Trinity Industries, Inc. (Form: 8-K)

DALLAS, TEXAS – November 2, 2004 — Trinity Industries, Inc., (NYSE:TRN) today reported financial results for the third quarter of 2004.

For the quarter ended September 30, 2004, the Company reported a net income of $900 thousand, or 0 cents per diluted share, on revenues of $567.2 million. This compares to a net income of $1.8 million, or 2 cents per diluted share, on revenues of $363.4 million in the third quarter of 2003. The third quarter of 2004 included pre-tax charges for steel and related material cost increases of $19.5 million for fixed sales price contracts and additional unabsorbed costs of approximately $1.2 million related to the previously announced shut-down of our Romanian railcar plant for annual maintenance. Offsetting these charges was $8.1 million in interest income received this quarter that was earned in prior periods but not recognized in income until collected.

For the nine months ended September 30, 2004, a net loss of $6.3 million was reported, or 19 cents per diluted share, on revenues of $1.6 billion, which compares to a net loss of $9.2 million, or 22 cents per diluted share, on revenues of $1.0 billion for the same period last year. The nine months ended September 30, 2004 include pre-tax charges for steel and related material cost increases of $37.5 million for fixed sales price contracts primarily in the Rail and Inland Barge Groups, $6.6 million in costs related to shortages of materials and unanticipated plant shut-downs, $1.9 million in additional costs related to the start-up of two idle railcar facilities to meet increasing demands, and additional unabsorbed costs of approximately $1.2 million related to the previously announced shut-down of our Romanian railcar plant for maintenance. Also included in the nine months ended September 30, 2004 is a pre-tax charge of $1.2 million related to the early retirement of the Company’s term debt that was repaid with a portion of the proceeds from the issuance of $300 million senior notes in March, 2004 and the $8.1 million interest income mentioned above.

“Our volume of business has definitely improved. Unfortunately, steel cost increases continue to impede our recovery. Fortunately, our current sales orders are priced with current steel costs and, if necessary, they contain contract language providing for price-escalation. Over the next six to nine months our new sales orders with updated pricing will substantially replace the fixed-price agreements in our current backlog. As a result, we expect to see the impact of steel cost increases progressively diminish in the future,” said Timothy R. Wallace, Trinity’s Chairman, President, and CEO. “The demand for railcars in North America continues to be strong. Our North American railcar backlog grew during the 3rd quarter to approximately 19,800 railcars. This is our largest railcar backlog since March 1999,” Wallace said.

“Our Leasing Group revenues are up year-over-year due to growth in our lease fleet, improved utilization and lease pricing. Our Construction Products Group had improved revenues and operating profit as a result of increased demand in our Highway Safety and Fittings businesses. The Industrial Products Group results improved due to increased LPG tank sales in the U.S. and increased volumes in tank heads for railcars.”

Trinity Industries, Inc., with headquarters in Dallas, Texas, is one of the nation’s leading diversified industrial companies. Trinity reports five principal business segments: the Rail Group, the Railcar Leasing and Management Services Group, the Inland Barge Group, the Construction Products Group, and the Industrial Products Group. Trinity’s web site may be accessed at http://www.trin.net.

This news release contains “forward looking statements” as defined by the Private Securities Litigation Reform Act of 1995 and includes statements as to expectations, beliefs and future financial performance, or assumptions underlying or concerning matters herein. These statements that are not historical facts are forward looking.

Readers are directed to Trinity’s Form 10-K and other SEC filings for a description of certain of the business issues and risks, a change in any of which could cause actual results or outcomes to differ materially from those expressed in the forward looking statements. Any forward looking statement speaks only as of the date on which such statement is made. Trinity undertakes no obligation to update any forward looking statement or statements to reflect events or circumstances after the date on which such statement is made.

Trinity Industries, Inc.
Condensed Consolidated Income Statement
(in millions, except per share amounts)


	Three Months Ended
	September 30,
	2004			2003
Revenues	$	567.2		$	363.4
Operating profit	$	3.8		$	10.1
Other expense		2.1			8.1

Income before income taxes		1.7			2.0
Provision for income taxes		0.8			0.2

Net income		0.9			1.8
Dividends on Series B preferred stock		(0.8	)		(0.8	)

Net income applicable to common shareholders	$	0.1		$	1.0

Net income applicable to common shareholders per common share:
Basic	$	0.00		$	0.02

Diluted	$	0.00		$	0.02

Weighted average number of shares outstanding:
Basic		46.5			45.6
Diluted		47.5			46.2

