<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------
FORM 10-K
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(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, 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 registrant as specified in its charter)
DELAWARE 75-0225040
(State of Incorporation) (I.R.S. Employer Identification 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
Securities Registered Pursuant to Section 12(b) of the Act
Name of each exchange
Title of each class on which registered
------------------- ----------------------
COMMON STOCK, $1.00 PAR VALUE NEW YORK STOCK EXCHANGE
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 $2,030,157,432 as of May 29, 1998.
43,350,782
( Number of Shares of common stock outstanding as of May 29, 1998)
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(Continued on reverse side)
<PAGE> 2
(Continued from cover page)
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's 1998 Annual Report to Stockholders for the
fiscal year ended March 31, 1998 are incorporated by reference into Parts I and
II hereof and portions of the Registrant's definitive Proxy Statement for the
1998 Annual Meeting of Stockholders to be held July 17, 1998 are incorporated by
reference into Part III hereof.
<PAGE> 3
PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF BUSINESS. Trinity Industries, Inc. (the
"Registrant" or "Trinity") was originally incorporated under the laws of the
State of Texas in 1933. On March 27, 1987, Trinity became a Delaware corporation
by 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 manufacture, marketing, and
leasing of a wide variety of products consisting principally of (i)
"Transportation Products" such as railcars, principally tank cars, hopper cars,
box cars, gondola cars, intermodal cars and miscellaneous other freight cars,
barges for inland waterway service, and leasing of Registrant manufactured
railcars to various industries; (ii) "Construction Products" such as highway
guardrail and safety products, ready-mix concrete and aggregates including
distribution and providing raw materials to owners, contractors and
sub-contractors for use in the building and foundation industry, passenger
loading bridges and conveyor systems for airports and other people and baggage
conveyance requirements, and beams, girders, and columns used in construction of
highway and railway bridges; (iii) "Industrial Products" such as extremely
large, heavy pressure vessels and other heavy welded products including
industrial silencers, desalinators, evaporators, and gas processing systems,
pressure and non-pressure containers for the storage and transportation of
liquefied gases, brewery products and other liquid and dry products, heat
transfer equipment for the chemical, petroleum and petrochemical industries,
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.
Various financial information concerning the Registrant's industry
segments for each of the last three fiscal years is included in the Registrant's
1998 Annual Report to Stockholders beginning on page 31 under the heading
"Segment Information", and such section is incorporated herein by reference.
TRANSPORTATION PRODUCTS. The Registrant manufactures railroad freight
cars, principally pressure and non-pressure tank cars, hopper cars, box cars,
intermodal cars and gondola cars used for transporting a wide variety of
liquids, gases and dry cargo. Tank cars transport products such as liquefied
petroleum gas, liquid fertilizer, sulfur, sulfuric acids and corn syrup. Covered
hopper cars carry cargo such as grain, dry fertilizer, plastic pellets and
cement. Open-top hoppers haul coal, and top-loading gondola cars transport a
variety of heavy bulk commodities such as scrap metals, finished flat steel
products, machinery and lumber. Intermodal cars transport various products which
have been loaded in containers to minimize shipping costs.
The Registrant produces river hopper barges which are used to carry
coal, grain and miscellaneous commodities for various barge transport companies
and tank barges which are used to transport liquid products.
The Registrant has one wholly-owned leasing subsidiary, Trinity Industries
Leasing Company ("TILC"), which was incorporated in 1979. TILC is engaged in
leasing specialized types of railcars to industrial companies in the petroleum,
chemical, grain, food processing, fertilizer and other industries which supply
cars to the railroads. At March 31, 1998, TILC had 10,598 railcars under lease
and/or management agreement.
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Substantially all equipment leased by TILC was purchased from the
Registrant at prices comparable to the prices for equipment sold by the
Registrant to third parties. As of March 31, 1998, TILC had equipment on lease
or available for lease purchased from the Registrant at a cost of $450.3
million. Generally, TILC purchases the equipment to be leased only after a
lessee has committed to lease such equipment.
The volume of equipment purchased and leased by TILC depends upon a
number of factors, including the demand for equipment manufactured by the
Registrant, the cost and availability of funds to finance the purchase of
equipment, the Registrant's decision to solicit orders for the purchase or lease
of equipment and factors which may affect the decision of the Registrant's
customers as to whether to purchase or lease equipment.
Although the Registrant is not contractually obligated to offer to TILC
equipment proposed to be leased by the Registrant's customers, it is the
Registrant's intention to effect all such leasing transactions through TILC.
Similarly, while TILC is not contractually obligated to purchase from the
Registrant any equipment proposed to be leased, TILC intends to purchase and
lease all equipment which the Registrant's customers desire to lease when the
lease rentals and other terms of the proposed lease are satisfactory to TILC,
subject to the availability and cost of funds to finance the acquisition of the
equipment.
CONSTRUCTION PRODUCTS. The construction products manufactured by the
Registrant include highway guardrail and highway safety devices and related
barrier products, ready-mix concrete and aggregates, passenger loading bridges,
baggage handling systems, and beams, girders, and columns. These products are
used in the highway construction, building and bridge industries and airports.
Generally, customers for highway guardrail and highway safety devices are
highway departments or subcontractors on highway projects. Ready-mix concrete
and aggregates are used in the building and foundation industry, and customers
include primarily owners, contractors and sub-contractors. Passenger loading
bridges and conveyor systems are generally sold to contractors, airports, or
airlines as part of airport terminal equipment. Some of the sales of beams,
girders and columns are to general contractors and subcontractors on highway
construction projects.
INDUSTRIAL PRODUCTS. The Registrant is engaged in manufacturing metal
containers consisting of extremely large, heavy pressure vessels and other heavy
welded products, including industrial silencers, desalinators, evaporators, and
gas processing systems for the storage and transportation of liquefied petroleum
("LP") gas and anhydrous ammonia fertilizer. Pressure LP gas containers are
utilized at industrial plants, utilities, small businesses and in suburban and
rural areas for residential heating and cooking needs. Fertilizer containers are
manufactured for highway and rail transport, bulk storage, farm storage and the
application and distribution of anhydrous ammonia. The Registrant also makes
heat transfer equipment for the chemical, petroleum and petrochemical industries
and a complete line of custom vessels, standard steam jacketed kettles, mix
cookers, and custom-fabricated cooking vessels for the food, meat, dairy,
pharmaceutical, cosmetic and chemical industries.
The Registrant also manufactures butt weld type fittings, flanges and
pressure and non-pressure container heads that are made from ferrous and
non-ferrous metals and their alloys. The weld fittings include caps, elbows,
return bends, concentric and eccentric reducers, full and reducing outlet tees,
and a full line of pipe flanges, all of which are pressure rated. The Registrant
manufactures and stocks, in standard, extra-heavy and double-extra-heavy weights
and in various diameters, weld caps, tees, reducers, elbows, return bends,
flanges and also manufactures to customer specifications. The basic raw
materials for weld fittings and flanges are carbon steel, stainless steel,
aluminum, chrome-moly and other metal tubing or seamless pipe and forgings. The
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Registrant sells its weld fittings and flanges to distributors and to other
manufacturers of weld fittings.
Container heads manufactured by the Registrant are pressed metal
components used in the further manufacture of a finished product. Many other
manufacturers order container heads from the Registrant. Container heads are
manufactured in various shapes and may be pressure rated or non-pressure,
depending on the intended use in further manufacture. Other pressed shapes are
also hot- or cold-formed to customer requirements.
MARKETING, RAW MATERIALS, EMPLOYEES AND COMPETITION. As of March 31,
1998, the Registrant operated in the continental United States, Mexico, and
Brazil. The Registrant sells substantially all of its products through its own
salesmen operating from offices in Montgomery, Alabama; Napa, California;
Denver, Colorado; Parrish, Florida; Chicago, Illinois; Elizabethtown and
Paducah, Kentucky; Shreveport, Louisiana; Flint, Michigan; St. Louis, Missouri;
Asheville, North Carolina; Cincinnati and Girard, Ohio; Beaumont, Dallas/Ft.
Worth, Houston and Navasota, Texas; Centerville, Utah; Olympia, Washington;
Milwaukee, Wisconsin; and Mexico. Independent sales representatives are also
used to a limited extent. The Registrant primarily markets its transportation
and industrial products throughout the United States. Except in the case of weld
fittings, guardrail, and standard size LP gas containers, the Registrant's
products are ordinarily fabricated to the customer's specifications pursuant to
a purchase order.
The principal materials used by the Registrant are steel plate,
structural steel shapes, steel forgings, and aggregate material for ready-mix
concrete. There are numerous domestic and foreign sources of such steel and most
other materials used by the Registrant.
The Registrant currently has approximately 17,000 employees, of which
approximately 13,700 are production employees and 3,300 are administrative,
sales, supervisory and office employees.
There are numerous companies located throughout the United States and
world-wide that are engaged in the business of manufacturing various
transportation and industrial products of the types manufactured by the
Registrant, and these industries are highly competitive. A number of
well-established companies actively compete with TILC in the business of owning
and leasing railcars, as well as banks, investment partnerships and other
financial and commercial institutions. Companies manufacturing products which
compete with the Registrant's construction products consist of numerous other
structural fabricators and ready-mix concrete and aggregate producers.
RECENT DEVELOPMENTS. Information concerning the Registrant's business
acquisitions are included in the Registrant's 1998 Annual Report to Stockholders
under the heading "Business Acquisitions and Divestitures," (page 33) and such
section is incorporated herein by reference.
ENVIRONMENTAL MATTERS. The Registrant's subsidiaries are subject to
comprehensive and frequently changing federal, state and local environmental
laws and regulations, including those governing emissions of air pollutants,
discharges of wastewater and storm waters, and the disposal of non-hazardous and
hazardous waste. The Registrant anticipates that it may incur additional costs
in the future to comply with currently existing laws and regulations, new
regulatory requirements arising from recently enacted statutes, particularly
those relating to the Clean Air Act Amendments of 1990, and any new statutory
requirements.
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OTHER MATTERS. To date, the Registrant has not suffered any material
shortages with respect to obtaining sufficient energy supplies to operate its
various plant facilities or its transportation vehicles. Future limitations on
the availability or consumption of petroleum products (particularly natural gas
for plant operations and diesel fuel for vehicles) could have an adverse effect
upon the Registrant's ability to conduct its business. The likelihood of such an
occurrence or its duration, and its ultimate effect on the Registrant's
operations, cannot be reasonably predicted at this time.
ITEM 2. PROPERTIES.
The Registrant's principal executive offices are located in a ten story
office building containing approximately 107,000 sq. ft. and a connected
adjacent building containing approximately 66,000 sq. ft., each owned by the
Registrant, in Dallas, Texas. The following table sets forth certain salient
facts with respect to each of the operating plant properties owned and/or leased
by the Registrant at March 31, 1998:
<TABLE>
<CAPTION>
Registrant's Uses of Approx.
Interest in Premises Bldg. Area Expiration Annual
Plant Location Property (1) (Sq Ft.) Date Rentals
- ------------------ ------------ -------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
Ackerman, MS Fee (c) 92,000 -- --
Alliance, NE Fee (a) 44,000 -- --
Americana, Brazil Fee (c) 29,000 -- --
Ashland City, TN Fee (a) 92,000 -- --
Asheville, NC Lease (a) 94,000 06/30/99 $198,000
Beaumont, TX Fee (a) 280,000 -- --
Belpre, OH Fee (b) 42,000 -- --
Bessemer, AL Fee (a) 171,000 -- --
Birmingham, AL Lease (b) 10,000 04/30/98 $ 14,000
Brusly, LA Fee (a) 148,000 -- --
Butler, PA Fee (a) 386,000 -- --
Butler, PA Lease (a) 30,000 12/31/02 $ 67,000
Caruthersville, MO Fee (a) 266,000 -- --
Caruthersville, MO Lease (a) 45,000 03/01/99 $ 72,000
Cedartown, GA Fee (c) 143,000 -- --
Centerville, UT Fee (b) 63,000 -- --
Cincinnati, OH
(2 plants) Fee (c) 203,000 -- --
Cynthiana, KY Lease (c) 317,000 04/30/01 $ 2,000
Dallas, TX
(2 plants) Fee (a) 447,000 -- --
Denton, TX Fee (a) 117,000 -- --
Douglas, WY Lease (a) 34,000 09/30/04 $ 15,000
Elizabethtown, KY Fee (b) 40,000 -- --
Elkhart, IN Fee (c) 108,000 -- --
Enid, OK Fee (c) 73,000 -- --
Findlay, OH Fee (a) 74,000 -- --
Ft. Worth, TX
(6 plants) Fee (a,b) 703,000 -- --
Girard, OH
(2 plants) Fee (b) 326,000 -- --
Greenville, PA Fee (a) 752,000 -- --
</TABLE>
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<TABLE>
<CAPTION>
Registrant's Uses of Approx.
Interest in Premises Bldg. Area Expiration Annual
Plant Location Property (1) (Sq Ft.) Date Rentals
- ------------------ ------------ -------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
Hamburg, NY Fee (b) 188,000
Houston, TX
(2 plants) Fee (b,c) 563,000 -- --
Huehuetoca, MX Fee (a,c) 281,000 -- --
Johnstown, PA Fee (a) 148,000 -- --
Lima, OH Fee (b) 72,000 -- --
Longview, TX
(4 plants) Fee (a) 675,000 -- --
Longview, TX Lease (a) 57,000 10/31/00 $ 40,000
Madisonville, LA Fee (a) 137,000 -- --
McKees Rocks, PA Fee (a) 462,000 -- --
Miles City, MT Fee (a) 72,000 -- --
Monclova, MX Fee (a,c) 207,000 -- --
Montgomery, AL Fee (a,b) 310,000 -- --
Mt. Orab, OH Fee (a) 183,000 -- --
Navasota, TX Fee (c) 170,000 -- --
New Castle, DE Lease (a) 12,000 06/30/00 $120,000
Nova Odesa, Brazil Fee (c) 21,000 -- --
Oklahoma City, OK Fee (a) 260,000 -- --
Orange, TX (2) Fee (a) 735,000 -- --
Paducah, KY Fee (a) 49,000 -- --
Paris, TN Fee (a) 29,000 -- --
Quincy, IL Fee (c) 95,000 -- --
Rock Springs, WY Fee (a) 20,000 -- --
Rocky Mount, NC Fee (c) 53,000 -- --
Russelville, AR Fee (c) 350,000 -- --
Saginaw, TX
(3 plants) Fee (a) 374,000 -- --
San Antonio, TX Fee (b) 224,000 -- --
Sand Springs, OK Fee (c) 184,000 -- --
Shreveport, LA Lease (a,c) 691,000 11/30/42 $ 12,000
Sioux City, IA Lease (a) 45,000 05/31/98 $ 97,000
Springfield, MO Lease (a) 171,000 12/31/08 $ 36,000
Sunbright, TN Fee (b) 74,000 -- --
Tulsa, OK Fee (a) 121,000 -- --
Vallejo, MX Fee (c) 54,000 -- --
Vidor, TX Fee (a) 126,000 -- --
Waycross, GA Fee (a) 5,000 -- --
West Memphis, AR Fee (c) 77,000 -- --
</TABLE>
(1) (a) Manufacture or repair of Transportation Products
(b) Manufacture of Construction Products
(c) Manufacture of Industrial Products
(2) Orange facility was sold in May 1998.
All machinery and equipment and the buildings occupied by the
Registrant are maintained in good condition. The Registrant estimates that its
plant facilities were utilized during the fiscal year
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at an average of approximately 80 percent of present productive capacity for
Transportation Products, 85 percent for Construction Products, and 75 percent
for Industrial Products.
ITEM 3. LEGAL PROCEEDINGS.
In September 1997, the Registrant settled a 13 year old lawsuit brought
against a former subsidiary of the Registrant by Morse/Diesel, Inc. The
settlement resulted in an after-tax charge of $43.8 million being recorded in
the second quarter of fiscal year 1998. The Registrant has not participated in
the business associated with this matter since 1989.
In April 1998, the Registrant settled a 5 year old patent infringement
lawsuit brought against the Registrant by Johnstown American Corp. for
approximately $10.5 million, net of tax.
In March 1998, the U.S. Department of Justice (the "Department") filed
a two count felony information against Syro, Inc., a wholly owned subsidiary of
the Registrant, in the United States District Court for the District of Utah
alleging that Syro, Inc. discharged waste waters from its Centerville, Utah
facility in violation of the Clean Water Act. To resolve this issue, Syro, Inc.
is in the process of negotiating a Plea Agreement with the Department and a
Settlement Agreement and Compliance Order with the U.S. Environmental Protection
Agency Suspension and Debarment Division. Negotiations with these parties to the
date of this filing indicate that a resolution of this issue would involve a
plea of guilty to a two count felony under the Clean Water Act and the payment
of $750,000 in fines and $250,000 in contributions to local environmental
groups.
The Registrant 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 effect on the Registrant's
consolidated financial statements.
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 year 1998.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS.
Market for the Registrant's common stock and related stockholder
matters are incorporated herein by reference from the information contained on
page 1 under the caption "Company Profile" and on page 40 under the caption
"Stockholder Information" of the Registrant's 1998 Annual Report to
Stockholders.
ITEM 6. SELECTED FINANCIAL DATA.
Selected financial data is incorporated herein by reference from the
information contained on page 22 under the caption "Financial Summary" of the
Registrant's 1998 Annual Report to Stockholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Management's discussion and analysis of financial condition and results
of operations are incorporated herein by reference from the Registrant's 1998
Annual Report to Stockholders, pages 23 through 26.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Financial statements of the Registrant at March 31, 1998 and 1997 and
for each of the three years in the period ended March 31, 1998 and the auditor's
report thereon, and the Registrant's unaudited quarterly financial data for the
two year period ended March 31, 1998, are incorporated herein by reference from
the Registrant's 1998 Annual Report to Stockholders, pages 27 through 40.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
No disclosure required.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
DIRECTORS OF THE REGISTRANT.
Information concerning the directors of the Registrant is incorporated
herein by reference from the Registrant's definitive proxy statement for the
Annual Meeting of Stockholders on July 17, 1998, page 4, under the caption
"Election of Directors".
