TRINITY INDUSTRIES INC
10-Qs and 10-Ks
PROXIES
Table of Contents
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C. 20549
Washington, D.C. 20549
Form 10-K
| (Mark One) | ||
|
þ
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the fiscal year ended December 31, 2010 | ||
|
OR
|
||
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
Commission File Number 1-6903
Trinity Industries,
Inc.
(Exact name of registrant as
specified in its charter)
|
Delaware
(State or Other Jurisdiction of Incorporation or Organization) |
75-0225040
(I.R.S. Employer Identification No.) |
|
|
2525 Stemmons Freeway,
Dallas, Texas (Address of principal executive offices) |
75207-2401
(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, Inc. |
Securities registered Pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the Registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes
þ
No
o
Indicate by check mark if the Registrant is not required to
file reports pursuant to Section 13 or Section 15(d)
of the
Act. Yes
o
No
þ
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 (or for such shorter period that the
Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past
90 days. Yes
þ
No
o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
(§ 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant
was required to submit and post such files). Yes
þ
No
o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
(§ 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of Registrant’s
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.
o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
“large accelerated filer,” “accelerated
filer” and “smaller reporting company” in
Rule 12b-2
of the Exchange Act. (Check one):
| Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o |
(Do not check if a smaller reporting company)
Indicate by check mark whether the Registrant is a shell
company (as defined in
Rule 12b-2
of the Exchange
Act). Yes
o
No
þ
The aggregate market value of voting and non-voting common
equity held by non-affiliates computed by reference to the price
at which the common equity was last sold as of the last business
day of the Registrant’s most recently completed second
fiscal quarter (June 30, 2010) was
$1,374.4 million.
At January 31, 2011 the number of shares of common stock
outstanding was 79,765,319.
The information required by Part III of this report, to
the extent not set forth herein, is incorporated by reference
from the Registrant’s definitive 2011 Proxy Statement.
TRINITY
INDUSTRIES, INC.
FORM 10-K
TABLE OF
CONTENTS
Table of Contents
PART I
| Item 1. | Business. |
General Development of Business.
Trinity
Industries, Inc. and its consolidated subsidiaries,
(“Trinity”, “Company”, “we”, or
“our”) headquartered in Dallas, Texas, is a
multi-industry company that owns a variety of market-leading
businesses which provide products and services to the
industrial, energy, transportation, and construction sectors.
Trinity was incorporated in 1933.
Trinity became a Delaware Corporation in 1987.
Our
principal executive offices are located at 2525 Stemmons
Freeway, Dallas, Texas
75207-2401,
our telephone number is
214-631-4420,
and our Internet website address is www.trin.net.
Financial Information About Industry
Segments.
Financial information about our industry
segments for the years ended December 31, 2010, 2009, and
2008 is presented in Part II, Item 7
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations.”
Narrative Description of Business.
We manufacture
and sell railcars and railcar parts in addition to leasing
railcars to our customers through our integrated business model,
which includes a captive leasing business, Trinity Industries
Leasing Company (“TILC”). We also manufacture and sell
inland barges, structural wind towers, concrete and aggregates,
highway products, tank containers, and a variety of steel parts
and components.
We serve our customers through the following five business
groups:
Rail Group.
Through wholly-owned
subsidiaries, our Rail Group is the leading freight railcar
manufacturer in North America (“Trinity Rail Group” or
“Rail Group”). We provide a full complement of
railcars used for transporting a wide variety of liquids, gases,
and dry cargo.
Trinity Rail Group offers a complete array of railcar solutions
to our customers. We manufacture a full line of railcars,
including:
| • | Auto Carrier Cars — Auto carrier cars transport automobiles and a variety of other vehicles. |
| • | Box Cars — Box cars transport products such as food products, auto parts, wood products, and paper. |
| • | Gondola Cars — Rotary gondola cars are primarily used for coal service. Top-loading gondola cars transport a variety of other heavy bulk commodities such as scrap metals and steel products. |
| • | Hopper Cars — Covered hopper cars carry cargo such as grain, distillers dried grain, dry fertilizer, plastic, cement, and sand. Open-top hoppers are most often used to haul coal and aggregates. |
| • | Intermodal Cars — Intermodal cars transport intermodal containers and trailers, which are generally interchangeable among railcars, trucks, and ships. |
| • | Specialty Cars — Specialty cars are designed to address the special needs of a particular industry or customer, such as waste-hauling gondolas, side dump cars, and pressure differential cars used to haul fine grain food products such as starch and flour. |
| • | Tank Cars — Tank cars transport products such as liquefied petroleum products, alcohol and renewable fuels, liquid fertilizer, and food and grain products such as vegetable oil and corn syrup. |
We produce the widest range of railcars in the industry allowing
us to capitalize on changing industry trends and developing
market opportunities. We also provide a variety of railcar
components primarily for the North American market from our
plants in the United States and Mexico. We manufacture and sell
railcar parts used in manufacturing and repairing railcars, such
as couplers, axles, and other devices. We also have two repair
and coating facilities located in Texas.
Our customers include railroads, leasing companies, and
industrial shippers of products, such as utilities,
petrochemical companies, grain shippers, agricultural product
companies, and major construction and industrial companies. We
compete against five major railcar manufacturers in the North
American market.
1
Table of Contents
For the year ended December 31, 2010, we shipped
approximately 4,750 railcars, or approximately 29% of total
North American railcar shipments. As of December 31, 2010,
our Rail Group backlog was approximately $457.6 million
consisting of approximately 5,960 railcars, including
$111.0 million in orders from the Railcar Leasing and
Management Services Group (“Leasing Group”). The total
amount of orders in our backlog dedicated to the Leasing Group
was supported by lease commitments with external customers.
We hold patents of varying duration for use in our manufacture
of railcars and components. We believe patents offer a marketing
advantage in certain circumstances. No material revenues are
received from licensing of these patents.
Railcar Leasing and Management Services
Group.
Through wholly-owned subsidiaries, primarily
TILC, and a majority owned subsidiary, TRIP Rail Holdings LLC
(“TRIP Holdings”), we provide operating leases for
tank cars and freight cars. As a provider of leasing and
management services, our Leasing Group is an important strategic
resource that uniquely links our Rail Group with our customers.
Trinity’s Rail Group and TILC coordinate sales and
marketing activities under the registered trade name
TrinityRail
®
,
thereby providing a single point of contact for railroads and
shippers seeking solutions to their rail equipment and service
needs.
Our railcars are leased to industrial shippers and railroads.
These companies operate in the petroleum, chemical,
agricultural, and energy industries, among others. Substantially
all of our railcars are manufactured by our Rail Group. The
terms of our railcar leases generally vary from one to twenty
years and provide for fixed monthly rentals. A small percentage
of our fleet is leased on a per diem basis. As of
December 31, 2010, the lease fleet of our wholly-owned
subsidiaries included approximately 51,910 owned or leased
railcars that were 99.3% utilized. Of this total, approximately
40,690 railcars were owned by TILC and approximately 11,220
railcars were financed in sale leaseback transactions. TRIP
Holdings’ lease fleet included approximately 14,700 owned
railcars that were 99.9% utilized as of December 31, 2010.
In addition, we manage railcar fleets on behalf of third
parties. We believe our railcar fleet management services
complement our leasing business by generating stable fee income,
strengthening customer relationships, and enhancing the view of
Trinity as a leading provider of railcar products and services.
Our railcar leasing business competes against a number of
well-established entities that are also in the business of
leasing railcars.
Construction Products Group.
Through
wholly-owned subsidiaries, our Construction Products Group
produces concrete and aggregates and manufactures highway
products as well as other steel products for infrastructure
related projects. Many of these lines of business are seasonal
and revenues are impacted by weather conditions.
We are a leader in the supply of ready mix concrete in certain
areas of Texas with additional plant locations in Arkansas. Our
customers for concrete include contractors and subcontractors in
the construction and foundation industry who are located near
our plant locations. We also distribute construction aggregates,
such as crushed stone, sand and gravel, asphalt rock, and
recycled concrete in several regions of Texas as well as smaller
operations in Arkansas and Louisiana. Our aggregates customers
are primarily other concrete producers and paving contractors.
We compete with ready mix concrete producers and aggregate
producers located in the regions where we operate.
Our highway products business is the leading full line producer
of guardrails, crash cushions, and other protective barriers
that dissipate the force of impact in collisions between
vehicles and fixed roadside objects in North America. Based on
revenues, we believe we are the largest highway guardrail
manufacturer in the United States, with a comprehensive
nationwide guardrail supply network. The Federal Highway
Administration, which determines which products are eligible for
federal funds for highway projects, has approved most of our
products as acceptable permanent and construction zone highway
hardware according to requirements of the National Cooperative
Highway Research Program.
Our crash cushions and other protective barriers include
multiple proprietary products manufactured through various
product license agreements with certain public and private
research organizations and inventors. We hold patents and are a
licensee for certain of our guardrail and end-treatment products
which enhances our competitive position for these products.
2
Table of Contents
We sell highway products in Canada, Mexico, and all 50 of the
United States. We compete against several national and regional
guardrail manufacturers. We also export our proprietary highway
products to more than 50 countries worldwide.
Inland Barge Group.
Through wholly-owned
subsidiaries, our Inland Barge Group is the leading manufacturer
of inland barges in the United States and the largest
manufacturer of fiberglass barge covers. We manufacture a
variety of dry cargo barges, such as deck barges, and open or
covered hopper barges that transport various commodities, such
as grain, coal, and aggregates. We also manufacture tank barges
used to transport liquid products. Our fiberglass reinforced
lift covers are used primarily for grain barges. Our four barge
manufacturing facilities are located along the United States
inland river systems, allowing for rapid delivery to our
customers. Our Inland Barge Group backlog as of
December 31, 2010 was approximately $508.0 million.
Our primary Inland Barge customers are commercial marine
transportation companies. Many companies have the capability to
enter into, and from time to time do enter into, the inland
barge manufacturing business. We strive to compete through
operational efficiency, timely delivery, and quality products.
Energy Equipment Group.
Through wholly-owned
subsidiaries, our Energy Equipment Group manufactures structural
wind towers, tank containers and tank heads for pressure
vessels, tank heads for non-pressure vessels, propane tanks, and
utility, traffic, and lighting structures, along with power
transmission poles.
We are a leading manufacturer of structural wind towers in North
America for use in the wind energy market. These towers are
manufactured in the United States and Mexico to customer
specifications and installed by our customers. Our customers are
generally turbine producers. Our structural wind towers backlog
as of December 31, 2010 was approximately $1.0 billion.
We are a leading manufacturer of tank containers and tank heads
for pressure and non-pressure vessels. We manufacture tanks in
the United States and Mexico. We market a portion of our
products in Mexico under the brand name of
TATSA
®
.
We manufacture tank heads, which are pressed metal components
used in the manufacturing of many of our finished products as
well as pressure rated or non-pressure rated tank heads,
depending on their intended use. We use a significant portion of
the tank heads we manufacture in the production of our tank cars
and containers. We also sell our tank heads to a broad range of
other manufacturers. There is strong competition in the tank
heads business.
We manufacture propane tanks that are used by industrial plants,
utilities, residences, and small businesses in suburban and
rural areas. We also manufacture fertilizer containers for bulk
storage, farm storage, and the application and distribution of
anhydrous ammonia. Our propane tank products range from
nine-gallon tanks for motor fuel use to 1,800,000-gallon bulk
storage spheres. We sell our propane tanks to propane dealers
and large industrial users. In the United States we generally
deliver the containers to our customers who install and fill the
containers. Our competitors include large and small
manufacturers of tanks.
We manufacture utility, traffic, and lighting structures, which
are used principally by municipalities, and various other local
and state governmental entities. We also manufacture
transmission structures to be used in the erection of private
and public electric transmission lines. These structures are
manufactured in the United States and Mexico to customer
specifications and installed by our customers.
There are a number of well-established entities that actively
compete with us in the business of manufacturing energy
equipment including several domestic and foreign manufacturers
of structural wind towers for the North American market.
All Other.
All Other includes our captive
insurance and transportation companies; legal, environmental,
and upkeep costs associated with non-operating facilities; other
peripheral businesses; and the change in market valuation
related to ineffective commodity hedges.
Foreign Operations.
Trinity’s foreign
operations are primarily located in Mexico. Continuing
operations included sales to foreign customers, primarily in
Mexico, which represented 6.4%, 4.4%, and 3.7% of our
consolidated revenues for the years ended December 31,
2010, 2009, and 2008, respectively. As of December 31,
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Table of Contents
2010 and 2009, we had approximately 3.5% and 5.1%, respectively,
of our long-lived assets not held for sale located outside the
United States.
We manufacture railcars, propane tank containers, tank heads,
structural wind towers, and other parts at our Mexico facilities
for local consumption as well as for export to the United States
and other countries. Any material change in the quotas,
regulations, or duties on imports imposed by the United States
government and its agencies or on exports imposed by the
government of Mexico or its agencies could adversely affect our
operations in Mexico. Our foreign activities are also subject to
various other risks of doing business in foreign countries,
including currency fluctuations, political changes, changes in
laws and regulations, social unrest, and economic instability.
Although our operations have not been materially affected by any
of these factors to date, any substantial disruption of business
as it is currently conducted could adversely affect our
operations at least in the short term.
Backlog.
As of December 31, 2010 and 2009, our
backlog was approximately as follows:
| As of December 31, | ||||||||
| 2010 | 2009 | |||||||
| (in millions) | ||||||||
|
Rail Group
|
||||||||
|
External Customers
|
$ | 346.6 | $ | 75.6 | ||||
|
Leasing Group
|
111.0 | 119.8 | ||||||
| $ | 457.6 | $ | 195.4 | |||||
|
Inland Barge
|
$ | 508.0 | $ | 318.8 | ||||
|
Structural wind towers
|
$ | 1,000.0 | $ | 1,100.0 | ||||
The total amount of orders in our backlog dedicated to the
Leasing Group was supported by lease commitments with external
customers.
Approximately 85% of our railcar backlog is expected to be
delivered in the 12 months ending December 31, 2011
with the remainder in 2012. The majority of our backlog for
barges is expected to be delivered in the 12 months ending
December 31, 2011. For multi-year barge orders, the
deliveries for 2011 are included in the backlog at this time;
deliveries beyond 2011 are not included in the backlog if
specific production quantities for future years have not been
determined. Approximately 25% of our backlog for structural wind
towers is expected to be delivered in 2011 with the remainder to
be delivered evenly over 2012 and 2013.
Marketing.
We sell substantially all of our products
and services through our own sales personnel operating from
offices in multiple locations in the United States as well as
Canada, Mexico, the United Kingdom, Singapore, and Sweden. We
also use independent sales representatives to a limited extent.
Raw Materials and Suppliers.
Railcar Specialty Components and
Steel.
Products manufactured at our railcar
manufacturing facilities require a significant supply of raw
materials such as steel, as well as numerous specialty
components such as brakes, wheels, axles, side frames, bolsters,
and bearings. Specialty components and steel purchased from
third parties comprise approximately 60% of the production cost
of each railcar. Although the number of alternative suppliers of
specialty components has declined in recent years, at least two
suppliers continue to produce most components. However, any
unanticipated interruption in the supply chain of specialty
components would have an impact on both our margins and
production schedules.
The principal material used in our Rail, Inland Barge, and
Energy Equipment Groups is steel. During 2010, the supply of
steel was sufficient to support our manufacturing requirements.
Market steel prices continue to exhibit short periods of
volatility and ended 2010 significantly higher than 2009.
Generally, we are able to mitigate a majority of this volatility
through contract-specific purchasing practices and existing
supplier commitments. Steel prices may continue to be volatile
in part as a result of scrap surcharges assessed by steel mills
and other market factors. We often use contractual price
escalation provisions and other arrangements with our customers
to reduce the impact of this volatility, thus minimizing the
effect on our operating margins for the year.
4
Table of Contents
In general, we believe there is enough capacity in the supply
industry to meet current production levels. We believe the
existing contracts and other relationships we have in place will
meet our current production forecasts. However, any
unanticipated interruption in our supply chain could have an
adverse impact on both our margins and production schedules.
Aggregates.
Aggregates can be found
throughout the United States, and many producers exist
nationwide. However, as a general rule, shipments from an
individual quarry are limited in geographic scope because the
cost of transporting processed aggregates to customers is high
in relation to the value of the product itself. We operate 13
mining facilities strategically located in Texas, Arkansas, and
Louisiana to fulfill some of our needs for aggregates.
Cement.
Cement required for the concrete and
aggregates business is received primarily from Texas and
overseas. In 2010, the supply of cement was sufficient in our
markets to meet demand. We have not experienced difficulties
supplying concrete to our customers.
Employees.
The following table presents the
approximate headcount breakdown of employees by business group:
|
December 31,
|
||||
| Business Group | 2010 | |||
|
Rail Group
|
2,610 | |||
|
Construction Products Group
|
1,710 | |||
|
Inland Barge Group
|
1,730 | |||
|
Energy Equipment Group
|
2,590 | |||
|
Railcar Leasing and Management Services Group
|
100 | |||
|
All Other
|
290 | |||
|
Corporate
|
240 | |||
| 9,270 | ||||
As of December 31, 2010, approximately 6,310 employees
were employed in the United States and approximately
2,960 employees were employed in Mexico.
Acquisitions and Divestitures.
See Note 2 of
the Notes to Consolidated Financial Statements.
Environmental Matters.
We are subject to
comprehensive federal, state, local, and foreign environmental
laws and regulations relating to the release or discharge of
materials into the environment; the management, use, processing,
handling, storage, transport, and disposal of hazardous and
non-hazardous waste and materials; and other activities relating
to the protection of human health and the environment. Such laws
and regulations not only expose us to liability for our own
acts, but also may expose us to liability for the acts of others
or for our actions which were in compliance with all applicable
laws at the time these actions were taken. In addition, such
laws may require significant expenditures to achieve compliance,
and are frequently modified or revised to impose new
obligations. Civil and criminal fines and penalties may be
imposed for non-compliance with these environmental laws and
regulations. Our operations that involve hazardous materials
also raise potential risks of liability under common law.
Environmental operating permits are, or may be, required for our
operations under these laws and regulations. These operating
permits are subject to modification, renewal, and revocation. We
regularly monitor and review our operations, procedures, and
policies for compliance with our operating permits and related
laws and regulations. Despite these compliance efforts, risk of
environmental liability is inherent in the operation of our
businesses, as it is with other companies engaged in similar
businesses. We believe that our operations and facilities,
whether owned, managed, or leased, are in substantial compliance
with applicable environmental laws and regulations and that any
non-compliance is not likely to have a material adverse effect
on our operations or financial condition.
However, future events, such as changes in, or modified
interpretations of, existing environmental laws and regulations
or enforcement policies, or further investigation or evaluation
of the potential health hazards associated with our products,
business activities, or properties, may give rise to additional
compliance and other costs that could have a material adverse
effect on our financial condition and operations.
5
Table of Contents
In addition to environmental laws, the transportation of
commodities by railcar or barge raises potential risks in the
event of a derailment, spill, or other accident. Generally,
liability under existing law in the United States for a
derailment, spill, or other accident depends on the negligence
of the party, such as the railroad, the shipper, or the
manufacturer of the barge, railcar, or its components. However,
under certain circumstances strict liability concepts may apply.
Governmental Regulation.
Railcar Industry.
The primary regulatory and
industry authorities involved in the regulation of the railcar
industry are the United States Environmental Protection Agency;
the Research and Special Programs Administration and the Federal
Railroad Administration, both divisions of the United States
Department of Transportation; and the Association of American
Railroads.
These organizations establish rules and regulations for the
railcar industry and rail interchange, including construction
specifications and standards for the design and manufacture of
railcars and railcar parts; mechanical, maintenance, and related
standards for railcars; safety of railroad equipment, tracks,
and operations; and packaging and transportation of hazardous or
toxic materials.
We believe that our operations are in substantial compliance
with these regulations. We cannot predict whether any future
changes in these rules and regulations could cause added
compliance costs that could have a material adverse effect on
our financial condition or operations.
Inland Barge Industry.
The primary regulatory
and industry authorities involved in the regulation of the
inland barge industry are the United States Coast Guard; the
United States National Transportation Safety Board; the United
States Customs Service; the Maritime Administration of the
United States Department of Transportation; and private industry
organizations such as the American Bureau of Shipping. These
organizations establish safety criteria, investigate vessel
accidents, and recommend improved safety standards. Violations
of these laws and related regulations can result in substantial
civil and criminal penalties as well as injunctions curtailing
operations.
We believe that our operations are in substantial compliance
with applicable laws and regulations. We cannot predict whether
future changes that affect compliance costs would have a
material adverse effect on our financial condition and
operations.
Highway Products.
The primary regulatory and
industry authorities involved in the regulation of highway
products business are the United States Department of
Transportation, the Federal Highway Administration, and various
state highway departments.
These organizations establish certain standards and
specifications related to the manufacture of our highway
products. If our products were found not to be in compliance
with these standards and specifications, we would be required to
re-qualify our products for installation on state and national
highways.
We believe that our highway products are in substantial
compliance with all applicable standards and specifications. We
cannot predict whether future changes in these standards and
specifications would have a material adverse effect on our
financial condition and operations.
Occupational Safety and Health Administration and Similar
Regulations.
Our operations are subject to
regulation of health and safety matters by the United States
Occupational Safety and Health Administration and the United
States Mine Safety and Health Administration. We believe that we
employ appropriate precautions to protect our employees and
others from workplace injuries and harmful exposure to materials
handled and managed at our facilities. However, claims that may
be asserted against us for work-related illnesses or injury and
the further adoption of occupational and mine safety and health
regulations in the United States or in foreign jurisdictions in
which we operate could increase our operating costs. While we do
not anticipate having to make material expenditures in order to
remain in substantial compliance with health and safety laws and
regulations, we are unable to predict the ultimate cost of
compliance. Accordingly, there can be no assurance that we will
not become involved in future litigation or other proceedings or
if we were found to be responsible or liable in any litigation
or proceeding, that such costs would not be material to us.
6
Table of Contents
Other Matters.
To date, we have not suffered
any material shortages with respect to obtaining sufficient
energy supplies to operate our various plant facilities or
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 a
material adverse effect upon our ability to conduct our
business. The likelihood of such an occurrence or its duration,
and its ultimate effect on our operations, cannot be reasonably
predicted at this time.
Executive Officers of the Company.
The following table sets forth the names and ages of all of our
executive officers and other corporate officers, their positions
and offices presently held by them, the year each person first
became an officer, and the term of each person’s office:
|
Officer
|
Term
|
|||||||||||
| Name(1) | Age | Office | Since | Expires | ||||||||
|
Timothy R.
Wallace
*
|
57 | Chairman, Chief Executive Officer, and President | 1985 | May 2011 | ||||||||
|
James E.
Perry
*
|
39 | Vice President and Chief Financial Officer | 2005 | May 2011 | ||||||||
|
William A. McWhirter
II
*
|
46 | Senior Vice President and Group President | 2005 | May 2011 | ||||||||
|
D. Stephen
Menzies
*
|
55 | Senior Vice President and Group President | 2001 | May 2011 | ||||||||
|
Antonio
Carrillo
*
|
44 | Vice President and Group President | 2010 | May 2011 | ||||||||
|
Madhuri A. Andrews
|
44 | Vice President, Information Technology | 2008 | May 2011 | ||||||||
|
Donald G. Collum
|
62 | Vice President and Chief Audit Executive | 2005 | May 2011 | ||||||||
|
Andrea F. Cowan
|
48 | Vice President | 2001 | May 2011 | ||||||||
|
Virginia C. Gray, Ph.D.
|
51 | Vice President, Organizational Development | 2007 | May 2011 | ||||||||
|
Mary E.
Henderson
*
|
52 | Vice President, Chief Accounting Officer, and Controller | 2009 | May 2011 | ||||||||
|
John M. Lee
|
50 | Vice President, Business Development | 1994 | May 2011 | ||||||||
|
S. Theis
Rice
*
|
60 | Vice President, Human Resources and Chief Legal Officer | 2002 | May 2011 | ||||||||
|
Gail M. Peck
|
43 | Treasurer | 2010 | May 2011 | ||||||||
|
Jared S. Richardson
|
38 | Associate General Counsel and Secretary | 2010 | May 2011 | ||||||||
| * | Executive officer subject to reporting requirements under Section 16 of the Securities Exchange Act of 1934. |
Ms. Andrews joined Trinity in 2008 as Vice President,
Information Technology. Since January 2002, she led the
information technology organization for Maxim Integrated
Products, Inc., a major semiconductor design and manufacturing
company.
Dr. Gray joined Trinity in 2007 and was appointed Vice
President, Organizational Development. Prior to that, she was
President of Vehicles of Change, a consulting firm focused on
improving organizational effectiveness.
Ms. Peck joined Trinity in 2010 as Treasurer. Prior to
joining Trinity, she worked for Centex Corporation, one of the
nation’s largest publicly-traded homebuilders, from 2001 to
2009, most recently serving as Vice President and Treasurer
since 2004.
Mr. Richardson joined the Company in 2010 as Associate
General Counsel and Secretary. From 2004 to 2009, he handled
corporate governance and secretary matters for Energy Future
Holdings Corp. (formerly TXU Corp.), a company engaged in the
generation, sale, transmission, and distribution of electricity.
All of the other above-mentioned officers have been in full time
employment of Trinity 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 with the exception of
Mr. Carrillo, Mr. McWhirter, Mr. Menzies,
Mr. Perry, and Ms. Henderson as more fully described
below:
Mr. Perry joined Trinity in 2004 and was appointed
Treasurer in April 2005. Mr. Perry was named a Vice
President of Trinity in 2006 and appointed its Vice President,
Finance in 2007. In 2010, Mr. Perry was appointed Chief
Financial Officer.
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Mr. McWhirter joined the Company in 1985 and held various
accounting positions until 1992, when he became a business group
officer. In 1999, he was elected to a corporate position as Vice
President for Mergers and Acquisitions. In 2001, he was named
Executive Vice President of a business group. In March 2005, he
became Vice President and Chief Financial Officer and in 2006,
Senior Vice President and Chief Financial Officer. In 2010,
Mr. McWhirter was named Senior Vice President and Group
President of the Construction Products and Inland Barge Groups.
Mr. Menzies joined Trinity in 2001 as President of Trinity
Industries Leasing Company. In 2006, he became Senior Vice
President and Group President for
TrinityRail
®
.
Mr. Carrillo joined Trinity in 1996 as Vice President of
Operations of Trinity Industries de Mexico and in 1999 became
the President of Trinity Industries de Mexico. In 2005, he was
named President of Trinity’s Energy Equipment Group, which
includes the Company’s structural wind towers business as
well as businesses that manufacture tank containers, tank heads,
propane tanks, and utility, traffic, and lighting structures. In
2009, Mr. Carrillo was named Group President of the Energy
Equipment Group and in 2010 was named Vice President.
Mr. Carrillo retains responsibility for Trinity’s
operations in Mexico.
Ms. Henderson joined the Company in 2003 as Director of
Financial Reporting. She was named Assistant Controller in 2005
and Controller in 2009. In 2010, Ms. Henderson was elected
Vice President, Chief Accounting Officer, and Controller.
| Item 1A. | Risk Factors. |
There are risks and uncertainties that could cause our actual
results to be materially different from those mentioned in
forward-looking statements that we make from time to time in
filings with the Securities and Exchange Commission
(“SEC”), news releases, reports, proxy statements,
registration statements, and other written communications, as
well as oral forward-looking statements made from time to time
by representatives of our Company. All known material risks and
uncertainties are described below. The cautionary statements
below discuss important factors that could cause our business,
financial condition, operating results, and cash flows to be
materially adversely affected. Accordingly, readers are
cautioned not to place undue reliance on the forward-looking
statements contained herein. We undertake no obligations to
update or revise publicly any forward-looking statements,
whether as a result of new information, future events, or
otherwise.
Negative global economic conditions could cause a decrease in
our revenues or an increase in our operating costs, which could
adversely affect our business and operating results.
If
global economic conditions experience a downturn, many of our
customers may delay or otherwise reduce their purchases of
railcars, barges, wind towers, and other products and services.
If negative conditions in the global credit markets prevent our
customers’ access to credit, product order volumes may
decrease which could result in lower revenues. Likewise, if our
suppliers face challenges in obtaining credit, in selling their
products, or otherwise in operating their businesses, they may
become unable to continue to offer the materials we purchase
from them to manufacture our products. These actions could
result in reductions in our revenues, increased price
competition, or increased operating costs, which could adversely
affect our business results of operations and financial
condition.
Negative global economic conditions may lead to cancellations
or delays in our backlog.
The lack of stability in the
global economy, prevailing conditions in the global credit
markets, volatility in the ethanol industry, changes in
legislative policy,
and/or
adverse changes in the financial condition of certain third
party lessees could possibly lead to cancellations or delays of
backlog orders.
The cyclical nature of our business results in lower revenues
during economic downturns.
We operate in cyclical
industries. Downturns in overall economic conditions usually
have a significant adverse effect on cyclical industries due to
decreased demand for new and replacement products. Decreased
demand could result in lower sales volumes, lower prices,
and/or
a
loss of profits. The railcar, barge, and wind energy industries
have previously experienced deep down cycles and at such times
operated with a minimal backlog.
The economic and financial crisis experienced by the United
States economy since 2008 has impacted our businesses. New
orders for railcars and barges dropped significantly in 2009 as
the transportation industry experienced a significant decline in
the shipment of freight. The transportation industry experienced
weakness
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throughout 2009 and began to improve in 2010. Orders and
deliveries for structural wind towers have been slow since
mid-2008 when green energy companies encountered tightened
credit markets coupled with lower prices for electricity and
natural gas sales. The slowdown in the residential and
commercial construction markets impacted our Construction
Products Group as well. We continually assess our manufacturing
capacity and take steps to align our production capacity with
demand for our products. As a result of our assessment, we have
adapted to the rapid decline in market conditions by reducing
our production footprint and staffing levels and by causing
certain facilities to be on non-operating status. To the extent
that demand for our products increases, non-operating facilities
are available for future operations.
Litigation claims could increase our costs and weaken our
financial condition.
We are currently, and may from
time to time be, involved in various claims or legal proceedings
arising out of our operations. Adverse outcomes in some or all
of these matters could result in judgments against us for
significant monetary damages that could increase our costs and
weaken our financial condition. We seek contractual recourse and
indemnification in the ordinary course of business, maintain
reserves for reasonably estimable liability, and purchase
liability insurance at coverage levels based upon commercial
norms in our industries in an effort to mitigate our liability
exposures. Nevertheless, our reserves may be inadequate to cover
the uninsured portion of claims or judgments. Any such claims or
judgments could have a material adverse effect on our business,
operations, or overall financial condition.
Increases in the price and demand for steel and other
component parts could lower our margins and
profitability.
The principal material used in our Rail,
Inland Barge, and Energy Equipment Groups is steel. During 2010,
the supply of steel was sufficient to support our manufacturing
requirements. Market steel prices continue to exhibit short
periods of volatility and ended 2010 significantly higher than
2009. We were able to mitigate the majority of this volatility
through contract-specific purchasing practices and existing
supplier commitments. Steel prices may continue to be volatile
in part as a result of scrap surcharges assessed by steel mills
and other market factors. We often use contractual price
escalation provisions and other arrangements with our customers
to reduce the impact of this volatility, thus minimizing the
effect on our operating margins for the year.
In general, we believe there is enough capacity in our supply
chain to meet current production level demands. We believe our
existing contracts and commercial relationships will supply our
current production forecasts. However, any unanticipated
interruption in our supply chain could have an adverse impact on
both our margins and production schedules.
We have potential exposure to environmental liabilities,
which may increase costs and lower profitability.
We
are subject to comprehensive federal, state, local, and foreign
environmental laws and regulations relating to the release or
discharge of materials into the environment; the management,
use, processing, handling, storage, transport, and disposal of
hazardous and non-hazardous waste and materials; and other
activities relating to the protection of human health and the
environment. Such laws and regulations not only expose us to
liability for our own acts, but also may expose us to liability
for the acts of others or for our actions which were in
compliance with all applicable laws at the time these actions
were taken. In addition, such laws may require significant
expenditures to achieve compliance, and are frequently modified
or revised to impose new obligations. Civil and criminal fines
and penalties may be imposed for non-compliance with these
environmental laws and regulations. Our operations that involve
hazardous materials also raise potential risks of liability
under common law.
Environmental operating permits are, or may be, required for our
operations under these laws and regulations. These operating
permits are subject to modification, renewal, and revocation. We
regularly monitor and review our operations, procedures, and
policies for compliance with our operating permits and related
laws and regulations. Despite these compliance efforts, risk of
environmental liability is inherent in the operation of our
businesses, as it is with other companies engaged in similar
businesses. We believe that our operations and facilities,
whether owned, managed, or leased, are in substantial compliance
with applicable environmental laws and regulations and that any
non-compliance is not likely to have a material adverse effect
on our operations or financial condition.
However, future events, such as changes in, or modified
interpretations of, existing environmental laws and regulations
or enforcement policies, or further investigation or evaluation
of the potential health hazards associated with our products,
business activities, or properties, may give rise to additional
compliance and other costs that could have a material adverse
effect on our financial condition and operations.
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In addition to environmental laws, the transportation of
commodities by railcar or barge raises potential risks in the
event of a derailment, spill, or other accident. Generally,
liability under existing law in the United States for a
derailment, spill, or other accident depends on the negligence,
if any, of the party, such as the railroad, the shipper, or the
manufacturer of the barge, railcar, or its components. However,
under certain circumstances strict liability concepts may apply.
We operate in highly competitive industries. We may not be
able to sustain our market leadership positions which may impact
our financial results.
We face aggressive competition
in all geographic markets and each industry sector in which we
operate. As a result, competition on pricing, product
performance and service is often intense. The effect of this
competition could reduce our revenues and operating profits,
limit our ability to grow, increase pricing pressure on our
products, and otherwise affect our financial results.
If we are unable to obtain refinancing for existing debt as
it matures or if our railcar leasing subsidiaries are unable to
obtain acceptable long-term financing of their railcar lease
fleet, our lenders may foreclose on the portion of our lease
fleet that secures our warehouse facilities.
In
general, the ability to refinance maturing debt is significant
to our leasing group’s operations. TILC, our wholly-owned
captive leasing subsidiary, uses borrowings under a non-recourse
warehouse facility to initially finance the railcars it
purchases from our rail manufacturing business. Trinity Rail
Leasing Warehouse Trust (“TRLWT”), a qualified
subsidiary of TILC, is the borrower under the warehouse
facility. Borrowings under the warehouse facility are available
through February 2013, and, unless, renewed, any amounts
outstanding would be payable in three equal installments in
August 2013, February 2014, and August 2014.
TRIP Holdings’ wholly-owned subsidiary, TRIP Rail Leasing
LLC (“TRIP Leasing”), entered into a
$1.19 billion warehouse loan agreement, which is
non-recourse to Trinity, to finance the purchase of its railcar
fleet. This warehouse loan had a two year revolving availability
period which ended in June 2009. Under the agreement a majority
of the lenders have the right to compel TRIP Leasing to commence
repayment of its outstanding borrowings in four quarterly
installments commencing June 2011 and ending March 2012. In the
event such action is taken, it is not expected that TRIP Leasing
will be able to make such payments from its anticipated cash
balances and net cash flow from operations prior to the initial
installment due date. TRIP Leasing is considering a number of
financing alternatives to address these quarterly installments.
If TRIP Leasing is unable to achieve such alternatives to the
satisfaction of the TRIP Warehouse Loan’s lenders, the
Company’s investment in TRIP Holdings may become impaired.
See Note 6 Investment in TRIP Holdings in the Notes to
Consolidated Financial Statements.
Borrowings under these warehouse loan agreements are secured by
the specific railcars financed by such borrowings and the
underlying leases. A decline in the value of the railcars
respectively securing borrowings under these warehouse loan
agreements or in the creditworthiness of the lessees under the
associated leases could reduce TRLWT’s or TRIP
Leasings’ (“leasing subsidiaries”) ability to
obtain long-term financing for such railcars. Additionally,
fluctuations in interest rates from the time the leasing
subsidiaries purchase railcars with short-term borrowings under
their respective warehouse loan agreements and the time they
obtain permanent financing for such railcars could decrease our
profitability on the leasing of the railcars and could have an
adverse impact on our financial results. If either or both of
these leasing subsidiaries are unable to obtain long-term
financing to replace borrowings under their respective warehouse
loan agreements, the lenders under the warehouse loan agreement
may foreclose on the portion of such leasing subsidiaries’
lease fleet pledged to secure its loan facility or Trinity may
decide to take such actions as might be necessary to resolve
such financing issues. As of December 31, 2010 there was
$80.2 million of indebtedness outstanding and
$394.8 million was available under the TILC warehouse loan
facility and $1.0 billion outstanding under the TRIP
Leasing warehouse loan agreement.
We may be unable to re-market railcars from expiring leases
on favorable terms, which could result in lower lease
utilization percentages and reduced revenues.
The
profitability of our railcar leasing business is dependent in
part on our ability to re-lease or sell railcars we own upon the
expiration of existing lease terms, or upon lease defaults or
bankruptcy filings by third party lessees. Our ability to
re-lease or sell leased railcars profitably is dependent upon
several factors, including, among others:
| • | the cost of and demand for leases or ownership of newer or specific use models; |
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| • | the availability in the market generally of other used or new railcars; |
| • | the degree of obsolescence of leased railcars; |
| • | the prevailing market and economic conditions, including the availability of credit, interest rates, and inflation rates; |
| • | the demand for refurbishment; |
| • | the cost of materials and labor; |
| • | the volume of railcar traffic; and |
| • | the volume and nature of railcar loadings. |
A downturn in the industries in which our lessees operate and
decreased demand for railcars could also increase our exposure
to re-marketing risk because lessees may demand shorter lease
terms or newer railcars, requiring us to re-market leased
railcars more frequently. Furthermore, the resale market for
previously leased railcars has a limited number of potential
buyers. Our inability to re-lease or sell leased railcars on
favorable terms could result in lower lease rates, lower lease
utilization percentages and reduced revenues.
Fluctuations in the supply of component parts used in the
production of our railcar-related and structural wind towers
products could have a material adverse effect on our ability to
cost-effectively manufacture and sell our products.
A
significant portion of our business depends on the adequate
supply of numerous specialty parts and components at competitive
prices such as brakes, wheels, side frames, bolsters, and
bearings for the railcar business, as well as flanges for the
wind towers business. We depend on third-party suppliers for a
significant portion of our parts and component needs. Specialty
parts and components comprise a significant portion of the
production cost of each railcar we manufacture. Due to
consolidations and challenging industry conditions, the number
of alternative suppliers of specialty parts and components has
declined in recent years, though generally a minimum of two
suppliers continue to produce the parts and components we use in
our products. While we endeavor to be diligent in contractual
relationships with our suppliers, a significant decrease in the
availability of specialty parts and components could materially
increase our cost of goods sold or prevent us from manufacturing
our products on a timely basis.
Reductions in the availability of energy supplies or an
increase in energy costs may increase our operating
costs.