Trinity Industries, Inc.
Condensed Consolidated Income Statement
(in millions, except per share amounts)


	Nine Months Ended
	September 30,
	2004			2003
Revenues	$	1,570.8		$	1,018.3
Operating profit		11.6			9.1
Other expense		20.9			22.3

Loss before income taxes		(9.3	)		(13.2	)
Provision (benefit) for income taxes		(3.0	)		(4.0	)

Net loss		(6.3	)		(9.2	)
Dividends on Series B preferred stock		(2.3	)		(0.8	)

Net loss applicable to common shareholders	$	(8.6	)	$	(10.0	)

Net loss applicable to common shareholders per common share:
Basic	$	(0.19	)	$	(0.22	)

Diluted	$	(0.19	)	$	(0.22	)

Weighted average number of shares outstanding:
Basic		46.4			45.6
Diluted		46.4			45.6


	Three Months Ended
	September 30,
Revenues:		2004			2003

Rail Group	$	315.2		$	190.2
Construction Products Group		170.8			133.7
Inland Barge Group		46.2			42.5
Industrial Products Group		35.0			31.5
Railcar Leasing and Management Services Group		36.5			29.9
All Other		9.3			7.9
Eliminations		(45.8	)		(72.3	)

Total Revenues	$	567.2		$	363.4

Operating profit (loss):	Three Months Ended
	September 30,

		2004			2003

Rail Group	$	(14.5	)	$	2.9
Construction Products Group		18.5			11.4
Inland Barge Group		(1.7	)		0.3
Industrial Products Group		4.5			2.7
Railcar Leasing and Management Services Group		7.9			9.3
All Other		(1.7	)		(2.0	)
Corporate		(7.2	)		(9.6	)
Eliminations		(2.0	)		(4.9	)

Consolidated	$	3.8		$	10.1


Revenues:	Nine Months Ended
	September 30,

		2004			2003

Rail Group	$	849.7		$	494.0
Construction Products Group		444.6			369.5
Inland Barge Group		153.6			129.8
Industrial Products Group		102.2			88.5
Railcar Leasing and Management Services Group		143.3			112.7
All Other		25.2			22.9
Eliminations		(147.8	)		(199.1	)

Total Revenues	$	1,570.8		$	1,018.3

Operating profit (loss):	Nine Months Ended
	September 30,

		2004			2003

Rail Group	$	(17.2	)	$	(13.5	)
Construction Products Group		35.0			29.8
Inland Barge Group		(12.8	)		0.5
Industrial Products Group		9.2			4.3
Railcar Leasing and Management Services Group		31.9			30.5
All Other		(2.0	)		(5.0	)
Corporate		(23.8	)		(25.0	)
Eliminations		(8.7	)		(12.5	)

Consolidated	$	11.6		$	9.1


	September 30,			December 31,
	2004			2003
Cash and equivalents	$	154.2		$	46.0
Accounts receivable		263.4			198.1
Inventories		383.2			258.0
Net property, plant and equipment, at cost (1)		791.9			945.2
Other assets		588.0			560.6

	$	2,180.7		$	2,007.9

Accounts payable and accrued liabilities	$	484.5		$	460.2
Debt (2)		522.4			395.2
Deferred Income		44.4			32.2
Other liabilities		62.9			58.7
Series B preferred stock		58.1			57.8
Stockholders’ equity		1,008.4			1,003.8

	$	2,180.7		$	2,007.9

(1) Property, Plant and Equipment
Corporate/Manufacturing:
Property, plant and equipment	$	872.9		$	868.6
Accumulated depreciation		(581.6	)		(569.0	)

		291.3			299.6

Leasing:
Equipment on lease		618.8			758.5
Accumulated depreciation		(118.2	)		(112.9	)

		500.6			645.6

		791.9			945.2

(2) Debt
Corporate/Manufacturing — Recourse
Revolving commitment	$	¯		$	¯
Term commitment		¯			122.8
Senior notes		300.0			¯
Other		5.3			5.7

		305.3			128.5

Leasing — Recourse
Equipment trust certificates		170.0			170.0

		170.0			170.0

Leasing – Non-recourse
Warehouse facility		47.1			71.1
Other		¯			25.6

		47.1			96.7

	$	522.4		$	395.2

Good morning from Dallas, Texas and Welcome to the Trinity Industries’ Third Quarter Results Conference Call. I’m Neil Shoop, Treasurer for Trinity. Thank you for being with us today.

a. Tim Wallace, Chairman, President and Chief Executive Officer
b. John Adams, Executive Vice President
c. Jim Ivy, Sr. Vice President and Chief Financial Officer
d. Chas Michel, Vice President, Controller, and
e. Steve Menzies, President of Trinity Industries Leasing Company

A replay of this conference call will be available starting one hour after the conference call ends today through midnight on Wednesday, November, 10^th.

