SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
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 Company 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)
(214) 631-4420
(Company's Telephone Number,
Including Area Code)
Indicate by check mark whether the Company (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
43,523,325
(Number of shares of common stock outstanding as of June 30, 1998)
Part I
Item 1 - Financial Statements
Trinity Industries, Inc. Consolidated Balance Sheet
(in millions except per share data)
June 30 March 31
1998 1998
(unaudited)
Cash and cash equivalents . . . . . . . . . $ 2.4 $ 3.1
Receivables . . . . . . . . . . . . . . . . 338.7 390.5
Inventories:
Raw materials and supplies. . . . . . . . 261.0 248.5
Work in process . . . . . . . . . . . . . 39.2 42.5
Finished goods . . . . . . . . . . . . . 58.4 51.6
358.6 342.6
Property, plant and equipment, at cost. . . 1,138.9 1,201.9
Less accumulated depreciation . . . . . . . (431.2) (475.0)
707.7 726.9
Other assets. . . . . . . . . . . . . . . . 121.8 110.8
$1,529.2 $1,573.9
Liabilities and Stockholders' Equity
Short-term debt . . . . . . . . . . . . . . $ 60.0 $ 101.0
Accounts payable and accrued liabilities. . 326.9 386.6
Long-term debt. . . . . . . . . . . . . . . 138.7 149.6
Deferred income taxes . . . . . . . . . . . 41.5 27.5
Other liabilities . . . . . . . . . . . . . 28.8 21.7
595.9 686.4
Stockholders' equity:
Common stock - par value $1 per
share; authorized 100.0 shares;
shares issued and outstanding at
June 30, 1998 - 43.5 and
March 31, 1998 - 43.5 . . . . . . . . . . 43.5 43.5
Capital in excess of par value. . . . . . 271.8 276.5
Retained earnings . . . . . . . . . . . . 618.0 567.5
933.3 887.5
$1,529.2 $1,573.9
Trinity Industries, Inc.
Consolidated Income Statement
(unaudited)
(in millions except per share data)
Three Months
Ended June 30
1998 1997
Revenues. . . . . . . . . . . . . . . . . . . . . . $ 711.5 $ 560.1
Operating costs:
Cost of revenues. . . . . . . . . . . . . . . . . 596.8 459.2
Selling, engineering and administrative expenses. 35.0 37.4
Retirement plans expense. . . . . . . . . . . . . 5.6 5.2
637.4 501.8
Operating profit. . . . . . . . . . . . . . . . . . 74.1 58.3
Other (income) expenses:
Interest income . . . . . . . . . . . . . . . . . (0.9) (0.5)
Interest expense. . . . . . . . . . . . . . . . . 4.5 5.0
Other, net. . . . . . . . . . . . . . . . . . . . (22.0) 1.2
(18.4) 5.7
Income before income taxes . . . . . . . . . . . . 92.5 52.6
Provision for income taxes:
Current . . . . . . . . . . . . . . . . . . . . . 20.5 18.4
Deferred. . . . . . . . . . . . . . . . . . . . . 14.2 1.0
34.7 19.4
Net income. . . . . . . . . . . . . . . . . . . . . $ 57.8 $ 33.2
Net income per common share:
Basic . . . . . . . . . . . . . . . . . . . . . . $ 1.33 $ 0.77
Diluted . . . . . . . . . . . . . . . . . . . . . $ 1.31 $ 0.76
Weighted average number of shares outstanding:
Basic . . . . . . . . . . . . . . . . . . . . . . 43.4 43.1
Diluted . . . . . . . . . . . . . . . . . . . . . 44.1 43.6
Trinity Industries, Inc.