We use various gases, including natural gas, at
our manufacturing facilities and use diesel fuel in vehicles to
transport our products to customers and to operate our plant
equipment. An outbreak or escalation of hostilities between the
United States and any foreign power and, in particular,
prolonged conflicts could result in a real or perceived shortage
of petroleum
and/or
natural gas, which could result in an increase in the cost of
natural gas or energy in general. Hurricanes or other natural
disasters could result in a real or perceived shortage of
petroleum
and/or
natural gas potentially resulting in an increase in natural gas
prices or general energy costs. Speculative trading in energy
futures in the world markets could also result in an increase in
natural gas and general energy cost. Future limitations on the
availability or consumption of petroleum products
and/or
an
increase in energy costs, particularly natural gas for plant
operations and diesel fuel for vehicles and plant equipment,
could have an adverse effect upon our ability to conduct our
business cost effectively.
Our manufacturer’s warranties expose us to product
replacement and repair claims.
Depending on the
product, we warrant against manufacturing defects due to our
workmanship and certain materials pursuant to express limited
contractual warranties. Accordingly, we may be subject to
significant warranty claims in the future such as multiple
claims based on one defect repeated throughout our production
process or claims for which the cost of repairing or replacing
the defective part, component or material is highly
disproportionate to the original cost. These types of warranty
claims could result in costly product recalls, significant
repair or replacement costs, and damage to our reputation.
Increasing insurance claims and expenses could lower
profitability and increase business risk.
The nature of
our business subjects us to product liability, property damage,
and personal injury claims, especially in connection with the
repair and manufacture of products that transport hazardous,
toxic, or volatile materials. We maintain reserves for
reasonably estimable liability claims and liability insurance
coverage at levels based upon commercial
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norms in the industries in which we operate and our historical
claims experience. Over the last several years, insurance
carriers have raised premiums for many companies operating in
our industries. Increased premiums may further increase our
insurance expense as coverage expires or otherwise cause us to
raise our self-insured retention. If the number or severity of
claims within our self-insured retention increases, we could
suffer costs in excess of our reserves. An unusually large
liability claim or a string of claims based on a failure
repeated throughout our production process may exceed our
insurance coverage or expose us to the entire damages judgment
if we were unable or elected not to insure against certain
hazards because of high premiums or other reasons. In addition,
the availability of, and our ability to collect on, insurance
coverage is often subject to factors beyond our control.
Moreover, any accident or incident involving us, even if we are
fully insured, contractually indemnified, or not held to be
liable, could negatively affect our reputation among customers
and the public, thereby making it more difficult for us to
compete effectively, and could significantly affect the cost and
availability of insurance in the future.
Risks related to our operations outside of the United States
could decrease our profitability.
Our operations
outside of the United States are subject to the risks associated
with cross-border business transactions and activities.
Political, legal, trade, economic changes or instability, or
social unrest could limit or curtail our respective foreign
business activities and operations. Some foreign countries where
we operate have regulatory authorities that regulate railroad
safety, railcar and railcar component part design, performance,
and manufacture of equipment used on their railroad systems. If
we fail to obtain and maintain certifications of our railcars
and railcar parts and components within the various foreign
countries where we operate, we may be unable to market and sell
our railcars, parts, and components in those countries. In
addition, unexpected changes in regulatory requirements, tariffs
and other trade barriers, more stringent rules relating to labor
or the environment, adverse tax consequences, and price exchange
controls could limit operations and make the manufacture and
distribution of our products difficult. Furthermore, any
material change in the quotas, regulations, or duties on imports
imposed by the United States government and agencies, or on
exports by the government of Mexico or its agencies, could
affect our ability to export products that we manufacture in
Mexico.
Because we do not have employment contracts with our key
management employees, we may not be able to retain their
services in the future.
Our success depends on the
continued services of our key management employees, none of whom
currently have an employment agreement with us. Although we have
historically been successful in retaining the services of our
key management, we may not be able to do so in the future. The
loss of the services of one or more key members of our
management team could result in increased costs associated with
attracting and retaining a replacement and could disrupt our
operations and result in a loss of revenues.
Repercussions from terrorist activities or armed conflict
could harm our business.
Terrorist activities,
anti-terrorist efforts, and other armed conflict involving the
United States or its interests abroad may adversely affect the
United States and global economies, potentially preventing us
from meeting our financial and other obligations. In particular,
the negative impacts of these events may affect the industries
in which we operate. This could result in delays in or
cancellations of the purchase of our products or shortages in
raw materials, parts, or components. Any of these occurrences
could have a material adverse impact on our operating results,
revenues, and costs.
Violations of or changes in the regulatory requirements
applicable to the industries in which we operate may increase
our operating costs.
We are subject to extensive
regulation by governmental regulatory and industry authorities.
Our railcar operations are subject to regulation by the United
States Environmental Protection Agency; the Research and Special
Programs Administration and the Federal Railroad Administration,
both divisions of the United States Department of
Transportation; and the Association of American Railroads. These
organizations establish rules and regulations for the railcar
industry and rail interchange, including construction
specifications and standards for the design and manufacture of
railcars; mechanical, maintenance, and related standards for
railcars; safety of railroad equipment, tracks, and operations;
and packaging and transportation of hazardous or toxic
materials. Future changes that affect compliance costs may have
a material adverse effect on our financial condition and
operations.
Our Inland Barge operations are subject to regulation by the
United States Coast Guard; the United States National
Transportation Safety Board; the United States Customs Service;
the Maritime Administration of the United States Department of
Transportation; and private industry organizations such as the
American Bureau of Shipping. These organizations establish
safety criteria, investigate vessel accidents and recommend
improved
12
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safety standards. Violations of these laws and related
regulations can result in substantial civil and criminal
penalties as well as injunctions curtailing operations.
Our Construction Products Group business is subject to
regulation by the United States Department of Transportation,
the Federal Highway Administration, and various state highway
departments. These organizations establish certain standards and
specifications related to the manufacture of our highway
products. If our products were found to be not in compliance
with these standards and specifications, we would be required to
re-qualify our products for installation on state and national
highways.
Our operations are also subject to regulation of health and
safety matters by the United States Occupational Safety and
Health Administration and the United States Mine Safety and
Health Administration. We believe that we employ appropriate
precautions to protect our employees and others from workplace
injuries and harmful exposure to materials handled and managed
at our facilities. However, claims that may be asserted against
us for work-related illnesses or injury, and the further
adoption of occupational and mine safety and health regulations
in the United States or in foreign jurisdictions in which
we operate could increase our operating costs. We are unable to
predict the ultimate cost of compliance with these health and
safety laws and regulations. Accordingly, there can be no
assurance that we will not become involved in future litigation,
investigations, or other proceedings or if we were found to be
responsible or liable in any litigation, investigations, or
proceedings, that such costs would not be material to us.
We may be required to reduce the value of our long-lived
assets
and/or
goodwill, which would weaken our financial results.
We
periodically evaluate for potential impairment the carrying
values of our long-lived assets to be held and used. The
carrying value of a long-lived asset to be held and used is
considered impaired when the carrying value is not recoverable
through undiscounted future cash flows and the fair value of the
asset is less than the carrying value. Fair value is determined
primarily using the anticipated cash flows discounted at a rate
commensurate with the risks involved or market quotes as
available. Impairment losses on long-lived assets held for sale
are determined in a similar manner, except that fair values are
reduced commensurate with the estimated cost to dispose of the
assets. In addition, goodwill is required to be tested for
impairment annually, or on an interim basis, whenever events or
circumstances change, indicating that the carrying amount of the
goodwill might be impaired. Due to an overall market decline for
products in the Rail Group during the second quarter of 2009, we
recorded a goodwill impairment charge of $325.0 million.
Impairment losses related to reductions in the value of our
long-lived assets or our goodwill could weaken our financial
condition and results of operations.
We may incur increased costs due to fluctuations in interest
rates and foreign currency exchange rates.
We are
exposed to risks associated with fluctuations in interest rates
and changes in foreign currency exchange rates. We seek to
minimize these risks, when considered appropriate, through the
use of interest rate hedges and similar financial instruments
and other activities, although these measures may not be
implemented or effective. Any material and untimely changes in
interest rates or exchange rates could result in significant
losses to us.
Railcars as a significant mode of transporting freight could
decline, become more efficient over time, experience a shift in
types of modal transportation,
and/or
certain railcar types could become obsolete.
As the
freight transportation markets we serve continue to evolve and
become more efficient, the use of railcars may decline in favor
of other more economic transportation modalities. Features and
functionality specific to certain railcar types could result in
those railcars becoming obsolete as customer requirements for
freight delivery change.
Business, regulatory, and legal developments regarding
climate change may affect the demand for our products or the
ability of our critical suppliers to meet our
needs.
The Company has followed the current debate over
climate change in general, and the related science, policy
discussion, and prospective legislation. Additionally, the
potential challenges and opportunities for the Company that
climate change policy and legislation may pose have been
reviewed. However, any such challenges or opportunities are
heavily dependent on the nature and degree of climate change
legislation and the extent to which it applies to our
industries. At this time, the Company cannot predict the
ultimate impact of climate change and climate change legislation
on the Company’s operations or opportunities. Potential
opportunities could include greater demand for wind towers and
certain types of rail cars, while potential challenges could
include decreased demand for certain types of rail cars and
higher energy costs. Further, when or if these impacts may occur
cannot be assessed until scientific analysis and legislative
policy are more developed and specific legislative proposals
begin to take shape.
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Changes in accounting standards or inaccurate estimates or
assumptions in the application of accounting policies could
adversely affect our financial results.
Our accounting
policies and methods are fundamental to how we record and report
our financial condition and results of operations. Some of these
policies require use of estimates and assumptions that may
affect the reported value of our assets or liabilities and
financial results and are critical because they require
management to make difficult, subjective, and complex judgments
about matters that are inherently uncertain. Accounting standard
setters and those who interpret the accounting standards (such
as the Financial Accounting Standards Board, the Securities and
Exchange Commission, and our independent registered public
accounting firm) may amend or even reverse their previous
interpretations or positions on how these standards should be
applied. These changes can be hard to predict and can materially
impact how we record and report our financial condition and
results of operations. In some cases, we could be required to
apply a new or revised standard retroactively, resulting in the
restatement of prior period financial statements. For a further
discussion of some of our critical accounting policies and
standards and recent accounting changes, see Critical Accounting
Policies and Estimates in Management’s Discussion and
Analysis of Financial Condition and Results of Operations and
Note 1 Summary of Significant Accounting Policies of the
Notes to Consolidated Financial Statements.
Some of our employees belong to labor unions and strikes or
work stoppages could adversely affect our
operations.
We are a party to collective bargaining
agreements with various labor unions at some of our operations
in the U.S. and all of our operations in Mexico. Disputes
with regard to the terms of these agreements or our potential
inability to negotiate acceptable contracts with these unions in
the future could result in, among other things, strikes, work
stoppages or other slowdowns by the affected workers. We cannot
be assured that our relations with our workforce will remain
positive or that union organizers will not be successful in
future attempts to organize at some of our facilities. If our
workers were to engage in a strike, work stoppage or other
slowdown, or other employees were to become unionized, or the
terms and conditions in future labor agreements were
renegotiated, we could experience a significant disruption of
our operations and higher ongoing labor costs. In addition, we
could face higher labor costs in the future as a result of
severance or other charges associated with lay-offs, shutdowns
or reductions in the size and scope of our operations or
difficulties of restarting our operations that have been
temporarily shuttered.
Natural disasters could disrupt our business and result in
loss of revenue or in higher expenses.
Any serious
disruption at any of our facilities due to hurricane,
earthquake, flood, or any other natural disaster could impair
our ability to use our facilities and have a material adverse
impact on our revenues and increase our costs and expenses. If
there is a natural disaster or other serious disruption at any
of our facilities, it could impair our ability to adequately
supply our customers and negatively impact our operating
results. While we maintain business recovery plans that are
intended to allow us to recover from natural disasters that
could disrupt our business, we cannot provide assurances that
our plans would fully protect us from the effects of all such
disasters. In addition, insurance may not adequately compensate
us for any losses incurred as a result of natural or other
disasters.
Additional Information.
Our Internet website address
is www.trin.net. Information on the website is available free of
charge. We make available on our website our annual report on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K,
and any amendments thereto, as soon as reasonably practicable
after such material is filed with, or furnished to, the SEC. The
contents of our website are not intended to be incorporated by
reference into this report or in any other report or document we
file and any reference to our website is intended to be an
inactive textual reference only.
| Item 1B. | Unresolved Staff Comments. |
None.
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| Item 2. | Properties. |
We principally operate in various locations throughout the
United States and in Mexico. Our facilities are considered to be
in good condition, well maintained, and adequate for our
purposes. The productive capacity utilized represents the
percentage for all of 2010.
|
Approximate Square
|
Productive
|
|||||||||
| Feet |
Capacity
|
|||||||||
| Owned | Leased | Utilized | ||||||||
|
Rail Group
|
5,108,773 | 32,016 | 24% | |||||||
|
Construction Products Group
|
1,349,000 | 21,000 | 74% | |||||||
|
Inland Barge Group
|
915,300 | 81,000 | 72% | |||||||
|
Energy Equipment Group
|
1,511,575 | 261,060 | 54% | |||||||
|
Executive Offices
|
173,000 | — | N/A | |||||||
| 9,057,648 | 395,076 | |||||||||
| Item 3. | Legal Proceedings. |
See Note 18 of the Notes to Consolidated Financial
Statements.
15
Table of Contents
PART II
| Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. |
Our common stock is traded on the New York Stock Exchange under
the ticker symbol “TRN”. The following table shows the
closing price range of our common stock by quarter for the years
ended December 31, 2010 and 2009.
| Prices | ||||||||
| Year Ended December 31, 2010 | High | Low | ||||||
|
Quarter ended March 31, 2010
|
$ | 20.58 | $ | 15.22 | ||||
|
Quarter ended June 30, 2010
|
26.46 | 17.72 | ||||||
|
Quarter ended September 30, 2010
|
22.27 | 16.45 | ||||||
|
Quarter ended December 31, 2010
|
26.68 | 22.01 | ||||||
| Year Ended December 31, 2009 | High | Low | ||||||
|
Quarter ended March 31, 2009
|
$ | 17.90 | $ | 6.47 | ||||
|
Quarter ended June 30, 2009
|
16.95 | 9.57 | ||||||
|
Quarter ended September 30, 2009
|
19.07 | 12.01 | ||||||
|
Quarter ended December 31, 2009
|
19.45 | 16.35 | ||||||
Our transfer agent and registrar as of December 31, 2010
was American Stock Transfer & Trust Company.
Holders
At December 31, 2010, we had approximately 1,894 record
holders of common stock. The par value of the common stock is
$1.00 per share.
Dividends
Trinity has paid 187 consecutive quarterly dividends. Quarterly
dividends declared by Trinity for the years ended
December 31, 2010 and 2009 are as follows:
| Year Ended December 31, | ||||||||
| 2010 | 2009 | |||||||
|
Quarter ended March 31,
|
$ | 0.08 | $ | 0.08 | ||||
|
Quarter ended June 30,
|
0.08 | 0.08 | ||||||
|
Quarter ended September 30,
|
0.08 | 0.08 | ||||||
|
Quarter ended December 31,
|
0.08 | 0.08 | ||||||
|
Total
|
$ | 0.32 | $ | 0.32 | ||||
Recent
Sales of Unregistered Securities
None.
16
Table of Contents
Performance
Graph
The following Performance Graph and related information shall
not be deemed “soliciting material” or to be
“filed” with the SEC, nor shall such information be
incorporated by reference into any future filing under the
Securities Act of 1933 or Securities Exchange Act of 1934, each
as amended, except to the extent that the Company specifically
incorporates it by reference into such filing.
The following graph compares the Company’s cumulative total
stockholder return (assuming reinvestment of dividends) during
the five-year period ended December 31, 2010 with an
overall stock market index (New York Stock Exchange index) and
the Company’s peer group index (Dow Jones Commercial
Vehicles & Trucks Index). The data in the graph
assumes $100 was invested on January 1, 2006.
COMPARISON
OF CUMULATIVE TOTAL RETURN
ASSUMES $100
INVESTED ON Jan. 01, 2006
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31,
2010
| 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | |||||||||||||||||||
|
Trinity Industries, Inc.
|
100 | 120 | 96 | 55 | 62 | 96 | ||||||||||||||||||
|
Dow Jones Commercial Vehicles & Trucks Index
|
100 | 128 | 186 | 89 | 130 | 214 | ||||||||||||||||||
|
New York Stock Exchange Index
|
100 | 120 | 131 | 80 | 102 | 116 | ||||||||||||||||||
17
Table of Contents
Issuer
Purchases of Equity Securities
This table provides information with respect to purchases by the
Company of shares of its common stock during the quarter ended
December 31, 2010:
|
Maximum
|
||||||||||||||||
|
Number (or
|
||||||||||||||||
|
Total Number of
|
Approximate
|
|||||||||||||||
|
Shares (or Units)
|
Dollar Value) of
|
|||||||||||||||
|
Purchased as
|
Shares (or Units)
|
|||||||||||||||
|
Part of Publicly
|
that May Yet Be
|
|||||||||||||||
|
Number of
|
Average Price
|
Announced
|
Purchased
|
|||||||||||||
|
Shares
|
Paid per
|
Plans or
|
Under the Plans
|
|||||||||||||
| Period | Purchased (1) | Share (1) | Programs (2) | or Programs (2, 3) | ||||||||||||
|
October 1, 2010 through October 31, 2010
|
— | $ | — | — | $ | 132,536,481 | ||||||||||
|
November 1, 2010 through November 30, 2010
|
3,339 | $ | 24.60 | — | $ | 132,536,481 | ||||||||||
|
December 1, 2010 through December 31, 2010
|
7,143 | $ | 24.99 | — | $ | 0 | ||||||||||
|
Total
|
10,482 | $ | 24.87 | — | $ | 0 | ||||||||||
| (1) | These columns include the following transactions during the three months ended December 31, 2010: (i) the deemed surrender to the Company of 4,712 shares of common stock to pay the exercise price and satisfy tax withholding in connection with the exercise of employee stock options; (ii) the surrender to the Company of 5,332 shares of common stock to satisfy tax withholding obligations in connection with the vesting of restricted stock issued to employees; and (iii) the purchase of 438 shares of common stock by the Trustee for assets held in a non-qualified employee profit sharing plan trust. | |
| (2) | The Company’s share repurchase program which commenced in 2007 with an authorization of $200 million expired on December 31, 2010. No shares were repurchased under the program for the three months ended December 31, 2010. From inception through December 31, 2010, the Company repurchased a total of 3,532,728 shares at a cost of approximately $67.5 million. | |
| (3) | On December 9, 2010, the Company’s Board of Directors authorized a new $200 million share repurchase program, effective January 1, 2011. This program replaces the Company’s previous share repurchase program and expires December 31, 2012. |
18
Table of Contents
| Item 6. | Selected Financial Data. |
The following financial information for the five years ended
December 31, 2010 has been derived from our audited
consolidated financial statements. This information should be
read in conjunction with Management’s Discussion and
Analysis of Financial Condition and Results of Operations and
the consolidated financial statements and notes thereto included
elsewhere herein.
| Year Ended December 31, | ||||||||||||||||||||
|
(in millions, except percent and per share data)
|
2010 | 2009 | 2008 | 2007 | 2006 | |||||||||||||||
|
Statement of Operations Data:
|
||||||||||||||||||||
|
Revenues
|
$ | 2,189.1 | $ | 2,575.2 | $ | 3,882.8 | $ | 3,832.8 | $ | 3,218.9 | ||||||||||
|
Operating profit (loss)
|
304.0 | (30.7 | ) | 559.5 | 529.8 | 396.0 | ||||||||||||||
|
Income (loss) from continuing operations
|
75.6 | (137.5 | ) | 282.4 | 289.8 | 212.6 | ||||||||||||||
|
Discontinued operations:
|
||||||||||||||||||||
|
Gain on sales of discontinued operations, net of provision for
income taxes of $12.2
|
— | — | — | — | 20.4 | |||||||||||||||
|
Loss from discontinued operations, net of benefit for income
taxes of $(0.0), $(0.0), $(0.0), $(0.2), and $(1.7)
|
(0.2 | ) | (0.2 | ) | (1.5 | ) | (0.7 | ) | (5.8 | ) | ||||||||||
|
Net income (loss)
|
$ | 75.4 | $ | (137.7 | ) | $ | 280.9 | $ | 289.1 | $ | 227.2 | |||||||||
|
Net income (loss) attributable to Trinity Industries, Inc.
|
$ | 67.4 | $ | (137.7 | ) | $ | 280.9 | $ | 289.1 | $ | 227.2 | |||||||||
|
Net income (loss) attributable to Trinity Industries, Inc. per
common share:
|
||||||||||||||||||||
|
Basic:
|
||||||||||||||||||||
|
Continuing operations
|
$ | 0.85 | $ | (1.81 | ) | $ | 3.49 | $ | 3.58 | $ | 2.69 | |||||||||
|
Discontinued operations
|
(0.00 | ) | (0.00 | ) | (0.02 | ) | (0.01 | ) | 0.19 | |||||||||||
| $ | 0.85 | $ | (1.81 | ) | $ | 3.47 | $ | 3.57 | $ | 2.88 | ||||||||||
|
Diluted:
|
||||||||||||||||||||
|
Continuing operations
|
$ | 0.85 | $ | (1.81 | ) | $ | 3.47 | $ | 3.55 | $ | 2.64 | |||||||||
|
Discontinued operations
|
(0.00 | ) | (0.00 | ) | (0.02 | ) | (0.01 | ) | 0.18 | |||||||||||
| $ | 0.85 | $ | (1.81 | ) | $ | 3.45 | $ | 3.54 | $ | 2.82 | ||||||||||
|
Weighted average number of shares outstanding:
|
||||||||||||||||||||
|
Basic
|
76.8 | 76.4 | 78.4 | 78.7 | 76.9 | |||||||||||||||
|
Diluted
|
77.0 | 76.4 | 78.8 | 79.4 | 78.5 | |||||||||||||||
|
Dividends declared per common share
|
$ | 0.32 | $ | 0.32 | $ | 0.31 | $ | 0.26 | $ | 0.21 | ||||||||||
|
Balance Sheet Data:
|
||||||||||||||||||||
|
Total assets
|
$ | 5,760.0 | $ | 4,656.4 | $ | 4,911.6 | $ | 4,039.7 | $ | 3,422.3 | ||||||||||
|
Debt — recourse
|
450.3 | 646.0 | 584.4 | 590.3 | 624.3 | |||||||||||||||
|
Debt — non-recourse
|
2,457.4 | 1,199.1 | 1,190.3 | 643.9 | 426.5 | |||||||||||||||
|
Stockholders’ equity
|
$ | 1,845.7 | $ | 1,806.3 | $ | 1,912.3 | $ | 1,812.7 | $ | 1,493.5 | ||||||||||
|
Ratio of total debt to total capital
|
61.2 | % | 50.5 | % | 48.1 | % | 40.5 | % | 41.3 | % | ||||||||||
|
Book value per share
|
$ | 23.13 | $ | 22.81 | $ | 24.08 | $ | 22.27 | $ | 18.67 | ||||||||||
A goodwill impairment charge of $325.0 million was recorded
in 2009 related to the Rail Group segment. See Note 9 of
the Notes to Consolidated Financial Statements for further
discussion.
Due to the adoption of an accounting pronouncement, Accounting
Standards Codification (“ASC”)
810-10,
which became effective January 1, 2010, the Consolidated
Balance Sheet as of December 31, 2010, and the Consolidated
Statements of Operations, Cash Flows, and Stockholder’s
Equity for the year ended December 31, 2010, include the
financial position and results of operations of TRIP Holdings
and its subsidiary. Prior periods were not restated. See
Notes 1 and 6 of the Notes to Consolidated Financial
Statements for an explanation of the effect of this
pronouncement.
19
Table of Contents
| 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 (“MD&A”) is intended to
provide a reader of our financial statements with a narrative
from the perspective of our management on our financial
condition, results of operations, liquidity and certain other
factors that may affect our future results. Our MD&A is
presented in the following sections:
| • | Company Overview |
| • | Executive Summary |
| • | Results of Operations |
| • | Liquidity and Capital Resources |
| • | Contractual Obligations and Commercial Commitments |
| • | Critical Accounting Policies and Estimates |
| • | Recent Accounting Pronouncements |
Our MD&A should be read in conjunction with our
Consolidated Financial Statements and related Notes in
Item 8, Financial Statements and Supplementary Data, of
this Annual Report on
Form 10-K.
Company
Overview
Trinity Industries, Inc., headquartered in Dallas, Texas, is a
multi-industry company that owns a variety of market-leading
businesses which provide products and services to the
industrial, energy, transportation, and construction sectors. We
operate in five distinct business groups which we report on a
segment basis: the Rail Group, Construction Products Group,
Inland Barge Group, Energy Equipment Group, and Railcar Leasing
and Management Services Group. We also report All Other which
includes the Company’s captive insurance and transportation
companies; legal, environmental, and upkeep costs associated
with non-operating facilities; other peripheral businesses; and
the change in market valuation related to ineffective commodity
hedges.
Our Rail and Inland Barge Groups and our structural wind towers
business operate in cyclical industries. Our Construction
Products and Energy Equipment Groups are subject to seasonal
fluctuations with the first quarter historically being the
weakest quarter. Fluctuations in the Railcar Leasing and
Management Services Group are primarily driven by railcar sales
from the lease fleet. The economic and financial crisis
experienced by the United States economy since 2008 has
impacted our businesses. New orders for railcars and barges
dropped significantly in 2009 as the transportation industry
experienced a significant decline in the shipment of freight.
The transportation industry experienced weakness throughout 2009
and began to improve in 2010. Orders and deliveries for
structural wind towers have been slow since mid-2008 when green
energy companies encountered tightened credit markets coupled
with lower prices for electricity and natural gas sales. The
slowdown in the residential and commercial construction markets
impacted our Construction Products Group as well. We continually
assess our manufacturing capacity and take steps to align our
production capacity with demand for our products. As a result of
our assessment, we have adapted to the rapid decline in market
conditions by reducing our production footprint and staffing
levels and by causing certain facilities to be on non-operating
status. To the extent that demand for our products increases,
non-operating facilities are available for future operations.
Executive
Summary
The Company’s revenues for 2010 were approximately
$2.2 billion. Operating profit from continuing operations
was $304.0 million which, as a result of a new accounting
standard effective January 1, 2010, included the results of
operations of TRIP Holdings and its subsidiary. For the year
ended December 31, 2010, we experienced increases in both
income from continuing operations and net income over the prior
year primarily as a result of the goodwill impairment charge of
$325.0 million recorded in 2009 and the inclusion of the
results of operations of TRIP Holdings in 2010 offset partially
by an overall decline in product shipments. Net income
attributable to Trinity Industries, Inc. common stockholders for
2010 increased $205.1 million compared to the prior year.
20
Table of Contents
As of December 31, 2010 and 2009, our backlog was
approximately as follows:
| As of December 31, | ||||||||
| 2010 | 2009 | |||||||
| (in millions) | ||||||||
|
Rail Group
|
||||||||
|
External Customers
|
$ | 346.6 | $ | 75.6 | ||||
|
Leasing Group
|
111.0 | 119.8 | ||||||
| $ | 457.6 | $ | 195.4 | |||||
|
Inland Barge
|
$ | 508.0 | $ | 318.8 | ||||
|
Structural wind towers
|
$ | 1,000.0 | $ | 1,100.0 | ||||
The total amount of orders in our backlog dedicated to the
Leasing Group was supported by lease commitments with external
customers.
Capital expenditures for 2010 were $257.6 million with
$216.6 million utilized for lease fleet additions, net of
deferred profit of $8.4 million.
In February 2010, pursuant to a tender offer, the Company
acquired the outstanding stock of Quixote Corporation
(“Quixote”) at a total cost of $58.1 million,
including $17.1 million in cash balances and
$1.1 million consisting of the Company’s
pre-acquisition investment in Quixote. In addition, the Company
assumed $40.0 million in debt that was subsequently retired
in the first quarter of 2010. Quixote is a leading manufacturer
of energy-absorbing highway crash cushions, truck-mounted
attenuators, and other transportation products. Based on its
valuation of the net assets acquired, Trinity recorded
$24.2 million in intangible assets primarily consisting of
the acquisition-date fair value allocated to patents, trade
names, and customer relationships which are being amortized over
their estimated economic life generally ranging from four to
twenty years and goodwill of $22.7 million. As a result of
the acquisition, the Company recorded transaction-related
expenses of $4.6 million including a $1.5 million
write-down of its pre-acquisition investment in Quixote
classified as other selling, engineering, and administrative
costs. In addition to the transaction-related expenses listed
above, there was a $1.8 million reclassification of
previously-recognized charges from Accumulated Other
Comprehensive Loss (“AOCL”) to earnings representing
the decline in fair value of its pre-acquisition investment in
Quixote, included in other, net in the consolidated statement of
operations. See Note 2 Acquisitions and Divestitures,
Note 12 Other, Net and Note 15 Accumulated Other
Comprehensive Loss of the Notes to Consolidated Financial
Statements.
In May 2010, the Company’s inland barge manufacturing
facility in Tennessee experienced a flood resulting in
significant damages to Trinity’s property and a temporary
disruption of its production activities. The Company is insured
against losses due to property damage and business interruption
subject to certain deductibles. As of December 31, 2010,
Trinity had received $20 million in payments from its
insurance carrier of which $12.0 million pertains to the
replacement of or repairs to damaged property, plant, and
equipment with a net book value of $2.3 million, with the
remainder pertaining primarily to the reimbursement of
flood-related expenses. Accordingly, the Company recognized a
gain of $9.7 million, principally in the third quarter of
2010, from the disposition of flood-damaged property, plant, and
equipment. Additionally, our barge manufacturing operations
incurred approximately $4.6 million in costs, net of
insurance advances, related to damages and lost productivity
resulting from the flood. As of October 1, 2010, the
Company’s inland barge production capacity at its Tennessee
operations was restored to its pre-flood levels.
In September 2010, we acquired an additional 29.0% interest in
TRIP Holdings for $28.6 million resulting in our
majority-ownership of TRIP Holdings and increasing our total
investment in TRIP Holdings to $90.4 million. TRIP Holdings
and its subsidiary, TRIP Leasing, provide railcar leasing and
management services in North America. Railcars were purchased
from the Rail and Railcar Leasing and Management Services groups
of Trinity by TRIP Leasing. Effective January 1, 2010, the
Company adopted a new accounting pronouncement,
ASC 810-10,
which required that the financial position and results of
operations of TRIP Holdings be included with the consolidated
financial statements of the Company. Prior periods were not
restated. See Note 6 Investment in TRIP Holdings of the
Notes to Consolidated Financial Statements.
21
Table of Contents
Trinity’s carrying value of its investment in TRIP Holdings
is as follows:
|
December 31,
|
December 31,
|
|||||||
| 2010 | 2009 | |||||||
|
(in millions) |
||||||||
|
Capital contributions
|
$ | 47.3 | $ | 47.3 | ||||
|
Equity purchased from investors
|
44.8 | 16.2 | ||||||
| 92.1 | 63.5 | |||||||
|
Equity in earnings
|
7.5 | 3.0 | ||||||
|
Equity in unrealized losses on derivative financial instruments
|
(1.4 | ) | (3.2 | ) | ||||
|
Distributions
|
(7.0 | ) | (6.0 | ) | ||||
|
Deferred broker fees
|
(0.8 | ) | (1.0 | ) | ||||
| $ | 90.4 | $ | 56.3 | |||||
In October 2010, Trinity Rail Leasing 2010 LLC, a Delaware
limited liability company (“TRL 2010”), a limited
purpose, indirect wholly-owned subsidiary of the Company, owned
through Trinity Industries Leasing Company (“TILC”),
issued $369.2 million in aggregate principal amount of
Secured Railcar Equipment Notes which are non-recourse to
Trinity.
In November 2010, the Company redeemed all of its
$201.5 million unsecured
6
1
/
2
% Senior
Notes which were scheduled to mature in 2014 at a redemption
price 102.167% of the principal amount, pursuant to the terms of
the indenture. The Company incurred approximately
$5.9 million in expenses related to the redemption which
are included in Other Income and Expense.
22
Table of Contents
Results
of Operations
Years
Ended December 31, 2010, 2009, and 2008
Overall
Summary for Continuing Operations
Revenues
| Year Ended December 31, 2010 | ||||||||||||||||
| Revenues |
Percent Change
|
|||||||||||||||
| External | Intersegment | Total | 2010 versus 2009 | |||||||||||||
| (in millions, except percents) | ||||||||||||||||
|
Rail Group
|
$ | 289.7 | $ | 232.4 | $ | 522.1 | (41.7 | )% | ||||||||
|
Construction Products Group
|
558.3 | 20.5 | 578.8 | 7.5 | % | |||||||||||
|
Inland Barge Group
|
422.3 | — | 422.3 | (19.9 | )% | |||||||||||
|
Energy Equipment Group
|
408.5 | 11.1 | 419.6 | (17.7 | )% | |||||||||||
|
Railcar Leasing and Management Services Group
|
498.1 | — | 498.1 | (5.0 | )% | |||||||||||
|
All Other
|
12.2 | 36.3 | 48.5 | 0.2 | % | |||||||||||
|
Eliminations – lease subsidiary
|
— | (216.8 | ) | (216.8 | ) | |||||||||||
|
Eliminations – other
|
— | (83.5 | ) | (83.5 | ) | |||||||||||
|
Consolidated Total
|
$ | 2,189.1 | $ | — | $ | 2,189.1 | (15.0 | )% | ||||||||
| Year Ended December 31, 2009 | ||||||||||||||||
| Revenues |
Percent Change
|
|||||||||||||||
| External | Intersegment | Total | 2009 versus 2008 | |||||||||||||
| (in millions, except percents) | ||||||||||||||||
|
Rail Group
|
$ | 485.2 | $ | 410.1 | $ | 895.3 | (65.1 | )% | ||||||||
|
Construction Products Group
|
524.0 | 14.5 | 538.5 | (27.3 | )% | |||||||||||
|
Inland Barge Group
|
527.3 | — | 527.3 | (15.7 | )% | |||||||||||
|
Energy Equipment Group
|
502.2 | 7.8 | 510.0 | (19.4 | )% | |||||||||||
|
Railcar Leasing and Management Services Group
|
524.5 | — | 524.5 | (2.1 | )% | |||||||||||
|
All Other
|
12.0 | 36.4 | 48.4 | (38.5 | )% | |||||||||||
|
Eliminations – lease subsidiary
|
— | (391.6 | ) | (391.6 | ) | |||||||||||
|
Eliminations – other
|
— | (77.2 | ) | (77.2 | ) | |||||||||||
|
Consolidated Total
|
$ | 2,575.2 | $ | — | $ | 2,575.2 | (33.7 | )% | ||||||||
| Year Ended December 31, 2008 | ||||||||||||||
| Revenues | ||||||||||||||
| External | Intersegment | Total | ||||||||||||
| (in millions) | ||||||||||||||
|
Rail Group
|
$ | 1,381.0 | $ | 1,182.4 | $ | 2,563.4 | ||||||||
|
Construction Products Group
|
719.7 | 21.5 | 741.2 | |||||||||||
|
Inland Barge Group
|
625.2 | — | 625.2 | |||||||||||
|
Energy Equipment Group
|
605.7 | 26.9 | 632.6 | |||||||||||
|
Railcar Leasing and Management Services Group
|
535.9 | — | 535.9 | |||||||||||
|
All Other
|
15.3 | 63.4 | 78.7 | |||||||||||
|
Eliminations – lease subsidiary
|
— | ( 1,162.4 | ) | ( 1,162.4 | ) | |||||||||
|
Eliminations – other
|
— | ( 131.8 | ) | ( 131.8 | ) | |||||||||
|
Consolidated Total
|
$ | 3,882.8 | $ | — | $ | 3,882.8 | ||||||||
Our revenues for the years ended December 31, 2010 and 2009
decreased from the previous years primarily due to the impact of
the economic downturn on the markets we serve, especially the
new railcar market. This decrease was partially offset in 2010
by the inclusion of the operating results of TRIP Holdings in
the consolidated statements of operations for the year ended
December 31, 2010. In addition, revenues for the year ended
23
Table of Contents
December 31, 2009 decreased due to lower pricing from
certain segments resulting from lower material costs and
competitive pricing pressures.
Operating
Profit (Loss)
| Year Ended December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (in millions) | ||||||||||||
|
Rail Group
|
$ | 1.5 | $ | (355.9 | ) | $ | 247.7 | |||||
|
Construction Products Group
|
47.4 | 32.6 | 64.2 | |||||||||
|
Inland Barge Group
|
69.0 | 125.2 | 119.2 | |||||||||
|
Energy Equipment Group
|
35.1 | 73.8 | 100.3 | |||||||||
|
Railcar Leasing and Management Services Group
|
207.0 | 149.0 | 158.9 | |||||||||
|
All Other
|
(11.4 | ) | 0.8 | 7.0 | ||||||||
|
Corporate
|
(33.6 | ) | (30.6 | ) | (41.3 | ) | ||||||
|
Eliminations – lease subsidiary
|
(8.4 | ) | (22.6 | ) | (86.3 | ) | ||||||
|
Eliminations – other
|
(2.6 | ) | (3.0 | ) | (10.2 | ) | ||||||
|
Consolidated Total
|
$ | 304.0 | $ | (30.7 | ) | $ | 559.5 | |||||
Our operating profit for the year ended December 31, 2010
increased primarily as a result of the $325.0 million
goodwill impairment charge in 2009 and the inclusion of the
results of operations of TRIP Holdings in 2010 partially offset
by lower product shipments. Selling, engineering, and
administrative expenses as a percentage of revenues increased to
8.5% for 2010 as compared to 7.2% for 2009. Overall, selling,
engineering, and administrative expenses were substantially
unchanged for 2010 when compared to the previous year.
Our operating profit for the year ended December 31, 2009
decreased as a result of the $325.0 million goodwill
impairment charge and lower revenues coupled with reduced
pricing driven by lower material costs and highly competitive
markets. Selling, engineering, and administrative expenses as a
percentage of revenues increased to 7.2% for 2009 as compared to
6.3% for 2008. Overall, selling, engineering, and administrative
expenses decreased $57.1 million year over year as a result
of decreased headcount and related costs and decreased
professional services.
Other Income and Expense.
Interest expense, net of
interest income, was $180.7 million for the year ended
December 31, 2010 and $121.5 million for the year
ended December 31, 2009. Interest income in 2010 decreased
$0.3 million over the prior year as a result of somewhat
lower cash balances. Interest expense in 2010 increased
$58.9 million over the prior year due to the inclusion of
TRIP Holdings interest expense of $46.9 million and an
increase in debt levels, including $238.3 million of
secured railcar equipment notes entered into in November 2009
and $369.2 million of secured railcar equipment notes
entered into in October 2010 for the Leasing Group. The increase
in Other, net expense for the year ended December 31, 2010
of $12.1 million was primarily due to lower gains in 2010
on equity investments, certain expenses related to the
retirement of the Company’s senior notes in November 2010,
and the recorded decline in the fair value of the Company’s
pre-acquisition investment in Quixote Corporation partially
offset by lower foreign currency translation losses. The
increase in Other, net for the year ended December 31, 2009
was primarily due to the $3.7 million gain recognized on
the sale of one of our equity investments partially offset by
foreign currency translation losses.
