-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PwZH5hqBNxtrlTGHu4pxq3OWucgVj4FrNawKgViutFSwI4q3lIyC+nZMWQp02/ku yJyN+A2rV+x48piC7pKFjA== 0000950134-98-005493.txt : 19980626 0000950134-98-005493.hdr.sgml : 19980626 ACCESSION NUMBER: 0000950134-98-005493 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980625 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRINITY INDUSTRIES INC CENTRAL INDEX KEY: 0000099780 STANDARD INDUSTRIAL CLASSIFICATION: RAILROAD EQUIPMENT [3743] IRS NUMBER: 750225040 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-06903 FILM NUMBER: 98653967 BUSINESS ADDRESS: STREET 1: 2525 STEMMONS FREEWAY CITY: DALLAS STATE: TX ZIP: 75207-2401 BUSINESS PHONE: 2146314420 FORMER COMPANY: FORMER CONFORMED NAME: TRINITY STEEL CO INC DATE OF NAME CHANGE: 19720407 10-K405 1 FORM 10-K FOR YEAR ENDED MARCH 31, 1998 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------ FORM 10-K ------------ (Mark One) [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 31, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER 1-6903 TRINITY INDUSTRIES, INC. ( Exact name of registrant as specified in its charter) DELAWARE 75-0225040 (State of Incorporation) (I.R.S. Employer Identification No.) 2525 STEMMONS FREEWAY DALLAS, TEXAS 75207-2401 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (214) 631-4420 Securities Registered Pursuant to Section 12(b) of the Act Name of each exchange Title of each class on which registered ------------------- ---------------------- COMMON STOCK, $1.00 PAR VALUE NEW YORK STOCK EXCHANGE Securities Registered Pursuant to Section 12(g) of the Act: NONE -------------- INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. Yes X No ----- ----- INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE BEST OF REGISTRANTS KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS FORM 10-K . [ X ] The aggregate market value of voting stock held by nonaffiliates of the Registrant is $2,030,157,432 as of May 29, 1998. 43,350,782 ( Number of Shares of common stock outstanding as of May 29, 1998) ================================================================================ (Continued on reverse side) 2 (Continued from cover page) DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's 1998 Annual Report to Stockholders for the fiscal year ended March 31, 1998 are incorporated by reference into Parts I and II hereof and portions of the Registrant's definitive Proxy Statement for the 1998 Annual Meeting of Stockholders to be held July 17, 1998 are incorporated by reference into Part III hereof. 3 PART I ITEM 1. BUSINESS GENERAL DEVELOPMENT OF BUSINESS. Trinity Industries, Inc. (the "Registrant" or "Trinity") was originally incorporated under the laws of the State of Texas in 1933. On March 27, 1987, Trinity became a Delaware corporation by merger into a wholly-owned subsidiary of the same name. NARRATIVE DESCRIPTION OF BUSINESS AND FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS. The Registrant is engaged in the manufacture, marketing, and leasing of a wide variety of products consisting principally of (i) "Transportation Products" such as railcars, principally tank cars, hopper cars, box cars, gondola cars, intermodal cars and miscellaneous other freight cars, barges for inland waterway service, and leasing of Registrant manufactured railcars to various industries; (ii) "Construction Products" such as highway guardrail and safety products, ready-mix concrete and aggregates including distribution and providing raw materials to owners, contractors and sub-contractors for use in the building and foundation industry, passenger loading bridges and conveyor systems for airports and other people and baggage conveyance requirements, and beams, girders, and columns used in construction of highway and railway bridges; (iii) "Industrial Products" such as extremely large, heavy pressure vessels and other heavy welded products including industrial silencers, desalinators, evaporators, and gas processing systems, pressure and non-pressure containers for the storage and transportation of liquefied gases, brewery products and other liquid and dry products, heat transfer equipment for the chemical, petroleum and petrochemical industries, weld fittings (tees, elbows, reducers, caps, flanges, etc.) used in pressure piping systems, and container heads (the ends of pressure and non-pressure containers) for use internally and by other manufacturers of containers. Various financial information concerning the Registrant's industry segments for each of the last three fiscal years is included in the Registrant's 1998 Annual Report to Stockholders beginning on page 31 under the heading "Segment Information", and such section is incorporated herein by reference. TRANSPORTATION PRODUCTS. The Registrant manufactures railroad freight cars, principally pressure and non-pressure tank cars, hopper cars, box cars, intermodal cars and gondola cars used for transporting a wide variety of liquids, gases and dry cargo. Tank cars transport products such as liquefied petroleum gas, liquid fertilizer, sulfur, sulfuric acids and corn syrup. Covered hopper cars carry cargo such as grain, dry fertilizer, plastic pellets and cement. Open-top hoppers haul coal, and top-loading gondola cars transport a variety of heavy bulk commodities such as scrap metals, finished flat steel products, machinery and lumber. Intermodal cars transport various products which have been loaded in containers to minimize shipping costs. The Registrant produces river hopper barges which are used to carry coal, grain and miscellaneous commodities for various barge transport companies and tank barges which are used to transport liquid products. The Registrant has one wholly-owned leasing subsidiary, Trinity Industries Leasing Company ("TILC"), which was incorporated in 1979. TILC is engaged in leasing specialized types of railcars to industrial companies in the petroleum, chemical, grain, food processing, fertilizer and other industries which supply cars to the railroads. At March 31, 1998, TILC had 10,598 railcars under lease and/or management agreement. 1 4 Substantially all equipment leased by TILC was purchased from the Registrant at prices comparable to the prices for equipment sold by the Registrant to third parties. As of March 31, 1998, TILC had equipment on lease or available for lease purchased from the Registrant at a cost of $450.3 million. Generally, TILC purchases the equipment to be leased only after a lessee has committed to lease such equipment. The volume of equipment purchased and leased by TILC depends upon a number of factors, including the demand for equipment manufactured by the Registrant, the cost and availability of funds to finance the purchase of equipment, the Registrant's decision to solicit orders for the purchase or lease of equipment and factors which may affect the decision of the Registrant's customers as to whether to purchase or lease equipment. Although the Registrant is not contractually obligated to offer to TILC equipment proposed to be leased by the Registrant's customers, it is the Registrant's intention to effect all such leasing transactions through TILC. Similarly, while TILC is not contractually obligated to purchase from the Registrant any equipment proposed to be leased, TILC intends to purchase and lease all equipment which the Registrant's customers desire to lease when the lease rentals and other terms of the proposed lease are satisfactory to TILC, subject to the availability and cost of funds to finance the acquisition of the equipment. CONSTRUCTION PRODUCTS. The construction products manufactured by the Registrant include highway guardrail and highway safety devices and related barrier products, ready-mix concrete and aggregates, passenger loading bridges, baggage handling systems, and beams, girders, and columns. These products are used in the highway construction, building and bridge industries and airports. Generally, customers for highway guardrail and highway safety devices are highway departments or subcontractors on highway projects. Ready-mix concrete and aggregates are used in the building and foundation industry, and customers include primarily owners, contractors and sub-contractors. Passenger loading bridges and conveyor systems are generally sold to contractors, airports, or airlines as part of airport terminal equipment. Some of the sales of beams, girders and columns are to general contractors and subcontractors on highway construction projects. INDUSTRIAL PRODUCTS. The Registrant is engaged in manufacturing metal containers consisting of extremely large, heavy pressure vessels and other heavy welded products, including industrial silencers, desalinators, evaporators, and gas processing systems for the storage and transportation of liquefied petroleum ("LP") gas and anhydrous ammonia fertilizer. Pressure LP gas containers are utilized at industrial plants, utilities, small businesses and in suburban and rural areas for residential heating and cooking needs. Fertilizer containers are manufactured for highway and rail transport, bulk storage, farm storage and the application and distribution of anhydrous ammonia. The Registrant also makes heat transfer equipment for the chemical, petroleum and petrochemical industries and a complete line of custom vessels, standard steam jacketed kettles, mix cookers, and custom-fabricated cooking vessels for the food, meat, dairy, pharmaceutical, cosmetic and chemical industries. The Registrant also manufactures butt weld type fittings, flanges and pressure and non-pressure container heads that are made from ferrous and non-ferrous metals and their alloys. The weld fittings include caps, elbows, return bends, concentric and eccentric reducers, full and reducing outlet tees, and a full line of pipe flanges, all of which are pressure rated. The Registrant manufactures and stocks, in standard, extra-heavy and double-extra-heavy weights and in various diameters, weld caps, tees, reducers, elbows, return bends, flanges and also manufactures to customer specifications. The basic raw materials for weld fittings and flanges are carbon steel, stainless steel, aluminum, chrome-moly and other metal tubing or seamless pipe and forgings. The 2 5 Registrant sells its weld fittings and flanges to distributors and to other manufacturers of weld fittings. Container heads manufactured by the Registrant are pressed metal components used in the further manufacture of a finished product. Many other manufacturers order container heads from the Registrant. Container heads are manufactured in various shapes and may be pressure rated or non-pressure, depending on the intended use in further manufacture. Other pressed shapes are also hot- or cold-formed to customer requirements. MARKETING, RAW MATERIALS, EMPLOYEES AND COMPETITION. As of March 31, 1998, the Registrant operated in the continental United States, Mexico, and Brazil. The Registrant sells substantially all of its products through its own salesmen operating from offices in Montgomery, Alabama; Napa, California; Denver, Colorado; Parrish, Florida; Chicago, Illinois; Elizabethtown and Paducah, Kentucky; Shreveport, Louisiana; Flint, Michigan; St. Louis, Missouri; Asheville, North Carolina; Cincinnati and Girard, Ohio; Beaumont, Dallas/Ft. Worth, Houston and Navasota, Texas; Centerville, Utah; Olympia, Washington; Milwaukee, Wisconsin; and Mexico. Independent sales representatives are also used to a limited extent. The Registrant primarily markets its transportation and industrial products throughout the United States. Except in the case of weld fittings, guardrail, and standard size LP gas containers, the Registrant's products are ordinarily fabricated to the customer's specifications pursuant to a purchase order. The principal materials used by the Registrant are steel plate, structural steel shapes, steel forgings, and aggregate material for ready-mix concrete. There are numerous domestic and foreign sources of such steel and most other materials used by the Registrant. The Registrant currently has approximately 17,000 employees, of which approximately 13,700 are production employees and 3,300 are administrative, sales, supervisory and office employees. There are numerous companies located throughout the United States and world-wide that are engaged in the business of manufacturing various transportation and industrial products of the types manufactured by the Registrant, and these industries are highly competitive. A number of well-established companies actively compete with TILC in the business of owning and leasing railcars, as well as banks, investment partnerships and other financial and commercial institutions. Companies manufacturing products which compete with the Registrant's construction products consist of numerous other structural fabricators and ready-mix concrete and aggregate producers. RECENT DEVELOPMENTS. Information concerning the Registrant's business acquisitions are included in the Registrant's 1998 Annual Report to Stockholders under the heading "Business Acquisitions and Divestitures," (page 33) and such section is incorporated herein by reference. ENVIRONMENTAL MATTERS. The Registrant's subsidiaries are subject to comprehensive and frequently changing federal, state and local environmental laws and regulations, including those governing emissions of air pollutants, discharges of wastewater and storm waters, and the disposal of non-hazardous and hazardous waste. The Registrant anticipates that it may incur additional costs in the future to comply with currently existing laws and regulations, new regulatory requirements arising from recently enacted statutes, particularly those relating to the Clean Air Act Amendments of 1990, and any new statutory requirements. 3 6 OTHER MATTERS. To date, the Registrant has not suffered any material shortages with respect to obtaining sufficient energy supplies to operate its various plant facilities or its transportation vehicles. Future limitations on the availability or consumption of petroleum products (particularly natural gas for plant operations and diesel fuel for vehicles) could have an adverse effect upon the Registrant's ability to conduct its business. The likelihood of such an occurrence or its duration, and its ultimate effect on the Registrant's operations, cannot be reasonably predicted at this time. ITEM 2. PROPERTIES. The Registrant's principal executive offices are located in a ten story office building containing approximately 107,000 sq. ft. and a connected adjacent building containing approximately 66,000 sq. ft., each owned by the Registrant, in Dallas, Texas. The following table sets forth certain salient facts with respect to each of the operating plant properties owned and/or leased by the Registrant at March 31, 1998:
Registrant's Uses of Approx. Interest in Premises Bldg. Area Expiration Annual Plant Location Property (1) (Sq Ft.) Date Rentals - ------------------ ------------ -------- ---------- ---------- -------- Ackerman, MS Fee (c) 92,000 -- -- Alliance, NE Fee (a) 44,000 -- -- Americana, Brazil Fee (c) 29,000 -- -- Ashland City, TN Fee (a) 92,000 -- -- Asheville, NC Lease (a) 94,000 06/30/99 $198,000 Beaumont, TX Fee (a) 280,000 -- -- Belpre, OH Fee (b) 42,000 -- -- Bessemer, AL Fee (a) 171,000 -- -- Birmingham, AL Lease (b) 10,000 04/30/98 $ 14,000 Brusly, LA Fee (a) 148,000 -- -- Butler, PA Fee (a) 386,000 -- -- Butler, PA Lease (a) 30,000 12/31/02 $ 67,000 Caruthersville, MO Fee (a) 266,000 -- -- Caruthersville, MO Lease (a) 45,000 03/01/99 $ 72,000 Cedartown, GA Fee (c) 143,000 -- -- Centerville, UT Fee (b) 63,000 -- -- Cincinnati, OH (2 plants) Fee (c) 203,000 -- -- Cynthiana, KY Lease (c) 317,000 04/30/01 $ 2,000 Dallas, TX (2 plants) Fee (a) 447,000 -- -- Denton, TX Fee (a) 117,000 -- -- Douglas, WY Lease (a) 34,000 09/30/04 $ 15,000 Elizabethtown, KY Fee (b) 40,000 -- -- Elkhart, IN Fee (c) 108,000 -- -- Enid, OK Fee (c) 73,000 -- -- Findlay, OH Fee (a) 74,000 -- -- Ft. Worth, TX (6 plants) Fee (a,b) 703,000 -- -- Girard, OH (2 plants) Fee (b) 326,000 -- -- Greenville, PA Fee (a) 752,000 -- --
4 7
Registrant's Uses of Approx. Interest in Premises Bldg. Area Expiration Annual Plant Location Property (1) (Sq Ft.) Date Rentals - ------------------ ------------ -------- ---------- ---------- -------- Hamburg, NY Fee (b) 188,000 Houston, TX (2 plants) Fee (b,c) 563,000 -- -- Huehuetoca, MX Fee (a,c) 281,000 -- -- Johnstown, PA Fee (a) 148,000 -- -- Lima, OH Fee (b) 72,000 -- -- Longview, TX (4 plants) Fee (a) 675,000 -- -- Longview, TX Lease (a) 57,000 10/31/00 $ 40,000 Madisonville, LA Fee (a) 137,000 -- -- McKees Rocks, PA Fee (a) 462,000 -- -- Miles City, MT Fee (a) 72,000 -- -- Monclova, MX Fee (a,c) 207,000 -- -- Montgomery, AL Fee (a,b) 310,000 -- -- Mt. Orab, OH Fee (a) 183,000 -- -- Navasota, TX Fee (c) 170,000 -- -- New Castle, DE Lease (a) 12,000 06/30/00 $120,000 Nova Odesa, Brazil Fee (c) 21,000 -- -- Oklahoma City, OK Fee (a) 260,000 -- -- Orange, TX (2) Fee (a) 735,000 -- -- Paducah, KY Fee (a) 49,000 -- -- Paris, TN Fee (a) 29,000 -- -- Quincy, IL Fee (c) 95,000 -- -- Rock Springs, WY Fee (a) 20,000 -- -- Rocky Mount, NC Fee (c) 53,000 -- -- Russelville, AR Fee (c) 350,000 -- -- Saginaw, TX (3 plants) Fee (a) 374,000 -- -- San Antonio, TX Fee (b) 224,000 -- -- Sand Springs, OK Fee (c) 184,000 -- -- Shreveport, LA Lease (a,c) 691,000 11/30/42 $ 12,000 Sioux City, IA Lease (a) 45,000 05/31/98 $ 97,000 Springfield, MO Lease (a) 171,000 12/31/08 $ 36,000 Sunbright, TN Fee (b) 74,000 -- -- Tulsa, OK Fee (a) 121,000 -- -- Vallejo, MX Fee (c) 54,000 -- -- Vidor, TX Fee (a) 126,000 -- -- Waycross, GA Fee (a) 5,000 -- -- West Memphis, AR Fee (c) 77,000 -- --
(1) (a) Manufacture or repair of Transportation Products (b) Manufacture of Construction Products (c) Manufacture of Industrial Products (2) Orange facility was sold in May 1998. All machinery and equipment and the buildings occupied by the Registrant are maintained in good condition. The Registrant estimates that its plant facilities were utilized during the fiscal year 5 8 at an average of approximately 80 percent of present productive capacity for Transportation Products, 85 percent for Construction Products, and 75 percent for Industrial Products. ITEM 3. LEGAL PROCEEDINGS. In September 1997, the Registrant settled a 13 year old lawsuit brought against a former subsidiary of the Registrant by Morse/Diesel, Inc. The settlement resulted in an after-tax charge of $43.8 million being recorded in the second quarter of fiscal year 1998. The Registrant has not participated in the business associated with this matter since 1989. In April 1998, the Registrant settled a 5 year old patent infringement lawsuit brought against the Registrant by Johnstown American Corp. for approximately $10.5 million, net of tax. In March 1998, the U.S. Department of Justice (the "Department") filed a two count felony information against Syro, Inc., a wholly owned subsidiary of the Registrant, in the United States District Court for the District of Utah alleging that Syro, Inc. discharged waste waters from its Centerville, Utah facility in violation of the Clean Water Act. To resolve this issue, Syro, Inc. is in the process of negotiating a Plea Agreement with the Department and a Settlement Agreement and Compliance Order with the U.S. Environmental Protection Agency Suspension and Debarment Division. Negotiations with these parties to the date of this filing indicate that a resolution of this issue would involve a plea of guilty to a two count felony under the Clean Water Act and the payment of $750,000 in fines and $250,000 in contributions to local environmental groups. The Registrant is involved in various other claims and lawsuits incidental to its business. In the opinion of management, these claims and suits in the aggregate will not have a material adverse effect on the Registrant's consolidated financial statements. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There were no matters submitted to a vote of security holders during the fourth quarter of fiscal year 1998. 6 9 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS. Market for the Registrant's common stock and related stockholder matters are incorporated herein by reference from the information contained on page 1 under the caption "Company Profile" and on page 40 under the caption "Stockholder Information" of the Registrant's 1998 Annual Report to Stockholders. ITEM 6. SELECTED FINANCIAL DATA. Selected financial data is incorporated herein by reference from the information contained on page 22 under the caption "Financial Summary" of the Registrant's 1998 Annual Report to Stockholders. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Management's discussion and analysis of financial condition and results of operations are incorporated herein by reference from the Registrant's 1998 Annual Report to Stockholders, pages 23 through 26. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. Financial statements of the Registrant at March 31, 1998 and 1997 and for each of the three years in the period ended March 31, 1998 and the auditor's report thereon, and the Registrant's unaudited quarterly financial data for the two year period ended March 31, 1998, are incorporated herein by reference from the Registrant's 1998 Annual Report to Stockholders, pages 27 through 40. ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. No disclosure required. 7 10 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. DIRECTORS OF THE REGISTRANT. Information concerning the directors of the Registrant is incorporated herein by reference from the Registrant's definitive proxy statement for the Annual Meeting of Stockholders on July 17, 1998, page 4, under the caption "Election of Directors". EXECUTIVE OFFICERS OF THE REGISTRANT.* The following table sets forth the names and ages of all executive officers of the Registrant, the nature of any family relationship between them, all positions and offices with the Registrant presently held by them, the year each person first became an officer and the term of each person's office:
Officer Term Name(1)(2) Age Office Since Expires - ---- --- ------------------------ -------- --------- W. Ray Wallace 75 Chairman & Chief 1958 July 1998 Executive Officer Timothy R. Wallace 44 Director, President & Chief Operating Officer 1993 July 1998 Jim S. Ivy 54 Vice President & Chief Financial Officer 1998 July 1998 Ralph A. Banks, Jr. 74 Senior Vice President 1962 July 1998 Richard G. Brown 74 Senior Vice President 1979 July 1998 Mark W. Stiles 49 Group Vice President 1993 July 1998 Jack L. Cunningham, Jr. 53 Vice President 1982 July 1998 John M. Lee 37 Vice President 1994 July 1998 R. A. Martin 63 Vice President 1974 July 1998 F. Dean Phelps, Jr. 54 Vice President 1979 July 1998 Joseph F. Piriano 61 Vice President 1992 July 1998 Linda S. Sickels 47 Vice President 1995 July 1998 Michael G. Fortado 54 Vice President, Secretary & General Counsel 1997 July 1998 Neil O. Shoop 54 Treasurer 1985 July 1998 William J. Goodwin 50 Controller 1986 July 1998
* This data is furnished as additional information pursuant to instructions to Item 401 to Regulation S-K and in lieu of inclusion in the Registrant's Proxy Statement. (1) W. Ray Wallace, Chairman & Chief Executive Officer, is the father of Timothy R. Wallace, Director, President and Chief Operating Officer. (2) Mr. Ivy joined the Registrant in 1998. Prior to this year, Mr. Ivy was a senior audit partner for a national public accounting firm. Mr. Lee joined the Registrant in 1994. For at least five years prior thereto, Mr. Lee was a manager for a national public accounting firm. Mr. Fortado joined the registrant in 1997. Prior to that, Mr. Fortado served one year as senior vice president, general counsel and corporate secretary for an oil and gas exploration company and prior to that as vice president, corporate secretary, and assistant general counsel for an integrated energy company. All of the other above-mentioned executive officers have been in the full-time employ of the Registrant 8 11 or its subsidiaries for more than five years. Although the titles of certain such officers have changed during the past five years, all have performed essentially the same duties during such period of time. ITEM 11. EXECUTIVE COMPENSATION. Information on executive compensation is incorporated herein by reference from the Registrant's definitive proxy statement for the Annual Meeting of Stockholders on July 17, 1998, beginning on page 8 under the caption "Executive Compensation and Other Matters". ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. Information concerning security ownership of certain beneficial owners and management is incorporated herein by reference from the Registrant's definitive proxy statement for the Annual Meeting of Stockholders on July 17, 1998, page 2, under the caption "Voting Securities and Stockholders". ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Information concerning certain relationships and related transactions is incorporated herein by reference from the Registrant's definitive proxy statement for the Annual Meeting of Stockholders on July 17, 1998, pages 4 and 5, under the caption "Election of Directors". PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a) 1&2. Financial statements and financial statement schedules. The financial statements and schedules listed in the accompanying indices to financial statements and financial statement schedules are filed as part of this Annual Report Form 10-K. 3. Exhibits. The exhibits listed on the accompanying index to exhibits are filed as part of this Annual Report Form 10-K. (b) Reports on Form 8-K No Form 8-K was filed during the fourth quarter of fiscal 1998. 9 12 Trinity Industries, Inc. Index to Financial Statements and Financial Statement Schedules (Item 14 (a))
REFERENCE ----------------------- 1998 Annual Form Report to 10-K Stockholders (Page) (Page) -------- ------------ Consolidated balance sheet at March 31, 1998 and 1997 ........................................ -- 28 For each of the three years in the period ended March 31, 1998: Consolidated income statement ................................ -- 27 Consolidated statement of cash flows ......................... -- 29 Consolidated statement of stockholders' equity ....................................... -- 30 Notes to consolidated financial statements ................................................. -- 30 Supplemental information: Supplementary unaudited quarterly data ........................ -- 40 Consolidated financial statement schedule for each of the three years in the period ended March 31, 1998: II - Allowance for doubtful accounts ...................... 12 -- Other financial information: Weighted average interest rate on short-term borrowings ....... 12 --
All other schedules have been omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedules, or because the information required is included in the consolidated financial statements, including the notes thereto. The consolidated financial statements and supplementary information listed in the above index which are included in the 1998 Annual Report to Stockholders have been incorporated by reference. 10 13 SCHEDULE II Trinity Industries, Inc. Allowance for Doubtful Accounts Year Ended March 31, 1998, 1997 and 1996 (in millions)
Additions Balance at charged to Accounts Balance beginning costs and charged at end of year expenses off of year ---------- ---------- ---------- ---------- Year Ended March 31, 1998 $ 1.0 $ 0.9 $ 0.2 $ 1.7 ========== ========== ========== ========== Year Ended March 31, 1997 $ 1.1 $ 1.4 $ 1.5 $ 1.0 ========== ========== ========== ========== Year Ended March 31, 1996 $ 0.8 $ 0.8 $ 0.5 $ 1.1 ========== ========== ========== ==========
Trinity Industries, Inc. Other Financial Information Short-Term Borrowings The weighted average interest rate on short-term borrowings outstanding as of March 31, 1998, 1997, and 1996 is 6.12%, 6.88%, and 6.04%, respectively. 11 14 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized. Trinity Industries, Inc. By /s/ Michael G. Fortado - ------------------------ ----------------------------------- Registrant Michael G. Fortado Vice President, Secretary/General Counsel June 25, 1998 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons of the Registrant and in the capacities and on the dates indicated: Directors: Directors (continued) /s/ John L. Adams /s/ Diana Natalicio - ------------------------ ------------------------------------- John L. Adams Diana Natalicio Director Director June 25, 1998 June 25, 1998 /s/ David W. Biegler /s/ Timothy R. Wallace - ------------------------ ------------------------------------- David W. Biegler Timothy R. Wallace Director Director June 25, 1998 June 25, 1998 - ------------------------ Barry J. Galt Director Principal Executive Officer: June 25, 1998 /s/ W. Ray Wallace ------------------------------------- /s/ Clifford J. Grum W. Ray Wallace - ------------------------ Chairman Clifford J. Grum June 25, 1998 Director June 25, 1998 /s/ Dean P. Guerin Principal Financial Officer: - ------------------------ Dean P. Guerin Director /s/ Jim S. Ivy June 25, 1998 ------------------------------------- Jim S. Ivy Vice President June 25, 1998 - ------------------------ Jess T. Hay Director June 25, 1998 Principal Accounting Officer: /s/ Edmund M. Hoffman /s/ John M. Lee - ------------------------ ------------------------------------- Edmund M. Hoffman John M. Lee Director Vice President June 25, 1998 June 25, 1998 12 15 Trinity Industries, Inc. Index to Exhibits (Item 14(a))
NO. DESCRIPTION PAGE - ----- ---------------------------------------------------------------------------- ---- (3.1) Certificate of Incorporation of Registrant (incorporated by reference to Exhibit 3.A to Registration Statement No. 33-10937 filed April 8, 1987). * (3.2) By-Laws of Registrant (incorporated by reference to Exhibit 3.2 to Form 10-K filed June 16, 1992). * (4.1) Specimen Common Stock Certificate of Registrant (incorporated by reference to Exhibit 3B to Registration Statement No. 33-10937 filed April 8, 1987). * (10.1) Fixed Charges Coverage Agreement dated as of January 15, 1980, between Registrant and Trinity Industries Leasing Company (incorporated by reference to Exhibit 10.1 to Registration Statement No. 2-70378 filed January 29, 1981). * (10.2) Tax Allocation Agreement dated as of January 22, 1980 between Registrant and its subsidiaries (including Trinity Industries Leasing Company) (incorporated by reference to Exhibit 10.2 to Registration Statement No. 2-70378 filed January 29, 1981). * (10.3) Form of Executive Severance Agreement entered into between the Registrant and all executive officers of the Registrant (incorporated by reference to Exhibit 10.3 to Form 10-K filed June 19, 1989). * (10.4) Trinity Industries, Inc., Stock Option Plan With Stock Appreciation Rights (incorporated by reference to Registration Statement No. 2-64813 filed July 5, 1979, as amended by Post-Effective Amendment No. 1 dated July 1, 1980, Post-Effective Amendment No.2 dated August 31, 1984, and Post-Effective Amendment No. 3 dated July 13, 1990). * (10.5) Directors' Retirement Plan adopted December 11, 1986 ( incorporated by reference to Exhibit 10.6 to Form 10-K filed June 14, 1990). * (10.6) 1989 Stock Option Plan with Stock Appreciation Rights (incorporated by reference to Registration Statement No. 33-35514 filed June 20, 1990) * (10.7) Supplemental Retirement Benefit Plan for W. Ray Wallace, effective July 18, 1990 (incorporated by reference to Exhibit 10.8 to Form 10-K filed June 13, 1991). * (10.8) 1993 Stock Option and Incentive Plan (incorporated by reference to Registration Statement No. 33-73026 filed December 15, 1993) *
16 Trinity Industries, Inc. Index to Exhibits -- (Continued) (Item 14(a))
NO. DESCRIPTION PAGE - ------ ---------------------------------------------------------------------- ----- (10.9) Pension Plan A for Salaried Employees of Trinity Industries, Inc. and Certain Affiliates dated August 20, 1985, as amended by Amendment No. 1 dated May 27, 1986, Amendment No. 2 dated December 30, 1986, Amendment No. 3 dated December 12, 1986, Amendment No. 4 dated March 31, 1987, Amendment No. 5 dated March 31, 1987, Amendment No. 6 dated December 4, 1987, Amendment No. 7 dated July 26, 1988, Amendment No. 8 dated July 28, 1988, Amendment No. 9 dated March 15, 1989, Amendment No. 10 dated March 31, 1989, and Amendment No. 11 dated July 14, 1989 (incorporated by reference to Exhibit 10.9 to Form 10-K filed June 13, 1991). * (10.10) Supplemental Profit Sharing Plan for Employees of Trinity Industries Inc. and Certain Affiliates dated June 30, 1990, as amended by Amendment No. 1 dated June 13, 1991. Supplemental Profit Sharing Trust for Employees of Trinity Industries, Inc. and Certain Affiliates dated June 30, 1990, as amended by Amendment No. 1 dated June 13, 1991 (incorporated by reference to Exhibit 10.10 to Form 10-K filed June 13, 1991). * (13) Annual Report to Stockholders. With the exception of the information incorporated by reference into Items 1, 3, 5, 6, 7 and 8 of Form 10-K, the 1998 Annual Report to Stockholders is not deemed a part of this report. (21) Listing of subsidiaries of the Registrant. 16 (23) Consent of Independent Auditors. 11 (27) Financial Data Schedules for the fiscal year ended March 31, 1998. (27.1) Restated Financial Data Schedules for fiscal years ended March 31, 1997 and 1996, and six months ended September 30, 1997, and three months ended June 30, 1997. (27.2) Restated Financial Data Schedules for fiscal year ended March 31, 1995, and nine months ended December 31, 1996, six months ended September 30, 1996, and three months ended June 30, 1996. (99.1) Annual Report on Form 11-K for employee stock purchase, savings and similar plans filed pursuant to Rule 15d-21.
* Incorporated herein by reference from previous filings with the Securities and Exchange Commission. EX-13 2 ANNUAL REPORT TO SHAREHOLDERS 1 [LOGO] TRINITY INDUSTRIES, INC. 1998 ANNUAL REPORT [PHOTOS] PUTTING IT ALL TOGETHER 2 TABLE OF CONTENTS 1 Company Profile 2 Letter To Our Stockholders 6 Transportation Products [PHOTO] 10 Construction Products 14 Industrial Products 18 Trinity Teamwork 20 Trinity 2000 21 Financial Information PRODUCTS. PEOPLE. PLANTS. PROCESSES. TRINITY INDUSTRIES PUTS IT ALL TOGETHER WITH INNOVATION AND KNOW-HOW. The nostalgic moan of the whistle as a locomotive rumbles through a sleepy town, pulling cars assembled with the assistance of robotic welding. o The romance of boats moving slowly down the winding Mississippi, pushing barges designed on a state-of-the-art CAD system. o The scenic beauty of a meandering mountain road as a vacationing family drives past, protected by a new design of steel guardrail precision-engineered to absorb energy and save lives. o Trinity Industries begins with the basics of American industry--concrete and steel, tanks and fittings, railcars and barges--and puts them all together with innovative techniques and leading-edge technology. Trinity brings people together to work in rewarding careers that shape our world and benefit our communities. Trinity combines and coordinates plants, divisions, and companies to operate with industry-leading power and efficiency. Trinity is solidly positioned at the forefront of essential industries with strong, expanding markets. o And because of all this, oranges from Florida become part of breakfast in Maine. Grain from a Midwest family farm feeds children halfway around the world. A retired couple living in a remote cabin can count on gas heat through the winter. o Other companies may do a few of the things that Trinity does. The difference is the way Trinity puts it all together. 3 [LOGO] COMPANY PROFILE Trinity Industries, Inc. is a leading manufacturer of a variety of products with manufacturing and fabrication operations in three business segments: Transportation Products, Construction Products, and Industrial Products. The Company, headquartered in Dallas, Texas, has seventy-eight facilities containing more than twelve million square feet of manufacturing space in twenty-two states, Mexico and Brazil. The Company also operates more than 115 ready-mix concrete and aggregate locations in Texas and Louisiana. o The Company has a continuing strategy of growth through internal expansion and strategic acquisitions within its established business segments. o Trinity's stockholders of record numbered more than 2,600 at March 31, 1998. Its common stock is traded on the New York Stock Exchange under the symbol TRN.
FINANCIAL HIGHLIGHTS YEAR ENDED MARCH 31 - --------------------------------------------------------------------------------------- (IN MILLIONS EXCEPT PER SHARE DATA) 1998 1997 1996 - --------------------------------------------------------------------------------------- Revenues $ 2,473.0 $ 2,234.3 $ 2,241.7 Income from continuing operations $ 103.7 $ 113.7 $ 101.3 Income from discontinued operations -- 23.8 12.5 ---------------------------------------- Net income $ 103.7 $ 137.5 $ 113.8 ======================================== Net income per common share (diluted): Income from continuing operations $ 2.36 $ 2.66 $ 2.42 Income from discontinued operations -- 0.55 0.30 ---------------------------------------- Net income per share $ 2.36 $ 3.21 $ 2.72 ======================================== Cash dividends per share $ 0.68 $ 0.68 $ 0.68 Total assets $ 1,573.9 $ 1,356.4 $ 1,426.6 Stockholders' equity $ 887.5 $ 809.5 $ 746.0
1 4 LETTER TO OUR STOCKHOLDERS BY EVERY DEFINITION, THE FISCAL YEAR 1998 WAS OUTSTANDING FOR TRINITY INDUSTRIES. [PHOTO] 2 5 [PHOTO] [PHOTO] [PHOTO] Trinity's recently constructed manufacturing facility in Monclova, Mexico, shown after the completion of its second phase of expansion. TO OUR STOCKHOLDERS We are pleased to report that fiscal 1998 was another record year for Trinity Industries. Driven by impressive performance in all of our business segments, revenue reached an all-time high. Earnings from continuing operations (excluding certain one-time, non-recurring charges) were also at record levels for the fifth consecutive year. For the year ended March 31, 1998, the Company reported income from continuing operations of $147.5 million (excluding the previously announced one-time charge to settle the Morse/Diesel litigation) or $3.36 per diluted share, an increase of 20 percent over the $123.0 million ($2.87 per diluted share) recorded in 1997. Revenue rose to $2.47 billion, 11 percent more than the $2.23 billion in 1997. Income from continuing operations including the one-time charge was $103.7 million, or $2.36 per diluted share, in fiscal 1998 and $113.7 million ($2.66 per diluted share) in fiscal 1997. Trinity's business philosophy remains one of internal expansion and growth through acquisition, low-cost production of high-quality products, unsurpassed customer service, and production flexibility. Our fiscal 1998 operations were characterized by excellent performance, solid margins, and strong markets in all of our businesses. Our Transportation Products segment generated record levels of revenue and operating income. In the railcar business, we benefited from strong industry demand, particularly in our third and fourth quarters. Our orders on hand reached record levels at the end of fiscal 1998, representing more than a year's worth of production. Trinity's orders on hand were equivalent to nearly half of the industry's total backlog, which will further strengthen our position as the nation's largest railcar manufacturer. Our barge division produced record volume in fiscal 1998 while improving production efficiency and reducing inventory levels. Fleet replacement continues to be a driving force for both railcars and barges. In the Construction Products segment, both our highway safety products and our ready-mix concrete businesses performed very well. Record operating results the past year were driven by increased activity in infrastructure improvements and in commercial, residential, and municipal construction. Due to continued strong activity in these sectors, high demand for our construction products is expected to continue. We 3 6 [PHOTO] [PHOTO] [PHOTO] are hopeful about the passage of pending federal legislation that will further increase spending on nationwide highway improvements. Our Industrial Products segment is one of the nation's principal manufacturers of liquefied petroleum gas (LPG) tanks, pipefittings, flanges, and tank heads. Solid performance in this area was fueled by increasing worldwide demand for energy and petrochemicals. During the year we increased plant capacity and expanded our product lines. We expect continued growth in the Industrial Products segment. In addition to internal expansion, Trinity made acquisitions in every business segment. Key acquisitions during the year included: o Industrial Products Division of the Ladish Co. Inc. - a leading manufacturer of pipefittings, flanges, and valves, with facilities in Arkansas and Kentucky; o Industrial Companies, Inc. - with five ready-mix facilities serving Louisiana and Texas; o Buffalo Specialties - a manufacturer of various highway safety products and railcar specialty parts, with offices and facilities in New York, Connecticut, Tennessee, and Alabama; o Difco, Inc. - a specialty railcar manufacturer located in Findlay, Ohio; o Busch Mechanical Services - a railcar rebuilding facility in Springfield, Missouri. We are constantly evaluating opportunities for further acquisitions that meet our criteria. AT TRINITY, OUR VISION IS TO DELIVER INNOVATIVE PRODUCTS AND UNPARALLELED PERFORMANCE. We look for companies with a compatible business philosophy, the potential for a unique market niche, and an overlap with our customer base. International markets increasingly present opportunities for Trinity. We substantially added to our 40-year presence in Mexico by breaking ground on an additional manufacturing plant in Monclova, Mexico, in February 1997; by the end of the calendar year, we were shipping newly constructed railcars. We have already initiated the second phase of expansion at this facility which replicates the operations of our other manufacturing plants. We see additional opportunities in Mexico to serve both Mexican and U.S. customers in a variety of our businesses. South America is emerging as an additional market for many of our products. In the past year we made our initial investment in South America with the acquisition of a manufacturing plant where we will produce LPG tanks. We continue to invest in ways to design and produce our products more efficiently and to 4 7 improve their quality, such as Computer Aided Design (CAD), Computer Aided Manufacturing (CAM), and robotic welding. Of course, our most valuable resource is our people. We continue to emphasize our training, safety, and QuEST Total Quality Management programs in order to provide our employees with a rewarding place to work. During the past year we introduced two new corporate officers. Michael Fortado was appointed Vice President, General Counsel, and Corporate Secretary. Jim Ivy joined Trinity as Chief Financial Officer. Michael and Jim bring valuable strengths