SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 31, 1997
TRINITY INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 1-6903 75-0225040
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) dentification 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
Reference is made to the Current Report on Form 8-K (the "Form 8-K") filed
by Trinity Industries, Inc. on April 14, 1997. The Form 8-K is hereby
amended to read as follows:
Item 2. Acquisition or Disposition of Assets
On March 31, 1997 Trinity Industries, Inc. ( Trinity ) distributed
to its stockholders 15,000,000 shares of common stock of Halter
Marine Group, Inc. ( Halter ), representing approximately 81.3% of
the outstanding shares of Halter Common Stock (the "Distribution").
In September 1996, Halter conducted an initial public offering and
sold shares representing approximately 18.7% of its outstanding
common stock. As a result of the Distribution, Trinity and Halter
are no longer affiliated entities.
Pursuant to Accounting Principles Board Opinion No. 30, "Reporting
the Results of Operations - Reporting the Effects of Disposal of
a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions" ("APB 30"), the Consolidated
Financial Statements of Trinity have been restated to reflect
the Distribution. Accordingly, the revenues, costs and expenses
and assets and liabilities of Halter have been excluded from the
respective captions in the Consolidated Financial Statements of
Trinity. The net operating results of Halter have been reported
net of applicable income taxes as "Income (loss) from discontinued
operations" and the net assets of Halter have been reported as "Net
assets of discontinued operations."
Trinity's Consolidated Balance Sheets as of March 31, 1997 and 1996
and the related consolidated statements of income, cash flows and
stockholders' equity for each of the three years in the period
ended March 31, 1997 follow:
<TABLE>
CONSOLIDATED INCOME STATEMENT
<CAPTION>
Year Ended March 31
1997 1996 1995
(in millions except per share data)
<S> <C> <C> <C>
Revenues. . . . . . . . . . . . . . . . . . . . $2,234.3 $2,241.7 $2,064.3
Operating costs:
Cost of revenues. . . . . . . . . . . . . . . 1,877.6 1,929.0 1,812.3
Selling, engineering and administrative
expenses . . . . . . . . . . . . . . . . . . 124.0 105.6 92.1
Retirement plans expense. . . . . . . . . . . 18.5 12.2 11.0
2,020.1 2,046.8 1,915.4
Operating profit. . . . . . . . . . . . . . . . 214.2 194.9 148.9
Other (income) expenses:
Interest income . . . . . . . . . . . . . . . (0.5) (1.8) (0.8)
Interest expense. . . . . . . . . . . . . . . 21.4 30.8 29.5
Other, net. . . . . . . . . . . . . . . . . . 12.0 0.1 (1.4)
32.9 29.1 27.3
Income from continuing operations before
income taxes . . . . . . . . . . . . . . . . . 181.3 165.8 121.6
Provision (benefit) for income taxes:
Current . . . . . . . . . . . . . . . . . . . 71.2 77.0 77.7
Deferred. . . . . . . . . . . . . . . . . . . (3.6) (12.5) (29.5)
67.6 64.5 48.2
Income from continuing operations . . . . . . . 113.7 101.3 73.4
Discontinued operations:
Income from discontinued operations (net of
income taxes of $10.9, $8.1, and $10.2,
respectively) . . . . . . . . . . . . . . . 14.5 12.5 15.7
Gain from sale of subsidiary stock in an
initial public offering . . . . . . . . . . 9.3 - -
23.8 12.5 15.7
Net income. . . . . . . . . . . . . . . . . . . $ 137.5 $ 113.8 $ 89.1
Income per common and common equivalent share
from continuing operations . . . . . . . . . . $ 2.66 $ 2.42 $ 1.81
Income per common and common equivalent share
from discontinued operations . . . . . . . . . 0.55 0.30 0.39
Net income per common and common
equivalent share . . . . . . . . . . . . . . . $ 3.21 $ 2.72 $ 2.20
Weighted average number of common and common
equivalent shares outstanding . . . . . . . . 42.8 41.9 40.5
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
CONSOLIDATED BALANCE SHEET
<CAPTION>
March 31
1997 1996
(in millions except per share data)
<S> <C> <C>
Assets
Cash and cash equivalents. . . . . . . . . . . . . . $ 12.2 $ 14.7
Receivables (net of allowance for doubtful accounts
of $1.0 in 1997 and $1.1 in 1996). . . . . . . . . 236.9 285.2
Inventories:
Raw Materials and Supplies . . . . . . . . . . . . 216.7 212.2
Work in process. . . . . . . . . . . . . . . . . . 41.9 78.6
Finished goods . . . . . . . . . . . . . . . . . . 55.9 38.9
314.5 329.7
Property, plant and equipment, at cost:. . . . . . . 1,136.5 1,007.1
Less accumulated depreciation. . . . . . . . . . . . (424.9) (369.6)
711.6 637.5
Net assets of discontinued operations . . . . . . . .. - 109.3
Other assets. . . . . . . . . . . . . . . . . . . . . 81.2 50.2
$1,356.4 $1,426.6
Liabilities and Stockholders' Equity
Short-term debt . . . . . . . . . . . . . . . . . . . $ 64.0 $ 216.0
Accounts payable and accrued liabilities. . . . . . . 261.2 210.0
Long-term debt. . . . . . . . . . . . . . . . . . . . 178.6 206.4
Deferred income taxes . . . . . . . . . . . . . . . . 22.8 33.1
Other liabilities . . . . . . . . . . . . . . . . . . 20.3 15.1
546.9 680.6
Stockholders' equity:
Common stock - par value $1 per share;
authorized - 100.0 shares; shares issued and
outstanding in 1997 - 43.0; in 1996 - 41.6 . . . . 43.0 41.6
Capital in excess of par value. . . . . . . . . . . 273.3 239.6
Retained earnings . . . . . . . . . . . . . . . . . 493.2 464.8
809.5 746.0
$1,356.4 $1,426.6
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>
Year Ended March 31
(in millions) 1997 1996 1995
<S> <C> <C> <C>
Cash flows from operating activities:
Net income. . . . . . . . . . . . . . . . . . . . . $137.5 $113.8 $ 89.1
Less: Income from discontinued operations . . . . . (23.8) (12.5) (15.7)
Income from continuing operations . . . . . . . . . 113.7 101.3 73.4
Adjustments to reconcile net income to net cash
provided (required) by operating activities:
Depreciation. . . . . . . . . . . . . . . . . . . 87.8 69.2 53.2
Deferred benefit for income taxes . . . . . . . . (3.6) (12.5) (29.5)
(Gain) loss on sale of property, plant
and equipment. . . . . . . . . . . . . . . . . . (4.3) 3.1 (0.7)
Other . . . . . . . . . . . . . . . . . . . . . . (4.5) (6.7) (6.6)
Change in assets and liabilities:
(Increase) decrease in receivables . . . . . . . 64.7 (14.9) (15.4)
(Increase) decrease in inventories . . . . . . . 17.9 (3.6) (39.5)
(Increase) decrease in other assets. . . . . . . (32.0) 7.8 (11.0)
Increase (decrease) in accounts payable and
accrued liabilities . . . . . . . . . . . . . . 51.5 (50.2) 79.3
Increase (decrease) in other liabilities . . . . (12.4) 0.9 (4.8)
Total adjustments. . . . . . . . . . . . . . . 165.1 (6.9) 25.0
Net cash provided by operating activities . . . . 278.8 94.4 98.4
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment 59.2 100.2 83.3
Capital expenditures. . . . . . . . . . . . . . . . (173.5) (127.5) (87.0)
Payment for purchase of acquisitions. . . . . . . . (7.9) (18.5) (58.3)
Cash of acquired subsidiary . . . . . . . . . . . . 2.3 1.2 1.1
Net cash required by investing activities . . . . (119.9) (44.6) (60.9)
Cash flows from financing activities:
Issuance of common stock. . . . . . . . . . . . . . 4.6 2.9 0.9
Net borrowings (repayments) under short-term debt . (152.0) (4.0) 28.0
Proceeds from issuance of long-term debt. . . . . . - 7.0 -
Payments to retire long-term debt . . . . . . . . . (31.6) (43.6) (38.1)
Dividends paid. . . . . . . . . . . . . . . . . . . (28.7) (27.9) (27.2)
Net cash required by financing activities . . . . (207.7) (65.6) (36.4)
Cash flows provided by discontinued operations . . . 46.3 15.7 5.2
Net increase (decrease) in cash and cash equivalents. (2.5) (0.1) 6.3
Cash and cash equivalents at beginning of period. . . 14.7 14.8 8.5
Cash and cash equivalents at end of period. . . . . . $ 12.2 $ 14.7 $ 14.8
</TABLE>
Interest paid in fiscal 1997, 1996, and 1995 was $24.5, $36.2, and $33.0,
respectively.
See accompanying notes to consolidated financial statements.
<TABLE>
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<CAPTION>
Common Capital
Common Stock in
Shares $1.00 Excess Total
(100,000,000 Par of Par Retained Stockholders'
(in millions except share Authorized) Value Value Earnings Equity
and per share data)
<S> <C> <C> <C> <C> <C>
Balance at March 31, 1994 . . . . . 39,711,698 $39.7 $213.4 $317.4 $570.5
Other . . . . . . . . . . . . . . 508,996 0.5 8.3 - 8.8
Net income. . . . . . . . . . . . - - - 89.1 89.1
Cash dividends ($0.68 per share). - - - (27.2) (27.2)
Balance at March 31, 1995 . . . . . 40,220,694 40.2 221.7 379.3 641.2
Other . . . . . . . . . . . . . . 1,375,343 1.4 17.9 - 19.3
Net income. . . . . . . . . . . . - - - 113.8 113.8
Cash dividends ($0.68 per share). - - - (28.3) (28.3)
Balance at March 31, 1996 . . . . . 41,596,037 41.6 239.6 464.8 746.0
Distribution of Halter Marine
Group, Inc. . . . . . . . . . . - - - (80.2) (80.2)
Other . . . . . . . . . . . . . . 1,450,328 1.4 33.7 - 35.1
Net income. . . . . . . . . . . . - - - 137.5 137.5
Cash dividends ($0.68 per share). - - - (28.9) (28.9)
Balance at March 31, 1997 . . . . . 43,046,365 $43.0 $273.3 $493.2 $809.5
</TABLE>
The Company has authorized and unissued 1,500,000 shares of no par value voting
preferred stock.
See accompanying notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Summary of Significant Accounting Policies
The financial statements of Trinity Industries, Inc. and its
consolidated subsidiaries ("Trinity" or the "Company") include the accounts
of all significant majority-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated. Certain amounts for periods
ended prior to March 31, 1997 have been reclassified to conform to the
current year presentation, including restatements to reflect the divestiture
of Trinity's former subsidiary, Halter Marine Group, Inc. ("Halter").
For purposes of the Consolidated Statement of Cash Flows, the Company
considers all highly liquid debt instruments purchased with a maturity of
three months or less to be cash equivalents. Financial instruments which
potentially subject the Company to concentrations of credit risk are
primarily cash investments and receivables. The Company places its cash
investments in investment grade, short-term debt instruments and limits the
amount of credit exposure to any one commercial issuer. Concentrations of
credit risk with respect to receivables are limited due to the large number
of customers in the Company's customer base, and their dispersion across
different industries and geographic areas. The Company maintains an
allowance for losses based upon the expected collectibility of all
receivables.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
The Company enters into lease contracts with third parties with terms
generally ranging between one and fifteen years, wherein certain equipment
manufactured by Trinity is leased for a specified type of service over the
term of the contract. The Company accounts for leases principally by the
operating method.
Inventories and investments are valued at the lower of cost or market.
Inventory cost is determined principally on the specific identification
method. Market replacement cost or net realizable value.
Depreciation and amortization are generally computed by the straight-
line method on the estimated useful lives of the assets. The costs
of ordinary maintenance and repair are charged to expense while renewals and
major replacements are capitalized.
Net income per common an common equivalent share is based on the
weighted average shares outstanding plus the assumed exercise of dilutive
stock options (less the number of treasury shares assumed to be purchased
from the proceeds using the average market price of Trinity's common stock).
In fiscal 1997, the Company adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of," which did not have a material
impact on the assets of continuing operations.
In fiscal 1997, the Company adopted Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation," and has elected
to continue to apply the accounting provisions of APB Opinion 25, "Accounting
for Stock Issued to Employees." See Stock Plans in Notes to Consolidated
Financial Statements.
In February 1997, Statement of Financial Accounting Standards No. 128,
"Earnings Per Share," was issued. Adoption is required by the Company
beginning with the interim financial statements issued for the third quarter
of fiscal 1998. The pro forma effect of applying this statement to fiscal
1997 earnings is an increase in net income per common and common equivalent
share of $0.02.
Segment Information
With the divestiture of Halter, Trinity revised its segment reporting to
more accurately reflect the nature of its current operations. The new
reporting format combines similar businesses to reflect current internal
organizational and operational focuses. Prior year segment results are
restated to the new segment reporting format.
Trinity manufactures, sells and leases a wide variety of products
principally in three business segments: (1) the Transportation Products
segment which consists primarily of railcars, principally tank cars and
freight cars, barges for inland waterway service, and railcar and barge
leasing to various industries; (2) the Construction Products segment which
consists primarily of highway guardrail and safety products, beams, girders,
and columns used in construction of highway and railway bridges, passenger
loading bridges and conveyor systems, and ready- mix concrete and aggregates;
(3) the Industrial Products segment which consists primarily of pressure and
non-pressure containers for the storage and transportation of liquefied
gases, other liquid, and dry products, weld fittings (tees, elbows, reducers,
caps, flanges, etc.) used in pressure piping systems and container heads (the
ends of pressure and non-pressure containers) for use internally and by other
manufacturers of containers.
Financial information for these segments is summarized in the following
table. The Company operates principally in the continental United States.
Intersegmental sales are shown at market prices.