Interest expense, net of interest income and capitalized
interest of $0.9 million for 2008, was $121.5 million
for the year ended December 31, 2009 and
$104.3 million for the year ended December 31, 2008.
Interest income in 2009 decreased $3.4 million over the
prior year as a result of lower interest rates which more than
offset the effect of increase in cash available for investment.
Interest expense in 2009 increased $13.8 million over the
prior year due to an increase in debt levels and an increase in
expense related to the ineffective portion of interest rate
hedges. Interest expense for the year ended December 31,
2009 included $3.9 million of interest expense related to
the ineffective portion of interest rate hedges.
24
Table of Contents
Income Taxes.
The provision for income taxes from
continuing operations results in effective tax rates different
from the statutory rates. The following is a reconciliation
between the statutory United States Federal income tax rate and
the Company’s effective income tax rate:
| Year Ended December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
|
Statutory rate
|
35.0 | % | 35.0 | % | 35.0 | % | ||||||
|
State taxes
|
3.3 | 1.9 | 1.7 | |||||||||
|
Impairment of goodwill
|
— | (23.7 | ) | — | ||||||||
|
Changes in valuation allowances
|
— | (6.5 | ) | — | ||||||||
|
Tax settlements
|
4.4 | — | — | |||||||||
|
Changes in tax reserves
|
(9.6 | ) | — | — | ||||||||
|
Other, net
|
2.0 | (0.3 | ) | 1.1 | ||||||||
|
Effective rate
|
35.1 | % | 6.4 | % | 37.8 | % | ||||||
Segment
Discussion
Rail
Group
| Year Ended December 31, | Percent Change | |||||||||||||||||||
|
2010 |
2009 | 2008 |
2010 versus 2009 |
2009 versus 2008 | ||||||||||||||||
| ($ in millions) | ||||||||||||||||||||
|
Revenues:
|
||||||||||||||||||||
|
Rail
|
$ | 391.9 | $ | 776.8 | $ | 2,396.9 | ( 49.5 | )% | (67.6 | )% | ||||||||||
|
Components
|
130.2 | 118.5 | 166.5 | 9.9 | % | (28.8 | )% | |||||||||||||
|
Total revenues
|
$ | 522.1 | $ | 895.3 | $ | 2,563.4 | ( 41.7 | )% | (65.1 | )% | ||||||||||
|
Operating profit (loss)
|
$ | 1.5 | $ | (355.9 | ) | $ | 247.7 | |||||||||||||
|
Operating profit (loss) margin
|
0.3 | % | (39.8 | )% | 9.7 | % | ||||||||||||||
Railcar shipments in 2010 decreased 47.8% as compared to 2009
shipments to approximately 4,750 railcars compared to the
railcars shipped in 2009 and 2008 of approximately 9,100 and
28,200 railcars, respectively. As of December 31, 2010, our
Rail Group backlog was as follows:
| Year Ended December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (in millions, except railcars) | ||||||||||||
|
External Customers
|
$ | 346.6 | $ | 75.6 | $ | 285.3 | ||||||
|
TRIP Leasing
|
— | — | 124.3 | |||||||||
|
Leasing Group
|
111.0 | 119.8 | 312.8 | |||||||||
|
Total
|
$ | 457.6 | $ | 195.4 | $ | 722.4 | ||||||
|
Number of railcars
|
5,960 | 2,320 | 8,260 | |||||||||
The total amount of orders in our backlog dedicated to the
Leasing Group was supported by lease commitments with external
customers.
Operating loss for the Rail Group decreased $357.4 million
for the year ended December 31, 2010 compared to the same
period last year. This decrease was primarily due to a
$325.0 million goodwill impairment charge during the
quarter ended June 30, 2009. The effect of significantly
reduced railcar deliveries on operating profit during 2010 was
offset by a reduction in operating expenses.
Operating profit for the Rail Group decreased for the year ended
December 31, 2009 compared to the prior year primarily due
to a $325.0 million goodwill impairment charge during the
quarter ended June 30, 2009 and lower railcar shipments.
See Note 9 of the Notes to Consolidated Financial
Statements. Additionally, a significantly reduced volume of
railcars was delivered during the year amid a lower pricing and
unit demand environment.
25
Table of Contents
In the year ended December 31, 2010, railcar shipments
included sales to the Leasing Group of $216.8 million
compared to $391.6 million in 2009 with a deferred profit
of $8.4 million compared to $22.6 million for the year
ended December 31, 2009. Sales to the Leasing Group and
related profits are included in the operating results of the
Rail Group but are eliminated in consolidation. Railcar sales to
the Leasing Group for 2008 were $1,162.4 million with a
deferred profit of $86.3 million. Results for the year
ended December 31, 2009 and December 31, 2008 included
$113.0 million and $337.5 million, respectively, in
railcars sold to TRIP Leasing, that resulted in gains of
$11.2 million and $61.6 million, respectively, of
which $2.8 million and $12.4 million, respectively, in
profit was deferred based on our equity interest. There were no
railcar sales to TRIP Leasing during the year ended
December 31, 2010.
Global Insight, Inc., an independent industry research firm, has
estimated in its fourth quarter 2010 report that the average age
of the North American freight car fleet is approximately
19.7 years, with approximately 37% older than 25 years
and has estimated that United States carload traffic will grow
by 2.5% in 2011, with an increase of 4.0% for 2012 before
slowing to 2.4% in 2013, 1.0% in 2014, and 0.2% in 2015.
The table below is an average of the most recent estimates of
approximate industry railcar deliveries for the next five years
from two independent third party research firms, Global Insight,
Inc. and Economic Planning Associates, Inc.
|
2011
|
28,000 | |||
|
2012
|
41,600 | |||
|
2013
|
54,200 | |||
|
2014
|
58,700 | |||
|
2015
|
58,800 |
TILC purchases a portion of our railcar production, financing a
portion of the purchase price through a non-recourse warehouse
loan facility and periodically refinances those borrowings
through equipment financing transactions. In 2010, TILC
purchased approximately 51.1% of our railcar production, up
slightly from 50.9% in 2009. On a segment basis, sales to TILC
and related profits are included in the operating results of our
Rail Group but are eliminated in consolidation.
Construction
Products Group
| Year Ended December 31, | Percent Change | |||||||||||||||||||
|
2010 |
2009 | 2008 |
2010 versus 2009 |
2009 versus 2008 | ||||||||||||||||
| ($ in millions) | ||||||||||||||||||||
|
Revenues:
|
||||||||||||||||||||
|
Concrete and Aggregates
|
$ | 256.9 | $ | 291.4 | $ | 430.5 | (11.8 | )% | (32.3 | )% | ||||||||||
|
Highway Products
|
312.9 | 238.0 | 284.1 | 31.5 | % | (16.2 | )% | |||||||||||||
|
Other
|
9.0 | 9.1 | 26.6 | (1.1 | )% | (65.8 | )% | |||||||||||||
|
Total revenues
|
$ | 578.8 | $ | 538.5 | $ | 741.2 | 7.5 | % | (27.3 | )% | ||||||||||
|
Operating profit
|
$ | 47.4 | $ | 32.6 | $ | 64.2 | ||||||||||||||
|
Operating profit margin
|
8.2 | % | 6.1 | % | 8.7 | % | ||||||||||||||
The increase in revenues for the year ended December 31,
2010, compared to the same period in 2009 was attributable to
revenues from the acquisition of Quixote Corporation partially
offset by a decline in the economic conditions related to the
markets served by our Concrete and Aggregates operations and the
divestiture of our asphalt operations in August 2010. Revenues
decreased for the year ended December 31, 2009 compared to
the same period in 2008 primarily due to the overall decline in
the economic conditions related to the markets served by this
segment including a reduction in state funding of highway
construction and in commercial and residential construction.
Additionally, revenues declined as the result of lower material
costs that are passed onto the customer.
Operating profit and operating margin for the year ended
December 31, 2010 compared to the same period in 2009
increased as a result of the Quixote acquisition, higher Highway
Products volume, lower operating costs, and $3.8 million in
gains recognized from divestitures in our Concrete and
Aggregates business. Operating profit and
26
Table of Contents
operating margin for the year ended December 31, 2009
compared to the same period in 2008 decreased as a result of
lower volumes and decreased operating efficiencies.
Additionally, operating profit included a $2.8 million
write down of surplus inventory quantities in 2009 while 2008
included higher gains from property dispositions related to our
Concrete and Aggregates operations.
Inland
Barge Group
| Year Ended December 31, | Percent Change | |||||||||||||||||||
|
2010 |
2009 | 2008 |
2010 versus 2009 |
2009 versus 2008 | ||||||||||||||||
| ($ in millions) | ||||||||||||||||||||
|
Revenues
|
$ | 422.3 | $ | 527.3 | $ | 625.2 | (19.9 | )% | (15.7 | )% | ||||||||||
|
Operating profit
|
$ | 69.0 | $ | 125.2 | $ | 119.2 | ||||||||||||||
|
Operating profit margin
|
16.3 | % | 23.7 | % | 19.1 | % | ||||||||||||||
Operating profit for the year ended December 31, 2010
included a $9.7 million gain from the disposition of
damaged property, plant, and equipment resulting from a flood at
our Tennessee barge manufacturing facility in May 2010.
Additionally, our barge manufacturing operations incurred
approximately $4.6 million in costs, net of insurance
advances, related to damages and lost productivity resulting
from the flood. Excluding this net $5.1 million increase in
operating profit resulting from the effects of the flood,
revenues and operating profit decreased for the year ended
December 31, 2010 compared to the same period in the prior
year due to a change in the mix of tank barge types and more
competitive hopper barges prices overall. The decrease in
revenues for the year ended December 31, 2009 compared to
the same period in 2008 was primarily due to the shipment of
fewer hopper barges and a change in the mix of tank barge types.
Operating profit for the year ended December 31, 2009
increased compared to the same period in 2008 due to lower
material costs and better operating efficiencies. Operating
profit for the years ended December 31, 2009 and
December 31, 2008 included the refund of $1.6 million
and $2.0 million, respectively, in unclaimed settlement
funds related to a legal settlement. As of December 31,
2010, the backlog for the Inland Barge Group was approximately
$508.0 million compared to approximately
$318.8 million and approximately $527.8 million for
2009 and 2008, respectively.
Energy
Equipment Group
| Year Ended December 31, | Percent Change | |||||||||||||||||||
|
2010 |
2009 | 2008 |
2010 versus 2009 |
2009 versus 2008 | ||||||||||||||||
| ($ in millions) | ||||||||||||||||||||
|
Revenues:
|
||||||||||||||||||||
|
Structural wind towers
|
$ | 252.1 | $ | 358.3 | $ | 422.5 | (29.6 | )% | (15.2 | )% | ||||||||||
|
Other
|
167.5 | 151.7 | 210.1 | 10.4 | % | (27.8 | )% | |||||||||||||
|
Total revenues
|
$ | 419.6 | $ | 510.0 | $ | 632.6 | (17.7 | )% | (19.4 | )% | ||||||||||
|
Operating profit
|
$ | 35.1 | $ | 73.8 | $ | 100.3 | ||||||||||||||
|
Operating profit margin
|
8.4 | % | 14.5 | % | 15.9 | % | ||||||||||||||
Revenues and operating profit decreased for the year ended
December 31, 2010 compared to the same period in 2009 due
primarily to lower structural wind tower shipments, reduced
operating efficiency from lower production volume, and lower
margins on certain wind towers shipped. Revenues decreased for
the year ended December 31, 2009 compared to the same
period in 2008 due to overall lower volumes. As of
December 31, 2010, the backlog for structural wind towers
was approximately $1.0 billion compared to approximately
$1.1 billion and approximately $1.4 billion for 2009
and 2008, respectively. Approximately 25% of our backlog for
structural wind towers, as of December 31, 2010, is
expected to be delivered in 2011 with the remainder to be
delivered evenly over 2012, and 2013.
27
Table of Contents
Operating profit and operating margin for the year ended
December 31, 2009 decreased compared to the same period in
2008 as a result of lower volumes partially offset by improved
operating profit in structural wind towers due to better
operating efficiencies and product mix.
Railcar
Leasing and Management Services Group
| Year Ended December 31, | Percent Change | |||||||||||||||||||
|
2010 |
2009 | 2008 |
2010 versus 2009 |
2009 versus 2008 | ||||||||||||||||
| ($ in millions) | ||||||||||||||||||||
|
Revenues:
|
||||||||||||||||||||
|
Wholly-owned subsidiaries:
|
||||||||||||||||||||
|
Leasing and management
|
$ | 345.4 | $ | 329.3 | $ | 313.8 | 4.9 | % | 4.9 | % | ||||||||||
|
Sales of cars from the lease fleet
|
35.9 | 195.2 | 222.1 | (81.6 | )% | (12.1 | )% | |||||||||||||
| 381.3 | 524.5 | 535.9 | (27.3 | )% | (2.1 | )% | ||||||||||||||
|
TRIP Holdings:
|
||||||||||||||||||||
|
Leasing and management
|
116.0 | — | — | — | — | |||||||||||||||
|
Sales of cars from the lease fleet
|
0.8 | — | — | — | — | |||||||||||||||
| 116.8 | — | — | — | — | ||||||||||||||||
|
Total revenues
|
$ | 498.1 | $ | 524.5 | $ | 535.9 | (5.0 | )% | (2.1 | )% | ||||||||||
|
Operating profit:
|
||||||||||||||||||||
|
Wholly-owned subsidiaries:
|
||||||||||||||||||||
|
Leasing and management
|
$ | 131.7 | $ | 128.5 | $ | 124.2 | ||||||||||||||
|
Sales of cars from the lease fleet
|
6.8 | 20.5 | 34.7 | |||||||||||||||||
| 138.5 | 149.0 | 158.9 | ||||||||||||||||||
|
TRIP Holdings:
|
||||||||||||||||||||
|
Leasing and management
|
68.5 | — | — | |||||||||||||||||
|
Sales of cars from the lease fleet
|
— | — | — | |||||||||||||||||
| 68.5 | — | — | ||||||||||||||||||
|
Total operating profit
|
$ | 207.0 | $ | 149.0 | $ | 158.9 | ||||||||||||||
|
Operating profit margin:
|
||||||||||||||||||||
|
Leasing and management
|
43.4 | % | 39.0 | % | 39.6 | % | ||||||||||||||
|
Sales of cars from the lease fleet
|
18.5 | 10.5 | 15.6 | |||||||||||||||||
|
Total operating profit margin
|
41.6 | 28.4 | 29.7 | |||||||||||||||||
|
Fleet utilization:
|
||||||||||||||||||||
|
Wholly-owned subsidiaries
|
99.3 | % | 97.8 | % | 98.6 | % | ||||||||||||||
|
TRIP Holdings
|
99.9 | % | — | — | ||||||||||||||||
Total revenues decreased for the year ended December 31,
2010 due to decreased sales from the lease fleet including
$183.8 million in sales to TRIP Leasing for the year ended
December 31, 2009, partially offset by increased
utilization and rental revenues related to additions to the
lease fleet of our wholly-owned subsidiaries. Additionally, due
to the adoption of an accounting pronouncement, the Leasing
Group’s results of operations for the year ended
December 31, 2010 include TRIP Holdings and its subsidiary,
TRIP Leasing. See Notes 1 and 6 of the Notes to
Consolidated Financial Statements. Total revenues decreased for
the year ended December 31, 2009 due to decreased sales
from the lease fleet partially offset by increased rental
revenues related to additions to the lease fleet.
Operating profit increased for the year ended December 31,
2010 compared to 2009 due to the inclusion of TRIP Holdings in
the Leasing Group’s results of operations in 2010 and
increased utilization and rental revenues related to lease fleet
additions, partially offset by lower profit from lease fleet
sales. Operating profit decreased for the year ended
December 31, 2009 due to lower profit for lease fleet
sales, lower fleet utilization and lower rental rates partially
offset by increased rental proceeds from fleet additions.
Results for the years ended December 31, 2009 and
December 31, 2008 included $183.8 million and
$134.2 million, respectively, in sales of railcars to TRIP
28
Table of Contents
Leasing that resulted in the recognition of previously deferred
gains of $30.3 million and $20.8 million,
respectively, of which $7.6 million and $4.2 million,
respectively, were deferred based on our equity interest. There
were no sales to TRIP Leasing during the year ended
December 31, 2010.
To fund the continued expansion of its lease fleet to meet
market demand, the Leasing Group generally uses its non-recourse
$475 million warehouse facility or excess cash to provide
initial financing for a portion of the purchase price of the
railcars. After initial financing, the Leasing Group generally
obtains long-term financing for the railcars in the lease fleet
through non-recourse asset-backed securities, long-term
non-recourse operating leases pursuant to sales/leaseback
transactions, or long-term recourse debt such as equipment trust
certificates. In October 2010, Trinity Rail Leasing 2010 LLC
issued $369.2 million of
30-year
Secured Railcar Equipment Notes, which are non-recourse to
Trinity. See
Financing Activities
.
As of December 31, 2010, information regarding the Leasing
Group’s lease fleet follows:
|
Average remaining
|
||||||||||||
| No. of cars | Average age | lease term | ||||||||||
|
Wholly-owned subsidiaries
|
51,910 | 6.0 | 3.5 | |||||||||
|
TRIP Holdings
|
14,700 | 3.3 | 3.7 | |||||||||
All
Other
| Year Ended December 31, | Percent Change | |||||||||||||||||||
|
2010 |
2009 | 2008 |
2010 versus 2009 |
2009 versus 2008 | ||||||||||||||||
| ($ in millions) | ||||||||||||||||||||
|
Revenues
|
$ | 48.5 | $ | 48.4 | $ | 78.7 | 0.2 | % | (38.5 | )% | ||||||||||
|
Operating profit (loss)
|
$ | (11.4 | ) | $ | 0.8 | $ | 7.0 | |||||||||||||
Revenues for the year ended December 31, 2010 remained
relatively constant when compared to the same period in 2009.
The decrease in revenues for the year ended December 31,
2009 over the same period in 2008 was primarily due to a
decrease in both external and intersegment sales by our
transportation company as a result of an overall decline in
business activity. Operating profit decreased for the year ended
December 31, 2010 over the same period in 2009 due
primarily to gains on property dispositions in 2009. The
decrease in operating profit for the year ended
December 31, 2009 as compared to 2008 was primarily due to
the decrease in transportation company revenue and a decline in
the market valuation of commodity hedges that are required to be
marked to market.
Liquidity
and Capital Resources
Cash
Flows
Operating Activities.
Net cash provided by the
operating activities of continuing operations for the year ended
December 31, 2010 was $163.6 million compared to
$686.2 million of net cash provided by the operating
activities of continuing operations for the same period in 2009.
Accounts receivables at December 31, 2010 compared to the
accounts receivables balance at December 31, 2009 increased
by $62.2 million or approximately 38.9% due to higher
shipping volumes at year end primarily in our Rail and Energy
Equipment Groups. Raw materials inventory at December 31,
2010 increased by $72.3 million or approximately 74.5%
since December 31, 2009 primarily attributable to higher
levels in our Rail and Energy Equipment Groups required to meet
production demands. Finished goods inventory decreased slightly
by $9.3 million since December 31, 2009 primarily due
to lower finished goods inventory in our Rail Group. Accounts
payable increased from December 31, 2009 by
$53.4 million primarily due to higher production activity
while accrued liabilities decreased by $59.5 million due to
the normal settlement of certain items during the year.
Investing Activities.
Net cash required by investing
activities of continuing operations for the year ended
December 31, 2010 was $307.9 million compared to
$185.3 million for the same period last year. Capital
expenditures for the year ended December 31, 2010 were
$257.6 million, of which $216.6 million were for
additions to the lease fleet and $12.0 million were for
replacement of flood-damaged property. This compares to
$429.2 million of capital expenditures for the same period
last year, of which $381.8 million were for additions to
29
Table of Contents
the lease fleet. Proceeds from the sale of property, plant, and
equipment and other assets were $87.6 million for the year
ended December 31, 2010, composed primarily of the sale of
assets in our Construction Products Group for
$30.8 million, railcar sales from the lease fleet totaling
$36.7 million, and proceeds from the disposition of
flood-damaged property, plant and equipment of
$12.0 million. This compares to $313.9 million for the
same period in 2009 composed primarily of railcar sales from the
lease fleet, which included $183.8 million to TRIP Leasing,
and the sale of non-operating assets. Cash required related to
acquisitions amounted to $49.9 million, excluding
$17.1 million in cash balances acquired from Quixote.
Financing Activities.
Net cash required by financing
activities during the year ended December 31, 2010 and 2009
was $113.5 million and $50.9 million, respectively. As
discussed further below, in October 2010, TRL 2010 issued
$369.2 million in aggregate principal amount of Secured
Railcar Equipment Notes which are non-recourse to Trinity. A
portion of the proceeds from the TRL 2010 financing was used to
retire, in full, our 6.5% Senior Notes due March 2014 and a
portion of our borrowings under our TILC warehouse loan
facility. In addition, during the year ended December 31,
2010, we retired $40.0 million in debt assumed as a result
of the Quixote acquisition. We also purchased an additional
equity interest in TRIP Holdings from one of its other investors
for $28.6 million. We intend to use our cash and credit
facilities to fund the operations, expansions, and growth
initiatives of the Company.
At December 31, 2010 and for the year then ended, there
were no borrowings under our $425 million revolving credit
facility that matures on October 19, 2012. Interest on the
revolving credit facility is calculated at prime or LIBOR plus
87.5 basis points. After $79.9 million was considered
for letters of credit, $345.1 million was available under
the revolving credit facility as of December 31, 2010.
The $475 million TILC warehouse loan facility, established
to finance railcars owned by TILC, had $80.2 million
outstanding and $394.8 million available as of
December 31, 2010. There were no new borrowings under this
facility for the year ended December 31, 2010. The
warehouse loan is a non-recourse obligation, secured by a
portfolio of railcars and operating leases, certain cash
reserves, and other assets acquired and owned by the warehouse
loan facility. The principal and interest of this indebtedness
are paid from the cash flows of the underlying leases. Advances
under the facility bear interest at a defined index rate plus a
margin, for an all-in interest rate of 2.80% at
December 31, 2010. In February 2011, the warehouse loan
facility was renewed for an additional two years and now matures
in February 2013. Amounts outstanding at such time, if any, will
be payable in three installments in August 2013, February 2014,
and August 2014 unless renewed.
In June 2007, TRIP Leasing entered into a $1.19 billion
Warehouse Loan Agreement which contains a floating rate
revolving facility (the “TRIP Warehouse Loan”) of
which $1.0 billion in borrowings were outstanding as of
December 31, 2010. The TRIP Warehouse Loan is a
non-recourse obligation, secured by a portfolio of railcars and
operating leases, certain cash reserves, and other assets
acquired and owned by TRIP Leasing. The TRIP Warehouse Loan
consists of Tranche A bearing an interest rate of the one
month USD Libor plus 1.00% and Tranche B bearing an
interest rate of the one month USD Libor plus 2.25%. The TRIP
Warehouse Loan had a two year revolving availability period
which ended in June 2009. Commencing July 1, 2010, all
excess cash flow, as defined by the Warehouse Loan Agreement,
must be applied to reductions in principal in lieu of dividends
to equity members of TRIP Holdings. Commencing June 2011, a
majority of the TRIP Warehouse Loan lenders have the right to
compel TRIP Leasing to commence repayment of the outstanding
balance in four quarterly installments ending March 2012. In the
event such action is taken, it is not expected that TRIP Leasing
will be able to make such payments from its anticipated cash
balances and net cash flow from operations prior to that date.
Although, the quarterly installment due dates are subject to
extension by written agreement between TRIP Leasing and its
lenders, TRIP Leasing’s lenders have the right to direct
that TRIP Leasing take certain actions including the sale of
assets sufficient to retire the debt that is due. TRIP Leasing
is considering a number of financing alternatives to address
these quarterly installments. If TRIP Leasing is unable to
achieve such alternatives to the satisfaction of the TRIP
Warehouse Loan’s lenders, the Company’s investment in
TRIP Holdings may become impaired. See Note 6 Investment in
TRIP Holdings in the Notes to Consolidated Financial Statements
for a discussion of the Company’s investment in TRIP
Holdings.
In October 2010, TRL 2010, a limited purpose, indirect
wholly-owned subsidiary of the Company owned through TILC,
issued $369.2 million in aggregate principal amount of
Secured Railcar Equipment Notes,
Series 2010-1
(“2010 Secured Railcar Equipment Notes”) of which
$367.1 million was outstanding as of
30
Table of Contents
December 31, 2010. The 2010 Secured Railcar Equipment Notes
were issued pursuant to an Indenture, dated as of
October 25, 2010 between TRL 2010 and Wilmington
Trust Company, as indenture trustee. The 2010 Secured
Railcar Equipment Notes bear interest at a fixed rate of 5.19%,
are payable monthly, and have a stated final maturity date of
October 16, 2040. The 2010 Secured Railcar Equipment Notes
are obligations of TRL 2010 and are non-recourse to Trinity. The
obligations are secured by a portfolio of railcars and operating
leases thereon, certain cash reserves, and other assets of TRL
2010 acquired and owned by TRL 2010.
The Company’s share repurchase program which commenced in
2007 with an authorization of $200 million expired on
December 31, 2010. No shares were repurchased under the
program for the year ended December 31, 2010. From
inception through December 31, 2010, the Company
repurchased a total of 3,532,728 shares at a cost of
approximately $67.5 million. On December 9, 2010, the
Company’s Board of Directors authorized a new
$200 million share repurchase program, effective
January 1, 2011. This program replaces the Company’s
previous share repurchase program and expires December 31,
2012.
The economic and financial crisis experienced by the United
States economy since 2008 has impacted our businesses. New
orders for railcars and barges dropped significantly in 2009 as
the transportation industry experienced a significant decline in
the shipment of freight. The transportation industry experienced
weakness throughout 2009 and began to improve in 2010. Orders
and deliveries for structural wind towers have been slow since
mid-2008 when green energy companies encountered tightened
credit markets coupled with lower prices for electricity and
natural gas sales. The slowdown in the residential and
commercial construction markets impacted our Construction
Products Group as well. We continually assess our manufacturing
capacity and take steps to align our production capacity with
demand for our products. As a result of our assessment, we have
adapted to the rapid decline in market conditions by reducing
our production footprint and staffing levels and causing certain
facilities to be on non-operating status. To the extent that
demand for our products increases, non-operating facilities are
available for future operations.
Equity
Investment
See Note 6 of the Notes to Consolidated Financial
Statements.
Future
Operating Requirements
We expect to finance future operating requirements with cash on
hand, cash flows from operations, and depending on market
conditions, long-term and short-term debt, and equity. Debt
instruments that the Company has utilized include its revolving
credit facility, the warehouse facility, senior notes,
convertible subordinated notes, asset-backed securities, and
sale/leaseback transactions. The Company has also issued equity
at various times. As of December 31, 2010, the Company had
$345.1 million available under its revolving credit
facility and $394.8 million available under its warehouse
facility. Despite the volatile conditions in both the credit and
stock markets, the Company believes it has access to adequate
capital resources to fund operating requirements and is active
in the credit markets.
Off
Balance Sheet Arrangements
See Note 5 of the Notes to Consolidated Financial
Statements.
Derivative
Instruments
We use derivative instruments to mitigate the impact of changes
in interest rates and zinc, natural gas, and diesel fuel prices,
as well as to convert a portion of our variable-rate debt to
fixed-rate debt. Additionally, we use derivative instruments to
mitigate the impact of unfavorable fluctuations in foreign
currency exchange rates. We also use derivatives to lock in
fixed interest rates in anticipation of future debt issuances.
For instruments designated as hedges, the Company formally
documents the relationship between the hedging instrument and
the hedged item, as well as the risk management objective and
strategy for the use of the hedging instrument. This
documentation includes linking the derivatives that are
designated as fair value or cash flow hedges to specific assets
or liabilities on the balance sheet, commitments, or forecasted
transactions. At the time a derivative contract is entered into,
and at least quarterly thereafter, the Company assesses whether
the derivative item is effective in offsetting the changes
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in fair value or cash flows. Any change in fair value resulting
in ineffectiveness, as defined by accounting standards issued by
the FASB is recognized in current period earnings. For
derivative instruments that are designated and qualify as cash
flow hedges, the effective portion of the gain or loss on the
derivative instrument is recorded in AOCL as a separate
component of stockholders’ equity and reclassified into
earnings in the period during which the hedge transaction
affects earnings. Trinity monitors its derivative positions and
credit ratings of its counterparties and does not anticipate
losses due to counterparties’ non-performance. See
Note 3 of the Notes to Consolidated Financial Statements
for discussion of how the Company valued its commodity hedges
and interest rate swaps at December 31, 2010.
Interest
rate hedges
|
Included in accompanying balance sheet
|
||||||||||||||||||||
| at December 31, 2010 | ||||||||||||||||||||
|
AOCL —
|
||||||||||||||||||||
|
Notional
|
Interest
|
expense/
|
Noncontrolling
|
|||||||||||||||||
| Amount | Rate(1) | Liability | (income) | Interest | ||||||||||||||||
| (in millions, except %) | ||||||||||||||||||||
|
Interest rate locks:
|
||||||||||||||||||||
|
2005-2006
|
$ | 200.0 | 4.87 | % | — | $ | (2.6 | ) | — | |||||||||||
|
2006-2007
|
$ | 370.0 | 5.34 | % | — | $ | 14.1 | — | ||||||||||||
|
Interest rate swaps:
|
||||||||||||||||||||
|
TRIP warehouse
|
$ | 840.5 | 3.65 | % | $ | 48.3 | $ | 2.1 | $ | 19.5 | ||||||||||
|
2008 debt issuance
|
$ | 503.8 | 4.13 | % | $ | 45.7 | $ | 44.0 | — | |||||||||||
| (1) | Weighted average fixed interest rate |
| Effect on interest expense — increase/(decrease) | ||||||||||||||||
|
Expected effect
|
||||||||||||||||
| Year Ended December 31, |
during next
|
|||||||||||||||
| 2010 | 2009 | 2008 | twelve months | |||||||||||||
| (in millions) | ||||||||||||||||
|
Interest rate locks:
|
||||||||||||||||
|
2005-2006
|
$ | (0.4 | ) | $ | (0.4 | ) | $ | (0.4 | ) | $ | (0.3 | ) | ||||
|
2006-2007
|
$ | 3.8 | $ | 4.0 | $ | 7.1 | $ | 3.6 | ||||||||
|
Interest rate swaps:
|
||||||||||||||||
|
TILC warehouse
|
$ | 0.5 | $ | 2.9 | $ | 2.4 | — | |||||||||
|
TRIP warehouse
|
$ | 29.3 | — | — | $ | 25.5 | ||||||||||
|
2008 debt issuance
|
$ | 19.7 | $ | 21.6 | $ | 5.5 | $ | 18.4 | ||||||||
During 2005 and 2006, we entered into interest rate swap
transactions in anticipation of a future debt issuance. These
instruments, with a notional amount of $200 million, fixed
the interest rate on a portion of a future debt issuance
associated with a railcar leasing transaction in 2006 and
settled at maturity in the first quarter of 2006. These interest
rate swaps were being accounted for as cash flow hedges with
changes in the fair value of the instruments of
$4.5 million in income recorded in AOCL through the date
the related debt issuance closed in May 2006. The balance is
being amortized over the term of the related debt. The effect on
interest expense is due to amortization of the AOCL balance.
In anticipation of a future debt issuance, we entered into
interest rate swap transactions during the fourth quarter of
2006 and during 2007. These instruments, with a notional amount
of $370 million, hedged the interest rate on a portion of a
future debt issuance associated with an anticipated railcar
leasing transaction, which closed in May 2008. These instruments
settled during the second quarter of 2008 and were accounted for
as cash flow hedges with changes in the fair value of the
instruments of $24.5 million recorded as a loss in AOCL
through the date the related debt issuance closed in May 2008.
The balance is being amortized over the term of the related
debt. The effect on interest expense for 2010 and 2009 is due to
amortization of the AOCL balance. The effect on interest
32
Table of Contents
expense for 2008 included $4.5 million which related to the
ineffective portion of the hedges primarily associated with
hedged interest payments that were never made. The remaining
balance of $2.6 million is due to the amortization of the
AOCL balance.
During 2008, we entered into interest rate swap transactions,
with a notional amount of $200 million, which were being
used to counter our exposure to changes in the variable interest
rate associated with our warehouse facility. The effect on
interest expense included the mark to market valuation on the
interest rate swap transactions and monthly interest
settlements. These interest rate hedges expired during the
fourth quarter of 2010.
In May 2008, we entered into an interest rate swap transaction
that is being used to fix the LIBOR component of the debt
issuance which closed in May 2008. The effect on interest
expense results primarily from monthly interest settlements. In
2009, $1.0 million in unrealized derivative losses were
reclassified from AOCL to interest expense that was related to a
partial retirement of the debt issuance in the fourth quarter of
2009.
Between 2007 and 2009, TRIP Holdings entered into interest rate
swap transactions, all of which qualify as cash flow hedges. As
of December 31, 2010, maturities for cash flow hedges
ranged from
2011-2023.
The effect on interest expense results from monthly interest
settlements.
See Note 11 of the Notes to Consolidated Financial
Statements for a discussion of the related debt instruments.
Other
Derivatives
|
Effect on operating income —
|
||||||||||||
| increase/(decrease) | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (in millions) | ||||||||||||
|
Fuel hedges(1)
|
||||||||||||
|
Effect of mark to market valuation
|
$ | 0.0 | $ | (0.3 | ) | $ | (0.3 | ) | ||||
|
Settlements
|
(0.1 | ) | (1.2 | ) | 8.5 | |||||||
| $ | (0.1 | ) | $ | (1.5 | ) | $ | 8.2 | |||||
|
Foreign exchange hedges(2)
|
$ | (0.9 | ) | $ | (1.9 | ) | $ | — | ||||
|
Zinc(1)
|
$ | — | $ | — | $ | 1.8 | ||||||
| (1) | Included in cost of revenues in the accompanying consolidated statement of operations | |
| (2) | Included in other, net in the accompanying consolidated statement of operations |
Natural
gas and diesel fuel
We continue a program to mitigate the impact of fluctuations in
the price of natural gas and diesel fuel purchases. The intent
of the program is to protect our operating profit from adverse
price changes by entering into derivative instruments. For those
instruments that do not qualify for hedge accounting treatment,
any changes in their valuation are recorded directly to the
consolidated statement of operations.
Foreign
exchange hedge
During the years ended December 31, 2010 and 2009, we
entered into foreign exchange hedges to mitigate the impact on
operating profit of unfavorable fluctuations in foreign currency
exchange rates. These instruments are short term with quarterly
maturities and no remaining balance in AOCL as of
December 31, 2010 and 2009.
Zinc
We maintain a program to mitigate the impact of fluctuations in
the price of zinc purchases. The intent of this program is to
protect our operating profit from adverse price changes by
entering into derivative instruments. The effect of these
derivative instruments on the consolidated financial statements
for the years ended December 31, 2010 and 2009 was not
significant.
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Table of Contents
Stock-Based
Compensation
We have a stock-based compensation plan covering our employees
and our Board of Directors. See Note 16 of the Notes to
Consolidated Financial Statements.
Employee
Retirement Plans
As disclosed in Note 14 of the Notes to Consolidated
Financial Statements, the projected benefit obligation for the
employee retirement plans exceeds the plans’ assets by
$44.7 million as of December 31, 2010 as compared to
$68.5 million as of December 31, 2009. The change was
primarily due to actual investment returns. We continue to
sponsor an employee savings plan under the existing 401(k) plan
that covers substantially all employees and includes both a
company matching contribution and an annual retirement
contribution of up to 3% each of eligible compensation based on
our performance, as well as a Supplemental Profit Sharing Plan.
Both the annual retirement contribution and the company matching
contribution are discretionary, requiring board approval, and
made annually with the investment of the funds directed by the
participants.
Employer contributions for the year ending December 31,
2011 are expected to be $14.7 million for the defined
benefit plans compared to $11.6 million contributed during
2010. Employer contributions to the 401(k) plans and the
Supplemental Profit Sharing Plan for the year ending
December 31, 2011 are expected to be $8.1 million
compared to $7.9 million during 2010.
During the first quarter of 2009, the Company amended its
Supplemental Retirement Plan (the “Supplemental Plan”)
to reduce future retirement plan costs. This amendment provided
that all benefit accruals under the Supplemental Plan cease
effective March 31, 2009, and the Supplemental Plan was
frozen as of that date. In addition, the Company amended the
Trinity Industries, Inc. Standard Pension Plan (the
“Pension Plan”). This amendment was designed to reduce
future pension costs and provided that, effective March 31,
2009, all future benefit accruals under the Pension Plan
automatically cease for all participants, and the accrued
benefits under the Pension Plan were determined and frozen as of
that date. Accordingly, as a result of these amendments, accrued
pension liability was reduced by $44.1 million with an
offsetting reduction in funded status of pension liability
included in AOCL.
Contractual
Obligations and Commercial Commitments
As of December 31, 2010, we had the following contractual
obligations and commercial commitments:
| Payments Due by Period | ||||||||||||||||||||
|
1 Year
|
2-3
|
4-5
|
After
|
|||||||||||||||||
| Contractual Obligations and Commercial Commitments | Total | or Less | Years | Years | 5 Years | |||||||||||||||
| (in millions) | ||||||||||||||||||||
|
Debt and capital lease obligations:
|
||||||||||||||||||||
|
Debt:
|
||||||||||||||||||||
|
Parent and wholly-owned subsidiaries, excluding unamortized debt
discount
|
$ | 1,963.7 | $ | 71.2 | $ | 166.2 | $ | 185.9 | $ | 1,540.4 | ||||||||||
|
TRIP Holdings
|
1,003.9 | 732.9 | 271.0 | — | — | |||||||||||||||
|
Capital lease obligations
|
51.2 | 2.6 | 5.7 | 6.4 | 36.5 | |||||||||||||||
| 3,018.8 | 806.7 | 442.9 | 192.3 | 1,576.9 | ||||||||||||||||
|
Operating leases
|
18.8 | 8.8 | 5.6 | 2.0 | 2.4 | |||||||||||||||
|
Obligations for purchase of goods and services(1)
|
222.2 | 213.7 | 7.0 | 1.5 | — | |||||||||||||||
|
Letters of credit
|
79.9 | 74.3 | 5.6 | — | — | |||||||||||||||
|
Leasing Group — operating leases related to
sale/leaseback transactions
|
638.9 | 46.9 | 99.5 | 96.9 | 395.6 | |||||||||||||||
|
Other
|
6.8 | 5.3 | 1.3 | 0.2 | — | |||||||||||||||
|
Total
|
$ | 3,985.4 | $ | 1,155.7 | $ | 561.9 | $ | 292.9 | $ | 1,974.9 | ||||||||||
| (1) | Includes $185.8 million in purchase obligations for raw materials and components principally by the Rail and Inland Barge Groups. |
34
Table of Contents
As of December 31, 2010 and 2009, we had approximately
$48.0 million and $56.1 million, respectively, of tax
liabilities, including interest and penalties, related to
uncertain tax positions. Because of the high degree of
uncertainty regarding the timing of future cash outflows
associated with these liabilities, we are unable to estimate the
years in which settlement will occur with the respective taxing
authorities. See Note 13 of the Notes to Consolidated
Financial Statements.