that complement our executive team. It gives us great pride to recognize Senior Vice President Ralph Banks for his 55 years of dedicated service to Trinity Industries. Ralph's expertise in facility construction, fixtures, and tooling has been an immeasurable contribution, helping to improve our manufacturing processes and expand our business. Through the years, it has been our people - bright new talent joining forces with proven, experienced leaders - who have shaped Trinity. As we look ahead, the outlook continues bright in all of our business segments. The market conditions that helped produce our record performance are expected to continue. We are committed to producing results and further improving and growing our businesses. Most of all, we are very excited by the remarkable team of employees, customers, stockholders, and suppliers who all contributed to Trinity's success in fiscal 1998 and will be vital to our continued growth as we look forward to an even greater year in fiscal 1999. We sincerely thank each of you. /s/ W. RAY WALLACE W. Ray Wallace Chairman and Chief Executive Officer /s/ TIMOTHY R. WALLACE Timothy R. Wallace President and Chief Operating Officer [PHOTO] Timothy R. Wallace, President and Chief Operating Officer, and W. Ray Wallace, Chairman and Chief Executive Officer 5 8 TRANSPORTATION PRODUCTS Trinity's Transportation Products segment consists of our railcar, leasing, and marine products businesses. In fiscal 1998, segment revenues increased 9 percent while operating profit grew by 19 percent. Margin increased a full point to 12.7 percent versus 11.7 percent the prior year. RAILCARS DELIVERING RECORD PERFORMANCE Fiscal 1998 was a good year for Trinity's railcar business. The rail industry experienced robust growth as strong economic conditions and continuing fleet replacement cycles propelled demand for many types of railcars. Trinity continued as the industry leader, capitalizing on these conditions to deliver our broad line of railcars to a wide range of customers. The fiscal year ended with record levels of orders on hand. Industry figures project that 70,000 cars will be delivered in calendar 1998, an increase of approximately 40 percent over 1997. For Trinity, orders on hand increased 57 percent in our third quarter and another 39 percent in the fourth quarter. At year-end our orders on hand were equivalent to nearly half of the total backlog of the entire railcar industry. INNOVATIVE PRODUCTS & PLANTS Trinity is at the forefront of industry innovations that improve product lines and production methods. Our work with aluminum and lightweight composite materials produces cars that weigh less and thus can carry greater loads at the same gross weight. We have developed new car designs that transport TRANSPORTATION PRODUCTS - ----------------------------------------------- [S] [C] [C] (in millions) 1998 1997 - ----------------------------------------------- REVENUES $1,642.9 $1,501.5 - ----------------------------------------------- OPERATING PROFIT 209.3 175.2 - ----------------------------------------------- TRINITY LEADS THE RAILCAR INDUSTRY WITH INNOVATIVE PRODUCTS, COST-EFFECTIVE PRODUCTION AND SUPERIOR SERVICE. [PHOTO] [PHOTO] [PHOTO] 6 9 greater volumes of freight than ever before. We create these innovative products with advanced technology such as solid-state modeling with 3-D Computer Aided Design (CAD) workstations. We continue to incorporate robotic welding for consistent precision in our state-of-the-art assembly lines. Sophisticated workflow applications help us optimize our production process. Trinity produces the widest product offering of any railcar manufacturer. Our car types include: COVERED HOPPERS - primarily used to transport agricultural, mineral, and plastic products. The market for these cars is driven by such factors as grain exports, construction activity, and the petrochemicals and plastics industries. COAL CARS - increasingly important as utility companies convert their power plants to cleaner-burning Western coal. Railroads are improving their infrastructure and adding locomotives and cars to meet this demand. Our aluminum cars and the industry's first 315,000-pound car (compared to the standard 286,000-pound car) enable the shipment of more coal in fewer trips, reducing shipping costs. INTERMODAL CARS - an important part of a growing industry. Several factors drive this market, which increased 7 percent overall in calendar year 1997: an increased number of rail-truck partnerships; export and import volume, particularly related to the North American Free Trade Agreement (NAFTA); and large orders by TTX Inc. (an important Trinity customer that provides intermodal cars to several major railroads). BOX CARS - various types that serve numerous industries. Growth in this line was attributable to [PHOTO] Pat Wallace, Jeffrey Marsh, and John Nussrallah perform a final check on a tank car prior to customer viewing at a railcar exposition. 7 10 TRINITY'S HOPPER AND TANK BARGES ARE THE VITAL WORKHORSES OF THE NATION'S INLAND WATERWAYS. [PHOTO] Doug Schneider, Harry Hinkle, and Jess Collins review performance ratios for last fiscal year. increased traffic in paper, auto parts, and consumer goods, as well as replacement of an aging fleet. TANK CARS - a strong and growing market, driven by increased shipping in the chemical, food products, and petroleum products industries and by the ongoing replacement of older cars. REPAIR, MANAGEMENT, LEASING, & PARTS Trinity has built its railcar business by focusing on our customers' businesses and helping them solve problems. In addition to selling cars, we have found opportunities to serve our customers with parts and repairs, railcar fleet management, and financing. Trinity's leasing company functions as an important marketing component for our railcar sales activities. RAILCAR OUTLOOK Our record backlog of orders reflects strong demand for nearly every car Trinity manufactures. To satisfy this demand, we now have 18 freightcar lines shipping cars compared to nine lines a year ago; by the third quarter of this year, we anticipate having a total of 20 freightcar lines operating. We are able to minimize our product line changeovers which will improve our production efficiencies. Looking beyond the current year, fleet replacement levels should remain strong, as approximately 40 percent of the nation's railcars are over 20 years old and new car designs with higher load carrying capacity make the economic decision for replacement very viable. MARINE PRODUCTS Trinity's barge business also saw record results in fiscal 1998. Our barge sales volume increased 35 percent over the prior year. We continued to reduce costs and lower our working capital requirements by reducing inventory levels. 8 11 [PHOTO] Trinity's latest railcar products were previewed at the 1998 Intermodal Expo. THE BARGE INDUSTRY Trinity is North America's leading producer of inland barges. Our hopper and tank barges are used by many barge operating companies and shippers to transport a wide variety of cargo such as grain, coal, aggregates, and liquid petroleum products. Trinity is also one of the largest producers of fiberglass barge covers. The United States barge fleet consists of approximately 22,700 barges. As in the rail industry, the fleet replacement cycle is an important factor. A barge typically has a useful life of about 25 years. Currently, nearly one-third of the fleet is more than 20 years old, which suggests that approximately 7,000 barges will need replacing over the next five years. In addition, recent environmental legislation calls for the phased-in replacement of single-hull liquid tank barges with double-skin types. Trinity plans to produce a higher proportion of tank barges in the coming year. MARINE OUTLOOK In calendar 1997, the nation's barge industry delivered nearly 1,600 barges, the highest level in 16 years. Although demand has slowed somewhat from its peak level, Trinity's barge business is well positioned for the coming year and the long-term future. We ended fiscal 1998 with half a year's worth of orders on hand, and our tank barge line is booked at capacity through the current calendar year. We anticipate that industry demand will increase toward the end of the year, driven by seasonal freight rates and grain exports. In the meantime, we are doing what we do best: reducing costs to keep margins strong, and using our efficient production capabilities to maximum advantage. PAULINO MARTINEZ HAS WORKED AS A WELDER FOR TRINITY FOR FOUR YEARS. WHEN HE FIRST STARTED, CHANGING OUR PRODUCTION LINES FROM ONE TYPE OF RAILCAR TO ANOTHER REQUIRED 10 DAYS. NOW, WE CAN ACCOMPLISH A LINE CHANGEOVER IN AS LITTLE AS ONE DAY. BY MINIMIZING THE TIME REQUIRED FOR CHANGE-OVERS, WE ALSO MINIMIZE LOST REVENUE DUE TO DOWNTIME. IN FISCAL 1999, WE SHOULD BE ABLE TO BRING EVEN GREATER EFFICIENCY TO OUR PRODUCTION LINES. WITH SUFFICIENT ORDERS ON HAND TO KEEP ALL OF OUR RAILCAR LINES AT FULL PRODUCTION FOR THE FULL YEAR, WE WILL REQUIRE ONLY NINE CHANGE-OVERS VERSUS 22 LAST YEAR. 9 12 CONSTRUCTION PRODUCTS The two largest components of Trinity's Construction Products segment are our Highway Safety Products group and our Ready-Mix Concrete and Aggregate businesses. In fiscal 1998, segment revenues increased 15 percent while operating profit grew by 27 percent. Margin increased more than a full point to 12.1 percent versus 11.0 percent for 1997. HIGHWAY SAFETY PRODUCTS Trinity is North America's largest producer of highway guardrail and safety end-treatments, with products in use in all 50 states as well as in Canada, Mexico, the Caribbean, and Europe. Capitalizing on federal and state governments' emphasis on infrastructure improvement, this business line achieved record results in fiscal 1998. HIGHWAY SAFETY A TOP PRIORITY Improving the safety of our nation's transportation system remains a top priority for our federal government. The government has also recognized the critical link between a sound transportation system and continued domestic economic growth. Until this year, transportation infrastructure improvements were partially funded at the federal level through the Intermodal Surface Transportation Efficiency Act (ISTEA), which earmarked approximately $20 billion TRINITY'S INNOVATIVE HIGHWAY SAFETY PRODUCTS ARE SAVING LIVES AROUND THE WORLD.
CONSTRUCTION PRODUCTS - ---------------------------------------- (in millions) 1998 1997 - ---------------------------------------- Revenues $456.4 $395.2 - ---------------------------------------- Operating Profit 55.2 43.4 - ----------------------------------------
[PHOTO] [PHOTO] [PHOTO] Above: Patrick Turner and Rodney Boyd discuss the shipment of completed guardrail products. 10 13 per year. New proposals, which have passed both the Senate and the House of Representatives, would increase the funds designated for highway safety improvements to a range of $25-30 billion per year for the next six years -- an increase in the area of 38 percent. Increased highway spending would mean a larger market for guardrail and energy-absorbing end-treatments that Trinity manufactures. Another significant opportunity for Trinity's highway products business is the recently established National Highway System (NHS). The NHS more than triples the mileage of U.S. roadways that must be maintained to interstate highway standards. Further, in 1998 the Federal Highway Administration will continue implementing new mandatory standards for roadside safety products used on the NHS. This mandate has already created a strong demand for Trinity's guardrail end-treatment products. A PARTNERSHIP FOR SAFETY The innovative, life-saving highway products Trinity produces were developed through a unique partnership that has brought together the best efforts of the academic public, and private sectors. The Texas Transportation Institute is a state agency and part of the Texas A&M University system. The Institute conducts research in a broad range [PHOTO] Herb Richardson, Texas Transportation Institute Director, and Don Graham of Trinity examine an SRT-350 guardrail at the TTI crash test site. The guardrail successfully contained and stopped a pickup truck that was moving 62 miles per hour. 11 14 [PHOTO] A Trinity crew pours concrete for the foundation of a new school. of subjects seeking ways to improve every aspect of the transportation infrastructure. The Institute's own staff, along with scientists and engineers from Texas A&M, conducted countless hours of product design, research, and development. Trinity provided the manufacturing and marketing capability. Dr. Charlie Wooten, Director Emeritus of the Texas Transportation Institute, said, "Trinity has done an excellent job of seeing that these products are getting put into use. That's something we could never do by ourselves." We are pleased to be involved in a program that improves the safety of American travelers, and we are excited about the opportunities it brings for Trinity. READY-MIX CONCRETE & AGGREGATE Trinity's concrete and aggregate businesses primarily serve non-urban markets with a few selected urban markets in Texas and Louisiana. As in all of our business lines, we emphasize quality products, low cost, and exemplary customer service. Working to satisfy demand for all types of construction, our concrete and aggregate business recovered from the previous year's wet weather conditions to post solid results in fiscal 1998. A FOUNDATION FOR FUTURE GROWTH In the regions served by Trinity's ready-mix STRONG CONSTRUCTION ACTIVITY HELPED OUR CONCRETE AND AGGREGATE OPERATIONS POST RESULTS IN 1998. 12 15 concrete and aggregate business, the past year brought vigorous construction activity in every sector -- commercial, industrial, municipal, medical, and residential. During the year we added to our capabilities by acquiring the five ready-mix facilities and one aggregate facility of Industrial Companies, Inc. of Baton Rouge, Louisiana. As market conditions have increased prices, we have worked to lower our costs. We have continually reduced the cost of producing ready-mix concrete and aggregate as we have also reduced the costs of shipping and delivering these products. As a result, margins have improved. Coupled with a good backlog of construction projects at the end of the year, the outlook for fiscal 1999 is strong. WHEN EDDIE SIMMONS OF TRINITY'S TRANSMIT MIX CONCRETE COMPANY FIRST BEGAN DRIVING A CONCRETE TRUCK 41 YEARS AGO, CARS HAD TWO-TONE PAINT JOBS AND TAIL FINS. SINCE 1957, MUCH HAS CHANGED IN THE CONCRETE AND AGGREGATE BUSINESS. THROUGH IT ALL, EDDIE HAS CONSISTENTLY DELIVERED THE PRODUCT AND KEPT THE CUSTOMERS SATISFIED. IN FACT, HE HAS NEVER HAD AN ACCIDENT, NEVER HAD A CUSTOMER COMPLIANT, AND HASN'T TAKEN A SICK DAY IN MORE THAN 30 YEARS. FOR HIS EXEMPLARY PROFESSIONALISM AND OUTSTANDING SAFETY RECORD, EDDIE WAS AWARDED THE TITLE OF DRIVER OF THE YEAR BY THE NATIONAL READY-MIX CONCRETE ASSOCIATION. ALL OF US AT TRINITY JOIN MARK STILES, TRANSIT MIX PRESIDENT, IN CONGRATULATING EDDIE SIMMONS. [GRAPH] "THE DEMAND FOR READY-MIX CONCRETE CONTINUES TO GROW IN OUR MARKET." Mark Stiles, Transit Mix President 13 16 INDUSTRIAL PRODUCTS
INDUSTRIAL PRODUCTS - ---------------------------------------- (In millions) 1998 1997 - ---------------------------------------- Revenues $371.4 $327.6 - ---------------------------------------- Operating Profit 45.0 42.5 - ----------------------------------------
Our Industrial Products segment consists of our metal components and container businesses. In fiscal 1998, revenue for this segment increased 13 percent and operating profit grew 6 percent over the prior year. METAL COMPONENTS GROUP Trinity has been a recognized leader in the manufacturing of certain commodity and specialty metal components. Our wide range of pipefittings, flanges, and container heads are used extensively in pressure piping and storage systems worldwide. These products are integral to many process industries including oil and gas exploration and production, petrochemical manufacturing, gas transmission, power generation, paper manufacturing, and food processing. ACQUISITION & UPGRADES Early in fiscal 1998, Trinity acquired certain assets of the Industrial Products Division of Ladish Co., Inc. This acquisition significantly increased our plant capacity and capability. Trinity now has the broadest offering of fittings and flanges of any other producer in North America. With a business team focused on consolidating the acquired Ladish facilities and other equipment upgrades, we are beginning to see improvements in efficiencies and margins as these investments begin to pay off. Our revenue in this portion of our business is now WITH OUR INCREASED CAPACITY AND EXPANDED PRODUCT LINES, TRINITY OFFERS THE INDUSTRY'S BROADEST PRODUCT RANGE. [PHOTO] [PHOTO] [PHOTO] Above: Bob Van Noord and Charles Bennett inspect a completed flange in one of Trinity's metal labs. 14 17 approximately 40 percent above the level at this time a year ago. QUALITY, CAPACITY, EFFICIENCY Trinity's expertise and commitment to quality in forging and machining metal components is evident in the number of our facilities that have received the rigorous ISO 9002 (International Standardization Organization) accreditation. Coupled with our high levels of product quality, our production capacity allows us to handle any size order. Trinity has become a preferred provider for many of the leading petrochemical companies. We continue to penetrate important distribution channels by building lasting customer relationships with a strong network of industrial suppliers and other container manufacturers. Key demand factors for our metal components business are increasing worldwide energy consumption, petrochemical and refinery expansions, and energy infrastructure improvements. We anticipate continued steady growth in this segment. [PHOTO] Manuel Castro inspects tank heads prior to shipment from our new facility in Mexico. CONTAINERS Trinity produces a full line of containers including liquefied petroleum gas (LPG) tanks, storage vessels, truck and transport barrels, and custom vessels. These containers are used in residential, petrochemical production 15 18 [PHOTO] NATIONALLY AND INTERNATIONALLY, THE MARKET OUTLOOK IS BRIGHT FOR TRINITY'S LPG CONTAINER BUSINESS. [PHOTO] Severiano Pecheco and John "Rusty" McDearman review the load list for a shipment of LPG containers. refining, and power generation applications. They range in size from 120-gallon tanks for residential use to 120,000-gallon industrial bulk storage containers. The container business is where Trinity Industries had its beginning, and it remains an important business component for us. Our containers are recognized worldwide for their quality, dependability, and exceptional value. Trinity Industries de Mexico is the largest tank manufacturer in Mexico, featuring state-of-the-art facilities and a highly experienced workforce. PERFORMANCE & OUTLOOK In fiscal 1998, our container business generated increases in revenue and operating profit even though a mild winter reduced the usual seasonal demand for LPG gas containers in the fourth quarter. The future outlook for our container business is good. The U.S. housing industry is experiencing continued growth. The manufactured housing market in particular brings new opportunities. There is also a growing trend of families moving from cities to non-urban and rural areas not served by natural gas utilities. These factors should continue to increase the demand for LPG containers. We also see excellent growth opportunities in Mexico and South America. Our business in Mexico began by exporting containers made in the U.S. We then purchased manufacturing facilities and started producing 16 19 With a 36' articulating boom, Trinity's LPG container delivery trucks can load, unload, and position tanks of up to 1,000 gallon capacity. Trinity has a fleet of 60 of these versatile vehicles. For many of our customers, ease of delivery and installation is an important selling point. [PHOTO] containers in Mexico. Now, that evolution is being duplicated in South America. Many developing areas of South America lack an infrastructure of natural gas lines, so they depend primarily upon LPG containers. For years, Trinity has shipped containers from the U.S. and Mexico and has developed a customer base. In the past year, we purchased a manufacturing plant in Brazil. In both Mexico and South America, we see additional opportunities to penetrate new markets and to continue to expand our production. INDUSTRIAL MANUFACTURING HAS ALWAYS BEEN THE LIFEBLOOD OF TRINITY. FOR THE PAST 55 YEARS, ONE MAN HAS LEFT HIS MARK ON NEARLY EVERY PRODUCTION LINE WE HAVE IN PLACE: SENIOR VICE PRESIDENT RALPH A. BANKS, JR., TRINITY'S "MR. MANUFACTURING." RALPH ORIGINALLY HELPED SPEARHEAD TRINITY'S GROWTH IN THE PRESSURE VESSEL INDUSTRY. TODAY RALPH CONTINUES TO BE AT THE FOREFRONT OF TRINITY'S PLANT EXPANSION PROGRAMS, LEADING A TEAM OF SEASONED MANUFACTURING ENGINEERS WHO CARRY OUT HIS TRADITION OF STREAMLINING PRODUCTION PROCESSES. WE ARE GRATEFUL TO THE MANY PEOPLE WHO HAVE MADE INVALUABLE CONTRIBUTIONS TO THE SUCCESS OF TRINITY INDUSTRIES THROUGH THE YEARS. NO ONE HAS BEEN AT IT LONGER THAN RALPH BANKS. 17 20 TRINITY TEAMWORK Trinity's goal is the consistent growth of our business and improvement of our operations. Throughout our Company, employee teams are focused on developing effective solutions to a wide range of issues. Their impact has been evident in every area of our operations. TEAMWORK FOR GROWTH & EXPANSION When our new plant in Monclova, Mexico was beginning operations, managers met with their counterparts from other Trinity facilities to plan and coordinate issues such as material shipments, job scheduling, and product delivery. The result was a smooth integration of a new railcar facility in Mexico. Before our Montgomery, Alabama plant shifted from the production of structural steel and marine parts to railcars, a cross-disciplinary team of employees from six different plants began planning the changeover in order to minimize downtime and maintain a steady stream of revenue. Jobs in progress were gradually moved to other parts of the plant as tools, equipment, and technology for the new lines were put into operation. The last structural steel fabricated in this area of the facility went out the door at the beginning of April; by April 16, the first completed railcar was ready for inspection. Our acquisition consolidation teams work to bring newly acquired facilities online quickly. The Buffalo Specialities plants were purchased during the peak guardrail production season, yet they were converted to Trinity production with virtually no downtime. Similarly, the Busch railcar rebuilding facility was quickly and smoothly integrated. THROUGHOUT TRINITY, OUR PEOPLE ARE FINDING NEW WAYS TO PUT GOOD IDEAS TO WORK. [PHOTO] [PHOTO] [PHOTO] Above Left: Trinity's U.S./Mexico team reviews construction plans and coordinates shipments. Above Middle: Trinity's Environmental team works to reduce the environmental impact of waste water and air emissions. Above Right: Trinity's Desktop Standardization team streamlines our computer purchasing, training, and maintenance. Opposite page: By taking a proactive, plant-wide approach to safety, our Longview Plant safety team reduced recordable accidents by 53 percent and Workers' Comp claims by 45 percent in a single year. 18 21 TEAMWORK TO IMPROVE OUR BUSINESS Trinity's Total Quality Management program is known as QuEST, which stands for Quality, Efficiency, Service and Safety, and Trust. The idea behind QuEST is that our people, working together to improve our plants, processes, products, and productivity, will build loyal customers as we create a better place to work. Our Marine Products division formed a team to address all the total cost components of our barge manufacturing operations. As a result, they substantially reduced our cost of labor and materials. In our Ready-Mix Concrete and Aggregate area, managers of the Mining Group began setting goals and planning operations as a team, with incentives for total team performance. The group's operating profit increased 306 percent over the prior year. Further securing a good customer relationship through quality work and dedicated service, our Vidor facility was named Union Carbide's Contract Repair Shop of the Year for the second year in row. Trinity's teams also involve people outside the Company. General American Transportation Corporation (GATX) of Chicago relocated employees to Dallas in order to work closely with Trinity on product design and manufacturing. This arrangement has streamlined communication, reduced cycle time, and improved product quality. Ward Fuller, President and CEO of General American, said, "Teaming up with Trinity has been a tremendous success. It not only benefits GATX but, most importantly, benefits our customers." These are just a few examples of the way Trinity teamwork "puts it all together" to benefit our customers, consumers, employees, and stockholders. [PHOTO] Trinity's teamwork concept extends to our customers as well. GATX, a major customer, opened an office within a Trinity railcar facility in order to work closely with us through the design and manufacturing processes. Pictured are Mick Rimko and Mark Short of Trinity, with Thomas Fortunato and John Swezey of GATX. 19 22 TRINITY 2000 As the twentieth century draws to a close, most companies worldwide will have to modify or replace portions of their computer software in order to ensure a smooth transition into the new millennium. While the nature of Trinity's products, services, raw materials, and computer systems have prevented the Year 2000 issue from becoming a major uncertainty or a material expense, we have taken, and are taking, steps to manage and control the resolution of Year 2000 issues. TRINITY IS PREPARING TO FACE THE YEAR 2000. FOR EXAMPLE, WE HAVE: o Established a Year 2000 Steering Committee; o Appointed a full-time Year 2000 Project Leader; o Developed action plans for all identified mission critical systems, including system testing; o Established weekly status reporting on issue resolution action plans; o Engaged outside consultants to assist with our vendor compliance and assessment program and to advise Trinity regarding its Year 2000 compliance program; o Initiated programs to assure compliance in the areas of equipment and facilities, products, customers, international operations, and non mission critical software. Some remediation plans have already been completed, and over 85 percent of our projects are scheduled for completion by December 31, 1998. We will maintain high visibility of our progress and continue to evaluate the resources we are dedicating to the resolution of Year 2000 issues. [PHOTO] Jim S. Ivy Vice President and Chief Financial Officer 20 23 FINANCIAL INFORMATION 22 Financial Summary 23 Management's Discussion and Analysis of Financial Condition and Results of Operations 27 Consolidated Income Statement 28 Consolidated Balance Sheet 29 Consolidated Statement of Cash Flows 30 Consolidated Statement of Stockholders' Equity 30 Notes to Consolidated Financial Statements 39 Report of Independent Auditors 40 Supplemental Information 40 Stockholder Information 24 FINANCIAL SUMMARY
YEAR ENDED MARCH 31 ----------------------------------------------------------- (IN MILLIONS EXCEPT FOR PERCENT AND PER SHARE DATA) 1998 1997 1996 1995 1994 --------- --------- --------- --------- --------- Revenues(1) $ 2,473.0 2,234.3 2,241.7 2,064.3 1,509.6 Operating profit $ 255.9 214.2 194.9 148.9 106.7 Interest expense, net $ 19.1 20.9 29.0 28.7 25.8 Income from continuing operations before income taxes and cumulative effect of change in accounting for income taxes $ 165.9 181.3 165.8 121.6 82.5 Provision for income taxes $ 62.2 67.6 64.5 48.2 33.7 Effective tax rate % 37.5 37.3 38.9 39.6 40.8 Income from continuing operations before cumulative effect of change in accounting for income taxes $ 103.7 113.7 101.3 73.4 48.8 Cumulative effect as of April 1, 1993 of change in accounting for income taxes $ -- -- -- -- 7.9 Income from discontinued operations, net of income taxes $ -- 23.8 12.5 15.7 19.5 Net income $ 103.7 137.5 113.8 89.1 76.2 Total assets $ 1,573.9 1,356.4 1,426.6 1,400.5 1,279.1 Long-term debt $ 149.6 178.6 206.4 242.9 277.9 Stockholders' equity $ 887.5 809.5 746.0 641.2 570.5 Stock data:(2) Weighted average number of diluted shares outstanding 43.9 42.8 41.9 40.5 40.3 Net income per common share (diluted): Income from continuing operations before cumulative effect of change in accounting for income taxes $ 2.36 2.66 2.42 1.81 1.21 Cumulative effect of change in accounting for income taxes -- -- -- -- 0.20 Income from discontinued operations -- 0.55 0.30 0.39 0.48 --------- --------- --------- --------- --------- Net income per common share $ 2.36 3.21 2.72 2.20 1.89 Dividends per share $ 0.68 0.68 0.68 0.68 0.64 Book value per share $ 20.40 18.83 17.93 15.95 14.37
- -------------------------------------------------------------------------------- (1) On March 31, 1997, the Company made a pro rata distribution of the common stock of Halter Marine Group, Inc. (Halter) to its stockholders in the form of a property distribution. The results of operations and balance sheet of Halter have been reclassified in the financial statements to discontinued operations as a result of the divestiture. (2) On August 31, 1993, the Company distributed a three-for-two stock split in the form of a stock dividend. 22 25 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - -------------------------------------------------------------------------------- BASIS OF PRESENTATION Trinity Industries, Inc. is one of the nation's leading diversified industrial manufacturers. Trinity principally operates in three business segments: (i) the Transportation Products segment, (ii) the Construction Products segment, and (iii) the Industrial Products segment. The following discussion compares results from continuing operations of Trinity for fiscal 1998, 1997, and 1996. 1998 COMPARED WITH 1997 -- RESULTS OF OPERATIONS Revenues were $2.47 billion in fiscal 1998 compared to $2.23 billion in fiscal 1997, a 10.8% increase. Operating profit was $255.9 million in fiscal 1998 compared to $214.2 million in fiscal 1997, a 19.5% increase. All of Trinity's business segments contributed to the growth in revenues and operating profit in fiscal 1998. Selling, engineering and administrative expenses increased $20.2 million in fiscal year ended 1998, to $144.2 million, when compared to $124.0 million in fiscal 1997, but as a percentage of revenue increased only slightly as the Company continues to invest in people and systems to fuel additional growth. Other (income) expenses increased $57.1 million to $90.0 million in fiscal 1998 from $32.9 million in fiscal 1997. The Company recorded a one-time charge of $70.0 million ($43.8 million after-tax) in the current fiscal year which settled a thirteen year old lawsuit (see Contingencies in Notes to Consolidated Financial Statements). Net interest expense decreased $1.8 million due to a reduction in debt through scheduled debt payments. Other, net expense decreased $11.1 million in the current fiscal year to $0.9 million from $12.0 million in fiscal 1997. The decrease is due to the recording in fiscal 1997 of certain non-recurring charges, principally for valuation of production facilities determined to be in excess of that required for future business operations, in the amount of $15.0 million ($9.3 million after-tax). Income from continuing operations in fiscal 1998 was $103.7 million, or $2.36 per diluted share as compared to $113.7 million, or $2.66 per diluted share, in fiscal 1997. As stated above, results for fiscal 1998 and 1997 include certain one-time charges. Excluding these charges, income from continuing operations was $147.5 million, or $3.36 per diluted share, in fiscal 1998 and $123.0 million, or $2.87 per diluted share, in fiscal 1997. TRANSPORTATION PRODUCTS
(IN MILLIONS) 1998 1997 -------- -------- Revenues $1,642.9 $1,501.5 Operating Profit $ 209.3 $ 175.2 % of Revenues 12.7% 11.7%
Revenues increased in the Transportation Products segment $141.4 million, or 9.4%, in the current fiscal year. This increase was primarily due to increased demand for inland hopper barges. In the second half of fiscal year 1998 the inland hopper barge market began to soften, however, this condition was offset by a significant increase in overall railcar demand which began late in the first quarter of fiscal year 1998. The surge in railcar demand and the ongoing replacement cycle for railcars and barges continues to drive this segment, contributing to railcar backlogs that remain at record levels. And as the barge fleet continues to age, Trinity's product line of hopper and tank barges is well positioned to take advantage of the replacement demand as well as any additional demand generated by more and larger shipments of commodities in the nation's intercoastal waterways. Trinity's position as a manufacturer and as a full service provider of railcar maintenance services, management services, and leasing alternatives provides the Transportation Products segment with the resources for future growth in the market place. The Transportation Products segment's operating profit increased by $34.1 million in the current fiscal year to $209.3 million from $175.2 million in fiscal 1997. As a percentage of revenues, operating profit increased from 11.7% in 1997 to 12.7% in 1998. This increase is primarily a result of the Company's continued emphasis on improving its production 23 26 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - -------------------------------------------------------------------------------- methods and reducing costs and the efficiencies gained from higher volumes. During the fourth quarter of fiscal year 1998, the Company recorded a charge of approximately $5.0 million to settle a customer dispute. CONSTRUCTION PRODUCTS
(IN MILLIONS) 1998 1997 -------- -------- Revenues $ 456.4 $ 395.2 Operating Profit $ 55.2 $ 43.4 % of Revenues 12.1% 11.0%
The Construction Products segments' revenues increased by $61.2 million, or 15.5%, to $456.4 million in the current fiscal year from $395.2 million in fiscal 1997. The Company continues to expand its highway guardrail and safety system products as well as its ready-mix concrete and aggregate businesses. Based on the expectation of increased federal funding for highway safety improvements and new mandatory safety standards, Trinity's highway guardrail and safety system products should continue to see increased demand. The demand in residential, commercial, and municipal construction in the markets served by the Company's ready-mix concrete and aggregate businesses continues to rise. Operating profit increased in the Construction Products segment from $43.4 million in fiscal 1997 to $55.2 million in fiscal 1998, an increase of $11.8 million or 27.2%. As a percentage of revenues, operating profit increased to 12.1% in 1998 from 11.0% in 1997. The ready-mix concrete and aggregate businesses saw improvements due to cost reduction measures as well as better weather conditions in the current fiscal year as compared to the unusually severe weather in the previous year which restricted the pouring of ready-mix concrete. INDUSTRIAL PRODUCTS
(IN MILLIONS) 1998 1997 --------- --------- Revenues $ 371.4 $ 327.6 Operating Profit $ 45.0 $ 42.5 % of Revenues 12.1% 13.0%
Revenues in the Industrial Products segment increased from $327.6 million in fiscal 1997 to $371.4 million in fiscal 1998, an increase of $43.8 million, or 13.4%. This segment has benefited from the continuing improvements in the economy. The ongoing emphasis on protecting the environment in the chemical and petroleum industries benefits the Company's fittings and flanges product line. Coinciding with a general improvement in business conditions is the continued strength in new housing starts. These factors continue to support the long-term outlook for Trinity's containers product line, which includes liquefied petroleum gas cylinders and permanent storage containers as well as custom vessels. The Industrial Products segment's operating profit was a modest increase of $2.5 million to $45.0 million in fiscal 1998 from $42.5 million in fiscal 1997. As a percentage of revenues, operating profit decreased to 12.1% in 1998 from 13.0% in 1997. This decrease was primarily attributable to the costs of combining the Ladish operations along with the highly competitive environment in the fittings and flange product line. 1997 COMPARED WITH 1996 Record operating profits of $214.2 million were recorded for the fiscal year ended March 31, 1997, an increase of $19.3 million compared to fiscal 1996. This increase was due primarily to higher operating profit recorded in the Transportation Products and Industrial Products segments. The Construction Products segment operating profit remained comparable to the previous fiscal year. Revenues recorded for fiscal 1997 were $2.23 billion, a decrease of $7.4 million from fiscal 1996. Results from the Transportation Products segment reflected continued demand from the ongoing replacement cycle for those products. The Construction Products segment continued 24 27 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - -------------------------------------------------------------------------------- to benefit from federal and state government's focus on improving the nation's transportation systems and good levels of construction activities in the markets served by Trinity. The Industrial Products segment continued to experience favorable market conditions. Operating profit increased in the Transportation Products segment on slightly lower revenues when compared to fiscal 1996 as a result of improving margins attained from cost reduction programs put in place in prior years. Transportation Products achieved record operating profit in a highly competitive environment through increases in productivity and improvements to production methods. The replacement cycle for railcars and barges continued to be the main driver for the fiscal 1997 results. The inland river hopper barge product line continued to strengthen and was well positioned to take advantage of the current demand generated by the strong shipments of commodities as well as the replacement demand from the aging fleet. The Transportation Products segment positioned itself for future growth through investments which expanded its production capacity. Trinity's position as a full service provider of maintenance services, management services, and leasing alternatives continued to provide the Company with a steady revenue stream and to provide opportunities for growth in the market place. Revenues in the Construction Products segment increased in fiscal 1997 when compared to the prior fiscal year with stable operating profit. The increase in revenues signified the Company's emphasis on expanding its highway guardrail and safety system products and its ready-mix concrete and aggregate business. Stable operating profit in fiscal 1997 was primarily the result of unusually severe weather in the fourth quarter which restricted the pouring of ready-mix concrete. Demand for commercial, residential, and municipal construction and the overall strength of the economy in the markets served will benefit the ready-mix concrete and aggregate business. Highway safety systems products continued to benefit from the upgrading of America's highways and the new safety requirements mandated by the federal government. The Industrial Products segment benefited primarily from the general improvement in the economy. Continued improvements in the chemical and petroleum industries and the ongoing regulatory emphasis on protecting the environment increased the market for fittings and flanges as large industrial customers increased capacity and replaced and repaired their existing plants and piping systems. Continued strength in new housing starts and general business conditions continued to support the LPG container markets. Selling, engineering and administrative expenses increased to $124.0 million in fiscal 1997 from $105.6 million in fiscal 1996 due primarily to increased expenses attributable to operations of fiscal 1997 acquisitions in the Transportation Products segment. Retirement plans expense increased to $18.5 million in fiscal 1997 from $12.2 million in fiscal 1996 due primarily to an increased wage base and the effect of a change in actuarial tables utilized. Net interest expense of $20.9 million in fiscal 1997 decreased as compared to $29.0 million in fiscal 1996 due primarily to less short-term debt during the current fiscal year and to the reduction of equipment trust certificate debt through scheduled debt payments. Other, net expense increased to $12.0 million in fiscal 1997 from $0.1 million the previous fiscal year. The increase was due primarily to the recording of certain charges, principally for valuation of production facilities determined to be in excess of that required for future business operations. The provision for income taxes in fiscal 1997, expressed as a percent of income from continuing operations before income taxes is a 37.3 percent rate as compared to a 38.9 percent rate in fiscal 1996. LIQUIDITY AND FINANCIAL RESOURCES During fiscal 1998, internally generated funds and short term borrowing were used to support capital expenditures and payments for business acquisitions. The Company's cash and cash equivalents decreased $9.1 million for the twelve months ended March 31, 1998. Cash generated from operating activities declined to $120.9 million in fiscal 1998 from $278.8 25 28 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - -------------------------------------------------------------------------------- million in fiscal 1997. This decrease is due primarily to an increase in receivables offset by an increase in accounts payable and accrued liabilities. The increase in receivables is due primarily to the timing of railcar shipments and related invoicing in the fourth quarter of fiscal 1998. Cash required by investing activities decreased to $108.2 million in 1998 from $119.9 million in 1997. This fluctuation was due to an increase in proceeds from sale of property, plant and equipment of $22.2 million and a decline in capital expenditures of $44.1 million. This was offset by an increase in payments for acquisitions, net of cash acquired, of $54.6 million. Cash flows required by financing activities decreased by $185.9 million due primarily to an increase in short-term borrowings in the current year. Capital expenditures, excluding assets under lease, for fiscal 1998 were $49.9 million. Capital expenditures projected for fiscal 1999 are approximately $64.0 million excluding assets for leasing activities. Cash payments for acquisitions in fiscal 1998, net of cash acquired, totaled $60.2 million. Future operating requirements are expected to be financed principally with net cash flows from operations. Internally generated funds, short-term and long-term debt will continue to be used to finance business acquisitions. Additions to Trinity's assets under lease are anticipated to be financed through internally generated funds, the issuance of equipment trust certificates, or similar debt instruments. YEAR 2000 Some of the Company's computer programs were written using two digits rather than four to define the applicable year. As a result, those computer programs have time-sensitive software that recognize a date using "00" as the year 1900 rather than the year 2000. This could cause a system failure or miscalculations causing disruptions of operations and a temporary inability to process certain transactions. The Company has identified existing systems which require action and has plans in place to address the Year 2000 issue on such systems prior to the issue causing any disruption of normal business activities. The Company believes that the cost of addressing the Year 2000 issue is not material to the financial condition or results of operations. The costs of the project and the ability of the Company to timely complete the Year 2000 modifications are based on management's best estimates, which were derived utilizing numerous assumptions of future events, including the continued availability of certain resources and other factors. However, there can be no guarantee that these estimates will be achieved and actual results could differ materially from those anticipated. Specific factors that might cause such material differences include, but are not limited to, the availability and cost of personnel trained in this area, the ability to locate and correct all relevant computer codes, and similar uncertainties. INFLATION Changes in price levels did not significantly affect the Company's operations in fiscal 1998, 1997 or 1996. FORWARD LOOKING STATEMENTS Any statements contained herein that are not historical facts are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, and involve risks and uncertainties. These forward-looking statements include expectations, beliefs, plans, objectives, future financial performance, estimates, projections, goals and forecasts. Potential factors which could cause the Company's actual results of operations to differ materially from those in the forward-looking statements include market conditions and demand for the Company's products; competition; technologies; steel prices; interest rates and capital costs; taxes; unstable governments and business conditions in emerging economies; and legal, regulatory and environmental issues. Any forward-looking statement speaks only as of the date on which such statement is made. The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made. 26 29 CONSOLIDATED INCOME STATEMENT