Corporate operating profit elimination consists principally of the
administrative overhead of the Company.
Corporate assets consist primarily of cash and cash equivalents, other
assets, notes receivable, land held for investment, and certain property,
plant and equipment.
The Transportation Products segment includes revenues from one customer
which accounted for 10.8 percent, 14.9 percent, and 14.1 percent of
consolidated revenues in fiscal 1997, 1996, and 1995, respectively.
In the Segments of Business table below, the caption 'Additions (net) to
property, plant and equipment' does not include Business Acquisitions.
<TABLE>
Segments of Business
<CAPTION>
Eliminations
Transpor Construc- & Cor- Consol-
tation tion Industrial porate idated
(in millions) Products Products Products Items Total
Year ended March 31, 1997
<S> <C> <C> <C> <C> <C>
Total revenues:
Trade. . . . . . . . . . . . . $1,501.5 395.2 327.6 10.0 2,234.3
Intersegment . . . . . . . . . 129.3 - 4.8 (134.1) -
Total . . . . . . . . . . . . $1,630.8 395.2 332.4 (124.1) 2,234.3
Operating profit (loss). . . . . $ 175.2 43.4 42.5 (46.9) 214.2
Identifiable assets . . . . . . $ 846.0 210.8 164.9 134.7 1,356.4
Depreciation . . . . . . . . . . $ 49.5 22.8 7.8 7.7 87.8
Additions (net) to property,
plant and equipment . . . . . . $ 100.5 15.1 7.1 (0.1) 122.6
Year ended March 31, 1996
Total revenues:
Trade. . . . . . . . . . . . . $1,555.2 380.6 305.4 0.5 2,241.7
Intersegment . . . . . . . . . 86.9 - 6.5 (93.4) -
Total . . . . . . . . . . . . $1,642.1 380.6 311.9 (92.9) 2,241.7
Operating profit (loss). . . . . $ 157.9 43.4 35.4 (41.8) 194.9
Identifiable assets . . . . . . $ 832.5 218.4 151.6 224.1 1,426.6
Depreciation . . . . . . . . . . $ 33.7 19.3 8.9 7.3 69.2
Additions (net) to property,
plant and equipment . . . . . . $ 6.8 9.2 4.1 8.7 28.8
Year ended March 31, 1995
Total revenues:
Trade. . . . . . . . . . . . . $1,433.3 355.5 275.2 0.3 2,064.3
Intersegment . . . . . . . . . 29.4 - 3.9 (33.3) -
Total . . . . . . . . . . . . $1,462.7 355.5 279.1 (33.0) 2,064.3
Operating profit (loss). . . . . $ 133.8 35.6 24.6 (45.1) 148.9
Identifiable assets . . . . . . $ 821.0 228.7 136.9 213.9 1,400.5
Depreciation . . . . . . . . . . $ 24.9 14.6 7.2 6.5 53.2
Additions (net) to property,
plant and equipment . . . . . . $ (7.9) 12.9 6.9 11.3 23.2
</TABLE>
Business Acquisitions and Divestitures
Business Acquisitions
The Company, through wholly-owned subsidiaries, made certain business
acquisitions for continuing operations during fiscal 1997, 1996 and 1995. All
have been accounted for by the purchase method. The operations of these
companies have been included in the consolidated financial statements from
the effective dates of the acquisitions.
In fiscal 1997, the businesses acquired for continuing operations
included: (i) 100 percent of the capital stock of Transcisco Industries, Inc.
in exchange for 1,162,612 shares of Trinity common stock. Transcisco is a
diversified railcar services company engaged in railcar maintenance and
repair, specialty railcar leasing and management services, and Russian rail
transportation services through its 20 percent ownership of SFAT, Russia's
largest private rail transportation services company, and (ii) certain assets
of John Guidry Ready Mix Company, Inc., The Cement and Supply Company, and
Pitcock Bros. Ready Mix Concrete, Inc. for cash. These assets will be used
in the ready-mix concrete business. The aggregate purchase price of these
acquisitions was approximately $68.6 million. Contribution of these
acquisitions to revenues and operating profit during fiscal 1997 is not
material.
In fiscal 1996, the businesses acquired for continuing operations
included: (i) 100 percent of the capital stock of the holding company which
owns Grupo TATSA S. A. de C. V. in exchange for 1,199,000 shares of Trinity
common stock. Grupo TATSA, now known as Trinity Industries de Mexico,
headquartered in Mexico City, Mexico, manufactures and distributes a wide
variety of fabricated steel products including containers (primarily for the
storage or transportation of liquefied petroleum products), railcars and
railcar parts, and heads which are used within the Company as well as sold to
other manufacturers from its manufacturing facilities in Mexico City,
Monclova, and Huehuetoca, Mexico; (ii) certain assets of McDonald's
Ready-Mix, Brazos Point, Inc., and Dunn & Gerhart Everready Concrete, Inc.
for cash. These assets are utilized in the ready-mix concrete and aggregate
business; (iii) certain assets of Hall-Buck Marine, Inc. for cash.