Critical
Accounting Policies and Estimates
Management’s Discussion and Analysis of Financial Condition
and Results of Operations discusses our consolidated financial
statements, which have been prepared in accordance with
accounting principles generally accepted in the United States.
The preparation of these consolidated financial statements
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the
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. On an on-going basis,
management evaluates its estimates and judgments, including
those related to bad debts, inventories, property, plant, and
equipment, goodwill, income taxes, warranty obligations,
insurance, restructuring costs, contingencies, and litigation.
Management bases its estimates and judgments on historical
experience and on various other factors that are believed to be
reasonable under the circumstances, the results of which form
the basis for making judgments about the carrying values of
assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under
different assumptions or conditions.
We believe the following critical accounting policies, among
others, affect our more significant judgments and estimates used
in the preparation of our consolidated financial statements.
Inventory
We state all our inventories at the lower of cost or market. Our
policy related to excess and obsolete inventory requires the
inventory to be analyzed at the business unit level on a
quarterly basis and to record any required adjustments. In
assessing the ultimate realization of inventories, we are
required to make judgments as to future demand requirements and
compare that with the current or committed inventory levels. It
is possible that changes in required inventory reserves may
occur in the future due to then current market conditions.
Long-lived
Assets
We periodically evaluate the carrying value of long-lived assets
to be held and used for potential impairment. The carrying value
of long-lived assets to be held and used is considered impaired
only when the carrying value is not recoverable through
undiscounted future cash flows and the fair value of the assets
is less than its carrying value. Fair value is determined
primarily using the anticipated cash flows discounted at a rate
commensurate with the risks involved or market quotes as
available. Impairment losses on long-lived assets held for sale
are determined in a similar manner, except that fair values are
reduced by the estimated cost to dispose of the assets.
Goodwill
Goodwill is required to be tested for impairment annually, or on
an interim basis, whenever events or circumstances change,
indicating that the carrying amount of the goodwill might be
impaired. The goodwill impairment test is a two-step process
requiring the comparison of the reporting unit’s estimated
fair value with the carrying amount of its net assets. Step two
of the impairment test is necessary to determine the amount of
goodwill impairment to be recorded when the reporting
unit’s recorded net assets exceed its fair value.
Impairment is assessed at the “reporting unit” level
by applying a fair value-based test for each unit with recorded
goodwill. The estimates and judgments that most significantly
affect the fair value calculations are assumptions related to
revenue and operating profit growth, discount rates and exit
multiples. Due to an overall market decline for products in the
Rail Group during the second quarter of 2009, we concluded that
indications of impairment existed that required an interim
goodwill impairment analysis. Accordingly, we tested the Rail
Group’s goodwill for impairment as of June 30, 2009
and recorded a charge of $325.0 million during the second
quarter of 2009. As of December 31, 2010, the
Company’s annual impairment test of goodwill was completed
at the reporting unit level and no additional
35
Table of Contents
impairment charges were determined to be necessary. See
Note 9 of the Notes to Consolidated Financial Statements
for further explanation.
Given the uncertainties of the economy and its potential impact
on our businesses, there can be no assurance that our estimates
and assumptions regarding the fair value of our reporting units,
made for the purpose of the long-lived asset and goodwill
impairment test, will prove to be accurate predictions of the
future. If our assumptions regarding forecasted cash flows are
not achieved, it is possible that additional impairments of
remaining goodwill and long-lived assets may be required.
Warranties
The Company provides warranties against workmanship and
materials defects generally ranging from one to five years
depending on the product. The warranty costs are estimated using
a two-step approach. First, an engineering estimate is made for
the cost of all claims that have been filed by a customer.
Second, based on historical claims experience, a cost is accrued
for all products still within a warranty period for which no
claims have been filed. The Company provides for the estimated
cost of product warranties at the time revenue is recognized
related to products covered by warranties and assesses the
adequacy of the resulting reserves on a quarterly basis.
Insurance
We are effectively self-insured for workers’ compensation
claims. A third-party administrator processes all such claims.
We accrue our workers’ compensation liability based upon
independent actuarial studies. To the extent actuarial
assumptions change and claims experience rates differ from
historical rates, our liability may change.
Contingencies
and Litigation
The Company is involved in claims and lawsuits incidental to our
business. Based on information currently available, it is
management’s opinion that the ultimate outcome of all
current litigation and other claims, including settlements, in
the aggregate will not have a material adverse effect on the
Company’s overall financial condition for purpose of
financial reporting. However, resolution of certain claims or
lawsuits by settlement or otherwise could impact the operating
results of the reporting period in which such resolution occurs.
Environmental
We are involved in various proceedings related to environmental
matters. We have provided reserves to cover probable and
estimable liabilities with respect to such proceedings, taking
into account currently available information and our contractual
rights of indemnification. However, estimates of future response
costs are necessarily imprecise. Accordingly, there can be no
assurance that we will not become involved in future litigation
or other proceedings or, if we were found to be responsible or
liable in any litigation or proceeding, that such costs would
not be material to us.
Income
Taxes
The Company accounts for income taxes under the asset and
liability method prescribed by ASC 740. See Note 13 in
the Notes to Consolidated Financial Statements. Deferred tax
assets and liabilities are recognized for the future tax
consequences attributable to temporary differences between the
financial statement carrying amount of existing assets and
liabilities and their respective tax bases using currently
enacted tax rates. The effect of a change in tax rates on
deferred tax assets and liabilities is recognized in income in
the period that includes the enactment date. Management is
required to estimate the timing of the recognition of deferred
tax assets and liabilities, make assumptions about the future
deductibility of deferred tax assets and assess deferred tax
liabilities based on enacted law and tax rates for the
appropriate tax jurisdictions to determine the amount of such
deferred tax assets and liabilities. Changes in the calculated
deferred tax assets and liabilities may occur in certain
circumstances, including statutory income tax rate changes,
statutory tax law changes, changes in the anticipated timing of
recognition of deferred tax assets and liabilities or changes in
the structure or tax status of the Company. The Company assesses
whether a valuation allowance should be established against its
deferred tax assets based on consideration of all
36
Table of Contents
available evidence, both positive and negative, using a more
likely than not standard. This assessment considers, among other
matters, the nature, frequency and severity of recent losses,
forecast of future profitability, the duration of statutory
carry back and carry forward periods, the Company’s
experience with tax attributes expiring unused, and tax planning
alternatives.
At times, we may claim tax benefits that may be challenged by a
tax authority. We recognize tax benefits only for tax positions
that are more likely than not to be sustained upon examination
by tax authorities. The amount recognized is measured as the
largest amount of benefit that is greater than 50 percent
likely to be realized upon settlement. A liability for
“unrecognized tax benefits” is recorded for any tax
benefits claimed in our tax returns that do not meet these
recognition and measurement standards.
Recent
Accounting Pronouncements
See Note 1 of the Notes to Consolidated Financial
Statements.
Forward-Looking
Statements
This annual report on
Form 10-K
(or statements otherwise made by the Company or on the
Company’s behalf from time to time in other reports,
filings with the SEC, news releases, conferences, World Wide Web
postings or otherwise) contains forward-looking statements
within the meaning of the Private Securities Litigation Reform
Act of 1995. Any statements contained herein that are not
historical facts are forward-looking statements and involve
risks and uncertainties. These forward-looking statements
include expectations, beliefs, plans, objectives, future
financial performances, estimates, projections, goals, and
forecasts. Trinity uses the words “anticipates,”
“believes,” “estimates,”
“expects,” “intends,” “forecasts,”
“may,” “will,” “should,” and
similar expressions to identify these forward-looking
statements. Potential factors, which could cause our actual
results of operations to differ materially from those in the
forward-looking statements include, among others:
| • | market conditions and demand for our business products and services; |
| • | the cyclical nature of industries in which we compete; |
| • | variations in weather in areas where our construction products are sold, used, or installed; |
| • | disruption of manufacturing capacity due to weather related events; |
| • | the timing of introduction of new products; |
| • | the timing and delivery of customer orders or a breach of customer contracts; |
| • | the credit worthiness of customers and their access to capital; |
| • | product price changes; |
| • | changes in mix of products sold; |
| • | the extent of utilization of manufacturing capacity; |
| • | availability and costs of steel, component parts, supplies, and other raw materials; |
| • | competition and other competitive factors; |
| • | changing technologies; |
| • | surcharges and other fees added to fixed pricing agreements for steel, component parts, supplies and other raw materials; |
| • | interest rates and capital costs; |
| • | counter-party risks for financial instruments; |
| • | long-term funding of our operations; |
| • | taxes; |
| • | the stability of the governments and political and business conditions in certain foreign countries, particularly Mexico; |
| • | changes in import and export quotas and regulations; |
| • | business conditions in emerging economies; |
| • | costs and results of litigation; and |
| • | legal, regulatory, and environmental issues. |
Any forward-looking statement speaks only as of the date on
which such statement is made. Trinity undertakes no obligation
to update any forward-looking statement to reflect events or
circumstances after the date on which such statement is made.
37
Table of Contents
| Item 7A. | Quantitative and Qualitative Disclosures About Market Risk. |
Our earnings could be affected by changes in interest rates due
to the impact those changes have on our variable rate debt
obligations, which represented approximately 54.2% of our total
debt as of December 31, 2010. If interest rates average one
percentage point more in fiscal year 2011 than they did during
2010, our interest expense would increase by $3.0 million.
In comparison, at December 31, 2009, we estimated that if
interest rates averaged one percentage point more in fiscal year
2010 than they did during the year ended December 31, 2009,
our interest expense would increase by $0.6 million. The
impact of an increase in interest rates was determined based on
the impact of the hypothetical change in interest rates and
scheduled principal payments on our variable-rate debt
obligations as of December 31, 2010 and 2009. A one
percentage point increase in the interest rate yield would
decrease the fair value of the fixed rate debt by approximately
$122.7 million. A one percentage point decrease in the
interest rate yield would increase the fair value of the fixed
rate debt by approximately $144.3 million.
Trinity uses derivative instruments to mitigate the impact of
increases in natural gas, diesel fuel prices, and zinc. Existing
hedge transactions as of December 31, 2010 are based on the
New York Mercantile Exchange for natural gas and heating oil.
Hedge transactions are settled with the counterparty in cash. At
December 31, 2010 and December 31, 2009 the effect on
the consolidated balance sheets was insignificant. The effect on
the consolidated statement of operations for the year ended
December 31, 2010 was operating expense of
$0.1 million, and for the year ended December 31, 2009
was operating expense of $1.5 million. We estimate that the
impact to earnings and the balance sheet that could result from
hypothetical price changes of up to 10% is not significant based
on hedge positions at December 31, 2010.
In addition, we are subject to market risk related to our net
investments in our foreign subsidiaries. The net investment in
foreign subsidiaries as of December 31, 2010 was
$236.3 million. The impact of such market risk exposures as
a result of foreign exchange rate fluctuations has not been
material to us. See Note 12 of the Notes to Consolidated
Financial Statements.
38
Table of Contents
| Item 8. | Financial Statements and Supplementary Data. |
Trinity
Industries, Inc.
Index to
Financial Statements
| Page | ||||
| 40 | ||||
| 41 | ||||
| 42 | ||||
| 43 | ||||
| 44 | ||||
| 45 | ||||
| 46 | ||||
Due to the adoption of an accounting pronouncement, Accounting
Standards Codification (“ASC”)
810-10,
which became effective January 1, 2010, the Consolidated
Balance Sheet as of December 31, 2010, and the Consolidated
Statements of Operations, Cash Flows, and Stockholder’s
Equity for the year ended December 31, 2010, include the
financial position and results of operations of TRIP Rail
Holdings LLC (“TRIP Holdings”) and its subsidiary. See
Notes 1 and 6 of the Notes to Consolidated Financial
Statements for an explanation of the effect of this
pronouncement.
39
Table of Contents
Report of
Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Trinity Industries, Inc.
We have audited Trinity Industries, Inc. and Subsidiaries’
internal control over financial reporting as of
December 31, 2010, based on criteria established in
Internal Control — Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission
(the COSO criteria). Trinity Industries, Inc.’s management
is responsible for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness
of internal control over financial reporting included in the
accompanying Management’s Report on Internal Control over
Financial Reporting. Our responsibility is to express an opinion
on the Company’s internal control over financial reporting
based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, Trinity Industries, Inc. and Subsidiaries
maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2010, based on
the COSO criteria.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of Trinity Industries, Inc. and
Subsidiaries as of December 31, 2010 and 2009, and the
related consolidated statements of operations, cash flows, and
stockholders’ equity for each of the three years in the
period ended December 31, 2010 of Trinity Industries, Inc.
and Subsidiaries and our report dated February 17, 2011
expressed an unqualified opinion thereon.
/s/ ERNST & YOUNG LLP
Dallas, Texas
February 17, 2011
40
Table of Contents
Report of
Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Trinity Industries, Inc.
We have audited the accompanying consolidated balance sheets of
Trinity Industries, Inc. and Subsidiaries as of
December 31, 2010 and 2009, and the related consolidated
statements of operations, cash flows and stockholders’
equity for each of the three years in the period ended
December 31, 2010. 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 the standards of the
Public Company Accounting Oversight Board (United States). 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 consolidated
financial position of Trinity Industries, Inc. and Subsidiaries
at December 31, 2010 and 2009, and the consolidated results
of their operations and their cash flows for each of the three
years in the period ended December 31, 2010, in conformity
with U.S. generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial
statements, during the year ended December 31, 2010, the
Company adopted a new accounting standard relating to
consolidation of variable interest entities.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States),
Trinity Industries, Inc. and Subsidiaries’ internal control
over financial reporting as of December 31, 2010, based on
criteria established in Internal Control — Integrated
Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission and our report dated February 17,
2011 expressed an unqualified opinion thereon.
/s/ ERNST & YOUNG LLP
Dallas, Texas
February 17, 2011
41
Table of Contents
Trinity
Industries, Inc. and Subsidiaries
Consolidated Statements of Operations
Consolidated Statements of Operations
| Year Ended December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (in millions, except per share data) | ||||||||||||
|
Revenues:
|
||||||||||||
|
Manufacturing
|
$ | 1,691.0 | $ | 2,050.7 | $ | 3,346.9 | ||||||
|
Leasing
|
498.1 | 524.5 | 535.9 | |||||||||
| 2,189.1 | 2,575.2 | 3,882.8 | ||||||||||
|
Operating costs:
|
||||||||||||
|
Cost of revenues:
|
||||||||||||
|
Manufacturing
|
1,426.8 | 1,706.7 | 2,621.4 | |||||||||
|
Leasing
|
271.0 | 362.6 | 362.5 | |||||||||
|
Other
|
10.9 | 25.7 | 96.4 | |||||||||
| 1,708.7 | 2,095.0 | 3,080.3 | ||||||||||
|
Selling, engineering, and administrative expenses:
|
||||||||||||
|
Manufacturing
|
132.3 | 142.5 | 187.1 | |||||||||
|
Leasing
|
20.1 | 12.9 | 14.5 | |||||||||
|
Other
|
33.7 | 30.5 | 41.4 | |||||||||
| 186.1 | 185.9 | 243.0 | ||||||||||
|
Gain on disposition of flood-damaged property, plant, and
equipment
|
9.7 | — | — | |||||||||
|
Goodwill impairment
|
— | 325.0 | — | |||||||||
|
Total operating profit (loss)
|
304.0 | (30.7 | ) | 559.5 | ||||||||
|
Other (income) expense:
|
||||||||||||
|
Interest income
|
(1.4 | ) | (1.7 | ) | (5.1 | ) | ||||||
|
Interest expense
|
182.1 | 123.2 | 109.4 | |||||||||
|
Other, net
|
6.8 | (5.3 | ) | 1.4 | ||||||||
| 187.5 | 116.2 | 105.7 | ||||||||||
|
Income (loss) from continuing operations before income taxes
|
116.5 | (146.9 | ) | 453.8 | ||||||||
|
Provision (benefit) for income taxes:
|
||||||||||||
|
Current
|
(19.2 | ) | 14.4 | (75.8 | ) | |||||||
|
Deferred
|
60.1 | (23.8 | ) | 247.2 | ||||||||
| 40.9 | (9.4 | ) | 171.4 | |||||||||
|
Income (loss) from continuing operations
|
75.6 | (137.5 | ) | 282.4 | ||||||||
|
Discontinued operations:
|
||||||||||||
|
Loss from discontinued operations, net of benefit for income
taxes of $(0.0)
|
(0.2 | ) | (0.2 | ) | (1.5 | ) | ||||||
|
Net income (loss)
|
75.4 | (137.7 | ) | 280.9 | ||||||||
|
Net income attributable to noncontrolling interest
|
8.0 | — | — | |||||||||
|
Net income (loss) attributable to Trinity Industries, Inc.
|
$ | 67.4 | $ | (137.7 | ) | $ | 280.9 | |||||
|
Net income (loss) attributable to Trinity Industries, Inc. per
common share:
|
||||||||||||
|
Basic:
|
||||||||||||
|
Continuing operations
|
$ | 0.85 | $ | (1.81 | ) | $ | 3.49 | |||||
|
Discontinued operations
|
(0.00 | ) | (0.00 | ) | (0.02 | ) | ||||||
| $ | 0.85 | $ | (1.81 | ) | $ | 3.47 | ||||||
|
Diluted:
|
||||||||||||
|
Continuing operations
|
$ | 0.85 | $ | (1.81 | ) | $ | 3.47 | |||||
|
Discontinued operations
|
(0.00 | ) | (0.00 | ) | (0.02 | ) | ||||||
| $ | 0.85 | $ | (1.81 | ) | $ | 3.45 | ||||||
|
Weighted average number of shares outstanding:
|
||||||||||||
|
Basic
|
76.8 | 76.4 | 78.4 | |||||||||
|
Diluted
|
77.0 | 76.4 | 78.8 | |||||||||
|
Dividends declared per common share
|
$ | 0.32 | $ | 0.32 | $ | 0.31 | ||||||
See accompanying notes to consolidated financial statements.
42
Table of Contents
Trinity
Industries, Inc. and Subsidiaries
Consolidated Balance Sheets
Consolidated Balance Sheets
|
December 31,
|
December 31,
|
|||||||
| 2010 | 2009 | |||||||
| (in millions) | ||||||||
|
ASSETS
|
||||||||
|
Cash and cash equivalents
|
$ | 354.0 | $ | 611.8 | ||||
|
Short-term marketable securities
|
158.0 | 70.0 | ||||||
|
Receivables, net of allowance for doubtful accounts of $5.5 and
$5.1
|
232.0 | 159.8 | ||||||
|
Income tax receivable
|
7.4 | 11.2 | ||||||
|
Inventories:
|
||||||||
|
Raw materials and supplies
|
169.4 | 97.1 | ||||||
|
Work in process
|
83.3 | 46.5 | ||||||
|
Finished goods
|
78.6 | 87.9 | ||||||
| 331.3 | 231.5 | |||||||
|
Property, plant, and equipment, at cost, including TRIP Holdings
of $1,282.1 at December 31, 2010
|
5,202.2 | 3,973.3 | ||||||
|
Less accumulated depreciation, including TRIP Holdings of $90.3
at December 31, 2010
|
(1,090.2 | ) | (935.1 | ) | ||||
| 4,112.0 | 3,038.2 | |||||||
|
Goodwill
|
197.6 | 180.8 | ||||||
|
Restricted cash, including TRIP Holdings of $46.0 at
December 31, 2010
|
207.1 | 138.6 | ||||||
|
Other assets
|
160.6 | 214.5 | ||||||
| $ | 5,760.0 | $ | 4,656.4 | |||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
|
Accounts payable
|
$ | 132.8 | $ | 76.8 | ||||
|
Accrued liabilities
|
375.6 | 374.5 | ||||||
|
Debt:
|
||||||||
|
Recourse, net of unamortized discount of $111.1 and $121.6
|
450.3 | 646.0 | ||||||
|
Non-recourse:
|
||||||||
|
Parent and wholly-owned subsidiaries
|
1,453.5 | 1,199.1 | ||||||
|
TRIP Holdings
|
1,003.9 | — | ||||||
| 2,907.7 | 1,845.1 | |||||||
|
Deferred income
|
33.6 | 77.7 | ||||||
|
Deferred income taxes
|
391.0 | 397.9 | ||||||
|
Other liabilities
|
73.6 | 78.1 | ||||||
| 3,914.3 | 2,850.1 | |||||||
|
Stockholders’ equity:
|
||||||||
|
Preferred stock — 1.5 shares authorized and
un-issued
|
— | — | ||||||
|
Common stock — shares authorized — 200.0;
shares issued and outstanding at December 31,
2010 — 81.7; at December 31, 2009 — 81.7
|
81.7 | 81.7 | ||||||
|
Capital in excess of par value
|
606.1 | 598.4 | ||||||
|
Retained earnings
|
1,200.5 | 1,263.9 | ||||||
|
Accumulated other comprehensive loss
|
(95.5 | ) | (98.0 | ) | ||||
|
Treasury stock — at December 31, 2010 —
1.9 shares; at December 31, 2009 —
2.5 shares
|
(28.0 | ) | (39.7 | ) | ||||
| 1,764.8 | 1,806.3 | |||||||
|
Noncontrolling interest
|
80.9 | — | ||||||
| 1,845.7 | 1,806.3 | |||||||
| $ | 5,760.0 | $ | 4,656.4 | |||||
See accompanying notes to consolidated financial statements.
43
Table of Contents
Trinity
Industries, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Consolidated Statements of Cash Flows
| Year Ended December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (in millions) | ||||||||||||
|
Operating activities:
|
||||||||||||
|
Net income (loss)
|
$ | 75.4 | $ | (137.7 | ) | $ | 280.9 | |||||
|
Adjustments to reconcile net income (loss) to net cash provided
by continuing operating activities:
|
||||||||||||
|
Loss from discontinued operations
|
0.2 | 0.2 | 1.5 | |||||||||
|
Goodwill impairment
|
— | 325.0 | — | |||||||||
|
Depreciation and amortization
|
189.6 | 160.8 | 140.3 | |||||||||
|
Stock-based compensation expense
|
15.7 | 13.5 | 18.7 | |||||||||
|
Excess tax benefits from stock-based compensation
|
( 0.6 | ) | — | (0.9 | ) | |||||||
|
Provision (benefit) for deferred income taxes
|
60.1 | (23.8 | ) | 247.2 | ||||||||
|
Gain on disposition of railcars from our lease fleet
|
(6.8 | ) | (20.5 | ) | (34.7 | ) | ||||||
|
Gain on disposition of property, plant, equipment, and other
assets
|
(7.9 | ) | (5.9 | ) | (10.5 | ) | ||||||
|
Gain on disposition of flood-damaged property, plant, and
equipment
|
(9.7 | ) | — | — | ||||||||
|
Other
|
4.7 | 8.7 | 16.9 | |||||||||
|
Changes in assets and liabilities:
|
||||||||||||
|
(Increase) decrease in receivables
|
(62.2 | ) | 91.5 | 43.4 | ||||||||
|
Decrease in income tax receivable — collection of
refunds
|
26.9 | 111.4 | — | |||||||||
|
(Increase) decrease in income tax receivable — other
|
(23.1 | ) | (23.9 | ) | (98.7 | ) | ||||||
|
(Increase) decrease in inventories
|
(88.7 | ) | 380.1 | (25.8 | ) | |||||||
|
(Increase) decrease in other assets
|
21.2 | (43.1 | ) | (18.6 | ) | |||||||
|
Increase (decrease) in accounts payable
|
53.4 | (140.8 | ) | (13.8 | ) | |||||||
|
Increase (decrease) in accrued liabilities
|
(59.5 | ) | (20.5 | ) | (114.5 | ) | ||||||
|
Increase (decrease) in other liabilities
|
(25.1 | ) | 11.2 | 8.2 | ||||||||
|
Net cash provided by operating activities
|
163.6 | 686.2 | 439.6 | |||||||||
|
Investing activities:
|
||||||||||||
|
Investment in short-term marketable securities
|
(88.0 | ) | (70.0 | ) | — | |||||||
|
Proceeds from sales of railcars from our lease fleet
|
36.7 | 195.2 | 222.1 | |||||||||
|
Proceeds from sales of railcars from our lease fleet —
sale and leaseback
|
— | 103.6 | — | |||||||||
|
Proceeds from disposition of property, plant, equipment, and
other assets
|
38.9 | 15.1 | 20.8 | |||||||||
|
Proceeds from disposition of flood-damaged property, plant, and
equipment
|
12.0 | — | — | |||||||||
|
Capital expenditures — leasing
|
(216.6 | ) | (381.8 | ) | (1,110.8 | ) | ||||||
|
Capital expenditures — manufacturing and other
|
(29.0 | ) | (47.4 | ) | (132.3 | ) | ||||||
|
Capital expenditures — replacement of flood-damaged
property, plant, and equipment
|
(12.0 | ) | — | — | ||||||||
|
Acquisitions, net of cash acquired
|
(49.9 | ) | — | — | ||||||||
|
Net cash required by investing activities
|
(307.9 | ) | (185.3 | ) | (1,000.2 | ) | ||||||
|
Financing activities:
|
||||||||||||
|
Proceeds from issuance of common stock, net
|
1.7 | 1.1 | 3.1 | |||||||||
|
Excess tax benefits from stock-based compensation
|
0.6 | — | 0.9 | |||||||||
|
Payments to retire debt — assumed debt of Quixote
|
(40.0 | ) | — | — | ||||||||
|
Payments to retire debt — other
|
(363.9 | ) | (294.0 | ) | (390.8 | ) | ||||||
|
Proceeds from issuance of debt
|
370.1 | 300.1 | 922.5 | |||||||||
|
Stock repurchases
|
— | (6.3 | ) | (58.3 | ) | |||||||
|
(Increase) decrease in restricted cash
|
(25.4 | ) | (26.5 | ) | (20.4 | ) | ||||||
|
Purchase of additional interest in TRIP Holdings
|
(28.6 | ) | — | — | ||||||||
|
Dividends paid to common shareholders
|
(25.4 | ) | (25.3 | ) | (24.2 | ) | ||||||
|
Distribution to noncontrolling interest
|
( 2.6 | ) | — | — | ||||||||
|
Net cash (required) provided by financing activities
|
(113.5 | ) | (50.9 | ) | 432.8 | |||||||
|
Net (decrease) increase in cash and cash equivalents
|
(257.8 | ) | 450.0 | (127.8 | ) | |||||||
|
Cash and cash equivalents at beginning of period
|
611.8 | 161.8 | 289.6 | |||||||||
|
Cash and cash equivalents at end of period
|
$ | 354.0 | $ | 611.8 | $ | 161.8 | ||||||
Interest paid for the years ended December 31, 2010, 2009,
and 2008, net of $0.9 million in capitalized interest for
2008, was $160.5 million, $101.4 million, and
$84.3 million, respectively. There was no capitalized
interest in 2010 or 2009. Tax refunds received, net of payments
made, for the years ended December 31, 2010 and 2009 were
$16.0 million and $85.6 million, respectively. Taxes
paid, net of refunds received, for the year ended
December 31, 2008 were $33.6 million.
Non-cash investing and financing activity: During the year ended
December 31, 2009, the Company acquired $56.6 million
of equipment on lease through the assumption of capital lease
obligations.
See accompanying notes to consolidated financial statements.
44
Table of Contents
Trinity
Industries, Inc. and Subsidiaries
Consolidated Statements of Stockholders’ Equity
Consolidated Statements of Stockholders’ Equity
|
Accumulated
|
||||||||||||||||||||||||||||||||||||||||
| Common Stock |
Capital in
|
Other
|
Treasury Stock |
Trinity
|
Total
|
|||||||||||||||||||||||||||||||||||
|
$1 Par
|
Excess of Par
|
Retained
|
Comprehensive
|
Stockholders’
|
Noncontrolling
|
Stockholders’
|
||||||||||||||||||||||||||||||||||
| Shares | Value | Value | Earnings | Loss | Shares | Cost | Equity | Interest | Equity | |||||||||||||||||||||||||||||||
| (in millions, except par value) | ||||||||||||||||||||||||||||||||||||||||
|
Balances at December 31, 2007
|
81.6 | $ | 81.6 | $ | 631.2 | $ | 1,171.0 | $ | (61.6 | ) | (0.2 | ) | $ | (9.5 | ) | $ | 1,812.7 | $ | — | $ | 1,812.7 | |||||||||||||||||||
|
Net income
|
— | — | — | 280.9 | — | — | — | 280.9 | — | 280.9 | ||||||||||||||||||||||||||||||
|
Other comprehensive income, net of tax:
|
||||||||||||||||||||||||||||||||||||||||
|
Currency translation adjustments
|
— | — | — | — | 0.2 | — | — | 0.2 | — | 0.2 | ||||||||||||||||||||||||||||||
|
Change in funded status of pension liability
|
— | — | — | — | (50.6 | ) | — | — | (50.6 | ) | — | (50.6 | ) | |||||||||||||||||||||||||||
|
Unrealized loss on derivative financial instruments
|
— | — | — | — | (48.3 | ) | — | — | (48.3 | ) | — | (48.3 | ) | |||||||||||||||||||||||||||
|
Other changes
|
— | — | — | — | (1.0 | ) | — | — | (1.0 | ) | — | (1.0 | ) | |||||||||||||||||||||||||||
|
Comprehensive net income
|
181.2 | — | 181.2 | |||||||||||||||||||||||||||||||||||||
|
Cash dividends on common stock
|
— | — | — | (24.9 | ) | — | — | — | (24.9 | ) | — | (24.9 | ) | |||||||||||||||||||||||||||
|
Restricted shares surrendered, net
|
— | — | (16.0 | ) | — | — | 0.3 | 11.1 | (4.9 | ) | — | (4.9 | ) | |||||||||||||||||||||||||||
|
Shares repurchased
|
— | — | — | — | — | (2.6 | ) | (58.3 | ) | (58.3 | ) | — | (58.3 | ) | ||||||||||||||||||||||||||
|
Stock options exercised
|
0.1 | 0.1 | (5.9 | ) | — | — | 0.2 | 8.9 | 3.1 | — | 3.1 | |||||||||||||||||||||||||||||
|
Income tax benefit from stock options exercised
|
— | — | 1.7 | — | — | — | — | 1.7 | — | 1.7 | ||||||||||||||||||||||||||||||
|
Stock-based compensation expense
|
— | — | 1.2 | — | — | — | — | 1.2 | — | 1.2 | ||||||||||||||||||||||||||||||
|
Other
|
— | — | 0.5 | — | — | — | — | 0.5 | — | 0.5 | ||||||||||||||||||||||||||||||
|
Balances at December 31, 2008
|
81.7 | $ | 81.7 | $ | 612.7 | $ | 1,427.0 | $ | (161.3 | ) | (2.3 | ) | $ | (47.8 | ) | $ | 1,912.3 | $ | — | $ | 1,912.3 | |||||||||||||||||||
|
Net loss
|
— | — | — | (137.7 | ) | — | — | — | (137.7 | ) | — | (137.7 | ) | |||||||||||||||||||||||||||
|
Other comprehensive loss, net of tax:
|
||||||||||||||||||||||||||||||||||||||||
|
Change in funded status of pension liability
|
— | — | — | — | 35.6 | — | — | 35.6 | — | 35.6 | ||||||||||||||||||||||||||||||
|
Unrealized gain on derivative financial instruments
|
— | — | — | — | 27.8 | — | — | 27.8 | — | 27.8 | ||||||||||||||||||||||||||||||
|
Other changes
|
— | — | — | — | (0.1 | ) | — | — | (0.1 | ) | — | (0.1 | ) | |||||||||||||||||||||||||||
|
Comprehensive net loss
|
(74.4 | ) | — | (74.4 | ) | |||||||||||||||||||||||||||||||||||
|
Cash dividends on common stock
|
— | — | — | (25.3 | ) | — | — | — | (25.3 | ) | — | (25.3 | ) | |||||||||||||||||||||||||||
|
Restricted shares issued, net
|
— | — | (12.6 | ) | — | — | 0.5 | 12.6 | — | — | — | |||||||||||||||||||||||||||||
|
Shares repurchased
|
— | — | — | — | — | (0.8 | ) | (6.3 | ) | (6.3 | ) | — | (6.3 | ) | ||||||||||||||||||||||||||
|
Stock options exercised
|
— | — | (0.6 | ) | — | — | 0.1 | 1.7 | 1.1 | — | 1.1 | |||||||||||||||||||||||||||||
|
Income tax expense from stock options exercised
|
— | — | (2.1 | ) | — | — | — | — | (2.1 | ) | — | (2.1 | ) | |||||||||||||||||||||||||||
|
Stock-based compensation expense
|
— | — | 1.0 | — | — | — | — | 1.0 | — | 1.0 | ||||||||||||||||||||||||||||||
|
Other
|
— | — | — | (0.1 | ) | — | — | 0.1 | — | — | — | |||||||||||||||||||||||||||||
|
Balances at December 31, 2009
|
81.7 | $ | 81.7 | $ | 598.4 | $ | 1,263.9 | $ | (98.0 | ) | (2.5 | ) | $ | (39.7 | ) | $ | 1,806.3 | $ | — | $ | 1,806.3 | |||||||||||||||||||
|
Cumulative effect of consolidating TRIP Holdings (see
Notes 1 and 6)
|
— | — | — | (105.4 | ) | — | — | — | (105.4 | ) | 129.9 | 24.5 | ||||||||||||||||||||||||||||
|
Balances at December 31, 2009 as adjusted
|
81.7 | 81.7 | 598.4 | 1,158.5 | (98.0 | ) | (2.5 | ) | (39.7 | ) | 1,700.9 | 129.9 | 1,830.8 | |||||||||||||||||||||||||||
|
Net income
|
— | — | — | 67.4 | — | — | — | 67.4 | 8.0 | 75.4 | ||||||||||||||||||||||||||||||
|
Other comprehensive loss, net of tax:
|
||||||||||||||||||||||||||||||||||||||||
|
Change in funded status of pension liability
|
— | — | — | — | 8.7 | — | — | 8.7 | — | 8.7 | ||||||||||||||||||||||||||||||
|
Unrealized loss on derivative financial instruments
|
— | — | — | — | (7.3 | ) | — | — | (7.3 | ) | (9.1 | ) | (16.4 | ) | ||||||||||||||||||||||||||
|
Other changes
|
— | — | — | — | 1.1 | — | — | 1.1 | — | 1.1 | ||||||||||||||||||||||||||||||
|
Comprehensive net income (loss)
|
69.9 | (1.1 | ) | 68.8 | ||||||||||||||||||||||||||||||||||||
|
Purchase of additional interest in TRIP Holdings
|
— | — | 10.3 | — | — | — | — | 10.3 | (47.9 | ) | (37.6 | ) | ||||||||||||||||||||||||||||
|
Cash dividends on common stock
|
— | — | — | (25.4 | ) | — | — | — | (25.4 | ) | — | (25.4 | ) | |||||||||||||||||||||||||||
|
Restricted shares issued, net
|
— | — | (2.3 | ) | — | — | 0.4 | 9.2 | 6.9 | — | 6.9 | |||||||||||||||||||||||||||||
|
Stock options exercised
|
— | — | (0.8 | ) | — | — | 0.1 | 2.5 | 1.7 | — | 1.7 | |||||||||||||||||||||||||||||
|
Income tax expense from stock options exercised
|
— | — | (0.2 | ) | — | — | — | — | (0.2 | ) | — | (0.2 | ) | |||||||||||||||||||||||||||
|
Stock-based compensation expense
|
— | — | 0.6 | — | — | — | — | 0.6 | — | 0.6 | ||||||||||||||||||||||||||||||
|
Other
|
— | — | 0.1 | — | — | 0.1 | — | 0.1 | — | 0.1 | ||||||||||||||||||||||||||||||
|
Balances at December 31, 2010
|
81.7 | $ | 81.7 | $ | 606.1 | $ | 1,200.5 | $ | (95.5 | ) | (1.9 | ) | $ | (28.0 | ) | $ | 1,764.8 | $ | 80.9 | $ | 1,845.7 | |||||||||||||||||||
See accompanying notes to consolidated financial statements.
45
Table of Contents
Trinity
Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
| Note 1. | Summary of Significant Accounting Policies |
Principles
of Consolidation
The financial statements of Trinity Industries, Inc. and its
consolidated subsidiaries (“Trinity”,
“Company”, “we” or “our”) include
the accounts of all majority owned subsidiaries. The equity
method of accounting is used for companies in which the Company
has significant influence and 50% or less ownership. All
significant intercompany accounts and transactions have been
eliminated.
On January 1, 2010, the Company adopted the provisions of a
new accounting standard, Accounting Standards Codification
(“ASC”)
810-10,
requiring the inclusion of the consolidated financial statements
of TRIP Holdings and subsidiary in the consolidated financial
statements of the Company as of January 1, 2010. Prior to
January 1, 2010, the Company’s investment in TRIP
Holdings was accounted for using the equity method. Accordingly,
the consolidated balance sheet of the Company as of
December 31, 2010 and the consolidated statements of
operations, cash flows, and stockholders’ equity for the
year ended December 31, 2010 include the accounts of all
subsidiaries including TRIP Holdings. As a result of adopting
this pronouncement, we determined the effects on Trinity’s
consolidated financial statements as if TRIP Holdings had been
included in the Company’s consolidated financial statements
from TRIP Holdings’ inception and recorded a charge to
retained earnings of $105.4 million, net of
$57.7 million of tax benefit, and a noncontrolling interest
of $129.9 million as of January 1, 2010. Prior periods
were not restated. All significant intercompany accounts and
transactions have been eliminated. Profits have been deferred on
sales of railcars from the Rail or Leasing Group to TRIP
Holdings and will be amortized over the life of the related
equipment. Additionally, any future profits on the sale of
railcars to TRIP Holdings will be deferred and amortized over
the life of the related equipment. The noncontrolling interest
represents the non-Trinity equity interest in TRIP Holdings. In
September 2010, Trinity increased its ownership interest in TRIP
Holdings to 57.1%. The effect of adopting this accounting
standard was an increase to net income from continuing
operations and net income attributable to Trinity Industries,
Inc. of $5.3 million or $0.07 per basic diluted share. The
effect of adopting this accounting standard was an increase to
income from continuing operations and net income attributable to
Trinity Industries, Inc. of $5.3 million or $0.07 per
share. See Note 6 Investment in TRIP Holdings for further
discussion.
Stockholders’
Equity
The Company’s share repurchase program which commenced in
2007 with an authorization of $200 million expired on
December 31, 2010. No shares were repurchased under the
program for the year ended December 31, 2010. From
inception through December 31, 2010, the Company
repurchased a total of 3,532,728 shares at a cost of
approximately $67.5 million. On December 9, 2010, the
Company’s Board of Directors authorized a new
$200 million share repurchase program, effective
January 1, 2011. This program replaces the Company’s
previous share repurchase program and expires December 31,
2012.