EXECUTIVE OFFICERS OF THE REGISTRANT.*
The following table sets forth the names and ages of all executive
officers of the Registrant, the nature of any family relationship between them,
all positions and offices with the Registrant presently held by them, the year
each person first became an officer and the term of each person's office:
<TABLE>
<CAPTION>
Officer Term
Name(1)(2) Age Office Since Expires
- ---- --- ------------------------ -------- ---------
<S> <C> <C> <C> <C>
W. Ray Wallace 75 Chairman & Chief 1958 July 1998
Executive Officer
Timothy R. Wallace 44 Director, President &
Chief Operating Officer 1993 July 1998
Jim S. Ivy 54 Vice President &
Chief Financial Officer 1998 July 1998
Ralph A. Banks, Jr. 74 Senior Vice President 1962 July 1998
Richard G. Brown 74 Senior Vice President 1979 July 1998
Mark W. Stiles 49 Group Vice President 1993 July 1998
Jack L. Cunningham, Jr. 53 Vice President 1982 July 1998
John M. Lee 37 Vice President 1994 July 1998
R. A. Martin 63 Vice President 1974 July 1998
F. Dean Phelps, Jr. 54 Vice President 1979 July 1998
Joseph F. Piriano 61 Vice President 1992 July 1998
Linda S. Sickels 47 Vice President 1995 July 1998
Michael G. Fortado 54 Vice President, Secretary
& General Counsel 1997 July 1998
Neil O. Shoop 54 Treasurer 1985 July 1998
William J. Goodwin 50 Controller 1986 July 1998
</TABLE>
* This data is furnished as additional information pursuant to instructions to
Item 401 to Regulation S-K and in lieu of inclusion in the Registrant's Proxy
Statement.
(1) W. Ray Wallace, Chairman & Chief Executive Officer, is the father of Timothy
R. Wallace, Director, President and Chief Operating Officer.
(2) Mr. Ivy joined the Registrant in 1998. Prior to this year, Mr. Ivy was a
senior audit partner for a national public accounting firm. Mr. Lee joined the
Registrant in 1994. For at least five years prior thereto, Mr. Lee was a manager
for a national public accounting firm. Mr. Fortado joined the registrant in
1997. Prior to that, Mr. Fortado served one year as senior vice president,
general counsel and corporate secretary for an oil and gas exploration company
and prior to that as vice president, corporate secretary, and assistant general
counsel for an integrated energy company. All of the other above-mentioned
executive officers have been in the full-time employ of the Registrant
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or its subsidiaries for more than five years. Although the titles of certain
such officers have changed during the past five years, all have performed
essentially the same duties during such period of time.
ITEM 11. EXECUTIVE COMPENSATION.
Information on executive compensation is incorporated herein by
reference from the Registrant's definitive proxy statement for the Annual
Meeting of Stockholders on July 17, 1998, beginning on page 8 under the caption
"Executive Compensation and Other Matters".
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information concerning security ownership of certain beneficial owners
and management is incorporated herein by reference from the Registrant's
definitive proxy statement for the Annual Meeting of Stockholders on July 17,
1998, page 2, under the caption "Voting Securities and Stockholders".
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information concerning certain relationships and related transactions
is incorporated herein by reference from the Registrant's definitive proxy
statement for the Annual Meeting of Stockholders on July 17, 1998, pages 4 and
5, under the caption "Election of Directors".
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 and schedules listed in the
accompanying indices to financial statements and
financial statement schedules are filed as part of this
Annual Report Form 10-K.
3. Exhibits.
The exhibits listed on the accompanying index to
exhibits are filed as part of this Annual Report Form
10-K.
(b) Reports on Form 8-K
No Form 8-K was filed during the fourth quarter of
fiscal 1998.
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Trinity Industries, Inc.
Index to Financial Statements
and Financial Statement Schedules
(Item 14 (a))
<TABLE>
<CAPTION>
REFERENCE
-----------------------
1998 Annual
Form Report to
10-K Stockholders
(Page) (Page)
-------- ------------
<S> <C> <C>
Consolidated balance sheet at
March 31, 1998 and 1997 ........................................ -- 28
For each of the three years in the
period ended March 31, 1998:
Consolidated income statement ................................ -- 27
Consolidated statement of cash flows ......................... -- 29
Consolidated statement of
stockholders' equity ....................................... -- 30
Notes to consolidated financial
statements ................................................. -- 30
Supplemental information:
Supplementary unaudited quarterly data ........................ -- 40
Consolidated financial statement schedule
for each of the three years in the
period ended March 31, 1998:
II - Allowance for doubtful accounts ...................... 12 --
Other financial information:
Weighted average interest rate on short-term borrowings ....... 12 --
</TABLE>
All other schedules have been omitted since the required information is
not present or is not present in amounts sufficient to require submission of the
schedules, or because the information required is included in the consolidated
financial statements, including the notes thereto.
The consolidated financial statements and supplementary information
listed in the above index which are included in the 1998 Annual Report to
Stockholders have been incorporated by reference.
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SCHEDULE II
Trinity Industries, Inc.
Allowance for Doubtful Accounts
Year Ended March 31, 1998, 1997 and 1996
(in millions)
<TABLE>
<CAPTION>
Additions
Balance at charged to Accounts Balance
beginning costs and charged at end
of year expenses off of year
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Year Ended March 31, 1998 $ 1.0 $ 0.9 $ 0.2 $ 1.7
========== ========== ========== ==========
Year Ended March 31, 1997 $ 1.1 $ 1.4 $ 1.5 $ 1.0
========== ========== ========== ==========
Year Ended March 31, 1996 $ 0.8 $ 0.8 $ 0.5 $ 1.1
========== ========== ========== ==========
</TABLE>
Trinity Industries, Inc.
Other Financial Information
Short-Term Borrowings
The weighted average interest rate on short-term borrowings outstanding as of
March 31, 1998, 1997, and 1996 is 6.12%, 6.88%, and 6.04%, respectively.
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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, Inc. By /s/ Michael G. Fortado
- ------------------------ -----------------------------------
Registrant Michael G. Fortado
Vice President,
Secretary/General Counsel
June 25, 1998
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:
Directors: Directors (continued)
/s/ John L. Adams /s/ Diana Natalicio
- ------------------------ -------------------------------------
John L. Adams Diana Natalicio
Director Director
June 25, 1998 June 25, 1998
/s/ David W. Biegler /s/ Timothy R. Wallace
- ------------------------ -------------------------------------
David W. Biegler Timothy R. Wallace
Director Director
June 25, 1998 June 25, 1998
- ------------------------
Barry J. Galt
Director Principal Executive Officer:
June 25, 1998 /s/ W. Ray Wallace
-------------------------------------
/s/ Clifford J. Grum W. Ray Wallace
- ------------------------ Chairman
Clifford J. Grum June 25, 1998
Director
June 25, 1998
/s/ Dean P. Guerin Principal Financial Officer:
- ------------------------
Dean P. Guerin
Director /s/ Jim S. Ivy
June 25, 1998 -------------------------------------
Jim S. Ivy
Vice President
June 25, 1998
- ------------------------
Jess T. Hay
Director
June 25, 1998 Principal Accounting Officer:
/s/ Edmund M. Hoffman /s/ John M. Lee
- ------------------------ -------------------------------------
Edmund M. Hoffman John M. Lee
Director Vice President
June 25, 1998 June 25, 1998
12
<PAGE> 15
Trinity Industries, Inc.
Index to Exhibits
(Item 14(a))
<TABLE>
<CAPTION>
NO. DESCRIPTION PAGE
- ----- ---------------------------------------------------------------------------- ----
<S> <C> <C>
(3.1) Certificate of Incorporation of Registrant (incorporated by reference to
Exhibit 3.A to Registration Statement No. 33-10937 filed April 8, 1987). *
(3.2) By-Laws of Registrant (incorporated by reference to Exhibit 3.2 to Form 10-K
filed June 16, 1992). *
(4.1) Specimen Common Stock Certificate of Registrant (incorporated by reference
to Exhibit 3B to Registration Statement No. 33-10937 filed April 8, 1987). *
(10.1) Fixed Charges Coverage Agreement dated as of January 15, 1980, between
Registrant and Trinity Industries Leasing Company (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 its subsidiaries (including Trinity Industries Leasing Company)
(incorporated by reference to Exhibit 10.2 to Registration Statement
No. 2-70378 filed January 29, 1981). *
(10.3) Form of Executive Severance Agreement entered into between the
Registrant and all executive officers of the Registrant (incorporated
by reference to Exhibit 10.3 to Form 10-K filed June 19, 1989). *
(10.4) Trinity Industries, Inc., Stock Option Plan With Stock Appreciation Rights
(incorporated by reference to Registration Statement No. 2-64813 filed
July 5, 1979, as amended by Post-Effective Amendment No. 1 dated July 1, 1980,
Post-Effective Amendment No.2 dated August 31, 1984, and Post-Effective
Amendment No. 3 dated July 13, 1990). *
(10.5) Directors' Retirement Plan adopted December 11, 1986 ( incorporated by
reference to Exhibit 10.6 to Form 10-K filed June 14, 1990). *
(10.6) 1989 Stock Option Plan with Stock Appreciation Rights (incorporated by
reference to Registration Statement No. 33-35514 filed June 20, 1990) *
(10.7) Supplemental Retirement Benefit Plan for W. Ray Wallace, effective
July 18, 1990 (incorporated by reference to Exhibit 10.8 to Form 10-K
filed June 13, 1991). *
(10.8) 1993 Stock Option and Incentive Plan (incorporated by reference to
Registration Statement No. 33-73026 filed December 15, 1993) *
</TABLE>
<PAGE> 16
Trinity Industries, Inc.
Index to Exhibits -- (Continued)
(Item 14(a))
<TABLE>
<CAPTION>
NO. DESCRIPTION PAGE
- ------ ---------------------------------------------------------------------- -----
<S> <C> <C>
(10.9) Pension Plan A for Salaried Employees of Trinity Industries, Inc. and
Certain Affiliates dated August 20, 1985, as amended by Amendment
No. 1 dated May 27, 1986, Amendment No. 2 dated December 30, 1986,
Amendment No. 3 dated December 12, 1986, Amendment No. 4 dated
March 31, 1987, Amendment No. 5 dated March 31, 1987, Amendment
No. 6 dated December 4, 1987, Amendment No. 7 dated July 26, 1988,
Amendment No. 8 dated July 28, 1988, Amendment No. 9 dated March
15, 1989, Amendment No. 10 dated March 31, 1989, and Amendment
No. 11 dated July 14, 1989 (incorporated by reference to Exhibit 10.9
to Form 10-K filed June 13, 1991). *
(10.10) Supplemental Profit Sharing Plan for Employees of Trinity Industries Inc.
and Certain Affiliates dated June 30, 1990, as amended by Amendment
No. 1 dated June 13, 1991. Supplemental Profit Sharing Trust for
Employees of Trinity Industries, Inc. and Certain Affiliates dated June 30,
1990, as amended by Amendment No. 1 dated June 13, 1991 (incorporated
by reference to Exhibit 10.10 to Form 10-K filed June 13, 1991). *
(13) Annual Report to Stockholders. With the exception of the information
incorporated by reference into Items 1, 3, 5, 6, 7 and 8 of Form 10-K,
the 1998 Annual Report to Stockholders is not deemed a part of this
report.
(21) Listing of subsidiaries of the Registrant. 16
(23) Consent of Independent Auditors. 11
(27) Financial Data Schedules for the fiscal year ended March 31, 1998.
(27.1) Restated Financial Data Schedules for fiscal years ended March 31,
1997 and 1996, and six months ended September 30, 1997, and three
months ended June 30, 1997.
(27.2) Restated Financial Data Schedules for fiscal year ended March 31,
1995, and nine months ended December 31, 1996, six months ended
September 30, 1996, and three months ended June 30, 1996.
(99.1) Annual Report on Form 11-K for employee stock purchase, savings and
similar plans filed pursuant to Rule 15d-21.
</TABLE>
* Incorporated herein by reference from previous filings with the Securities
and Exchange Commission.
<PAGE> 1
[LOGO] TRINITY INDUSTRIES, INC.
1998 ANNUAL REPORT
[PHOTOS]
PUTTING IT ALL
TOGETHER
<PAGE> 2
TABLE OF CONTENTS
1 Company Profile
2 Letter To Our Stockholders
6 Transportation Products
[PHOTO] 10 Construction Products
14 Industrial Products
18 Trinity Teamwork
20 Trinity 2000
21 Financial Information
PRODUCTS. PEOPLE. PLANTS. PROCESSES. TRINITY INDUSTRIES PUTS IT ALL TOGETHER
WITH INNOVATION AND KNOW-HOW.
The nostalgic moan of the whistle as a locomotive rumbles through a sleepy
town, pulling cars assembled with the assistance of robotic welding. o The
romance of boats moving slowly down the winding Mississippi, pushing barges
designed on a state-of-the-art CAD system. o The scenic beauty of a meandering
mountain road as a vacationing family drives past, protected by a new design of
steel guardrail precision-engineered to absorb energy and save lives. o Trinity
Industries begins with the basics of American industry--concrete and steel,
tanks and fittings, railcars and barges--and puts them all together with
innovative techniques and leading-edge technology. Trinity brings people
together to work in rewarding careers that shape our world and benefit our
communities. Trinity combines and coordinates plants, divisions, and companies
to operate with industry-leading power and efficiency. Trinity is solidly
positioned at the forefront of essential industries with strong, expanding
markets. o And because of all this, oranges from Florida become part of
breakfast in Maine. Grain from a Midwest family farm feeds children halfway
around the world. A retired couple living in a remote cabin can count on gas
heat through the winter. o Other companies may do a few of the things that
Trinity does. The difference is the way Trinity puts it all together.
<PAGE> 3
[LOGO]
COMPANY PROFILE
Trinity Industries, Inc. is a leading manufacturer of a variety of products with
manufacturing and fabrication operations in three business segments:
Transportation Products, Construction Products, and Industrial Products. The
Company, headquartered in Dallas, Texas, has seventy-eight facilities containing
more than twelve million square feet of manufacturing space in twenty-two
states, Mexico and Brazil. The Company also operates more than 115 ready-mix
concrete and aggregate locations in Texas and Louisiana. o The Company has a
continuing strategy of growth through internal expansion and strategic
acquisitions within its established business segments. o Trinity's stockholders
of record numbered more than 2,600 at March 31, 1998. Its common stock is traded
on the New York Stock Exchange under the symbol TRN.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS YEAR ENDED MARCH 31
- ---------------------------------------------------------------------------------------
(IN MILLIONS EXCEPT PER SHARE DATA) 1998 1997 1996
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $ 2,473.0 $ 2,234.3 $ 2,241.7
Income from continuing operations $ 103.7 $ 113.7 $ 101.3
Income from discontinued operations -- 23.8 12.5
----------------------------------------
Net income $ 103.7 $ 137.5 $ 113.8
========================================
Net income per common share (diluted):
Income from continuing operations $ 2.36 $ 2.66 $ 2.42
Income from discontinued operations -- 0.55 0.30
----------------------------------------
Net income per share $ 2.36 $ 3.21 $ 2.72
========================================
Cash dividends per share $ 0.68 $ 0.68 $ 0.68
Total assets $ 1,573.9 $ 1,356.4 $ 1,426.6
Stockholders' equity $ 887.5 $ 809.5 $ 746.0
</TABLE>
1
<PAGE> 4
LETTER TO OUR
STOCKHOLDERS
BY EVERY DEFINITION, THE FISCAL YEAR 1998 WAS OUTSTANDING FOR TRINITY
INDUSTRIES.
[PHOTO]
2
<PAGE> 5
[PHOTO] [PHOTO] [PHOTO]
Trinity's recently constructed
manufacturing facility in
Monclova, Mexico, shown
after the completion of its
second phase of expansion.
TO OUR STOCKHOLDERS
We are pleased to report that fiscal 1998 was another record year for
Trinity Industries. Driven by impressive performance in all of our business
segments, revenue reached an all-time high. Earnings from continuing operations
(excluding certain one-time, non-recurring charges) were also at record levels
for the fifth consecutive year.
For the year ended March 31, 1998, the Company reported income from
continuing operations of $147.5 million (excluding the previously announced
one-time charge to settle the Morse/Diesel litigation) or $3.36 per diluted
share, an increase of 20 percent over the $123.0 million ($2.87 per diluted
share) recorded in 1997. Revenue rose to $2.47 billion, 11 percent more than
the $2.23 billion in 1997. Income from continuing operations including the
one-time charge was $103.7 million, or $2.36 per diluted share, in fiscal 1998
and $113.7 million ($2.66 per diluted share) in fiscal 1997.
Trinity's business philosophy remains one of internal expansion and growth
through acquisition, low-cost production of high-quality products, unsurpassed
customer service, and production flexibility. Our fiscal 1998 operations were
characterized by excellent performance, solid margins, and strong markets in
all of our businesses.
Our Transportation Products segment generated record levels of revenue and
operating income. In the railcar business, we benefited from strong industry
demand, particularly in our third and fourth quarters. Our orders on hand
reached record levels at the end of fiscal 1998, representing more than a
year's worth of production. Trinity's orders on hand were equivalent to nearly
half of the industry's total backlog, which will further strengthen our
position as the nation's largest railcar manufacturer. Our barge division
produced record volume in fiscal 1998 while improving production efficiency and
reducing inventory levels. Fleet replacement continues to be a driving force
for both railcars and barges.
In the Construction Products segment, both our highway safety products and
our ready-mix concrete businesses performed very well. Record operating results
the past year were driven by increased activity in infrastructure improvements
and in commercial, residential, and municipal construction. Due to continued
strong activity in these sectors, high demand for our construction products is
expected to continue. We
3
<PAGE> 6
[PHOTO] [PHOTO] [PHOTO]
are hopeful about the passage of pending federal legislation that will further
increase spending on nationwide highway improvements.
Our Industrial Products segment is one of the nation's principal
manufacturers of liquefied petroleum gas (LPG) tanks, pipefittings, flanges,
and tank heads. Solid performance in this area was fueled by increasing
worldwide demand for energy and petrochemicals. During the year we increased
plant capacity and expanded our product lines. We expect continued growth in
the Industrial Products segment.
In addition to internal expansion, Trinity made acquisitions in every
business segment. Key acquisitions during the year included:
o Industrial Products Division of the Ladish Co. Inc. - a leading manufacturer
of pipefittings, flanges, and valves, with facilities in Arkansas and Kentucky;
o Industrial Companies, Inc. - with five ready-mix facilities serving Louisiana
and Texas;
o Buffalo Specialties - a manufacturer of various highway safety products and
railcar specialty parts, with offices and facilities in New York, Connecticut,
Tennessee, and Alabama;
o Difco, Inc. - a specialty railcar manufacturer located in Findlay, Ohio;
o Busch Mechanical Services - a railcar rebuilding facility in Springfield,
Missouri.
We are constantly evaluating opportunities for further acquisitions that
meet our criteria.
AT TRINITY, OUR VISION IS TO DELIVER INNOVATIVE PRODUCTS AND UNPARALLELED
PERFORMANCE.
We look for companies with a compatible business philosophy, the potential for a
unique market niche, and an overlap with our customer base.
International markets increasingly present opportunities for Trinity. We
substantially added to our 40-year presence in Mexico by breaking ground on an
additional manufacturing plant in Monclova, Mexico, in February 1997; by the
end of the calendar year, we were shipping newly constructed railcars. We have
already initiated the second phase of expansion at this facility which
replicates the operations of our other manufacturing plants. We see additional
opportunities in Mexico to serve both Mexican and U.S. customers in a variety
of our businesses.
South America is emerging as an additional market for many of our
products. In the past year we made our initial investment in South America with
the acquisition of a manufacturing plant where we will produce LPG tanks.