I would also like to welcome our audio webcast listeners today. Replay of this broadcast will also be available on our website located at www.trin.net.

In a moment, John Adams, Tim Wallace, Steve Menzies and Jim Ivy will have some brief comments. Following that, we’ll move to the Q&A session.

“Today’s conference call contains forward looking statements as defined by the Private Securities Litigation Reform Act of 1995 and includes statements as to expectations, intentions and predictions of future financial performance. Statements that are not historical facts are forward looking. Participants are directed to Trinity’s Form 10-K and other SEC filings for a description of certain of the business issues and risks, a change in any of which could cause actual results or outcomes to differ materially from those expressed in the forward looking statements.

Remember, a replay of this call will be available starting one hour after this call ends today through midnight, Wednesday, November 10^th.

4. Also, this replay will be available on our website located at www.trin.net.

Trinity Industries, Inc.
Earnings Release Conference Call
John L. Adams, Executive Vice President
November 3, 2004

Before I discuss our balance sheet and debt obligations with you, I will briefly discuss a non-GAAP financial ratio we use when we review the financial performance of our Leasing Company. Besides reviewing our operating profit, we also review EBITDAR – E B I T D A R — earnings before interest, taxes, depreciation, amortization and rent expense. We believe this to be a more consistent way to review the performance of leasing. Other measurements like Operating Profit and EBITDA are influenced by the methods used to finance lease assets like short term debt or leveraged lease debt. EBITDAR allows an apples to apples approach as it looks only at operating profit plus depreciation and rental expense. We feel it is important to look at our business in a consistent way and the EBITDAR approach is a way to do this. Jim Ivy will discuss this term again when he reviews our numbers. Page 23 of our 10Q, filed this morning, shows how this number is calculated.

Now to our balance sheet. When you review it on page 9 of our press release, you will notice an increase in cash of $108 million. This is part of the proceeds of the $300 million senior note issue we completed in March. The increase in receivables and inventory is attributable to the increased demand for our products which Tim will be reviewing with you.

The reduction in property, plant, and equipment is attributable to our leveraged lease financing this quarter which I will discuss in a moment.

Looking at our debt, bank financing outstanding of $123 million as of 12/31/03 was refinanced by the senior note issue of $300 million previously mentioned. Therefore, we had no bank indebtedness at 9/30/04.

Since our last conference call, we have done a third leveraged lease financing for our leasing company and also renewed our railcar leasing warehouse facility. The leveraged lease closed this quarter for $180 million and was well received. The overall rate was 4.95% on this 22 year debt. This financing is the reason leasing assets decreased from the $646 million to $501 million on our balance sheet.

As I mentioned, our railcar warehouse leasing facility was also renewed in August for another year. This is a $300 million facility led by CSFB which continues to work extremely well for us. $47 million was outstanding as of 9/30/04.

Trinity Industries, Inc.
Earnings Release Conference Call
Comments of Tim Wallace, Chairman, President and CEO
November 3, 2004

Issues pertaining to steel continued to be a major challenge for our company during the 3rd quarter. In situations where we sold products with firm prices and our steel costs increased dramatically, we have been caught in a short-term bind. I’ll take a few minutes to provide more detail.

As you know, the world-wide shortage of steel combined with consolidation in the U.S. steel industry has put North American steel producers in the driver’s seat. They currently establish prices, terms and conditions for selling their products. Last year, we negotiated fixed priced purchase agreements with several of our primary steel suppliers. Based on these agreements, we sold a number of products at fixed prices. This has been our standard practice for years. Unfortunately, when raw materials for steel increased abnormally in cost, a few of our primary steel suppliers informed us that they expected us to pay surcharges. Since we don’t have any options other than to purchase their steel, we were forced to absorb the extra costs. We also purchase a portion of our steel from secondary steel suppliers. Secondary steel suppliers purchase steel directly from the primary mills and provide further processing for us. These suppliers also increased their prices significantly. These came as additional unexpected increases in our costs.

