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 December 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 1-6903
TRINITY INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
Incorporated Under the Laws 75-0225040
of the State of Delaware (I.R.S. Employer
Identification No.)
2525 Stemmons Freeway
Dallas, Texas 75207-2401
(Address of Principal (Zip Code)
Executive Offices)
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
43,068,927
(Number of shares of common stock outstanding as of December 31,
1996)
Part I
Item 1 - Financial Statements
Trinity Industries, Inc.
Consolidated Balance Sheet
(unaudited)
(in millions except per share data)
December 31 March 31
Assets 1996 1996
Cash and cash equivalents . . . . . . . . . $ 14.5 $ 15.4
Receivables . . . . . . . . . . . . . . . . 260.2 293.5
Inventories:
Finished goods. . . . . . . . . . . . . . 47.9 38.9
Work in process . . . . . . . . . . . . . 122.4 146.5
Raw material and supplies . . . . . . . . 221.2 218.3
Total inventories 391.5 403.7
Property, plant and equipment, at cost:
Excluding Leasing Subsidiary. . . . . . . 817.6 745.3
Leasing Subsidiary. . . . . . . . . . . . 426.5 353.7
Less accumulated depreciation:
Excluding Leasing Subsidiary. . . . . . . (378.0) (336.5)
Leasing Subsidiary. . . . . . . . . . . . (78.6) (70.2)
Other assets. . . . . . . . . . . . . . . . 104.9 50.9
$1,558.6 $1,455.8
Liabilities and Stockholders' Equity
Short-term debt . . . . . . . . . . . . . . $ 62.0 $ 216.0
Accounts payable and accrued liabilities. . 316.8 222.9
Billings in excess of cost and related
earnings. . . . . . . . . . . . . . . . . 22.3 19.2
Long-term debt:
Excluding Leasing Subsidiary. . . . . . . 79.8 37.6
Leasing Subsidiary. . . . . . . . . . . . 145.9 168.8
Deferred income taxes . . . . . . . . . . . 31.2 30.2
Other liabilities . . . . . . . . . . . . . 16.2 15.1
Minority interest . . . . . . . . . . . . . 16.5 -
690.7 709.8
Stockholders' equity:
Common stock - par value $1 per share;
authorized 100.0 shares; shares issued
and outstanding at December 31, 1996 -
43.1 and March 31, 1996 - 41.6. . . . . 43.1 41.6
Capital in excess of par value. . . . . . 278.6 239.6
Retained earnings . . . . . . . . . . . . 546.2 464.8
867.9 746.0
$1,558.6 $1,455.8
Trinity Industries, Inc.
Consolidated Income Statement
(unaudited)
(in millions except per share data)
Nine Months
Ended December 31
1996 1995
Revenues. . . . . . . . . . . . . . . . . . . . . . $1,998.4 $1,835.5
Operating costs:
Cost of revenues. . . . . . . . . . . . . . . . . 1,692.1 1,573.4
Selling, engineering and administrative expenses. 108.1 89.5
Interest expense of Leasing Subsidiary. . . . . . 11.2 13.5
Retirement plans expense. . . . . . . . . . . . . 14.4 10.3
1,825.8 1,686.7
Operating profit. . . . . . . . . . . . . . . . . . 172.6 148.8
Other (income) expenses:
Interest income . . . . . . . . . . . . . . . . . (0.6) (1.6)
Interest expense - excluding Leasing Subsidiary . 8.7 13.6
Other, net. . . . . . . . . . . . . . . . . . . . (2.8) (0.9)
5.3 11.1
Income before income taxes . . . . . . . . . . . . 167.3 137.7
Provision (benefit) for income taxes:
Current . . . . . . . . . . . . . . . . . . . . . 66.5 69.1
Deferred. . . . . . . . . . . . . . . . . . . . . (2.3) (14.9)
64.2 54.2
Net income. . . . . . . . . . . . . . . . . . . . . $ 103.1 $ 83.5
Net income per common and common equivalent share . $ 2.42 $ 1.99
Weighted average number of common and common
equivalent shares outstanding. . . . . . . . . . . 42.6 41.8
<PAGE>
Trinity Industries, Inc.