We continue to invest in ways to design and produce our products more
efficiently and to
4
<PAGE> 7
improve their quality, such as Computer Aided Design (CAD), Computer Aided
Manufacturing (CAM), and robotic welding. Of course, our most valuable resource
is our people. We continue to emphasize our training, safety, and QuEST Total
Quality Management programs in order to provide our employees with a rewarding
place to work.
During the past year we introduced two new corporate officers. Michael
Fortado was appointed Vice President, General Counsel, and Corporate Secretary.
Jim Ivy joined Trinity as Chief Financial Officer. Michael and Jim bring
valuable strengths that complement our executive team.
It gives us great pride to recognize Senior Vice President Ralph Banks for
his 55 years of dedicated service to Trinity Industries. Ralph's expertise in
facility construction, fixtures, and tooling has been an immeasurable
contribution, helping to improve our manufacturing processes and expand our
business. Through the years, it has been our people - bright new talent joining
forces with proven, experienced leaders - who have shaped Trinity.
As we look ahead, the outlook continues bright in all of our business
segments. The market conditions that helped produce our record performance are
expected to continue. We are committed to producing results and further
improving and growing our businesses. Most of all, we are very excited by the
remarkable team of employees, customers, stockholders, and suppliers who all
contributed to Trinity's success in fiscal 1998 and will be vital to our
continued growth as we look forward to an even greater year in fiscal 1999. We
sincerely thank each of you.
/s/ W. RAY WALLACE
W. Ray Wallace
Chairman and Chief Executive Officer
/s/ TIMOTHY R. WALLACE
Timothy R. Wallace
President and Chief Operating Officer
[PHOTO]
Timothy R. Wallace, President
and Chief Operating Officer, and
W. Ray Wallace, Chairman and
Chief Executive Officer
5
<PAGE> 8
TRANSPORTATION
PRODUCTS
Trinity's Transportation Products segment consists of our railcar,
leasing, and marine products businesses. In fiscal 1998, segment revenues
increased 9 percent while operating profit grew by 19 percent. Margin increased
a full point to 12.7 percent versus 11.7 percent the prior year.
RAILCARS
DELIVERING RECORD PERFORMANCE
Fiscal 1998 was a good year for Trinity's railcar business. The rail
industry experienced robust growth as strong economic conditions and continuing
fleet replacement cycles propelled demand for many types of railcars. Trinity
continued as the industry leader, capitalizing on these conditions to deliver
our broad line of railcars to a wide range of customers.
The fiscal year ended with record levels of orders on hand. Industry
figures project that 70,000 cars will be delivered in calendar 1998, an
increase of approximately 40 percent over 1997. For Trinity, orders on hand
increased 57 percent in our third quarter and another 39 percent in the fourth
quarter. At year-end our orders on hand were equivalent to nearly half of the
total backlog of the entire railcar industry.
INNOVATIVE PRODUCTS & PLANTS
Trinity is at the forefront of industry innovations that improve product
lines and production methods. Our work with aluminum and lightweight composite
materials produces cars that weigh less and thus can carry greater loads at the
same gross weight. We have developed new car designs that transport
TRANSPORTATION PRODUCTS
- -----------------------------------------------
[S] [C] [C]
(in millions) 1998 1997
- -----------------------------------------------
REVENUES $1,642.9 $1,501.5
- -----------------------------------------------
OPERATING PROFIT 209.3 175.2
- -----------------------------------------------
TRINITY LEADS THE RAILCAR INDUSTRY WITH INNOVATIVE PRODUCTS, COST-EFFECTIVE
PRODUCTION AND SUPERIOR SERVICE.
[PHOTO] [PHOTO] [PHOTO]
6
<PAGE> 9
greater volumes of freight than ever before.
We create these innovative products with advanced technology such as
solid-state modeling with 3-D Computer Aided Design (CAD) workstations. We
continue to incorporate robotic welding for consistent precision in our
state-of-the-art assembly lines. Sophisticated workflow applications help us
optimize our production process.
Trinity produces the widest product offering of any railcar manufacturer.
Our car types include:
COVERED HOPPERS - primarily used to transport agricultural, mineral, and plastic
products. The market for these cars is driven by such factors as grain exports,
construction activity, and the petrochemicals and plastics industries.
COAL CARS - increasingly important as utility companies convert their power
plants to cleaner-burning Western coal. Railroads are improving their
infrastructure and adding locomotives and cars to meet this demand. Our
aluminum cars and the industry's first 315,000-pound car (compared to the
standard 286,000-pound car) enable the shipment of more coal in fewer trips,
reducing shipping costs.
INTERMODAL CARS - an important part of a growing industry. Several factors drive
this market, which increased 7 percent overall in calendar year 1997: an
increased number of rail-truck partnerships; export and import volume,
particularly related to the North American Free Trade Agreement (NAFTA); and
large orders by TTX Inc. (an important Trinity customer that provides intermodal
cars to several major railroads).
BOX CARS - various types that serve numerous industries. Growth in this line was
attributable to
[PHOTO]
Pat Wallace, Jeffrey Marsh, and
John Nussrallah perform a final check
on a tank car prior to customer
viewing at a railcar exposition.
7
<PAGE> 10
TRINITY'S HOPPER AND TANK BARGES ARE THE VITAL WORKHORSES OF THE NATION'S
INLAND WATERWAYS.
[PHOTO]
Doug Schneider, Harry Hinkle,
and Jess Collins review
performance ratios for last
fiscal year.
increased traffic in paper, auto parts, and consumer goods, as well as
replacement of an aging fleet.
TANK CARS - a strong and growing market, driven by increased shipping in the
chemical, food products, and petroleum products industries and by the ongoing
replacement of older cars.
REPAIR, MANAGEMENT, LEASING, & PARTS
Trinity has built its railcar business by focusing on our customers'
businesses and helping them solve problems. In addition to selling cars, we have
found opportunities to serve our customers with parts and repairs, railcar
fleet management, and financing. Trinity's leasing company functions as an
important marketing component for our railcar sales activities.
RAILCAR OUTLOOK
Our record backlog of orders reflects strong demand for nearly every car
Trinity manufactures. To satisfy this demand, we now have 18 freightcar lines
shipping cars compared to nine lines a year ago; by the third quarter of this
year, we anticipate having a total of 20 freightcar lines operating. We are able
to minimize our product line changeovers which will improve our production
efficiencies. Looking beyond the current year, fleet replacement levels should
remain strong, as approximately 40 percent of the nation's railcars are over 20
years old and new car designs with higher load carrying capacity make the
economic decision for replacement very viable.
MARINE PRODUCTS
Trinity's barge business also saw record results in fiscal 1998. Our barge
sales volume increased 35 percent over the prior year. We continued to reduce
costs and lower our working capital requirements by reducing inventory levels.
8
<PAGE> 11
[PHOTO]
Trinity's latest railcar
products were previewed at the
1998 Intermodal Expo.
THE BARGE INDUSTRY
Trinity is North America's leading producer of inland barges. Our hopper
and tank barges are used by many barge operating companies and shippers to
transport a wide variety of cargo such as grain, coal, aggregates, and liquid
petroleum products. Trinity is also one of the largest producers of fiberglass
barge covers.
The United States barge fleet consists of approximately 22,700 barges. As
in the rail industry, the fleet replacement cycle is an important factor. A
barge typically has a useful life of about 25 years. Currently, nearly one-third
of the fleet is more than 20 years old, which suggests that approximately 7,000
barges will need replacing over the next five years. In addition, recent
environmental legislation calls for the phased-in replacement of single-hull
liquid tank barges with double-skin types. Trinity plans to produce a higher
proportion of tank barges in the coming year.
MARINE OUTLOOK
In calendar 1997, the nation's barge industry delivered nearly 1,600
barges, the highest level in 16 years. Although demand has slowed somewhat from
its peak level, Trinity's barge business is well positioned for the coming year
and the long-term future.
We ended fiscal 1998 with half a year's worth of orders on hand, and our
tank barge line is booked at capacity through the current calendar year. We
anticipate that industry demand will increase toward the end of the year,
driven by seasonal freight rates and grain exports. In the meantime, we are
doing what we do best: reducing costs to keep margins strong, and using our
efficient production capabilities to maximum advantage.
PAULINO MARTINEZ HAS WORKED AS A WELDER FOR TRINITY FOR FOUR YEARS. WHEN HE
FIRST STARTED, CHANGING OUR PRODUCTION LINES FROM ONE TYPE OF RAILCAR TO ANOTHER
REQUIRED 10 DAYS. NOW, WE CAN ACCOMPLISH A LINE CHANGEOVER IN AS LITTLE AS ONE
DAY. BY MINIMIZING THE TIME REQUIRED FOR CHANGE-OVERS, WE ALSO MINIMIZE LOST
REVENUE DUE TO DOWNTIME.
IN FISCAL 1999, WE SHOULD BE ABLE TO BRING EVEN GREATER EFFICIENCY TO OUR
PRODUCTION LINES. WITH SUFFICIENT ORDERS ON HAND TO KEEP ALL OF OUR RAILCAR
LINES AT FULL PRODUCTION FOR THE FULL YEAR, WE WILL REQUIRE ONLY NINE
CHANGE-OVERS VERSUS 22 LAST YEAR.
9
<PAGE> 12
CONSTRUCTION
PRODUCTS
The two largest components of Trinity's Construction Products segment are
our Highway Safety Products group and our Ready-Mix Concrete and Aggregate
businesses. In fiscal 1998, segment revenues increased 15 percent while
operating profit grew by 27 percent. Margin increased more than a full point
to 12.1 percent versus 11.0 percent for 1997.
HIGHWAY SAFETY PRODUCTS
Trinity is North America's largest producer of highway guardrail and
safety end-treatments, with products in use in all 50 states as well as in
Canada, Mexico, the Caribbean, and Europe. Capitalizing on federal and state
governments' emphasis on infrastructure improvement, this business line achieved
record results in fiscal 1998.
HIGHWAY SAFETY A TOP PRIORITY
Improving the safety of our nation's transportation system remains a top
priority for our federal government. The government has also recognized the
critical link between a sound transportation system and continued domestic
economic growth.
Until this year, transportation infrastructure improvements were partially
funded at the federal level through the Intermodal Surface Transportation
Efficiency Act (ISTEA), which earmarked approximately $20 billion
TRINITY'S INNOVATIVE HIGHWAY SAFETY PRODUCTS ARE SAVING LIVES AROUND THE
WORLD.
<TABLE>
<CAPTION>
CONSTRUCTION PRODUCTS
- ----------------------------------------
(in millions) 1998 1997
- ----------------------------------------
<S> <C> <C>
Revenues $456.4 $395.2
- ----------------------------------------
Operating Profit 55.2 43.4
- ----------------------------------------
</TABLE>
[PHOTO] [PHOTO] [PHOTO]
Above: Patrick Turner and
Rodney Boyd discuss the
shipment of completed
guardrail products.
10
<PAGE> 13
per year. New proposals, which have passed both the Senate and the House of
Representatives, would increase the funds designated for highway safety
improvements to a range of $25-30 billion per year for the next six years -- an
increase in the area of 38 percent. Increased highway spending would mean a
larger market for guardrail and energy-absorbing end-treatments that Trinity
manufactures.
Another significant opportunity for Trinity's highway products business is
the recently established National Highway System (NHS). The NHS more than
triples the mileage of U.S. roadways that must be maintained to interstate
highway standards. Further, in 1998 the Federal Highway Administration will
continue implementing new mandatory standards for roadside safety products used
on the NHS. This mandate has already created a strong demand for Trinity's
guardrail end-treatment products.
A PARTNERSHIP FOR SAFETY
The innovative, life-saving highway products Trinity produces were
developed through a unique partnership that has brought together the best
efforts of the academic public, and private sectors. The Texas Transportation
Institute is a state agency and part of the Texas A&M University system. The
Institute conducts research in a broad range
[PHOTO]
Herb Richardson, Texas
Transportation Institute
Director, and Don Graham
of Trinity examine an
SRT-350 guardrail at the
TTI crash test site. The
guardrail successfully
contained and stopped a
pickup truck that was
moving 62 miles per hour.
11
<PAGE> 14
[PHOTO]
A Trinity crew pours concrete for the
foundation of a new school.
of subjects seeking ways to improve every aspect of the transportation
infrastructure. The Institute's own staff, along with scientists and engineers
from Texas A&M, conducted countless hours of product design, research, and
development. Trinity provided the manufacturing and marketing capability. Dr.
Charlie Wooten, Director Emeritus of the Texas Transportation Institute, said,
"Trinity has done an excellent job of seeing that these products are getting
put into use. That's something we could never do by ourselves."
We are pleased to be involved in a program that improves the safety of
American travelers, and we are excited about the opportunities it brings for
Trinity.
READY-MIX CONCRETE & AGGREGATE
Trinity's concrete and aggregate businesses primarily serve non-urban
markets with a few selected urban markets in Texas and Louisiana. As in all of
our business lines, we emphasize quality products, low cost, and exemplary
customer service. Working to satisfy demand for all types of construction, our
concrete and aggregate business recovered from the previous year's wet weather
conditions to post solid results in fiscal 1998.
A FOUNDATION FOR FUTURE GROWTH
In the regions served by Trinity's ready-mix
STRONG CONSTRUCTION ACTIVITY HELPED OUR CONCRETE AND AGGREGATE OPERATIONS POST
RESULTS IN 1998.
12
<PAGE> 15
concrete and aggregate business, the past year brought vigorous construction
activity in every sector -- commercial, industrial, municipal, medical, and
residential.
During the year we added to our capabilities by acquiring the five
ready-mix facilities and one aggregate facility of Industrial Companies, Inc.
of Baton Rouge, Louisiana. As market conditions have increased prices, we have
worked to lower our costs. We have continually reduced the cost of producing
ready-mix concrete and aggregate as we have also reduced the costs of shipping
and delivering these products. As a result, margins have improved. Coupled with
a good backlog of construction projects at the end of the year, the outlook for
fiscal 1999 is strong.
WHEN EDDIE SIMMONS OF TRINITY'S TRANSMIT MIX CONCRETE COMPANY FIRST BEGAN
DRIVING A CONCRETE TRUCK 41 YEARS AGO, CARS HAD TWO-TONE PAINT JOBS AND TAIL
FINS. SINCE 1957, MUCH HAS CHANGED IN THE CONCRETE AND AGGREGATE BUSINESS.
THROUGH IT ALL, EDDIE HAS CONSISTENTLY DELIVERED THE PRODUCT AND KEPT THE
CUSTOMERS SATISFIED. IN FACT, HE HAS NEVER HAD AN ACCIDENT, NEVER HAD A CUSTOMER
COMPLIANT, AND HASN'T TAKEN A SICK DAY IN MORE THAN 30 YEARS.
FOR HIS EXEMPLARY PROFESSIONALISM AND OUTSTANDING SAFETY RECORD, EDDIE WAS
AWARDED THE TITLE OF DRIVER OF THE YEAR BY THE NATIONAL READY-MIX CONCRETE
ASSOCIATION. ALL OF US AT TRINITY JOIN MARK STILES, TRANSIT MIX PRESIDENT, IN
CONGRATULATING EDDIE SIMMONS.
[GRAPH]
"THE DEMAND FOR READY-MIX
CONCRETE CONTINUES TO GROW IN OUR MARKET."
Mark Stiles, Transit Mix President
13
<PAGE> 16
INDUSTRIAL
PRODUCTS
<TABLE>
<CAPTION>
INDUSTRIAL PRODUCTS
- ----------------------------------------
(In millions) 1998 1997
- ----------------------------------------
<S> <C> <C>
Revenues $371.4 $327.6
- ----------------------------------------
Operating Profit 45.0 42.5
- ----------------------------------------
</TABLE>
Our Industrial Products segment consists of our metal components and container
businesses. In fiscal 1998, revenue for this segment increased 13 percent and
operating profit grew 6 percent over the prior year.
METAL COMPONENTS GROUP
Trinity has been a recognized leader in the manufacturing of certain
commodity and specialty metal components. Our wide range of pipefittings,
flanges, and container heads are used extensively in pressure piping and storage
systems worldwide. These products are integral to many process industries
including oil and gas exploration and production, petrochemical manufacturing,
gas transmission, power generation, paper manufacturing, and food processing.
ACQUISITION & UPGRADES
Early in fiscal 1998, Trinity acquired certain assets of the Industrial
Products Division of Ladish Co., Inc. This acquisition significantly increased
our plant capacity and capability. Trinity now has the broadest offering of
fittings and flanges of any other producer in North America.
With a business team focused on consolidating the acquired Ladish
facilities and other equipment upgrades, we are beginning to see improvements
in efficiencies and margins as these investments begin to pay off. Our revenue
in this portion of our business is now
WITH OUR INCREASED CAPACITY AND EXPANDED PRODUCT LINES, TRINITY OFFERS THE
INDUSTRY'S BROADEST PRODUCT RANGE.
[PHOTO] [PHOTO] [PHOTO]
Above: Bob Van Noord and
Charles Bennett inspect a
completed flange in one of
Trinity's metal labs.
14
<PAGE> 17
approximately 40 percent above the level at this time a year ago.
QUALITY, CAPACITY, EFFICIENCY
Trinity's expertise and commitment to quality in forging and machining
metal components is evident in the number of our facilities that have received
the rigorous ISO 9002 (International Standardization Organization)
accreditation.
Coupled with our high levels of product quality, our production capacity
allows us to handle any size order. Trinity has become a preferred provider for
many of the leading petrochemical companies. We continue to penetrate important
distribution channels by building lasting customer relationships with a strong
network of industrial suppliers and other container manufacturers.
Key demand factors for our metal components business are increasing
worldwide energy consumption, petrochemical and refinery expansions, and energy
infrastructure improvements. We anticipate continued steady growth in this
segment.
[PHOTO]
Manuel Castro inspects tank
heads prior to shipment from our
new facility in Mexico.
CONTAINERS
Trinity produces a full line of containers including liquefied petroleum
gas (LPG) tanks, storage vessels, truck and transport barrels, and custom
vessels. These containers are used in residential, petrochemical production
15
<PAGE> 18
[PHOTO]
NATIONALLY AND INTERNATIONALLY, THE MARKET OUTLOOK IS BRIGHT FOR TRINITY'S LPG
CONTAINER BUSINESS.
[PHOTO]
Severiano Pecheco and John
"Rusty" McDearman review the load list
for a shipment of LPG containers.
refining, and power generation applications. They range in size from 120-gallon
tanks for residential use to 120,000-gallon industrial bulk storage containers.
The container business is where Trinity Industries had its beginning, and
it remains an important business component for us. Our containers are
recognized worldwide for their quality, dependability, and exceptional value.
Trinity Industries de Mexico is the largest tank manufacturer in Mexico,
featuring state-of-the-art facilities and a highly experienced workforce.
PERFORMANCE & OUTLOOK
In fiscal 1998, our container business generated increases in revenue and
operating profit even though a mild winter reduced the usual seasonal demand
for LPG gas containers in the fourth quarter.
