TRINITY INDUSTRIES INC - 10-Q Quarterly Report

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 JUNE 30, 2004


[ ]		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 (State of Incorporation)		75-0225040 (I.R.S. Employer Identification No.)


2525 Stemmons Freeway Dallas, Texas (Address of principal executive offices)		75207-2401 (Zip Code)

Registrant’s telephone number, including area code (214) 631-4420

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ].

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes [X] No [ ]

At July 30, 2004 there were 47,134,910 shares of the Registrant’s common stock outstanding.

Item 1. Financial Statements

Trinity Industries, Inc. and Subsidiaries
Consolidated Statements of Operations


	Three Months Ended June 30,
	2004			2003
	(unaudited)
	(in millions except per share amounts)
Revenues	$	548.7		$	365.8
Operating costs:
Cost of revenues		491.4			320.5
Selling, engineering and administrative expenses		43.0			34.9

		534.4			355.4

Operating profit		14.3			10.4
Other (income) expense:
Interest income		(0.5	)		(0.2	)
Interest expense		10.9			8.4
Other, net		(1.6	)		(2.6	)

		8.8			5.6

Income before income taxes		5.5			4.8
Provision for income taxes		1.9			1.3

Net income		3.6			3.5
Dividends on Series B preferred stock		(0.7	)		—

Net income applicable to common shareholders	$	2.9		$	3.5

Net income applicable to common shareholders per common share:
Basic	$	0.06		$	0.08

Diluted	$	0.06		$	0.08

Weighted average number of shares outstanding:
Basic		46.4			45.5
Diluted		47.4			45.6

See accompanying notes to consolidated financial statements.

Trinity Industries, Inc. and Subsidiaries
Consolidated Statements of Operations


	Six Months Ended June 30,
	2004			2003
	(unaudited) (in millions except per share amounts)
Revenues	$	1,003.6		$	654.9
Operating costs:
Cost of revenues		916.5			586.9
Selling, engineering and administrative expenses		79.3			69.0

		995.8			655.9

Operating profit (loss)		7.8			(1.0	)
Other (income) expense:
Interest income		(0.7	)		(0.3	)
Interest expense		21.0			17.9
Other, net		(1.5	)		(3.4	)

		18.8			14.2

Loss before income taxes		(11.0	)		(15.2	)
Provision (benefit) for income taxes		(3.8	)		(4.2	)

Net loss		(7.2	)		(11.0	)
Dividends on Series B preferred stock		(1.5	)		—

Net loss applicable to common shareholders	$	(8.7	)	$	(11.0	)

Net loss applicable to common shareholders per common share:
Basic	$	(0.19	)	$	(0.24	)

Diluted	$	(0.19	)	$	(0.24	)

Weighted average number of shares outstanding:
Basic		46.3			45.5
Diluted		46.3			45.5

See accompanying notes to consolidated financial statements.

Trinity Industries, Inc. and Subsidiaries
Consolidated Balance Sheets


	June 30,			December 31,
	2004			2003
	(unaudited)			(as reported)
	(in millions)
Assets
Cash and cash equivalents	$	187.6		$	46.0
Receivables, net of allowance		241.9			198.1
Inventories:
Raw materials and supplies		181.6			158.4
Work in process		81.9			60.0
Finished goods		48.9			39.6

		312.4			258.0
Property, plant and equipment, at cost		1,622.8			1,627.1
Less accumulated depreciation		(690.1	)		(681.9	)

		932.7			945.2
Goodwill		420.2			415.1
Other assets		146.7			145.5

	$	2,241.5		$	2,007.9

Liabilities and Stockholders’ Equity
Accounts payable and accrued liabilities	$	466.7		$	460.2
Debt:
Recourse		475.7			298.5
Non-recourse		155.1			96.7

		630.8			395.2
Deferred income		30.9			32.2
Other liabilities		56.5			58.7

		1,184.9			946.3
Series B redeemable convertible preferred stock, no par value, $0.1 liquidation value		58.0			57.8
Stockholders’ equity:
Preferred stock — 1.5 shares authorized and unissued		—			—
Common stock — shares issued and outstanding at June 30, 2004 - 50.9; at December 31, 2003 —50.9		50.9			50.9
Capital in excess of par value		430.0			434.7
Retained earnings		635.5			649.9
Accumulated other comprehensive loss		(27.5	)		(27.3	)
Treasury stock (3.8 shares at June 30, 2004 and 4.3 shares at December 31, 2003)		(90.3	)		(104.4	)

		998.6			1,003.8

	$	2,241.5		$	2,007.9

See accompanying notes to consolidated financial statements.