Consolidated Income Statement
(unaudited)
(in millions except per share data)
Three Months
Ended December 31
1996 1995
Revenues. . . . . . . . . . . . . . . . . . . . . . $692.9 $602.3
Operating costs:
Cost of revenues. . . . . . . . . . . . . . . . . 588.9 514.9
Selling, engineering and administrative expenses. 36.5 30.0
Interest expense of Leasing Subsidiary. . . . . . 3.5 4.3
Retirement plans expense. . . . . . . . . . . . . 5.7 3.5
634.6 552.7
Operating profit. . . . . . . . . . . . . . . . . . 58.3 49.6
Other (income) expenses:
Interest income . . . . . . . . . . . . . . . . . (0.1) (0.3)
Interest expense - excluding Leasing Subsidiary . 2.3 4.7
Other, net. . . . . . . . . . . . . . . . . . . . (0.7) (1.1)
1.5 3.3
Income before income taxes . . . . . . . . . . . . 56.8 46.3
Provision (benefit) for income taxes:
Current . . . . . . . . . . . . . . . . . . . . . 22.6 24.1
Deferred. . . . . . . . . . . . . . . . . . . . . (0.7) (5.9)
21.9 18.2
Net income. . . . . . . . . . . . . . . . . . . . . $ 34.9 $ 28.1
Net income per common and common equivalent share . $ 0.80 $ .67
Weighted average number of common and common
equivalent shares outstanding. . . . . . . . . . . 43.4 41.9
Trinity Industries, Inc.
Consolidated Statement of Cash Flows
(unaudited)
(in millions)
Nine Months
Ended December 31
1996 1995
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . $103.1 $ 83.5
Adjustments to reconcile net income to net cash
provided (required) by operating activities:
Depreciation:
Excluding Leasing Subsidiary. . . . . . . . . . 59.5 41.4
Leasing Subsidiary. . . . . . . . . . . . . . . 13.9 13.7
Deferred benefit for income taxes. . . . . . . . (2.3) (14.9)
Gain on sale of property, plant and equipment. . (1.6) (2.7)
Gain on sale of minority interest. . . . . . . . (15.0) -
Other. . . . . . . . . . . . . . . . . . . . . . (2.4) (2.1)
Changes in assets and liabilities:
Decrease in receivables . . . . . . . . . . . . 41.9 59.5
(Increase) decrease in inventories. . . . . . . 14.9 (33.8)
Increase in other assets . . . . . . . . . . . (33.2) (2.1)
Increase (decrease) in accounts payable
and accrued liabilities. . . . . . . . . . . . 88.6 (47.2)
Increase in billings in excess of cost and
related earnings . . . . . . . . . . . . . . . 5.9 16.8
Increase (decrease)in other liabilities . . . . (13.5) 1.4
Total adjustments . . . . . . . . . . . . . . 156.7 30.0
Net cash provided by operating activities. . . . 259.8 113.5
Cash flows from investing activities:
Proceeds from sale of property, plant
and equipment . . . . . . . . . . . . . . . . . . 20.4 67.5
Proceeds from sale of minority interest. . . . . . 33.8 -
Capital expenditures:
Excluding Leasing Subsidiary. . . . . . . . . . . (48.9) (33.1)
Leasing Subsidiary. . . . . . . . . . . . . . . . (102.0) (46.5)
Payment for purchase of acquisitions,
net of cash acquired. . . . . . . . . . . . . . . (8.7) (28.6)
Cash of acquired subsidiary. . . . . . . . . . . . 2.3 1.2
Net cash required by investing activities. . . . (103.1) (39.5)
Cash flows from financing activities:
Issuance of common stock . . . . . . . . . . . . . 2.2 2.5
Net repayments under short-term debt . . . . . . . (154.0) (29.0)
Proceeds from issuance of long-term debt . . . . . 50.0 7.0
Payments to retire long-term debt. . . . . . . . . (34.4) (37.1)
Dividends paid . . . . . . . . . . . . . . . . . . (21.4) (20.9)
Net cash required by financing activities. . . . (157.6) (77.5)
Net decrease in cash and cash equivalents . . . . . (0.9) (3.5)
Cash and cash equivalents at beginning of year. . . 15.4 15.3
Cash and cash equivalents at end of period. . . . . $ 14.5 $ 11.8
<TABLE>
Trinity Industries, Inc.