YEAR ENDED MARCH 31 --------------------------------------- (IN MILLIONS EXCEPT PER SHARE DATA) 1998 1997 1996 --------- --------- --------- Revenues $ 2,473.0 $ 2,234.3 $ 2,241.7 Operating costs: Cost of revenues 2,054.0 1,877.6 1,929.0 Selling, engineering and administrative expenses 144.2 124.0 105.6 Retirement plans expense 18.9 18.5 12.2 --------- --------- --------- 2,217.1 2,020.1 2,046.8 --------- --------- --------- Operating profit 255.9 214.2 194.9 Other (income) expenses: Litigation settlement 70.0 -- -- Interest income (1.8) (0.5) (1.8) Interest expense 20.9 21.4 30.8 Other, net 0.9 12.0 0.1 --------- --------- --------- 90.0 32.9 29.1 --------- --------- --------- Income from continuing operations before income taxes 165.9 181.3 165.8 Provision (benefit) for income taxes Current 53.3 71.2 77.0 Deferred 8.9 (3.6) (12.5) --------- --------- --------- 62.2 67.6 64.5 --------- --------- --------- Income from continuing operations 103.7 113.7 101.3 Discontinued operations: Income from discontinued operations (net of income taxes of $10.9 in 1997 and $8.1 in 1996) -- 14.5 12.5 Gain from sale of subsidiary stock in an initial public offering -- 9.3 -- --------- --------- --------- -- 23.8 12.5 --------- --------- --------- Net income $ 103.7 $ 137.5 $ 113.8 --------- --------- --------- Net income per common share: Basic: Income from continuing operations $ 2.41 $ 2.68 $ 2.45 Income from discontinued operations -- 0.56 0.30 --------- --------- --------- Net income per share $ 2.41 $ 3.24 $ 2.75 --------- --------- --------- Diluted: Income from continuing operations $ 2.36 $ 2.66 $ 2.42 Income from discontinued operations -- 0.55 0.30 --------- --------- --------- Net income per share $ 2.36 $ 3.21 $ 2.72 --------- --------- --------- Weighted average number of shares outstanding: Basic 43.1 42.4 41.4 Diluted 43.9 42.8 41.9
See accompanying notes to consolidated financial statements. 27 30 CONSOLIDATED BALANCE SHEET
MARCH 31 ------------------------ (IN MILLIONS EXCEPT PER SHARE DATA) 1998 1997 --------- --------- ASSETS Cash and cash equivalents $ 3.1 $ 12.2 Receivables (net of allowance for doubtful accounts of $1.7 in 1998 and $1.0 in 1997) 390.5 236.9 Inventories Raw materials and supplies 248.5 216.7 Work in process 42.5 41.9 Finished goods 51.6 55.9 --------- --------- 342.6 314.5 Property, plant and equipment, at cost 1,201.9 1,136.5 Less accumulated depreciation (475.0) (424.9) --------- --------- 726.9 711.6 Other assets 110.8 81.2 --------- --------- $ 1,573.9 $ 1,356.4 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Short-term debt $ 101.0 $ 64.0 Accounts payable and accrued liabilities 386.6 261.2 Long-term debt 149.6 178.6 Deferred income taxes 27.5 22.8 Other liabilities 21.7 20.3 --------- --------- 686.4 546.9 --------- --------- Stockholders' equity: Common stock - par value $1 per share; authorized - 100.0 shares; shares issued and outstanding in 1998 - 43.5; in 1997 - 43.0 43.5 43.0 Capital in excess of par value 276.5 273.3 Retained earnings 567.5 493.2 --------- --------- 887.5 809.5 --------- --------- $ 1,573.9 $ 1,356.4 ========= =========
See accompanying notes to consolidated financial statements. 28 31 CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED MARCH 31 ------------------------------------ (IN MILLIONS) 1998 1997 1996 -------- -------- -------- Cash flows from operating activities: Net income $ 103.7 $ 137.5 $ 113.8 Less: Income from discontinued operations -- (23.8) (12.5) -------- -------- -------- Income from continuing operations 103.7 113.7 101.3 Adjustments to reconcile net income to net cash provided (required) by operating activities: Depreciation and amortization 78.1 87.8 69.2 Provision (benefit) for deferred income taxes 8.9 (3.6) (12.5) (Gain) loss on sale of property, plant and equipment (4.2) (4.3) 3.1 Other (6.2) (4.5) (6.7) Changes in assets and liabilities: (Increase) decrease in receivables (150.9) 64.7 (14.9) (Increase) decrease in inventories (3.2) 17.9 (3.6) (Increase) decrease in other assets (30.6) (32.0) 7.8 Increase (decrease) in accounts payable and accrued liabilities 121.1 51.5 (50.2) Increase (decrease) in other liabilities 4.2 (12.4) 0.9 -------- -------- -------- Total adjustments 17.2 165.1 (6.9) -------- -------- -------- Net cash provided by operating activities 120.9 278.8 94.4 Cash flows from investing activities: Proceeds from sale of property, plant and equipment 81.4 59.2 100.2 Capital expenditures (129.4) (173.5) (127.5) Payment for purchase of acquisitions, net of cash acquired (60.2) (5.6) (17.3) -------- -------- -------- Net cash required by investing activities (108.2) (119.9) (44.6) Cash flows from financing activities: Issuance of common stock 2.4 4.6 2.9 Net borrowings (repayments) under short-term debt 34.5 (152.0) (4.0) Proceeds from issuance of long-term debt -- -- 7.0 Payments to retire long-term debt (29.4) (31.6) (43.6) Dividends paid (29.3) (28.7) (27.9) -------- -------- -------- Net cash required by financing activities (21.8) (207.7) (65.6) -------- -------- -------- Cash flows provided by discontinued operations -- 46.3 15.7 -------- -------- -------- Net decrease in cash and cash equivalents (9.1) (2.5) (0.1) Cash and cash equivalents at beginning of period 12.2 14.7 14.8 -------- -------- -------- Cash and cash equivalents at end of period $ 3.1 $ 12.2 $ 14.7 ======== ======== ========
Interest paid in fiscal 1998, 1997, and 1996 was $23.1, $24.5, and $36.2, respectively. See accompanying notes to consolidated financial statements. 29 32 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
COMMON COMMON CAPITAL SHARES STOCK IN TOTAL (IN MILLIONS EXCEPT SHARE (100,000,000 $1.00 EXCESS OF RETAINED STOCKHOLDERS' AND PER SHARE DATA) AUTHORIZED) PAR VALUE PAR VALUE EARNINGS EQUITY ---------- ---------- ---------- ---------- ---------- Balance at March 31, 1995 40,220,694 $ 40.2 $ 221.7 $ 379.3 $ 641.2 Other 1,375,343 1.4 17.9 -- 19.3 Net Income -- -- -- 113.8 113.8 Cash dividends ($0.68 per share) -- -- -- (28.3) (28.3) ---------- ---------- ---------- ---------- ---------- Balance at March 31, 1996 41,596,037 41.6 239.6 464.8 746.0 Distribution of Halter Marine Group, Inc. -- -- -- (80.2) (80.2) Other 1,450,328 1.4 33.7 -- 35.1 Net Income -- -- -- 137.5 137.5 Cash dividends ($0.68 per share) -- -- -- (28.9) (28.9) ---------- ---------- ---------- ---------- ---------- BALANCE AT MARCH 31, 1997 43,046,365 43.0 273.3 493.2 809.5 OTHER 442,911 0.5 3.2 -- 3.7 NET INCOME -- -- -- 103.7 103.7 CASH DIVIDENDS ($0.68 PER SHARE) -- -- -- (29.4) (29.4) ---------- ---------- ---------- ---------- ---------- BALANCE AT MARCH 31, 1998 43,489,276 $ 43.5 $ 276.5 $ 567.5 $ 887.5 ========== ========== ========== ========== ==========
The Company has authorized and unissued 1,500,000 shares of no par value voting preferred stock. - -------------------------------------------------------------------------------- See accompanying notes to consolidated financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of Trinity Industries, Inc. and its consolidated subsidiaries ("Trinity" or the "Company") include the accounts of all significant majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. For purposes of the Consolidated Statement of Cash Flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. Financial instruments which potentially subject the Company to concentrations of credit risk are primarily cash investments and receivables. The Company places its cash investments in investment grade, short-term debt instruments and limits the amount of credit exposure to any one commercial issuer. Concentrations of credit risk with respect to receivables are limited due to the large number of customers in the Company's customer base, and their dispersion across different industries and geographic areas. The Company maintains an allowance for losses based upon the expected collectibility of all receivables. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company enters into lease contracts with third parties with the terms generally ranging between one and fifteen years, 30 33 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- wherein certain equipment manufactured by Trinity is leased for a specified type of service over the term of the contract. The Company primarily enters into operating leases. Inventories and investments are valued at the lower of cost or market. Inventory cost is determined principally on the specific identification method. Market is replacement cost or net realizable value. Depreciation and amortization are generally computed by the straight-line method on the estimated useful lives of the assets, generally 2 to 30 years. The costs of ordinary maintenance and repair are charged to expense while renewals and major replacements are capitalized. In fiscal 1997, the Company adopted Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," and has elected to continue to apply the accounting provisions of APB Opinion 25, "Accounting for Stock Issued to Employees." In the third quarter of fiscal 1998, the Company adopted Statement of Financial Accounting Standards No. 128, "Earnings Per Share." Diluted net income per common share is based on the weighted average shares outstanding plus the assumed exercise of dilutive stock options (less the number of treasury shares assumed to be purchased from the proceeds using the average market price of Trinity's common stock). Basic net income per common share is based on the weighted average number of common shares outstanding for the period. The numerator for both basic net income per common share and diluted net income per common share is net income. The difference between the denominator in the basic calculation and the denominator in the diluted calculation is attributable to the effect of employee stock options. Prior period earnings per share amounts have been restated. In fiscal 1998, Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income," was issued. Adoption is required for the Company beginning in the first quarter of fiscal 1999. The Company does not believe that the adoption of this statement will have a significant impact on its financial statements. In fiscal 1998, Statement of Financial Accounting Standards No. 131, "Disclosures About Segments of an Enterprise and Related Information," was issued. The disclosure requirements for this statement are effective for the Company's financial statements for the year ended March 31, 1999 but not for interim financial reporting until fiscal 2000. The Company has not yet determined the impact of adopting Statement No. 131. SEGMENT INFORMATION Trinity manufactures, sells and leases a wide variety of products principally in three business segments: (i) the Transportation Products segment which consists primarily of railcars, principally tank cars and freight cars, barges for inland waterway service, and railcar leasing to various industries; (ii) the Construction Products segment which consists primarily of highway guardrail and safety products, beams, girders, and columns used in construction of highway and railway bridges, passenger loading bridges and conveyor systems, and ready-mix concrete and aggregates; and (iii) the Industrial Products segment which consists primarily of pressure and non-pressure containers for the storage and transportation of liquefied gases, other liquid and dry products, weld fittings (tees, elbows, reducers, caps, flanges, etc.) used in pressure piping systems, and container heads (the ends of pressure and non-pressure containers) for use internally and by other manufacturers of containers. Financial information for these segments is summarized in the following table. The Company operates principally in the continental United States and Mexico. Intersegmental sales are shown at market prices. Corporate operating profit eliminations consist primarily of the administrative overhead of the Company. Corporate assets consist primarily of cash and cash equivalents, other assets, notes receivable, land held for investment, and certain property, plant and equipment. The Transportation Products segment includes revenues from one customer which accounted for 10.1 percent, 10.8 percent, and 14.9 percent of consolidated revenues in fiscal 1998, 1997, and 1996, respectively. In the Segments of Business table below, the caption 'Additions (net) to property, plant and equipment' does not include business acquisitions. Certain reclassifications have been made to prior year statements to conform to the current year presentation. 31 34 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEGMENTS OF BUSINESS - --------------------------------------------------------------------------------
ELIMINATIONS TRANSPORTATION CONSTRUCTION INDUSTRIAL & CORPORATE CONSOLIDATED (IN MILLIONS) PRODUCTS PRODUCTS PRODUCTS ITEMS TOTAL ------------- ------------ ---------- ------------- ------------- YEAR ENDED MARCH 31, 1998 TOTAL REVENUES: TRADE $ 1,642.9 456.4 371.4 2.3 2,473.0 INTERSEGMENT -- 9.4 7.2 (16.6) -- ---------- ------- ------ ------ ------- TOTAL $ 1,642.9 465.8 378.6 (14.3) 2,473.0 ========== ======= ====== ====== ======= OPERATING PROFIT (LOSS) $ 209.3 55.2 45.0 (53.6) 255.9 IDENTIFIABLE ASSETS $ 976.9 224.2 221.5 151.3 1,573.9 DEPRECIATION $ 40.7 21.0 8.4 8.0 78.1 ADDITIONS (NET) TO PROPERTY, PLANT AND EQUIPMENT $ 25.7 14.1 7.1 12.0 58.9 - --------------------------------------------------------------------------------------------------------------------- Year ended March 31, 1997 Total revenues: Trade $ 1,501.5 395.2 327.6 10.0 2,234.3 Intersegment -- 7.4 7.8 (15.2) -- ---------- ------- ------ ------ ------- Total $ 1,501.5 402.6 335.4 5.2 2,234.3 ========== ======= ====== ====== ======= Operating profit (loss) $ 175.2 43.4 42.5 (46.9) 214.2 Identifiable assets $ 846.0 210.8 164.9 134.7 1,356.4 Depreciation $ 49.5 22.8 7.8 7.7 87.8 Additions (net) to property, plant and equipment $ 100.5 15.1 7.1 (0.1) 122.6 - --------------------------------------------------------------------------------------------------------------------- Year ended March 31, 1996 Total revenues: Trade $ 1,555.2 380.6 305.4 0.5 2,241.7 Intersegment -- 4.9 13.4 (18.3) -- ---------- ------ ------ ------ ------- Total $ 1,555.2 385.5 318.8 (17.8) 2,241.7 ========== ====== ====== ====== ======= Operating profit (loss) $ 157.9 43.4 35.4 (41.8) 194.9 Identifiable assets $ 832.5 218.4 151.6 224.1 1,426.6 Depreciation $ 33.7 19.3 8.9 7.3 69.2 Additions (net) to property, plant and equipment $ 6.8 9.2 4.1 8.7 28.8
32 35 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- BUSINESS ACQUISITIONS AND DIVESTITURES BUSINESS ACQUISITIONS The Company made certain business acquisitions during fiscal 1998, 1997 and 1996. All have been accounted for by the purchase method. The operations of these companies have been included in the consolidated financial statements from the effective dates of the acquisitions. In fiscal 1998, the businesses acquired for continuing operations included: (i) certain assets of the Industrial Products Division of Ladish Co., Inc. for cash. These assets are utilized in the manufacture of metal components; (ii) certain assets of Buffalo Specialty Products, Inc. for cash. These assets are utilized in the manufacture of construction products; (iii) 100 percent of the capital stock of Differential Holdings, Inc. in exchange for 94,067 shares of Trinity common stock. Differential Holdings, Inc., through its wholly-owned subsidiary Difco, Inc., manufactures railcars; (iv) certain assets of Industrial Companies, Inc. for cash. These assets will be used in the ready-mix concrete business; and (v) certain assets of the Springfield, Missouri facility of Busch Mechanical Services, Inc. for cash. These assets are utilized in the railcar repair business. The aggregate purchase price for these acquisitions was approximately $70.8 million. Contributions of these acquisitions to revenues and operating profit during fiscal 1998 was not material. In fiscal 1997, the businesses acquired for continuing operations included: (i) 100 percent of the capital stock of Transcisco Industries, Inc. ("Transcisco") in exchange for 1,162,612 shares of Trinity common stock. Transcisco is a diversified railcar services company engaged in railcar maintenance and repair, specialty railcar leasing and management services, and Russian rail transportation services through its 20 percent ownership of SFAT, Russia's largest private rail transportation services company, and (ii) certain assets of John Guidry Ready Mix Company, Inc., The Cement and Supply Company, and Pitcock Bros. Ready Mix Concrete, Inc. for cash. These assets are used in the ready-mix concrete business. The aggregate purchase price of these acquisitions was approximately $68.6 million. In fiscal 1996, the businesses acquired for continuing operations included: (i) 100 percent of the capital stock of the holding company which owns Grupo TATSA S. A. de C. V. in exchange for 1,199,000 shares of Trinity common stock. Grupo TATSA, now known as Trinity Industries de Mexico, headquartered in Mexico City, Mexico, manufactures and distributes a wide variety of fabricated steel products including containers (primarily for the storage or transportation of liquefied petroleum products), railcars and railcar parts, and heads which are used within the Company as well as sold to other manufacturers from its manufacturing facilities in Mexico City, Monclova, and Huehuetoca, Mexico; (ii) certain assets of McDonald's Ready-Mix, Brazos Point, Inc. and Dunn & Gerhart Everready Concrete, Inc. for cash. These assets are utilized in the ready-mix concrete and aggregate business; (iii) certain assets of Hall-Buck Marine, Inc. for cash. Hall-Buck's assets are utilized in the maintenance and repair of marine products; and (iv) certain assets of The Casteel Group, Inc. for cash. Casteel's assets are utilized in the fabrication of construction products. The aggregate purchase price of these acquisitions was approximately $52.6 million. DIVESTITURE Halter Marine Group, Inc. ("Halter"), previously a wholly-owned subsidiary of the Company, completed its initial public offering (the "Offering") of 3,450,000 shares of common stock, par value $.01 per share on October 29, 1996. The 3,450,000 shares of common stock sold to the public represented approximately 19.0 percent of the total outstanding common stock of Halter. The Company retained ownership of the remaining 15,000,000 shares. The Offering price was $11 per share of Halter common stock resulting in net proceeds to Halter of approximately $33.8 million after deducting underwriting discounts and commissions and Halter's Offering expenses. Trinity recorded a net gain of approximately $9.3 million from the sale of the Halter common stock. 33 36 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- At the close of business on March 31, 1997, the Company completed the divestiture of Halter with the distribution of its remaining 15 million shares of Halter common stock to its stockholders in the form of a tax-free property distribution. Each of the Company's stockholders of record at March 21, 1997 received 0.348 of a share of Halter common stock for each share of Trinity common stock held. Prior year's financial statements have been reclassified to reflect the divestiture of the Halter business. The income from discontinued operations reflected in the table below is inclusive of minority interest held by stockholders outside of the Company. Summary operating results of discontinued operations are as follows (in millions):