During the 3rd quarter we performed a detailed profitability analysis of the orders in our backlog with fixed prices. Our North American railcar business has by far the largest fixed priced backlog. We assume that our current material costs will be applicable at the time we produce these orders. As a result of our profitability analysis and in compliance with generally accepted accounting practices, during the 3rd quarter we reported additional losses on future shipments. If our prices fluctuate prior to the time we produce the fixed priced orders in our backlog, we will readjust our calculations. Since we have a number of fixed priced orders in our backlog with low margins, a significant price increase could cause us to have to report additional losses. On the flipside, if we have price reductions, we will increase our earnings. Until we work through our fixed priced backlog, we will be performing these types of adjustments. Jim Ivy will provide more details in his report.

We have had several people ask us why we don’t consider purchasing a portion of our materials at current prices in order to cap our costs. Since a portion of our steel purchases have stair-stepped price increases occurring over the next few quarters, this would be a logical tactic to deploy. Unfortunately, the primary mills have placed limitations on the amount of the lower priced steel we can purchase. As I stated earlier, it is definitely a seller’s market.

It is also important to note that a large portion of the steel we purchase is in the form of steel plate. News articles usually refer to the price of sheet steel rather than plate steel. Lately, the news media has reported that the price of steel has started a modest decline or is flat. In most instances, they are referring to sheet steel. Steel plate continues to be in short supply and the price has not declined.

Last spring, when we were informed that our steel prices were increasing, we immediately responded by raising our product prices. We also began incorporating escalation clauses into our long term sales agreements. The effectiveness of our escalation clauses have improved as we have gained more experience using them. We are not quoting long-term prices for our products without escalation clauses or having rock solid agreements with our suppliers. We’ve learned several hard lessons during the past 9 months and we don’t plan on repeating them.

•

We have either established new pricing arrangements with key steel suppliers or we are in the final stages of negotiating new agreements.

•

We don’t expect any new steel pricing surprises from our suppliers unless some unforeseen event occurs.

•

And finally, I’m pleased to inform you that our third quarter sales contracts met new pricing objectives established earlier this year. They cover our current steel costs and if necessary, include escalation clauses. Jim Ivy will provide more detailed information about the quality of our railcar backlog from a pricing point of view.

At this point, I’ll provide a brief operational overview of our non-rail businesses and then conclude with our rail businesses. Steve Menzies will provide some comments on the rail market and an update on our Leasing Company’s performance.

Our construction businesses performed well during the 3rd quarter. They improved substantially when compared to the first two quarters. In fact, during the 3rd quarter, this segment recorded operating profit that exceeded the first half of the year. Each of our construction-related businesses also improved its year-over-year performance for the quarter, except for our bridge structure businesses, which was impacted by rising steel prices. Raw material shortages and price increases along with rising transportation costs are affecting our margins in our concrete business. Additionally, we are experiencing aggregate shortages in areas where we depend on rail shipments. We continue to work with the railroads to address this problem. Fortunately, demand for concrete and aggregates remains strong in the markets we serve in the Southwest.

Our highway safety business is performing well. Business volume and margins improved on a year-over-year comparison basis. The improvement is due to increased sales in our proprietary line of products coupled with a continued demand for our standard products at prices which reflect the current steel market conditions. Our access to steel also helps us generate a portion of our sales. Our pipe fitting business is continuing to experience a nice rebound and recognizing the cost benefits of previous plant consolidations. We have a good backlog of orders in this business at decent prices. We are beginning to see some improvement in our bridge steel business. Our new prices in this business reflect our current steel costs. We are fortunate that we didn’t get caught with a large, fixed-price backlog in this business. As we transition into the fall and winter, we normally see our sales decrease in our construction-related businesses as a result of weather conditions. While these businesses are currently performing well, we believe the passage of a new highway bill will offer improved results.

During the 3rd quarter, our industrial products group continued to perform better than it did during the same quarter of last year. The steps we took a year ago to address our cost structure in our industrial manufacturing business are paying off. Our propane tank business normally operates with a short-term backlog, enabling us to price our products based on current steel costs. We converted some of our large storage tank manufacturing capacity to produce wind tower structures and now have a nice backlog of orders for wind towers that also reflect current steel prices.

Our barge group continued to be affected by steel prices and litigation expenses during the 3^rd quarter. Jim Ivy will provide specific financial data on this during his update. Our tank barge business has extended its backlog into the summer of ‘05 and we are continuing to receive inquiries for additional tank barges. Our hopper barge customers tell us they need additional hopper barges, but the order levels have been low. The daily rental rates for hopper barges remain strong, reflecting steady demand for shipments by hopper barge. I’m very pleased to report we recently sold our first batch of hopper barges at new pricing levels. Our current backlog for hopper barge orders carries us through the lst quarter of 2005. We are considering producing a limited number of barges for our leasing company. Discovery and pre-trial proceedings continue in our barge litigation.