Consolidated Statement of Stockholders' Equity
(unaudited)
(in millions except share and per share data)
<CAPTION>
Common Capital
Common Stock in Total
Shares $1.00 Excess Stock-
(100,000,000) Par of Par Retained holders'
Authorized) Value Value Earnings Equity
<S> <C> <C> <C> <C> <C>
Balance at March 31, 1995 . . . . 40,220,694 $40.2 $221.7 $379.3 $641.2
Other. . . . . . . . . . . . . . 1,329,099 1.4 17.5 - 18.9
Net income . . . . . . . . . . . - - - 83.5 83.5
Cash dividends
($0.51 per share) . . . . . . - - - (21.2) (21.2)
Balance December 31, 1995 . . . . 41,549,793 $41.6 $239.2 $441.6 $722.4
Balance at March 31, 1996 . . . . 41,596,037 $41.6 $239.6 $464.8 $746.0
Other. . . . . . . . . . . . . . 1,472,890 1.5 39.0 - 40.5
Net income . . . . . . . . . . . - - - 103.1 103.1
Cash dividends
($0.51 per share) . . . . . . - - - (21.7) (21.7)
Balance December 31, 1996 . . . . 43,068,927 $43.1 $278.6 $546.2 $867.9
</TABLE>
The foregoing consolidated financial statements are unaudited and have been
prepared from the books and records of the Registrant. In the opinion of the
Registrant, all adjustments, consisting only of normal and recurring
adjustments necessary to a fair presentation of the financial position of the
Registrant as of December 31, 1996 and March 31, 1996, the results of
operations for the nine and three month periods ended December 31, 1996 and
1995 and cash flows for the nine month periods ended December 31, 1996 and
1995, in conformity with generally accepted accounting principles, have been
made.
<PAGE>
Trinity Industries, Inc.
Notes to Consolidated Financial Statements
December 31, 1996
General
On September 25, 1996, the Registrants' ocean-going marine vessel
subsidiary Halter Marine Group, Inc. ("Halter") commenced an initial
public offering (the "Offering") of Halter Marine Group, Inc. common
stock at which time three million shares of common stock,
representing approximately 17 percent of the total outstanding shares
of common stock of Halter, began trading on the American Stock
Exchange. On October 1, 1996, Halter closed the sale of the
3,000,000 shares of its common stock to the public at a price of $11
per share. The net proceeds of the Offering were used to repay a
portion of the indebtedness incurred under Halter's bank credit
facility and to repay income taxes payable to the Registrant. On
October 29, 1996, the underwriters of the Offering exercised their
over-allotment option in full for 450,000 shares of common stock.
The net proceeds from the over-allotment exercise of approximately
$4.6 million were used for general corporate purposes of Halter.
At the conclusion of the Offering, the Registrant retained 15 million
shares, or approximately 82 percent of the total outstanding common
stock of Halter. The Registrant recorded a gain on sale of the
Halter stock of $15 million which is included in Other, net on the
Consolidated Income Statement for the current period. The Registrant
is considering divesting its remaining interest in Halter though
there can be no assurances that a divestiture will ultimately be
completed.
Halter, based in Gulfport, MS, manufactures and markets a broad
range of small- to mid-size commercial, military and government
vessels, including offshore support vessels, offshore double-hull
tank barges, patrol boats, landing craft, oceanographic research
vessels, tugboats, towboats and luxury yachts.
In the third quarter ended December 31, 1996, the Registrant
recorded certain charges totaling $15 million, principally for
valuation of production facilities determined to be in excess of that
required for future business operations which are included in
Other, net on the Consolidated Income Statement.
Acquisitions
On September 3, 1996, the Registrant acquired, pursuant to a merger
agreement through a wholly-owned subsidiary of the Registrant, 100
percent of the outstanding common stock of Transcisco Industries,
Inc. ("Transcisco") in exchange for approximately 1.3 million shares
of common stock of the Registrant. 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,
a leading Russian private rail transportation firm.
The acquisition was accounted for by the purchase method. The
operations of Transcisco have been included in the consolidated
financial statements of the Registrant from the effective date of
the acquisition. Contribution from this acquisition to revenues and
operating profit for the nine month and three month periods ended
December 31, 1996 was not material.