Consolidated Statement of Cash Flows
(unaudited)
(in millions)
Three Months
Ended June 30
1998 1997
Cash flows from operating activities :
Net income. . . . . . . . . . . . . . . . . . . . . $ 57.8 $ 33.2
Adjustments to reconcile net income to net cash
provided (required) by operating activities:
Depreciation. . . . . . . . . . . . . . . . . . . 17.9 17.6
Deferred provision for income taxes . . . . . . . 14.2 1.0
Gain on sale of property, plant and equipment
and other assets . . . . . . . . . . . . . . . . (22.7) (0.8)
Other . . . . . . . . . . . . . . . . . . . . . . (3.9) 1.8
Change in assets and liabilities:
(Increase) decrease in receivables . . . . . . . 51.8 (52.2)
(Increase) decrease in inventories . . . . . . . (16.0) 14.5
(Increase) decrease in other assets . . . . . . (14.0) 4.1
Increase (decrease) in accounts payable and
accrued liabilities . . . . . . . . . . . . . . (71.2) 3.2
Increase in other liabilities. . . . . . . . . . 7.1 0.3
Total adjustments . . . . . . . . . . . . . . . (36.8) (10.5)
Net cash provided by operating
activities. . . . . . . . . . . . . . . . . . . 21.0 22.7
Cash flows from investing activities:
Proceeds from sale of property, plant
and equipment and other assets . . . . . . . . . . 75.2 12.3
Capital expenditures. . . . . . . . . . . . . . . . (38.0) (23.2)
Payment for purchase of acquisitions,
net of cash acquired . . . . . . . . . . . . . . . - (36.5)
Net cash provided (required) by
investing activities . . . . . . . . . . . . . 37.2 (47.4)
Cash flows from financing activities:
Issuance of common stock. . . . . . . . . . . . . . 0.4 0.2
Net borrowings (repayments) under short-term debt . (41.0) 38.0
Payments to retire long-term debt . . . . . . . . . (10.9) (10.8)
Dividends paid. . . . . . . . . . . . . . . . . . . (7.4) (7.3)
Net cash provided (required) by
financing activities. . . . . . . . . . . . . . (58.9) 20.1
Net decrease in cash and cash equivalents. . . . . . (0.7) (4.6)
Cash and cash equivalents at beginning of period . . 3.1 12.2
Cash and cash equivalents at end of period . . . . . $ 2.4 $ 7.6
<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, 1997 . . . . 43,046,365 $43.0 $273.3 $493.2 $809.5
Other. . . . . . . . . . . . . . 49,514 0.1 0.4 - 0.5
Net income . . . . . . . . . . . - - - 33.2 33.2
Cash dividends
($0.17 per share) . . . . . . - - - (7.4) (7.4)
Balance June 30, 1997 . . . . . . 43,095,879 $43.1 $273.7 $519.0 $835.8
Balance at March 31, 1998 . . . . 43,489,276 $43.5 $276.5 $567.5 $887.5
Other. . . . . . . . . . . . . . 34,049 - (4.7) .1 (4.6)
Net income . . . . . . . . . . . - - - 57.8 57.8
Cash dividends
($0.17 per share) . . . . . . - - - (7.4) (7.4)
Balance June 30, 1998 . . . . . . 43,523,325 $43.5 $271.8 $618.0 $933.3
</TABLE>
The foregoing consolidated financial statements are unaudited and have been
prepared from the books and records of the Company. In the opinion of the
Company, all adjustments, consisting only of normal and recurring
adjustments necessary to a fair presentation of the financial position of
the Company as of June 30, 1998 and March 31, 1998, the results of
operations for the three month periods ended June 30, 1998 and 1997 and
cash flows for the three month periods ended June 30, 1998 and 1997, in
conformity with generally accepted accounting principles, have been made.
Trinity Industries, Inc.
Notes to Consolidated Financial Statements
(unaudited)
June 30, 1998
Divestitures
In the quarter ended June 30, 1998, the Company completed the
divestiture of two wholly-owned subsidiaries with the sale of 100% of
the outstanding common stock of Beaird Industries, Inc. and the sale of
100% of the outstanding common stock of Trinity Marine Orange, Inc. In
addition, the Company completed the sale of certain real estate not
associated with the Company's manufacturing operations. Results for
the first quarter of fiscal 1999 included a nonrecurring net after-tax
gain totaling $13.8 million, or $0.31 per diluted share, primarily
from the above mentioned sales.