Hall-Buck's assets are utilized in the maintenance and repair of marine
products; and (iv) certain assets of The Casteel Group, Inc. for cash.
Casteel's assets are utilized in the fabrication of construction products.
The aggregate purchase price of these acquisitions was approximately $52.6
million.
In fiscal 1995, the businesses and properties acquired for continuing
operations included: (i) 100 percent of the common stock of Concrete Pipe
Products Company, Inc. and Midland Concrete, Incorporated for 149,001 shares
and 35,033 shares of Trinity common stock, respectively, certain assets of
Gemini Industries, Inc., Ratliff Ready-Mix, Inc., and Diamond Ready-Mix for
cash, and certain properties acquired for mineral extraction. These companies
and assets are utilized in the ready-mix concrete and aggregates business;
(ii) certain assets of Port Allen Marine Services, Inc., the Syntechnics
Division of The Alpha Corporation of Tennessee, and New NABRICO Corporation
for cash. These businesses produce and repair barges and manufacture other
marine products; (iii) certain assets of Flo- Bend, Inc. for cash. These
assets are utilized in the manufacture of metal components; and (iv) certain
assets of the Ready-Mix Concrete Operations and Aggregate Operations of
LaFarge Corporation for cash. These operations are utilized in the ready-mix
concrete and aggregates business. The aggregate purchase price of these
acquisitions was approximately $80.9 million.
Divestiture
Halter Marine Group, Inc., previously a wholly-owned subsidiary of the
Company, completed its initial public offering (the "Offering") of 3,450,000
shares of common stock, par value $.01 per share on October 29, 1996. The
3,450,000 shares of common stock sold to the public represented approximately
19.0 percent of the total outstanding common stock of Halter. The Company
retained ownership of the remaining 15,000,000 shares. The Offering price
was $11 per share of Halter common stock resulting in net proceeds to Halter
of approximately $33.8 million after deducting underwriting discounts and
commissions and Halter's Offering expenses. Trinity recorded a net gain of
approximately $9.3 million from the sale of Halter common stock in the
Offering.
At the close of business on March 31, 1997, the Company completed the
divestiture of Halter with the distribution of its remaining 15 million
shares of Halter common stock to its stockholders in the form of a tax-free
property distribution. Each of the Company's stockholders of record at March
21, 1997 received 0.348 of a share of Halter common stock for each share of
Trinity common stock held.
Prior year's financial statements have been reclassified to reflect the
divestiture of the Halter business. The income from discontinued operations
reflected in the table below is inclusive of minority interest held by
stockholders outside of the Company. Summary operating results of
discontinued operations are as follows (in millions):
Year Ended March 31
1997 1996 1995
Revenues . . . . . . . . . . . . . . . $406.8 $254.3 $250.6
Income from discontinued operations
before income taxes . . . . . . . . . $ 27.0 $ 20.6 $ 25.9
Provision for income taxes . . . . . . 10.9 8.1 10.2
Income from discontinued operations. . $ 16.1 $ 12.5 $ 15.7
Due to the divestiture of Halter, the Halter assets at March 31, 1997 are
not included in the Company's March 31, 1997 Consolidated Balance Sheet.
At March 31, 1997, Trinity guaranteed contract performance obligations
of Halter in the aggregate amount of approximately $66.1 million, and
Halter has outstanding contract bid and performance bonds and similar
obligations issued by third parties with Trinity as the obligor with an
aggregate face amount of approximately $94.6 million.
Stock Plans
The Company has a Stock Option and Incentive Plan (the "Plan") which
provides for grants of incentive or non-qualified stock options, restricted
stock awards, performance awards and stock appreciation rights ("SARs").
Grants may be made to directors, officers, and employees in managerial or
other key positions in the Company. Incentive options may be granted over a
period not to exceed ten years at a price not less than fair market value on
the date of grant. The maximum number of shares of common stock which may be
issued under the Plan shall not exceed 1,500,000 unless adjusted for changes
in capitalization of the Company. The Plan provides that, to the extent
awards granted pursuant to this Plan or any prior stock option plan are
forfeited, expire or are canceled, they may again be granted pursuant to the
provisions of this Plan. The Plan provides that if shares already owned by
the optionee are surrendered as full or partial payment of the exercise price
of an option, a new option (the "Reload Option") may be granted equal to the
number of shares surrendered. The exercise price of the Reload Option is the
fair market value on the effective date of the surrender of the shares.
