SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(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, 1996
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 1-8099
Trinity Industries Leasing Company
( Exact name of registrant as specified in its charter)
Delaware 75-1640393
( State of Incorporation) (I.R.S. Employer Identification No.)
2000 Gardner Expressway
Quincy, IL 62306
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (217) 224-7236
Securities Registered Pursuant to Section 12(b) of the Act
Name of each exchange
Title of each class on which registered
N/A N/A
Securities Registered Pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
and (2) has been subject to such filing requirements for the
past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrants 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 none as of March 31, 1996.
1,000
( Number of Shares of common stock outstanding as of May 31, 1996)
PART I
Item 1. Business.
General Development of Business. Trinity Industries Leasing
Company, (the "Registrant") was incorporated under the laws of the
State of Texas in 1979. On April 4, 1988, the Registrant
reorganized as a Delaware corporation by Registrant's merger into a
wholly-owned subsidiary of the same name.
Narrative Description of Business and Financial Information About
Industry Segments. The Registrant is engaged in the business of
leasing specialized types of railcars, consisting of both tank
railcars and hopper railcars and the leasing of liquefied petroleum
gas ("LPG") tanks, (the "Equipment"). The revenues and profits from
LPG tank leases are not significant to the operations of the
Registrant and are included in the Railcar Leasing segment for
reporting purposes. At March 31, 1996, the Registrant had under
lease 8,283 railcars, including 5,170 tank cars and 3,113 hopper
cars. Included in railcars under lease are 2,158 railcars (1,400
tank cars and 758 hopper cars) that are owned by third parties and
subleased to the Registrant's customers. Substantially all of the
Equipment is manufactured by the Registrant's parent company,
Trinity Industries, Inc. ("Trinity").
In addition to the overall condition of the United States
economy, the volume of Equipment purchased and leased by the
Registrant depends upon a number of factors, including the demand
for Equipment manufactured by Trinity, the cost and availability of
funds to finance the purchase of Equipment, Trinity's decisions to
solicit orders for the purchase or lease of Equipment and factors
which may affect the decisions of Trinity's customers as to whether
to purchase or lease Equipment.
Both the decision by Trinity regarding whether to solicit orders
from customers for the purchase or lease of Equipment and the
customer's decision regarding whether to buy or lease the Equipment
are influenced by the relative abilities of Trinity (on a total
enterprise basis) and the customer to realize the benefit of
accelerated tax depreciation associated with ownership of the
Equipment. The decision is also influenced by the relative costs of
funds to Trinity (on a total enterprise basis) and to the customer
to finance the purchase of the Equipment and the relative
perceptions by Trinity and the customer of the residual value of the
Equipment at the end of the lease term.
Other significant factors which may affect the decision of
Trinity's customers whether to lease or buy Equipment include the
willingness of the customer to commit its resources to finance the
acquisition of the Equipment and whether the customer expects that
its need for the Equipment will be short-term or long-term, which
may be affected by the nature of its industry.
Additional information concerning the Registrant's business and
financial information about industry segments is contained in this
report under Item 7 "Management's Discussion and Analysis of
Financial Condition and Results of Operations" on pages 5 through 6
and in the Financial Statements and Notes to Financial Statements on
pages 9 through 15.
Types of Leases. The Registrant uses the operating method to
account for its leases. The Registrant records its cost as an
investment in the Equipment leased. Depreciation expense is
provided for financial reporting purposes on the straight-line
method over the estimated useful life of the Equipment. For federal
income tax purposes, depreciation expense is provided using
accelerated methods.
Operating leases may be either "full service" or "net" leases.
Under full service leases, the Registrant is responsible for the
maintenance and repair of the Equipment, modifications required to
meet governmental or industry safety or other standards, the costs
of insuring the Equipment, and ad valorem and other taxes. Under
full service leases, the Registrant bears the risk of an uninsured
loss of the Equipment. Under net leases, these matters are the
responsibility of the lessee.
Railcar Leasing. The Registrant's railcars are leased to
industrial companies in the petroleum, chemical, grain, food
processing, fertilizer, coal and other industries which supply their
own railcars to the railroads. The practice of United States
railroads using privately-owned railcars developed because many
types of commodity shipments were best handled in specialized
railcars. The railroads either did not or were not in a position to
supply these specialized railcars to shippers, and railcar leasing
companies have come into existence as a result. Federal laws and
regulations provide that it is the duty of common carrier railroads
to furnish such railcars as may be reasonably necessary for the
transportation of all commodities they hold themselves out as
carrying, except that they have no obligation to supply tank
railcars and no right to exclude tank railcars provided to shippers
for loading on the railroads' lines. Railroads also have the
exclusive right to furnish railcars other than tank railcars. Use
of other privately-owned railcars is, therefore, optional with the
railroads, and they are not required to use them if they are able to
furnish railcars of their own. The approval of the railroad on
which privately-owned railcars (other than tank railcars) are to be
used is required before such railcars may be placed in service or
assigned to handle traffic. The approval, known as OT-5, is
obtained fairly easily in periods of railcar shortages, but in
periods of oversupply, railroads may cancel OT-5 approvals or
decline to grant new approvals.