Trinity Industries, Inc. and Subsidiaries
Consolidated Statements Cash Flows


	Six Months Ended June 30,
	2004			2003
	(unaudited)
	(in millions)
Operating activities:
Net loss	$	(7.2	)	$	(11.0	)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization		43.6			42.8
Deferred income taxes		(3.8	)		7.9
Gain on sale of property, plant, equipment and other assets		(3.0	)		(4.4	)
Other		(4.5	)		1.7
Changes in assets and liabilities:
(Increase) decrease in receivables		(44.1	)		(40.5	)
Decrease in tax receivable		—			45.4
(Increase) decrease in inventories		(53.4	)		(5.8	)
(Increase) decrease in other assets		(5.3	)		13.0
Increase in accounts payable and accrued liabilities		6.0			23.5
Increase in other liabilities		1.0			14.6

Net cash (required) provided by operating activities		(70.7	)		87.2

Investing activities:
Proceeds from sale of property, plant, equipment and other assets		47.2			31.9
Capital expenditures — lease subsidiary		(77.1	)		(112.6	)
Capital expenditures — other		(13.3	)		(8.6	)
Payment for purchase of acquisitions, net of cash acquired		(15.7	)		—
Sale of investment in equity trust .		8.5			—

Net cash required by investing activities		(50.4	)		(89.3	)

Financing activities:
Issuance of redeemable preferred stock		—			57.6
Payments to retire debt		(188.5	)		(105.2	)
Proceeds from issuance of debt		449.7			108.2
Proceeds from issuance of common stock, net		8.5			—
Dividends paid to common shareholders		(5.6	)		(5.7	)
Dividends paid to preferred shareholders		(1.4	)		—

Net cash provided by financing activities		262.7			54.9

Net increase in cash and cash equivalents		141.6			52.8
Cash and cash equivalents at beginning of period		46.0			19.1

Cash and cash equivalents at end of period	$	187.6		$	71.9

Interest paid for the six months ended June 30, 2004 and 2003 was $12.1 and $15.9, respectively. Taxes paid, net of refunds received, were $7.0 for the six months ended June 30, 2004 and taxes received, net of payments made were $45.5 for the six months ended June 30, 2003.

See accompanying notes to consolidated financial statements.

Trinity Industries, Inc. and Subsidiaries
Consolidated Statement of Stockholders’ Equity


	Common		Common		Capital						Accumulated
	Shares		Stock		in Excess						Other						Treasury			Total
	(100,000,000		$1.00 Par		of Par			Retained			Comprehensive			Treasury			Stock at			Stockholders'
	Authorized)		Value		Value			Earnings			Loss			Shares			Cost			Equity
	(unaudited)
	(in millions except share and per share data)
Balance at December 31, 2003		50,940,351	$	50.9	$	434.7		$	649.9		$	(27.3	)		(4,260,860	)	$	(104.4	)	$	1,003.8
Net loss		—		—		—			(7.2	)		—			—			—			(7.2	)
Currency translation adjustments		—		—		—			—			(1.0	)		—			—			(1.0	)
Unrealized loss on derivative financial instruments		—		—		—			—			0.8			—			—			0.8

Comprehensive net loss																					(7.4	)
Cash dividends ($0.12 per common share)		—		—		—			(5.7	)		—			—			—			(5.7	)
Dividends on Series B preferred stock.		—		—		—			(1.5	)		—			—			—			(1.5	)
Restricted shares issued.		—		—		(0.1	)		—			—			20,800			0.7			0.6
Stock options exercised.		—		—		(4.3	)		—			—			371,850			12.6			8.3
Other		—		—		(0.3	)		—			—			25,425			0.8			0.5

Balance at June 30, 2004		50,940,351	$	50.9	$	430.0		$	635.5		$	(27.5	)		(3,842,785	)	$	(90.3	)	$	998.6

See accompanying notes to consolidated financial statements.

Trinity Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(unaudited)

Note 1. Summary of Significant Accounting Policies

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”). 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 June 30, 2004 and the results of operations for the three-month and six-month periods ended June 30, 2004 and 2003, and cash flows for the six-month periods ended June 30, 2004 and 2003, in conformity with generally accepted accounting principles, have been made. Because of seasonal and other factors, the results of operations for the three-month and six-month periods ended June 30, 2004 may not be indicative of expected results of operations for the year ending December 31, 2004. These interim financial statements and notes are condensed as permitted by the instructions to Form 10-Q and should be read in conjunction with the audited consolidated financial statements of the Company included in its Form 10-K for the year ended December 31, 2003.

Stock Based Compensation

The Company has elected to apply the accounting provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” (APB No. 25) and its interpretations and, accordingly, no compensation expense has been recorded for the stock options. The effect of computing compensation expense in accordance with Statement of Accounting Standards No. 123, “Accounting for Stock Based Compensation,” using the Black-Scholes option pricing method for the three and six months ended June 30, 2004 and 2003 are shown in the accompanying table (in millions).