Restricted stock awards issued under the Plan may not be disposed of by
the recipient until all restrictions specified in the award expire. Under
the Plan, 20,000 shares of restricted stock were granted during 1997 at a
grant-date fair value of $25.13 per share.
<TABLE>
The following table summarizes stock option activity:
<CAPTION>
Stock Options
Weighted Weighted
Incentive Average Non-Incentive Average
Shares Exercise Price Shares Exercise Price
<S> <C> <C> <C> <C>
Outstanding at March 31, 1994 . . . . . . . . . . . . . . . . 373,321 $18.57 1,602,686 $23.94
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,100 $32.78 68,887 $36.45
Cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . (4,080) $18.78 (6,000) $24.78
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . (31,731) $18.01 (80,539) $24.70
Outstanding at March 31, 1995 . . . . . . . . . . . . . . . . 343,610 $18.88 1,585,034 $24.44
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . 79,500 $32.59 41,273 $37.64
Cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . (10,212) $19.99 (11,090) $21.99
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . (56,025) $17.77 (245,629) $23.61
Outstanding at March 31, 1996 . . . . . . . . . . . . . . . . 356,873 $22.07 1,369,588 $25.01
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . 305,505 $32.05 174,951 $32.62
Cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . (3,625) $22.43 (3,000) $26.67
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . (105,047) $18.39 (132,523) $23.35
Outstanding at March 31, 1997 . . . . . . . . . . . . . . . . 553,706 $28.28 1,409,016 $26.11
</TABLE>
At March 31, 1997, there were 893,548 shares (1,146,660 at March 31, 1996)
reserved for future options.
<TABLE>
The following table summarizes information about stock options outstanding at March 31, 1997:
<CAPTION>
Options Outstanding Options Exercisable
Weighted Weighted Weighted
Average Average Average
Remaining Life Shares Exercise Price Shares Exercise Price
<S> <C> <C> <C> <C> <C>
Incentive options . . . . . 4 Years 164,591 $19.06 164,591 $19.06
10 Years 389,115 $32.17 18,350 $32.57
Non-Incentive options . . . 3 Years 467,495 $19.29 467,495 $19.29
7 Years 941,521 $29.49 298,253 $31.43
1,962,722 948,689
</TABLE>
Pursuant to a merger agreement between Transcisco Industries, Inc.
("Transcisco") and a wholly-owned subsidiary of the Company, stock options
outstanding to purchase Transcisco stock were converted to options to acquire
shares of Trinity stock. Transcisco options were converted into incentive
options to acquire 58,208 shares and non-incentive options to acquire 92,092
shares of Trinity stock at prices ranging from $1.17 to $29.51 per share.
For the fiscal year ended March 31, 1997, 117,518 options were exercised and
10,053 options were canceled. As of March 31, 1997, 22,729 options were
outstanding and 16,633 options were exercisable.
The exercise price for outstanding options under the Plan ranged from
$16.58 to $39.25 at March 31, 1997. In connection with the Halter property
distribution, stock options outstanding at the close of business on March 31,
1997 were adjusted to preserve the economic value of such options. Incentive
and non-incentive options shown outstanding in the table above were adjusted
to 694,192 and 1,767,899 options, respectively at prices ranging from $13.22
to $31.28. Incentive and non-incentive options pursuant to the Transcisco
converted options were adjusted to 7,700 and 20,817, respectively at prices
ranging from $2.11 to $22.46 per share.
In October 1995, Statement of Financial Accounting Standards ("SFAS")
No. 123, "Accounting for Stock-Based Compensation," was issued. The Company
has elected the option to apply the accounting provisions of APB Opinion 25,
"Accounting for Stock Issued to Employees." Accordingly, no compensation
cost has been recorded for the stock options granted. The effect of computing
compensation cost in accordance with SFAS No. 123 is not material to the
Company's net income or net income per share. SFAS No. 123 does not apply to
grants prior to fiscal year 1996.
The weighted-average fair value of options granted during 1997 and 1996
was $9.26 and $10.39, respectively. The fair value of each option grant is
estimated on the date of the grant using the Black-Scholes option-pricing
model with the following weighted-average assumptions:
1997 1996
Expected option life in years. . . . . . . . . . . 6.8 6.8
Interest rate. . . . . . . . . . . . . . . . . . . 6.45% 6.42%
Volatility factor. . . . . . . . . . . . . . . . . 0.209 0.224
Dividend yield . . . . . . . . . . . . . . . . . . 2.11% 2.00%
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. Because the Company's employee
stock options have characteristics significantly different from those of
traded options and because changes in the subjective input assumptions can
materially affect the fair value estimate, the existing models, in
management's opinion, do not provide a reliable measure of the fair value of
its employee stock options.
<TABLE>
Long-term Debt
<CAPTION>
March 31
1997 1996
(in millions)
<S> <C> <C>
4.95-9.25 percent industrial development revenue bonds
payable in varying amounts through 2005 . . . . . . . . $ 1.7 $ 2.0
6.0-10.0 percent promissory notes, generally payable
annually through 2001 . . . . . . . . . . . . . . . . . 33.5 35.6
6.96-11.55 percent equipment trust certificates to
institutional investors generally payable in semi-
annual installments of varying amounts through 2003 . . 133.8 158.1
11.3 percent notes payable monthly through 2003. . . . . 9.6 10.7
$178.6 $206.4
</TABLE>
The fair value of non-traded, fixed rate outstanding debt, estimated
using discounted cash flow analysis, approximates its carrying value. The
Company is required to maintain certain financial ratios, as defined.
Principal payments due during the next five years are: 1998 - $28.2; 1999 -
$27.9; 2000 - $25.9; 2001 - $51.3; and 2002 - $24.0.
The trustees of the equipment trusts have been assigned title to railcars
with a cost of $303.8 at March 31, 1997 for the life of the respective
equipment trusts. Leases relating to such railcars financed by equipment
trust certificates have been assigned as collateral.
Future minimum rental revenues on leases in each fiscal year are
approximately $59.1 in 1998, $49.4 in 1999, $41.7 in 2000, $34.3 in 2001,
and $29.7 in 2002, and $120.1 thereafter.
<TABLE>
Property, Plant and Equipment
<CAPTION>
March 31
1997 1996
(in millions)
<S> <C> <C>
Land . . . . . . . . . . . . . . . . . . . . . . . . $ 34.5 $ 34.7
Buildings and improvements . . . . . . . . . . . . . 208.6 185.4
Machinery. . . . . . . . . . . . . . . . . . . . . . 458.4 416.4
Equipment on lease (predominately long-term) . . . . 413.7 353.7
Construction in progress . . . . . . . . . . . . . . 21.3 16.9
$1,136.5 $1,007.1
</TABLE>
Income Taxes
(in millions)
The provision for federal income taxes is determined on a
consolidated return basis. The significant components of the
provision (benefit) for income taxes from continuing operations
follows:
Year Ended March 31
1997 1996 1995
Current
Federal. . . $63.2 $70.0 $70.4
State. . . . 8.0 7.0 7.3
71.2 77.0 77.7
Deferred. . . . . (3.6) (12.5) (29.5)
Total . . . . . . $67.6 $64.5 $48.2
Deferred income tax is provided in the financial statements
for differences between financial and taxable income. The
components of deferred tax liabilities and assets follow:
March 31
1997 1996
Deferred tax liabilities:
Excess of tax depreciation over
financial statement depreciation......... $ 74.1 $ 75.7
Total deferred tax liabilities........ 74.1 75.7
Deferred tax assets:
Pensions and other benefits.............. 35.4 39.8
Accounts receivable, inventory, and other
asset valuation accounts................. 3.6 1.7
Other..................................... 12.3 1.1
Total deferred tax assets................ 51.3 42.6
Net deferred tax liabilities.............. $ 22.8 $ 33.1
The provision for income taxes from continuing operations results in
effective tax rates different than the statutory rates. The reconciliation
between the effective and statutory rates follows:
Year Ended March 31
1997 1996 1995
Statutory rate.............. 35.0% 35.0% 35.0%
State taxes................. 2.3 3.2 4.0
Other....................... - 0.7 0.6
Effective tax rate.......... 37.3% 38.9% 39.6%
In fiscal 1997, 1996, and 1995 income taxes of $85.9, $118.1, and $55.9,
respectively, were paid net of refunds received which includes amounts
associated with Halter.
Employee Benefit Plans
(in millions)
Pension plans are in effect which provide income and death benefits for
eligible employees. The Company's policy is to fund retirement costs accrued
to the extent such amounts are deductible for income tax purposes. Plan
assets include cash, short-term debt securities, and other investments.
Benefits are based on years of credited service and compensation.