The number of railcars purchased in each of the last five fiscal
years and all railcars purchased as a group prior to fiscal 1992
with the remaining economic life of the railcars in the lease fleet
are detailed below. The remaining economic life for railcars
purchased prior to fiscal 1992 is based on a weighted average. Some
prior year totals have been adjusted to more accurately reflect
amounts presented in the fiscal 1995 report.
Prior to
Year of purchase 1996 1995 1994 1993 1992 1992
Tank Cars 171 177 150 600 546 2126
Remaining economic life 30 29 28 27 26 20
Hopper Cars 953 114 169 276 226 617
Remaining economic life 25 24 23 22 21 16
The terms of the Registrant's railcar leases predominantly vary
from one to fifteen years and provide for fixed monthly rentals,
with an additional mileage charge when usage exceeds a specified
maximum. The average remaining lease term for the fleet is
approximately 5 years for tank cars and 6 years for hopper cars.
Under full service leases, if the Registrant makes a modification
required by governmental or industry standards, the monthly car
rental is increased on the basis of a prescribed formula.
The Registrant has the responsibility for maintaining its
railcars in good condition and repair in accordance with the
interchange rules of the Association of American Railroads ("AAR").
The AAR rules governing railroad equipment require the railroads to
be responsible for the condition of railcars traveling on their
lines and, accordingly, the railroads are entitled to make all
repairs on such railcars. The cost of repairs is governed by AAR
guidelines. Although most railroads generally have the capability
to make repairs, they usually prefer to limit their involvement to
routine maintenance. If a railroad chooses not to repair a car, the
Registrant is notified and makes arrangements for one of its
facilities or another private maintenance facility to perform the
necessary repairs. Written estimates are required from all repair
facilities prior to the repair being performed.
Maintenance and repair of new railcars are normally minor in
nature and cost. Typical repairs include replacement of brake
shoes, repairs of safety equipment, testing of air brake equipment
and replacement of wheels. As the railcars age, the frequency of
repair and maintenance and the associated expenses normally
increase. Most maintenance and repair expenses are a result of a
combination of circumstances, including the number of miles
traveled, condition of railroad tracks traveled, condition of the
roadbed, terrain traveled, weight, nature and balance of cargo,
train handling (including speed and coupling procedures) and loading
and unloading methods. As the railcars age, increased maintenance
and repair expenses may have an effect on the Registrant's results
of operations.
Marketing. The Registrant generates its railcar leases
through employees of Trinity who are employed to sell or lease
railcars. Proposals are submitted to prospective customers on a
basis which permits the customer to either purchase or lease the
railcars.
In addition to the railcar marketing personnel, Trinity employs
customer service, fleet management and accounting personnel on
behalf of the Registrant.
Competition. The businesses in which the Registrant is engaged
are highly competitive, and there are a number of well-established
companies which actively compete with the Registrant in the business
of owning and leasing railcars. There are also a number of banks,
investment partnerships and other financial institutions which
compete with the Registrant in railcar leasing. The principal
competitive factors in leasing railcars include price and other
terms of the lease, proximity of the manufacturing plant to the
customer's loading point, quality of equipment, and delivery time.
Regulations. The Registrant is not a common carrier and is not
subject to the comprehensive federal and state regulation of common
carriers as to rates and other matters. There are certain areas,
however, in which the Registrant's operations are or can be affected
by governmental regulation and by rules adopted as standards by the
railroad industry.
To be eligible for operation on United States railroads, all
railroad freight railcars must be built to meet construction
specifications and standards of the AAR. In addition, all such
railcars must meet certain federal regulations with respect to
safety appliances and features which are promulgated and
administered by the U.S. Department of Transportation ("DOT"). The
manufacturer is obligated to make sure that its railcars meet such
requirements.
Operation of freight railcars in railroad interchange service is
subject to the AAR Interchange Rules. These rules prescribe
mechanical, maintenance and related standards and provide a method
for placing responsibility for maintenance and repair on all
railcars operated in interchange between railroads. Under its
full-service leases, the Registrant is responsible for meeting the
maintenance and repair standards of the AAR Interchange Rules.
Operation and maintenance of freight railcars are also subject to
federal regulation by DOT under the Federal Railroad Safety Act.
DOT may periodically require modifications to existing railcars for
safety reasons.
Relationship of the Registrant with Trinity. The Registrant's
business consists principally of leasing Equipment purchased from
Trinity. Such Equipment is purchased at prices comparable to the
prices for Equipment sold by Trinity to third parties. The
determination of the price to be paid to Trinity is made by the
Registrant's officers, all of whom are also officers of Trinity.
Although Trinity is not contractually obligated to offer to the
Registrant Equipment proposed to be leased by Trinity's customers,
it is Trinity's intention to effect all such leasing transactions
through the Registrant. Similarly, while the Registrant is not
contractually obligated to purchase from Trinity any Equipment
proposed to be leased, the Registrant intends to purchase and lease
all Equipment which Trinity's customers desire to lease when the
lease rentals and other terms of the proposed lease are satisfactory
to the Registrant, subject to the availability and cost of funds to
finance the acquisition of the Equipment.
Trinity has entered into an agreement (the "Fixed Charges
Coverage Agreement") with the Registrant whereby Trinity is
obligated to make such payments to the Registrant as may be required
to maintain the Registrant's net earnings available for fixed
charges (as defined) at an amount equal to not less than one and
one-half times the fixed charges (as defined) of the Registrant.
The Fixed Charges Coverage Agreement will terminate in accordance
with its terms at such time as the Registrant shall have delivered a
certificate of its certified public accountants demonstrating that
net earnings available for fixed charges, without considering any
payments by Trinity, have been not less than 1.5 times fixed charges
in each of the five then most recently completed fiscal years;
provided that the Registrant and Trinity may agree in connection
with "Future Financing Agreements" to maintain the Fixed Charges
Coverage Agreement in force and effect during the term of such
"Future Financing Agreements." The Fixed Charges Coverage Agreement
also provides that neither Trinity nor the Registrant will amend,
modify or terminate or waive the observance of the Fixed Charges
Coverage Agreement without the prior written consent of the holder
of at least the requisite percentage of "Benefitted Holders" under
"Future Financing Agreements". The Fixed Charges Coverage Agreement
further provides that the holders of any other indebtedness
incurred by the Registrant under any agreement designated by the
Registrant as a "Future Financing Agreement" may be designated, with
the acceptance of Trinity, "Benefitted Holders". Any Benefitted
Holder may enforce the Fixed Charges Coverage Agreement directly
against Trinity. (See 'Income maintenance fees from Trinity' in
Statements of Income and Retained Earnings on page 10).
The holders of the 12.875% Equipment Trust Certificates due
December 31, 1996, the holders of the 11.55% Equipment Trust
Certificates due November 30, 1997, the holders of the 8.75%
Equipment Trust Certificates due March 31, 1999, the holders of
10.25% Equipment Trust Certificates due January 31, 2000, the
holders of the 10.2% Equipment Trust Certificates due October 31,
1998, the holders of the 9.44% Equipment Trust Certificates due
September 3, 2001, the holders of the 8.24% Equipment Trust
Certificates due June 30, 2002, the holders of the 7.65% Equipment
Trust Certificates due December 31, 2002, the holders of the 6.96%
Equipment Trust Certificates due June 24, 2003, the Trustee in the
Leveraged Lease financing dated as of April 1, 1985, and Greyhound
Leasing and Financial Corp. and CIT Group/Equipment Financing, Inc.
(Lessors in single investment leases) and Pitney Bowes Credit Corp.
(Lessor in two investment leases) have been designated "Benefitted
Holders," and the requisite percentage of the holders of such
Certificates for the aforementioned consent is 66 2/3%.
Under a tax allocation agreement between Trinity and its
subsidiaries, a consolidated federal income tax return is filed by
the group, and it is agreed that each subsidiary will pay to Trinity
an amount equal to its proportionate share of the consolidated
federal income tax liability of the group, but not in excess of the
amount that the subsidiary would pay if it were filing a separate
federal income tax return. Similarly, if there is a tax benefit by
virtue of a net operating loss, the entity to which such benefit is
attributable is entitled to receive from all the other entities
payment of an amount equal to the tax benefit within 90 days after
the end of the applicable taxable year. Additionally, if Trinity is
not able to fully recognize the benefit of a consolidated net
operating loss, each entity contributing to the net operating loss
will receive its proportionate share of the tax benefit recognized
by Trinity.
The Registrant has an arrangement with Trinity whereby it pays
Trinity for furnishing certain staff functions, including financial
and data processing services. In addition, marketing and primary
administration are provided by employees of Trinity. Such payments
are based on Trinity's cost of providing such services, including
allocation of overhead.
Employees. At March 31, 1996, approximately 25 persons
participated in the Registrant's operations, all of whom were
employees of Trinity.
Item 2. Properties.
The Registrant owns no significant physical properties other than
the Equipment it leases. All office space and equipment necessary
to the Registrant's business are provided by Trinity.
Item 3. Legal Proceedings.
The Registrant is involved in 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 Registrant's financial position or results of
operations.
Item 4. Submission of Matters to a Vote of Security Holders.
There were no matters submitted to a vote of security holders
during the fourth quarter of fiscal 1996.
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters.
All of the issued and outstanding shares of common stock of the
Registrant are owned by Trinity Industries, Inc. and are not traded
on any exchange or otherwise. No dividends were declared or paid
during the last two fiscal years.
Item 6. Selected Financial Data.