YEAR ENDED MARCH 31 1997 1996 - ------------------- -------- -------- Revenues $406.8 $254.3 Income from discontinued operations before income taxes $ 27.0 $ 20.6 Provision for income taxes 10.9 8.1 ------ ------ Income from discontinued operations $ 16.1 $ 12.5 ====== ======
Due to the divestiture of Halter, the Halter net assets at March 31, 1997 are not included in the Company's March 31, 1997 Consolidated Balance Sheet. At March 31, 1998, Trinity has guaranteed contract performance obligations of Halter in the aggregate amount of approximately $14.9 million, and Halter has outstanding contract bid and performance bonds and similar obligations issued by third parties with Trinity as the obligor with an aggregate face amount of approximately $50.7 million. STOCK PLANS The Company has a Stock Option and Incentive Plan (the "Plan") which provides for grants of incentive or non-qualified stock options, restricted stock awards, performance awards and stock appreciation rights ("SARs"). Grants may be made to directors, officers and employees in managerial or other key positions in the Company. Incentive options may be granted over a period not to exceed ten years at a price not less than fair market value on the date of grant. The maximum number of shares of common stock which may be issued under the Plan shall not exceed 1,500,000 unless adjusted for changes in capitalization of the Company. The Plan provides that, to the extent awards granted pursuant to this Plan or any prior stock option plan are forfeited, expire or canceled, they may again be granted pursuant to the provisions of this Plan. The Plan provides that if shares already owned by the optionee are surrendered as full or partial payment of the exercise price of an option, a new option (the "Reload Option") may be granted equal to the number of shares surrendered. The exercise price of the Reload Option shall be the fair market value on the effective date of the grant. 34 37 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THE FOLLOWING TABLE SUMMARIZES STOCK OPTION ACTIVITY: - --------------------------------------------------------------------------------
WEIGHTED WEIGHTED AVERAGE NON- AVERAGE INCENTIVE EXERCISE INCENTIVE EXERCISE SHARES PRICE SHARES PRICE --------- ---------- ---------- --------- Outstanding at March 31, 1995 343,610 $ 18.88 1,585,034 $ 24.44 Granted 79,500 $ 32.59 41,273 $ 37.64 Canceled (10,212) $ 19.99 (11,090) $ 21.99 Exercised (56,025) $ 17.77 (245,629) $ 23.61 --------- ---------- Outstanding at March 31, 1996 356,873 $ 22.07 1,369,588 $ 25.01 Granted 305,505 $ 32.05 174,951 $ 32.62 Canceled (3,625) $ 22.43 (3,000) $ 26.67 Exercised (105,045) $ 18.39 (132,523) $ 23.35 --------- ---------- Outstanding at March 31, 1997 553,706 $ 28.28 1,409,016 $ 26.11 Effect of Halter property distribution adjustment 140,486 $ 28.28 358,883 $ 26.11 Granted 140,773 $ 50.62 248,445 $ 44.08 Canceled (109,861) $ 26.87 (204,596) $ 21.88 Exercised (154,148) $ 16.93 (400,209) $ 22.27 --------- ---------- Outstanding at March 31, 1998 570,956 $ 30.15 1,411,539 $ 24.33 ========= ==========
At March 31, 1998, there were 525,627 shares (893,548 at March 31, 1997) reserved for future options. The following table summarizes information about stock options outstanding at March 31, 1998:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE ---------------------------------------------------------------------------- WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE REMAINING EXERCISE EXERCISE LIFE SHARES PRICES SHARES PRICES --------- -------- ------------ ----------- ---------- Incentive options 3 Years 74,488 $ 15.35 74,488 $ 15.35 9 Years 496,468 $ 32.37 74,905 $ 25.60 Non-Incentive options 4 Years 973,578 $ 18.97 727,307 $ 18.07 9 Years 437,961 $ 36.25 91,273 $ 27.62 --------- ---------- 1,982,495 967,973 ========= ==========
35 38 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- In connection with the Halter property distribution, stock options outstanding at the close of business on March 31, 1997 were adjusted to preserve the economic value of such options. Incentive and non-incentive options shown outstanding at March 31, 1997, in the table above, were adjusted to 694,192 and 1,767,899 options, respectively at prices ranging from $13.22 to $31.28. Restricted stock awards issued under the Plan may not be disposed of by the recipient until all restrictions specified in the award expire. The following table summarizes restricted stock information:
RESTRICTED STOCK ---------------------- 1998 1997 ---------------------- Restricted shares awarded 24,000 20,000 Grant date fair value $ 53.00 $ 25.13 Outstanding at March 31 40,500 20,000
The Company has elected to account for stock options under the accounting provisions of APB Opinion 25, Accounting for Stock Issued to Employees. Accordingly, no compensation cost has been recorded for the stock options granted. The effect of computing compensation cost in accordance with SFAS No. 123 in fiscal 1998 is approximately $1.5 million, or $0.02 per common share. The effect in fiscal 1997 was not material. SFAS No. 123 does not apply to grants prior to fiscal year 1996. The weighted average fair value of options granted during 1998 and 1997 was $17.72 and $9.26, respectively. The fair value of each option grant is estimated on the date of the grant using the Black-Scholes option-pricing model with the following weighted average assumptions:
---------------------- 1998 1997 ---------------------- Expected option life in years 6.5 6.8 Interest rate 7.05% 6.45% Volatility factor 0.283 0.209 Dividend yield 1.56% 2.11%
The Black-Scholes model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. Because the Company's employee stock options have characteristics significantly different from those of traded options and because changes in the subjective input assumptions can materially affect the fair value estimate, the existing models, in management's opinion, do not provide a reliable measure of the fair value of its employee stock options. DEBT LONG-TERM DEBT
March 31 - ----------------------------------------------------------------------------------------------------------- (IN MILLIONS) 1998 1997 - ----------------------------------------------------------------------------------------------------------- 5.10-9.25 percent industrial development revenue bonds payable in varying amounts through 2005 $ 1.9 $ 1.7 6.0-8.25 percent promissory notes, generally payable annually through 2001 31.7 33.5 6.96-11.55 percent equipment trust certificates to institutional investors generally payable in semi-annual installments of varying amounts through 2003 107.5 133.8 11.3 percent notes payable monthly through 2003 8.5 9.6 ------------------ $149.6 $178.6 ==================
36 39 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- The fair value of non-traded, fixed rate outstanding debt, estimated using discounted cash flow analysis, approximates its carrying value. The Company is required to maintain certain financial ratios, as defined. Principal payments due during the next five years are: 1999 - $29.2; 2000 - $27.3; 2001 - $52.9; 2002 - $25.9; and 2003 - $11.4. The trustees of the equipment trusts have been assigned title to railcars with a cost of $279.7 at March 31, 1998 for the life of the respective equipment trusts. Leases relating to such railcars financed by equipment trust certificates have been assigned as collateral. Future minimum rental revenues on leases in each fiscal year are approximately $66.0 - 1999; $57.7 - 2000; $47.0 - 2001; $41.7 - 2002; $34.2 - 2003; and $120.4 thereafter. SHORT-TERM DEBT Short-term debt primarily consists of money market borrowings, with interest rates ranging from 5.86% to 6.43% in 1998 and 6.8% to 6.9% in 1997, generally due within 30 days. PROPERTY, PLANT AND EQUIPMENT
March 31 - ---------------------------------------------------- (IN MILLIONS) 1998 1997 - ---------------------------- -------- -------- Land $ 37.6 $ 34.5 Buildings and improvements 224.7 208.6 Machinery 497.7 458.4 Equipment on lease (predominately long-term) 416.8 413.7 Construction in progress 25.1 21.3 -------- -------- $1,201.9 $1,136.5 ======== ========
INCOME TAXES (IN MILLIONS) The provision for federal income taxes is determined on a consolidated return basis. The significant components of the provision (benefit) for income taxes from continuing operations follow:
Year Ended March 31 ------------------------------- 1998 1997 1996 ------- ------- -------- Current Federal $ 48.0 $ 63.2 $ 70.0 State 5.3 8.0 7.0 ------- ------- ------- 53.3 71.2 77.0 Deferred 8.9 (3.6) (12.5) ------- ------- ------- Total $ 62.2 $ 67.6 $ 64.5 ======= ======= =======
Deferred income tax is provided in the financial statements for differences between financial and taxable income. The components of deferred liabilities and assets follow:
March 31 ------------------ 1998 1997 ------- ------- Deferred tax liabilities: Tax over book depreciation $ 73.4 $ 74.1 ------- ------- Total deferred tax liabilities 73.4 74.1 ------- ------- Deferred tax assets: Pensions and other benefits 34.2 35.4 Accounts receivable, inventory, and other asset valuation accounts 8.5 3.6 Other 3.2 12.3 ------- ------- Total deferred tax assets 45.9 51.3 ------- ------- Net deferred tax liabilities $ 27.5 $ 22.8 ======= =======
The provision for income taxes from continuing operations results in effective tax rates different than the statutory rates. The reconciliation between the effective and statutory rates follows:
Year Ended March 31 ---------------------- 1998 1997 1996 ---- ---- ---- Statutory rate 35.0% 35.0% 35.0% State taxes 2.1 2.3 3.2 Other (net) 0.4 -- 0.7 ---- ---- ---- Effective tax rate 37.5% 37.3% 38.9% ==== ==== ====
In fiscal 1998, 1997 and 1996 income taxes of $33.6, $85.9, and $118.1 respectively, were paid net of refunds received and for 1997 and 1996, include amounts associated with Halter. 37 40 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- EMPLOYEE BENEFIT PLANS (IN MILLIONS) Pension plans are in effect which provide income and death benefits for eligible employees. The Company's policy is to fund retirement costs accrued to the extent such amounts are deductible for income tax purposes. Plan assets include cash, short-term debt securities, and other investments. Benefits are based on years of credited service and compensation. Net periodic pension expense for fiscal 1998, 1997 and 1996 included the following components:
Year Ended March 31 --------------------------------- 1998 1997 1996 ------- ------- ------- Service cost-benefits earned during the period $ 15.1 $ 13.7 $ 8.0 Interest cost on projected benefit obligation 10.2 9.5 7.4 Actual return on assets (34.5) (13.0) (16.9) Net amortization and deferral 23.6 3.7 10.1 Accrual of profit sharing contribution 4.5 4.6 3.6 ------- ------- ------- Net periodic pension expense $ 18.9 $ 18.5 $ 12.2 ======= ======= =======
Assumptions used for valuation of the projected benefit obligation were:
------------------------------ 1998 1997 1996 ---- ---- ---- Discount rates 7.25% 7.75% 7.75% Rates of increase in compensation levels 4.75% 4.75% 4.75% Expected long-term rate of return on assets 9% 9% 9%
Amounts recognized in the Company's consolidated balance sheet follow:
March 31 -------------------- 1998 1997 ------- ------- Actuarial present value of benefit obligation: Vested benefit obligation $ 96.2 $ 82.1 ======= ======= Accumulated benefit obligation $ 113.1 $ 95.6 ======= ======= Projected benefit obligation $ 150.0 $ 124.5 Plan assets at fair value 153.4 114.3 ------- ------- Projected benefit obligation less than (in excess of) plan assets 3.4 (10.2) Unrecognized net asset at April 1, 1985 (1.4) (1.5) Unrecognized net asset at January 1, 1986 (0.5) (0.7) Unrecognized net loss at March 31 6.2 17.0 ======= ======= Prepaid pension expense $ 7.7 $ 4.6 ======= =======
The Company has a contributory profit sharing plan for employees of the Company and certain affiliates. Under the plan, eligible employees are allowed to make voluntary pre-tax contributions. The Company's contribution to this plan, as defined, is based on consolidated earnings and dividends. 38 41 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- CONTINGENCIES In September 1997, the Company settled a 13 year old lawsuit brought against a former subsidiary of the Company by Morse/Diesel, Inc. The settlement resulted in an after-tax charge of $43.8 million being recorded in the second quarter of fiscal year 1998. The Company has not participated in the business associated with this matter since 1989. In April 1998, the Company settled a 5 year old patent infringement lawsuit brought against the Company by Johnstown America Corp. for approximately $10.5 million, net of tax. The Company is involved in various other claims and lawsuits incidental to its business. In the opinion of management, these claims and suits in the aggregate will not have a material adverse affect on the Company's consolidated financial statements. STOCKHOLDER'S RIGHTS PLAN The Company has adopted a Stockholder's Rights Plan. Effective April 27, 1989, the Company paid a dividend distribution of one purchase right for each outstanding share of the Company's $1.00 par value common stock. Each right entitles the stockholder to purchase from the Company one one-hundredth of a share of Series A Junior Participating Preferred Stock at an exercise price of one hundred and seventy-five dollars. As amended, the rights are not exercisable or detachable from the common stock until ten business days after a person acquires beneficial ownership of ten percent or more of the Company's common stock or if a person or group commences a tender or exchange offer upon consummation of which that person or group would beneficially own ten percent or more of the common stock. If any person becomes a beneficial owner of ten percent or more of the Company's common stock other than pursuant to an offer, as defined, for all shares determined by certain directors to be fair to the stockholders and otherwise in the best interests of both the Company and its stockholders (other than by reason of share purchases by the Company), each right not owned by that person or related parties enables its holder to purchase, at the right's then current exercise price, shares of the Company's common stock having a calculated value of twice the right's exercise price. The rights, which are subject to adjustment, may be redeemed by the Company at a price of one cent per right at any time prior to their expiration on April 27, 1999 or the point at which they become exercisable. REPORT OF INDEPENDENT AUDITORS - -------------------------------------------------------------------------------- THE BOARD OF DIRECTORS AND STOCKHOLDERS TRINITY INDUSTRIES, INC. We have audited the accompanying consolidated balance sheets of Trinity Industries, Inc. as of March 31, 1998 and 1997, and the related consolidated statements of income, cash flows and stockholders' equity for each of the three years in the period ended March 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Trinity Industries, Inc. at March 31, 1998 and 1997, and the consolidated results of its operations and its cash flows for each of the three years in the period ended March 31, 1998, in conformity with generally accepted accounting principles. ERNST & YOUNG LLP Dallas, Texas May 6, 1998 39 42 SUPPLEMENTAL INFORMATION
SUPPLEMENTAL UNAUDITED QUARTERLY DATA - ----------------------------------------------------------------------------------------------------------- FIRST SECOND THIRD FOURTH (IN MILLIONS EXCEPT FOR PER SHARE DATA QUARTER QUARTER QUARTER QUARTER YEAR - ----------------------------------------------------------------------------------------------------------- YEAR ENDED MARCH 31, 1998: REVENUES $ 560.1 560.3 642.4 710.2 2,473.0 OPERATING PROFIT $ 58.3 63.2 68.7 65.7 255.9 NET INCOME (LOSS)(1) $ 33.2 (7.3) 38.8 39.0 103.7 NET INCOME (LOSS) PER COMMON SHARE: BASIC $ 0.77 (0.17) 0.90 0.90 2.41 DILUTED $ 0.76 (0.17) 0.88 0.89 2.36 Year ended March 31, 1997: Revenues $ 576.5 548.5 580.4 528.9 2,234.3 Operating profit $ 53.9 54.4 54.3 51.6 214.2 Income from continuing operations $ 30.5 30.5 22.1 30.6 113.7 Income from discontinued operations 3.3 3.9 12.8 3.8 23.8 ------- ------- ------- ------- ------- Net income $ 33.8 34.4 34.9 34.4 137.5 ======= ======= ======= ======= ======= Net income per common share: Basic: Income from continuing operations $ 0.73 0.73 0.51 0.71 2.68 Income from discontinued operations 0.08 0.09 0.30 0.09 0.56 ------- ------- ------- ------- ------- Net income per common share $ 0.81 0.82 0.81 0.80 3.24 ======= ======= ======= ======= ======= Diluted: Income from continuing operations $ 0.72 0.72 0.51 0.71 2.66 Income from discontinued operations 0.08 0.09 0.29 0.08 0.55 ------- ------- ------- ------- ------- Net income per common share $ 0.80 0.81 0.80 0.79 3.21 ======= ======= ======= ======= =======
(1)Loss in second quarter is due to one-time after-tax charge of $43.8, or $1.00 per diluted share, for litigation settlement. STOCKHOLDER INFORMATION - -------------------------------------------------------------------------------- EXECUTIVE OFFICES 2525 Stemmons Freeway Dallas, Texas 75201-2401 P.O. Box 568887 Dallas, TX 75356-8887 Tel: (214) 631-4420 AUDITORS Ernst & Young LLP TRANSFER AGENT AND REGISTRAR The Bank of New York New York, New York ANNUAL MEETING The Annual Meeting of Stockholders will be held on July 17, 1998 at 9:30 a.m. at the offices of the Company, 2525 Stemmons Freeway, Dallas, Texas 75207-2401 FORM 10-K A copy of the Company's 10-K, as filed with the Securities and Exchange Commission, shall be furnished without charge upon written request to Michael E. Conley, Director of Investor Relations, Trinity Industries, Inc., P.O. Box 568887, Dallas, Texas 75356-8887
STOCK CLOSING PRICE RANGE - -------------------------------------------------------------------------------- 1998 1997 1996 1995 1994 - -------------------------------------------------------------------------------- First Quarter 34 3/4- 36- 40 1/4- 39 3/4- 35 1/2- 24 1/2 33 1/8 32 33 7/8 29 5/8 Second Quarter 48 1/4- 33 7/8- 36 1/8- 35 1/4- 38 1/4- 31 1/4 31 1/8 30 7/8 31 32 1/2 Third Quarter 54- 37 1/2- 32 1/2- 35 3/8- 43 7/8- 39 32 1/2 28 1/4 30 1/2 34 3/4 Fourth Quarter 55- 36 7/8- 35 3/4- 37 3/8- 47 3/8- 43 9/16 30 3/8 31 1/8 31 3/4 37 1/2
40 43
BOARD OF DIRECTORS EXECUTIVE OFFICERS OPERATING PRESIDENTS W. Ray Wallace W. Ray Wallace Don A. Graham Chairman and Chief Executive Officer Chairman and Chief Executive Officer Group President Highway Safety/ Fittings and Flange John L. Adams Timothy R. Wallace John R. Nussrallah Chairman and Chief Executive Officer President and Chief Operating Officer Group President Chase Bank of Texas, N.A. Railcar Ralph A. Banks, Jr. David W. Biegler Senior Vice President Douglas H. Schneider President and Chief Operating Officer Group President Texas Utilities Company Richard G. Brown Marine, LPG, and International Senior Vice President Barry J. Galt Mark W. Stiles Chairman, President and Mark W. Stiles Group President Chief Executive Officer Group Vice President Concrete/Aggregates Seagull Energy Corporation Jack L. Cunningham, Jr. Rodney A. Boyd Clifford J. Grum Vice President President Chairman and Chief Executive Officer Rollform Division Temple-Inland, Inc. Michael G. Fortado Vice President, Secretary/ Manuel Castro, Sr. Dean P. Guerin General Counsel President Investments Trinity Industries de Mexico Jim S. Ivy Jess T. Hay Vice President and Harry W. Hinkle Chairman of HCB Enterprises, Chairman Chief Financial Officer President Texas Foundation for Higher Education Specialty Products Division John M. Lee Edmund M. Hoffman Vice President Jeffrey J. Marsh Investments President Richard A. Martin Railcar - Tank Car Division Diana Natalicio Vice President President John R. McDearman University of Texas at El Paso F. Dean Phelps, Jr. President Vice President LPG Tank Division Timothy R. Wallace President and Chief Operating Officer Joseph F. Piriano Patrick A. Turner Vice President President Trinity Industries Transportation, Inc. Linda S. Sickels Vice President Robert K. Van Noord President Neil O. Shoop Fittings and Flange Division Treasurer Patrick S. Wallace William J. Goodwin President Controller Railcar - Rail Services Division
44 [LOGO] TRINITY INDUSTRIES, INC. 2525 Stemmons Freeway o Dallas, Texas 75207-2401 P.O. Box 568887 o Dallas, Texas 75356-8887 214-631-4420 EX-21 3 SUBSIDIARIES OF THE REGISTRANT 1 EXHIBIT 21 Trinity Industries, Inc. Listing of Subsidiaries of the Registrant The Registrant has no parent. At March 31, 1998, the operating subsidiaries of the Registrant were:
Percentage of Organized voting securities under the owned by the Name of subsidiary laws of Registrant - --------------------------------------- ------------ ----------------- Beaird Industries, Inc. Delaware 100% Helmsdale, Limited Isle of Man 100% International Industrial Indemnity Co. Vermont 100% Standard Forged Products, Inc. Delaware 100% Syntechnics, Inc. Delaware 100% Syro, Inc. Ohio 100% Transit Mix Concrete & Materials Company Delaware 100% Transit Mix Concrete & Materials Company of Louisiana Louisiana 100% Trinity DIFCO, Inc. Delaware 100% Trinity Casteel, Inc. Delaware 100% Trinity Equipment Co., Inc. Delaware 100% Trinity Financial Services, Inc. Delaware 100% Trinity Fitting & Flange Group, Inc. Delaware 100% Trinity Industries do Brasil, Ltda. Brazil 100% Trinity Industries Buffalo, Inc. Delaware 100% Trinity Industries Leasing Company Delaware 100% Trinity Industries de Mexico SA de CV Mexico 100% Trinity Industries Real Properties, Inc. Delaware 100% Trinity Industries Transportation, Inc. Texas 100% Trinity Marine Caruthersville, Inc. Delaware 100% Trinity Marine Nashville, Inc. Delaware 100% Trinity Marine Orange, Inc. Delaware 100% Trinity Marine Port Allen, Inc. Delaware 100% Trinity Marine Products, Inc. Delaware 100% Trinity Materials, Inc. Delaware 100% Trinity Mobile Railcar Repair, Inc. Delaware 100% Trinity Rail, Inc. Delaware 100% Trinity Rail Management, Inc. Delaware 100% Transcisco Trading Company Delaware 100% Trinity Rail Services, Inc. California 100%
EX-23 4 CONSENT OF ERNST & YOUNG LLP 1 EXHIBIT (23) Consent of Independent Auditors We consent to the incorporation by reference in this Annual Report (Form 10-K) of Trinity Industries, Inc. of our report dated May 6, 1998, included in the 1998 Annual Report to Stockholders of Trinity Industries, Inc. Our audits also included the financial statement schedule of Trinity Industries, Inc. listed in Item 14(a). This schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. We also consent to the incorporation by reference in Post-Effective Amendment No. 3 to the Registration Statement (Form S-8, No. 2-64813), Post-Effective Amendment No. 1 to the Registration Statement (Form S-8, No. 33-10937), Post-Effective Amendment No. 1 to the Registration Statement (Form S-3, No. 33-12526), Amendment No. 1 to the Registration Statement (Form S-3, No. 33-57338), Registration Statement (Form S-8, No. 33-35514), Registration Statement (Form S-8, No. 33-73026), Post-Effective Amendment No. 1 to the Registration Statement (Form S-4, No. 33-51709), Post-Effective Amendment No. 1 to the Registration Statement (Form S-4, No. 333-08321) of Trinity Industries, Inc. and in the related Prospectuses of our reports dated May 6, 1998 and June 24, 1998, with respect to the consolidated financial statements and schedule of Trinity Industries, Inc. included or incorporated by reference in this Annual Report (Form 10-K) for the year ended March 31, 1998. ERNST & YOUNG LLP Dallas, Texas June 24, 1998 EX-27 5 FINANCIAL DATA SCHEDULE
5 1,000 12-MOS MAR-31-1998 MAR-31-1998 3,100 0 390,500 0 342,600 0 1,201,900 (475,000) 1,573,900 0 0 0 0 43,500 844,000 1,573,900 0 2,473,000 0 2,054,000 0 0 20,900 165,900 62,200 103,700 0 0 0 103,700 2.41 2.36
EX-27.1 6 RESTATED FINANANCIAL DATA SCHEDULE
5 1,000 12-MOS 12-MOS 6-MOS 3-MOS MAR-31-1997 MAR-31-1996 MAR-31-1998 MAR-31-1998 MAR-31-1997 MAR-31-1996 SEP-30-1997 JUN-30-1997 12,200 14,700 3,400 7,600 0 0 0 0 236,900 285,200 292,300 291,000 0 0 0 0 314,500 329,700 340,700 318,000 0 0 0 0 1,136,500 1,007,100 1,195,200 1,161,600 (424,900) (369,600) (451,000) (439,600) 1,356,400 1,426,600 1,484,800 1,417,600 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 43,000 41,600 43,200 43,100 766,500 704,400 782,700 792,700 1,356,400 1,426,600 1,484,800 1,417,600 0 0 0 0 2,234,300 2,241,700 1,120,400 560,100 0 0 0 0 1,877,600 1,929,000 917,600 459,200 0 0 0 0 0 0 0 0 21,400 30,800 10,200 5,000 181,300 165,800 41,500 52,600 67,600 64,500 15,600 19,400 113,700 101,300 25,900 33,200 23,800 12,500 0 0 0 0 0 0 0 0 0 0 137,500 113,800 25,900 33,200 3.24 2.75 0.60 0.77 3.21 2.72 0.59 0.76
EX-27.2 7 RESTATED FINANCIAL DATA SCHEDULE
5 1,000 12-MOS 9-MOS 6-MOS 3-MOS MAR-31-1995 MAR-31-1997 MAR-31-1997 MAR-31-1997 MAR-31-1995 DEC-31-1996 SEP-30-1996 JUN-30-1996 14,800 8,700 18,500 3,700 0 0 0 0 263,000 232,900 236,200 242,100 0 0 0 0 317,500 307,800 312,500 330,100 0 0 0 0 1,019,700 1,147,900 1,107,000 1,016,300 (370,700) (418,800) (398,800) (383,000) 1,400,500 1,473,200 1,501,800 1,385,800 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 40,200 43,100 43,000 41,700 601,000 824,800 800,400 732,100 1,400,500 1,473,200 1,501,800 1,385,800 0 0 0 0 2,064,300 1,705,400 1,125,000 576,500 0 0 0 0 1,812,300 1,435,700 946,800 487,000 0 0 0 0 0 0 0 0 29,500 17,400 12,400 6,400 121,600 134,200 98,500 49,100 48,200 51,100 37,500 18,600 73,400 83,100 61,000 30,500 15,700 20,000 7,200 3,300 0 0 0 0 0 0 0 0 89,100 103,100 68,200 33,800 2.23 2.44 1.63 0.81 2.20 2.42 1.62 0.80
EX-99.1 8 ANNUAL REPORT FOR 11-K 1 EXHIBIT 99.1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------- FORM 11-K ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 31, 1998 Commission File Number 1-6903 ------------------------- PROFIT SHARING PLAN FOR EMPLOYEES OF TRINITY INDUSTRIES, INC. AND CERTAIN AFFILIATES (Full Title of the plan) TRINITY INDUSTRIES, INC. (Name of issuer of the securities held pursuant to the plan) Delaware 75-0225040 (State of Incorporation) (I.R.S. Employer Identification No.) 2525 Stemmons Freeway Dallas, Texas 75207-2401 (Address of principal executive offices) (Zip Code) Issuer's telephone number, including area code (214) 631-4420 ================================================================================ 2 Profit Sharing Plan for Employees of Trinity Industries, Inc. and Certain Affiliates Index to Annual Report on Form 11-K (a) Financial Statements
Description Page ------------------------------------------------ ---- Report of Independent Auditors . . . . . . . . . . 4 Statements of Financial Condition, With Fund Information as of March 31, 1998 and 1997. . . . . 5 - 6 Statements of Income and Changes in Plan Equity, With Fund Information for the Years Ended March 31, 1998, 1997 and 1996. . . . . . . . . 7 - 9 Notes to Financial Statements. . . . . . . . . . . 10
(b) Exhibits
Number Title Page ------ --------------------------------- ---- 23 Consent of independent auditors 23 Line-27 a Schedule of Assets Held for Investment Purposes 24-25 Line-27 d Schedule of Reportable Transactions 26
3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees have duly caused this Annual Report to be signed by the undersigned thereunto duly authorized. Profit Sharing Plan for Employees of Trinity Industries, Inc. and Certain Affiliates /s/ John M. Lee - ------------------------ John M. Lee Vice President June 25, 1998 3 4 Report of Independent Auditors The Board of Directors Trinity Industries, Inc. We have audited the accompanying statements of financial condition of the Profit Sharing Plan for Employees of Trinity Industries, Inc. and Certain Affiliates (the "Plan") as of March 31, 1998 and 1997, and the related statements of income and changes in Plan equity for each of the three years in the period ended March 31, 1998. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial condition of the Plan at March 31, 1998 and 1997, and the income and changes in Plan equity for each of the three years in the period ended March 31, 1998, in conformity with generally accepted accounting principles. Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplemental schedules of assets held for investment purposes as of March 31, 1998, and reportable transactions for the year then ended, are presented for purposes of complying with the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974, and are not a required part of the basic financial statements. The fund information in the statements of financial condition and the statements of income and changes in Plan equity is presented for purposes of additional analysis rather than to present the financial condition and income and changes in plan equity of each fund. The supplemental schedules and fund information have been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. Dallas, Texas ERNST & YOUNG LLP June 12, 1998 4 5 Profit Sharing Plan for Employees of Trinity Industries, Inc. and Certain Affiliates Statement of Financial Condition, With Fund Information March 31, 1998
Putnam Mutual Funds ------------------------------------------- Guaranteed U. S. Govt. Stock Investment Growth & Income Assets Account Account Income Trust Voyager ------------ ------------ ------------ ------------ ------------ Cash and short-term investments ......................... $ 311,055 $ 2,187,542 $ 15,001 $ 15,276 $ 14,999 Notes receivable from participants ................... -- -- -- -- -- Investment in Trinity Industries, Inc. common stock, at fair value ......... 23,455,410 -- -- -- -- Investment in Halter Marine Group, Inc. common stock, at fair value ......... 2,771,188 -- -- -- -- Investment in guaranteed investment contracts, at contract value ...................... -- 37,478,543 -- -- -- Investment in Putnam mutual funds, at fair value ................ -- -- 21,241,233 6,845,093 22,909,895 Interest receivable ................... 1,243 195,007 259 123 285 Contribution receivable from Trinity ........................ 681,292 1,406,200 902,855 264,223 981,319 Contribution receivable from employees ...................... -- -- -- -- -- ------------ ------------ ------------ ------------ ------------ Plan Equity ........................... $27,220,18 $ 41,267,292 $ 22,159,348 $ 7,124,715 $ 23,906,498 ============ ============ ============ ============ ============
Participant Loans Total ------------ ------------ Cash and short-term investments ......................... $ 76,521 $ 2,620,394 Notes receivable from participants ................... 1,266,866 1,266,866 Investment in Trinity Industries, Inc. common stock, at fair value ......... -- 23,455,410 Investment in Halter Marine Group, Inc. common stock, at fair value ......... -- 2,771,188 Investment in guaranteed investment contracts, at contract value ...................... -- 37,478,543 Investment in Putnam mutual funds, at fair value ................ -- 50,996,221 Interest receivable ................... 812 197,729 Contribution receivable from Trinity ........................ -- 4,235,889 Contribution receivable from employees ...................... 39,993 39,993 ------------ ------------ Plan Equity ........................... $ 1,384,192 $123,062,233 ============ ============
See accompanying notes to financial statements. 5 6 Profit Sharing Plan for Employees of Trinity Industries, Inc. and Certain Affiliates Statement of Financial Condition, With Fund Information March 31, 1997
Putnam Mutual Funds --------------------------------------- Guaranteed U. S. Govt. Stock Investment Growth & Income Participant Assets Account Account Income Trust Voyager Loans Total ----------- ----------- ----------- ----------- ----------- ----------- ----------- Cash and short-term investments ................. $ 8,651 $ 462,966 $ 3,315 $ 5,149 $ 3,309 $ 63,433 $ 546,823 Notes receivable from participants ........... -- -- -- -- -- 959,157 959,157 Investment in Trinity common stock, at fair value . 11,707,801 -- -- -- -- -- 11,707,801 Investment in guaranteed investment contracts, at contract value .............. -- 34,629,904 -- -- -- -- 34,629,904 Investment in Putnam mutual funds, at fair value ........ -- -- 12,973,297 5,449,145 12,509,249 -- 30,931,691 Interest receivable ........... 465 209,350 90 30 347 641 210,923 Contribution receivable from Trinity ................ 676,128 1,779,673 758,561 271,819 906,172 -- 4,392,353 Contribution receivable from employees .............. 98,032 185,647 106,769 29,855 129,569 -- 549,872 ----------- ----------- ----------- ----------- ----------- ----------- ----------- Plan Equity ................... $12,491,077 $37,267,540 $13,842,032 $ 5,755,998 $13,548,646 $ 1,023,231 $83,928,524 =========== =========== =========== =========== =========== =========== ===========
See accompanying notes to financial statements. 6 7 Profit Sharing Plan for Employees of Trinity Industries, Inc. and Certain Affiliates Statement of Income and Changes in Plan Equity, With Fund Information Year Ended March 31, 1998
Putnam Mutual Funds ----------------------------------------------- Guaranteed U.S. Govt. Stock Investment Growth & Income Account Account Income Trust Voyager ------------- ------------- ------------- ------------- ------------- Net investment income: Interest .......................... $ 13,478 $ 2,357,177 $ 3,746 $ 1,695 $ 4,569 Dividends ......................... 280,127 -- 2,294,268 387,367 1,091,255 ------------- ------------- ------------- ------------- ------------- 293,605 2,357,177 2,298,014 389,062 1,095,824 Net realized gain(loss) on investments .................... 347,060 -- 238,425 (4,246) 365,269 Unrealized appreciation (depreciation) of investments .................... 12,455,553 -- 2,388,560 202,427 5,733,735 Contributions: Employee contribution ............. 2,761,318 4,682,007 3,178,363 924,506 3,627,687 Employer contribution ............. 681,292 1,406,200 902,855 264,223 981,319 ------------- ------------- ------------- ------------- ------------- 3,442,610 6,088,207 4,081,218 1,188,729 4,609,006 Withdrawals, distributions and transfers ..................... (1,809,717) (4,445,632) (688,901) (407,255) (1,445,982) ------------- ------------- ------------- ------------- ------------- Net increase in Plan Equity ............................ 14,729,111 3,999,752 8,317,316 1,368,717 10,357,852 Plan Equity: Beginning of year ................. 12,491,077 37,267,540 13,842,032 5,755,998 13,548,646 ------------- ------------- ------------- ------------- ------------- End of year ....................... $ 27,220,188 $ 41,267,292 $ 22,159,348 $ 7,124,715 $ 23,906,498 ============= ============= ============= ============= =============
Participant Loans Total ------------- ------------- Net investment income: Interest .......................... $ 5,414 $ 2,386,079 Dividends ......................... -- 4,053,017 ------------- ------------- 5,414 6,439,096 Net realized gain(loss) on investments .................... -- 946,508 Unrealized appreciation (depreciation) of investments .................... (1,483) 20,778,792 Contributions: Employee contribution ............. 457,886 15,631,767 Employer contribution ............. -- 4,235,889 ------------- ------------- 457,886 19,867,656 Withdrawals, distributions and transfers ..................... (100,856) (8,898,343) ------------- ------------- Net increase in Plan Equity ............................ 360,961 39,133,709 Plan Equity: Beginning of year ................. 1,023,231 83,928,524 ------------- ------------- End of year ....................... $ 1,384,192 $ 123,062,233 ============= =============
See accompanying notes to financial statements. 7 8 Profit Sharing Plan for Employees of Trinity Industries, Inc. and Certain Affiliates Statement of Income and Changes in Plan Equity, With Fund Information Year Ended March 31, 1997
Putnam Mutual Funds ------------------------------------------- Guaranteed U.S. Govt. Stock Investment Growth & Income Account Account Income Trust Voyager ------------ ------------ ------------ ------------ ------------ Net investment income: Interest .......................... $ 4,733 $ 2,618,472 $ 2,184 $ 335,753 $ 3,032 Dividends ......................... 277,519 -- 961,995 -- 642,747 ------------ ------------ ------------ ------------ ------------ 282,252 2,618,472 964,179 335,753 645,779 Net realized gain(loss) on investments .................... 26,352 -- 36,728 (29,828) 21,920 Unrealized appreciation (depreciation) of investments .................... (2,325,333) -- 676,370 (32,663) (928,839) Contributions: Employee contribution ............. 2,758,108 5,065,279 2,387,157 953,693 2,751,676 Employer contribution ............. 676,128 1,779,673 758,561 271,819 906,172 ------------ ------------ ------------ ------------ ------------ 3,434,236 6,844,952 3,145,718 1,225,512 3,657,848 Withdrawals, distributions and transfers ..................... (1,494,617) (6,515,500) 1,544,735 (190,070) 3,469,873 Halter Marine Group, Inc. ............ divestiture ....................... (1,556,223) (7,473,914) (1,220,040) (658,137) (1,383,931) ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in Plan equity ............................ (1,633,333) (4,525,990) 5,147,690 650,567 5,482,650 Plan equity: Beginning of year ................. 14,124,410 41,793,530 8,694,342 5,105,431 8,065,996 ------------ ------------ ------------ ------------ ------------ End of year ....................... $ 12,491,077 $ 37,267,540 $ 13,842,032 $ 5,755,998 $ 13,548,646 ============ ============ ============ ============ ============
Participant Loans Total ------------ ------------ Net investment income: Interest .......................... $ 7,358 $ 2,971,532 Dividends ......................... -- 1,882,261 ------------ ------------ 7,358 4,853,793 Net realized gain(loss) on investments .................... -- 55,172 Unrealized appreciation (depreciation) of investments .................... 1,483 (2,608,982) Contributions: Employee contribution ............. 332,111 14,248,024 Employer contribution ............. -- 4,392,353 ------------ ------------ 332,111 18,640,377 Withdrawals, distributions and transfers ..................... (238,145) (3,423,724) Halter Marine Group, Inc. ............ divestiture ....................... -- (12,292,245) ------------ ------------ Net increase (decrease) in Plan equity ............................ 102,807 5,224,391 Plan equity: Beginning of year ................. 920,424 78,704,133 ------------ ------------ End of year ....................... $ 1,023,231 $ 83,928,524 ============ ============
See accompanying notes to financial statements. 8 9 Profit Sharing Plan for Employees of Trinity Industries, Inc. and Certain Affiliates Statement of Income and Changes in Plan Equity, With Fund Information Year Ended March 31, 1996
Putnam Mutual Funds -------------------------------------------- Guaranteed U.S. Govt. Stock Investment Growth & Income Account Account Income Trust Voyager ------------ ------------ ------------ ------------ ------------ Net investment income: Interest .......................... $ 5,982 $ 2,405,823 $ 2,869 $ 293,918 $ 2,195 Dividends ......................... 227,852 -- 443,358 -- 329,350 ------------ ------------ ------------ ------------ ------------ 233,834 2,405,823 446,227 293,918 331,545 Net realized gain(loss) on investments .................... -- -- 32,305 (7,249) 19,660 Unrealized appreciation (depreciation) of investments .................... (788,303) -- 1,204,205 84,158 1,331,542 Contributions: Employee contribution ............. 2,772,131 6,118,003 1,996,984 1,087,979 2,027,629 Employer contribution ............. 695,789 1,862,773 570,775 284,627 589,330 ------------ ------------ ------------ ------------ ------------ 3,467,920 7,980,776 2,567,759 1,372,606 2,616,959 Withdrawals, distributions and transfers ..................... (820,254) (2,627,389) (490,579) (416,335) (314,666) ------------ ------------ ------------ ------------ ------------ Net increase in Plan equity .......... 2,093,197 7,759,210 3,759,917 1,327,098 3,985,040 Plan equity: Beginning of year ................. 12,031,213 34,034,320 4,934,425 3,778,333 4,080,956 ------------ ------------ ------------ ------------ ------------ End of year ....................... $ 14,124,410 $ 41,793,530 $ 8,694,342 $ 5,105,431 $ 8,065,996 ============ ============ ============ ============ ============
Participant Loans Total ------------ ------------ Net investment income: Interest .......................... $ 5,447 $ 2,716,234 Dividends ......................... -- 1,000,560 ------------ ------------ 5,447 3,716,794 Net realized gain(loss) on investments .................... -- 44,716 Unrealized appreciation (depreciation) of investments .................... (44) 1,831,558 Contributions: Employee contribution ............. 289,602 14,292,328 Employer contribution ............. -- 4,003,294 ------------ ------------ 289,602 18,295,622 Withdrawals, distributions and transfers ..................... (187,665) (4,856,888) ------------ ------------ Net increase in Plan equity .......... 107,340 19,031,802 Plan equity: Beginning of year ................. 813,084 59,672,331 ------------ ------------ End of year ....................... $ 920,424 $ 78,704,133 ============ ============