The future outlook for our container business is good. The U.S. housing
industry is experiencing continued growth. The manufactured housing market in
particular brings new opportunities. There is also a growing trend of families
moving from cities to non-urban and rural areas not served by natural gas
utilities. These factors should continue to increase the demand for LPG
containers.
We also see excellent growth opportunities in Mexico and South America.
Our business in Mexico began by exporting containers made in the U.S. We then
purchased manufacturing facilities and started producing
16
<PAGE> 19
With a 36' articulating boom, Trinity's LPG container
delivery trucks can load, unload, and position
tanks of up to 1,000 gallon capacity. Trinity has a
fleet of 60 of these versatile vehicles. For many of
our customers, ease of delivery and installation is
an important selling point.
[PHOTO]
containers in Mexico. Now, that evolution is being duplicated in South America.
Many developing areas of South America lack an infrastructure of natural gas
lines, so they depend primarily upon LPG containers. For years, Trinity has
shipped containers from the U.S. and Mexico and has developed a customer base.
In the past year, we purchased a manufacturing plant in Brazil. In both Mexico
and South America, we see additional opportunities to penetrate new markets and
to continue to expand our production.
INDUSTRIAL MANUFACTURING HAS ALWAYS BEEN THE LIFEBLOOD OF TRINITY. FOR THE
PAST 55 YEARS, ONE MAN HAS LEFT HIS MARK ON NEARLY EVERY PRODUCTION LINE WE
HAVE IN PLACE: SENIOR VICE PRESIDENT RALPH A. BANKS, JR., TRINITY'S "MR.
MANUFACTURING."
RALPH ORIGINALLY HELPED SPEARHEAD TRINITY'S GROWTH IN THE PRESSURE VESSEL
INDUSTRY. TODAY RALPH CONTINUES TO BE AT THE FOREFRONT OF TRINITY'S PLANT
EXPANSION PROGRAMS, LEADING A TEAM OF SEASONED MANUFACTURING ENGINEERS WHO
CARRY OUT HIS TRADITION OF STREAMLINING PRODUCTION PROCESSES.
WE ARE GRATEFUL TO THE MANY PEOPLE WHO HAVE MADE INVALUABLE CONTRIBUTIONS
TO THE SUCCESS OF TRINITY INDUSTRIES THROUGH THE YEARS. NO ONE HAS BEEN AT IT
LONGER THAN RALPH BANKS.
17
<PAGE> 20
TRINITY TEAMWORK
Trinity's goal is the consistent growth of our business and improvement of our
operations. Throughout our Company, employee teams are focused on developing
effective solutions to a wide range of issues. Their impact has been evident in
every area of our operations.
TEAMWORK FOR GROWTH & EXPANSION
When our new plant in Monclova, Mexico was beginning operations, managers
met with their counterparts from other Trinity facilities to plan and
coordinate issues such as material shipments, job scheduling, and product
delivery. The result was a smooth integration of a new railcar facility in
Mexico.
Before our Montgomery, Alabama plant shifted from the production of
structural steel and marine parts to railcars, a cross-disciplinary team of
employees from six different plants began planning the changeover in order to
minimize downtime and maintain a steady stream of revenue. Jobs in progress
were gradually moved to other parts of the plant as tools, equipment, and
technology for the new lines were put into operation. The last structural steel
fabricated in this area of the facility went out the door at the beginning of
April; by April 16, the first completed railcar was ready for inspection.
Our acquisition consolidation teams work to bring newly acquired
facilities online quickly. The Buffalo Specialities plants were purchased
during the peak guardrail production season, yet they were converted to Trinity
production with virtually no downtime. Similarly, the Busch railcar rebuilding
facility was quickly and smoothly integrated.
THROUGHOUT TRINITY, OUR PEOPLE ARE FINDING NEW WAYS TO PUT GOOD IDEAS TO WORK.
[PHOTO] [PHOTO] [PHOTO]
Above Left: Trinity's U.S./Mexico team reviews construction plans and
coordinates shipments. Above Middle: Trinity's Environmental team works to
reduce the environmental impact of waste water and air emissions. Above Right:
Trinity's Desktop Standardization team streamlines our computer purchasing,
training, and maintenance. Opposite page: By taking a proactive, plant-wide
approach to safety, our Longview Plant safety team reduced recordable accidents
by 53 percent and Workers' Comp claims by 45 percent in a single year.
18
<PAGE> 21
TEAMWORK TO IMPROVE OUR BUSINESS
Trinity's Total Quality Management program is known as QuEST, which stands for
Quality, Efficiency, Service and Safety, and Trust. The idea behind QuEST is
that our people, working together to improve our plants, processes, products,
and productivity, will build loyal customers as we create a better place to
work.
Our Marine Products division formed a team to address all the total cost
components of our barge manufacturing operations. As a result, they
substantially reduced our cost of labor and materials.
In our Ready-Mix Concrete and Aggregate area, managers of the Mining Group
began setting goals and planning operations as a team, with incentives for
total team performance. The group's operating profit increased 306 percent over
the prior year.
Further securing a good customer relationship through quality work and
dedicated service, our Vidor facility was named Union Carbide's Contract Repair
Shop of the Year for the second year in row.
Trinity's teams also involve people outside the Company. General American
Transportation Corporation (GATX) of Chicago relocated employees to Dallas in
order to work closely with Trinity on product design and manufacturing. This
arrangement has streamlined communication, reduced cycle time, and improved
product quality. Ward Fuller, President and CEO of General American, said,
"Teaming up with Trinity has been a tremendous success. It not only benefits
GATX but, most importantly, benefits our customers."
These are just a few examples of the way Trinity teamwork "puts it all
together" to benefit our customers, consumers, employees, and stockholders.
[PHOTO]
Trinity's teamwork concept extends to our customers as well. GATX, a major
customer, opened an office within a Trinity railcar facility in order to work
closely with us through the design and manufacturing processes. Pictured are
Mick Rimko and Mark Short of Trinity, with Thomas Fortunato and John Swezey of
GATX.
19
<PAGE> 22
TRINITY 2000
As the twentieth century draws to a close, most companies worldwide will
have to modify or replace portions of their computer software in order to
ensure a smooth transition into the new millennium. While the nature of
Trinity's products, services, raw materials, and computer systems have
prevented the Year 2000 issue from becoming a major uncertainty or a material
expense, we have taken, and are taking, steps to manage and control the
resolution of Year 2000 issues.
TRINITY IS PREPARING TO FACE THE YEAR 2000.
FOR EXAMPLE, WE HAVE:
o Established a Year 2000 Steering Committee;
o Appointed a full-time Year 2000 Project Leader;
o Developed action plans for all identified mission critical systems,
including system testing;
o Established weekly status reporting on issue resolution action plans;
o Engaged outside consultants to assist with our vendor compliance and
assessment program and to advise Trinity regarding its Year 2000
compliance program;
o Initiated programs to assure compliance in the areas of equipment and
facilities, products, customers, international operations, and non mission
critical software.
Some remediation plans have already been completed, and over 85 percent of
our projects are scheduled for completion by December 31, 1998. We will
maintain high visibility of our progress and continue to evaluate the resources
we are dedicating to the resolution of Year 2000 issues.
[PHOTO]
Jim S. Ivy
Vice President and Chief Financial Officer
20
<PAGE> 23
FINANCIAL INFORMATION
22 Financial Summary
23 Management's Discussion and Analysis of Financial
Condition and Results of Operations
27 Consolidated Income Statement
28 Consolidated Balance Sheet
29 Consolidated Statement of Cash Flows
30 Consolidated Statement of Stockholders' Equity
30 Notes to Consolidated Financial Statements
39 Report of Independent Auditors
40 Supplemental Information
40 Stockholder Information
<PAGE> 24
FINANCIAL SUMMARY
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31
-----------------------------------------------------------
(IN MILLIONS EXCEPT FOR PERCENT AND PER SHARE DATA) 1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Revenues(1) $ 2,473.0 2,234.3 2,241.7 2,064.3 1,509.6
Operating profit $ 255.9 214.2 194.9 148.9 106.7
Interest expense, net $ 19.1 20.9 29.0 28.7 25.8
Income from continuing operations before income taxes and
cumulative effect of change in accounting for income taxes $ 165.9 181.3 165.8 121.6 82.5
Provision for income taxes $ 62.2 67.6 64.5 48.2 33.7
Effective tax rate % 37.5 37.3 38.9 39.6 40.8
Income from continuing operations before cumulative effect
of change in accounting for income taxes $ 103.7 113.7 101.3 73.4 48.8
Cumulative effect as of April 1, 1993 of change in accounting
for income taxes $ -- -- -- -- 7.9
Income from discontinued operations, net of income taxes $ -- 23.8 12.5 15.7 19.5
Net income $ 103.7 137.5 113.8 89.1 76.2
Total assets $ 1,573.9 1,356.4 1,426.6 1,400.5 1,279.1
Long-term debt $ 149.6 178.6 206.4 242.9 277.9
Stockholders' equity $ 887.5 809.5 746.0 641.2 570.5
Stock data:(2)
Weighted average number of diluted shares outstanding 43.9 42.8 41.9 40.5 40.3
Net income per common share (diluted):
Income from continuing operations before cumulative effect
of change in accounting for income taxes $ 2.36 2.66 2.42 1.81 1.21
Cumulative effect of change in accounting for income taxes -- -- -- -- 0.20
Income from discontinued operations -- 0.55 0.30 0.39 0.48
--------- --------- --------- --------- ---------
Net income per common share $ 2.36 3.21 2.72 2.20 1.89
Dividends per share $ 0.68 0.68 0.68 0.68 0.64
Book value per share $ 20.40 18.83 17.93 15.95 14.37
</TABLE>
- --------------------------------------------------------------------------------
(1) On March 31, 1997, the Company made a pro rata distribution of the common
stock of Halter Marine Group, Inc. (Halter) to its stockholders in the form
of a property distribution. The results of operations and balance sheet of
Halter have been reclassified in the financial statements to discontinued
operations as a result of the divestiture.
(2) On August 31, 1993, the Company distributed a three-for-two stock split in
the form of a stock dividend.
22
<PAGE> 25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
BASIS OF PRESENTATION
Trinity Industries, Inc. is one of the nation's leading diversified
industrial manufacturers. Trinity principally operates in three business
segments: (i) the Transportation Products segment, (ii) the Construction
Products segment, and (iii) the Industrial Products segment. The following
discussion compares results from continuing operations of Trinity for fiscal
1998, 1997, and 1996.
1998 COMPARED WITH 1997 -- RESULTS OF OPERATIONS
Revenues were $2.47 billion in fiscal 1998 compared to $2.23 billion in
fiscal 1997, a 10.8% increase. Operating profit was $255.9 million in fiscal
1998 compared to $214.2 million in fiscal 1997, a 19.5% increase. All of
Trinity's business segments contributed to the growth in revenues and operating
profit in fiscal 1998. Selling, engineering and administrative expenses
increased $20.2 million in fiscal year ended 1998, to $144.2 million, when
compared to $124.0 million in fiscal 1997, but as a percentage of revenue
increased only slightly as the Company continues to invest in people and systems
to fuel additional growth.
Other (income) expenses increased $57.1 million to $90.0 million in
fiscal 1998 from $32.9 million in fiscal 1997. The Company recorded a one-time
charge of $70.0 million ($43.8 million after-tax) in the current fiscal year
which settled a thirteen year old lawsuit (see Contingencies in Notes to
Consolidated Financial Statements). Net interest expense decreased $1.8 million
due to a reduction in debt through scheduled debt payments. Other, net expense
decreased $11.1 million in the current fiscal year to $0.9 million from $12.0
million in fiscal 1997. The decrease is due to the recording in fiscal 1997 of
certain non-recurring charges, principally for valuation of production
facilities determined to be in excess of that required for future business
operations, in the amount of $15.0 million ($9.3 million after-tax).
Income from continuing operations in fiscal 1998 was $103.7 million, or
$2.36 per diluted share as compared to $113.7 million, or $2.66 per diluted
share, in fiscal 1997. As stated above, results for fiscal 1998 and 1997 include
certain one-time charges. Excluding these charges, income from continuing
operations was $147.5 million, or $3.36 per diluted share, in fiscal 1998 and
$123.0 million, or $2.87 per diluted share, in fiscal 1997.
TRANSPORTATION PRODUCTS
<TABLE>
<CAPTION>
(IN MILLIONS) 1998 1997
-------- --------
<S> <C> <C>
Revenues $1,642.9 $1,501.5
Operating Profit $ 209.3 $ 175.2
% of Revenues 12.7% 11.7%
</TABLE>
Revenues increased in the Transportation Products segment $141.4
million, or 9.4%, in the current fiscal year. This increase was primarily due to
increased demand for inland hopper barges. In the second half of fiscal year
1998 the inland hopper barge market began to soften, however, this condition was
offset by a significant increase in overall railcar demand which began late in
the first quarter of fiscal year 1998. The surge in railcar demand and the
ongoing replacement cycle for railcars and barges continues to drive this
segment, contributing to railcar backlogs that remain at record levels. And as
the barge fleet continues to age, Trinity's product line of hopper and tank
barges is well positioned to take advantage of the replacement demand as well as
any additional demand generated by more and larger shipments of commodities in
the nation's intercoastal waterways. Trinity's position as a manufacturer and as
a full service provider of railcar maintenance services, management services,
and leasing alternatives provides the Transportation Products segment with the
resources for future growth in the market place.
The Transportation Products segment's operating profit increased by
$34.1 million in the current fiscal year to $209.3 million from $175.2 million
in fiscal 1997. As a percentage of revenues, operating profit increased from
11.7% in 1997 to 12.7% in 1998. This increase is primarily a result of the
Company's continued emphasis on improving its production
23
<PAGE> 26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
methods and reducing costs and the efficiencies gained from higher volumes.
During the fourth quarter of fiscal year 1998, the Company recorded a charge of
approximately $5.0 million to settle a customer dispute.
CONSTRUCTION PRODUCTS
<TABLE>
<CAPTION>
(IN MILLIONS) 1998 1997
-------- --------
<S> <C> <C>
Revenues $ 456.4 $ 395.2
Operating Profit $ 55.2 $ 43.4
% of Revenues 12.1% 11.0%
</TABLE>
The Construction Products segments' revenues increased by $61.2
million, or 15.5%, to $456.4 million in the current fiscal year from $395.2
million in fiscal 1997. The Company continues to expand its highway guardrail
and safety system products as well as its ready-mix concrete and aggregate
businesses. Based on the expectation of increased federal funding for highway
safety improvements and new mandatory safety standards, Trinity's highway
guardrail and safety system products should continue to see increased demand.
The demand in residential, commercial, and municipal construction in the markets
served by the Company's ready-mix concrete and aggregate businesses continues to
rise.
Operating profit increased in the Construction Products segment from
$43.4 million in fiscal 1997 to $55.2 million in fiscal 1998, an increase of
$11.8 million or 27.2%. As a percentage of revenues, operating profit increased
to 12.1% in 1998 from 11.0% in 1997. The ready-mix concrete and aggregate
businesses saw improvements due to cost reduction measures as well as
better weather conditions in the current fiscal year as compared to the
unusually severe weather in the previous year which restricted the pouring of
ready-mix concrete.
INDUSTRIAL PRODUCTS
<TABLE>
<CAPTION>
(IN MILLIONS) 1998 1997
--------- ---------
<S> <C> <C>
Revenues $ 371.4 $ 327.6
Operating Profit $ 45.0 $ 42.5
% of Revenues 12.1% 13.0%
</TABLE>
Revenues in the Industrial Products segment increased from $327.6
million in fiscal 1997 to $371.4 million in fiscal 1998, an increase of $43.8
million, or 13.4%. This segment has benefited from the continuing improvements
in the economy. The ongoing emphasis on protecting the environment in the
chemical and petroleum industries benefits the Company's fittings and flanges
product line. Coinciding with a general improvement in business conditions is
the continued strength in new housing starts. These factors continue to support
the long-term outlook for Trinity's containers product line, which includes
liquefied petroleum gas cylinders and permanent storage containers as well as
custom vessels.
The Industrial Products segment's operating profit was a modest
increase of $2.5 million to $45.0 million in fiscal 1998 from $42.5 million in
fiscal 1997. As a percentage of revenues, operating profit decreased to 12.1% in
1998 from 13.0% in 1997. This decrease was primarily attributable to the costs
of combining the Ladish operations along with the highly competitive environment
in the fittings and flange product line.
1997 COMPARED WITH 1996
Record operating profits of $214.2 million were recorded for the fiscal
year ended March 31, 1997, an increase of $19.3 million compared to fiscal 1996.
This increase was due primarily to higher operating profit recorded in the
Transportation Products and Industrial Products segments. The Construction
Products segment operating profit remained comparable to the previous fiscal
year. Revenues recorded for fiscal 1997 were $2.23 billion, a decrease of $7.4
million from fiscal 1996. Results from the Transportation Products segment
reflected continued demand from the ongoing replacement cycle for those
products. The Construction Products segment continued
24
<PAGE> 27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- --------------------------------------------------------------------------------
to benefit from federal and state government's focus on improving the nation's
transportation systems and good levels of construction activities in the markets
served by Trinity. The Industrial Products segment continued to experience
favorable market conditions.
Operating profit increased in the Transportation Products segment on
slightly lower revenues when compared to fiscal 1996 as a result of improving
margins attained from cost reduction programs put in place in prior years.
Transportation Products achieved record operating profit in a highly competitive
environment through increases in productivity and improvements to production
methods. The replacement cycle for railcars and barges continued to be the main
driver for the fiscal 1997 results. The inland river hopper barge product line
continued to strengthen and was well positioned to take advantage of the current
demand generated by the strong shipments of commodities as well as the
replacement demand from the aging fleet. The Transportation Products segment
positioned itself for future growth through investments which expanded its
production capacity. Trinity's position as a full service provider of
maintenance services, management services, and leasing alternatives continued to
provide the Company with a steady revenue stream and to provide opportunities
for growth in the market place.
Revenues in the Construction Products segment increased in fiscal 1997
when compared to the prior fiscal year with stable operating profit. The
increase in revenues signified the Company's emphasis on expanding its highway
guardrail and safety system products and its ready-mix concrete and aggregate
business. Stable operating profit in fiscal 1997 was primarily the result of
unusually severe weather in the fourth quarter which restricted the pouring of
ready-mix concrete. Demand for commercial, residential, and municipal
construction and the overall strength of the economy in the markets served will
benefit the ready-mix concrete and aggregate business. Highway safety systems
products continued to benefit from the upgrading of America's highways and the
new safety requirements mandated by the federal government.
The Industrial Products segment benefited primarily from the general
improvement in the economy. Continued improvements in the chemical and petroleum
industries and the ongoing regulatory emphasis on protecting the environment
increased the market for fittings and flanges as large industrial customers
increased capacity and replaced and repaired their existing plants and piping
systems. Continued strength in new housing starts and general business
conditions continued to support the LPG container markets.