(in millions)
Year Ended March 31
1996 1995 1994 1993 1992
Operating results:
Revenues. . . . . . . . . . . . $135.4 $156.9 $104.6 $ 79.6 $ 71.5
Income maintenance fees
from Trinity . . . . . . . . . $ - $ - $ - $ 1.4 $ 0.5
Net income. . . . . . . . . . . $ 20.7 $ 20.8 $ 19.1 $ 11.7 $ 10.7
At year-end:
Total assets. . . . . . . . . . $442.7 $471.9 $495.1 $490.6 $519.1
Total long-term debt
and obligation under
capital lease. . . . . . . . . $168.8 $205.2 $236.0 $244.0 $291.3
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Financial Condition. At 3/31/96, TILC's cash balance includes
$5.3M pledged as collateral in lieu of railcars on equipment trusts
certificates. The cash pledged will be released as railcars on
lease are assigned as collateral. The decrease in "Equipment on
Lease" at March 31, 1996 compared to March 31, 1995 is the result of
the sale of 2,028 railcars previously for lease. The railcars
sold were older cars with an average age of approximately 11.7
years. The decrease in 'Note receivable from Trinity' at March 31,
1996 compared to March 31, 1995 is due principally to equipment
purchases and debt payments partially offset by proceeds from
railcar sales. The decrease in 'Long-term debt' at March 31, 1996
compared to March 31, 1995 is due to scheduled principal payments
and the retirement of Equipment Trust 2 and the early retirement of
Equipment Trust 3 .
Operations. The decrease in revenues in fiscal 1996 compared to
fiscal 1995 is due principally to the sale of the barge fleet in
fiscal 1995. The increase in revenues in fiscal 1995 compared to
fiscal 1994 is due principally to the sale of selected railcar types
previously for lease. Operating profit did not change
significantly from fiscal 1995.
Revenue data on the average number of railcars and barges owned
during the last five fiscal years is shown below. Revenue data
below excludes proceeds from the sale of railcars and barges, and
lease revenues from railcars not owned by the Registrant.
Year Ended March 31
1996 1995 1994 1993 1992
Average railcars owned 6,582 7,783 8,589 8,064 7,338
Average
revenue per railcar $6,898 $6,412 $6,578 $6,164 $6,106
Average barges owned 0 219 219 220 221
Average
revenue per barge $ 0 $92,817 $84,475 $102,272 $94,570
Interest income increased in fiscal 1996 compared to fiscal 1995
due to an increase in the average outstanding Note Receivable from
Trinity. Interest income increased in fiscal 1995 compared to
fiscal 1994 due to an increase in the prime based lending rate and
an increase in the Note Receivable from Trinity.
The provision for income taxes was 35.0% in fiscal years 1996,
1995, and 1994. (See Income Taxes in Notes to Financial Statements).
Effective April 1, 1993, the registrant adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income
Taxes." This statement requires a change from the deferred to the
liability method of computing income taxes. As permitted by
Statement No. 109, the Registrant has elected not to restate the
financial statements of any prior period. The cumulative effect of
applying the change in accounting method is a decrease in the
Registrant's deferred tax liability and a nonrecurring credit of
$8.1 million.
Liquidity and Financial Resources. Liquidity for the leasing
business differs significantly from that of industrial companies.
Inflows of cash including lease and rental revenue, investment
income and other income, and outflows of cash, including interest,
maintenance, insurance and other operating expenses are reasonably
determinable. Generally, excluding acquisition of Equipment for
lease, sufficient funds are generated from operations to meet
liquidity requirements. Sources of funds are principally from
operations, borrowings and when required, quarterly payments from
Trinity under the Fixed Charges Coverage Agreement. To the extent
that funds generated from operations cannot provide adequate funds
for investment in new assets for lease objectives or the timing of
funds cannot be satisfactorily matched, external short-term or
long-term financing may be required. In fiscal 1996, the
combination of net cash provided by operating activities ($14.9
million) and net cash provided by investing activities ($5.2
million) were required to fund financing activities ($15.0
million). Short-term financing for working capital and to
temporarily finance additional Equipment purchases is generally
available from Trinity or from lines of credit from banks. Capital
resources represent those funds available for long-term financing
and major business commitments of the Registrant. For a leasing
company, the capital assets available for lease are the principal
resource of the business. For a leasing company to expand and grow,
it is necessary to purchase additional capital assets.
The average age of the Registrant's railcar fleet is approximately 5.4
years. The average economic life of the fleet is expected to be twenty five
to thirty years. As the railcars age, increased maintenance and repair
expenses may have an effect on the Registrant's results of operations. Capital
expenditures for fiscal 1996 were $86.1 million. Capital expenditures
projected for fiscal 1997 are approximately $64.7 million. Long-term financing
needs have been and are expected to be met through the issuance of equipment
trust certificates, and from time to time, the public offering of debt
securities.
The volume of Equipment purchased and leased by the Registrant is
affected by the ability of the Registrant to obtain long-term
external financing at satisfactory rates and on satisfactory terms
and conditions. If the Registrant is unable to obtain satisfactory
long-term financing from third parties, it is likely that the only
other source of external funds available to the Registrant would be
borrowings from Trinity. The Registrant was formed in large part to
provide a vehicle to obtain financing for the lease of Equipment
independent of Trinity. The need for Trinity to finance the
Registrant's acquisition of Equipment may make it less desirable for
Trinity to offer its customers the option of leasing rather than
purchasing Equipment, and it may be expected that Trinity will be
willing to provide only a limited amount of funds to the Registrant
to meet the Registrant's financing requirements, except on an
interim basis. The Registrant's results of operations in future
periods will be affected by the volume of Equipment purchased and
leased.
Inflation. Changes in price levels did not significantly affect
the Registrant's operation in fiscal 1996, 1995, or 1994.
Item 8. Financial Statements and Supplementary Data.
Page
Report of independent auditors. . . . . . . . . . . . . . . 8
Balance sheets. . . . . . . . . . . . . . . . . . . . . . . 9
Statements of income and retained earnings. . . . . . . . . 10
Statements of cash flows. . . . . . . . . . . . . . . . . . 11
Notes to financial statements . . . . . . . . . . . . . . . 12
Supplemental information . . . . . . . . . . . . . . . . . 15
Report of Independent Auditors
Board of Directors
Trinity Industries Leasing Company
We have audited the accompanying balance sheets of Trinity
Industries Leasing Company as of March 31, 1996 and 1995, and the
related statements of income and retained earnings and cash flows
for each of the three years in the period ended March 31, 1996.
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 generally accepted
auditing standards. Those 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 evaluating 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 financial position of Trinity
Industries Leasing Company as of March 31, 1996 and 1995, and the
results of its operations and its cash flows for each of the three
years in the period ended March 31, 1996, in conformity with
generally accepted accounting principles.
As more fully discussed in the Notes to Financial Statements, the
Company changed its method of accounting for income taxes.
ERNST & YOUNG LLP
Dallas, Texas
May 9, 1996
Trinity Industries Leasing Company
Balance Sheets
(in millions except share data)
March 31
1996 1995
Assets
Cash and cash equivalents. . . . . . . . . . $ 5.3 $ 0.2
Note receivable from Trinity . . . . . . . . 108.5 129.9
Equipment on lease (predominantly
long-term), at cost . . . . . . . . . . . . 391.6 431.0
Less accumulated depreciation. . . . . . . . (70.2) ( 95.4)
Other assets . . . . . . . . . . . . . . . . 7.5 6.2
$442.7 $471.9
Liabilities and Stockholder's Equity
Accounts payable and accrued liabilities . . $ 9.7 $ 8.9
Long-term debt . . . . . . . . . . . . . . . 168.8 205.2
Deferred federal income tax. . . . . . . . . 64.9 78.3
Other liabilities. . . . . . . . . . . . . . 2.9 3.8
246.3 296.2
Stockholder's equity:
Common stock $1.00 par; authorized
10,000 shares; issued 1,000
shares at March 31, 1996 and
1995, respectively . . . . . . . . . . . . - -
Additional paid-in capital . . . . . . . . 19.3 19.3
Retained earnings. . . . . . . . . . . . . 177.1 156.4
196.4 175.7
$442.7 $471.9
See accompanying notes to financial statements.
Trinity Industries Leasing Company
Statements of Income
and Retained Earnings
(in millions)
Year Ended March 31
1996 1995 1994
Revenues . . . . . . . . . . . . . . . $135.4 $156.9 $104.6
Operating costs:
Cost of revenues . . . . . . . . . . . 94.4 112.2 65.6
Interest expense . . . . . . . . . . . 17.6 21.1 23.7
112.0 133.3 69.3
Operating profit. . . . . . . . . . . . 23.4 23.6 15.3
Other income:
Interest income (including $11.2, $8.1,
and $5.0 from Trinity in 1996, 1995,
and 1994, respectively) . . . . . . . 11.4 8.2 5.0
Other, net . . . . . . . . . . . . . . (2.9) 0.2 0.6
8.5 8.4 5.6
Income before income taxes and
cumulative effect of change in
accounting for income taxes. . . . . . 31.9 32.0 20.9
Provision (benefit) for income taxes:
Current. . . . . . . . . . . . . . . . 24.6 28.7 4.0
Deferred . . . . . . . . . . . . . . . (13.4) (17.5) 3.3
Effect of statutory rate increase. . . - - 2.6
11.2 11.2 9.9
Income before cumulative effect of
change in accounting for income taxes. 20.7 20.8 11.0
Cumulative effect as of April 1, 1993
of change in accounting
for income taxes . . . . . . . . . . . - - 8.1
Net income . . . . . . . . . . . . . . 20.7 20.8 19.1
Retained earnings at beginning of year. 156.4 135.6 116.5
Retained earnings at end of year. . . . $177.1 $156.4 $135.6
See accompanying notes to financial statements.
Trinity Industries Leasing Company
Statements of Cash Flows
(in millions)
Year Ended March 31
1996 1995 1994
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . $ 20.7 $ 20.8 $ 19.1
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization . . . 18.1 21.1 21.2
Deferred provision (benefit) for
federal income tax . . . . . . . . (13.4) (17.5) 3.3
Cumulative effect of change in
accounting for income taxes. . . . - - (8.1)
Effect of statutory
rate increase. . . . . . . . . . . - - 2.6
Gain on retirement of equipment . . (10.2) (8.1) (2.3)
Other . . . . . . . . . . . . . . . 1.2 0.1 0.7
Changes in assets and liabilities:
(Increase) decrease in other
assets . . . . . . . . . . . . . (1.2) 1.7 0.2
Increase (decrease) in accounts
payable and accrued liabilities . 0.8 5.1 (4.2)
Decrease in other liabilities. . . (0.9) (0.7) (0.2)
Total adjustments. . . . . . . . (5.6) 1.7 13.2
Net cash provided by operating
activities . . . . . . . . . . . . 15.1 22.5 32.3
Cash flows from investing activities:
Proceeds from retirement of equipment. 91.3 76.1 26.9
Capital expenditures . . . . . . . . . (86.1) (28.7) (37.6)
Net cash provided (required) by
investing activities. . . . . . . . . . 5.2 47.4 (10.7)
Cash flows from financing activities:
(Increase) decrease in note receivable
from Trinity. . . . . . . . . . . . . 21.4 (39.1) (13.6)
Proceeds from issuance of long-term
debt. . . . . . . . . . . . . . . . . - - 20.0
Payments to retire long-term debt. . . (35.5) (29.9) (27.2)
Decrease in long-term obligation
under capital lease . . . . . . . . . (0.9) (0.9) (0.8)
Net cash required
by financing activities. . . . . . (15.0) (69.9) (21.6)
Trinity Industries Leasing Company
Statement of Cash Flows
(in millions)
(continued)
Year Ended March 31
1996 1995 1994
Net increase in cash and
cash equivalents . . . . . . . . . . . 5.1 - -
Cash and cash equivalents at
beginning of year. . . . . . . . . . . 0.2 0.2 0.2
Cash and cash equivalents at
end of year. . . . . . . . . . . . . . $ 5.3 $ 0.2 $ 0.2
See accompanying notes to financial statements.
Trinity Industries Leasing Company
Notes to Financial Statements
March 31, 1996, 1995, 1994
Summary of Significant Accounting Policies and Basis of Presentation
(in millions)
The Registrant purchases railcars manufactured by Trinity, of
which the Registrant is a wholly-owned subsidiary, at market prices
and leases the equipment to third parties. In addition, Trinity
performs certain repairs and maintenance for the Registrant's
equipment on lease. Costs and expenses include amounts paid or
accrued to Trinity for repairs and maintenance of $0.9, $0.9, and
$1.3, in fiscal 1996, 1995 and 1994, respectively. As described
further in Income Taxes and Long-Term Debt, the Registrant has
transactions with Trinity which are recorded on the bases determined
by the parties.
For purposes of the Statement of Cash Flows, the Registrant
considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
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 these estimates.
The Registrant enters into predominantly long-term lease
contracts with third parties wherein the equipment is leased for a
specified type of service over the term of the contract. The
Registrant accounts for its leases by the operating method.
Generally, lease contracts have terms of one to fifteen years.
Future minimum rentals on operating leases in each of the following
five fiscal years are approximately $52.5 in 1997, $46.7 in 1998,
$41.3 in 1999, $36.0 in 2000, $28.5 in 2001 and $313.0 in the
aggregate.
The Registrant has future lease commitments of approximately $6.7
for each of the next two fiscal years $7.3 in fiscal 1999, 2000 and
2001 and $65.2 in the aggregate under four operating leases. The
railcars are leased by the Registrant to established lessees under
normal leasing arrangements. Depreciation expense is provided for
financial reporting by the straight-line method over the estimated
useful lives of the assets ranging from twenty five to thirty
years. For federal income tax purposes, depreciation expense is
provided using accelerated methods. Ordinary maintenance and
repairs are charged to expense in the period incurred.
Under arrangements between the Registrant and Trinity, Trinity provides to
or receives from the Registrant financing, with interest at market rates. The
note receivable from Trinity is dated March 1, 1994 and will mature in fiscal
2001. The interest rate on the note at March 31, 1996 is currently 7.25
percent. The note is not collateralized.
Income Taxes
(in millions)
The Registrant is included in the consolidated federal income tax
return of Trinity. Trinity reimburses or charges the Registrant for
current income tax benefits or expenses incurred from inclusion of
the Registrant in Trinity's consolidated federal income tax return.
The provision for income taxes reflected in the Statement of Income
and Retained Earnings approximates the provision as if calculated on
a separate return basis. Deferred taxes are provided for temporary
differences, principally depreciation, between financial and tax
reporting.
Effective April 1, 1993, the registrant adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income
Taxes." This statement requires a change from the deferred to the
liability method of computing income taxes. As permitted by
Statement No. 109, the Registrant has elected not to restate the
financial statements of any prior period. The cumulative effect of
applying the change in accounting method is a decrease in the
Registrant's deferred tax liability and a nonrecurring credit of
$8.1 million.
The net deferred tax liability at March 31, 1996 is $64.9
million and is comprised primarily of tax over book depreciation.
All other items are not material.
Long-term Debt
(in millions)
March 31
1996 1995
6.96 - 15.5 percent equipment trust certificates to
institutional investors, generally payable in semi-annual
installments of varying amounts through 2003 . . . . . . . . $158.1 $193.6
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . 10.7 11.6
$168.8 $205.2
The equipment trust agreements contain provisions which, among
other things, prohibit the Registrant from incurring funded
indebtedness, as defined, if, after giving effect to the funded
indebtedness proposed, the total funded indebtedness of the
Registrant would then exceed eighty percent of the total
capitalization, as defined, of the Registrant. Titles to railcars
with a cost of $354.4 at March 31, 1996 have been assigned for the
life of the respective equipment trusts to the trustees of the
equipment trusts. Leases relating to such railcars financed by
equipment trust certificates have been assigned as collateral.
Trinity is required to pay fees to the Registrant quarterly to
maintain net earnings, as defined, at specified levels.
Interest of $18.3, $21.6, and $23.8 was paid by the Registrant
in fiscal 1996, 1995, and 1994, respectively.
Principal payments due during each of the next five fiscal years
are: 1997 - $24.3; 1998 - $26.3; 1999 - $26.1; 2000 - $23.9; and
2001 - $23.1
The fair value of non-traded, fixed rate outstanding debt,
estimated using discounted cash flow analysis, approximates its
carrying value.
Segment Information
The Registrant is engaged in the business of (1) leasing
specialized types of railcars ("Railcar Leasing"); and (2) the
leasing of liquefied petroleum gas ("LPG") tanks. The revenues and
profits from LPG tank leases are not significant to the operations
of the Registrant and are included in the Railcar Leasing segment
for reporting purposes. Corporate assets consist primarily of cash
and cash equivalents and note receivable from Trinity.
The Railcar operations include revenues from one customer which
accounted for 50% of consolidated revenues in fiscal 1996.
Financial information for these segments is summarized in the
following table. The Registrant operates principally in the
continental United States.
Segments of Business Railcar Corporate
(in millions) Leasing Items Total
Year ended March 31, 1996
Revenues . . . . . . . . . . . $135.4 - 135.4
Operating profit . . . . . . . $ 23.4 - 23.4
Identifiable assets. . . . . . $312.5 130.2 442.7
Depreciation . . . . . . . . . $ 18.1 - 18.1
Additions (net) to equipment . $ 4.7 - 4.7
Segments of Business Railcar Barge Corporate
(in millions) Leasing Operations Items Total
Year ended March 31, 1995
Revenues . . . . . . . . . . . $104.8 52.1 - 156.9
Operating profit . . . . . . . $ 20.4 3.2 - 23.6
Identifiable assets. . . . . . $325.5 - 146.4 471.9
Depreciation . . . . . . . . . $ 18.1 2.1 - 20.2
Additions (net) to equipment . $ (8.6) (30.7) - (39.3)
Segments of Business Railcar Barge Corporate
(in millions) Leasing Operations Items Total
Year ended March 31, 1994
Revenues . . . . . . . . . . . $ 85.9 18.7 - 104.6
Operating profit . . . . . . . $ 14.6 0.7 - 15.3
Identifiable assets. . . . . . $352.3 32.8 110.0 495.1
Depreciation . . . . . . . . . $ 17.7 2.5 - 20.2
Additions (net) to equipment . $ 12.8 - - 12.8
Supplemental Information
Supplementary Unaudited Quarterly Data
(in millions)
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
Year ended March 31, 1996:
Revenues. . . . . . . . . . $ 22.3 57.9 24.4 30.8 135.4
Operating profit. . . . . . $ 4.3 7.9 4.5 6.7 23.4
Net income. . . . . . . . . $ 4.7 6.8 4.9 4.3 20.7
Year ended March 31, 1995:
Revenues. . . . . . . . . . $ 19.9 32.1 35.7 69.2 156.9
Operating profit. . . . . . $ 3.2 6.0 8.6 5.9 23.7
Net income. . . . . . . . . $ 3.2 5.0 6.9 5.7 20.8
Item 9. Disagreements on Accounting Financial Disclosure.
No disclosure required.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The Registrant has three directors, all of whom are also
executive officers of the Registrant. Mr. W. Ray Wallace became
director at the time of the organization of the Registrant. Mr. F.
Dean Phelps, Jr. became a director on May 31, 1986. Mr. John T.
Sanford became a director in February 1996.
The following table sets forth the names and ages of, and the
positions and offices with the Registrant presently held by, all
executive officers of the Registrant:
Name Age Office Principal Occupation
W. Ray Wallace 73 President & President and Chief
Director Executive Officer of
Trinity since 1958
Richard G. Brown 72 Executive Vice Senior Vice President
President or Vice President of
Trinity since 1979
John T. Sanford 44 Senior Vice Senior Vice President or
President and Vice President
Director of Trinity since 1993
F. Dean Phelps, Jr. 52 Vice President Vice President
and Director or Controller of
Trinity since 1979
Neil O. Shoop 52 Treasurer Treasurer
or Assistant Treasurer
of Trinity since 1979
J. J. French, Jr. 65 Secretary Attorney, Joe French &
Associates (a Professional
Corporation)
Mr. French, an attorney, is President of Joe French & Associates (a
Professional Corporation). For at least five years prior thereto,
Mr. French was employed by Locke Purnell Rain Harrell (a
Professional Corporation).
Item 11. Executive Compensation.
All of the officers and directors of the Registrant are employees
of Trinity except Mr. French, an attorney who is President of Joe
French & Associates (A Professional Corporation). The Registrant
does not pay remuneration and/or provide other benefits to its
officers and directors in addition to the remuneration and benefits
they receive from Trinity.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The Registrant is a wholly-owned subsidiary of Trinity. No
officers or directors of the Registrant have beneficial ownership of
the common stock nor an option or other right to acquire the common
stock of the Registrant.
Item 13. Certain Relationships and Related Transactions.
Mr. J. J. French, Jr., Secretary of the Registrant, is President
and Owner of Joe French & Associates (a Professional Corporation).
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) 1 & 2 Financial statements and financial statement schedules.
The financial statements listed in the
accompanying index to financial statements
are filed as part of this annual report.
3 Exhibits.
The exhibits listed on the accompanying index
to exhibits are filed as part of this annual report.
(b) Reports on Form 8-K
No Form 8-K was filed during the fourth
quarter of fiscal 1996.
Trinity Industries Leasing Company
Index to Financial Statements
(Item 14(a))
Page
Balance sheets at March 31, 1996 and 1995 . . . . . . . . 9
For each of the three years in the period ended
March 31, 1996:
Statements of income and retained earnings . . . . . . . 10
Statements of cash flows . . . . . . . . . . . . . . . . 11
Notes to financial statements . . . . . . . . . . . . . . 12
Supplemental information:
Supplementary unaudited quarterly data . . . . . . . . . 15
All other schedules are omitted since the required information
is not present or is not present in amounts sufficient to require
submission of the schedule or because the information required is
included in the financial statements and notes thereto.
Trinity Industries Leasing Company
Index to Exhibits
(Item 14(a))
NO. DESCRIPTION PAGE
(3.1) Articles of Incorporation of Registrant
(incorporated by reference to Exhibit 3.1
to Registration Statement No. 2-70378 filed
January 29, 1981). *
(3.2) By-Laws of Registrant (incorporated by
reference to Exhibit 3.2 to Registration
Statement No. 2-70378 filed January 29,
1981). *
(10.1) Fixed Charges Coverage Agreement dated as
of January 15, 1980, between Registrant and
Trinity Industries, Inc. (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 Registrant and
Trinity Industries, Inc. (incorporated by
reference to Exhibit 10.2 to Registration
Statement No. 2-70378 filed January 29,
1981). *
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
Annual Report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Trinity Industries Leasing Company
Registrant
By: /s/ F. Dean Phelps, Jr.
F. Dean Phelps, Jr.
Vice President
June 26, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons of the
Registrant and in the capacities and on the dates indicated:
/s/ W. Ray Wallace
W. Ray Wallace
President and Director
Principal Executive Officer
June 26, 1996
/s/ John T. Sanford
John T. Sanford
Senior Vice President and Director
Principal Financial Officer
June 26, 1996
/s/ F. Dean Phelps, Jr.
F. Dean Phelps, Jr.
Vice President and Director
Principal Accounting Officer
June 26, 1996
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
Annual Report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Trinity Industries Leasing Company
Registrant
By:
F. Dean Phelps, Jr.
Vice President
June 26, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons of the
Registrant and in the capacities and on the dates indicated:
W. Ray Wallace
President and Director
Principal Executive Officer
June 26, 1996
John T. Sanford
Senior Vice President and Director
Principal Financial Officer
June 26, 1996
F. Dean Phelps, Jr.
Vice President and Director
Principal Accounting Officer
June 26, 1996
[TYPE] EX-27
[DESCRIPTION] ART. 5 FDS FOR 4TH QUARTER 10K
[ARTICLE] 5
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] MAR-31-1996
[PERIOD-END] MAR-31-1996
[CASH] 5,300,000
[SECURITIES] 0
[RECEIVABLES] 0
[ALLOWANCES] 0
[INVENTORY] 0
[CURRENT-ASSETS] 5,300,000
[PP&E] 391,600,000
[DEPRECIATION] (70,200,000)
[TOTAL-ASSETS] 442,700,000
[CURRENT-LIABILITIES] 9,700,000
[BONDS] 0
[COMMON] 1000
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[OTHER-SE] 196,400,000
[TOTAL-LIABILITY-AND-EQUITY] 442,700,000
[SALES] 0
[TOTAL-REVENUES] 135,400,000
[CGS] 94,400,000
[TOTAL-COSTS] 94,400,000
[OTHER-EXPENSES] 0
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 17,600,000
[INCOME-PRETAX] 31,900,000
[INCOME-TAX] 11,200,000
[INCOME-CONTINUING] 11,200,000
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 20,700,000
[EPS-PRIMARY] 0
[EPS-DILUTED] 0
</TABLE>