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2004			2003			2004			2003
Pro forma
Net income (loss) applicable to common shareholders, as reported .	$	2.9		$	3.5		$	(8.7	)	$	(11.0	)
Add: Stock compensation expense related to restricted stock		0.8			0.4			1.3			0.9
Deduct: Total stock based employee compensation expense determined under fair value based method for all awards, net of related income tax effects		(1.4	)		(1.6	)		(2.6	)		(3.3	)

Pro forma net income (loss) applicable to common shareholders	$	2.3		$	2.3		$	(10.0	)	$	(13.4	)

Pro forma net income (loss) applicable to common shareholders per diluted share	$	0.05		$	0.05		$	(0.22	)	$	(0.29	)

Net income (loss) applicable to common shareholders per diluted share — as reported	$	0.06		$	0.08		$	(0.19	)	$	(0.24	)

Net Loss Applicable to Common Shareholders

Diluted net income applicable to common shareholders is based on the weighted average shares outstanding plus the dilutive impact of stock options and Series B preferred stock. Basic net income applicable to common shareholders is based on the weighted average number of common shares outstanding for the period. The numerator for basic net income (loss) applicable to common shareholders is net income (loss) adjusted for dividends on the Series B preferred stock in 2004 and net income (loss) in 2003. The numerator for diluted net income (loss) applicable to common shareholders is net income (loss),

adjusted for dividends on the Series B preferred stock in 2004. The difference between the denominator in the basic calculation and the denominator in the diluted calculation for the three months ended June 30, 2004 and June 30, 2003 was attributable to the effect of employee stock options. Employee stock options were antidilutive for all other periods presented. The Series B preferred stock was antidilutive for all periods presented and therefore not considered in the diluted net income (loss) per common share calculation.

Reclassifications

Certain reclassifications have been made to prior year statements to conform to the current period presentation.

Note 2. Segment Information

The Company reports operating results in the following business segments: (1) the Rail Group, which manufactures and sells railcars and component parts; (2) the Constructions Products Group, which manufactures and sells highway 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 tank heads and pressure and non-pressure containers for the storage and transportation of liquefied gases and other liquid and dry products; and (5) the Railcar Leasing and Management Services Group, which provides fleet management, maintenance and leasing services. Finally, All Other includes the Company’s captive insurance and transportation companies, structural towers, and other peripheral businesses.

Sales and related profits from the Rail Group to Railcar Leasing and Management Services Group are recorded in Rail Group and eliminated in consolidation. Sales of railcars from the lease fleet are included in the Railcar Leasing and Management Services Group. Sales between groups are recorded at prices comparable to those charged to external customers.

Three Months Ended June 30, 2004 (in millions)


									Operating
	Revenues								Profit
	Outside		Intersegment			Total			(Loss)
Rail Group	$	224.6	$	49.0		$	273.6		$	0.9
Construction Products Group		153.2		0.5			153.7			14.5
Inland Barge Group		64.1		—			64.1			(5.4	)
Industrial Products Group		34.3		1.1			35.4			3.9
Railcar Leasing and Management Services Group		71.7		—			71.7			14.4
All Other		0.8		7.5			8.3			(1.6	)
Corporate		—		—			—			(9.0	)
Eliminations		—		(58.1	)		(58.1	)		(3.4	)

Consolidated Total	$	548.7	$	—		$	548.7		$	14.3

Three Months Ended June 30, 2003 (in millions)


									Operating
	Revenues								Profit
	Outside		Intersegment			Total			(Loss)
Rail Group	$	106.8	$	47.9		$	154.7		$	(6.1	)
Construction Products Group		132.2		0.1			132.3			15.3
Inland Barge Group		43.2		—			43.2			1.0
Industrial Products Group		27.7		0.8			28.5			1.6
Railcar Leasing and Management Services Group		54.3		—			54.3			12.6
All Other		1.6		6.1			7.7			(2.1	)
Corporate		—		—			—			(8.2	)
Eliminations		—		(54.9	)		(54.9	)		(3.7	)

Consolidated Total	$	365.8	$	—		$	365.8		$	10.4

Six Months Ended June 30, 2004 (in millions)


									Operating
	Revenues								Profit
	Outside		Intersegment			Total			(Loss)
Rail Group	$	449.8	$	84.7		$	534.5		$	(2.7	)
Construction Products Group		273.2		0.6			273.8			16.5
Inland Barge Group		107.4		—			107.4			(11.1	)
Industrial Products Group		64.7		2.5			67.2			4.7
Railcar Leasing and Management Services Group		106.8		—			106.8			24.0
All Other		1.7		14.2			15.9			(0.3	)
Corporate		—		—			—			(16.6	)
Eliminations		—		(102.0	)		(102.0	)		(6.7	)

Consolidated Total	$	1,003.6	$	—		$	1,003.6		$	7.8

Six Months Ended June 30, 2003 (in millions)


							Operating
	Revenues						Profit
	Outside		Intersegment		Total		(Loss)
Rail Group	$	190.8	$	113.0	$	303.8	$	(16.4	)
Construction Products Group		235.6


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		19
Item 3 Quantitative and Qualitative Disclosures About Market Risk		26
Item 4 Controls and Procedures		26
PART II OTHER INFORMATION
Item 1 Legal Proceedings		27
Item 2 Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities		28
Item 4 Submission of Matters to a Vote of Security Holders		28
Item 6 Exhibits and Reports on Form 8-K		29
SIGNATURES		30
CERTIFICATIONS
Rule 13a-14(a) Certification of CEO
Rule 13a-14(a) Certification of CFO
Certification Pursuant to Section 906
Certification Pursuant to Section 906

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents