to repay outstanding indebtedness of Trinity as of December 31, 2001.
Principal payments due during the next five years as of December 31, 2001,
including the above Pass Through Certificates, are (in millions) 2002 - $11.5;
2003 - $290.7; 2004 - $0.3; 2005 - $40.2; 2006 - $10.3; and $123.3 thereafter.
NOTE 6. STOCKHOLDERS' EQUITY
On March 6, 2002, Trinity privately placed a total of 1.5 million
unregistered shares of its common stock for net proceeds of $31.3 million.
Trinity has now registered these shares.
NOTE 7. DEPOSIT AGREEMENT
The Company entered into a deposit agreement with Altos Hornos de Mexico, SA
de C.V. ("AHMSA") which provides for funds to be deposited with AHMSA which are
then used along with other funds from the Company to purchase steel from AHMSA.
As of March 31, 2002, total funds on deposit including interest due amounted to
approximately $44.2 million. Since May 1999 AHMSA has been operating under a
judicial declaration of suspension of payments, which under applicable Mexican
law, allows companies in Mexico to (1) seek a debt restructuring agreement with
their creditors in an orderly fashion; (2) continue their operations; and (3)
avoid declaration of bankruptcy and liquidation of assets. Should AHMSA not be
able to operate under the declaration of suspension of payments because of its
financial condition, AHMSA's creditors have no access to the funds on deposit
and all funds on deposit with AHMSA under Mexican law should be returned to the
Company.
9
NOTE 8. OTHER, NET
Other (income) expense consists of the following items (in millions):
<Table>
<Caption>
THREE MONTHS ENDED
MARCH 31,
------------------
2002 2001
------ ------
Gain on sale of property,
plant and equipment .............. $(0.2) $(1.2)
Foreign exchange
transactions ..................... 0.2 (0.8)
Loss on equity
Investments ...................... 0.7 0.1
Other ............................. (0.2) (0.4)
----- -----
Other, net ....................... $ 0.5 $(2.3)
===== =====
</Table>
NOTE 9. CONTINGENCIES
In May of 2001, a judgement in the amount of $14.8 million was entered
against the Company in a lawsuit brought for an alleged breach of contract
involving the proposed production of a composite component for a refrigerated
railcar for the Company. The amount of the judgement was accrued by the Company
in fiscal 2001. The Company intends to appeal this judgement.
The Company is subject to federal, state, local and foreign laws and
regulations relating to the environment and to work places. The Company believes
that it is currently in substantial compliance with such laws and the
regulations promulgated thereunder.
The Company is involved in various proceedings relating to environmental
matters. The Company has provided reserves amounting to $11.5 million to cover
probable and estimable liabilities of the Company with respect to such
investigations and cleanup activities, taking into account currently available
information and the Company's contractual rights of indemnification. However,
estimates of future response costs are necessarily imprecise. Accordingly, there
can be no assurance that the Company will not become involved in future
litigation or other proceedings or, if the Company were found to be responsible
or liable in any litigation or proceeding, that such costs would not be material
to the Company.
The Company is involved in various other claims and lawsuits incidental to
its business. In the opinion of management, their claims and suits in the
aggregate will not have a material adverse effect on the Company's consolidated
financial statements.
NOTE 10. PROSPECTIVE ACCOUNTING CHANGES
In October 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, which is effective for fiscal years
beginning after December 15, 2001. SFAS 144 addresses accounting and reporting
of long-lived assets, except goodwill, that are held and used or disposed of
through sale or other means. The Company adopted SFAS 144 as of January 1, 2002.
There was no impact to the Company's financial statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
GENERAL
The following discussion should be read in conjunction with the unaudited
consolidated financial statements and related notes thereto appearing elsewhere
in this document
10
Trinity is one of the nation's leading diversified industrial companies
providing a variety of high volume, repetitive products and services for the
transportation, industrial and construction sectors of the marketplace. We
compete in cyclical markets and are continuously looking for opportunities to
improve our competitive positions.
In October 2001, we completed our merger transaction with privately owned
Thrall Car Manufacturing Company (Thrall). This merger combines Trinity's
strength in tank car production, Thrall's strength in auto rack manufacturing
and research and development expertise across the entire spectrum of railcars.
Due to the integration of Trinity and Thrall's operations, separate financial
information for Thrall only is not available.
UNUSUAL CHARGES
During the three months ended March 31, 2001, Trinity recorded special
pretax charges of approximately $55.8 million, $35.7 million net of 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 May
14, 2001. All of these charges were charged to operating profit. These charges
are reflected in the following income statement categories and segments (in
millions).
<Table>
<Caption>
RAILCAR
LEASING &
CONSTRUCTION INLAND INDUSTRIAL MANAGEMENT CORPORATE
RAIL PRODUCTS BARGE PRODUCTS SERVICES & OTHER TOTAL
------ ------------ ------ ---------- ---------- --------- -------
Cost of revenues ............................... $45.9 $ -- $ -- $ -- $ -- $ 8.0 $ 53.9
Selling, engineering & administrative .......... 1.3 -- -- -- -- 0.6 1.9
----- ----- ----- ----- ----- ------ ------
Charged to operating profit .................... 47.2 -- -- -- -- 8.6 55.8
Operating profit (loss) before charges ......... 8.6 3.3 1.8 (1.1) 7.8 (22.8) (2.4)
----- ----- ----- ----- ----- ------ ------
Operating profit (loss) reported ............... $(38.6) $ 3.3 $ 1.8 $(1.1) $ 7.8 $(31.4) $(58.2)
===== ===== ===== ===== ===== ====== ======
</Table>
THREE MONTHS ENDED MARCH 31, 2002 COMPARED WITH THREE MONTHS ENDED MARCH 31,
2001 -- RESULTS OF OPERATIONS
Revenues decreased $34.4 million to $384.3 million for the three months
ended March 31, 2002 compared to $418.7 million for the three months ended March
31, 2001, a decrease of 8.2%. The decline in revenues was due to the reduction
in railcar shipments and a reduction in the construction products and all other
groups due to exiting several lines of business offset by an increase in leasing
revenues resulting from an increase in the lease fleet.
The following table reconciles the revenue amounts discussed under each
segment with the consolidated total revenues shown in the Selected Financial
Data (in millions).
<Table>
<Caption>
THREE MONTHS ENDED MARCH 31, 2002 THREE MONTHS ENDED MARCH 31, 2001
--------------------------------- ---------------------------------
REVENUES REVENUES
--------------------------------- ---------------------------------
OUTSIDE INTERSEGMENT TOTAL OUTSIDE INTERSEGMENT TOTAL
------- ------------ ----- ------- ------------ -----
Rail Group ............................. $150.6 $ 20.5 $171.1 $178.7 $114.7 $293.4
Construction Products Group ............ 112.6 0.5 113.1 116.6 1.5 118.1
Inland Barge Group ..................... 61.2 -- 61.2 58.4 0.1 58.5
Industrial Products Group .............. 30.7 0.6 31.3 33.2 5.3 38.5
Railcar Leasing and Management
Services Group ........................ 26.7 -- 26.7 20.1 -- 20.1
All Other .............................. 2.5 6.7 9.2 11.7 15.8 27.5
Eliminations & Corporate Items ......... -- (28.3) (28.3) -- (137.4) (137.4)
------ ------ ------ ------ ------ ------
Consolidated Total ..................... $384.3 $ -- $384.3 $418.7 $ -- $418.7
====== ====== ====== ====== ====== ======
</Table>
Operating loss decreased $54.0 million to $4.2 million for the three months
ended March 31, 2002 compared to $58.2 million for the same period in 2001.
Special charges for the three months ended March 31, 2001 were $55.8 million.
Improved operating profits in the Construction Products and All other groups due
to exiting unprofitable business lines were offset by an operating loss in the
Rail group caused by reduced revenues and unabsorbed overhead due to lower
volumes.
11
Selling, engineering and administrative expenses decreased $11.1 million to
$40.5 million for the three months ended March 31, 2002 compared to $51.6
million for the comparable period in 2001, a decrease of 21.5%. The decrease was
a result of lower head count, cost reduction efforts and special charges
recorded in the prior quarter.
Interest expense, net of interest income, increased $0.5 million to $6.7
million for the three months ended March 31, 2002 compared to $6.2 million for
the same period in 2001, an increase of 8.1%. The increase was primarily
attributable to lower interest income.
Other, net was an expense of $0.5 million for the three months ended March
31, 2002 compared to income of $2.3 million for the comparable period in 2001.
The decrease was due to a lesser amount of gains on sale of property, plant and
equipment in the current period compared to the same period last year and
foreign exchange losses in the current period compared to gains in the prior
year period.
The current year effective tax rate of 25.0% is due to the absence of tax
benefits on certain foreign losses.
Net loss for the three months ended March 31, 2002 was $8.6 million, or
$0.19 per diluted share as compared to a net loss of $39.7 million, or $1.08 per
diluted share, the same period in 2001.
TRINITY RAIL GROUP
<Table>
<Caption>
THREE MONTHS
ENDED
MARCH 31,
-------------------
2002 2001
---- ----
(IN MILLIONS)
Revenues ..................................... $171.1 $293.4
Operating profit (loss) including unusual
charges ..................................... $(12.2) $(38.6)
Operating profit (loss) before unusual
charges ..................................... $(12.2) $ 8.6
Operating profit (loss) margin before
unusual charges ............................. (7.1)% 2.9%
</Table>
Revenues declined 41.7% for the three months ended March 31, 2002 compared
to the same period in 2001. This decline is due to the current downturn in the
North American railcar market. Railcar units shipped dropped approximately 66%
compared to the prior year to approximately 1,300 cars. Operating profit margins
were impacted by the inefficiencies of lower production levels and price
pressures in the current competitive environment. With the current railcar
market, our shipments are expected to be 5,000 to 7,000 in 2002.
In the three months ended March 31, 2002 railcar sales to Trinity Industries
Leasing Company included in the Rail Group results were $20.4 million compared
to $114.8 million in the comparable period in 2001 with profit of $0.9 million
compared to $5.8 million for the same period in 2001. Sales to Trinity
Industries Leasing Company and related profits are eliminated in consolidation.
CONSTRUCTION PRODUCTS GROUP
<Table>
<Caption>
THREE MONTHS
ENDED
MARCH 31,
-------------------
2002 2001
---- ----
(IN MILLIONS)
Revenues ............................... $113.1 $118.1
Operating profit ....................... $ 7.5 $ 3.3
Operating profit margin ................ 6.6% 2.8%
</Table>
Revenues declined 4.2% for the three months ended March 31, 2002 compared to
the same period in 2001. The decrease in revenues was primarily attributable to
exiting the sheet pile, flange and valve businesses offset by
12
increased revenue and profits related to improved weather conditions in the
concrete and aggregate and bridge business. Operating profit margins increased
as a result of cost reduction associated with the consolidation of plants and
elimination of unprofitable products.
INLAND BARGE GROUP
<Table>
<Caption>
THREE MONTHS
ENDED
MARCH 31,
-------------------
2002 2001
---- ----
(IN MILLIONS)
Revenues ............................... $61.2 $58.5
Operating profit ....................... $ 1.9 $ 1.8
Operating profit margin ................ 3.1% 3.1%
</Table>
Revenues increased 4.6% for the three months ended March 31, 2002 compared
to the same period in 2001. The increase in revenues was primarily attributable
to increased deliveries of covered hopper barges.
INDUSTRIAL PRODUCTS GROUP
<Table>
<Caption>
THREE MONTHS
ENDED
MARCH 31,
-------------------
2002 2001
---- ----
(IN MILLIONS)
Revenues ............................... $31.3 $38.5
Operating profit (loss) ................ $ 0.9 $(1.1)
Operating profit (loss) margin ......... 2.9% (2.9%)
</Table>
Revenues declined 18.7% for the three months ended March 31, 2002 compared
to the same period in 2001. The decline in revenues is primarily due to reduced
demand from gas distributors in the Mexico liquefied petroleum gas market.
RAILCAR LEASING AND MANAGEMENT SERVICES GROUP
<Table>
<Caption>
THREE MONTHS
ENDED
MARCH 31,
-------------------
2002 2001
---- ----
(IN MILLIONS)
Revenues ............................... $26.7 $20.1
Operating profit ....................... $ 7.1 $ 7.8
Operating profit margin ................ 26.6% 38.8%
</Table>
Revenues increased due to the increase in the size of the lease fleet that
includes railcars under management as well as Company owned railcars and
railcars we lease under operating leases. Operating profit is down due to the
increased size of the fleet that we manage or lease compared to the fleet we
own. This shift resulted from the fact that, in the March quarter a year ago, we
were building a substantial portfolio of lease cars that were subsequently moved
from owned cars to leased cars later in the year in a sale and leaseback
transaction described in our annual report on Form 10-K. The reason that leased
cars result in lower operating profit margins is that operating lease expense on
the railcars we lease includes both a depreciation component and an interest
component that is charged to operating expense. For owned cars, only a
depreciation component is charged to operating expense. Also affecting operating
profit this quarter was selling, engineering and administrative expense that was
increased in connection with our strategy to grow both the lease fleet and the
managed car fleet going forward.
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Included in the results of this group are revenues from the sale of railcars
from the lease fleet of $1.0 million in the three months ended March 31, 2002
and $1.7 million in the same period in 2001. Operating profits on these sales
were $0.2 million for the three months ended March 31, 2002 and $0.2 million in
the same period in 2001.
ALL OTHER
Revenues in All Other decreased to $9.2 million in the three months ended
March 31, 2002 from $27.5 million for the three months ended March 31, 2001.
This decrease is primarily due to discontinuing the operations of TEMCO during
the same period in 2001. TEMCO produced concrete mixers, concrete batch plants
and component parts for concrete related industries. Additionally, the temporary
slowdown in the wind tower business contributed to lower revenues.
Operating loss was $2.9 for the three months ended March 31, 2002, and $14.7
in the same period in 2001. Restructuring charges included in the three months
ended March 31, 2001 were $8.0 million primarily related to exiting the TEMCO
business referred to above and environmental liabilities. Excluding
restructuring charges, a larger operating loss was recorded in the same period
in 2001 due primarily to operating losses associated with TEMCO.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for the three months ended March
31, 2002 decreased to $16.7 million compared to $34.9 million for the same
period in 2001. The decrease was due to positive working capital changes offset
by a net loss in the current period. Capital expenditures for the three months
ended March 31, 2002 were $29.4 million, of which $19.1 million was for
additions to the lease portfolio. This compares to $120.9 million of capital
expenditures for the same period last year, of which $96.4 million was for
additions to the lease portfolio. Proceeds from the sale of property, plant and
equipment were $1.5 million for the three months ended March 31, 2002 composed
primarily of the sale of cars from the lease fleet in 2002, compared to $7.0
million for the same period in 2001.
We expect to finance future operating requirements with cash flows from
operations, long-term and short-term debt, and privately placed equity. Our
committed revolving bank facility for $450 million expires in June 2002. We are
currently negotiating with our lead banks to replace this facility with a
combination of revolving and term debt with covenants comparable to the exiting
facility. We expect this replacement facility to be completed by the end of
June.
On February 15, 2002, Trinity Industries Leasing sold $170,000,000 of 2002-1
Pass Through Certificates with interest payments at 7.755%, commencing on August
15, 2002 and due semiannually thereafter. Equipment notes issued by Trinity
Industries Leasing for the benefit of the holders of the Pass Through
Certificates are collateralized by interest in certain railcars owned by Trinity
Industries Leasing and the leases pursuant to which such railcars are leased to
customers. The equipment notes, including the obligations to make payments of
principal and interest thereon are direct obligations of Trinity Industries
Leasing and are fully and unconditionally guaranteed by Trinity as guarantor.
On March 6, 2002, we privately placed a total of 1.5 million unregistered
shares of our common stock for net proceeds of $31.3 million. We have registered
these shares.
FORWARD LOOKING STATEMENTS. This annual report on Form 10-K contains
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Any statements contained herein that are not
historical facts are forward-looking statements and involve risks and
uncertainties. These forward-looking statements include expectations, beliefs,
plans, objectives, future financial performance, estimates, projections, goals
and forecasts. Potential factors which could cause our actual results of
operations to differ materially from those in the forward-looking statements
include:
o market conditions and demand for our products;
o the cyclical nature of both the railcar and barge industries;
o abnormal periods of inclement weather in areas where construction products are
sold and used; o the timing of introduction of new products;
14
o the timing of customer orders;
o price erosion;
o changes in mix of products sold;
o the extent of utilization of manufacturing capacity;
o availability of supplies and raw materials;
o price competition and other competitive factors;
o changing technologies;
o steel prices;
o interest rates and capital costs;
o taxes;
o the stability of the governments and political and business conditions in
certain foreign countries, particularly Mexico and Romania;
o changes in import and export quotas and regulations;
o business conditions in emerging economies; and
o legal, regulatory and environmental issues.
Any forward-looking statement speaks only as of the date on which such
statement is made. Trinity undertakes no obligation to update any
forward-looking statement to reflect events or circumstances after the date on
which such statement is made.
PART II
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
(b) Reports on Form 8-K
(1) Trinity filed a Current Report on Form 8-K dated March 20, 2002, reporting
close, under Item 7, pro forma operating results and related pro forma
adjustments for the nine months ended December 31, 2001 as if the merger
with Thrall Car Manufacturing had occurred as of April 1, 2001.
(2) Trinity filed a Current Report on Form 8-K dated April 29, 2002,
reporting, under Item 5, operating results for the three months ended
March 31, 2002. Pursuant to Form 8-K:
(i) under Item 7, the news release dated April 26, 2002 was filed.
15
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/ JIM S. IVY
Registrant
Jim S. Ivy
Vice President and
Chief Financial Officer
May 15, 2002
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