See accompanying notes to financial statements. 9 10 Profit Sharing Plan for Employees of Trinity Industries, Inc. and Certain Affiliates Notes to Financial Statements March 31, 1998 1. Description of the Plan General - The Profit Sharing Plan for Employees of Trinity Industries, Inc. and Certain Affiliates (the "Plan") was adopted by the Board of Directors of Trinity Industries, Inc. (the "Board") on December 11, 1986 and became effective January 1, 1987, for eligible employees of Trinity Industries, Inc. and Certain Affiliates (the "Employer"). The Plan was amended and restated effective April 1, 1994. The Plan is a defined contribution plan designed to comply with the provisions of Title I of the Employee Retirement Income Security Act of 1974 ("ERISA"). The following is a brief description of the Plan. Participants should refer to the Plan document for complete information regarding the Plan. The Plan's fiscal year end is March 31. Divestiture - At the close of business on March 31, 1997, Trinity Industries, Inc. completed the divestiture, which commenced on September 26, 1996, of Halter Marine Group, Inc. ("Halter") by distributing the remaining shares of Halter stock to its stockholders in the form of a tax-free distribution. The Plan received .348 shares of Halter common stock for each share of Trinity Common Stock held in the Plan in the form of a tax-free distribution. The financial statements for the year ended March 31, 1997 reflect the transfer of participants' assets, who were employed by Halter, out of the Plan. 10 11 Participation - Each employee is eligible to contribute to the Plan on the first day of the calendar quarter on or immediately following his employment date with the Company and must meet the following requirements: o Must be classified as a full-time, part-time, or temporary employee of Trinity Industries, Inc.; and o Must be in a unit of employees who are designated as eligible to participate in the Plan; and o Must not be included in a unit of employees covered by a collective bargaining agreement unless benefits under this Plan were included in an agreement as a result of good faith bargaining. Eligible employees automatically become participants and must indicate on the form or forms provided by the Plan Committee ("Committee") whether or not they want to make contributions to the Plan. If they elect to contribute, they will authorize the Employer to make payroll deductions for contributions to the Plan. Contributions - For fiscal year 1998 and 1997, each Plan participant agrees to contribute not less than two percent nor more than fourteen percent of their compensation in one percent increments as designated by the participant. A participant's salary reduction may not exceed $10,000, $9,500, and $9,500 per calendar year ended 1998, 1997, and 1996, respectively. A salary reduction and contribution agreement must be entered into by each employee as the employee begins participation in the Plan and may be amended by such employee twice each year. Employer matching contributions shall be made if Company earnings are at least sufficient to pay dividends to stockholders ($0.68, $0.68 and $0.68 per share for the years ended March 31, 1998, 1997, and 1996, respectively) but in no event less than $0.33 per share of common stock. If the Employer matching contribution is made, then each participant with at least five 11 12 years of service, shall receive an amount equal to 50 percent of that portion of such participant's employee contribution up to six percent of such participant's total compensation for the year. If the Employer matching contribution is made, then each participant with at least one but less than five years of service shall receive an amount equal to 25 percent of that portion of such participant's employee contribution up to six percent of such participant's total compensation for the year. Effective April 1, 1998, if the Employer matching contribution is made, then each participant shall receive an amount equal to a percentage of that portion of such participant's employee contribution up to six percent of such participant's total compensation for the year under the following schedule:
Percentage of Years of service Employer Contribution ---------------- --------------------- 1 but less than 2 25% 2 but less than 3 30% 3 but less than 4 35% 4 but less than 5 40% 5 years 50%
Employer contributions are net of forfeitures, as defined. Employer contributions for a given plan year shall be deposited in the Profit Sharing Trust for Employees of Trinity Industries, Inc. and Certain Affiliates (the "Trust Fund") as defined below, no later than the date on which the Employer files its Federal income tax return for such year. The Employer and Chase Bank of Texas, NA (the "Trustee"), (formerly Texas Commerce Bank - Dallas), have entered into a Trust Agreement under which the latter acts as Trustee under the Plan. In its capacity as Trustee, Chase Bank of Texas, NA invests the employee contributions and Employer contributions in the following investment options (hereafter collectively referred to as the "Trust Fund"): 12 13 (a) Trinity Stock Investment Account ("Stock Account") holds shares of Employer common stock purchased on behalf of the participants and Halter common stock by virtue of the tax-free distribution. Idle cash is invested in interest-bearing accounts until such time as it can be utilized to purchase Employer common stock. (b) Guaranteed Investment Contract Account (the "Guaranteed Investment Account") invests in guaranteed investment contracts issued by various insurance companies selected annually by the Committee. At March 31, 1998, the guaranteed investment contracts had guaranteed annual rates of return of 7.33% (GAC 8672), 6.08% (GAC 20254), and 5.66% (GAC 16795). At March 31, 1997, the guaranteed investment contracts had guaranteed annual rates of return of 6.08% (GAC 20254), 8.31% (GAC 7614), 5.15% (GAC 7219), and 7.33% (GAC 8672). Participant's accounts invested in the Guaranteed Investment Account earn interest at a rate blended from all of the contracts included in the Guaranteed Investment Account. The account is credited with earnings on the underlying investments and charged for plan withdrawals and administrative expenses charged by the insurance companies. Transfers of participants accounts to and from the Guaranteed Investment Account are not permitted. However, during fiscal year 1997, participants were offered a one-time option to transfer monies out of the Guaranteed Investment Account and into other fund options. (c) Putnam Mutual Funds Investment Accounts (the "Putnam Mutual Funds") invests in three mutual funds selected by the Committee. At March 31, 1998 and 1997, the funds are U.S. Government Income Trust, Growth and Income, and Voyager. Participants may elect the extent to which assets are invested in the options described above in increments of 10 percent or 25 percent. 13 14 Benefits - Distribution of a participant's account balance is payable upon retirement at or after age 65, total disability, death, or termination of employment. Distribution is equal to the salary reduction contribution and related earnings plus the vested portion of the Employer contribution and related earnings. Withdrawal of up to 100 percent of the employee contribution can be made only to meet "immediate and heavy financial needs" (medical care, college tuition, the purchase of a principal residence, or to prevent the foreclosure on a principal residence) as long as the funds are not available for such needs from other sources. No withdrawal can be made against the earnings on the employee contributions or against the Employer contribution and related earnings. These restrictions no longer apply when the participant reaches age 59 1/2. Loans for "immediate and heavy financial needs" may be made for a minimum of $1,000 up to a maximum of $50,000, not to exceed 50 percent of the Employee contribution and related earnings and not to exceed 50 percent of the vested portion of the Employer contribution and related earnings. Loans are subject to rules and regulations established by the Committee, as defined in the Plan. Vesting - The Employer contribution and related earnings (losses) vest to participants, depending upon the number of years of vesting service, as defined, completed by such participant as follows:
Years of Service Percentage Vested ---------------- ----------------- Less than 1 0 1 but less than 2 20 2 but less than 3 40 3 but less than 4 60 4 but less than 5 80 5 or more 100
Participants are 100 percent vested in their Employer contribution and allocated portion of related earnings (losses) upon their attainment of age 65 and are always 100 percent vested in their employee contribution and related earnings (losses) on such contribution. 14 15 Administration of the Plan - The Plan is administered by the Committee, consisting of at least three persons who are appointed by the Board. The members of the Committee serve at the discretion of the Board, and any committee member who is an employee of the Employer shall not receive compensation for his services. A separate account is maintained for each participant. The Plan provides that account balances for participants are adjusted periodically as follows: (a) Employee contributions are generally allocated on a quarterly basis; (b) Participant's share of the Employer contribution shall be allocated to the participant's account as of a date no later than the last day of the Plan year; (c) Earnings and appreciation or depreciation in the fair value of investment assets of the Trust Fund for each calendar quarter shall be allocated to the accounts of participants, former participants and beneficiaries who had unpaid balances in their accounts on the last day of such calendar quarter in proportion to the balances in such accounts at the beginning of the calendar quarter. Upon request, distributions shall be made no earlier than the later of the last day of the calendar quarter in which entitlement occurs or the date on which the Committee determines the final balances. Distributions from the Stock Account shall be made in cash unless otherwise designated by the participant. Income tax status - The Plan has received determination letters from the Internal Revenue Service dated November 4, 1994, September 27, 1996, and April 30, 1997 stating that the Plan, including certain amendments thereto, is a qualified plan under Section 401(a) of the Internal Revenue Code of 1986 (the "Code") and that the Trust is exempt from federal income tax under Section 501(a) of the Code. The Plan has been amended since receiving its determination letter; however, the Committee believes that the Plan is designed and is currently being operated in compliance with applicable requirements of the Code. The Committee is not aware of any course of action or series of events that have occurred that might adversely affect the Plan's qualified status. 15 16 Employee contributions and Employer contributions are not included in the participant's federal taxable income in the year such contributions are made. A participant shall not be subject to federal income taxes with respect to participation in the Plan until the amounts are withdrawn or distributed. Amendment or termination of the Plan - The Employer may amend the Plan at any time. However, no amendment, unless made to secure approval of the Internal Revenue Service or other governmental agency, may operate retroactively to reduce or divest the then vested interest in the Plan of any participant, former participant or beneficiary, or to reduce or divest any benefit payable under the Plan unless all participants, former participants and beneficiaries then having vested interests or benefit payments affected thereby consent to such amendment. The Employer may terminate the Plan at any time. Upon complete or partial termination, the accounts of all participants affected thereby shall become 100 percent vested, and the Committee shall direct the Trustee to distribute the assets in the Trust Fund, after receipt of any required approval by the Internal Revenue Service and payment of any expenses properly chargeable thereto, to participants, former participants, and beneficiaries in proportion to their respective account balances. 2. Significant Accounting Policies & Events Investments and investment income - Cash and cash equivalents are valued at cost which approximates fair value. Investments in the common stock of the Employer and Halter are valued at their quoted market price. Investment in the Putnam Mutual Funds are valued at the quoted market prices which represent the net asset value of shares held by the Plan at year end. The Plan is in compliance with AICPA Statement of Position 94-4, "Reporting of investment contracts held by health and welfare benefit plans and defined contribution pension plans," with fair value approximating the recorded contract value for the guaranteed investment contracts. Security transactions are recorded on a trade date basis. The statements of income and changes in Plan equity include net unrealized appreciation or depreciation in fair value on investments. The Plan's financial statements are prepared on an accrual basis. 16 17 Realized gains and losses - Realized gains and losses have been calculated using historical cost (first in, first out). Use of estimates in the preparation of financial statements - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts in the financial statements and accompanying notes. Actual results could differ from those estimates. 3. Investments Investments are as follows:
March 31, 1998 March 31, 1997 --------------------------- --------------------------- Cost Fair value Cost Fair value ------------ ------------ ------------ ------------ Trinity Industries, Inc. common stock $ 9,856,316 $ 23,455,410* $ 11,220,350 $ 11,707,801* Halter Marine Group, Inc. common stock $ 3,427,278 $ 2,771,188 -- -- Guaranteed investment contracts GAC 20254 16,156,699 16,156,699* 15,230,674 15,230,674* GAC 8672 4,167,290 4,167,290 1,000,000 1,000,000 GAC 16795 17,154,554 17,154,554* -- -- GAC 7219 -- -- 4,324,900 4,324,900* GAC 7614 -- -- 14,074,330 14,074,330* ------------ ------------ ------------ ------------ 37,478,543 37,478,543 34,629,904 34,629,904 Putnam mutual funds U.S. Govt Income Trust 6,825,834 6,845,093* 5,632,314 5,449,145* Growth & Income 16,789,885 21,241,233* 10,910,509 12,973,297* Voyager 16,375,982 22,909,895* 11,709,070 12,509,249* ------------ ------------ ------------ ------------ 39,991,701 50,996,221 28,251,893 30,931,691 Participant loans 1,266,866 1,266,866 957,674 959,157 ------------ ------------ ------------ ------------ $ 92,020,704 $115,968,228 $ 75,059,821 $ 78,228,553 ============ ============ ============ ============
* Investment represents 5 percent or more of the fair value of total assets. 17 18 4. Reconciliation of Financial Statements to the Form 5500 The following is a reconciliation of Plan equity per the financial statements to the Form 5500:
March 31 1998 1997 ------------- ------------- Plan equity per the financial statements $ 123,062,233 $ 83,928,524 Amounts allocated to withdrawing participants (2,792,574) (2,030,571) ------------- ------------- Plan equity per the Form 5500 $ 120,269,659 $ 81,897,953 ============= =============
The following is a reconciliation of withdrawals, distributions and transfers per the financial statements to the Form 5500:
Year Ended March 31 1998 ----------- Withdrawals, distributions and transfers per the financial statements $ 8,898,343 Amounts allocated to withdrawing participants at end of year 2,792,574 Amounts allocated to withdrawing participants at beginning of year (2,030,571) ----------- Withdrawals, distributions and transfers per the Form 5500 $ 9,660,346 ===========
Amounts allocated to withdrawing participants are recorded on the Form 5500 for withdrawals that have been processed and approved for payment prior to March 31 but not yet paid as of that date. 18 19 5. Unrealized Appreciation (Depreciation) of Investments Unrealized appreciation (depreciation) of investments in Trinity and Halter common stock, Putnam mutual funds, and participant loans for the years ended March 31, 1998, 1997, and 1996 were determined as follows:
Net Investments Investments increase at fair value at cost (decrease) ------------- ------------ ------------ March 31, 1998 Trinity common stock March 31, 1998 $ 23,455,410 $ 9,856,316 $ 13,599,094 March 31, 1997 11,707,801 11,220,350 487,451 ------------ ------------ ------------ 11,747,609 (1,364,034) 13,111,643 Halter common stock March 31, 1998 $ 2,771,188 $ 3,427,278 $ (656,090) March 31, 1997 -- -- -- ------------ ------------ ------------ 2,771,188 3,427,278 (656,090) Putnam mutual funds March 31, 1998 50,996,221 39,991,701 11,004,520 March 31, 1997 30,931,691 28,251,893 2,679,798 ------------ ------------ ------------ 20,064,530 11,739,808 8,324,722 Participant loans March 31, 1998 1,266,866 1,266,866 -- March 31, 1997 959,157 957,674 1,483 ------------ ------------ ------------ 307,709 309,192 (1,483) ------------ Unrealized appreciation of investments $ 20,778,792 ============
19 20 March 31, 1997 Trinity common stock March 31, 1997 $ 11,707,801 $ 11,220,350 $ 487,451 March 31, 1996 13,156,629 10,343,846 2,812,783 ------------ ------------ ------------ (1,448,828) 876,504 (2,325,332) Putnam mutual funds March 31, 1997 30,931,691 28,251,893 2,679,798 March 31, 1996 19,569,446 16,604,515 2,964,931 ------------ ------------ ------------ 11,362,245 11,647,378 (285,133) Participant loans March 31, 1997 959,157 957,674 1,483 March 31, 1996 863,724 863,724 -- ------------ ------------ ------------ 95,433 93,950 1,483 ------------ Unrealized depreciation of investments $ (2,608,982) ============ March 31, 1996 Trinity common stock March 31, 1996 $ 13,156,629 $ 10,343,846 $ 2,812,783 March 31, 1995 11,192,467 7,591,381 3,601,086 ------------ ------------ ------------ 1,964,162 2,752,465 (788,303) Putnam mutual funds March 31, 1996 19,569,446 16,604,515 2,964,931 March 31, 1995 11,245,201 10,900,175 345,026 ------------ ------------ ------------ 8,324,245 5,704,340 2,619,905 Participant loans March 31, 1996 863,724 864,088 (364) March 31, 1995 768,096 768,416 (320) ------------ ------------ ------------ 95,628 95,672 (44) Unrealized appreciation of investments $ 1,831,558 ============
20 21 6. Expenses The expenses incurred by the Trustee in the performance of its duties, including the Trustee's compensation and the services of the recordkeeper, shall be paid by the Plan unless paid by the Employer. The Employer paid $526,177, $187,993, and $300,751 for recordkeeping and trustee fees on behalf of the Plan for the fiscal years ended March 31, 1998, 1997, and 1996, respectively. 7. Year 2000 (unaudited) The Employer has developed a plan to modify its internal information technology to be ready for the year 2000 and has begun converting critical data processing systems. The project also includes determining whether third party service providers have reasonable plans in place to become year 2000 compliant. The Employer currently expects the project to be substantially complete by early 1999. The Employer does not expect this project to have a significant effect on plan operations. 21 22 Index to Exhibits
Number Title Page ------ --------------------------------- ---- 23 Consent of independent auditors 23 Line-27 a Schedule of Assets Held for Investment Purposes 24-25 Line-27 d Schedule of Reportable Transactions 26
22 23 Exhibit 23 Consent of Ernst & Young LLP, Independent Auditors We consent to the incorporation by reference in Post Effective Amendment No. 1 to the Registration Statement (Form S-8, File No. 33-10937), pertaining to the Profit Sharing Plan for Employees of Trinity Industries, Inc. and Certain Affiliates and in the related Prospectus of our report dated June 12, 1998, with respect to the financial statements and supplemental schedules of the Profit Sharing Plan for Employees of Trinity Industries, Inc. and Certain Affiliates included in this Annual Report (Form 11-K) for the year ended March 31, 1998. ERNST & YOUNG LLP Dallas, Texas June 24, 1998 23 24 Profit Sharing Plan for Employees of Trinity Industries, Inc. And Certain Affiliates Line 27 a - Assets Held for Investment Purposes March 31, 1998
Description of Current Identity Investment Cost value - ------------------------ ------------ ------------ ----------- Chase Bank of Texas* short-term money market $ 2,631,469 $ 2,631,469 Trinity Industries, Inc.* common stock; 9,856,316 23,455,410 426,462 shares Halter Marine Group, Inc. common stock; 3,427,278 2,771,188 174,563 shares John Hancock Mutual Life guaranteed investment contract; GAC 8672; 7.33% 4,167,290 4,167,290 Travelers guaranteed investment contract; GAC 16795; 5.66% 17,154,554 17,154,554 Metropolitan Life Ins Co. guaranteed investment contract; GAC 20254; 6.08% 16,156,699 16,156,699 ---------- ---------- 37,478,543 37,478,543
25 Line 27 a - Assets Held for Investment Purposes (Cont'd) Putnam U. S. Govt. Income Trust; mutual fund; 594,704 shares 6,825,834 6,845,093 Growth & Income; mutual fund; 1,308,932 shares 16,789,885 21,241,233 Voyager; mutual fund; 1,409,471 shares 16,375,982 22,909,895 ----------- ------------ 39,991,701 50,996,221 Participants* Loans with an interest rate of 10.5% -- 1,266,866 ----------- ------------ $93,385,307 $118,599,697 * Party-in-interest 25 26 Profit Sharing Plan for Employees of Trinity Industries, Inc. and Certain Affiliates Line 27 d - Reportable Transactions Year Ended March 31, 1998
(a) (b) (c) (d) (g) (h) (i) Current Value of Identity of Purchase Selling Cost of Asset on Net Gain Party Involved Asset Price Price Asset Trans. Date or (Loss) - -------------- ----- ---------- ----------- ----------- ----------- --------- Category (i)-Individual transactions in excess of 5% of Plan Assets Travelers GAC 16795 17,000,000 -- 17,000,000 17,000,000 -- John Hancock Mutual Life GAC 7219 -- 4,491,668 4,491,668 4,491,668 -- John Hancock Mutual Life GAC 7614 -- 14,946,788 14,946,788 14,946,788 -- Category (iii)-Series of securities transactions in excess of 5% of Plan Assets Travelers GAC 16795 17,154,554 -- 17,154,554 17,154,554 -- John Hancock Mutual Life GAC 7219 166,769 -- 166,769 166,769 -- -- 4,491,668 4,491,668 4,491,668 -- John Hancock Mutual Life GAC 7614 872,458 -- 872,458 872,458 -- -- 14,946,788 14,946,788 14,946,788 -- Putnam Investments, Inc. Growth & Income 6,685,599 -- 6,685,599 6,685,599 -- -- 1,044,648 806,223 1,044,648 238,425 Voyager 5,957,087 -- 5,957,087 5,957,087 -- -- 1,655,444 1,290,175 1,655,444 365,269 Chase Bank of Texas* Short-term Money market 28,254,162 -- 28,254,162 28,254,162 -- -- 26,169,516 26,169,516 26,169,516 --
There were no category (ii) or (iv) reportable transactions. Columns (e) and (f) are not applicable. * Party-in-interest 26 -----END PRIVACY-ENHANCED MESSAGE-----