Revenue
Recognition
Revenues for contracts providing for a large number of units and
few deliveries are recorded as the individual units are
produced, inspected, and accepted by the customer as the risk of
loss passes to the customer upon pre-delivery acceptance on
these contracts. This occurs primarily in the Rail and Inland
Barge Groups. Revenues from construction contracts are recorded
using percentage of completion accounting, using incurred labor
hours to estimated total hours of the contract. Revenue from
rentals and operating leases, including contracts which contain
non-level fixed rental payments, is recognized monthly on a
straight-line basis. Fees for shipping and handling are recorded
as revenue. For all other products, we recognize revenue when
products are shipped or services are provided.
46
Table of Contents
Income
Taxes
The liability method is used to account for income taxes.
Deferred income taxes represent the tax effects of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts
used for income tax purposes. Valuation allowances reduce
deferred tax assets to an amount that will more likely than not
be realized.
Financial
Instruments
The Company considers all highly liquid debt instruments to be
either cash and cash equivalents if purchased with a maturity of
three months or less or short-term marketable securities if
purchased with a maturity of more than three months and less
than one year.
Financial instruments that potentially subject the Company to a
concentration of credit risk are primarily cash investments,
short-term marketable securities, and receivables. The Company
places its cash investments and short-term marketable securities
in bank deposits and 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 control procedures to monitor the
credit worthiness of customers, the large number of customers in
the Company’s customer base, and their dispersion across
different industries and geographic areas. As receivables are
generally unsecured, the Company maintains an allowance for
doubtful accounts based upon the expected collectability of all
receivables. Receivable balances determined to be uncollectible
are charged against the allowance.
Inventories
Inventories are valued at the lower of cost or market, with cost
determined principally on the first in first out method. Market
is replacement cost or net realizable value. Work in process and
finished goods include material, labor, and overhead.
Property,
Plant, and Equipment
Property, plant, and equipment are stated at cost and
depreciated over their estimated useful lives using the
straight-line method. The estimated useful lives are: buildings
and improvements — 3 to 30 years; leasehold
improvements — the lesser of the term of the lease or
7 years; machinery and equipment — 2 to
10 years; information systems hardware and
software — 2 to 5 years; and railcars in our
lease fleet — generally 35 years. The costs of
ordinary maintenance and repair are charged to operating costs
while renewals and major replacements are capitalized.
Long-lived
Assets
The Company periodically evaluates the carrying value of
long-lived assets to be held and used for potential impairment.
The carrying value of long-lived assets to be held and used is
considered impaired only when their carrying value is not
recoverable through undiscounted future cash flows and the fair
value of the assets is less than their carrying value. Fair
value is determined primarily using the anticipated cash flows
discounted at a rate commensurate with the risks involved or
market quotes as available. Impairment losses on long-lived
assets held for sale are determined in a similar manner, except
that fair values are reduced for the estimated cost to dispose
of the assets. Impairment losses were not material for the years
ended December 31, 2010, 2009, and 2008.
Goodwill
and Intangible Assets
Goodwill is required to be tested for impairment annually, or on
an interim basis whenever events or circumstances change,
indicating that the carrying amount of the goodwill might be
impaired. The goodwill impairment test is a two-step process
requiring the comparison of the reporting unit’s estimated
fair value with the carrying amount of its net assets. Step two
of the impairment test is necessary to determine the amount of
goodwill impairment to be recorded when the reporting
unit’s recorded net assets exceed its fair value.
Impairment is assessed at the “reporting unit” level
by applying a fair value-based test for each unit with recorded
goodwill. The estimates
47
Table of Contents
and judgments that most significantly affect the fair value
calculations are assumptions related to revenue and operating
profit growth, discount rates and exit multiples. Due to an
overall market decline for products in the Rail Group during the
second quarter of 2009, we concluded that indications of
impairment existed that required an interim goodwill impairment
analysis. Accordingly, we tested the Rail Group’s goodwill
for impairment as of June 30, 2009 and recorded a charge of
$325.0 million during the second quarter of 2009. See
Note 9 Goodwill for further explanation and results of this
test. As of December 31, 2010 and 2009, the Company’s
annual impairment test of goodwill was completed at the
reporting unit level and no additional impairment charges were
determined to be necessary.
Intangible assets with defined useful lives, which as of
December 31, 2010 had net book values of
$26.9 million, are amortized over their estimated useful
lives and are also evaluated for potential impairment at least
annually. Impairment losses were not material for the years
ended December 31, 2010, 2009, and 2008.
Restricted
Cash
Restricted cash consists of cash and cash equivalents which are
held as collateral for the Company’s non-recourse debt and
lease obligations and as such are restricted in use.
Insurance
The Company is effectively self-insured for workers’
compensation. A third party administrator is used to process
claims. We accrue our workers’ compensation liability based
upon independent actuarial studies.
Warranties
The Company provides warranties against workmanship and
materials defects generally ranging from one to five years
depending on the product. The warranty costs are estimated using
a two-step approach. First, an engineering estimate is made for
the cost of all claims that have been filed by a customer.
Second, based on historical claims experience, a cost is accrued
for all products still within a warranty period for which no
claims have been filed. The Company provides for the estimated
cost of product warranties at the time revenue is recognized
related to products covered by warranties and assesses the
adequacy of the resulting reserves on a quarterly basis.
Foreign
Currency Translation
Operations outside the United States prepare financial
statements in currencies other than the United States dollar.
The income statement amounts are translated at average exchange
rates for the year, while the assets and liabilities are
translated at year-end exchange rates. Translation adjustments
are accumulated as a separate component of stockholders’
equity and other comprehensive loss.
Other
Comprehensive Income (Loss)
Other comprehensive income (loss) is defined as the change in
equity of a business enterprise during a period from
transactions and other events and circumstances from non-owner
sources. Comprehensive net income (loss) consists of net income
(loss), foreign currency translation adjustments, the effective
unrealized portions of changes in fair value of the
Company’s derivative financial instruments, and the change
in the funded status of pension liabilities. See Note 15
Accumulated Other Comprehensive Loss (“AOCL”). All
components are shown net of tax.
Recent
Accounting Pronouncements
In June 2009, the Financial Accounting Standards Board
(“FASB”) issued a new accounting standard,
ASC 810-10,
that amended the previous accounting rules for consolidation of
variable interest entities. The new standard replaced the
quantitative-based risks and rewards calculation for determining
which enterprise has a controlling financial interest in a
variable interest entity with an approach focused on identifying
which enterprise has the power to direct the activities of a
variable interest entity that most significantly affect its
economic performance and the obligation to absorb losses of the
entity or the right to receive benefits from the entity.
48
Table of Contents
Additionally, the new standard provided more timely and useful
information about an enterprise’s involvement with a
variable interest entity. This standard was effective for annual
reporting periods beginning after November 15, 2009.
Accordingly, the Company adopted this new standard on
January 1, 2010. See Note 6 Investment in TRIP
Holdings for a further explanation of the effects of
implementing this pronouncement as it applies to our investment
in TRIP Holdings.
Management’s
Estimates
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.
Reclassifications
Certain prior year balances have been reclassified in the
Consolidated Statements of Cash Flows to conform to the 2010
presentations.
| Note 2. | Acquisitions and Divestitures |
In February 2010, pursuant to a tender offer, the Company’s
Construction Products Group acquired the outstanding stock of
Quixote Corporation (“Quixote”) at a total cost of
$58.1 million, including $17.1 million in cash
balances and $1.1 million consisting of the Company’s
pre-acquisition investment in Quixote. In addition, the Company
assumed $40.0 million in debt that was subsequently retired
in the first quarter of 2010. Quixote is a leading manufacturer
of energy-absorbing highway crash cushions, truck-mounted
attenuators, and other transportation products. Based on its
valuation of the net assets acquired, Trinity recorded
$24.2 million in intangible assets primarily consisting of
the acquisition-date fair value allocated to patents, trade
names and customer relationships which are being amortized over
their estimated economic life generally ranging from four to
twenty years and goodwill of $22.7 million. As a result of
the acquisition, the Company recorded transaction-related
expenses of $4.6 million including a $1.5 million
write-down of its pre-acquisition investment in Quixote
classified as other selling, engineering, and administrative
costs. In addition to the transaction-related expenses listed
above, there was a $1.8 million reclassification of
previously-recognized charges from AOCL to earnings representing
the decline in fair value of the Company’s pre-acquisition
investment in Quixote, included in other, net in the
consolidated statement of operations. See Note 12 Other,
Net and Note 15 Accumulated Other Comprehensive Loss.
Acquisition and divestiture activity is summarized as follows:
| Acquisitions | Divestitures | |||||||||||||||||||||||
|
Net cash
|
||||||||||||||||||||||||
|
paid during
|
Goodwill
|
Gain/(loss)
|
Goodwill
|
|||||||||||||||||||||
| Total cost | the year | recorded | Proceeds | recognized | charged off | |||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||
|
2010:
|
||||||||||||||||||||||||
|
Construction Products Group
|
||||||||||||||||||||||||
|
Quixote
|
$ | 58.1 | $ | 39.9 | $ | 22.7 | $ | — | $ | — | $ | — | ||||||||||||
|
Other
|
5.0 | 5.0 | 4.0 | 30.8 | 3.8 | 16.5 | ||||||||||||||||||
| 63.1 | 44.9 | 26.7 | 30.8 | 3.8 | 16.5 | |||||||||||||||||||
|
Energy Equipment Group
|
7.4 | 5.0 | 6.6 | — | — | — | ||||||||||||||||||
| $ | 70.5 | $ | 49.9 | $ | 33.3 | $ | 30.8 | $ | 3.8 | $ | 16.5 | |||||||||||||
|
2009:
|
$ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
|
2008:
|
||||||||||||||||||||||||
|
Construction Products Group
|
$ | — | $ | — | $ | — | $ | 17.8 | $ | 8.1 | $ | 1.5 | ||||||||||||
49
Table of Contents
| Note 3. | Fair Value Accounting |
Assets and liabilities measured at fair value on a recurring
basis are summarized below:
| Fair Value Measurement as of December 31, 2010 | ||||||||||||||||
| (in millions) | ||||||||||||||||
|
Level 1 |
Level 2 | Level 3 | Total | |||||||||||||
|
Assets:
|
||||||||||||||||
|
Cash equivalents
|
$ | 286.0 | $ | — | $ | — | $ | 286.0 | ||||||||
|
Short-term marketable securities
|
158.0 | — | — | 158.0 | ||||||||||||
|
Restricted cash
|
207.1 | — | — | 207.1 | ||||||||||||
|
Fuel derivative instruments
(1)
|
— | 0.1 | — | 0.1 | ||||||||||||
|
Total assets
|
$ | 651.1 | $ | 0.1 | $ | — | $ | 651.2 | ||||||||
|
Liabilities:
|
||||||||||||||||
|
Interest rate hedges
(2)
|
||||||||||||||||
|
Parent and wholly-owned subsidiaries
|
$ | — | $ | 45.7 | $ | — | $ | 45.7 | ||||||||
|
TRIP Holdings
|
— | 48.3 | — | 48.3 | ||||||||||||
|
Total liabilities
|
$ | — | $ | 94.0 | $ | — | $ | 94.0 | ||||||||
| (1) | Included in other assets on the consolidated balance sheet. | |
| (2) | Included in accrued liabilities on the consolidated balance sheet. |
The carrying amounts and estimated fair values of our long-term
debt at December 31, 2010 were as follows:
|
Estimated Fair
|
||||||||
| Carrying Value | Value | |||||||
| (in millions) | ||||||||
|
Recourse:
|
||||||||
|
Convertible subordinated notes
|
$ | 338.9 | $ | 448.3 | ||||
|
Capital lease obligations
|
51.2 | 51.2 | ||||||
|
Term loan
|
57.4 | 54.2 | ||||||
|
Other
|
2.8 | 2.8 | ||||||
| 450.3 | 556.5 | |||||||
|
Non-recourse:
|
||||||||
|
2006 secured railcar equipment notes
|
283.2 | 302.8 | ||||||
|
Promissory notes
|
493.8 | 482.2 | ||||||
|
2009 secured railcar equipment notes
|
229.2 | 256.1 | ||||||
|
2010 secured railcar equipment notes
|
367.1 | 345.5 | ||||||
|
TILC warehouse facility
|
80.2 | 80.2 | ||||||
|
TRIP Holdings warehouse loan
|
1,003.9 | 994.0 | ||||||
| 2,457.4 | 2,460.8 | |||||||
|
Total
|
$ | 2,907.7 | $ | 3,017.3 | ||||
The estimated fair value of our convertible subordinated notes
was based on a quoted market price as of December 31, 2010.
The estimated fair values of our 2006, 2009, and 2010 secured
railcar equipment notes, promissory notes, TRIP Holdings
warehouse loan, and term loan are based on our estimate of their
fair value as of December 31, 2010 determined by
discounting their future cash flows at a current market interest
rate. The carrying value of our TILC warehouse facility
approximates fair value because the interest rate adjusts to the
market interest rate and there has been no change in the
Company’s credit rating since the loan agreement was
renewed in 2009 and again in February, 2011. The fair values of
all other financial instruments are estimated to approximate
carrying value.
Fair value is defined as the exchange price that would be
received for an asset or paid to transfer a liability (an exit
price) in the principal or most advantageous market to that
asset or liability in an orderly transaction between market
participants on the measurement date. An entity is required to
establish a fair value hierarchy which
50
Table of Contents
maximizes the use of observable inputs and minimizes the use of
unobservable inputs when measuring fair value. The three levels
of inputs that may be used to measure fair values are listed
below:
Level 1 – This level is defined as quoted prices
in active markets for identical assets or liabilities. The
Company’s cash equivalents, short-term marketable
securities, and restricted cash are instruments of the
United States Treasury, fully-insured certificates of
deposit or highly-rated money market mutual funds.
Level 2 – This level is defined as observable
inputs other than Level 1 prices such as quoted prices for
similar assets or liabilities; quoted prices in markets that are
not active; or other inputs that are observable or can be
corroborated by observable market data for substantially the
full term of the assets or liabilities. The Company’s fuel
derivative instruments, which are commodity options, are valued
using energy and commodity market data. Interest rate hedges are
valued at exit prices obtained from each counterparty.
Level 3 – This level is defined as unobservable
inputs that are supported by little or no market activity and
that are significant to the fair value of the assets or
liabilities.
| Note 4. | Segment Information |
The Company reports operating results in five principal business
segments: (1) the Rail Group, which manufactures and sells
railcars and related parts and components; (2) the
Construction Products Group, which manufactures and sells
highway products and concrete and aggregates; (3) the
Inland Barge Group, which manufactures and sells barges and
related products for inland waterway services; (4) the
Energy Equipment Group, which manufactures and sells products
for energy related businesses, including structural wind towers,
tank containers and tank heads for pressure and non-pressure
vessels, propane tanks and utility, traffic, and lighting
structures, along with transmission poles; and (5) the
Railcar Leasing and Management Services Group (“Leasing
Group”), which provides fleet management, maintenance, and
leasing services. The category All Other includes our captive
insurance and transportation companies; legal, environmental,
and upkeep costs associated with non-operating facilities; other
peripheral businesses; and the change in market valuation
related to ineffective commodity hedges. Gains and losses from
the sale of property, plant, and equipment which are related to
manufacturing and dedicated to the specific manufacturing
operations of a particular segment are recorded in the cost of
revenues of that respective segment. Gains and losses from the
sale of property, plant, and equipment which can be utilized by
multiple segments are recorded in the cost of revenues of the
All Other segment.
Sales and related net profits from the Rail Group to the Leasing
Group are recorded in the Rail Group and eliminated in
consolidation. Sales between these groups are recorded at prices
comparable to those charged to external customers giving
consideration for quantity, features, and production demand.
Amortization of deferred profit on railcars sold to the Leasing
Group is included in the operating profits of the Leasing Group.
Sales of railcars from the lease fleet are included in the
Leasing Group. Revenue and operating profit of the Leasing Group
for the year ended December 31, 2010 include the operating
results of TRIP Holdings. Total assets of the Leasing Group
include the assets of TRIP Holdings as of December 31,
2010. See Note 1 Summary of Significant Accounting
Policies — Principals of Consolidation for further
discussion.
51
Table of Contents
The financial information from continuing operations for these
segments is shown in the tables below. We operate principally in
North America.
Year
Ended December 31, 2010
|
Operating
|
||||||||||||||||||||||||||||
| Revenues |
Profit
|
Depreciation &
|
Capital
|
|||||||||||||||||||||||||
| External | Intersegment | Total | (Loss) | Assets | Amortization | Expenditures | ||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||
|
Rail Group
|
$ | 289.7 | $ | 232.4 | $ | 522.1 | $ | 1.5 | $ | 482.9 | $ | 24.0 | $ | 4.0 | ||||||||||||||
|
Construction Products Group
|
558.3 | 20.5 | 578.8 | 47.4 | 335.2 | 23.7 | 5.5 | |||||||||||||||||||||
|
Inland Barge Group
|
422.3 | — | 422.3 | 69.0 | 94.5 | 5.5 | 14.6 | |||||||||||||||||||||
|
Energy Equipment Group
|
408.5 | 11.1 | 419.6 | 35.1 | 352.4 | 17.1 | 8.1 | |||||||||||||||||||||
|
Railcar Leasing and Management Services Group
|
498.1 | — | 498.1 | 207.0 | 4,452.6 | 112.6 | 216.6 | |||||||||||||||||||||
|
All Other
|
12.2 | 36.3 | 48.5 | (11.4 | ) | 27.5 | 3.6 | 4.2 | ||||||||||||||||||||
|
Corporate
|
— | — | — | (33.6 | ) | 538.5 | 3.4 | 4.6 | ||||||||||||||||||||
|
Eliminations-Lease subsidiary
|
— | (216.8 | ) | (216.8 | ) | (8.4 | ) | (522.1 | ) | — | — | |||||||||||||||||
|
Eliminations – Other
|
— | (83.5 | ) | (83.5 | ) | (2.6 | ) | (1.5 | ) | (0.3 | ) | — | ||||||||||||||||
|
Consolidated Total
|
$ | 2,189.1 | $ | — | $ | 2,189.1 | $ | 304.0 | $ | 5,760.0 | $ | 189.6 | $ | 257.6 | ||||||||||||||
Year
Ended December 31, 2009
|
Operating
|
||||||||||||||||||||||||||||
| Revenues |
Profit
|
Depreciation &
|
Capital
|
|||||||||||||||||||||||||
| External | Intersegment | Total | (Loss) | Assets | Amortization | Expenditures | ||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||
|
Rail Group
|
$ | 485.2 | $ | 410.1 | $ | 895.3 | $ | (355.9 | ) | $ | 450.7 | $ | 25.0 | $ | 19.6 | |||||||||||||
|
Construction Products Group
|
524.0 | 14.5 | 538.5 | 32.6 | 277.3 | 23.5 | 11.6 | |||||||||||||||||||||
|
Inland Barge Group
|
527.3 | — | 527.3 | 125.2 | 69.4 | 6.1 | 1.3 | |||||||||||||||||||||
|
Energy Equipment Group
|
502.2 | 7.8 | 510.0 | 73.8 | 242.0 | 16.9 | 9.1 | |||||||||||||||||||||
|
Railcar Leasing and Management Services Group
|
524.5 | — | 524.5 | 149.0 | 3,167.3 | 82.4 | 381.8 | |||||||||||||||||||||
|
All Other
|
12.0 | 36.4 | 48.4 | 0.8 | 27.6 | 3.1 | 2.0 | |||||||||||||||||||||
|
Corporate
|
— | — | — | (30.6 | ) | 753.1 | 4.2 | 3.8 | ||||||||||||||||||||
|
Eliminations – Lease subsidiary
|
— | (391.6 | ) | (391.6 | ) | (22.6 | ) | (329.0 | ) | — | — | |||||||||||||||||
|
Eliminations – Other
|
— | (77.2 | ) | (77.2 | ) | (3.0 | ) | (2.0 | ) | (0.4 | ) | — | ||||||||||||||||
|
Consolidated Total
|
$ | 2,575.2 | $ | — | $ | 2,575.2 | $ | (30.7 | ) | $ | 4,656.4 | $ | 160.8 | $ | 429.2 | |||||||||||||
Year
Ended December 31, 2008
|
Operating
|
||||||||||||||||||||||||||||
| Revenues |
Profit
|
Depreciation &
|
Capital
|
|||||||||||||||||||||||||
| External | Intersegment | Total | (Loss) | Assets | Amortization | Expenditures | ||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||
|
Rail Group
|
$ | 1,381.0 | $ | 1,182.4 | $ | 2,563.4 | $ | 247.7 | $ | 1,098.6 | $ | 26.9 | $ | 43.4 | ||||||||||||||
|
Construction Products Group
|
719.7 | 21.5 | 741.2 | 64.2 | 335.1 | 24.7 | 25.5 | |||||||||||||||||||||
|
Inland Barge Group
|
625.2 | — | 625.2 | 119.2 | 135.9 | 5.3 | 8.7 | |||||||||||||||||||||
|
Energy Equipment Group
|
605.7 | 26.9 | 632.6 | 100.3 | 301.9 | 12.1 | 42.7 | |||||||||||||||||||||
|
Railcar Leasing and Management Services Group
|
535.9 | — | 535.9 | 158.9 | 3,020.3 | 65.2 | 1,110.8 | |||||||||||||||||||||
|
All Other
|
15.3 | 63.4 | 78.7 | 7.0 | 41.8 | 2.6 | 8.6 | |||||||||||||||||||||
|
Corporate
|
— | — | — | (41.3 | ) | 325.2 | 4.0 | 3.4 | ||||||||||||||||||||
|
Eliminations – Lease subsidiary
|
— | (1,162.4 | ) | (1,162.4 | ) | (86.3 | ) | (342.3 | ) | — | — | |||||||||||||||||
|
Eliminations
–
Other
|
— | (131.8 | ) | (131.8 | ) | (10.2 | ) | (4.9 | ) | (0.5 | ) | — | ||||||||||||||||
|
Consolidated Total
|
$ | 3,882.8 | $ | — | $ | 3,882.8 | $ | 559.5 | $ | 4,911.6 | $ | 140.3 | $ | 1,243.1 | ||||||||||||||
Corporate assets are composed of cash and cash equivalents,
short-term marketable securities, notes receivable, certain
property, plant, and equipment, and other assets. Capital
expenditures do not include business acquisitions.
52
Table of Contents
Externally reported revenues and operating profit for our Mexico
operations for the years ended December 31, 2010, 2009, and
2008 are presented below:
| External Revenues | Operating Profit | |||||||||||||||||||||||
|
Year Ended
|
Year Ended
|
|||||||||||||||||||||||
| December 31, | December 31, | |||||||||||||||||||||||
| 2010 | 2009 | 2008 | 2010 | 2009 | 2008 | |||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||
|
Mexico
|
$ | 98.3 | $ | 86.8 | $ | 119.0 | $ | 3.4 | $ | 15.2 | $ | 31.1 | ||||||||||||
Total assets and long-lived assets for our Mexico operations as
of December 31, 2010 and 2009 are presented below:
| Total Assets | Long-Lived Assets | |||||||||||||||
| December 31, | ||||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
| (in millions) | ||||||||||||||||
|
Mexico
|
$ | 288.8 | $ | 213.9 | $ | 151.7 | $ | 164.1 | ||||||||
| Note 5. | Railcar Leasing and Management Services Group |
The Railcar Leasing and Management Services Group provides fleet
management, maintenance, and leasing services. Selected
consolidating financial information for the Leasing Group is as
follows:
| December 31, 2010 | ||||||||||||||||
| Leasing Group | ||||||||||||||||
|
Wholly
|
||||||||||||||||
|
Owned
|
TRIP
|
Manufacturing/
|
||||||||||||||
| Subsidiaries | Holdings | Corporate | Total | |||||||||||||
| (in millions) | ||||||||||||||||
|
Cash, cash equivalents, and short-term marketable securities
|
$ | 3.8 | $ | — | $ | 508.2 | $ | 512.0 | ||||||||
|
Property, plant, and equipment, net
|
$ | 2,965.4 | $ | 1,191.8 | $ | 491.4 | $ | 4,648.6 | ||||||||
|
Net deferred profit on railcars sold to the Leasing Group
|
(340.4 | ) | (196.2 | ) | — | (536.6 | ) | |||||||||
| $ | 2,625.0 | $ | 995.6 | $ | 491.4 | $ | 4,112.0 | |||||||||
|
Restricted cash
|
$ | 161.1 | $ | 46.0 | $ | — | $ | 207.1 | ||||||||
|
Debt:
|
||||||||||||||||
|
Recourse
|
$ | 108.6 | $ | — | $ | 452.8 | $ | 561.4 | ||||||||
|
Less: unamortized discount
|
— | — | (111.1 | ) | (111.1 | ) | ||||||||||
| 108.6 | — | 341.7 | 450.3 | |||||||||||||
|
Non-recourse
|
1,453.5 | 1,003.9 | — | 2,457.4 | ||||||||||||
|
Total debt
|
$ | 1,562.1 | $ | 1,003.9 | $ | 341.7 | $ | 2,907.7 | ||||||||
53
Table of Contents
| December 31, 2009 | ||||||||||||||||
| Leasing Group | ||||||||||||||||
|
Wholly
|
||||||||||||||||
|
Owned
|
TRIP
|
Manufacturing/
|
||||||||||||||
| Subsidiaries | Holdings | Corporate | Total | |||||||||||||
| (in millions) | ||||||||||||||||
|
Cash, cash equivalents, and short-term marketable securities
|
$ | 6.7 | $ | — | $ | 675.1 | $ | 681.8 | ||||||||
|
Property, plant, and equipment, net
|
$ | 2,850.1 | $ | — | $ | 517.1 | $ | 3,367.2 | ||||||||
|
Net deferred profit on railcars sold to the Leasing Group
|
(329.0 | ) | — | — | (329.0 | ) | ||||||||||
| $ | 2,521.1 | $ | — | $ | 517.1 | $ | 3,038.2 | |||||||||
|
Restricted cash
|
$ | 138.6 | $ | — | $ | — | $ | 138.6 | ||||||||
|
Debt:
|
||||||||||||||||
|
Recourse
|
$ | 113.4 | $ | — | $ | 654.2 | $ | 767.6 | ||||||||
|
Less: unamortized discount
|
— | — | (121.6 | ) | (121.6 | ) | ||||||||||
| 113.4 | — | 532.6 | 646.0 | |||||||||||||
|
Non-recourse
|
1,199.1 | — | — | 1,199.1 | ||||||||||||
|
Total debt
|
$ | 1,312.5 | $ | — | $ | 532.6 | $ | 1,845.1 | ||||||||
See Note 1 Summary of Significant Accounting Policies,
Note 6 Investment in TRIP Holdings and Note 11 Debt
for a further discussion regarding the accounting for the
Company’s investment in TRIP Holdings and TRIP
Holdings’ debt.
| Year Ended December 31, | Percent Change | |||||||||||||||||||
| 2010 | 2009 | 2008 | 2010 versus 2009 | 2009 versus 2008 | ||||||||||||||||
| ($ in millions) | ||||||||||||||||||||
|
Revenues:
|
||||||||||||||||||||
|
Wholly-owned subsidiaries:
|
||||||||||||||||||||
|
Leasing and management
|
$ | 345.4 | $ | 329.3 | $ | 313.8 | 4.9 | % | 4.9 | % | ||||||||||
|
Sales of cars from the lease fleet
|
35.9 | 195.2 | 222.1 | (81.6 | )% | (12.1 | )% | |||||||||||||
| 381.3 | 524.5 | 535.9 | (27.3 | )% | (2.1 | )% | ||||||||||||||
|
TRIP Holdings:
|
||||||||||||||||||||
|
Leasing and management
|
116.0 | — | — | — | — | |||||||||||||||
|
Sales of cars from the lease fleet
|
0.8 | — | — | — | — | |||||||||||||||
| 116.8 | — | — | — | — | ||||||||||||||||
|
Total revenues
|
$ | 498.1 | $ | 524.5 | $ | 535.9 | (5.0 | )% | (2.1 | )% | ||||||||||
|
Operating profit:
|
||||||||||||||||||||
|
Wholly-owned subsidiaries:
|
||||||||||||||||||||
|
Leasing and management
|
$ | 131.7 | $ | 128.5 | $ | 124.2 | ||||||||||||||
|
Sales of cars from the lease fleet
|
6.8 | 20.5 | 34.7 | |||||||||||||||||
| 138.5 | 149.0 | 158.9 | ||||||||||||||||||
|
TRIP Holdings:
|
||||||||||||||||||||
|
Leasing and management
|
68.5 | — | — | |||||||||||||||||
|
Sales of cars from the lease fleet
|
— | — | — | |||||||||||||||||
| 68.5 | — | — | ||||||||||||||||||
|
Total operating profit
|
$ | 207.0 | $ | 149.0 | $ | 158.9 | ||||||||||||||
|
Operating profit margin:
|
||||||||||||||||||||
|
Leasing and management
|
43.4 | % | 39.0 | % | 39.6 | % | ||||||||||||||
|
Sales of cars from the lease fleet
|
18.5 | 10.5 | 15.6 | |||||||||||||||||
|
Total operating profit margin
|
41.6 | 28.4 | 29.7 | |||||||||||||||||
54
Table of Contents
For the years ended December 31, 2009 and 2008, revenues of
$183.8 million and $134.2 million, respectively, and
operating profit of $22.7 million and $16.6 million,
respectively, were related to sales of railcars from the lease
fleet to TRIP Holdings. There were no sales to TRIP Holdings
during the year ended December 31, 2010. See Note 6
Investment in TRIP Holdings.
The Leasing Group’s interest expense, which is not a
component of operating profit and includes the effects of hedges
related to the Leasing Group’s debt, was
$138.6 million including $46.9 million of TRIP
Holdings’ interest expense for the year ended
December 31, 2010. Interest expense including the effects
of hedges was $80.1 million and $67.2 million for the
years ended December 31, 2009 and 2008, respectively. Rent
expense, which is a component of operating profit, was
$48.6 million, $46.7 million, and $44.8 million
for the years ended December 31, 2010, 2009, and 2008,
respectively.
Equipment consists primarily of railcars leased by third
parties. The Leasing Group primarily purchases equipment
manufactured by the Rail Group and enters into lease contracts
with third parties with terms generally ranging between one and
twenty years. The Leasing Group primarily enters into operating
leases. Future contractual minimum rental revenues on leases are
as follows:
| 2011 | 2012 | 2013 | 2014 | 2015 | Thereafter | Total | ||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||
|
Wholly-owned subsidiaries
|
$ | 227.1 | $ | 178.9 | $ | 136.6 | $ | 97.8 | $ | 71.0 | $ | 169.9 | $ | 881.3 | ||||||||||||||
|
TRIP Holdings
|
103.4 | 82.4 | 51.4 | 33.2 | 27.4 | 69.7 | 367.5 | |||||||||||||||||||||
| $ | 330.5 | $ | 261.3 | $ | 188.0 | $ | 131.0 | $ | 98.4 | $ | 239.6 | $ | 1,248.8 | |||||||||||||||
Debt.
The Leasing Group’s debt at
December 31, 2010 consists of both recourse and
non-recourse debt including debt owed by TRIP Holdings which is
secured solely by the assets of TRIP Holdings. In 2009, the
Company entered into a seven-year $61.0 million term loan
agreement and capital lease obligations totaling
$56.6 million. These debt obligations are guaranteed by
Trinity Industries, Inc. and certain subsidiaries and secured by
railcar equipment and related leases. See Note 11 Debt for
the form, maturities, and descriptions of Leasing Group debt. As
of December 31, 2010, Trinity’s wholly-owned
subsidiaries included in the Leasing Group held equipment with a
net book value of approximately $2,214.1 million that is
pledged as collateral for Leasing Group debt held by those
subsidiaries, including equipment with a net book value of
$52.4 million securing capital lease obligations. TRIP
Holdings equipment with a net book value of
$1,191.8 million, excluding deferred profit on railcars
sold to TRIP Holdings, is pledged as collateral for the TRIP
Holdings warehouse loan. See Note 6 Investment in TRIP
Holdings for further discussion.
Off Balance Sheet Arrangements.
In prior years,
the Leasing Group completed a series of financing transactions
whereby railcars were sold to one or more separate independent
owner trusts (“Trusts”). Each Trust financed the
purchase of the railcars with a combination of debt and equity.
In each transaction, the equity participant in the Trust is
considered to be the primary beneficiary of the Trusts and
therefore, the debt related to the Trusts is not included as
part of the consolidated financial statements. The Leasing
Group, through newly formed, wholly-owned, qualified
subsidiaries, leased railcars from the Trusts under operating
leases with terms of 22 years, and subleased the railcars
to independent third party customers under shorter term
operating rental agreements. Under the terms of the operating
lease agreements between the subsidiaries and the Trusts, the
Leasing Group has the option to purchase at a predetermined
fixed price, certain of the railcars from the Trusts in 2016 and
other railcars in 2019. The Leasing Group also has options to
purchase the railcars at the end of the respective lease
agreements in 2023, 2026, and 2027 at the then fair market value
of the railcars as determined by a third party, independent
appraisal. At the expiration of the operating lease agreements,
the Company has no further obligations with respect to the
leased railcars.
These Leasing Group subsidiaries had total assets as of
December 31, 2010 of $226.4 million, including cash of
$89.1 million and railcars of $101.9 million. The
right, title, and interest in each sublease, cash, and railcars
are pledged to collateralize the lease obligations to the Trusts
and are included in the consolidated financial statements of the
Company. Trinity does not guarantee the performance of the
subsidiaries’ lease obligations. Certain ratios and cash
deposits must be maintained by the Leasing Group’s
subsidiaries in order for excess cash flow, as defined in the
55
Table of Contents
agreements, from the lease to third parties to be available to
Trinity. Future operating lease obligations of the Leasing
Group’s subsidiaries as well as future contractual minimum
rental revenues related to these leases due to the Leasing Group
are as follows:
| 2011 | 2012 | 2013 | 2014 | 2015 | Thereafter | Total | ||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||
|
Future operating lease obligations of Trusts’ railcars
|
$ | 41.3 | $ | 44.5 | $ | 45.7 | $ | 44.9 | $ | 43.2 | $ | 382.0 | $ | 601.6 | ||||||||||||||
|
Future contractual minimum rental revenues of Trusts’
railcars
|
$ | 55.0 | $ | 42.0 | $ | 26.1 | $ | 15.1 | $ | 10.4 | $ | 28.2 | $ | 176.8 | ||||||||||||||
In each transaction the Leasing Group has entered into a
servicing and re-marketing agreement with the Trusts that
requires the Leasing Group to endeavor, consistent with
customary commercial practice as would be used by a prudent
person, to maintain railcars under lease for the benefit of the
Trusts. The Leasing Group also receives management fees under
the terms of the agreements. In each transaction, an independent
trustee for the Trust has authority for appointment of the
railcar fleet manager.
Operating Lease Obligations.
Future amounts due as
well as future contractual minimum rental revenues related to
operating leases other than leases with the Trusts are as
follows:
| 2011 | 2012 | 2013 | 2014 | 2015 | Thereafter | Total | ||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||
|
Future operating lease obligations
|
$ | 5.6 | $ | 4.8 | $ | 4.5 | $ | 4.4 | $ | 4.4 | $ | 13.6 | $ | 37.3 | ||||||||||||||
|
Future contractual minimum rental revenues
|
$ | 4.9 | $ | 4.2 | $ | 3.8 | $ | 3.4 | $ | 2.7 | $ | 7.0 | $ | 26.0 | ||||||||||||||
Operating lease obligations totaling $34.1 million are
guaranteed by Trinity Industries, Inc. and certain subsidiaries.
| Note 6. | Investment in TRIP Holdings |
In 2007, the Company and five other equity investors unrelated
to the Company or its subsidiaries formed TRIP Holdings for the
purpose of providing railcar leasing and management services in
North America. TRIP Holdings, through its wholly-owned
subsidiary, TRIP Rail Leasing LLC (“TRIP Leasing”),
purchased railcars from the Company’s Rail and Leasing
Groups funded by capital contributions from TRIP Holdings’
equity investors and third-party debt from 2007 through June
2009. Initially, the Company provided 20.0% of the total of all
capital contributions required by TRIP Holdings in exchange for
20.0% of the equity in TRIP Holdings. In 2009 and 2010 the
Company acquired an additional 37.1% equity ownership in TRIP
Holdings for approximately $44.8 million from other equity
investors including an additional 29.0% interest acquired in
September 2010 for $28.6 million. The Company receives
distributions from TRIP Holdings to equity investors based on
its equity interest and has an interest in the net assets of
TRIP Holdings upon a liquidation event equal to its equity
interest. The terms of the Company’s equity investment are
identical to the terms of each of the other equity investors.
Railcars purchased from the Company by TRIP Leasing are required
to be purchased at prices comparable with the prices of all
similar railcars sold by the Company during the same period for
new railcars and at prices based on third-party appraised values
for used railcars.
In 2008 and 2007, the Company contributed $14.6 million and
$21.3 million, respectively, in capital to TRIP Holdings
equal to its 20% pro rata share of total capital received during
those years by TRIP Holdings from the equity investors of TRIP
Holdings. In 2009, Trinity contributed $11.4 million to
TRIP Holdings pursuant to Trinity’s equity ownership
obligation, totaling a $92.1 million investment in TRIP
Holdings as of December 31, 2010 after considering equity
interests purchased by Trinity from other equity owners. No
contributions were made by Trinity to TRIP Holdings during the
twelve months ended December 31, 2010 and Trinity has no
remaining equity commitment to TRIP Holdings as of
December 31, 2010. In 2007, the Company also paid
$13.8 million in structuring and placement fees to the
principal underwriter in conjunction with the formation of TRIP
Holdings that were expensed on a pro rata basis as railcars were
purchased from the Company. The balance was fully amortized as
56
Table of Contents
of December 31, 2009. Such expense was treated as sales
commissions included in operating costs in the Company’s
consolidated statement of operations. As of December 31,
2010, TRIP Leasing had purchased $1,284.7 million of
railcars from the Company. Under TRIP Leasing’s debt
agreement, the lenders’ availability period to finance
additional railcar purchases ended in June 2009. The Company has
no obligation to guarantee performance under the debt agreement,
guarantee any railcar residual values, shield any parties from
losses, or guarantee minimum yields. See Note 11 Debt for a
description of TRIP Leasing’s debt obligations.
TILC, as manager of TRIP Holdings, has the authority to bind
TRIP Holdings and perform all acts necessary to conduct the
business of TRIP Holdings. For its services as manager, TILC
receives a monthly administrative fee and a potential
performance fee. Additionally, a disposition fee may be earned
by TILC if, no more than twelve months prior to a liquidity
event, TILC was serving as the manager. TILC also serves as
servicer under an agreement between TRIP Leasing and TILC,
providing remarketing and management services. For its services
as servicer, TILC receives: 1) a monthly servicing fee,
2) a broker fee on the purchase of equipment by TRIP
Leasing, and 3) a sales fee on the sale of equipment by
TRIP Leasing to an unaffiliated third party. The servicer may be
terminated upon the occurrence and during the continuation of a
servicer replacement event by a vote of the lenders with credit
exposure in the aggregate exceeding
66
2
/
3
%.