Selling, engineering and administrative expenses increased to $124.0
million in fiscal 1997 from $105.6 million in fiscal 1996 due primarily to
increased expenses attributable to operations of fiscal 1997 acquisitions in the
Transportation Products segment.
Retirement plans expense increased to $18.5 million in fiscal 1997 from
$12.2 million in fiscal 1996 due primarily to an increased wage base and the
effect of a change in actuarial tables utilized.
Net interest expense of $20.9 million in fiscal 1997 decreased as
compared to $29.0 million in fiscal 1996 due primarily to less short-term debt
during the current fiscal year and to the reduction of equipment trust
certificate debt through scheduled debt payments.
Other, net expense increased to $12.0 million in fiscal 1997 from $0.1
million the previous fiscal year. The increase was due primarily to the
recording of certain charges, principally for valuation of production facilities
determined to be in excess of that required for future business operations.
The provision for income taxes in fiscal 1997, expressed as a percent
of income from continuing operations before income taxes is a 37.3 percent rate
as compared to a 38.9 percent rate in fiscal 1996.
LIQUIDITY AND FINANCIAL RESOURCES
During fiscal 1998, internally generated funds and short term borrowing
were used to support capital expenditures and payments for business
acquisitions. The Company's cash and cash equivalents decreased $9.1 million for
the twelve months ended March 31, 1998. Cash generated from operating activities
declined to $120.9 million in fiscal 1998 from $278.8
25
<PAGE> 28
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- --------------------------------------------------------------------------------
million in fiscal 1997. This decrease is due primarily to an increase in
receivables offset by an increase in accounts payable and accrued liabilities.
The increase in receivables is due primarily to the timing of railcar shipments
and related invoicing in the fourth quarter of fiscal 1998. Cash required by
investing activities decreased to $108.2 million in 1998 from $119.9 million in
1997. This fluctuation was due to an increase in proceeds from sale of property,
plant and equipment of $22.2 million and a decline in capital expenditures of
$44.1 million. This was offset by an increase in payments for acquisitions, net
of cash acquired, of $54.6 million. Cash flows required by financing activities
decreased by $185.9 million due primarily to an increase in short-term
borrowings in the current year.
Capital expenditures, excluding assets under lease, for fiscal 1998
were $49.9 million. Capital expenditures projected for fiscal 1999 are
approximately $64.0 million excluding assets for leasing activities. Cash
payments for acquisitions in fiscal 1998, net of cash acquired, totaled $60.2
million. Future operating requirements are expected to be financed principally
with net cash flows from operations. Internally generated funds, short-term
and long-term debt will continue to be used to finance business acquisitions.
Additions to Trinity's assets under lease are anticipated to be financed through
internally generated funds, the issuance of equipment trust certificates, or
similar debt instruments.
YEAR 2000
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.
The costs of the project and the ability of the Company to timely
complete the Year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events, including
the continued availability of certain resources and other factors. However,
there can be no guarantee that these estimates will be achieved and actual
results could differ materially from those anticipated. Specific factors that
might cause such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to locate
and correct all relevant computer codes, and similar uncertainties.
INFLATION
Changes in price levels did not significantly affect the Company's
operations in fiscal 1998, 1997 or 1996.
FORWARD LOOKING STATEMENTS
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.
26
<PAGE> 29
CONSOLIDATED INCOME STATEMENT
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31
---------------------------------------
(IN MILLIONS EXCEPT PER SHARE DATA) 1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Revenues $ 2,473.0 $ 2,234.3 $ 2,241.7
Operating costs:
Cost of revenues 2,054.0 1,877.6 1,929.0
Selling, engineering and administrative
expenses 144.2 124.0 105.6
Retirement plans expense 18.9 18.5 12.2
--------- --------- ---------
2,217.1 2,020.1 2,046.8
--------- --------- ---------
Operating profit 255.9 214.2 194.9
Other (income) expenses:
Litigation settlement 70.0 -- --
Interest income (1.8) (0.5) (1.8)
Interest expense 20.9 21.4 30.8
Other, net 0.9 12.0 0.1
--------- --------- ---------
90.0 32.9 29.1
--------- --------- ---------
Income from continuing operations before income taxes 165.9 181.3 165.8
Provision (benefit) for income taxes
Current 53.3 71.2 77.0
Deferred 8.9 (3.6) (12.5)
--------- --------- ---------
62.2 67.6 64.5
--------- --------- ---------
Income from continuing operations 103.7 113.7 101.3
Discontinued operations:
Income from discontinued operations (net of
income taxes of $10.9 in 1997 and $8.1
in 1996) -- 14.5 12.5
Gain from sale of subsidiary stock in an initial public offering -- 9.3 --
--------- --------- ---------
-- 23.8 12.5
--------- --------- ---------
Net income $ 103.7 $ 137.5 $ 113.8
--------- --------- ---------
Net income per common share:
Basic:
Income from continuing operations $ 2.41 $ 2.68 $ 2.45
Income from discontinued operations -- 0.56 0.30
--------- --------- ---------
Net income per share $ 2.41 $ 3.24 $ 2.75
--------- --------- ---------
Diluted:
Income from continuing operations $ 2.36 $ 2.66 $ 2.42
Income from discontinued operations -- 0.55 0.30
--------- --------- ---------
Net income per share $ 2.36 $ 3.21 $ 2.72
--------- --------- ---------
Weighted average number of shares outstanding:
Basic 43.1 42.4 41.4
Diluted 43.9 42.8 41.9
</TABLE>
See accompanying notes to consolidated financial statements.
27
<PAGE> 30
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
MARCH 31
------------------------
(IN MILLIONS EXCEPT PER SHARE DATA) 1998 1997
--------- ---------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 3.1 $ 12.2
Receivables (net of allowance for doubtful accounts of
$1.7 in 1998 and $1.0 in 1997) 390.5 236.9
Inventories
Raw materials and supplies 248.5 216.7
Work in process 42.5 41.9
Finished goods 51.6 55.9
--------- ---------
342.6 314.5
Property, plant and equipment, at cost 1,201.9 1,136.5
Less accumulated depreciation (475.0) (424.9)
--------- ---------
726.9 711.6
Other assets 110.8 81.2
--------- ---------
$ 1,573.9 $ 1,356.4
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term debt $ 101.0 $ 64.0
Accounts payable and accrued liabilities 386.6 261.2
Long-term debt 149.6 178.6
Deferred income taxes 27.5 22.8
Other liabilities 21.7 20.3
--------- ---------
686.4 546.9
--------- ---------
Stockholders' equity:
Common stock - par value $1 per share;
authorized - 100.0 shares; shares issued and
outstanding in 1998 - 43.5; in 1997 - 43.0 43.5 43.0
Capital in excess of par value 276.5 273.3
Retained earnings 567.5 493.2
--------- ---------
887.5 809.5
--------- ---------
$ 1,573.9 $ 1,356.4
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
28
<PAGE> 31
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31
------------------------------------
(IN MILLIONS) 1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 103.7 $ 137.5 $ 113.8
Less: Income from discontinued operations -- (23.8) (12.5)
-------- -------- --------
Income from continuing operations 103.7 113.7 101.3
Adjustments to reconcile net income to net cash provided
(required) by operating activities:
Depreciation and amortization 78.1 87.8 69.2
Provision (benefit) for deferred income taxes 8.9 (3.6) (12.5)
(Gain) loss on sale of property, plant and equipment (4.2) (4.3) 3.1
Other (6.2) (4.5) (6.7)
Changes in assets and liabilities:
(Increase) decrease in receivables (150.9) 64.7 (14.9)
(Increase) decrease in inventories (3.2) 17.9 (3.6)
(Increase) decrease in other assets (30.6) (32.0) 7.8
Increase (decrease) in accounts payable and accrued liabilities 121.1 51.5 (50.2)
Increase (decrease) in other liabilities 4.2 (12.4) 0.9
-------- -------- --------
Total adjustments 17.2 165.1 (6.9)
-------- -------- --------
Net cash provided by operating activities 120.9 278.8 94.4
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment 81.4 59.2 100.2
Capital expenditures (129.4) (173.5) (127.5)
Payment for purchase of acquisitions, net of cash acquired (60.2) (5.6) (17.3)
-------- -------- --------
Net cash required by investing activities (108.2) (119.9) (44.6)
Cash flows from financing activities:
Issuance of common stock 2.4 4.6 2.9
Net borrowings (repayments) under short-term debt 34.5 (152.0) (4.0)
Proceeds from issuance of long-term debt -- -- 7.0
Payments to retire long-term debt (29.4) (31.6) (43.6)
Dividends paid (29.3) (28.7) (27.9)
-------- -------- --------
Net cash required by financing activities (21.8) (207.7) (65.6)
-------- -------- --------
Cash flows provided by discontinued operations -- 46.3 15.7
-------- -------- --------
Net decrease in cash and cash equivalents (9.1) (2.5) (0.1)
Cash and cash equivalents at beginning of period 12.2 14.7 14.8
-------- -------- --------
Cash and cash equivalents at end of period $ 3.1 $ 12.2 $ 14.7
======== ======== ========
</TABLE>
Interest paid in fiscal 1998, 1997, and 1996 was $23.1, $24.5, and $36.2,
respectively.
See accompanying notes to consolidated financial statements.
29
<PAGE> 32
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON COMMON CAPITAL
SHARES STOCK IN TOTAL
(IN MILLIONS EXCEPT SHARE (100,000,000 $1.00 EXCESS OF RETAINED STOCKHOLDERS'
AND PER SHARE DATA) AUTHORIZED) PAR VALUE PAR 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 1,375,343 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
OTHER 442,911 0.5 3.2 -- 3.7
NET INCOME -- -- -- 103.7 103.7
CASH DIVIDENDS ($0.68 PER SHARE) -- -- -- (29.4) (29.4)
---------- ---------- ---------- ---------- ----------
BALANCE AT MARCH 31, 1998 43,489,276 $ 43.5 $ 276.5 $ 567.5 $ 887.5
========== ========== ========== ========== ==========
</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.
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 the
terms generally ranging between one and fifteen years,
30
<PAGE> 33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
wherein certain equipment manufactured by Trinity is leased for a specified type
of service over the term of the contract. The Company primarily enters into
operating leases.
Inventories and investments are valued at the lower of cost or market.
Inventory cost is determined principally on the specific identification method.
Market is 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, generally 2 to 30 years. The
costs of ordinary maintenance and repair are charged to expense while renewals
and major replacements are capitalized.
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."
In the third quarter of fiscal 1998, the Company adopted Statement of
Financial Accounting Standards No. 128, "Earnings Per Share." Diluted net income
per common 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). Basic net income per common share is based on the
weighted average number of common shares outstanding for the period. The
numerator for both basic net income per common share and diluted net income per
common share is net income. The difference between the denominator in the basic
calculation and the denominator in the diluted calculation is attributable to
the effect of employee stock options. Prior period earnings per share amounts
have been restated.
In fiscal 1998, Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income," was issued. Adoption is required for the
Company beginning in the first quarter of fiscal 1999. The Company does not
believe that the adoption of this statement will have a significant impact on
its 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.
SEGMENT INFORMATION
Trinity manufactures, sells and leases a wide variety of products
principally in three business segments: (i) the Transportation Products segment
which consists primarily of railcars, principally tank cars and freight cars,
barges for inland waterway service, and railcar leasing to various industries;
(ii) 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; and (iii) 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 and
Mexico. Intersegmental sales are shown at market prices.
Corporate operating profit eliminations consist primarily 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 10.1 percent, 10.8 percent, and 14.9 percent of consolidated
revenues in fiscal 1998, 1997, and 1996, respectively.
In the Segments of Business table below, the caption 'Additions (net) to
property, plant and equipment' does not include business acquisitions.
Certain reclassifications have been made to prior year statements to
conform to the current year presentation.
31
<PAGE> 34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEGMENTS OF BUSINESS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ELIMINATIONS
TRANSPORTATION CONSTRUCTION INDUSTRIAL & CORPORATE CONSOLIDATED
(IN MILLIONS) PRODUCTS PRODUCTS PRODUCTS ITEMS TOTAL
------------- ------------ ---------- ------------- -------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED MARCH 31, 1998
TOTAL REVENUES:
TRADE $ 1,642.9 456.4 371.4 2.3 2,473.0
INTERSEGMENT -- 9.4 7.2 (16.6) --
---------- ------- ------ ------ -------
TOTAL $ 1,642.9 465.8 378.6 (14.3) 2,473.0
========== ======= ====== ====== =======
OPERATING PROFIT (LOSS) $ 209.3 55.2 45.0 (53.6) 255.9
IDENTIFIABLE ASSETS $ 976.9 224.2 221.5 151.3 1,573.9
DEPRECIATION $ 40.7 21.0 8.4 8.0 78.1
ADDITIONS (NET) TO PROPERTY,
PLANT AND EQUIPMENT $ 25.7 14.1 7.1 12.0 58.9
- ---------------------------------------------------------------------------------------------------------------------
Year ended March 31, 1997
Total revenues:
Trade $ 1,501.5 395.2 327.6 10.0 2,234.3
Intersegment -- 7.4 7.8 (15.2) --
---------- ------- ------ ------ -------
Total $ 1,501.5 402.6 335.4 5.2 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 -- 4.9 13.4 (18.3) --
---------- ------ ------ ------ -------
Total $ 1,555.2 385.5 318.8 (17.8) 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
</TABLE>
32
<PAGE> 35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
BUSINESS ACQUISITIONS AND DIVESTITURES
BUSINESS ACQUISITIONS
The Company made certain business acquisitions during fiscal 1998, 1997 and
1996. 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 1998, the businesses acquired for continuing operations included:
(i) certain assets of the Industrial Products Division of Ladish Co., Inc. for
cash. These assets are utilized in the manufacture of metal components; (ii)
certain assets of Buffalo Specialty Products, Inc. for cash. These assets are
utilized in the manufacture of construction products; (iii) 100 percent of the
capital stock of Differential Holdings, Inc. in exchange for 94,067 shares of
Trinity common stock. Differential Holdings, Inc., through its wholly-owned
subsidiary Difco, Inc., manufactures railcars; (iv) certain assets of Industrial
Companies, Inc. for cash. These assets will be used in the ready-mix concrete
business; and (v) certain assets of the Springfield, Missouri facility of Busch
Mechanical Services, Inc. for cash. These assets are utilized in the railcar
repair business. The aggregate purchase price for these acquisitions was
approximately $70.8 million. Contributions of these acquisitions to revenues and
operating profit during fiscal 1998 was not material.
In fiscal 1997, the businesses acquired for continuing operations included:
(i) 100 percent of the capital stock of Transcisco Industries, Inc.
("Transcisco") 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 are used in
the ready-mix concrete business. The aggregate purchase price of these
acquisitions was approximately $68.6 million.
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.
DIVESTITURE
Halter Marine Group, Inc. ("Halter"), 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 the Halter common stock.
33
<PAGE> 36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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):
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31 1997 1996
- ------------------- -------- --------
<S> <C> <C>
Revenues $406.8 $254.3
Income from discontinued operations
before income taxes $ 27.0 $ 20.6
Provision for income taxes 10.9 8.1
------ ------
Income from discontinued operations $ 16.1 $ 12.5
====== ======
</TABLE>
Due to the divestiture of Halter, the Halter net assets at March 31, 1997
are not included in the Company's March 31, 1997 Consolidated Balance Sheet.
At March 31, 1998, Trinity has guaranteed contract performance obligations
of Halter in the aggregate amount of approximately $14.9 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 $50.7 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 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 shall be the fair market
value on the effective date of the grant.
34
<PAGE> 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE FOLLOWING TABLE SUMMARIZES STOCK OPTION ACTIVITY:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
AVERAGE NON- AVERAGE
INCENTIVE EXERCISE INCENTIVE EXERCISE
SHARES PRICE SHARES PRICE
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Outstanding at March 31, 1995 343,610 $ 18.88 1,585,034 $ 24.44
Granted 79,500 $ 32.59 41,273 $ 37.64
Canceled (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
Canceled (3,625) $ 22.43 (3,000) $ 26.67
Exercised (105,045) $ 18.39 (132,523) $ 23.35
--------- ----------
Outstanding at March 31, 1997 553,706 $ 28.28 1,409,016 $ 26.11
Effect of Halter property distribution adjustment 140,486 $ 28.28 358,883 $ 26.11
Granted 140,773 $ 50.62 248,445 $ 44.08
Canceled (109,861) $ 26.87 (204,596) $ 21.88
Exercised (154,148) $ 16.93 (400,209) $ 22.27
--------- ----------
Outstanding at March 31, 1998 570,956 $ 30.15 1,411,539 $ 24.33
========= ==========
</TABLE>
At March 31, 1998, there were 525,627 shares (893,548 at March 31, 1997)
reserved for future options. The following table summarizes information
about stock options outstanding at March 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------------------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
REMAINING EXERCISE EXERCISE
LIFE SHARES PRICES SHARES PRICES
--------- -------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C>
Incentive options 3 Years 74,488 $ 15.35 74,488 $ 15.35
9 Years 496,468 $ 32.37 74,905 $ 25.60
Non-Incentive options 4 Years 973,578 $ 18.97 727,307 $ 18.07
9 Years 437,961 $ 36.25 91,273 $ 27.62
--------- ----------
1,982,495 967,973
========= ==========
</TABLE>
35
<PAGE> 38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
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 at March 31, 1997, in the table above, were adjusted to 694,192 and
1,767,899 options, respectively at prices ranging from $13.22 to $31.28.
Restricted stock awards issued under the Plan may not be disposed of by the
recipient until all restrictions specified in the award expire. The following
table summarizes restricted stock information:
<TABLE>
<CAPTION>
RESTRICTED STOCK
----------------------
1998 1997
----------------------
<S> <C> <C>
Restricted shares awarded 24,000 20,000
Grant date fair value $ 53.00 $ 25.13
Outstanding at March 31 40,500 20,000
</TABLE>
The Company has elected to account for stock options under 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 in fiscal 1998 is approximately $1.5 million, or $0.02 per common share. The
effect in fiscal 1997 was not material. SFAS No. 123 does not apply to grants
prior to fiscal year 1996.
The weighted average fair value of options granted during 1998 and 1997 was
$17.72 and $9.26, 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:
<TABLE>
<CAPTION>
----------------------
1998 1997
----------------------
<S> <C> <C>
Expected option life in years 6.5 6.8
Interest rate 7.05% 6.45%
Volatility factor 0.283 0.209
Dividend yield 1.56% 2.11%
</TABLE>
The Black-Scholes 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.
DEBT
LONG-TERM DEBT
<TABLE>
<CAPTION>
March 31
- -----------------------------------------------------------------------------------------------------------
(IN MILLIONS) 1998 1997
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
5.10-9.25 percent industrial development revenue bonds payable in varying
amounts through 2005 $ 1.9 $ 1.7
6.0-8.25 percent promissory notes, generally payable annually through 2001 31.7 33.5
6.96-11.55 percent equipment trust certificates to institutional investors generally
payable in semi-annual installments of varying amounts through 2003 107.5 133.8
11.3 percent notes payable monthly through 2003 8.5 9.6
------------------
$149.6 $178.6
==================
</TABLE>
36
<PAGE> 39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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: 1999 - $29.2; 2000 - $27.3; 2001 -
$52.9; 2002 - $25.9; and 2003 - $11.4.