Contingencies
In November, 1996, a jury sitting in the United States District
Court for the Southern District of New York returned a verdict
adverse to the Registrant and CIGNA, formerly Aetna Insurance
Company, in the retrial of an action brought against the Registrant
by Morse/Diesel, Inc. The verdict in favor of Morse/Diesel was in
the amount of $31,000,000 plus interest from July 18, 1984. A
verdict was also rendered in favor of the Registrant on its
counterclaim of $6,000,000 plus interest from December 18, 1984. The
litigation involves alleged damages from a construction subcontract
over the fabrication and erection of structural steel for the
construction of the Marriott Marquis Hotel in Times Square, New York
City, New York. The Registrant has been advised that it has
substantial defenses available, and it will pursue all available
avenues in the post-trial and appellate review processes. While the
Registrant's ultimate liability in this matter is difficult to
assess, it is management's belief that the final outcome is not
likely to have a material adverse effect on the Registrant's
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.
Item 2 - Management's Discussion and Analysis of Consolidated
Financial Condition and Statement of Operations
Financial Condition
The increase in 'Property, plant and equipment, at cost: Excluding
Leasing Subsidiary' and 'Other assets' at December 31, 1996 compared
to March 31, 1996 is primarily due to the acquisition of Transcisco
Industries, Inc. in the second quarter of the current year. 'Other
assets' includes the investment in SFAT recorded on the equity
method.
During the third quarter of fiscal 1997, Halter borrowed $50 million
under its bank credit facility. The proceeds were used to re-pay
short-term debt.
Statement of Operations
Nine Months Ended December 31, 1996 vs.
Nine Months Ended December 31, 1995
'Revenues' increased in the current nine month period compared to the
same period of the prior year due primarily to increased business in
the Marine Products, Construction Products and Containers segments.
The Marine Products segment continues to benefit from the existing
replacement cycle of various types of vessels. Additionally,
'Revenues' of the Marine Products segment increased due to the
completed expansion of certain of its facilities and the resulting
increases in throughput. 'Revenues' of the Construction Products
segment for the current period were higher due to the improved demand
for highway safety products, coupled with continuing demand for
ready-mix concrete and aggregates. With the emphasis in the repair
and upgrading of the nation's highway system, demand for construction
products is expected to remain favorable. 'Revenues' of the
Containers segment increased due to the rising demand in the propane
tank market.
The increase in 'Operating profit' in the current period is
principally due to improved results from the Railcars, Marine
Products, Construction Products, and Containers segments.
Three Months Ended December 31, 1996 vs.
Three Months Ended December 31, 1995
'Revenues' and 'Operating profit' increased primarily due to the
improved results in the Marine Products segment. The results are due
to the reasons stated above.
Part II
Item 5 - Other Information
During the quarter, the Board of Directors elected Timothy R. Wallace
as President and Chief Operating Officer and John T. Sanford as
Executive Vice President of Trinity. Also during the quarter, the
Board elected two new members, John L. Adams, Chairman and Chief
Executive Officer of Texas Commerce Bank in the Dallas/Ft. Worth
Metroplex, and Dr. Diana Natalicio, President of the University of
Texas at El Paso.
Item 6 - Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit
Number Description
27 Financial Data Schedule
(b) No Form 8-K was filed during the quarter.
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly authorized.
Trinity Industries, Inc.
By: /S/ F. Dean Phelps
F. Dean Phelps
Vice President
January 22, 1997
Index to Exhibit
No. Description Page
27 Financial Data Schedule *
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> DEC-31-1996
<CASH> 14,500,000
<SECURITIES> 0
<RECEIVABLES> 260,200,000
<ALLOWANCES> 0
<INVENTORY> 391,500,000
<CURRENT-ASSETS> 0
<PP&E> 1,244,100,000
<DEPRECIATION> (456,600,000)
<TOTAL-ASSETS> 1,558,600,000
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 43,100,000
0
0
<OTHER-SE> 824,800,000
<TOTAL-LIABILITY-AND-EQUITY> 1,558,600,000
<SALES> 0
<TOTAL-REVENUES> 1,998,400,000
<CGS> 0
<TOTAL-COSTS> 1,692,100,000
<OTHER-EXPENSES> 133,700,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,700,000
<INCOME-PRETAX> 167,300,000
<INCOME-TAX> 64,200,000
<INCOME-CONTINUING> 103,100,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 103,100,000
<EPS-PRIMARY> 2.42
<EPS-DILUTED> 0
</TABLE>