The Company’s carrying value of its investment in TRIP
Holdings is as follows:
|
December 31,
|
December 31,
|
|||||||
| 2010 | 2009 | |||||||
| (in millions) | ||||||||
|
Capital contributions
|
$ | 47.3 | $ | 47.3 | ||||
|
Equity purchased from investors
|
44.8 | 16.2 | ||||||
| 92.1 | 63.5 | |||||||
|
Equity in earnings
|
7.5 | 3.0 | ||||||
|
Equity in unrealized losses on derivative financial instruments
|
(1.4 | ) | (3.2 | ) | ||||
|
Distributions
|
(7.0 | ) | (6.0 | ) | ||||
|
Deferred broker fees
|
(0.8 | ) | (1.0 | ) | ||||
| $ | 90.4 | $ | 56.3 | |||||
On January 1, 2010, the Company adopted the provisions of a
new accounting pronouncement,
ASC 810-10,
which amended the rules regarding the consolidation of variable
interest entities. Under this new standard, which changed the
criteria for determining which enterprise has a controlling
financial interest, the Company was determined to be the primary
beneficiary of TRIP Holdings because of its combined role as
both equity member and manager/servicer of TRIP Holdings. As a
result of adopting this pronouncement, the consolidated
financial statements of TRIP Holdings and subsidiary are
required to be included with the consolidated financial
statements of the Company. We determined the effects on
Trinity’s consolidated financial statements as if TRIP
Holdings had been included in the Company’s consolidated
financial statements from TRIP Holdings’ inception and
recorded a charge to retained earnings of $105.4 million,
net of $57.7 million in tax benefit, and a noncontrolling
interest of $129.9 million as of January 1, 2010. With
the acquisition by Trinity of the additional ownership interest
in TRIP Holdings in September 2010, the Company’s
controlling financial interest in TRIP Holdings derives from its
majority ownership. Accordingly, the consolidated balance sheet
of the Company as of December 31, 2010 and the consolidated
statements of operations, cash flows, and stockholders’
equity for the twelve months ended December 31, 2010
include the accounts of TRIP Holdings. Prior periods were not
restated. All significant intercompany accounts and transactions
have been eliminated. Profits have been deferred on sales of
railcars from the Rail or Leasing Group to TRIP Holdings and
will be amortized over the life of the related equipment.
Additionally, any future profits on the sale of railcars to TRIP
Holdings will be deferred and amortized over the life of the
related equipment. The noncontrolling interest represents the
non-Trinity equity interest in TRIP Holdings. The assets of TRIP
Holdings may only be used to satisfy liabilities of TRIP
Holdings and the liabilities of TRIP Holdings have recourse only
to TRIP Holdings’ assets.
Prior to January 1, 2010, profit on equipment sales to TRIP
Leasing was recognized at the time of sale to the extent of the
non-Trinity interests in TRIP Holdings. The deferred profit on
the sale of equipment to TRIP Leasing
57
Table of Contents
pertaining to TILC’s interest in TRIP Holdings was being
amortized over the depreciable life of the related equipment.
All other fee income to TILC earned from services provided to
TRIP Holdings was recognized by TILC to the extent of the
non-Trinity interests in TRIP Holdings. Effective
January 1, 2010, amortization of the deferred profit on the
sale of equipment is recorded as if the entire profit on
equipment sales to TRIP Leasing was deferred at the time of the
sale and amortized over the depreciable life of the related
equipment. All fee income to TILC earned from services provided
to TRIP Holdings has been eliminated for the twelve months ended
December 31, 2010.
Sales of railcars to TRIP Leasing and related gains for the
years ended December 31, 2010, 2009, and 2008 are as
follows:
| Year Ended December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (in millions) | ||||||||||||
|
Rail Group:
|
||||||||||||
|
Sales of railcars to TRIP Leasing
|
$ | — | $ | 113.0 | $ | 337.5 | ||||||
|
Gain on sales of railcars to TRIP Leasing
|
$ | — | $ | 11.2 | $ | 61.6 | ||||||
|
Deferral of gain on sales of railcars to TRIP Leasing based on
Trinity’s equity interest
|
$ | — | $ | 2.8 | $ | 12.4 | ||||||
|
TILC:
|
||||||||||||
|
Sales of railcars to TRIP Leasing
|
$ | — | $ | 183.8 | $ | 134.2 | ||||||
|
Recognition of previously deferred gain on sales of railcars to
TRIP Leasing
|
$ | — | $ | 30.3 | $ | 20.8 | ||||||
|
Deferral of gain on sales of railcars to TRIP Leasing based on
Trinity’s equity interest
|
$ | — | $ | 7.6 | $ | 4.2 | ||||||
Administrative fees paid to TILC by TRIP Holdings and TRIP
Leasing for the years ended December 31, 2010, 2009, and
2008 were $3.7 million, $4.5 million, and
$4.1 million, respectively.
On October 15, 2009, TILC loaned TRIP Holdings
$14.5 million to resolve a collateral deficiency. The note
was repayable monthly from TRIP Holdings’ excess cash flow
plus accrued interest at 11% and was repaid in full in May, 2010.
| Note 7. | Derivative Instruments |
We use derivative instruments to mitigate the impact of changes
in interest rates and zinc, natural gas, and diesel fuel prices,
as well as to convert a portion of our variable-rate debt to
fixed-rate debt. Additionally, we use derivative instruments to
mitigate the impact of unfavorable fluctuations in foreign
currency exchange rates. We also use derivatives to lock in
fixed interest rates in anticipation of future debt issuances.
For instruments designated as hedges, the Company formally
documents the relationship between the hedging instrument and
the hedged item, as well as the risk management objective and
strategy for the use of the hedging instrument. This
documentation includes linking the derivatives that are
designated as fair value or cash flow hedges to specific assets
or liabilities on the balance sheet, commitments, or forecasted
transactions. At the time a derivative contract is entered into,
and at least quarterly thereafter, the Company assesses whether
the derivative item is effective in offsetting the changes in
fair value or cash flows. Any change in fair value resulting in
ineffectiveness, as defined by accounting standards issued by
the FASB, is recognized in current period earnings. For
derivative instruments that are designated and qualify as cash
flow hedges, the effective portion of the gain or loss on the
derivative instrument is recorded in AOCL as a separate
component of stockholders’ equity and reclassified into
earnings in the period during which the hedge transaction
affects earnings. Trinity monitors its derivative positions and
credit ratings of its counterparties and does not anticipate
losses due to counterparties’ non-performance. See
Note 3 Fair Value Accounting for discussion of how the
Company valued its commodity hedges and interest rate swaps at
December 31, 2010.
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Table of Contents
Interest
rate hedges
|
Included in accompanying balance
|
||||||||||||||||||||
| sheet at December 31, 2010 | ||||||||||||||||||||
|
AOCL —
|
||||||||||||||||||||
|
Notional
|
Interest
|
expense/
|
Noncontrolling
|
|||||||||||||||||
| Amount | Rate(1) | Liability | (income) | Interest | ||||||||||||||||
| (in millions, except %) | ||||||||||||||||||||
|
Interest rate locks:
|
||||||||||||||||||||
|
2005-2006
|
$ | 200.0 | 4.87 | % | — | $ | (2.6 | ) | — | |||||||||||
|
2006-2007
|
$ | 370.0 | 5.34 | % | — | $ | 14.1 | — | ||||||||||||
|
Interest rate swaps:
|
||||||||||||||||||||
|
TRIP warehouse
|
$ | 840.5 | 3.65 | % | $ | 48.3 | $ | 2.1 | $ | 19.5 | ||||||||||
|
2008 debt issuance
|
$ | 503.8 | 4.13 | % | $ | 45.7 | $ | 44.0 | — | |||||||||||
|
|
||||||||||||||||||||
|
(1) Weighted average fixed interest rate
|
||||||||||||||||||||
| Effect on interest expense — increase/(decrease) | ||||||||||||||||
|
Expected effect
|
||||||||||||||||
| Year Ended December 31, |
during next
|
|||||||||||||||
| 2010 | 2009 | 2008 | twelve months | |||||||||||||
| (in millions) | ||||||||||||||||
|
Interest rate locks:
|
||||||||||||||||
|
2005-2006
|
$ | (0.4 | ) | $ | (0.4 | ) | $ | (0.4 | ) | $ | (0.3 | ) | ||||
|
2006-2007
|
$ | 3.8 | $ | 4.0 | $ | 7.1 | $ | 3.6 | ||||||||
|
Interest rate swaps:
|
||||||||||||||||
|
TILC warehouse
|
$ | 0.5 | $ | 2.9 | $ | 2.4 | — | |||||||||
|
TRIP warehouse
|
$ | 29.3 | — | — | $ | 25.5 | ||||||||||
|
2008 debt issuance
|
$ | 19.7 | $ | 21.6 | $ | 5.5 | $ | 18.4 | ||||||||
During 2005 and 2006, we entered into interest rate swap
transactions in anticipation of a future debt issuance. These
instruments, with a notional amount of $200 million, fixed
the interest rate on a portion of a future debt issuance
associated with a railcar leasing transaction in 2006 and
settled at maturity in the first quarter of 2006. These interest
rate swaps were being accounted for as cash flow hedges with
changes in the fair value of the instruments of
$4.5 million in income recorded in AOCL through the date
the related debt issuance closed in May 2006. The balance is
being amortized over the term of the related debt. The effect on
interest expense is due to amortization of the AOCL balance.
In anticipation of a future debt issuance, we entered into
interest rate swap transactions during the fourth quarter of
2006 and during 2007. These instruments, with a notional amount
of $370 million, hedged the interest rate on a portion of a
future debt issuance associated with an anticipated railcar
leasing transaction, which closed in May 2008. These instruments
settled during the second quarter of 2008 and were accounted for
as cash flow hedges with changes in the fair value of the
instruments of $24.5 million recorded as a loss in AOCL
through the date the related debt issuance closed in May 2008.
The balance is being amortized over the term of the related
debt. The effect on interest expense for 2010 and 2009 is due to
amortization of the AOCL balance. The effect on interest expense
for 2008 included $4.5 million which related to the
ineffective portion of the hedges primarily associated with
hedged interest payments that were never made. The remaining
balance of $2.6 million is due to the amortization of the
AOCL balance.
During 2008, we entered into interest rate swap transactions,
with a notional amount of $200 million, which were being
used to counter our exposure to changes in the variable interest
rate associated with our warehouse facility. The effect on
interest expense included the mark to market valuation on the
interest rate swap transactions and monthly interest
settlements. These interest rate hedges expired during the
fourth quarter of 2010.
59
Table of Contents
In May 2008, we entered into an interest rate swap transaction
that is being used to fix the LIBOR component of the debt
issuance which closed in May 2008. The effect on interest
expense results primarily from monthly interest settlements. In
2009, $1.0 million in unrealized derivative losses were
reclassified from AOCL to interest expense that was related to a
partial retirement of the debt issuance in the fourth quarter of
2009.
Between 2007 and 2009, TRIP Holdings entered into interest rate
swap transactions, all of which qualify as cash flow hedges. As
of December 31, 2010, maturities for cash flow hedges
ranged from
2011-2023.
The effect on interest expense results from monthly interest
settlements.
See Note 11 Debt for a discussion of the related debt
instruments.
Other
Derivatives
| Effect on operating income — increase/(decrease) | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (in millions) | ||||||||||||
|
Fuel hedges(1)
|
||||||||||||
|
Effect of mark to market valuation
|
$ | 0.0 | $ | (0.3 | ) | $ | (0.3 | ) | ||||
|
Settlements
|
(0.1 | ) | (1.2 | ) | 8.5 | |||||||
| $ | (0.1 | ) | $ | (1.5 | ) | $ | 8.2 | |||||
|
Foreign exchange hedges(2)
|
$ | (0.9 | ) | $ | (1.9 | ) | $ | — | ||||
|
Zinc(1)
|
$ | — | $ | — | $ | 1.8 | ||||||
| (1) | Included in cost of revenues in the accompanying consolidated statement of operations | |
| (2) | Included in other, net in the accompanying consolidated statement of operations |
Natural
gas and diesel fuel
We continue a program to mitigate the impact of fluctuations in
the price of natural gas and diesel fuel purchases. The intent
of the program is to protect our operating profit from adverse
price changes by entering into derivative instruments. For those
instruments that do not qualify for hedge accounting treatment,
any changes in their valuation are recorded directly to the
consolidated statement of operations.
Foreign
exchange hedge
During the years ended December 31, 2010 and 2009, we
entered into foreign exchange hedges to mitigate the impact on
operating profit of unfavorable fluctuations in foreign currency
exchange rates. These instruments are short term with quarterly
maturities and no remaining balance in AOCL as of
December 31, 2010 and 2009.
Zinc
We maintain a program to mitigate the impact of fluctuations in
the price of zinc purchases. The intent of this program is to
protect our operating profit from adverse price changes by
entering into derivative instruments. The effect of these
derivative instruments on the consolidated financial statements
for the years ended December 31, 2010 and 2009 was not
significant.
60
Table of Contents
| Note 8. | Property, Plant, and Equipment |
The following table summarizes the components of property,
plant, and equipment as of December 31, 2010 and 2009.
|
December 31,
|
December 31,
|
|||||||
| 2010 | 2009 | |||||||
| (in millions) | ||||||||
|
Manufacturing/Corporate:
|
||||||||
|
Land
|
$ | 40.9 | $ | 39.1 | ||||
|
Buildings and improvements
|
418.4 | 405.9 | ||||||
|
Machinery and other
|
699.7 | 708.1 | ||||||
|
Construction in progress
|
9.7 | 12.2 | ||||||
| 1,168.7 | 1,165.3 | |||||||
|
Less accumulated depreciation
|
(677.3 | ) | (648.2 | ) | ||||
| 491.4 | 517.1 | |||||||
|
Leasing:
|
||||||||
|
Wholly-owned subsidiaries:
|
||||||||
|
Machinery and other
|
38.2 | 38.1 | ||||||
|
Equipment on lease
|
3,249.8 | 3,098.9 | ||||||
| 3,288.0 | 3,137.0 | |||||||
|
Less accumulated depreciation
|
(322.6 | ) | (286.9 | ) | ||||
| 2,965.4 | 2,850.1 | |||||||
|
TRIP Holdings:
|
||||||||
|
Equipment on lease
|
1,282.1 | — | ||||||
|
Less accumulated depreciation
|
(90.3 | ) | — | |||||
| 1,191.8 | — | |||||||
|
Net deferred profit on railcars sold to the Leasing Group
|
||||||||
|
Sold to wholly-owned subsidiaries
|
(340.4 | ) | (329.0 | ) | ||||
|
Sold to TRIP Holdings
|
(196.2 | ) | — | |||||
| $ | 4,112.0 | $ | 3,038.2 | |||||
We lease certain equipment and facilities under operating
leases. Future minimum rent expense on non-Leasing Group leases
in each year is (in millions): 2011 — $8.8;
2012 — $3.6; 2013 — $2.0; 2014 —
$1.2; 2015 — $0.8; and $2.4 thereafter. See
Note 5 Railcar Leasing and Management Services Group for
information related to the lease agreements, future operating
lease obligations, and future minimum rent expense associated
with the Leasing Group.
We did not capitalize any interest expense as part of the
construction of facilities and equipment during 2010 or 2009.
In May 2010, the Company’s inland barge manufacturing
facility in Tennessee experienced a flood resulting in
significant damages to Trinity’s property and a temporary
disruption of its production activities. The Company is insured
against losses due to property damage and business interruption
subject to certain deductibles. As of December 31, 2010,
Trinity had received $20 million in payments from its
insurance carrier of which $12.0 million pertains to the
replacement of or repairs to damaged property, plant, and
equipment with a net book value of $2.3 million, with the
remainder pertaining primarily to the reimbursement of
flood-related expenses. Accordingly, the Company has recognized
a gain of $9.7 million, principally in the third quarter of
2010, from the disposition of flood-damaged property, plant, and
equipment.
We estimate the fair market value of properties no longer in use
or held for sale based on the location and condition of the
properties, the fair market value of similar properties in the
area, and the Company’s experience selling similar
properties in the past. As of December 31, 2010, the
Company had non-operating plants with a net book value of
$4.3 million. Our estimated fair value of these assets
exceeds their book value.
61
Table of Contents
| Note 9. | Goodwill |
Goodwill by segment is as follows:
|
December 31,
|
December 31,
|
|||||||
| 2010 | 2009 | |||||||
| (in millions) | ||||||||
|
Rail Group
|
$ | 122.5 | $ | 122.5 | ||||
|
Construction Products Group
|
62.4 | 52.2 | ||||||
|
Energy Equipment Group
|
10.9 | 4.3 | ||||||
|
Railcar Leasing and Management Services Group
|
1.8 | 1.8 | ||||||
| $ | 197.6 | $ | 180.8 | |||||
During the second quarter of 2009, there was a significant
decline in new orders for railcars and continued weakening
demand for products in the Rail Group as well as a change in the
average estimated railcar deliveries from independent third
party research firms. Additionally, the significant number of
idled railcars in the North American fleet resulted in the
creation of new internal sales estimates by railcar type. Based
on this information, we concluded that indications of impairment
existed with respect to the Rail Group which required an interim
goodwill impairment analysis and, accordingly, we performed such
a test as of June 30, 2009. The result of our impairment
analysis indicated that the remaining implied goodwill amounted
to $122.5 million for our Rail Group as of June 30,
2009 and, consequently, we recorded an impairment charge of
$325.0 million during the second quarter of 2009. As of
December 31, 2010 and 2009, the Company’s annual
impairment test of goodwill was completed at the reporting unit
level and no additional impairment charges were determined to be
necessary.
The increase in the Construction Products Group goodwill as of
December 31, 2010 over the same period last year is due to
an increase in goodwill of $24.7 million related to 2010
acquisitions and a $2.0 million contingent payment related
to an acquisition in 2007, offset by a $16.5 million
reduction related to the sale of the Company’s asphalt
operations and a ready mix plant. The increase in the Energy
Equipment Group goodwill is due to an acquisition in the second
quarter of 2010. See Note 2 Acquisitions and Divestitures.
| Note 10. | Warranties |
The Company provides warranties against manufacturing defects
generally ranging from one to five years depending on the
product. The warranty costs are estimated using a two-step
approach. First, an engineering estimate is made for the cost of
all claims that have been filed by a customer. Second, based on
historical claims experience, a cost is accrued for all products
still within a warranty period for which no claims have been
filed. The Company provides for the estimated cost of product
warranties at the time revenue is recognized related to products
covered by warranties and assesses the adequacy of the resulting
reserves on a quarterly basis. The changes in the accruals for
warranties for the years ended December 31, 2010, 2009, and
2008 are as follows:
|
December 31,
|
December 31,
|
December 31,
|
||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (in millions) | ||||||||||||
|
Beginning balance
|
$ | 19.6 | $ | 25.7 | $ | 28.3 | ||||||
|
Warranty costs incurred
|
(5.7 | ) | (8.6 | ) | (6.2 | ) | ||||||
|
Warranty originations and revisions
|
1.9 | 9.8 | 9.7 | |||||||||
|
Warranty expirations
|
(2.6 | ) | (7.3 | ) | (6.1 | ) | ||||||
|
Ending balance
|
$ | 13.2 | $ | 19.6 | $ | 25.7 | ||||||
62
Table of Contents
| Note 11. | Debt |
The following table summarizes the components of debt as of
December 31, 2010 and 2009.
|
December 31,
|
December 31,
|
|||||||
| 2010 | 2009 | |||||||
| (in millions) | ||||||||
|
Manufacturing/Corporate — Recourse:
|
||||||||
|
Revolving credit facility
|
$ | — | $ | — | ||||
|
Convertible subordinated notes
|
450.0 | 450.0 | ||||||
|
Less: unamortized discount
|
(111.1 | ) | (121.6 | ) | ||||
| 338.9 | 328.4 | |||||||
|
Senior notes
|
— | 201.5 | ||||||
|
Other
|
2.8 | 2.7 | ||||||
| 341.7 | 532.6 | |||||||
|
Leasing — Recourse:
|
||||||||
|
Capital lease obligations
|
51.2 | 53.6 | ||||||
|
Term Loan
|
57.4 | 59.8 | ||||||
| 450.3 | 646.0 | |||||||
|
Leasing — Non-recourse:
|
||||||||
|
2006 secured railcar equipment notes
|
283.2 | 304.7 | ||||||
|
Promissory notes
|
493.8 | 515.4 | ||||||
|
2009 secured railcar equipment notes
|
229.2 | 237.6 | ||||||
|
2010 secured railcar equipment notes
|
367.1 | — | ||||||
|
TILC warehouse facility
|
80.2 | 141.4 | ||||||
|
TRIP Holdings warehouse loan
|
1,003.9 | — | ||||||
| 2,457.4 | 1,199.1 | |||||||
|
Total debt
|
$ | 2,907.7 | $ | 1,845.1 | ||||
We have a $425.0 million unsecured revolving credit
facility which matures on October 19, 2012. As of
December 31, 2010, we had letters of credit issued under
our revolving credit facility in an aggregate principal amount
of $79.9 million, leaving $345.1 million available for
borrowing. Other than with respect to such letters of credit,
there were no borrowings under our revolving credit facility as
of December 31, 2010 or for the twelve month period then
ended. Of the outstanding letters of credit as of
December 31, 2010, $74.3 million are expected to
expire in 2011 and the remainder in 2012. The majority of our
letters of credit obligations support the Company’s various
insurance programs and generally renew each year. Borrowings
under the credit facility bear interest at prime or LIBOR plus
87.5 basis points. Trinity’s revolving credit facility
requires maintenance of ratios related to interest coverage for
the leasing and manufacturing operations, leverage, and minimum
net worth. As of December 31, 2010, we were in compliance
with all such covenants.
The Company’s $450 million of Convertible Subordinated
Notes due 2036 (“Convertible Subordinated Notes”) bear
an interest rate of
3
7
/
8
%
per annum on the principal amount payable semi-annually in
arrears on June 1 and December 1 of each year. In addition,
commencing with the six-month period beginning June 1,
2018, and for each six-month period thereafter, we will pay
contingent interest to the holders of the Convertible
Subordinated Notes under certain circumstances. The Convertible
Subordinated Notes mature on June 1, 2036, unless redeemed,
repurchased, or converted earlier. We may not redeem the
Convertible Subordinated Notes before June 1, 2018. On or
after that date, we may redeem all or part of the Convertible
Subordinated Notes for cash at 100% of the principal amount of
the notes to be redeemed, plus accrued and unpaid interest
(including any contingent interest) up to, but excluding, the
redemption date. Holders of the Convertible Subordinated Notes
may require us to purchase all or a portion of their notes on
June 1, 2018 or upon a fundamental change. In each case,
the Convertible Subordinated Notes would be purchased for cash
at a price equal to 100% of the principal amount of the notes to
be purchased plus any accrued and unpaid interest (including any
contingent interest) to, but excluding, the purchase date.
As of December 31, 2010 and 2009, capital in excess of par
value included $92.8 million related to the estimated value
of the Convertible Subordinated Notes’ conversion options,
in accordance with
ASC 470-20.
Debt discount recorded in the consolidated balance sheet is
being amortized through June 1, 2018 to yield an effective
63
Table of Contents
annual interest rate of 8.42% based upon the estimated market
interest rate for comparable non-convertible debt as of the
issuance date of the Convertible Subordinated Notes. Total
interest expense recognized on the Convertible Subordinated
Notes for the years ended December 31, 2010, 2009, and
2008, is as follows:
| Year Ended December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (in millions) | ||||||||||||
|
Coupon rate interest
|
$ | 17.4 | $ | 17.4 | $ | 17.4 | ||||||
|
Amortized debt discount
|
10.5 | 9.6 | 8.8 | |||||||||
| $ | 27.9 | $ | 27.0 | $ | 26.2 | |||||||
At December 31, 2010, the Convertible Subordinated Notes
were convertible at a price of $51.58 per share resulting in
8,724,312 issuable shares. As of December 31, 2010, if the
Convertible Subordinated Notes had been converted, no shares
would have been issued since the trading price of the
Company’s common stock was below the conversion price of
the Convertible Subordinated Notes. The Company has not entered
into any derivatives transactions associated with these notes.
In May 2006, Trinity Rail Leasing V, L.P., a limited
partnership (“TRL V”) and a limited purpose, indirect
wholly-owned subsidiary of the Company owned through TILC issued
$355.0 million in aggregate principal amount of Secured
Railcar Equipment Notes,
Series 2006-1A
(the “2006 Secured Railcar Equipment Notes”), of which
$283.2 million was outstanding as of December 31,
2010. The 2006 Secured Railcar Equipment Notes were issued
pursuant to a Master Indenture, dated May 24, 2006, between
TRL V and Wilmington Trust Company, as indenture trustee.
The 2006 Secured Railcar Equipment Notes bear interest at a
fixed rate of 5.9% per annum, are payable monthly, and have a
final maturity of May 14, 2036. The 2006 Secured Railcar
Equipment Notes are obligations of TRL V and are non-recourse to
Trinity. The obligations are secured by a portfolio of railcars
and operating leases thereon, certain cash reserves, and other
assets acquired and owned by TRL V.
In May 2008, Trinity Rail Leasing VI LLC, a Delaware limited
liability company (“TRL VI”), a limited purpose,
indirect wholly-owned subsidiary of Trinity, issued
$572.2 million of
30-year
promissory notes (the “Promissory Notes”) to financial
institutions, of which $493.8 million was outstanding as of
December 31, 2010. The Promissory Notes are secured by a
portfolio of railcars, operating leases thereon, and certain
cash reserves. The Promissory Notes are obligations of TRL VI
and are non-recourse to Trinity. TRL VI acquired the railcars
securing the Promissory Notes by purchase from TILC and a
subsidiary. The Promissory Notes bear interest at a floating
rate of one-month LIBOR plus a margin of 1.50%. The LIBOR
portion of the interest rate on the Promissory Notes is fixed at
approximately 4.13% for the first seven years from the date of
issuance of the Promissory Notes through interest rate swaps.
The interest rate margin on the Promissory Notes will increase
by 0.50% on each of the seventh and eighth anniversary dates of
the issuance of the Promissory Notes and by an additional 2.00%
on the tenth anniversary date of the issuance of the Promissory
Notes. The Promissory Notes may be prepaid at any time and may
be prepaid without penalty at any time after the third
anniversary date of the issuance of the Promissory Notes.
In November 2009, Trinity Rail Leasing VII LLC, a Delaware
limited liability company (“TRL VII”), a limited
purpose, indirect wholly-owned subsidiary of the Company owned
through TILC, issued $238.3 million in aggregate principal
amount of Secured Railcar Equipment Notes,
Series 2009-1
(“the 2009 Secured Railcar Equipment Notes”), of which
$229.2 million was outstanding as of December 31,
2010. The 2009 Secured Railcar Equipment Notes were issued
pursuant to a Master Indenture, dated November 5, 2009
between TRL VII and Wilmington Trust Company, as indenture
trustee. The 2009 Secured Railcar Equipment Notes bear interest
at a fixed rate of 6.66% per annum, are payable monthly, and
have a final maturity date of November 16, 2039. The 2009
Secured Railcar Equipment Notes are obligations of TRL VII and
are non-recourse to Trinity. The obligations are secured by a
portfolio of railcars and operating leases thereon, certain cash
reserves, and other assets acquired and owned by TRL VII.
In October, 2010, Trinity Rail Leasing 2010 LLC, a Delaware
limited liability company (“TRL 2010”), a limited
purpose, indirect wholly-owned subsidiary of the Company owned
through TILC, issued $369.2 million in aggregate principal
amount of Secured Railcar Equipment Notes,
Series 2010-1
(“2010 Secured Railcar Equipment Notes”), of which
$367.1 million was outstanding as of December 31,
2010. The 2010 Secured Railcar Equipment
64
Table of Contents
Notes were issued pursuant to an Indenture, dated as of
October 25, 2010 between TRL 2010 and Wilmington
Trust Company, as indenture trustee. The 2010 Secured
Railcar Equipment Notes bear interest at a fixed rate of 5.19%,
are payable monthly, and have a stated final maturity date of
October 16, 2040. The 2010 Secured Railcar Equipment Notes
are obligations of TRL 2010 and are non-recourse to Trinity. The
obligations are secured by a portfolio of railcars and operating
leases thereon, certain cash reserves, and other assets of TRL
2010 acquired and owned by TRL 2010.
The $475 million TILC warehouse loan facility, established
to finance railcars owned by TILC, had $80.2 million
outstanding and $394.8 million available as of
December 31, 2010. The warehouse loan is a non-recourse
obligation, secured by a portfolio of railcars and operating
leases, certain cash reserves, and other assets acquired and
owned by the warehouse loan facility. The principal and interest
of this indebtedness are paid from the cash flows of the
underlying leases. Advances under the facility bear interest at
a defined index rate plus a margin, for an all-in interest rate
of 2.80% at December 31, 2010. In February 2011, the
warehouse loan facility was renewed for an additional two years
and now matures in February 2013. Amounts outstanding at such
time, if any, will be payable in three installments in August
2013, February 2014, and August 2014 unless renewed.
In June 2007, TRIP Leasing entered into a $1.19 billion
Warehouse Loan Agreement which contains a floating rate
revolving facility (the “TRIP Warehouse Loan”) of
which $1.0 billion in borrowings were outstanding as of
December 31, 2010. The TRIP Warehouse Loan is a
non-recourse obligation, secured by a portfolio of railcars and
operating leases, certain cash reserves, and other assets
acquired and owned by TRIP Leasing. The TRIP Warehouse Loan
consists of Tranche A bearing an interest rate of the one
month USD Libor plus 1.00% and Tranche B bearing an
interest rate of the one month USD Libor plus 2.25%. The TRIP
Warehouse Loan had a two year revolving availability period
which ended in June 2009. Commencing July 1, 2010, all
excess cash flow, as defined by the Warehouse Loan Agreement,
must be applied to reductions in principal in lieu of dividends
to equity members of TRIP Holdings. Commencing June 2011, a
majority of the TRIP Warehouse Loan lenders have the right to
compel TRIP Leasing to commence repayment of the outstanding
balance in four quarterly installments ending March 2012. In the
event such action is taken, it is not expected that TRIP Leasing
will be able to make such payments from its anticipated cash
balances and net cash flow from operations prior to that date.
Although the quarterly installment due dates are subject to
extension by written agreement between TRIP Leasing and its
lenders, TRIP Leasing’s lenders have the right to direct
that TRIP Leasing take certain actions including the sale of
assets sufficient to retire the debt that is due. TRIP Leasing
is considering a number of financing alternatives to address
these quarterly installments. If TRIP Leasing is unable to
achieve such alternatives to the satisfaction of the TRIP
Warehouse Loan’s lenders, the Company’s investment in
TRIP Holdings may become impaired. See Note 6 Investment in
TRIP Holdings for a discussion of the Company’s investment
in TRIP Holdings.
In 2009, the Company entered into a seven-year
$61.0 million term loan agreement and capital lease
obligations totaling $56.6 million. These new debt
obligations are guaranteed by the Company and secured by railcar
equipment and related leases.
In November 2010, the Company redeemed all of its
$201.5 million unsecured
6
1
/
2
% Senior
Notes which were scheduled to mature in 2014 at a redemption
price 102.167% of the principal amount, pursuant to the terms of
the indenture. The Company incurred approximately
$5.9 million in expenses related to the redemption which
are included in Other Income and Expense.
65
Table of Contents
The remaining principal payments under debt agreements as of
December 31, 2010, after considering the renewal of the
TILC warehouse loan facility in February 2011, are as follows:
| 2011 | 2012 | 2013 | 2014 | 2015 | Thereafter | |||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||
|
Recourse:
|
||||||||||||||||||||||||
|
Manufacturing/Corporate
|
$ | 0.7 | $ | 0.5 | $ | 0.7 | $ | 0.2 | $ | 0.2 | $ | 450.5 | ||||||||||||
|
Leasing – capital lease obligations (Note 5)
|
2.6 | 2.8 | 2.9 | 3.1 | 3.3 | 36.5 | ||||||||||||||||||
|
Leasing – term loan (Note 5)
|
2.6 | 2.8 | 3.1 | 3.3 | 3.5 | 42.1 | ||||||||||||||||||
|
Non-recourse – leasing (Note 5):
|
||||||||||||||||||||||||
|
2006 secured railcar equipment notes
|
14.7 | 13.5 | 15.2 | 17.0 | 18.6 | 204.2 | ||||||||||||||||||
|
Promissory notes
|
27.8 | 25.8 | 27.8 | 24.6 | 21.9 | 365.9 | ||||||||||||||||||
|
2009 secured railcar equipment notes
|
10.2 | 9.2 | 10.2 | 9.9 | 9.6 | 180.1 | ||||||||||||||||||
|
2010 secured railcar equipment notes
|
12.8 | 12.8 | 14.6 | 14.0 | 15.3 | 297.6 | ||||||||||||||||||
|
TILC warehouse facility
|
2.4 | 2.6 | 2.6 | 1.7 | — | — | ||||||||||||||||||
|
TRIP Holdings warehouse loan
|
28.0 | 7.0 | — | — | — | — | ||||||||||||||||||
|
Facility termination payments:
|
||||||||||||||||||||||||
|
TILC warehouse facility
|
— | — | 24.8 | 46.1 | — | — | ||||||||||||||||||
|
TRIP Holdings warehouse loan
|
704.9 | 264.0 | — | — | — | — | ||||||||||||||||||
|
Total principal payments
|
$ | 806.7 | $ | 341.0 | $ | 101.9 | $ | 119.9 | $ | 72.4 | $ | 1,576.9 | ||||||||||||
| Note 12. | Other, Net |
Other, net (income) expense consists of the following items:
| Year Ended December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (in millions) | ||||||||||||
|
Foreign currency exchange transactions
|
$ | — | $ | 2.2 | $ | 4.6 | ||||||
|
Loss (gain) on equity investments
|
1.7 | (6.5 | ) | (0.6 | ) | |||||||
|
Costs related to redemption of Senior Notes
|
5.9 | — | — | |||||||||
|
Other
|
(0.8 | ) | (1.0 | ) | (2.6 | ) | ||||||
|
Other, net
|
$ | 6.8 | $ | (5.3 | ) | $ | 1.4 | |||||
Loss on equity investments for the year ended December 31,
2010 includes a $1.8 million loss on the write-down of the
Company’s pre-acquisition investment in Quixote
Corporation. See Note 2 Acquisitions and Divestitures. Gain
on equity investments for 2009 includes a $3.7 million gain
from the sale of an investment during the year ended
December 31, 2009. See Note 11 Debt for further
explanation of the Senior Notes redemption.
66
Table of Contents
| Note 13. | Income Taxes |
The components of the provision for income taxes from continuing
operations are as follows:
| Year Ended December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (in millions) | ||||||||||||
|
Current:
|
||||||||||||
|
Federal
|
$ | (22.2 | ) | $ | 5.8 | $ | (97.1 | ) | ||||
|
State
|
(2.0 | ) | 0.7 | 7.2 | ||||||||
|
Foreign
|
5.0 | 7.9 | 14.1 | |||||||||
|
Total current
|
(19.2 | ) | 14.4 | (75.8 | ) | |||||||
|
Deferred:
|
||||||||||||
|
Federal
|
57.0 | (27.1 | ) | 250.9 | ||||||||
|
State
|
3.4 | (3.5 | ) | 4.6 | ||||||||
|
Foreign
|
(0.3 | ) | 6.8 | (8.3 | ) | |||||||
|
Total deferred
|
60.1 | (23.8 | ) | 247.2 | ||||||||
|
Provision
|
$ | 40.9 | $ | (9.4 | ) | $ | 171.4 | |||||
Deferred income taxes represent the tax effects of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts
used for income tax purposes. The components of deferred tax
liabilities and assets are as follows:
| December 31, | ||||||||
| 2010 | 2009 | |||||||
| (in millions) | ||||||||
|
Deferred tax liabilities:
|
||||||||
|
Depreciation, depletion, and amortization
|
$ | 667.3 | $ | 563.6 | ||||
|
Convertible debt
|
80.9 | 74.0 | ||||||
|
Total deferred tax liabilities
|
748.2 | 637.6 | ||||||
|
Deferred tax assets:
|
||||||||
|
Workers compensation, pensions, and other benefits
|
44.7 | 53.1 | ||||||
|
Warranties and reserves
|
17.5 | 16.7 | ||||||
|
Equity items
|
56.4 | 48.2 | ||||||
|
Tax loss carryforwards and credits
|
224.3 | 104.5 | ||||||
|
Inventory
|
7.6 | 7.6 | ||||||
|
Accrued liabilities and other
|
1.6 | 2.6 | ||||||
|
Total deferred tax assets
|
352.1 | 232.7 | ||||||
|
Net deferred tax liabilities before valuation allowance
|
396.1 | 404.9 | ||||||
|
Valuation allowance
|
19.9 | 15.6 | ||||||
|
Net deferred tax liabilities before reserve for uncertain tax
positions
|
416.0 | 420.5 | ||||||
|
Deferred tax assets included in reserve for uncertain tax
positions
|
(25.0 | ) | (22.6 | ) | ||||
|
Adjusted net deferred tax liabilities
|
$ | 391.0 | $ | 397.9 | ||||
At December 31, 2010, the Company had $488.4 million
of Federal consolidated net operating loss carryforwards and
tax-effected $6.3 million of state loss carryforwards. The
Federal tax loss carryforward includes $50.4 million
acquired from Quixote and $299.3 million that are due to
TRIP Holdings’ separate tax return filing. The Federal tax
loss carryforwards are due to expire between 2011 and 2030. Our
ability to utilize the tax loss carryforwards that were acquired
as part of the Quixote acquisition against future taxable income
is subject to restrictions under the Internal Revenue Code. TRIP
does not file as part of the Company’s consolidated tax
return and instead, files on its own behalf. Accordingly, the
tax loss carryforwards that are established for TRIP can only be
used to offset future taxable income of TRIP. We have
established a valuation allowance for Federal, state, and
foreign tax operating losses which may not be realizable. These
net operating losses expire between 2011 and 2030.
67
Table of Contents
Realization of deferred tax assets is dependent on generating
sufficient taxable income in future periods. We have established
valuation allowances against tax losses and credits that we will
most likely be unable to utilize. We believe that it is more
likely than not that we will be able to generate sufficient
future taxable income to utilize the remaining deferred tax
assets.
During the first quarter ended March 31, 2010, we closed an
audit with one of our Mexican subsidiaries’ 2002 tax year.
The 2003 tax year of our Mexican subsidiaries is still under
review and thus the statute of limitations remains open from
2003 forward.
During the third quarter ended September 30, 2010, we
effectively settled our Internal Revenue Service
(“IRS”) exam cycle which covered the years ended
March 31, 1998 through December 31, 2002. In addition,
we are currently under two separate IRS examination cycles for
the years ended 2004 through 2005 and 2006 through 2008.
Therefore, our statute of limitations remains open from the year
ended December 31, 2004 and forward. We have concluded the
field work for the
2004-2005
exam cycle and have been issued a Revenue Agent Report, or
“30-Day
Letter.” Certain issues have been agreed upon by us and the
IRS and certain issues remain unresolved. Accordingly, we have
appealed those unresolved issues to the Appeals Division of the
IRS. The Appeals Division’s review is currently scheduled
to start in February 2011. Due to the uncertainty of the length
of the appeals process and possible post-appeals litigation on
any issues, the statute of limitations related to the
2004-2005
exam cycle will remain open for an indeterminable period of
time. Likewise, as the
2006-2008
cycle is still in the examination level, we are unable to
determine how long these periods will remain open.