The trustees of the equipment trusts have been assigned title to
railcars with a cost of $279.7 at March 31, 1998 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 $66.0 - 1999; $57.7 - 2000; $47.0 - 2001; $41.7 - 2002; $34.2 -
2003; and $120.4 thereafter.
SHORT-TERM DEBT
Short-term debt primarily consists of money market borrowings, with
interest rates ranging from 5.86% to 6.43% in 1998 and 6.8% to 6.9% in 1997,
generally due within 30 days.
PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
March 31
- ----------------------------------------------------
(IN MILLIONS) 1998 1997
- ---------------------------- -------- --------
<S> <C> <C>
Land $ 37.6 $ 34.5
Buildings and improvements 224.7 208.6
Machinery 497.7 458.4
Equipment on lease
(predominately long-term) 416.8 413.7
Construction in progress 25.1 21.3
-------- --------
$1,201.9 $1,136.5
======== ========
</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 follow:
<TABLE>
<CAPTION>
Year Ended March 31
-------------------------------
1998 1997 1996
------- ------- --------
<S> <C> <C> <C>
Current
Federal $ 48.0 $ 63.2 $ 70.0
State 5.3 8.0 7.0
------- ------- -------
53.3 71.2 77.0
Deferred 8.9 (3.6) (12.5)
------- ------- -------
Total $ 62.2 $ 67.6 $ 64.5
======= ======= =======
</TABLE>
Deferred income tax is provided in the financial statements for
differences between financial and taxable income. The components of deferred
liabilities and assets follow:
<TABLE>
<CAPTION>
March 31
------------------
1998 1997
------- -------
<S> <C> <C>
Deferred tax liabilities:
Tax over book depreciation $ 73.4 $ 74.1
------- -------
Total deferred tax liabilities 73.4 74.1
------- -------
Deferred tax assets:
Pensions and other benefits 34.2 35.4
Accounts receivable, inventory, and
other asset valuation accounts 8.5 3.6
Other 3.2 12.3
------- -------
Total deferred tax assets 45.9 51.3
------- -------
Net deferred tax liabilities $ 27.5 $ 22.8
======= =======
</TABLE>
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:
<TABLE>
<CAPTION>
Year Ended March 31
----------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Statutory rate 35.0% 35.0% 35.0%
State taxes 2.1 2.3 3.2
Other (net) 0.4 -- 0.7
---- ---- ----
Effective tax rate 37.5% 37.3% 38.9%
==== ==== ====
</TABLE>
In fiscal 1998, 1997 and 1996 income taxes of $33.6, $85.9, and $118.1
respectively, were paid net of refunds received and for 1997 and 1996, include
amounts associated with Halter.
37
<PAGE> 40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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. Net periodic pension
expense for fiscal 1998, 1997 and 1996 included the following components:
<TABLE>
<CAPTION>
Year Ended March 31
---------------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Service cost-benefits earned during the period $ 15.1 $ 13.7 $ 8.0
Interest cost on projected benefit obligation 10.2 9.5 7.4
Actual return on assets (34.5) (13.0) (16.9)
Net amortization and deferral 23.6 3.7 10.1
Accrual of profit sharing contribution 4.5 4.6 3.6
------- ------- -------
Net periodic pension expense $ 18.9 $ 18.5 $ 12.2
======= ======= =======
</TABLE>
Assumptions used for valuation of the projected benefit obligation were:
<TABLE>
<CAPTION>
------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Discount rates 7.25% 7.75% 7.75%
Rates of increase in compensation levels 4.75% 4.75% 4.75%
Expected long-term rate of return on assets 9% 9% 9%
</TABLE>
Amounts recognized in the Company's consolidated balance sheet follow:
<TABLE>
<CAPTION>
March 31
--------------------
1998 1997
------- -------
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested benefit obligation $ 96.2 $ 82.1
======= =======
Accumulated benefit obligation $ 113.1 $ 95.6
======= =======
Projected benefit obligation $ 150.0 $ 124.5
Plan assets at fair value 153.4 114.3
------- -------
Projected benefit obligation less than (in excess of) plan assets 3.4 (10.2)
Unrecognized net asset at April 1, 1985 (1.4) (1.5)
Unrecognized net asset at January 1, 1986 (0.5) (0.7)
Unrecognized net loss at March 31 6.2 17.0
======= =======
Prepaid pension expense $ 7.7 $ 4.6
======= =======
</TABLE>
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.
38
<PAGE> 41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
CONTINGENCIES
In September 1997, the Company settled a 13 year old lawsuit brought
against a former subsidiary of the Company by Morse/Diesel, Inc. The settlement
resulted in an after-tax charge of $43.8 million being recorded in the second
quarter of fiscal year 1998. The Company has not participated in the business
associated with this matter since 1989.
In April 1998, the Company settled a 5 year old patent infringement lawsuit
brought against the Company by Johnstown America Corp. for approximately $10.5
million, net of tax.
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.
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS AND STOCKHOLDERS
TRINITY INDUSTRIES, INC.
We have audited the accompanying consolidated balance sheets of Trinity
Industries, Inc. as of March 31, 1998 and 1997, and the related consolidated
statements of income, cash flows and stockholders' equity for each of the three
years in the period ended March 31, 1998. 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. These 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 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 consolidated financial position of
Trinity Industries, Inc. at March 31, 1998 and 1997, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended March 31, 1998, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Dallas, Texas
May 6, 1998
39
<PAGE> 42
SUPPLEMENTAL INFORMATION
<TABLE>
<CAPTION>
SUPPLEMENTAL UNAUDITED QUARTERLY DATA
- -----------------------------------------------------------------------------------------------------------
FIRST SECOND THIRD FOURTH
(IN MILLIONS EXCEPT FOR PER SHARE DATA QUARTER QUARTER QUARTER QUARTER YEAR
- -----------------------------------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 1998:
<S> <C> <C> <C> <C> <C>
REVENUES $ 560.1 560.3 642.4 710.2 2,473.0
OPERATING PROFIT $ 58.3 63.2 68.7 65.7 255.9
NET INCOME (LOSS)(1) $ 33.2 (7.3) 38.8 39.0 103.7
NET INCOME (LOSS) PER COMMON SHARE:
BASIC $ 0.77 (0.17) 0.90 0.90 2.41
DILUTED $ 0.76 (0.17) 0.88 0.89 2.36
Year ended March 31, 1997:
Revenues $ 576.5 548.5 580.4 528.9 2,234.3
Operating profit $ 53.9 54.4 54.3 51.6 214.2
Income from continuing operations $ 30.5 30.5 22.1 30.6 113.7
Income from discontinued operations 3.3 3.9 12.8 3.8 23.8
------- ------- ------- ------- -------
Net income $ 33.8 34.4 34.9 34.4 137.5
======= ======= ======= ======= =======
Net income per common share:
Basic:
Income from continuing operations $ 0.73 0.73 0.51 0.71 2.68
Income from discontinued operations 0.08 0.09 0.30 0.09 0.56
------- ------- ------- ------- -------
Net income per common share $ 0.81 0.82 0.81 0.80 3.24
======= ======= ======= ======= =======
Diluted:
Income from continuing operations $ 0.72 0.72 0.51 0.71 2.66
Income from discontinued operations 0.08 0.09 0.29 0.08 0.55
------- ------- ------- ------- -------
Net income per common share $ 0.80 0.81 0.80 0.79 3.21
======= ======= ======= ======= =======
</TABLE>
(1)Loss in second quarter is due to one-time after-tax charge of $43.8, or $1.00
per diluted share, for litigation settlement.
STOCKHOLDER INFORMATION
- --------------------------------------------------------------------------------
EXECUTIVE OFFICES
2525 Stemmons Freeway
Dallas, Texas 75201-2401
P.O. Box 568887
Dallas, TX 75356-8887
Tel: (214) 631-4420
AUDITORS
Ernst & Young LLP
TRANSFER AGENT AND REGISTRAR
The Bank of New York
New York, New York
ANNUAL MEETING
The Annual Meeting of Stockholders will be held on July 17, 1998 at 9:30 a.m. at
the offices of the Company, 2525 Stemmons Freeway, Dallas, Texas
75207-2401
FORM 10-K
A copy of the Company's 10-K, as filed with the Securities and Exchange
Commission, shall be furnished without charge upon written request to Michael E.
Conley, Director of Investor Relations, Trinity Industries, Inc., P.O. Box
568887, Dallas, Texas 75356-8887
<TABLE>
<CAPTION>
STOCK CLOSING PRICE RANGE
- --------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
First Quarter 34 3/4- 36- 40 1/4- 39 3/4- 35 1/2-
24 1/2 33 1/8 32 33 7/8 29 5/8
Second Quarter 48 1/4- 33 7/8- 36 1/8- 35 1/4- 38 1/4-
31 1/4 31 1/8 30 7/8 31 32 1/2
Third Quarter 54- 37 1/2- 32 1/2- 35 3/8- 43 7/8-
39 32 1/2 28 1/4 30 1/2 34 3/4
Fourth Quarter 55- 36 7/8- 35 3/4- 37 3/8- 47 3/8-
43 9/16 30 3/8 31 1/8 31 3/4 37 1/2
</TABLE>
40
<PAGE> 43
<TABLE>
<CAPTION>
BOARD OF DIRECTORS EXECUTIVE OFFICERS OPERATING PRESIDENTS
<S> <C> <C>
W. Ray Wallace W. Ray Wallace Don A. Graham
Chairman and Chief Executive Officer Chairman and Chief Executive Officer Group President Highway Safety/
Fittings and Flange
John L. Adams Timothy R. Wallace John R. Nussrallah
Chairman and Chief Executive Officer President and Chief Operating Officer Group President
Chase Bank of Texas, N.A. Railcar
Ralph A. Banks, Jr.
David W. Biegler Senior Vice President Douglas H. Schneider
President and Chief Operating Officer Group President
Texas Utilities Company Richard G. Brown Marine, LPG, and International
Senior Vice President
Barry J. Galt Mark W. Stiles
Chairman, President and Mark W. Stiles Group President
Chief Executive Officer Group Vice President Concrete/Aggregates
Seagull Energy Corporation
Jack L. Cunningham, Jr. Rodney A. Boyd
Clifford J. Grum Vice President President
Chairman and Chief Executive Officer Rollform Division
Temple-Inland, Inc. Michael G. Fortado
Vice President, Secretary/ Manuel Castro, Sr.
Dean P. Guerin General Counsel President
Investments Trinity Industries de Mexico
Jim S. Ivy
Jess T. Hay Vice President and Harry W. Hinkle
Chairman of HCB Enterprises, Chairman Chief Financial Officer President
Texas Foundation for Higher Education Specialty Products Division
John M. Lee
Edmund M. Hoffman Vice President Jeffrey J. Marsh
Investments President
Richard A. Martin Railcar - Tank Car Division
Diana Natalicio Vice President
President John R. McDearman
University of Texas at El Paso F. Dean Phelps, Jr. President
Vice President LPG Tank Division
Timothy R. Wallace
President and Chief Operating Officer Joseph F. Piriano Patrick A. Turner
Vice President President
Trinity Industries Transportation, Inc.
Linda S. Sickels
Vice President Robert K. Van Noord
President
Neil O. Shoop Fittings and Flange Division
Treasurer
Patrick S. Wallace
William J. Goodwin President
Controller Railcar - Rail Services Division
</TABLE>
<PAGE> 44
[LOGO]
TRINITY INDUSTRIES, INC.
2525 Stemmons Freeway o Dallas, Texas 75207-2401
P.O. Box 568887 o Dallas, Texas 75356-8887
214-631-4420
<PAGE> 1
EXHIBIT 21
Trinity Industries, Inc.
Listing of Subsidiaries of the Registrant
The Registrant has no parent.
At March 31, 1998, the operating subsidiaries of the Registrant were:
<TABLE>
<CAPTION>
Percentage of
Organized voting securities
under the owned by the
Name of subsidiary laws of Registrant
- --------------------------------------- ------------ -----------------
<S> <C> <C>
Beaird Industries, Inc. Delaware 100%
Helmsdale, Limited Isle of Man 100%
International Industrial Indemnity Co. Vermont 100%
Standard Forged Products, Inc. Delaware 100%
Syntechnics, Inc. Delaware 100%
Syro, Inc. Ohio 100%
Transit Mix Concrete & Materials
Company Delaware 100%
Transit Mix Concrete & Materials
Company of Louisiana Louisiana 100%
Trinity DIFCO, Inc. Delaware 100%
Trinity Casteel, Inc. Delaware 100%
Trinity Equipment Co., Inc. Delaware 100%
Trinity Financial Services, Inc. Delaware 100%
Trinity Fitting & Flange Group, Inc. Delaware 100%
Trinity Industries do Brasil, Ltda. Brazil 100%
Trinity Industries Buffalo, Inc. Delaware 100%
Trinity Industries Leasing Company Delaware 100%
Trinity Industries de Mexico SA de CV Mexico 100%
Trinity Industries Real Properties, Inc. Delaware 100%
Trinity Industries Transportation, Inc. Texas 100%
Trinity Marine Caruthersville, Inc. Delaware 100%
Trinity Marine Nashville, Inc. Delaware 100%
Trinity Marine Orange, Inc. Delaware 100%
Trinity Marine Port Allen, Inc. Delaware 100%
Trinity Marine Products, Inc. Delaware 100%
Trinity Materials, Inc. Delaware 100%
Trinity Mobile Railcar Repair, Inc. Delaware 100%
Trinity Rail, Inc. Delaware 100%
Trinity Rail Management, Inc. Delaware 100%
Transcisco Trading Company Delaware 100%
Trinity Rail Services, Inc. California 100%
</TABLE>
<PAGE> 1
EXHIBIT (23)
Consent of Independent Auditors
We consent to the incorporation by reference in this Annual Report
(Form 10-K) of Trinity Industries, Inc. of our report dated May 6, 1998,
included in the 1998 Annual Report to Stockholders of Trinity Industries, Inc.
Our audits also included the financial statement schedule of Trinity
Industries, Inc. listed in Item 14(a). This schedule is the responsibility of
the Company's management. Our responsibility is to express an opinion based on
our audits. In our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
We also consent to the incorporation by reference in Post-Effective
Amendment No. 3 to the Registration Statement (Form S-8, No. 2-64813),
Post-Effective Amendment No. 1 to the Registration Statement (Form S-8, No.
33-10937), Post-Effective Amendment No. 1 to the Registration Statement (Form
S-3, No. 33-12526), Amendment No. 1 to the Registration Statement (Form S-3, No.
33-57338), Registration Statement (Form S-8, No. 33-35514), Registration
Statement (Form S-8, No. 33-73026), Post-Effective Amendment No. 1 to the
Registration Statement (Form S-4, No. 33-51709), Post-Effective Amendment No. 1
to the Registration Statement (Form S-4, No. 333-08321) of Trinity Industries,
Inc. and in the related Prospectuses of our reports dated May 6, 1998 and June
24, 1998, with respect to the consolidated financial statements and schedule of
Trinity Industries, Inc. included or incorporated by reference in this Annual
Report (Form 10-K) for the year ended March 31, 1998.
ERNST & YOUNG LLP
Dallas, Texas
June 24, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 3,100
<SECURITIES> 0
<RECEIVABLES> 390,500
<ALLOWANCES> 0
<INVENTORY> 342,600
<CURRENT-ASSETS> 0
<PP&E> 1,201,900
<DEPRECIATION> (475,000)
<TOTAL-ASSETS> 1,573,900
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 43,500
<OTHER-SE> 844,000
<TOTAL-LIABILITY-AND-EQUITY> 1,573,900
<SALES> 0
<TOTAL-REVENUES> 2,473,000
<CGS> 0
<TOTAL-COSTS> 2,054,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,900
<INCOME-PRETAX> 165,900
<INCOME-TAX> 62,200
<INCOME-CONTINUING> 103,700
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 103,700
<EPS-PRIMARY> 2.41
<EPS-DILUTED> 2.36
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS 6-MOS 3-MOS
<FISCAL-YEAR-END> MAR-31-1997 MAR-31-1996 MAR-31-1998 MAR-31-1998
<PERIOD-END> MAR-31-1997 MAR-31-1996 SEP-30-1997 JUN-30-1997
<CASH> 12,200 14,700 3,400 7,600
<SECURITIES> 0 0 0 0
<RECEIVABLES> 236,900 285,200 292,300 291,000
<ALLOWANCES> 0 0 0 0
<INVENTORY> 314,500 329,700 340,700 318,000
<CURRENT-ASSETS> 0 0 0 0
<PP&E> 1,136,500 1,007,100 1,195,200 1,161,600
<DEPRECIATION> (424,900) (369,600) (451,000) (439,600)
<TOTAL-ASSETS> 1,356,400 1,426,600 1,484,800 1,417,600
<CURRENT-LIABILITIES> 0 0 0 0
<BONDS> 0 0 0 0
0 0 0 0
0 0 0 0
<COMMON> 43,000 41,600 43,200 43,100
<OTHER-SE> 766,500 704,400 782,700 792,700
<TOTAL-LIABILITY-AND-EQUITY> 1,356,400 1,426,600 1,484,800 1,417,600
<SALES> 0 0 0 0
<TOTAL-REVENUES> 2,234,300 2,241,700 1,120,400 560,100
<CGS> 0 0 0 0
<TOTAL-COSTS> 1,877,600 1,929,000 917,600 459,200
<OTHER-EXPENSES> 0 0 0 0
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 21,400 30,800 10,200 5,000
<INCOME-PRETAX> 181,300 165,800 41,500 52,600
<INCOME-TAX> 67,600 64,500 15,600 19,400
<INCOME-CONTINUING> 113,700 101,300 25,900 33,200
<DISCONTINUED> 23,800 12,500 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 137,500 113,800 25,900 33,200
<EPS-PRIMARY> 3.24 2.75 0.60 0.77
<EPS-DILUTED> 3.21 2.72 0.59 0.76
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 9-MOS 6-MOS 3-MOS
<FISCAL-YEAR-END> MAR-31-1995 MAR-31-1997 MAR-31-1997 MAR-31-1997
<PERIOD-END> MAR-31-1995 DEC-31-1996 SEP-30-1996 JUN-30-1996
<CASH> 14,800 8,700 18,500 3,700
<SECURITIES> 0 0 0 0
<RECEIVABLES> 263,000 232,900 236,200 242,100
<ALLOWANCES> 0 0 0 0
<INVENTORY> 317,500 307,800 312,500 330,100
<CURRENT-ASSETS> 0 0 0 0
<PP&E> 1,019,700 1,147,900 1,107,000 1,016,300
<DEPRECIATION> (370,700) (418,800) (398,800) (383,000)
<TOTAL-ASSETS> 1,400,500 1,473,200 1,501,800 1,385,800
<CURRENT-LIABILITIES> 0 0 0 0
<BONDS> 0 0 0 0
0 0 0 0
0 0 0 0
<COMMON> 40,200 43,100 43,000 41,700
<OTHER-SE> 601,000 824,800 800,400 732,100
<TOTAL-LIABILITY-AND-EQUITY> 1,400,500 1,473,200 1,501,800 1,385,800
<SALES> 0 0 0 0
<TOTAL-REVENUES> 2,064,300 1,705,400 1,125,000 576,500
<CGS> 0 0 0 0
<TOTAL-COSTS> 1,812,300 1,435,700 946,800 487,000
<OTHER-EXPENSES> 0 0 0 0
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 29,500 17,400 12,400 6,400
<INCOME-PRETAX> 121,600 134,200 98,500 49,100
<INCOME-TAX> 48,200 51,100 37,500 18,600
<INCOME-CONTINUING> 73,400 83,100 61,000 30,500
<DISCONTINUED> 15,700 20,000 7,200 3,300
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 89,100 103,100 68,200 33,800
<EPS-PRIMARY> 2.23 2.44 1.63 0.81
<EPS-DILUTED> 2.20 2.42 1.62 0.80
</TABLE>
<PAGE> 1
EXHIBIT 99.1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 1998
Commission File Number 1-6903
-------------------------
PROFIT SHARING PLAN FOR EMPLOYEES OF TRINITY INDUSTRIES, INC.