Contingencies
In April 1998, the Company settled a 5-year-old patent infringement
lawsuit brought against the Company by Johnstown America Corp.
Under terms of the settlement, Trinity paid Johnstown $16.75 million.
The lawsuit involved Trinity's Aluminator II rotary gondola railcar,
which was discontinued in 1997.
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.
New Accounting Standards
The Company has adopted Statement of Financial Accounting
Standards No. 128, "Earnings Per Share," issued in February 1997.
Prior period earnings per share amounts have been restated.
The Company has adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income," issued in
fiscal 1998. Adoption of this statement did not have a significant
impact on the financial statements.
In fiscal 1998, Statement of Financial Accounting Standards No. 131,
"Disclosures About Segments of an Enterprise and Related Information,"
was issued. The disclosure requirements for this statement are
effective for the Company's financial statements for the year ended
March 31, 1999, but not for interim financial reporting until fiscal
2000. The Company has not yet determined the impact of adopting
Statement No. 131.
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations
Statement of Operations
Three Months Ended June 30, 1998 vs.
Three Months Ended June 30, 1997
Operating profit in the current quarter increased $15.8 million, or
27.1%, compared to the same period last year due to an increase in
revenues in the Transportation Products and Construction Products segments.
Revenues and operating profit for the Transportation Products segment
increased by $130.7 and $10.5 million, respectively, in the current
three month period when compared to the prior year quarter. The
primary factor behind the increases continues to be high demand for
railcars which began in fiscal 1998 and the ongoing replacement cycle
for railcars. Orders on hand at quarter end were at a record level.
The high railcar demand is offset by a lower demand for hopper barges
which began in fiscal 1998 due to a reduction in the transport of grain.
The overall age of the barge fleet and the resulting replacement cycle
should serve to drive demand for this business in the future.
Construction Products revenues and operating profit for the current
quarter increased by $17.3 and $2.8 million, respectively, due to the
continuance of governmental spending on the nation's transportation
infrastructure, which utilizes the Company's highway guardrail and
safety systems products, and the increasing residential, commercial,
industrial and municipal construction which benefits the Company's
ready-mix concrete and aggregate businesses. The ready-mix concrete
and aggregate businesses also experienced improvements due to better
weather conditions in the first quarter of fiscal 1999 compared to the
same time period in the previous year. Increased revenues are also
attributable to the acquisition of assets of Buffalo Specialty
Products, Inc. in the second quarter of fiscal 1998.
The Industrial Products segment's revenues were higher in the
current quarter by $3.5 million, although operating profit
declined by $1.0 million, when compared to the prior year quarter.
The increase in revenues is primarily due to the Ladish acquisition
effective June 1, 1997, while the decline in profit was attributable
to increased price competition, partly as a result of the "Asian
Crisis," in the fittings and flange business and the mild winter which
impacts the Company's LPG business. Environmental regulation and
increasing energy consumption drive demand for fittings and flanges
and the start-up of new housing supports the Company's LPG business
and benefits the long-term outlook for this segment.
Financial Condition
The decrease in 'Receivables' at June 30, 1998 compared to March 31,
1998 is due primarily to customer receipts in the Transportation Products
segment from railcar shipments in the fourth quarter of fiscal 1998,
as well as a decline in demand for inland hopper barges.
The decrease in 'Property, Plant and Equipment' at June 30, 1998
compared to March 31, 1998 is due primarily to the divestiture of
Beaird Industries, Inc. and Trinity Marine Orange, Inc.
The decrease in 'Accounts payable and accrued liabilities' is due
primarily to the timing of payments for normal vendor payables along
with the previously accrued payment of the Johnstown settlement in the
first fiscal quarter.