During the third quarter ended September 30, 2010, the
Swiss authorities began auditing one of our Swiss subsidiaries
for the
2006-2009
cycle. During the fourth quarter, the Swiss Tax Inspector made a
preliminary assessment of taxes and interest of
$3.0 million that we are currently reviewing. Accordingly,
we have accrued $3.0 million of taxes and interest for the
amount we believe will be ultimately settled. We have recorded a
deferred tax asset for the foreign taxes that will be creditable
against future U.S. tax and interest expense that will be
deductible. This results in an overall impact of
$0.3 million, which was recorded as a component of income
tax expense.
Our various other European subsidiaries, including subsidiaries
that were sold in 2006, are impacted by various statutes of
limitations which are generally open from 2003 forward. An
exception to this is our discontinued operations in Romania,
which have been audited through 2004.
Generally, states’ statutes of limitations in the United
States are open from 2002 forward; however, some state statutes
of limitations will re-open as a result of the settlement of our
1998-2002
cycle up to one year after we filed the amended tax returns to
reflect the IRS adjustments and thus will remain open throughout
2011.
The Company received income tax refunds of $26.9 million
during the year ended December 31, 2010, and
$111.4 million during the year ended December 31, 2009.
The provision for income taxes from continuing operations
results in effective tax rates different from the statutory
rates. The following is a reconciliation between the statutory
United States Federal income tax rate and the Company’s
effective income tax rate:
| Year Ended December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
|
Statutory rate
|
35.0 | % | 35.0 | % | 35.0 | % | ||||||
|
State taxes
|
3.3 | 1.9 | 1.7 | |||||||||
|
Impairment of goodwill
|
— | (23.7 | ) | — | ||||||||
|
Changes in valuation allowances
|
— | (6.5 | ) | — | ||||||||
|
Tax settlements
|
4.4 | — | — | |||||||||
|
Changes in tax reserves
|
(9.6 | ) | — | — | ||||||||
|
Other, net
|
2.0 | (0.3 | ) | 1.1 | ||||||||
|
Effective rate
|
35.1 | % | 6.4 | % | 37.8 | % | ||||||
Income (loss) from continuing operations before income taxes for
the year ended December 31, 2010, 2009, and 2008 was
$113.7 million, $(158.4) million, and
$430.5 million, respectively, for United States operations,
and
68
Table of Contents
$2.9 million, $11.5 million, and $23.3 million,
respectively, for foreign operations. The Company has provided
United States deferred income taxes on the un-repatriated
earnings of its foreign operations. The Company has
$32.1 million of foreign tax credit carryforwards which
will expire between 2014 and 2020.
The change in unrecognized tax benefits for the years ended
December 31, 2010 and 2009 were as follows:
| Year Ended December 31, | ||||||||
| 2010 | 2009 | |||||||
| (in millions) | ||||||||
|
Beginning balance
|
$ | 40.1 | $ | 32.9 | ||||
|
Additions for tax positions related to the current year
|
3.3 | 5.8 | ||||||
|
Additions for tax positions of prior years
|
9.3 | 7.5 | ||||||
|
Reductions for tax positions of prior years
|
(5.6 | ) | (4.5 | ) | ||||
|
Settlements
|
(9.5 | ) | (1.5 | ) | ||||
|
Expirations of statute of limitations
|
(0.8 | ) | (0.1 | ) | ||||
|
Ending balance
|
$ | 36.8 | $ | 40.1 | ||||
The additions for the years ended December 31, 2010 and
December 31, 2009, were amounts provided for tax positions
previously taken in foreign jurisdictions and tax positions
taken for Federal and state income tax purposes as well as
deferred tax liabilities that have been reclassified to
uncertain tax positions.
The increase in tax positions related to prior years is
primarily related to a Federal tax position that was taken on a
previously filed tax return. This position was submitted to the
IRS and we anticipate making a payment related to this position
when the current examination cycle closes. During the first
quarter we established income tax reserves of $1.6 million
related to our acquisition of Quixote Corporation. During the
fourth quarter, we recorded $2.6 million of reserves
related to an audit of one of our Swiss subsidiaries. The
reduction in tax positions of prior years was primarily related
to state taxes. During the year ended December 31, 2010, we
received additional facts on certain state tax positions that
led us to change the measurement of certain state tax benefits
previously recorded. Additionally, we completed some state
audits for which the Company’s tax position was not
challenged by the state and for which the positions are now
effectively settled and a federal tax position that we believed
would be sustained upon audit and therefore was no longer at
risk.
Settlements during the year ended December 31, 2010 related
to a first quarter tax settlement of a 2002 Mexico tax issue of
one of our subsidiaries and a third quarter settlement of the
1998-2002
IRS audit. We paid $2.1 million in taxes, penalties, and
interest related to the Mexico settlement and $6.1 million
in taxes, penalties, and interest related to the IRS
examination. The excess of the amount reserved over the
settlement amount for the Mexico and IRS exams was
$1.8 million and $4.1 million, respectively, which is
recorded as a benefit to income taxes. In addition, we settled
an outstanding audit for Quixote Corporation that began prior to
our acquisition of Quixote and for which we were fully reserved.
We have therefore released $0.7 million of reserves related
to this audit cycle, which will also reduce Quixote’s tax
loss carryforward. There is no impact to income tax expense as a
result of the Quixote audit.
The total amount of unrecognized tax benefits including interest
and penalties at December 31, 2010 and 2009, that would
affect the Company’s effective tax rate if recognized was
$14.9 million and $25.0 million, respectively. There
is a reasonable possibility that unrecognized Federal and state
tax benefits will decrease by December 31, 2011 due to a
lapse in the statute of limitations for assessing tax. Amounts
subject to a lapse in statute by December 31, 2011 total
$0.1 million. Further, there is a reasonable possibility
that the unrecognized Federal tax benefits will decrease by
December 31, 2011 due to settlements with taxing
authorities. Amounts expected to settle by December 31,
2011 total $3.0 million.
Trinity accounts for interest expense and penalties related to
income tax issues as income tax expense. Accordingly, interest
expense and penalties associated with an uncertain tax position
are included in the income tax provision. The total amount of
accrued interest and penalties as of December 31, 2010 and
2009 was $11.2 million and $16.0 million,
respectively. Income tax expense for the years ended
December 31, 2010 and 2009 included a reduction in income
tax expense of $4.8 million and $5.4 million,
respectively, in interest expense and penalties related to
uncertain tax positions.
69
Table of Contents
| Note 14. | Employee Retirement Plans |
The Company sponsors defined benefit plans and defined
contribution profit sharing plans which provide retirement
income and death benefits for eligible employees. The annual
measurement date of the benefit obligations, fair value of plan
assets, and funded status is December 31.
Actuarial
Assumptions
| Year Ended December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
|
Assumptions used to determine benefit obligations at the
annual measurement date were:
|
||||||||||||
|
Obligation discount rate
|
5.90 | % | 6.10 | % | 6.50 | % | ||||||
|
Compensation increase rate
|
3.00 | % | 3.00 | % | 4.00 | % | ||||||
|
Assumptions used to determine net periodic benefit costs
were:
|
||||||||||||
|
Obligation discount rate
|
6.10 | % | 6.50 | % | 6.50 | % | ||||||
|
Long-term rate of return on plan assets
|
7.75 | % | 7.75 | % | 7.75 | % | ||||||
|
Compensation increase rate
|
3.00 | % | 4.00 | % | 4.00 | % | ||||||
The expected long-term rate of return on plan assets is an
assumption reflecting the anticipated weighted average rate of
earnings on the portfolio over the long-term. To arrive at this
rate, we developed estimates based upon the anticipated
performance of the assets in its portfolio.
Components
of Net Retirement Cost
| Year Ended December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (in millions) | ||||||||||||
|
Expense Components
|
||||||||||||
|
Service cost
|
$ | 0.9 | $ | 3.0 | $ | 9.7 | ||||||
|
Interest
|
18.7 | 19.7 | 20.8 | |||||||||
|
Expected return on plan assets
|
(20.1 | ) | (15.7 | ) | (20.1 | ) | ||||||
|
Amortization and deferral:
|
||||||||||||
|
Actuarial loss
|
1.9 | 4.2 | 1.8 | |||||||||
|
Prior service cost
|
0.1 | 0.1 | 0.2 | |||||||||
|
Transition asset
|
— | — | (0.1 | ) | ||||||||
|
Profit sharing
|
8.3 | 7.6 | 7.6 | |||||||||
|
Other
|
0.2 | (0.4 | ) | — | ||||||||
|
Net expense
|
$ | 10.0 | $ | 18.5 | $ | 19.9 | ||||||
70
Table of Contents
Obligations
and Funded Status
| Year Ended December 31, | ||||||||
| 2010 | 2009 | |||||||
| (in millions) | ||||||||
|
Accumulated Benefit Obligations
|
$ | 335.7 | $ | 326.0 | ||||
|
Projected Benefit Obligations:
|
||||||||
|
Beginning of year
|
$ | 326.1 | $ | 334.0 | ||||
|
Service cost
|
0.9 | 3.0 | ||||||
|
Interest
|
18.7 | 19.7 | ||||||
|
Benefits paid
|
(12.9 | ) | (11.6 | ) | ||||
|
Actuarial loss
|
3.3 | 15.1 | ||||||
|
Curtailments
|
— | (33.8 | ) | |||||
|
Amendments
|
0.2 | — | ||||||
|
Settlements
|
(0.5 | ) | (0.3 | ) | ||||
|
End of year
|
$ | 335.8 | $ | 326.1 | ||||
|
Plans’ Assets:
|
||||||||
|
Beginning of year
|
$ | 257.6 | $ | 200.6 | ||||
|
Actual return on assets
|
35.3 | 49.6 | ||||||
|
Employer contributions
|
11.6 | 19.3 | ||||||
|
Benefits paid
|
(12.9 | ) | (11.6 | ) | ||||
|
Settlements
|
(0.5 | ) | (0.3 | ) | ||||
|
End of year
|
$ | 291.1 | $ | 257.6 | ||||
|
Consolidated Balance Sheet Components:
|
||||||||
|
Funded status
|
$ | (44.7 | ) | $ | (68.5 | ) | ||
The unfunded status of the plans of $44.7 million and
$68.5 million at December 31, 2010 and 2009,
respectively, was recognized in the accompanying balance sheets
as accrued pension liability and included in Accrued
Liabilities. No plan assets are expected to be returned to us
during the year ending December 31, 2011.
Amounts
Recognized in Other Comprehensive Income (Loss)
| Year Ended December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (in millions) | ||||||||||||
|
Actuarial gain (loss)
|
$ | 11.9 | $ | 18.7 | $ | (81.6 | ) | |||||
|
Amortization of actuarial loss
|
1.9 | 4.2 | 1.9 | |||||||||
|
Amortization of prior service cost
|
0.1 | 0.1 | 0.2 | |||||||||
|
Amortization of transition asset
|
— | — | (0.1 | ) | ||||||||
|
Other
|
(0.2 | ) | — | — | ||||||||
|
Curtailments
|
— | 33.5 | — | |||||||||
|
Settlements
|
0.2 | — | — | |||||||||
|
Total before income taxes
|
13.9 | 56.5 | (79.6 | ) | ||||||||
|
Income tax expense (benefit)
|
5.2 | 20.9 | (29.0 | ) | ||||||||
|
Net amount recognized in other comprehensive income (loss)
|
$ | 8.7 | $ | 35.6 | $ | (50.6 | ) | |||||
Included in AOCL at December 31, 2010 were the following
amounts that have not been recognized in net periodic pension
cost: prior service cost of $0.4 million ($0.3 million
net of related income taxes) and unrecognized actuarial losses
of $66.5 million ($41.8 million net of related income
taxes).
Actuarial loss included in AOCL and expected to be recognized in
net periodic pension cost for the year ended December 31,
2011 is $1.9 million ($1.2 million net of related
income taxes).
71
Table of Contents
Plan
Assets
The estimated fair value of plan assets at year end 2010 and
2009, indicating input levels used to determine fair value, and
the range of target asset allocations are as follows:
|
Target
|
December 31,
|
December 31,
|
||||||||||
| Allocation | 2010 | 2009 | ||||||||||
|
Cash and cash equivalents
|
1 | % | 2 | % | ||||||||
|
Equity securities
|
55-65 | % | 68 | 61 | ||||||||
|
Debt securities
|
35-45 | % | 31 | 37 | ||||||||
|
Total
|
100 | % | 100 | % | ||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| (in millions) | ||||||||||||||||
|
Temporary cash investments
|
$ | 3.5 | $ | — | $ | — | $ | 3.5 | ||||||||
|
Common trust funds
|
— | 210.3 | — | 210.3 | ||||||||||||
|
Registered investment companies
|
71.7 | — | — | 71.7 | ||||||||||||
|
Corporate stock
|
2.9 | — | — | 2.9 | ||||||||||||
|
Corporate bonds
|
2.0 | — | — | 2.0 | ||||||||||||
|
U.S. government obligations
|
0.7 | — | — | 0.7 | ||||||||||||
| $ | 80.8 | $ | 210.3 | $ | — | $ | 291.1 | |||||||||
The Company’s pension investment strategies have been
developed as part of a comprehensive asset/liability management
process that considers the relationship between both the assets
and liabilities of the plans. These strategies consider not only
the expected risk and returns on plan assets, but also the
actuarial projections of liabilities, projected contributions,
and funded status. The equity allocation is heavily weighted
toward domestic large capitalized companies. There is also a
lesser exposure to domestic small/mid cap companies, as well as
international equities. The fixed income allocation is equally
split between a limited duration portfolio and a core plus
portfolio that has a duration in-line with published bond
indices. This asset mix is designed to meet the longer-term
obligations of the plan as projected by actuarial studies.
The principal pension investment strategies include asset
allocation and active asset management. The range of target
asset allocations has been determined after giving consideration
to the expected returns of each asset category, the expected
performance of each asset category, the volatility of the asset
returns over time and the complementary nature of the asset mix
within the portfolio. Each asset category is managed by external
money managers with the objective of generating returns that
exceed market-based benchmarks.
The pension plan assets are valued at fair value. The following
is a description of the valuation methodologies used in
determining fair value, including the general classification of
such instruments pursuant to the valuation hierarchy as
described further in Note 3 Fair Value Accounting.
Temporary cash investments — These investments consist
of U.S. dollars held in master trust accounts with the
trustee. These temporary cash investments are classified as
Level 1 instruments.
Common trust funds — Common trust funds are comprised
of shares or units in commingled funds that are not publicly
traded. The underlying assets in these funds are publicly traded
on exchanges and price quotes for the assets held by these funds
are readily available. Holdings of common trust funds are
classified as Level 2 investments.
Registered investment companies — Registered
investment companies are mutual funds registered with the
Securities and Exchange Commission. Mutual fund shares are
traded actively on public exchanges. The share prices for mutual
funds are published at the close of each business day. Holdings
of mutual funds are classified as Level 1 investments.
72
Table of Contents
Corporate stock
—
This investment category
consists of stock issued by U.S. companies traded actively
on exchanges. Price quotes for these shares are readily
available. Holdings of corporate stock are classified as
Level 1 investments.
Corporate bonds — Corporate bonds consist of fixed
income securities of U.S. and
non-U.S. corporations.
These assets are valued using quoted prices in active markets.
Corporate bonds are classified as Level 1 investments.
U.S. government obligations — U.S government
obligations consist of fixed income securities issued directly
by the U.S. Treasury or by government-sponsored
enterprises. These assets are valued using quoted prices in
active markets. U.S. government obligations are classified
as Level 1 investments.
Cash
Flows
Employer contributions for the year ending December 31,
2011 are expected to be $14.7 million for the defined
benefit plans compared to $11.6 million contributed during
2010. Employer contributions to the 401(k) plans and the
Supplemental Profit Sharing Plan for the year ending
December 31, 2011 are expected to be $8.1 million
compared to $7.9 million during 2010.
Benefit payments expected to be paid during the next ten years
are as follows:
| Amounts | ||||
| (in millions) | ||||
|
2011
|
$ | 13.7 | ||
|
2012
|
14.6 | |||
|
2013
|
15.6 | |||
|
2014
|
16.7 | |||
|
2015
|
17.8 | |||
|
2016-2020
|
108.5 | |||
During the first quarter of 2009, the Company amended its
Supplemental Retirement Plan (the “Supplemental Plan”)
to reduce future retirement plan costs. This amendment provides
that all benefit accruals under the Supplemental Plan cease
effective March 31, 2009, and the Supplemental Plan was
frozen as of that date. In addition, the Company amended the
Trinity Industries, Inc. Standard Pension Plan (the
“Pension Plan”). This amendment was designed to reduce
future pension costs and provides that, effective March 31,
2009, all future benefit accruals under the Pension Plan
automatically ceased for all participants, and the accrued
benefits under the Pension Plan were determined and frozen as of
that date. Accordingly, as a result of these amendments, the
accrued pension liability was reduced by $44.1 million with
an offsetting reduction in funded status of pension liability
included in AOCL.
Participants in the Pension Plan are now eligible to receive
future retirement benefits through a company-funded annual
retirement contribution provided through the Profit Sharing Plan
for Employees of Trinity Industries, Inc. and Certain
Affiliates. The contribution ranges from one to three percent of
eligible compensation based on service. Both the annual
retirement contribution and the company matching contribution
are discretionary, requiring board approval, and are made
annually with the investment of the funds directed by the
participants.
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Table of Contents
| Note 15. | Accumulated Other Comprehensive Loss |
Comprehensive net income (loss) is as follows:
| Year Ended December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (in millions) | ||||||||||||
|
Net income (loss) attributable to Trinity
|
$ | 67.4 | $ | (137.7 | ) | $ | 280.9 | |||||
|
Other comprehensive income (loss):
|
||||||||||||
|
Change in currency translation adjustment, net of tax expense
(benefit) of $(0.0), $(0.0), and $0.1
|
— | — | 0.2 | |||||||||
|
Change in funded status of pension liability, net of tax expense
(benefit) of $5.2, $20.9, and $(29.0)
|
8.7 | 35.6 | (50.6 | ) | ||||||||
|
Change in unrealized (loss) gain on derivative financial
instruments, net of tax (benefit) expense of $(2.6), $14.2, and
$(27.9)
|
(7.3 | ) | 27.8 | (48.3 | ) | |||||||
|
Other changes, net of tax benefit of $0.7, (0.0), and (0.6)
|
1.1 | (0.1 | ) | (1.0 | ) | |||||||
|
Comprehensive net income (loss) attributable to Trinity
|
$ | 69.9 | $ | (74.4 | ) | $ | 181.2 | |||||
The components of accumulated other comprehensive loss are as
follows:
|
December 31,
|
December 31,
|
|||||||
| 2010 | 2009 | |||||||
| (in millions) | ||||||||
|
Currency translation adjustments, net of tax benefit of $(0.2)
and $(0.2)
|
$ | (17.1 | ) | $ | (17.1 | ) | ||
|
Funded status of pension liability, net of tax benefit of
$(24.8) and $(30.0)
|
(42.1 | ) | (50.8 | ) | ||||
|
Unrealized loss on derivative financial instruments, net of tax
benefit of $(21.4) and $(18.8)
|
(36.3 | ) | (29.0 | ) | ||||
|
Other changes, net of tax benefit of $— and $(0.7)
|
— | (1.1 | ) | |||||
| $ | (95.5 | ) | $ | (98.0 | ) | |||
See Note 7 Derivative Instruments for information on the
reclassification of amounts in accumulated other comprehensive
loss into earnings.
| Note 16. | Stock-Based Compensation |
The Company’s 2004 Amended and Restated Stock Option and
Incentive Plan (“the Plan”) provides for awarding
6,000,000 (adjusted for stock splits) shares of common stock
plus (i) shares covered by forfeited, expired, and canceled
options granted under prior plans; and (ii) shares tendered
as full or partial payment for the purchase price of an award or
to satisfy tax withholding obligations. At December 31,
2010, a total of 2,636,838 shares were available for
issuance. The Plan provides for the granting of nonqualified and
incentive stock options having maximum ten-year terms to
purchase common stock at its market value on the award date;
stock appreciation rights based on common stock fair market
values with settlement in common stock or cash; restricted
stock; restricted stock units; and performance awards with
settlement in common stock or cash on achievement of specific
business objectives. Under previous plans, nonqualified and
incentive stock options, restricted shares, and restricted stock
units were granted at their fair market values. Options become
exercisable in various percentages over periods ranging up to
five years.
The cost of employee services received in exchange for awards of
equity instruments are referred to as share-based payments and
are based on the grant date fair-value of those awards.
Stock-based compensation includes compensation expense,
recognized over the applicable vesting periods, for both new
share-based awards and share-based awards granted prior to, but
not yet vested, as of January 1, 2006. The Company uses the
Black-Scholes-Merton option pricing model to determine the fair
value of stock options granted to employees. Stock-based
74
Table of Contents
compensation totaled approximately $15.7 million,
$13.5 million, and $18.7 million for the years ended
December 31, 2010, 2009, and 2008, respectively.
The income tax benefit related to stock-based compensation
expense was $4.0 million, $2.3 million, and
$6.7 million for the years ended December 31, 2010,
2009, and 2008, respectively. The Company has presented excess
tax benefits from the exercise of stock-based compensation
awards as a financing activity in the consolidated statement of
cash flows. No stock-based compensation costs were capitalized
as part of the cost of an asset for the years ended
December 31, 2010, 2009, and 2008.
Stock
Options
Expense related to stock options issued to eligible employees
under the Plan is recognized over their vesting period on a
straight line basis. Stock options generally vest over
5 years and have contractual terms of 10 years.
|
Weighted-
|
||||||||||||||||
|
Average
|
||||||||||||||||
|
Weighted-
|
Remaining
|
|||||||||||||||
|
Number
|
Average
|
Contractual
|
Aggregate
|
|||||||||||||
|
of
|
Exercise
|
Terms
|
Intrinsic
|
|||||||||||||
| Shares | Price | (Years) | Value | |||||||||||||
| (in millions) | ||||||||||||||||
|
Options outstanding at December 31, 2009
|
1,015,465 | $ | 16.20 | |||||||||||||
|
Granted
|
— | — | ||||||||||||||
|
Exercised
|
(127,457 | ) | 15.07 | |||||||||||||
|
Cancelled
|
(7,921 | ) | 16.94 | |||||||||||||
|
Options outstanding at December 31, 2010
|
880,087 | 16.35 | 5.4 | $ | 9.0 | |||||||||||
|
Options exercisable at December 31, 2010
|
449,587 | $ | 16.46 | 3.1 | $ | 4.6 | ||||||||||
At December 31, 2010, unrecognized compensation expense
related to stock options was $1.0 million. At
December 31, 2010, for unrecognized compensation expense
related to stock options, the weighted average recognition
period was 1.4 years. The intrinsic value of options
exercised totaled approximately $0.9 million,
$0.3 million, and $8.7 million during fiscal years
2010, 2009, and 2008, respectively.
Restricted
Stock
Restricted share awards consist of restricted stock and
restricted stock units. Expense related to restricted stock and
restricted stock units issued to eligible employees under the
Plan is recognized ratably over the vesting period or to the
date on which retirement eligibility is achieved, if shorter.
Restricted stock and restricted stock units issued to eligible
employees under our long-term incentive plans generally vest for
periods ranging from one to fifteen years from the date of
grant. Certain awards vest one-hundred percent upon the
employee’s retirement from the Company, the employee’s
reaching the age of 65 or when the employee’s age plus
years of vested service equal 80. Restricted stock units issued
to non-employee directors under the Plan vest on the grant date
or on the first business day immediately preceding the next
Annual Meeting of Stockholders.
|
Weighted
|
||||||||
|
Number of
|
Average Fair
|
|||||||
|
Restricted
|
Value per
|
|||||||
| Share Awards | Award | |||||||
|
Restricted share awards outstanding at December 31,
2009
|
2,801,790 | $ | 25.32 | |||||
|
Granted
|
727,725 | 25.18 | ||||||
|
Vested
|
(493,143 | ) | 28.12 | |||||
|
Forfeited
|
(60,244 | ) | 26.70 | |||||
|
Restricted share awards outstanding at December 31,
2010
|
2,976,128 | $ | 24.79 | |||||
At December 31, 2010, unrecognized compensation expense
related to restricted share awards totaled approximately
$47.4 million which will be recognized over a weighted
average period of 4.6 years. The total
75
Table of Contents
fair value of shares vested during fiscal years 2010, 2009, and
2008 was $11.7 million, $7.4 million, and
$10.3 million, respectively. The weighted average fair
value of restricted share awards granted during 2010, 2009, and
2008 was $25.18, $15.68, and $32.42 per share, respectively.
Note 17.
Earnings Per Common Share
On January 1, 2009, we adopted the provisions of a new FASB
accounting pronouncement,
ASC 260-10,
requiring that unvested share-based payment awards containing
non-forfeitable rights to dividends be considered participating
securities and included in the computation of earnings per share
pursuant to the two-class method. This pronouncement requires
that, upon adoption, all prior period earnings per share data
presented be adjusted retrospectively. The effect of adopting
this pronouncement for the year ended December 31, 2008 was
to decrease basic net income per common share from continuing
operations by $0.11 and to decrease diluted net income per
common share from continuing operations by $0.07. There was no
change to the discontinued operations per common share data.
Basic net income attributable to Trinity per common share is
computed by dividing net income attributable to Trinity
remaining after allocation to unvested restricted shares by the
weighted average number of common shares outstanding for the
period. Except when the effect would be antidilutive, the
calculation of diluted net income attributable to Trinity per
common share includes the net impact of unvested restricted
shares and shares that could be issued under outstanding stock
options. Total weighted average restricted shares and
antidilutive stock options were 2.8 million shares,
3.7 million shares, and 2.6 million shares,
respectively, for the years ended December 31, 2010, 2009
and 2008, respectively.
The computation of basic and diluted net income (loss)
attributable to controlling interest is as follows:
| Year Ended December 31, 2010 | ||||||||||||
|
Earnings
|
||||||||||||
|
Avg. Shares
|
(Loss)
|
|||||||||||
| Income (Loss) | Outstanding | Per Share | ||||||||||
| (in millions, except per share amounts) | ||||||||||||
|
Income from continuing operations
|
$ | 75.6 | ||||||||||
|
Less: income from continuing operations attributable to
noncontrolling interest
|
8.0 | |||||||||||
|
Income from continuing operations attributable to Trinity
|
67.6 | |||||||||||
|
Unvested restricted share participation
|
(2.3 | ) | ||||||||||
|
Income from continuing operations attributable to
Trinity — basic
|
65.3 | 76.8 | $ | 0.85 | ||||||||
|
Effect of dilutive securities:
|
||||||||||||
|
Stock options
|
— | 0.2 | ||||||||||
|
Income from continuing operations attributable to
Trinity — diluted
|
$ | 65.3 | 77.0 | $ | 0.85 | |||||||
|
Loss from discontinued operations, net of taxes
|
$ | (0.2 | ) | |||||||||
|
Loss allocable to unvested restricted shares
|
— | |||||||||||
|
Loss from discontinued operations, net of taxes — basic
|
(0.2 | ) | 76.8 | $ | (0.00 | ) | ||||||
|
Effect of dilutive securities:
|
||||||||||||
|
Stock options
|
— | 0.2 | ||||||||||
|
Loss from discontinued operations, net of taxes —
diluted
|
$ | (0.2 | ) | 77.0 | $ | (0.00 | ) | |||||
76
Table of Contents
| Year Ended December 31, 2009 | ||||||||||||
|
Earnings
|
||||||||||||
|
Avg. Shares
|
(Loss)
|
|||||||||||
| Income (Loss) | Outstanding | Per Share | ||||||||||
| (in millions, except per share amounts) | ||||||||||||
|
Loss from continuing operations
|
$ | (137.5 | ) | |||||||||
|
Less: income from continuing operations attributable to
noncontrolling interest
|
— | |||||||||||
|
Loss from continuing operations attributable to Trinity
|
(137.5 | ) | ||||||||||
|
Unvested restricted share participation
|
(1.0 | ) | ||||||||||
|
Loss from continuing operations attributable to
Trinity — basic
|
(138.5 | ) | 76.4 | $ | (1.81 | ) | ||||||
|
Effect of dilutive securities:
|
||||||||||||
|
Stock options
|
— | — | ||||||||||
|
Loss from continuing operations attributable to
Trinity — diluted
|
$ | (138.5 | ) | 76.4 | $ | (1.81 | ) | |||||
|
Loss from discontinued operations, net of taxes
|
$ | (0.2 | ) | |||||||||
|
Loss allocable to unvested restricted shares
|
— | |||||||||||
|
Loss from discontinued operations, net of taxes — basic
|
(0.2 | ) | 76.4 | $ | (0.00 | ) | ||||||
|
Effect of dilutive securities:
|
||||||||||||
|
Stock options
|
— | — | ||||||||||
|
Loss from discontinued operations, net of taxes —
diluted
|
$ | (0.2 | ) | 76.4 | $ | (0.00 | ) | |||||
| Year Ended December 31, 2008 | ||||||||||||
|
Earnings
|
||||||||||||
|
Avg. Shares
|
(Loss)
|
|||||||||||
| Income (Loss) | Outstanding | Per Share | ||||||||||
| (in millions, except per share amounts) | ||||||||||||
|
Income from continuing operations
|
$ | 282.4 | ||||||||||
|
Less: income from continuing operations attributable to
noncontrolling interest
|
— | |||||||||||
|
Income from continuing operations attributable to Trinity
|
282.4 | |||||||||||
|
Unvested restricted share participation
|
(9.0 | ) | ||||||||||
|
Income from continuing operations attributable to
Trinity — basic
|
273.4 | 78.4 | $ | 3.49 | ||||||||
|
Effect of dilutive securities:
|
||||||||||||
|
Stock options
|
— | 0.4 | ||||||||||
|
Income from continuing operations attributable to
Trinity — diluted
|
$ | 273.4 | 78.8 | $ | 3.47 | |||||||
|
Loss from discontinued operations, net of taxes
|
$ | (1.5 | ) | |||||||||
|
Loss allocable to unvested restricted shares
|
— | |||||||||||
|
Loss from discontinued operations, net of taxes — basic
|
(1.5 | ) | 78.4 | $ | (0.02 | ) | ||||||
|
Effect of dilutive securities:
|
||||||||||||
|
Stock options
|
— | 0.4 | ||||||||||
|
Loss from discontinued operations, net of taxes —
diluted
|
$ | (1.5 | ) | 78.8 | $ | (0.02 | ) | |||||
Note 18.
Commitments and Contingencies
Litigation
and Contingencies
The Company is involved in claims and lawsuits incidental to our
business. Based on information currently available, it is
management’s opinion that the ultimate outcome of all
current litigation and other claims, including
77
Table of Contents
settlements, in the aggregate will not have a material adverse
effect on the Company’s overall financial condition for
purposes of financial reporting. However, resolution of certain
claims or lawsuits by settlement or otherwise could impact the
operating results of the reporting period in which such
resolution occurs.
Trinity is subject to Federal, state, local, and foreign laws
and regulations relating to the environment and the workplace.
The Company has reserved $10.9 million to cover our
probable and estimable liabilities with respect to the
investigations, assessments, and remedial responses to such
matters, taking into account currently available information and
our contractual rights to indemnification and recourse to third
parties. However, estimates of liability arising from future
proceedings, assessments, or remediation are inherently
imprecise. Accordingly, there can be no assurance that we will
not become involved in future litigation or other proceedings
involving the environment and the workplace or, if we are found
to be responsible or liable in any such litigation or
proceeding, that such costs would not be material to the
Company. We believe that we are currently in substantial
compliance with environmental and workplace laws and regulations.
Other
Commitments
Non-cancelable purchase obligations amounted to
$222.2 million as of December 31, 2010, of which
$185.8 million were for the purchase of raw materials and
components, principally by the Rail and Inland Barge Groups.
Note 19.
Selected Quarterly Financial Data (Unaudited)
|
Three Months
|
Three Months
|
Three Months
|
Three Months
|
|||||||||||||
|
Ended
|
Ended
|
Ended
|
Ended
|
|||||||||||||
|
March 31,
|
June 30,
|
September 30,
|
December 31,
|
|||||||||||||
| 2010 | 2010 | 2010 | 2010 | |||||||||||||
| (in millions except per share data) | ||||||||||||||||
|
Year ended December 31, 2010:
|
||||||||||||||||
|
Revenues
|
$ | 454.0 | $ | 543.1 | $ | 540.0 | $ | 652.0 | ||||||||
|
Operating profit
|
52.0 | 78.9 | 92.0 | 81.1 | ||||||||||||
|
Income from continuing operations
|
4.3 | 21.1 | 31.6 | 18.6 | ||||||||||||
|
Loss from discontinued operations, net of benefit for income
taxes of $0.0
|
(0.0 | ) | (0.0 | ) | (0.1 | ) | (0.1 | ) | ||||||||
|
Net income
|
4.3 | 21.1 | 31.5 | 18.5 | ||||||||||||
|
Net income attributable to Trinity Industries, Inc.
|
2.0 | 18.4 | 29.7 | 17.3 | ||||||||||||
|
Net income (loss) attributable to Trinity Industries, Inc. per
common share:
|
||||||||||||||||
|
Basic:
|
||||||||||||||||
|
Continuing operations
|
$ | 0.02 | $ | 0.23 | $ | 0.37 | $ | 0.22 | ||||||||
|
Discontinued operations
|
(0.00 | ) | (0.00 | ) | (0.00 | ) | (0.00 | ) | ||||||||
| $ | 0.02 | $ | 0.23 | $ | 0.37 | $ | 0.22 | |||||||||
|
Diluted:
|
||||||||||||||||
|
Continuing operations
|
$ | 0.02 | $ | 0.23 | $ | 0.37 | $ | 0.22 | ||||||||
|
Discontinued operations
|
(0.00 | ) | (0.00 | ) | (0.00 | ) | (0.00 | ) | ||||||||
| $ | 0.02 | $ | 0.23 | $ | 0.37 | $ | 0.22 | |||||||||
78
Table of Contents
|
Three Months
|
Three Months
|
Three Months
|
Three Months
|
|||||||||||||
|
Ended
|
Ended
|
Ended
|
Ended
|
|||||||||||||
|
March 31,
|
June 30,
|
September 30,
|
December 31,
|
|||||||||||||
| 2009 | 2009 | 2009 | 2009 | |||||||||||||
| (in millions except per share data) | ||||||||||||||||
|
Year ended December 31, 2009:
|
||||||||||||||||
|
Revenues
|
$ | 793.5 | $ | 716.1 | $ | 557.4 | $ | 508.2 | ||||||||
|
Operating profit (loss)
|
85.9 | (240.3 | ) | 64.6 | 59.1 | |||||||||||
|
Income (loss) from continuing operations
|
34.0 | (209.4 | ) | 23.2 | 14.7 | |||||||||||
|
Loss from discontinued operations, net of benefit for income
taxes of $0.0
|
(0.1 | ) | (0.0 | ) | (0.0 | ) | (0.1 | ) | ||||||||
|
Net income (loss)
|
33.9 | (209.4 | ) | 23.2 | 14.6 | |||||||||||
|
Net income (loss) per common share:
|
||||||||||||||||
|
Basic:
|
||||||||||||||||
|
Continuing operations
|
$ | 0.43 | $ | (2.75 | ) | $ | 0.29 | $ | 0.19 | |||||||
|
Discontinued operations
|
(0.00 | ) | (0.00 | ) | (0.00 | ) | (0.00 | ) | ||||||||
| $ | 0.43 | $ | (2.75 | ) | $ | 0.29 | $ | 0.19 | ||||||||
|
Diluted:
|
||||||||||||||||
|
Continuing operations
|
$ | 0.43 | $ | (2.75 | ) | $ | 0.29 | $ | 0.19 | |||||||
|
Discontinued operations
|
(0.00 | ) | (0.00 | ) | (0.00 | ) | (0.00 | ) | ||||||||
| $ | 0.43 | $ | (2.75 | ) | $ | 0.29 | $ | 0.19 | ||||||||
A goodwill impairment charge of $325.0 million was recorded
during the three months ended June 30, 2009 related to the
Rail Group segment. See Note 9 Goodwill for further
discussion.
Effective January 1, 2010, Trinity’s consolidated
financial statements include the financial position and results
of operations of TRIP Holdings. See Note 1 Summary of
Significant Accounting Policies for further discussion.
79
Table of Contents
| Item 9. | Changes In and Disagreements with Accountants on Accounting and Financial Disclosure. |
None.
| Item 9A. | Controls and Procedures. |
Disclosure
Controls and Procedures.
The Company maintains controls and procedures designed to ensure
that it is able to collect the information it is required to
disclose in the reports it files with the SEC, and to process,
summarize, and disclose this information within the time periods
specified in the rules of the SEC. The Company’s Chief
Executive and Chief Financial Officers are responsible for
establishing and maintaining these procedures and, as required
by the rules of the SEC, evaluating their effectiveness. Based
on their evaluation of the Company’s disclosure controls
and procedures which took place as of the end of the period
covered by this report, the Chief Executive and Chief Financial
Officers believe that these procedures are effective to ensure
that the Company is able to collect, process, and disclose the
information it is required to disclose in the reports it files
with the SEC within the required time periods.
Management’s
Report on Internal Control over Financial Reporting.
Management of the Company is responsible for establishing and
maintaining effective internal control over financial reporting
as defined in
Rules 13a-15(f)
under the Securities Exchange Act of 1934. The Company’s
internal control over financial reporting is designed to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for
external purposes in accordance with accounting principles
generally accepted in the United States.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Therefore, even those systems determined to be effective can
provide only reasonable assurance, as opposed to absolute
assurance, of achieving their internal control objectives.
Management assessed the effectiveness of the Company’s
internal control over financial reporting as of
December 31, 2010. In making this assessment, management
used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in
Internal
Control — Integrated Framework.
Based on our
assessment, we believe that, as of December 31, 2010, the
Company’s internal control over financial reporting was
effective based on those criteria.