AND CERTAIN AFFILIATES
(Full Title of the plan)
TRINITY INDUSTRIES, INC.
(Name of issuer of the securities held pursuant to the plan)
Delaware 75-0225040
(State of Incorporation) (I.R.S. Employer Identification No.)
2525 Stemmons Freeway Dallas, Texas 75207-2401
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code (214) 631-4420
================================================================================
<PAGE> 2
Profit Sharing Plan for Employees of Trinity Industries, Inc.
and Certain Affiliates
Index to Annual Report on Form 11-K
(a) Financial Statements
<TABLE>
<CAPTION>
Description Page
------------------------------------------------ ----
<S> <C>
Report of Independent Auditors . . . . . . . . . . 4
Statements of Financial Condition, With Fund
Information as of March 31, 1998 and 1997. . . . . 5 - 6
Statements of Income and Changes in Plan Equity,
With Fund Information for the Years Ended
March 31, 1998, 1997 and 1996. . . . . . . . . 7 - 9
Notes to Financial Statements. . . . . . . . . . . 10
</TABLE>
(b) Exhibits
<TABLE>
<CAPTION>
Number Title Page
------ --------------------------------- ----
<S> <C> <C>
23 Consent of independent auditors 23
Line-27 a Schedule of Assets Held for
Investment Purposes 24-25
Line-27 d Schedule of Reportable
Transactions 26
</TABLE>
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees have duly caused this Annual Report to be signed by the undersigned
thereunto duly authorized.
Profit Sharing Plan for Employees of Trinity Industries, Inc. and Certain
Affiliates
/s/ John M. Lee
- ------------------------
John M. Lee
Vice President
June 25, 1998
3
<PAGE> 4
Report of Independent Auditors
The Board of Directors
Trinity Industries, Inc.
We have audited the accompanying statements of financial condition of the Profit
Sharing Plan for Employees of Trinity Industries, Inc. and Certain Affiliates
(the "Plan") as of March 31, 1998 and 1997, and the related statements of income
and changes in Plan equity for each of the three years in the period ended March
31, 1998. These financial statements are the responsibility of the Plan'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 condition of the Plan at March 31, 1998 and
1997, and the income and changes in Plan equity for each of the three years in
the period ended March 31, 1998, in conformity with generally accepted
accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplemental schedules
of assets held for investment purposes as of March 31, 1998, and reportable
transactions for the year then ended, are presented for purposes of complying
with the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974, and are
not a required part of the basic financial statements. The fund information in
the statements of financial condition and the statements of income and changes
in Plan equity is presented for purposes of additional analysis rather than to
present the financial condition and income and changes in plan equity of each
fund. The supplemental schedules and fund information have been subjected to the
auditing procedures applied in our audits of the basic financial statements and,
in our opinion, are fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
Dallas, Texas ERNST & YOUNG LLP
June 12, 1998
4
<PAGE> 5
Profit Sharing Plan for Employees
of Trinity Industries, Inc. and Certain Affiliates
Statement of Financial Condition, With Fund Information
March 31, 1998
<TABLE>
<CAPTION>
Putnam Mutual Funds
-------------------------------------------
Guaranteed U. S. Govt.
Stock Investment Growth & Income
Assets Account Account Income Trust Voyager
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash and short-term
investments ......................... $ 311,055 $ 2,187,542 $ 15,001 $ 15,276 $ 14,999
Notes receivable
from participants ................... -- -- -- -- --
Investment in Trinity Industries, Inc.
common stock, at fair value ......... 23,455,410 -- -- -- --
Investment in Halter Marine Group, Inc.
common stock, at fair value ......... 2,771,188 -- -- -- --
Investment in guaranteed
investment contracts, at
contract value ...................... -- 37,478,543 -- -- --
Investment in Putnam mutual
funds, at fair value ................ -- -- 21,241,233 6,845,093 22,909,895
Interest receivable ................... 1,243 195,007 259 123 285
Contribution receivable
from Trinity ........................ 681,292 1,406,200 902,855 264,223 981,319
Contribution receivable
from employees ...................... -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Plan Equity ........................... $27,220,18 $ 41,267,292 $ 22,159,348 $ 7,124,715 $ 23,906,498
============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Participant
Loans Total
------------ ------------
<S> <C> <C>
Cash and short-term
investments ......................... $ 76,521 $ 2,620,394
Notes receivable
from participants ................... 1,266,866 1,266,866
Investment in Trinity Industries, Inc.
common stock, at fair value ......... -- 23,455,410
Investment in Halter Marine Group, Inc.
common stock, at fair value ......... -- 2,771,188
Investment in guaranteed
investment contracts, at
contract value ...................... -- 37,478,543
Investment in Putnam mutual
funds, at fair value ................ -- 50,996,221
Interest receivable ................... 812 197,729
Contribution receivable
from Trinity ........................ -- 4,235,889
Contribution receivable
from employees ...................... 39,993 39,993
------------ ------------
Plan Equity ........................... $ 1,384,192 $123,062,233
============ ============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 6
Profit Sharing Plan for Employees
of Trinity Industries, Inc. and Certain Affiliates
Statement of Financial Condition, With Fund Information
March 31, 1997
<TABLE>
<CAPTION>
Putnam Mutual Funds
---------------------------------------
Guaranteed U. S. Govt.
Stock Investment Growth & Income Participant
Assets Account Account Income Trust Voyager Loans Total
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Cash and short-term
investments ................. $ 8,651 $ 462,966 $ 3,315 $ 5,149 $ 3,309 $ 63,433 $ 546,823
Notes receivable
from participants ........... -- -- -- -- -- 959,157 959,157
Investment in Trinity
common stock, at fair value . 11,707,801 -- -- -- -- -- 11,707,801
Investment in guaranteed
investment contracts, at
contract value .............. -- 34,629,904 -- -- -- -- 34,629,904
Investment in Putnam mutual
funds, at fair value ........ -- -- 12,973,297 5,449,145 12,509,249 -- 30,931,691
Interest receivable ........... 465 209,350 90 30 347 641 210,923
Contribution receivable
from Trinity ................ 676,128 1,779,673 758,561 271,819 906,172 -- 4,392,353
Contribution receivable
from employees .............. 98,032 185,647 106,769 29,855 129,569 -- 549,872
----------- ----------- ----------- ----------- ----------- ----------- -----------
Plan Equity ................... $12,491,077 $37,267,540 $13,842,032 $ 5,755,998 $13,548,646 $ 1,023,231 $83,928,524
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
6
<PAGE> 7
Profit Sharing Plan for Employees
of Trinity Industries, Inc. and Certain Affiliates
Statement of Income and Changes in Plan Equity, With Fund Information
Year Ended March 31, 1998
<TABLE>
<CAPTION>
Putnam Mutual Funds
-----------------------------------------------
Guaranteed U.S. Govt.
Stock Investment Growth & Income
Account Account Income Trust Voyager
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net investment income:
Interest .......................... $ 13,478 $ 2,357,177 $ 3,746 $ 1,695 $ 4,569
Dividends ......................... 280,127 -- 2,294,268 387,367 1,091,255
------------- ------------- ------------- ------------- -------------
293,605 2,357,177 2,298,014 389,062 1,095,824
Net realized gain(loss)
on investments .................... 347,060 -- 238,425 (4,246) 365,269
Unrealized appreciation (depreciation)
of investments .................... 12,455,553 -- 2,388,560 202,427 5,733,735
Contributions:
Employee contribution ............. 2,761,318 4,682,007 3,178,363 924,506 3,627,687
Employer contribution ............. 681,292 1,406,200 902,855 264,223 981,319
------------- ------------- ------------- ------------- -------------
3,442,610 6,088,207 4,081,218 1,188,729 4,609,006
Withdrawals, distributions
and transfers ..................... (1,809,717) (4,445,632) (688,901) (407,255) (1,445,982)
------------- ------------- ------------- ------------- -------------
Net increase in Plan
Equity ............................ 14,729,111 3,999,752 8,317,316 1,368,717 10,357,852
Plan Equity:
Beginning of year ................. 12,491,077 37,267,540 13,842,032 5,755,998 13,548,646
------------- ------------- ------------- ------------- -------------
End of year ....................... $ 27,220,188 $ 41,267,292 $ 22,159,348 $ 7,124,715 $ 23,906,498
============= ============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
Participant
Loans Total
------------- -------------
<S> <C> <C>
Net investment income:
Interest .......................... $ 5,414 $ 2,386,079
Dividends ......................... -- 4,053,017
------------- -------------
5,414 6,439,096
Net realized gain(loss)
on investments .................... -- 946,508
Unrealized appreciation (depreciation)
of investments .................... (1,483) 20,778,792
Contributions:
Employee contribution ............. 457,886 15,631,767
Employer contribution ............. -- 4,235,889
------------- -------------
457,886 19,867,656
Withdrawals, distributions
and transfers ..................... (100,856) (8,898,343)
------------- -------------
Net increase in Plan
Equity ............................ 360,961 39,133,709
Plan Equity:
Beginning of year ................. 1,023,231 83,928,524
------------- -------------
End of year ....................... $ 1,384,192 $ 123,062,233
============= =============
</TABLE>
See accompanying notes to financial statements.
7
<PAGE> 8
Profit Sharing Plan for Employees
of Trinity Industries, Inc. and Certain Affiliates
Statement of Income and Changes in Plan Equity, With Fund Information
Year Ended March 31, 1997
<TABLE>
<CAPTION>
Putnam Mutual Funds
-------------------------------------------
Guaranteed U.S. Govt.
Stock Investment Growth & Income
Account Account Income Trust Voyager
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net investment income:
Interest .......................... $ 4,733 $ 2,618,472 $ 2,184 $ 335,753 $ 3,032
Dividends ......................... 277,519 -- 961,995 -- 642,747
------------ ------------ ------------ ------------ ------------
282,252 2,618,472 964,179 335,753 645,779
Net realized gain(loss)
on investments .................... 26,352 -- 36,728 (29,828) 21,920
Unrealized appreciation (depreciation)
of investments .................... (2,325,333) -- 676,370 (32,663) (928,839)
Contributions:
Employee contribution ............. 2,758,108 5,065,279 2,387,157 953,693 2,751,676
Employer contribution ............. 676,128 1,779,673 758,561 271,819 906,172
------------ ------------ ------------ ------------ ------------
3,434,236 6,844,952 3,145,718 1,225,512 3,657,848
Withdrawals, distributions
and transfers ..................... (1,494,617) (6,515,500) 1,544,735 (190,070) 3,469,873
Halter Marine Group, Inc. ............
divestiture ....................... (1,556,223) (7,473,914) (1,220,040) (658,137) (1,383,931)
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in Plan
equity ............................ (1,633,333) (4,525,990) 5,147,690 650,567 5,482,650
Plan equity:
Beginning of year ................. 14,124,410 41,793,530 8,694,342 5,105,431 8,065,996
------------ ------------ ------------ ------------ ------------
End of year ....................... $ 12,491,077 $ 37,267,540 $ 13,842,032 $ 5,755,998 $ 13,548,646
============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Participant
Loans Total
------------ ------------
<S> <C> <C>
Net investment income:
Interest .......................... $ 7,358 $ 2,971,532
Dividends ......................... -- 1,882,261
------------ ------------
7,358 4,853,793
Net realized gain(loss)
on investments .................... -- 55,172
Unrealized appreciation (depreciation)
of investments .................... 1,483 (2,608,982)
Contributions:
Employee contribution ............. 332,111 14,248,024
Employer contribution ............. -- 4,392,353
------------ ------------
332,111 18,640,377
Withdrawals, distributions
and transfers ..................... (238,145) (3,423,724)
Halter Marine Group, Inc. ............
divestiture ....................... -- (12,292,245)
------------ ------------
Net increase (decrease) in Plan
equity ............................ 102,807 5,224,391
Plan equity:
Beginning of year ................. 920,424 78,704,133
------------ ------------
End of year ....................... $ 1,023,231 $ 83,928,524
============ ============
</TABLE>
See accompanying notes to financial statements.
8
<PAGE> 9
Profit Sharing Plan for Employees
of Trinity Industries, Inc. and Certain Affiliates
Statement of Income and Changes in Plan Equity, With Fund Information
Year Ended March 31, 1996
<TABLE>
<CAPTION>
Putnam Mutual Funds
--------------------------------------------
Guaranteed U.S. Govt.
Stock Investment Growth & Income
Account Account Income Trust Voyager
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net investment income:
Interest .......................... $ 5,982 $ 2,405,823 $ 2,869 $ 293,918 $ 2,195
Dividends ......................... 227,852 -- 443,358 -- 329,350
------------ ------------ ------------ ------------ ------------
233,834 2,405,823 446,227 293,918 331,545
Net realized gain(loss)
on investments .................... -- -- 32,305 (7,249) 19,660
Unrealized appreciation (depreciation)
of investments .................... (788,303) -- 1,204,205 84,158 1,331,542
Contributions:
Employee contribution ............. 2,772,131 6,118,003 1,996,984 1,087,979 2,027,629
Employer contribution ............. 695,789 1,862,773 570,775 284,627 589,330
------------ ------------ ------------ ------------ ------------
3,467,920 7,980,776 2,567,759 1,372,606 2,616,959
Withdrawals, distributions
and transfers ..................... (820,254) (2,627,389) (490,579) (416,335) (314,666)
------------ ------------ ------------ ------------ ------------
Net increase in Plan equity .......... 2,093,197 7,759,210 3,759,917 1,327,098 3,985,040
Plan equity:
Beginning of year ................. 12,031,213 34,034,320 4,934,425 3,778,333 4,080,956
------------ ------------ ------------ ------------ ------------
End of year ....................... $ 14,124,410 $ 41,793,530 $ 8,694,342 $ 5,105,431 $ 8,065,996
============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Participant
Loans Total
------------ ------------
<S> <C> <C>
Net investment income:
Interest .......................... $ 5,447 $ 2,716,234
Dividends ......................... -- 1,000,560
------------ ------------
5,447 3,716,794
Net realized gain(loss)
on investments .................... -- 44,716
Unrealized appreciation (depreciation)
of investments .................... (44) 1,831,558
Contributions:
Employee contribution ............. 289,602 14,292,328
Employer contribution ............. -- 4,003,294
------------ ------------
289,602 18,295,622
Withdrawals, distributions
and transfers ..................... (187,665) (4,856,888)
------------ ------------
Net increase in Plan equity .......... 107,340 19,031,802
Plan equity:
Beginning of year ................. 813,084 59,672,331
------------ ------------
End of year ....................... $ 920,424 $ 78,704,133
============ ============
</TABLE>
See accompanying notes to financial statements.
9
<PAGE> 10
Profit Sharing Plan for Employees
of Trinity Industries, Inc. and Certain Affiliates
Notes to Financial Statements
March 31, 1998
1. Description of the Plan
General - The Profit Sharing Plan for Employees of Trinity Industries, Inc.
and Certain Affiliates (the "Plan") was adopted by the Board of Directors of
Trinity Industries, Inc. (the "Board") on December 11, 1986 and became effective
January 1, 1987, for eligible employees of Trinity Industries, Inc. and Certain
Affiliates (the "Employer"). The Plan was amended and restated effective April
1, 1994. The Plan is a defined contribution plan designed to comply with the
provisions of Title I of the Employee Retirement Income Security Act of 1974
("ERISA"). The following is a brief description of the Plan. Participants should
refer to the Plan document for complete information regarding the Plan. The
Plan's fiscal year end is March 31.
Divestiture - At the close of business on March 31, 1997, Trinity
Industries, Inc. completed the divestiture, which commenced on September 26,
1996, of Halter Marine Group, Inc. ("Halter") by distributing the remaining
shares of Halter stock to its stockholders in the form of a tax-free
distribution. The Plan received .348 shares of Halter common stock for each
share of Trinity Common Stock held in the Plan in the form of a tax-free
distribution.
The financial statements for the year ended March 31, 1997 reflect the
transfer of participants' assets, who were employed by Halter, out of the Plan.
10
<PAGE> 11
Participation - Each employee is eligible to contribute to the Plan on the
first day of the calendar quarter on or immediately following his employment
date with the Company and must meet the following requirements:
o Must be classified as a full-time, part-time, or temporary
employee of Trinity Industries, Inc.; and
o Must be in a unit of employees who are designated as eligible to
participate in the Plan; and
o Must not be included in a unit of employees covered by a
collective bargaining agreement unless benefits under this Plan
were included in an agreement as a result of good faith
bargaining.
Eligible employees automatically become participants and must indicate on
the form or forms provided by the Plan Committee ("Committee") whether or not
they want to make contributions to the Plan. If they elect to contribute, they
will authorize the Employer to make payroll deductions for contributions to the
Plan.
Contributions - For fiscal year 1998 and 1997, each Plan participant agrees
to contribute not less than two percent nor more than fourteen percent of their
compensation in one percent increments as designated by the participant. A
participant's salary reduction may not exceed $10,000, $9,500, and $9,500 per
calendar year ended 1998, 1997, and 1996, respectively. A salary reduction and
contribution agreement must be entered into by each employee as the employee
begins participation in the Plan and may be amended by such employee twice each
year.