<TABLE>
Net periodic pension expense for fiscal 1997, 1996, and 1995 included
the following components:
<CAPTION>
Year Ended March 31
1997 1996 1995
<S> <C> <C> <C>
Service cost-benefits earned during the period $ 13.7 $ 8.0 $ 7.1
Interest cost on projected benefit obligation. 9.5 7.4 6.6
Actual return on assets. . . . . . . . . . . . (13.0) (16.9) (6.2)
Net amortization and deferral. . . . . . . . . 3.7 10.1 0.3
Accrual of profit sharing contribution . . . . 4.6 3.6 3.2
Net periodic pension expense . . . . . . . . . $ 18.5 $ 12.2 $ 11.0
</TABLE>
<TABLE>
Assumptions used for valuation of the projected
benefit obligation were:
<CAPTION> Year Ended March 31
1997 1996 1995
<S> <C> <C> <C>
Discount rates . . . . . . . . . . . . . . . . 7.75% 7.75% 8.25%
Rates of increase in compensation levels . . . 4.75% 4.75% 5.25%
Expected long-term rate of return on assets. . 9.00% 9.00% 9.00%
</TABLE>
Amounts recognized in the Company's Consolidated
Balance Sheet follow: March 31
1997 1996
Actuarial present value of benefit obligation:
Vested benefit obligation. . . . . . . . . . $ 82.1 $ 69.9
Accumulated benefit obligation . . . . . . . $ 95.6 $ 83.6
Projected benefit obligation . . . . . . . . . $124.5 $112.4
Plan assets at fair value. . . . . . . . . . . 114.3 92.6
Projected benefit obligation
in excess of plan assets. . . . . . . . . . . (10.2) (19.8)
Unrecognized net asset at April 1, 1985. . . . (1.5) (1.6)
Unrecognized net asset at January 1, 1986. . . (0.7) (0.7)
Unrecognized net loss at March 31. . . . . . . 17.0 22.3
Accrued pension expense. . . . . . . . . . . . $ 4.6 $ 0.2
The Company has a contributory profit sharing plan for employees of the
Company and certain affiliates. Under the plan, eligible employees are
allowed to make voluntary pre-tax contributions. The Company's contribution
to this plan, as defined, is based on consolidated earnings and dividends.
Contingencies
In November 1996, a jury sitting in the United States District Court for
the Southern District of New York returned a verdict against the Company and
CIGNA, formally Aetna Insurance Company, in a retrial of an action brought
against the Company by Morse/Diesel, Inc. for damages allegedly caused in the
construction of the Marriott Marquis Hotel in Times Square, New York City,
New York. A verdict was rendered in favor of Morse/Diesel in the amount of
thirty-one million dollars plus interest from July, 1984. A verdict was
rendered in favor of the Company on its counterclaim of six million dollars
plus interest from December, 1984. The Company has been advised that it has
substantial arguments against the validity of the verdict, and it will pursue
all available avenues in the post-trial and appellate review processes.
In May 1997, the United States Court of Appeals for the Federal Circuit
rendered and remanded for trial in the District Court an appeal from an order
of the United States District Court for the Western District of Pennsylvania
entered on September 13, 1996 concerning a patent in the matter Johnstown
America Corporation and JAC Patent Corporation, Plaintiffs- Appellants versus
Trinity Industries, Inc. Defendant-Appellee. Trinity has been advised that it
has legal and factual defenses, and Trinity will vigorously contest Johnstown
America's claim for actual damages.
While the ultimate liability in these matters is difficult to assess, it
is management's belief that the final outcome is not likely to have a
material adverse affect on the Company's consolidated financial position.
However, there can be no assurance that the outcome of such litigation would
not be material to the results of a particular reporting period.
The Company is involved in various other claims and lawsuits incidental
to its business. In the opinion of management, these claims and suits in the
aggregate will not have a material adverse affect on the Company's
consolidated financial statements.
Stockholder's Rights Plan
The Company has adopted a Stockholder's Rights Plan. Effective April
27, 1989, the Company paid a dividend distribution of one purchase right for
each outstanding share of the Company's $1.00 par value common stock. Each
right entitles the stockholder to purchase from the Company one one-hundredth
of a share of Series A Junior Participating Preferred Stock at an exercise
price of one hundred and seventy-five dollars. As amended, the rights are
not exercisable or detachable from the common stock until ten business days
after a person acquires beneficial ownership of ten percent or more of the
Company's common stock or if a person or group commences a tender or exchange
offer upon consummation of which that person or group would beneficially own
ten percent or more of the common stock.
If any person becomes a beneficial owner of ten percent or more of the
Company's common stock other than pursuant to an offer, as defined, for all
shares determined by certain directors to be fair to the stockholders and
otherwise in the best interests of both the Company and its stockholders
(other than by reason of share purchases by the Company), each right not
owned by that person or related parties enables its holder to purchase, at
the right's then current exercise price, shares of the Company's common stock
having a calculated value of twice the right's exercise price.
The rights, which are subject to adjustment, may be redeemed by the
Company at a price of one cent per right at any time prior to their
expiration on April 27, 1999 or the point at which they become exercisable.
Item 7. Financial Statements and Exhibits
(c) Exhibits (Previously filed)
Exhibit 27(1) - Financial Data Schedule
Exhibit 99(1) - Press release of Registrant dated March 31, 1997
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TRINITY INDUSTRIES, INC.
Date: June 26, 1997 By: \s\ F. Dean Phelps
F. Dean Phelps
Vice President