The effectiveness of internal control over financial reporting
as of December 31, 2010, has been audited by
Ernst & Young LLP, the independent registered public
accounting firm who also audited the Company’s consolidated
financial statements. Ernst & Young LLP’s
attestation report on effectiveness of the Company’s
internal control over financial reporting is included herein.
| Item 9B. | Other Information. |
The Company, through a wholly owned subsidiary, owned or
operated a total of thirteen (13) sand, gravel, and
aggregate quarries in Texas, Arkansas, and Louisiana in 2010. On
July 21, 2010, the United States Congress enacted the
Dodd-Frank Wall Street Reform and Consumer Protection Act (the
“Financial Reform Act”). Section 1503 of the
Financial Reform Act requires that we disclose in our periodic
reports filed pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 specific information about each
of our quarries comprised of notices, violations, and orders
made by the Federal Mine Safety and Health Administration
(“MSHA”) pursuant to the
80
Table of Contents
Federal Mine Safety and Health Act of 1977 (the “Mine
Act”). The following table sets forth the reportable
information required for our quarries that operated during the
12-month
period ended December 31, 2010.
|
Total no.
|
Pending
|
|||||||||||||||||||||||||||||||||||
|
of
|
Total no. of
|
Total no.
|
Received
|
legal action
|
||||||||||||||||||||||||||||||||
|
significant
|
Total
|
unwarrantable
|
Total no.
|
of
|
Total
|
written
|
before the
|
|||||||||||||||||||||||||||||
|
and
|
no. of
|
compliance
|
of
|
imminent
|
dollar
|
notice
|
Federal
|
|||||||||||||||||||||||||||||
|
substantial
|
orders
|
failure
|
flagrant
|
danger
|
value of
|
Total
|
under
|
Mine Safety
|
||||||||||||||||||||||||||||
|
violations
|
under
|
citations and
|
violations
|
orders
|
proposed
|
no. of
|
Mine
|
and Health
|
||||||||||||||||||||||||||||
|
under
|
Mine
|
orders under
|
under
|
under
|
assessments
|
mining
|
Act
|
Review
|
||||||||||||||||||||||||||||
|
Quarry Site
|
Mine Act
|
Act
|
Mine Act
|
Mine Act
|
Mine Act
|
from
|
related
|
§104(e)
|
Commission
|
|||||||||||||||||||||||||||
| MSHA ID | §104 | §104(b) | §104(d) | §110(b)(2) | §107(a) | MSHA | fatalities | (yes/no)? | (yes/no)? | |||||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||||||||||||
| Rye 4102547 | 0 | 0 | 0 | 0 | 0 | $ | 0.100 | 0 | No | No | ||||||||||||||||||||||||||
| Belton 4101043 | 0 | 0 | 0 | 0 | 0 | $ | 0.263 | 0 | No | No | ||||||||||||||||||||||||||
| Malloy Bridge 4102946 | 0 | 0 | 0 | 0 | 0 | $ | 0.100 | 0 | No | No | ||||||||||||||||||||||||||
| Cottonwood 4104553 | 5 | (i) | 0 | 0 | 0 | 0 | $ | 0.900 | 0 | No | No | |||||||||||||||||||||||||
| Wills Point 4104113 | 0 | 0 | 0 | 0 | 0 | $ | 0.100 | 0 | No | No | ||||||||||||||||||||||||||
| Waco-Angerman 4103492 | 2 | (ii) | 0 | 0 | 0 | 0 | $ | 0.354 | 0 | No | No | |||||||||||||||||||||||||
| Indian Village 1600348 | 0 | 0 | 0 | 0 | 0 | $ | 0.200 | 0 | No | No | ||||||||||||||||||||||||||
| Alvord 4103689 | 0 | 0 | 0 | 0 | 0 | $ | 0.100 | 0 | No | No | ||||||||||||||||||||||||||
| Lockesburg 0301681 | 13 | (iii) | 0 | 1 | (iii) | 0 | 0 | $ | 12.195 | 0 | No | No | ||||||||||||||||||||||||
| Hearne 4104394 | 0 | 0 | 0 | 0 | 0 | $ | 0.000 | 0 | No | No | ||||||||||||||||||||||||||
| Kopperl 4104450 | 0 | 0 | 0 | 0 | 0 | $ | 0.700 | 0 | No | No | ||||||||||||||||||||||||||
| Cleveland 4104567 | 0 | 0 | 0 | 0 | 0 | $ | 0.000 | 0 | No | No | ||||||||||||||||||||||||||
| Wills Point II 4104071 | 0 | 0 | 0 | 0 | 0 | $ | 0.000 | 0 | No | No | ||||||||||||||||||||||||||
| (i) | These five citations relate to conveyor system return roller guarding. All five citations are being contested. |
| (ii) | These two citations cover berm construction dimensions (1) and berm erosion (1). |
| (iii) | The fourteen citations relate to one (1) missing on-site speed limit sign, four (4) general housekeeping issues, one (1) delayed engagement of an equipment back up alarm (Sec. 104), one (1) operating equipment without a functioning back up alarm [Section 104(d)], one (1) protected travel-way opening, five (5) electrical box conditions and labeling, and one (1) lack of equipment guard. |
81
Table of Contents
PART III
| Item 10. | Directors, Executive Officers and Corporate Governance. |
Information regarding the directors of the Company is
incorporated by reference to the information set forth under the
caption “Proposal 1 — Election of
Directors” in the Company’s Proxy Statement for the
2011 Annual Meeting of Stockholders (the “2011 Proxy
Statement”). Information relating to the executive officers
of the Company is set forth in Part I of this report under
the caption “Executive Officers of the Company.”
Information relating to the Board of Directors’
determinations concerning whether at least one of the members of
the Audit Committee is an “audit committee financial
expert” as that term is defined under Item 407 (d)(5)
of
Regulation S-K
is incorporated by reference to the information set forth under
the caption “Corporate Governance — Board
Committees — Audit Committee” in the
Company’s 2011 Proxy Statement. Information regarding the
Company’s Audit Committee is incorporated by reference to
the information set forth under the caption “Corporate
Governance — Board Committees — Audit
Committee” in the Company’s 2011 Proxy Statement.
Information regarding compliance with Section 16(a) of the
Securities and Exchange Act of 1934 is incorporated by reference
to the information set forth under the caption “Additional
Information — Section 16(a) Beneficial Ownership
Reporting Compliance” in the Company’s 2011 Proxy
Statement.
The Company has adopted a Code of Business Conduct and Ethics
that applies to all of its directors, officers, and employees.
The Code of Business Conduct and Ethics is on the Company’s
website at
www.trin.net
under the caption “Investor
Relations/ Governance.” The Company intends to post any
amendments or waivers for its Code of Business Conduct and
Ethics to the Company’s website at
www.trin.net
to
the extent applicable to an executive officer or director of the
Company.
| Item 11. | Executive Compensation. |
Information regarding compensation of executive officers and
directors is incorporated by reference to the information set
forth under the caption “Executive Compensation” in
the Company’s 2011 Proxy Statement. Information concerning
compensation committee interlocks and insider participation is
incorporated by reference to the information set forth under the
caption “Corporate Governance — Compensation
Committee Interlocks and Insider Participation” in the
Company’s 2011 Proxy Statement. Information about the
compensation committee report is incorporated by reference to
the information set forth under the caption “Executive
Compensation — Human Resources Committee Report”
in the Company’s 2011 Proxy Statement.
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. |
Information concerning security ownership of certain beneficial
owners and management is incorporated herein by reference from
the Company’s 2011 Proxy Statement, under the caption
“Security Ownership — Security Ownership of
Certain Beneficial Owners and Management.”
82
Table of Contents
The following table sets forth information about Trinity common
stock that may be issued under all of Trinity’s existing
equity compensation plans as of December 31, 2010.
Equity
Compensation Plan Information
| (a) | (b) | (c) | ||||||||||
|
Number of Securities
|
||||||||||||
|
Number of Securities
|
Remaining Available for
|
|||||||||||
|
to be Issued
|
Weighted-Average
|
Future Issuance under
|
||||||||||
|
Upon Exercise of
|
Exercise Price of
|
Equity Compensation
|
||||||||||
|
Outstanding Options,
|
Outstanding Options,
|
Plans (Excluding Securities
|
||||||||||
| Warrants and Rights | Warrants and Rights | Reflected in Column (a)) | ||||||||||
|
Plan Category
|
||||||||||||
|
Equity compensation plans approved by security holders:
|
||||||||||||
|
Stock Options
|
880,087 | |||||||||||
|
Restricted stock units
|
243,405 | |||||||||||
| 1,123,492 | $ | 12.81 | (1) | 2,636,838 | ||||||||
|
Equity compensation plans not approved by security holders
|
— | (2) | — | — | ||||||||
|
Total
|
1,123,492 | $ | 12.81 | 2,636,838 | ||||||||
| (1) | Includes 243,405 shares of common stock issuable upon the vesting and conversion of restricted stock units. The restricted stock units do not have an exercise price. | |
| (2) | Excludes information regarding the Trinity Deferred Plan for Director Fees. This plan permits the deferral of the payment of the annual retainer fee and board and committee meeting fees. At the election of the participant, the deferred fees may be converted into phantom stock units with a fair market value equal to the value of the fees deferred, and such phantom stock units are credited to the director’s account (along with the amount of any dividends or stock distributions). At the time a participant ceases to be a director, cash will be distributed to the participant. At December 31, 2010, 90,481 phantom stock units were credited to the accounts of participants. Also excludes information regarding the Trinity Industries Supplemental Profit Sharing Plan (“Supplemental Plan”) for certain of its highly compensated employees. Information about the Supplemental Plan is incorporated herein by reference from the Company’s 2011 Proxy Statement, under the caption “Executive Compensation — Post-Employment Benefits.” At December 31, 2010, 46,573 stock units were credited to the accounts of participants under the Supplemental Plan. |
| Item 13. | Certain Relationships and Related Transactions, and Director Independence. |
Information regarding certain relationships and related person
transactions is incorporated by reference to the information set
forth under the captions “Corporate Governance-Compensation
Committee Interlocks and Insider Participation” and
“Transactions with Related Persons” in the
Company’s 2011 Proxy Statement. Information regarding the
independence of directors is incorporated by reference to the
information set forth under the captions “Corporate
Governance-Independence of Directors” in the Company’s
2011 Proxy Statement.
| Item 14. | Principal Accountant Fees and Services. |
Information regarding principal accountant fees and services is
incorporated by reference to the information set forth under the
captions “Fees of Independent Registered Public Accounting
Firm for Fiscal Years 2010 and 2009” in the Company’s
2011 Proxy Statement.
83
Table of Contents
PART IV
| Item 15. | Exhibits and Financial Statement Schedules. |
(a) (1)
Financial Statements.
See Item 8.
(2)
Financial Statement Schedule.
All schedules are omitted because they are not required, not
significant, not applicable, or the information is shown in the
consolidated financial statements or the notes to consolidated
financial statements.
(3)
Exhibits.
See Index to Exhibits for a listing of Exhibits which are filed
herewith or incorporated herein by reference to the location
indicated.
84
Table of Contents
EXHIBIT 23
CONSENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We 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),
Registration Statement
(Form S-8,
No. 33-35514),
Registration Statement
(Form S-8,
No. 33-73026),
Registration Statement
(Form S-8,
No. 333-77735),
Registration Statement
(Form S-8,
No. 333-91067),
Registration Statement
(Form S-8,
No. 333-85588),
Registration Statement
(Form S-8,
No. 333-85590),
Registration Statement
(Form S-8,
No. 333-114854),
Registration Statement
(Form S-8,
No. 333-115376),
Registration Statement
(Form S-3,
No. 333-134596),
Registration Statement
(Form S-8,
No. 333-159552)
and Registration Statement
(Form S-8,
No. 333-169452)
of Trinity Industries, Inc. and Subsidiaries and in the related
Prospectuses of our reports dated February 17, 2011 with
respect to the consolidated financial statements of Trinity
Industries, Inc. and Subsidiaries and the effectiveness of
internal control over financial reporting of Trinity Industries,
Inc. and Subsidiaries included in this Annual Report
(Form 10-K)
for the year ended December 31, 2010.
/s/
ERNST & YOUNG LLP
Dallas, Texas
February 17, 2011
85
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
|
TRINITY INDUSTRIES, INC.
Registrant |
By
/s/ James
E. Perry
James
E. Perry
Vice President and Chief Financial Officer Dated: February 17, 2011 |
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
dates indicated.
Directors:
|
/s/ John
L.
Adams
Director Dated: February 17, 2011 |
/s/ Diana
S. Natalicio
Director Dated: February 17, 2011 |
|
|
/s/ Rhys
J. Best
Director Dated: February 17, 2011 |
/s/ Charles
W. Matthews
Director Dated: February 17, 2011 |
|
|
/s/ David
W.
Biegler
Director Dated: February 17, 2011 |
/s/ Douglas
L.
Rock
Director Dated: February 17, 2011 |
|
|
/s/ Leldon
E. Echols
Director Dated: February 17, 2011 |
Principal Executive Officer: |
|
|
/s/ Ronald
J. Gafford
Director Dated: February 17, 2011 |
/s/ Timothy
R.
Wallace
Chairman, Chief Executive Officer, President, and Director Dated: February 17, 2011 |
|
|
/s/ Ronald
W. Haddock
Director Dated: February 17, 2011 |
Principal Financial Officer: |
|
|
/s/ Jess
T.
Hay
Director Dated: February 17, 2011 |
/s/ James
E.
Perry
Vice President and Chief Financial Officer Dated: February 17, 2011 |
|
|
/s/ Adrián
Lajous
Director Dated: February 17, 2011 |
Principal Accounting Officer: |
|
|
/s/ Mary
E.
Henderson
Vice President, Chief Accounting Officer, and Controller Dated: February 17, 2011 |
86
Table of Contents
Trinity
Industries, Inc.
Index to Exhibits
Index to Exhibits
(Item 15(b))
| NO. | DESCRIPTION | |
|
(3.1)
|
Certificate of Incorporation of Trinity Industries, Inc., as amended May 23, 2007 (incorporated by reference to Exhibit 3.1 to our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2007). | |
|
(3.2)
|
Amended and Restated By-Laws of Trinity Industries, Inc., as amended September 9, 2010 (incorporated by reference to Exhibit 99.2 to our Form 8-K filed September 10, 2010). | |
|
(4.01)
|
Indenture, dated June 7, 2006, between Trinity Industries, Inc. and Wells Fargo Bank, National Association, as trustee (including the Form of 3 7 / 8 % Convertible Subordinated Note due 2036 as an exhibit thereto) (incorporated by reference to Exhibit 4.01 to our Form 8-K filed June 7, 2006). | |
|
(4.01.1)
|
Officers’ Certificate of Trinity Industries, Inc. pursuant to the Indenture dated June 7, 2006, relating to the Company’s 3 7 / 8 % Convertible Subordinated Notes due 2036 (incorporated by reference to Exhibit 4.01.1 to our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2006). | |
|
(4.1)
|
Specimen Common Stock Certificate of Trinity Industries, Inc. (incorporated by reference to Exhibit 4.1 of Registration Statement No. 333-159552 filed May 28, 2009). | |
|
(4.2)
|
Pass Through Trust Agreement dated as of February 15, 2002 among Trinity Industries Leasing Company, Trinity Industries, Inc. and Wilmington Trust Company, as Trustee (incorporated by reference to Exhibit 4.4 to our Annual Report on Form 10-K for the annual period ended December 31, 2007). | |
|
(4.2.1)
|
Trust Indenture and Security Agreement dated as of February 15, 2002 among Trinity Industries Leasing Company, Trinity Industries, Inc. and The Bank of New York, as Trustee (incorporated by reference to Exhibit 4.4.1 to our Annual Report on Form 10-K for the annual period ended December 31, 2007). | |
|
(4.2.2)
|
Trust Indenture and Security Agreement dated as of February 15, 2002 among Trinity Industries Leasing Company, Trinity Industries, Inc. and The Bank of New York, as Trustee (incorporated by reference to Exhibit 4.4.2 to our Annual Report on Form 10-K for the annual period ended December 31, 2007). | |
|
(4.2.3)
|
Trust Indenture and Security Agreement dated as of February 15, 2002 among Trinity Industries Leasing Company, Trinity Industries, Inc. and The Bank of New York, as Trustee (incorporated by reference to Exhibit 4.4.3 to our Annual Report on Form 10-K for the annual period ended December 31, 2007). | |
|
(10.1.1)
|
Form of Amended and Restated Executive Severance Agreement dated September 9, 2008 entered into between Trinity Industries, Inc. and the Chief Executive Officer, and each of the two Senior Vice Presidents (incorporated by reference to Exhibit 10.1.1 to our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2008).* | |
|
(10.1.2)
|
Form of Amended and Restated Executive Severance Agreement dated September 9, 2008, entered into between Trinity Industries, Inc. and certain executive officers and certain other subsidiary and divisional officers of Trinity Industries, Inc. (incorporated by reference to Exhibit 10.1.2 to our Annual Report on Form 10-K for the annual period ended December 31, 2008).* | |
|
(10.2)
|
Trinity Industries, Inc. Directors’ Retirement Plan, as amended September 10, 1998 (incorporated by reference to Exhibit 10.2 of Registration Statement No. 333-117526 filed July 21, 2004).* | |
|
(10.2.1)
|
Amendment No. 2 to the Trinity Industries, Inc. Directors’ Retirement Plan (filed herewith).* | |
|
(10.2.2)
|
Amendment No. 3 to the Trinity Industries, Inc. Directors’ Retirement Plan (incorporated by reference to Exhibit 10.2.2 to our Annual Report on Form 10-K for the annual period ended December 31, 2005).* | |
|
(10.3)
|
1993 Stock Option and Incentive Plan (incorporated by reference to Exhibit 4.1 of Registration Statement No. 33-73026 filed December 15, 1993).* | |
|
(10.3.1)
|
Amendment No. 1 to the 1993 Stock Option and Incentive Plan (incorporated by reference to Exhibit 10.3.1 to our Annual Report on Form 10-K for the annual period December 31, 2005).* |
87
Table of Contents
| NO. | DESCRIPTION | |
|
(10.3.2)
|
Amendment No. 2 to the 1993 Stock Option and Incentive Plan (incorporated by reference to Exhibit 10.3.2 to our Annual Report on Form 10-K for the annual period December 31, 2005).* | |
|
(10.3.3)
|
Amendment No. 3 to the 1993 Stock Option and Incentive Plan (incorporated by reference to Exhibit 10.3.3 to our Annual Report on Form 10-K for the annual period ended December 31, 2005).* | |
|
(10.3.4)
|
Amendment No. 4 to the 1993 Stock Option and Incentive Plan (incorporated by reference to Exhibit 10.3.4 to our Annual Report on Form 10-K for the annual period ended December 31, 2005).* | |
|
(10.3.5)
|
Amendment No. 5 to the 1993 Stock Option and Incentive Plan (incorporated by reference to Exhibit 10.3.5 to our Annual Report on Form 10-K for the annual period ended December 31, 2005).* | |
|
(10.4)
|
Supplemental Profit Sharing Plan for Employees of Trinity Industries, Inc. and Certain Affiliates as restated effective January 1, 2005 (incorporated by reference to Exhibit 10.5 to our Annual Report on Form 10-K for the annual period ended December 31, 2007).* | |
|
(10.5)
|
Trinity Industries, Inc. Supplemental Profit Sharing and Deferred Director Fee Trust dated March 31, 1999 (incorporated by reference to Exhibit 10.7 of Registration Statement No. 333-117526 filed July 21, 2004).* | |
|
(10.5.1)
|
Amendment No. 1 to the Trinity Industries, Inc. Supplemental Profit Sharing and Deferred Director Fee Trust dated December 27, 2000 (incorporated by reference to Exhibit 10.7.1 of Registration Statement No. 333-117526 filed July 21, 2004).* | |
|
(10.6)
|
Supplemental Retirement Plan as Amended and Restated effective January 1, 2009 (incorporated by reference to Exhibit 10.7 to our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2008).* | |
|
(10.6.1)
|
Amendment No. 1 to the Supplemental Retirement Plan as Amended and Restated effective January 1, 2009 (incorporated by reference to Exhibit 10.7.1 to our Form 8-K filed February 17, 2009).* | |
|
(10.7)
|
Trinity Industries, Inc. Deferred Plan for Director Fees, as amended (incorporated by reference to Exhibit 10.9 of Registration Statement No. 333-117526 filed July 21, 2004).* | |
|
(10.7.1)
|
Amendment to Trinity Industries, Inc. Deferred Plan for Director Fees dated December 7, 2005 (incorporated by reference to Exhibit 10.8.1 to our Annual Report on Form 10-K for the annual period ended December 31, 2005).* | |
|
(10.7.2)
|
Trinity Industries, Inc. 2005 Deferred Plan for Director Fees (incorporated by reference to Exhibit 10.8.2 to our Annual Report on Form 10-K for the annual period ended December 31, 2005).* | |
|
(10.8)
|
Deferred Compensation Trust of Trinity Industries, Inc. and Certain Affiliates effective January 1, 2002 (incorporated by reference to Exhibit 10.10 of Registration Statement No. 333-117526 filed July 21, 2004).* | |
|
(10.9)
|
Trinity Industries, Inc. 1998 Stock Option and Incentive Plan (incorporated by reference to Exhibit 4.2 of Registration Statement No. 333-77735 filed May 4, 1999).* | |
|
(10.9.1)
|
Amendment No. 1 to the Trinity Industries, Inc. 1998 Stock Option Plan and Incentive Plan (incorporated by reference to Exhibit 10.9.1 to our Annual Report on Form 10-K for the annual period ended December 31, 2009).* | |
|
(10.9.2)
|
Amendment No. 2 to the Trinity Industries, Inc. 1998 Stock Option and Incentive Plan (incorporated by reference to Exhibit 10.9.2 to our Annual Report on Form 10-K for the annual period ended December 31, 2009).* | |
|
(10.9.3)
|
Amendment No. 3 to the Trinity Industries, Inc. 1998 Stock Option and Incentive Plan (incorporated by reference to Exhibit 10.10.3 to our Annual Report on Form 10-K for the annual period ended December 31, 2005).* |
88
Table of Contents
| NO. | DESCRIPTION | |
|
(10.9.4)
|
Amendment No. 4 to the Trinity Industries, Inc. 1998 Stock Option and Incentive Plan (incorporated by reference to Exhibit 10.10.4 to our Annual Report on Form 10-K for the annual period ended December 31, 2005).* | |
|
(10.10)
|
Amended and Restated Trinity Industries, Inc. 2004 Stock Option and Incentive Plan (incorporated by reference to Exhibit 10.1 to our Form 8-K filed May 4, 2010).* | |
|
(10.10.1)
|
Form of Notice of Grant of Stock Options and Non-Qualified Option Agreement with Non-Qualified Stock Option Terms and Conditions as of September 8, 2004 (filed herewith).* | |
|
(10.10.1.1)
|
Non-Qualified Stock Option Terms and Conditions as of December 6, 2005 (incorporated by reference to Exhibit 10.11.1.1 to our Annual Report on Form 10-K for the annual period ended December 31, 2005).* | |
|
(10.10.1.2)
|
Form of Notice of Grant of Stock Options and Non-Qualified Option Agreement with Non-Qualified Stock Option Terms and Conditions as of December 9, 2008 (incorporated by reference to Exhibit 10.11.1.2 to our Annual Report on Form 10-K for the annual period ended December 31, 2008).* | |
|
(10.10.2)
|
Form of Notice of Grant of Stock Options and Incentive Stock Option Agreement with Incentive Stock Option Terms and Conditions as of September 8, 2004 (filed herewith).* | |
|
(10.10.2.1)
|
Incentive Stock Option Terms and Conditions as of December 6, 2005 (incorporated by reference to Exhibit 10.11.2.1 to our Annual Report on Form 10-K for the annual period ended December 31, 2005).* | |
|
(10.10.2.2)
|
Form of Notice of Grant of Stock Options and Incentive Stock Option Agreement with Incentive Stock Option Terms and Conditions as of December 9, 2008 (incorporated by reference to Exhibit 10.11.2.2 to our Annual Report on Form 10-K for the annual period ended December 31, 2008).* | |
|
(10.10.3)
|
Form of Restricted Stock Grant Agreement for grants issued prior to 2008 (incorporated by reference to Exhibit 10.11.3 to our Annual Report on Form 10-K for the annual period ended December 31, 2007).* | |
|
(10.10.3.1)
|
Form of Restricted Stock Grant Agreement for grants issued commencing 2008 (incorporated by reference to Exhibit 10.11.3 to our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2008).* | |
|
(10.10.4)
|
Form of Non-Qualified Stock Option Agreement for Non-Employee Directors (filed herewith).* | |
|
(10.10.5)
|
Form of Restricted Stock Unit Agreement for Non-Employee Directors for grants issued prior to 2008 (incorporated by reference to Exhibit 10.11.5 to our Annual Report on Form 10-K for the annual period ended December 31, 2007).* | |
|
(10.10.5.1)
|
Form of Restricted Stock Unit Agreement for Non-Employee Directors for grants issued commencing 2008 (incorporated by reference to Exhibit 10.11.5 to our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2008).* | |
|
(10.11)
|
Supplemental Retirement and Director Retirement Trust of Trinity Industries, Inc. (incorporated by reference to Exhibit 10.11 to our Annual Report on Form 10-K for the annual period ended December 31, 2009).* | |
|
(10.12)
|
Form of 2008 Deferred Compensation Plan and Agreement as amended and restated entered into between Trinity Industries, Inc. and certain officers of Trinity Industries, Inc. or its subsidiaries (incorporated by reference to Exhibit 10.13 to our Annual Report on Form 10-K for the annual period ended December 31, 2007).* | |
|
(10.13)
|
Trinity Industries, Inc. Short-Term Management Incentive Plan (incorporated by reference to Exhibit 10.14 to our Annual Report on Form 10-K for the annual period ended December 31, 2007).* | |
|
(10.14)
|
Equipment Lease Agreement (TRL 1 2001-1A) dated as of May 17, 2001 between TRLI-1A Railcar Statutory Trust, lesser, and Trinity Rail Leasing I L.P., lessee (incorporated by reference to Exhibit 10.15 to our Annual Report on Form 10-K for the annual period ended December 31, 2007). | |
|
(10.14.1)
|
Participation Agreement (TRL 1 2001-1A) dated as of May 17, 2001 among Trinity Rail Leasing I L.P., lessee, et. al. (incorporated by reference to Exhibit 10.15.1 to our Annual Report on Form 10-K for the annual period ended December 31, 2007). |
89
Table of Contents
| NO. | DESCRIPTION | |
|
(10.14.2)
|
Equipment Lease Agreement (TRL 1 2001-1B) dated as of July 12, 2001 between TRL 1 2001-1B Railcar Statutory Trust, lessor, and Trinity Rail Leasing I L.P., lessee (incorporated by reference to Exhibit 10.15.2 to our Annual Report on Form 10-K for the annual period ended December 31, 2007). | |
|
(10.14.3)
|
Participation Agreement (TRL 1 2001-1B) dated as of May 17, 2001 among Trinity Rail Leasing I L.P., lessee, et. al. (incorporated by reference to Exhibit 10.15.3 to our Annual Report on Form 10-K for the annual period ended December 31, 2007). | |
|
(10.14.4)
|
Equipment Lease Agreement (TRL 1 2001-1C) dated as of December 28, 2001 between TRL 1 2001-1C Railcar Statutory Trust, lessor, and Trinity Rail Leasing 1 L.P., lessee (incorporated by reference to Exhibit 10.15.4 to our Annual Report on Form 10-K for the annual period ended December 31, 2007). | |
|
(10.14.5)
|
Participation Agreement (TRL 1 2001-1C) dated as of December 28, 2001 among Trinity Rail Leasing 1 L.P., lessee, et. al. (incorporated by reference to Exhibit 10.15.5 to our Annual Report on Form 10-K for the annual period ended December 31, 2007). | |
|
(10.15)
|
Equipment Lease Agreement (TRL III 2003-1A) dated as of November 12, 2003 between TRL III-1A Railcar Statutory Trust, lessor, and Trinity Rail Leasing III L.P., lessee (incorporated by reference to Exhibit 10.16 to our Annual Report on Form 10-K for the annual period ended December 31, 2007). | |
|
(10.15.1)
|
Participation Agreement (TRL III 2003-1A) dated as of November 12, 2003 between TRL III-1A among Trinity Rail Leasing III L.P., lessee, et. al. (incorporated by reference to Exhibit 10.16.1 to our Annual Report on Form 10-K for the annual period ended December 31, 2007). | |
|
(10.15.2)
|
Equipment Lease Agreement (TRL III 2003-1B) dated as of November 12, 2003 between TRL III-1B Railcar Statutory Trust, lessor, and Trinity Rail Leasing III L.P., lessee, (incorporated by reference to Exhibit 10.16.2 to our Annual Report on Form 10-K for the annual period ended December 31, 2007). | |
|
(10.15.3)
|
Participation Agreement (TRL III 2003-1B) dated as of November 12, 2003 between TRL III-1B among Trinity Rail Leasing III L.P., lessee, et. al. (incorporated by reference to Exhibit 10.16.3 to our Annual Report on Form 10-K for the annual period ended December 31, 2007). | |
|
(10.15.4)
|
Equipment Lease Agreement (TRL III 2003-1C) dated as of November 12, 2003 between TRL III-1C Railcar Statutory Trust, lessor, and Trinity Rail Leasing III L.P., lessee (incorporated by reference to Exhibit 10.16.4 to our Annual Report on Form 10-K for the annual period ended December 31, 2007). | |
|
(10.15.5)
|
Participation Agreement (TRL III 2003-1C) dated as of November 12, 2003 between TRL III-1C among Trinity Rail Leasing III L.P., lessee, et. al. (incorporated by reference to Exhibit 10.16.5 to our Annual Report on Form 10-K for the annual period ended December 31, 2007). | |
|
(10.16)
|
Equipment Lease Agreement (TRL IV 2004-1A) between TRL IV 2004-1A Statutory Trust, lessor, and Trinity Rail Leasing IV L.P., lessee (incorporated by reference to Exhibit 10.17 to our Annual Report on Form 10-K for the annual period ended December 31, 2007). | |
|
(10.16.1)
|
Participation Agreement (TRL IV 2004-1A) among Trinity Rail Leasing IV, L.P., lessee, et. al (incorporated by reference to Exhibit 10.17.1 to our Annual Report on Form 10-K for the annual period ended December 31, 2007). | |
|
(10.17)
|
Second Amended and Restated Credit Agreement dated as of April 20, 2005 among Trinity Industries, Inc, as Borrower, JP Morgan Chase Bank, N.A., individually and as Issuing Bank and Administrative Agent, The Royal Bank of Scotland plc, Wachovia Bank, N.A., and Bank of America, N.A., each individually and as Syndication Agents, Dresdner Bank AG, Individually and as Documentation Agent, and certain other Lenders party thereto from time to time (filed herewith). | |
|
(10.17.1)
|
First Amendment to the Second Amended and Restated Credit Agreement dated June 9, 2006, amending the Second Amended and Restated Credit Agreement dated April 20, 2005 (incorporated by reference to Exhibit 10.18.2 to our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2006). |
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Table of Contents
| NO. | DESCRIPTION | |
|
(10.17.2)
|
Second Amendment to the Second Amended and Restated Credit Agreement dated June 21, 2006, amending the Second Amended and Restated Credit Agreement dated April 20, 2005 (incorporated by reference to Exhibit 10.18.3 to our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2006). | |
|
(10.17.3)
|
Third Amendment to the Second Amended and Restated Credit Agreement dated June 22, 2007, amending the Second Amended and Restated Credit Agreement dated April 20, 2005 (incorporated by reference to Exhibit 10.18.4 to our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2007). | |
|
(10.17.4)
|
Fourth Amendment to the Second Amended and Restated Credit Agreement dated October 19, 2007, amending the Second Amended and Restated Credit Agreement dated April 20, 2005 (incorporated by reference to Exhibit 10.18.5 to our Form 8-K filed on October 19, 2007). | |
|
(10.17.5)
|
Fifth Amendment to the Second Amended and Restated Credit Agreement dated February 9, 2009, amending the Second Amended and Restated Credit Agreement dated April 20, 2005 (incorporated by reference to Exhibit 10.18.6 to our Annual Report on Form 10-K for the annual period ended December 31, 2008). | |
|
(10.17.6)
|
Sixth Amendment to the Second Amended and Restated Credit Agreement dated March 31, 2009, amending the Second Amended and Restated Credit Agreement dated April 20, 2005 (incorporated by reference to Exhibit 10.18.7 to our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2009). | |
|
(10.17.7)
|
Seventh Amendment to the Second Amended and Restated Credit Agreement dated September 7, 2010, amending the Second Amended and Restated Credit Agreement dated April 20, 2005 (incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2010). | |
|
(10.18)
|
Second Amended and Restated Warehouse Loan Agreement dated as of May 29, 2009 among Trinity Industries Leasing Company, Trinity Rail Leasing Warehouse Trust (formerly known as Trinity Rail Leasing Trust II), The Committed Lenders and the Conduit Lenders from time to time party hereto, Credit Suisse, New York Branch, as Agent, and Wilmington Trust Company, as Collateral Agent and Depositary (incorporated by reference to Exhibit 10.19 to our Form 8-K filed on June 2, 2009). | |
|
(10.18.1)
|
Amendment No. 1 to the Second Amended and Restated Warehouse Loan Agreement, dated February 4, 2011, amending the Second Amended and Restated of Warehouse Loan Agreement dated May 29, 2009 (incorporated by reference to Exhibit 10.1 to our Form 8-K filed on February 8, 2011). | |
|
(10.19)
|
Term Loan Agreement dated as of May 9, 2008 among Trinity Rail Leasing VI LLC, the Committed Lenders and the Conduit Lenders From Time to Time Party Hereto, DVB Bank AG, as Agent, and Wilmington Trust Company; as Collateral and Depositary (incorporated by reference to Exhibit 10.20 to our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2008). | |
|
(10.19.1)
|
Purchase and Sale Agreement (TILC) dated as of May 9, 2008 among Trinity Industries Leasing Company, as Seller and Trinity Rail Leasing VI LLC, as Buyer (incorporated by reference to Exhibit 10.20.1 to our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2008). | |
|
(10.19.2)
|
Purchase and Sale Agreement (TRLT-II) dated as of May 9, 2008 among Trinity Rail Leasing Trust II, as Seller, Trinity Rail Leasing VI LLC, as Buyer and Trinity Industries Leasing Company (incorporated by reference to Exhibit 10.20.2 to our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2008). | |
|
(10.20)
|
Master Indenture dated November 5, 2009, between Trinity Rail Leasing VII LLC and Wilmington Trust Company, as indenture trustee (incorporated by reference to Exhibit 10.20 to our Annual Report on Form 10-K for the annual period ended December 31, 2009). | |
|
(10.20.1)
|
Purchase and Contribution Agreement, dated November 5, 2009, among Trinity Industries Leasing Company, Trinity Rail Leasing Warehouse Trust, and Trinity Rail Leasing VII L.L.C. (incorporated by reference to Exhibit 10.20.1 to our Annual Report on Form 10-K for the annual period ended December 31, 2009). | |
|
(10.21)
|
Perquisite Plan beginning January 1, 2004 in which the Company’s Executive Officers participate (filed herewith).* |
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Table of Contents
| NO. | DESCRIPTION | |
|
(10.22)
|
Purchase and Contribution Agreement, dated May 18, 2006, among Trinity Industries Leasing Company, Trinity Leasing Trust II, and Trinity Rail Leasing V L.P. (incorporated by reference to Exhibit 10.26 to our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2006). | |
|
(10.22.1)
|
Master Indenture dated May 18, 2006, between Trinity Rail Leasing V L.P. and Wilmington Trust Company, as indenture trustee (incorporated by reference to Exhibit 10.26.1 to our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2006). | |
|
(10.23)
|
Board Compensation Summary Sheet (incorporated by reference to Exhibit 10.27 to our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2008).* | |
|
(10.24)
|
Retirement Transition Agreement between Trinity North American Freight Car, Inc. and Martin Graham (incorporated by reference to Exhibit 10.28 to our Annual Report on Form 10-K for the annual period ended December 31, 2007).* | |
|
(10.25)
|
Retirement Transition Agreement between Trinity Industries, Inc. and Mark W. Stiles (incorporated by reference to Exhibit 10.1 to our Form 8-K filed July 30, 2010).* | |
|
(10.26)
|
Indenture dated as of October 25, 2010, between Trinity Rail Leasing 2010 LLC and Wilmington Trust Company, as indenture trustee (incorporated by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2010). | |
|
(10.26.1)
|
Purchase and Contribution Agreement, dated as of October 25, 2010, among Trinity Rail Leasing Warehouse Trust, Trinity Industries Leasing Company, and Trinity Rail Leasing 2010 LLC (incorporated by reference to Exhibit 10.3 to our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2010). | |
|
(10.26.2)
|
Note Purchase Agreement dated October 18, 2010 among Trinity Industries, Inc., Trinity Industries Leasing Company, Trinity Rail Leasing 2010 LLC, Credit Suisse Securities (USA) LLC, Lloyds TSB Bank PLC, Credit Agricole Securities (USA) Inc., Wells Fargo Securities, LLC, and Rabo Securities USA, Inc. (incorporated by reference to Exhibit 10.4 to our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2010). | |
|
(12)
|
Computation of Ratio of Earnings to Fixed Charges (filed herewith). | |
|
(21)
|
Listing of subsidiaries of Trinity Industries, Inc. (filed herewith). | |
|
(23)
|
Consent of Ernst & Young LLP (contained on page 85 of this document and filed herewith). | |
|
(31.1)
|
Rule 13a-15(e) and 15d-15(e) Certification of the Chief Executive Officer (filed herewith). | |
|
(31.2)
|
Rule 13a-15(e) and 15d-15(e) Certification of the Chief Financial Officer (filed herewith). | |
|
(32.1)
|
Certification pursuant to 18U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith). | |
|
(32.2)
|
Certification pursuant to 18U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith). | |
|
101.INS
|
XBRL Instance Document (filed electronically herewith)** | |
|
101.SCH
|
XBRL Taxonomy Extension Schema Document (filed electronically herewith)** | |
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document (filed electronically herewith)** | |
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document (filed electronically herewith)** | |
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document (filed electronically herewith)** | |
|
101.DEF
|
XBRL Taxonomy Extenson Definition Linkbase Document (filed electronically herewith)** | |
|
*
|
Management contracts and compensatory plan arrangements. | |
|
**
|
Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability. |
92
TABLE OF CONTENTS
Part IprintItem 1. BusinessprintItem 1A. Risk FactorsprintItem 1B. Unresolved Staff CommentsprintItem 2. PropertiesprintItem 3. Legal ProceedingsprintPart IIprintItem 5. Market For Registrant S Common Equity, Related Stockholder Matters and Issuer Purchases Of Equity SecuritiesprintItem 6. Selected Financial DataprintItem 7. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsprintItem 7A. Quantitative and Qualitative Disclosures About Market RiskprintItem 8. Financial Statements and Supplementary DataprintNote 1. Summary Of Significant Accounting PoliciesprintNote 2. Acquisitions and DivestituresprintNote 3. Fair Value AccountingprintNote 4. Segment InformationprintNote 5. Railcar Leasing and Management Services GroupprintNote 6. Investment in Trip HoldingsprintNote 7. Derivative InstrumentsprintNote 8. Property, Plant, and EquipmentprintNote 9. GoodwillprintNote 10. WarrantiesprintNote 11. DebtprintNote 12. Other, NetprintNote 13. Income TaxesprintNote 14. Employee Retirement PlansprintNote 15. Accumulated Other Comprehensive LossprintNote 16. Stock-based CompensationprintNote 17. Earnings Per Common ShareprintNote 18. Commitments and ContingenciesprintNote 19. Selected Quarterly Financial Data (unaudited)printItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureprintItem 9A. Controls and ProceduresprintItem 9B. Other InformationprintPart IIIprintItem 10. Directors, Executive Officers and Corporate GovernanceprintItem 11. Executive CompensationprintItem 12. Security Ownership Of Certain Beneficial Owners and Management and Related Stockholder MattersprintItem 13. Certain Relationships and Related Transactions, and Director IndependenceprintItem 14. Principal Accountant Fees and ServicesprintPart IVprintItem 15. Exhibits and Financial Statement Schedulesprint