Liquidity & Capital Resources
The Company's cash and cash equivalents decreased $5.2 million
in the first three months of fiscal year 1999, from $7.6 million at
June 30, 1997 to $2.4 million at June 30, 1998. Cash generated from
operations declined to $21.0 million in the current period, compared
to $22.7 million in the prior year. This decrease is primarily due to
normal fluctuations in working capital levels. Cash provided by
investing activities increased to $37.2 million in the current period
ended June 30, 1998 compared to cash required of $47.4 million in the
prior year period. This increase is due primarily to proceeds from
the sale of property, plant, and equipment as well as other assets.
Cash flows required by financing activities increased by $79.0
million due primarily to repayments of short-term borrowings due to
receipts in the first quarter of fiscal 1999 from the above mentioned
sales described under "Divestitures".
Year 2000 Issue
Some of the Company's computer programs were written using
two digits rather than four to define the applicable year. As a
result, those computer programs have time-sensitive software
that recognize a date using "00" as the year 1900 rather than the
year 2000. This could cause a system failure or miscalculations
causing disruptions of operations and a temporary inability to
process certain transactions.
The Company has identified existing systems which require
action and has plans in place to address the Year 2000 issue
on such systems prior to the issue causing any disruption of
normal business activities. The Company believes that the
cost of addressing the Year 2000 issue is not material to the
financial condition or results of operations.
Additionally, the Company has initiated formal communications
with all of its significant suppliers and large customers to
determine the extent to which the Company's interface systems
are vulnerable to those third parties' failure to remediate their
own Year 2000 issues. There is no guarantee that the systems of
other companies on which the Company's systems rely will be
timely converted and would not have an adverse effect on the
Company's systems.
It is management's belief that the potential costs or the
consequences of an incomplete or untimely resolution of the
Year 2000 issue do not represent a material event or uncertainty
which is reasonably likely to affect future financial results.
Any statements contained herein that are not historical facts are
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995, and involve risks and
uncertainties. These forward-looking statements include
expectations, beliefs, plans, objectives, future financial
performance, estimates, projections, goals and forecasts. Potential
factors which could cause the Company's actual results of
operations to differ materially from those in the forward-
looking statements include market conditions and demand for the
Company's products; competition; technologies; steel prices;
interest rates and capital costs; taxes; unstable governments
and business conditions in emerging economies; and legal,
regulatory and environmental issues. Any forward-looking statement
speaks only as of the date on which such statement is made.
The Company undertakes no obligation to update any forward-
looking statement to reflect events or circumstances after
the date on which such statement is made.
Part II
Item 4 - Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders held July 17, 1998, stockholders
elected ten incumbent directors for a one-year term (Proposal No. 1)
and approved the Company's 1998 Stock Option and Incentive Plan
(Proposal No. 2). The vote tabulation on each proposal follows:
Proposal Proposal
No. 1 No. 2
For 37,971,233 32,030,647
Against/Withheld 77,752 5,922,341
Abstentions 81,184 177,181
38,130,169 38,130,169
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 Company has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
Trinity Industries, Inc.
By: \S\ John M. Lee
John M. Lee
Vice President
August 14, 1998
Index to Exhibits
No. Description Page
27 Financial Data Schedule *
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> JUN-30-1998
<CASH> 2,400
<SECURITIES> 0
<RECEIVABLES> 338,700
<ALLOWANCES> 0
<INVENTORY> 358,600
<CURRENT-ASSETS> 0
<PP&E> 1,138,900
<DEPRECIATION> (431,200)
<TOTAL-ASSETS> 1,529,200
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 43,500
<OTHER-SE> 889,800
<TOTAL-LIABILITY-AND-EQUITY> 1,529,200
<SALES> 0
<TOTAL-REVENUES> 711,500
<CGS> 0
<TOTAL-COSTS> 596,800
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,500
<INCOME-PRETAX> 92,500
<INCOME-TAX> 34,700
<INCOME-CONTINUING> 57,800
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 57,800
<EPS-PRIMARY> 1.33
<EPS-DILUTED> 1.31
</TABLE>