Employer matching contributions shall be made if Company earnings are at
least sufficient to pay dividends to stockholders ($0.68, $0.68 and $0.68 per
share for the years ended March 31, 1998, 1997, and 1996, respectively) but in
no event less than $0.33 per share of common stock. If the Employer matching
contribution is made, then each participant with at least five
11
<PAGE> 12
years of service, shall receive an amount equal to 50 percent of that portion of
such participant's employee contribution up to six percent of such participant's
total compensation for the year. If the Employer matching contribution is made,
then each participant with at least one but less than five years of service
shall receive an amount equal to 25 percent of that portion of such
participant's employee contribution up to six percent of such participant's
total compensation for the year. Effective April 1, 1998, if the Employer
matching contribution is made, then each participant shall receive an amount
equal to a percentage of that portion of such participant's employee
contribution up to six percent of such participant's total compensation for the
year under the following schedule:
<TABLE>
<CAPTION>
Percentage of
Years of service Employer Contribution
---------------- ---------------------
<S> <C>
1 but less than 2 25%
2 but less than 3 30%
3 but less than 4 35%
4 but less than 5 40%
5 years 50%
</TABLE>
Employer contributions are net of forfeitures, as defined. Employer
contributions for a given plan year shall be deposited in the Profit Sharing
Trust for Employees of Trinity Industries, Inc. and Certain Affiliates (the
"Trust Fund") as defined below, no later than the date on which the Employer
files its Federal income tax return for such year.
The Employer and Chase Bank of Texas, NA (the "Trustee"), (formerly Texas
Commerce Bank - Dallas), have entered into a Trust Agreement under which the
latter acts as Trustee under the Plan.
In its capacity as Trustee, Chase Bank of Texas, NA invests the employee
contributions and Employer contributions in the following investment options
(hereafter collectively referred to as the "Trust Fund"):
12
<PAGE> 13
(a) Trinity Stock Investment Account ("Stock Account") holds shares of
Employer common stock purchased on behalf of the participants and Halter
common stock by virtue of the tax-free distribution. Idle cash is invested
in interest-bearing accounts until such time as it can be utilized to
purchase Employer common stock.
(b) Guaranteed Investment Contract Account (the "Guaranteed Investment
Account") invests in guaranteed investment contracts issued by various
insurance companies selected annually by the Committee. At March 31, 1998,
the guaranteed investment contracts had guaranteed annual rates of return
of 7.33% (GAC 8672), 6.08% (GAC 20254), and 5.66% (GAC 16795).
At March 31, 1997, the guaranteed investment contracts had guaranteed
annual rates of return of 6.08% (GAC 20254), 8.31% (GAC 7614), 5.15% (GAC
7219), and 7.33% (GAC 8672).
Participant's accounts invested in the Guaranteed Investment Account earn
interest at a rate blended from all of the contracts included in the
Guaranteed Investment Account. The account is credited with earnings on
the underlying investments and charged for plan withdrawals and
administrative expenses charged by the insurance companies. Transfers of
participants accounts to and from the Guaranteed Investment Account are
not permitted. However, during fiscal year 1997, participants were offered
a one-time option to transfer monies out of the Guaranteed Investment
Account and into other fund options.
(c) Putnam Mutual Funds Investment Accounts (the "Putnam Mutual Funds")
invests in three mutual funds selected by the Committee. At March 31, 1998
and 1997, the funds are U.S. Government Income Trust, Growth and Income,
and Voyager.
Participants may elect the extent to which assets are invested in the
options described above in increments of 10 percent or 25 percent.
13
<PAGE> 14
Benefits - Distribution of a participant's account balance is payable upon
retirement at or after age 65, total disability, death, or termination of
employment. Distribution is equal to the salary reduction contribution and
related earnings plus the vested portion of the Employer contribution and
related earnings.
Withdrawal of up to 100 percent of the employee contribution can be made
only to meet "immediate and heavy financial needs" (medical care, college
tuition, the purchase of a principal residence, or to prevent the foreclosure on
a principal residence) as long as the funds are not available for such needs
from other sources. No withdrawal can be made against the earnings on the
employee contributions or against the Employer contribution and related
earnings. These restrictions no longer apply when the participant reaches age 59
1/2.
Loans for "immediate and heavy financial needs" may be made for a minimum
of $1,000 up to a maximum of $50,000, not to exceed 50 percent of the Employee
contribution and related earnings and not to exceed 50 percent of the vested
portion of the Employer contribution and related earnings. Loans are subject to
rules and regulations established by the Committee, as defined in the Plan.
Vesting - The Employer contribution and related earnings (losses) vest to
participants, depending upon the number of years of vesting service, as defined,
completed by such participant as follows:
<TABLE>
<CAPTION>
Years of Service Percentage Vested
---------------- -----------------
<S> <C>
Less than 1 0
1 but less than 2 20
2 but less than 3 40
3 but less than 4 60
4 but less than 5 80
5 or more 100
</TABLE>
Participants are 100 percent vested in their Employer contribution and
allocated portion of related earnings (losses) upon their attainment of age 65
and are always 100 percent vested in their employee contribution and related
earnings (losses) on such contribution.
14
<PAGE> 15
Administration of the Plan - The Plan is administered by the
Committee, consisting of at least three persons who are appointed by the
Board. The members of the Committee serve at the discretion of the Board,
and any committee member who is an employee of the Employer shall not
receive compensation for his services.
A separate account is maintained for each participant. The Plan
provides that account balances for participants are adjusted periodically
as follows:
(a) Employee contributions are generally allocated on a quarterly
basis;
(b) Participant's share of the Employer contribution shall be
allocated to the participant's account as of a date no later than
the last day of the Plan year;
(c) Earnings and appreciation or depreciation in the fair value of
investment assets of the Trust Fund for each calendar quarter shall
be allocated to the accounts of participants, former participants
and beneficiaries who had unpaid balances in their accounts on the
last day of such calendar quarter in proportion to the balances in
such accounts at the beginning of the calendar quarter.
Upon request, distributions shall be made no earlier than the later of
the last day of the calendar quarter in which entitlement occurs or the
date on which the Committee determines the final balances. Distributions
from the Stock Account shall be made in cash unless otherwise designated by
the participant.
Income tax status - The Plan has received determination letters from the
Internal Revenue Service dated November 4, 1994, September 27, 1996, and April
30, 1997 stating that the Plan, including certain amendments thereto, is a
qualified plan under Section 401(a) of the Internal Revenue Code of 1986 (the
"Code") and that the Trust is exempt from federal income tax under Section
501(a) of the Code. The Plan has been amended since receiving its determination
letter; however, the Committee believes that the Plan is designed and is
currently being operated in compliance with applicable requirements of the Code.
The Committee is not aware of any course of action or series of events that have
occurred that might adversely affect the Plan's qualified status.
15
<PAGE> 16
Employee contributions and Employer contributions are not included in the
participant's federal taxable income in the year such contributions are made. A
participant shall not be subject to federal income taxes with respect to
participation in the Plan until the amounts are withdrawn or distributed.
Amendment or termination of the Plan - The Employer may amend the Plan at
any time. However, no amendment, unless made to secure approval of the Internal
Revenue Service or other governmental agency, may operate retroactively to
reduce or divest the then vested interest in the Plan of any participant, former
participant or beneficiary, or to reduce or divest any benefit payable under the
Plan unless all participants, former participants and beneficiaries then having
vested interests or benefit payments affected thereby consent to such amendment.
The Employer may terminate the Plan at any time. Upon complete or partial
termination, the accounts of all participants affected thereby shall become 100
percent vested, and the Committee shall direct the Trustee to distribute the
assets in the Trust Fund, after receipt of any required approval by the Internal
Revenue Service and payment of any expenses properly chargeable thereto, to
participants, former participants, and beneficiaries in proportion to their
respective account balances.
2. Significant Accounting Policies & Events
Investments and investment income - Cash and cash equivalents are valued at
cost which approximates fair value. Investments in the common stock of the
Employer and Halter are valued at their quoted market price. Investment in the
Putnam Mutual Funds are valued at the quoted market prices which represent the
net asset value of shares held by the Plan at year end. The Plan is in
compliance with AICPA Statement of Position 94-4, "Reporting of investment
contracts held by health and welfare benefit plans and defined contribution
pension plans," with fair value approximating the recorded contract value for
the guaranteed investment contracts.
Security transactions are recorded on a trade date basis. The statements of
income and changes in Plan equity include net unrealized appreciation or
depreciation in fair value on investments. The Plan's financial statements are
prepared on an accrual basis.
16
<PAGE> 17
Realized gains and losses - Realized gains and losses have been calculated
using historical cost (first in, first out).
Use of estimates in the preparation of financial statements - The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts in the financial statements and accompanying notes. Actual
results could differ from those estimates.
3. Investments
Investments are as follows:
<TABLE>
<CAPTION>
March 31, 1998 March 31, 1997
--------------------------- ---------------------------
Cost Fair value Cost Fair value
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Trinity Industries,
Inc. common
stock $ 9,856,316 $ 23,455,410* $ 11,220,350 $ 11,707,801*
Halter Marine
Group, Inc.
common stock $ 3,427,278 $ 2,771,188 -- --
Guaranteed investment
contracts
GAC 20254 16,156,699 16,156,699* 15,230,674 15,230,674*
GAC 8672 4,167,290 4,167,290 1,000,000 1,000,000
GAC 16795 17,154,554 17,154,554* -- --
GAC 7219 -- -- 4,324,900 4,324,900*
GAC 7614 -- -- 14,074,330 14,074,330*
------------ ------------ ------------ ------------
37,478,543 37,478,543 34,629,904 34,629,904
Putnam mutual funds
U.S. Govt
Income Trust 6,825,834 6,845,093* 5,632,314 5,449,145*
Growth & Income 16,789,885 21,241,233* 10,910,509 12,973,297*
Voyager 16,375,982 22,909,895* 11,709,070 12,509,249*
------------ ------------ ------------ ------------
39,991,701 50,996,221 28,251,893 30,931,691
Participant loans 1,266,866 1,266,866 957,674 959,157
------------ ------------ ------------ ------------
$ 92,020,704 $115,968,228 $ 75,059,821 $ 78,228,553
============ ============ ============ ============
</TABLE>
* Investment represents 5 percent or more of the fair value of total assets.
17
<PAGE> 18
4. Reconciliation of Financial Statements to the Form 5500
The following is a reconciliation of Plan equity per the financial
statements to the Form 5500:
<TABLE>
<CAPTION>
March 31
1998 1997
------------- -------------
<S> <C> <C>
Plan equity per the financial statements $ 123,062,233 $ 83,928,524
Amounts allocated to withdrawing participants (2,792,574) (2,030,571)
------------- -------------
Plan equity per the Form 5500 $ 120,269,659 $ 81,897,953
============= =============
</TABLE>
The following is a reconciliation of withdrawals, distributions and
transfers per the financial statements to the Form 5500:
<TABLE>
<CAPTION>
Year Ended March 31
1998
-----------
<S> <C>
Withdrawals, distributions and transfers
per the financial statements $ 8,898,343
Amounts allocated to withdrawing participants at
end of year 2,792,574
Amounts allocated to withdrawing participants at
beginning of year (2,030,571)
-----------
Withdrawals, distributions and transfers
per the Form 5500 $ 9,660,346
===========
</TABLE>
Amounts allocated to withdrawing participants are recorded on the Form 5500
for withdrawals that have been processed and approved for payment prior to March
31 but not yet paid as of that date.
18
<PAGE> 19
5. Unrealized Appreciation (Depreciation) of Investments
Unrealized appreciation (depreciation) of investments in Trinity and Halter
common stock, Putnam mutual funds, and participant loans for the years ended
March 31, 1998, 1997, and 1996 were determined as follows:
<TABLE>
<CAPTION>
Net
Investments Investments increase
at fair value at cost (decrease)
------------- ------------ ------------
<S> <C> <C> <C>
March 31, 1998
Trinity common stock
March 31, 1998 $ 23,455,410 $ 9,856,316 $ 13,599,094
March 31, 1997 11,707,801 11,220,350 487,451
------------ ------------ ------------
11,747,609 (1,364,034) 13,111,643
Halter common stock
March 31, 1998 $ 2,771,188 $ 3,427,278 $ (656,090)
March 31, 1997 -- -- --
------------ ------------ ------------
2,771,188 3,427,278 (656,090)
Putnam mutual funds
March 31, 1998 50,996,221 39,991,701 11,004,520
March 31, 1997 30,931,691 28,251,893 2,679,798
------------ ------------ ------------
20,064,530 11,739,808 8,324,722
Participant loans
March 31, 1998 1,266,866 1,266,866 --
March 31, 1997 959,157 957,674 1,483
------------ ------------ ------------
307,709 309,192 (1,483)
------------
Unrealized appreciation
of investments $ 20,778,792
============
</TABLE>
19
<PAGE> 20
<TABLE>
<S> <C> <C> <C>
March 31, 1997
Trinity common stock
March 31, 1997 $ 11,707,801 $ 11,220,350 $ 487,451
March 31, 1996 13,156,629 10,343,846 2,812,783
------------ ------------ ------------
(1,448,828) 876,504 (2,325,332)
Putnam mutual funds
March 31, 1997 30,931,691 28,251,893 2,679,798
March 31, 1996 19,569,446 16,604,515 2,964,931
------------ ------------ ------------
11,362,245 11,647,378 (285,133)
Participant loans
March 31, 1997 959,157 957,674 1,483
March 31, 1996 863,724 863,724 --
------------ ------------ ------------
95,433 93,950 1,483
------------
Unrealized depreciation
of investments $ (2,608,982)
============
March 31, 1996
Trinity common stock
March 31, 1996 $ 13,156,629 $ 10,343,846 $ 2,812,783
March 31, 1995 11,192,467 7,591,381 3,601,086
------------ ------------ ------------
1,964,162 2,752,465 (788,303)
Putnam mutual funds
March 31, 1996 19,569,446 16,604,515 2,964,931
March 31, 1995 11,245,201 10,900,175 345,026
------------ ------------ ------------
8,324,245 5,704,340 2,619,905
Participant loans
March 31, 1996 863,724 864,088 (364)
March 31, 1995 768,096 768,416 (320)
------------ ------------ ------------
95,628 95,672 (44)
Unrealized appreciation
of investments $ 1,831,558
============
</TABLE>
20
<PAGE> 21
6. Expenses
The expenses incurred by the Trustee in the performance of its duties,
including the Trustee's compensation and the services of the recordkeeper, shall
be paid by the Plan unless paid by the Employer. The Employer paid $526,177,
$187,993, and $300,751 for recordkeeping and trustee fees on behalf of the Plan
for the fiscal years ended March 31, 1998, 1997, and 1996, respectively.
7. Year 2000 (unaudited)
The Employer has developed a plan to modify its internal information
technology to be ready for the year 2000 and has begun converting critical data
processing systems. The project also includes determining whether third party
service providers have reasonable plans in place to become year 2000 compliant.
The Employer currently expects the project to be substantially complete by early
1999. The Employer does not expect this project to have a significant effect on
plan operations.
21
<PAGE> 22
Index to Exhibits
<TABLE>
<CAPTION>
Number Title Page
------ --------------------------------- ----
<S> <C> <C>
23 Consent of independent auditors 23
Line-27 a Schedule of Assets Held for
Investment Purposes 24-25
Line-27 d Schedule of Reportable
Transactions 26
</TABLE>
22
<PAGE> 23
Exhibit 23
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in Post Effective Amendment No.
1 to the Registration Statement (Form S-8, File No. 33-10937), pertaining to the
Profit Sharing Plan for Employees of Trinity Industries, Inc. and Certain
Affiliates and in the related Prospectus of our report dated June 12, 1998, with
respect to the financial statements and supplemental schedules of the Profit
Sharing Plan for Employees of Trinity Industries, Inc. and Certain Affiliates
included in this Annual Report (Form 11-K) for the year ended March 31, 1998.
ERNST & YOUNG LLP
Dallas, Texas
June 24, 1998
23
<PAGE> 24
Profit Sharing Plan for Employees
of Trinity Industries, Inc. And Certain Affiliates
Line 27 a - Assets Held for Investment Purposes
March 31, 1998
<TABLE>
<CAPTION>
Description
of Current
Identity Investment Cost value
- ------------------------ ------------ ------------ -----------
<S> <C> <C> <C>
Chase Bank of Texas* short-term
money market $ 2,631,469 $ 2,631,469
Trinity Industries, Inc.* common stock; 9,856,316 23,455,410
426,462 shares
Halter Marine Group, Inc. common stock; 3,427,278 2,771,188
174,563 shares
John Hancock Mutual Life guaranteed investment
contract; GAC 8672;
7.33% 4,167,290 4,167,290
Travelers guaranteed investment
contract; GAC 16795;
5.66% 17,154,554 17,154,554
Metropolitan Life Ins Co. guaranteed investment
contract; GAC 20254;
6.08% 16,156,699 16,156,699
---------- ----------
37,478,543 37,478,543
</TABLE>
<PAGE> 25
Line 27 a - Assets Held for Investment Purposes (Cont'd)
Putnam
U. S. Govt. Income
Trust; mutual fund;
594,704 shares 6,825,834 6,845,093
Growth & Income;
mutual fund;
1,308,932 shares 16,789,885 21,241,233
Voyager;
mutual fund;
1,409,471 shares 16,375,982 22,909,895
----------- ------------
39,991,701 50,996,221
Participants* Loans with an
interest rate
of 10.5% -- 1,266,866
----------- ------------
$93,385,307 $118,599,697
* Party-in-interest
25
<PAGE> 26
Profit Sharing Plan for Employees
of Trinity Industries, Inc. and Certain Affiliates
Line 27 d - Reportable Transactions
Year Ended March 31, 1998
<TABLE>
<CAPTION>
(a) (b) (c) (d) (g) (h) (i)
Current
Value of
Identity of Purchase Selling Cost of Asset on Net Gain
Party Involved Asset Price Price Asset Trans. Date or (Loss)
- -------------- ----- ---------- ----------- ----------- ----------- ---------
Category (i)-Individual transactions in excess of 5% of Plan Assets
<S> <C> <C> <C> <C> <C> <C>
Travelers GAC 16795 17,000,000 -- 17,000,000 17,000,000 --
John Hancock
Mutual Life GAC 7219 -- 4,491,668 4,491,668 4,491,668 --
John Hancock
Mutual Life GAC 7614 -- 14,946,788 14,946,788 14,946,788 --
Category (iii)-Series of securities transactions
in excess of 5% of Plan Assets
Travelers GAC 16795 17,154,554 -- 17,154,554 17,154,554 --
John Hancock
Mutual Life GAC 7219 166,769 -- 166,769 166,769 --
-- 4,491,668 4,491,668 4,491,668 --
John Hancock
Mutual Life GAC 7614 872,458 -- 872,458 872,458 --
-- 14,946,788 14,946,788 14,946,788 --
Putnam Investments,
Inc. Growth &
Income 6,685,599 -- 6,685,599 6,685,599 --
-- 1,044,648 806,223 1,044,648 238,425
Voyager 5,957,087 -- 5,957,087 5,957,087 --
-- 1,655,444 1,290,175 1,655,444 365,269
Chase Bank of Texas*
Short-term
Money market 28,254,162 -- 28,254,162 28,254,162 --
-- 26,169,516 26,169,516 26,169,516 --
</TABLE>
There were no category (ii) or (iv) reportable transactions.
Columns (e) and (f) are not applicable.
* Party-in-interest
26