Our European railcar business shipped approximately 330 units during the 3rd quarter, half of what we shipped in the 2nd quarter. The decrease was in large part due to a two-week shut down of production lines in our Romanian plant for maintenance purposes. Our 4th quarter shipments should be close to the quantity we shipped in the 2nd quarter. During the 4^th quarter, we expect to break even. For the year, we expect our European railcar business to make a small profit.

The demand for railcars in Europe is very light and the market is highly competitive. Until demand increases, our quarterly earnings will fluctuate from small losses to small profits. This has proven true during the last few quarters with the quarterly result generally tied to the size and mix of our backlog. We expect the financial results of the lst quarter of 2005 to be comparable to the 3rd quarter of 2004 because of volume and mix issues.

Our North American railcar businesses’ earnings were mostly affected by material-related issues during the 3^rd quarter. Earlier, I mentioned the effects of steel price increases. We also experienced across-the-board price increases in the basic materials we use to manufacture railcars. This is representative of inflationary increases most manufacturers are experiencing in their basic raw materials and supplies. It seems like every vendor is trying to get on the band wagon of increasing prices. Our sourcing personnel are challenged to contain miscellaneous price increases.

In addition, we continued to have spot material shortages and a small amount of defective materials. The bottlenecks in the railcar supply chain are causing a significant portion of our inefficiencies. We chart material delivery performance on a monthly basis. From March through July of this year, 50% of our material deliveries were not made according to our suppliers’ promises. In August we saw a slight improvement with 60% of our materials delivered as promised. In September, the quality of deliveries improved to 70%. We are hopeful this trend will continue.

The demand for railcars in North America during the 3^rd quarter remained strong. Steve Menzies will provide information pertaining to industry order levels. We set a goal to increase our production by targeting tack-on type orders. Our market share improved during the 3rd quarter and we received a variety of orders that extended our production lines. With our current backlog, we should be able to minimize our line changeovers and other situations that complicate production. We were very successful in restarting a railcar manufacturing plant in Texas. We shipped the first car from the plant in May. At this time we are producing 50 units per week in this facility.

We continue to believe there will be a long-term demand for railcars in North America driven by replacement factors. According to Global Research’s latest statistics there are approximately 800,000 railcars in the North American fleet over the age of 20. We expect the market demand to remain relatively strong for several years rather than a short-term spike in demand. The strength of the 3rd quarter order levels reinforces the fact that a full-fledged recovery is underway. We expect to ship between 14,000 and 15,000 railcars this year, which represents a 68% to 80% increase over our shipments in 2003.

Here are a few key statistics pertaining to orders and shipments during the 3^rd quarter. Our backlog of orders for railcars in North America increased 13.0% to more than 19,800 units over the second quarter. Our shipments increased approximately 30% over the 2nd quarter, to approximately 4,150 units. Our quarterly revenue increased in our North American railcar group over the 2nd quarter by $70 million. Thirteen per cent of our shipments were to customers of our Leasing Company. As a comparison, during the 3rd quarter of ‘02 we shipped approximately 1200 units. During the 3rd quarter of ‘03 we shipped 88% more or 2200 units. As I stated earlier, during the 3rd qtr of ‘04 we shipped 4150 units. On a forward looking basis, we expect our shipments during the 4th quarter to be between 4,000 and 4,500 units. We expect to continue to increase our production to a range between 5,000 to 5,500 units per quarter between the lst quarter and the middle of next summer. As you can see, we have a tremendous ability to increase our production levels. It is difficult for us to make an exact shipment prediction because of the supply chain issues.

Since our railcar group is confronted with a variety of challenges, I recently visited with our Board and we felt it would be in Trinity’s best interest for me to become more directly involved in the railcar business. As a result, we eliminated the position of CEO of our rail group.

Trinity Industries, Inc.
Analyst Conference Call
November 3, 2004
Comments by Steve Menzies

As Tim indicated, demand for railcars in North America remained strong in the 3^rd quarter. Continuing the solid recovery that we believe began earlier this year, orders for 2004 year-to-date have totaled over 58,000 including the 20,700 plus railcars ordered during the 3^rd quarter. This level of orders is the largest three consecutive quarters of industry railcar orders since 1998. During the 3^rd quarter, Trinity received over 6,400 railcar orders or approximately 31% of the North American industry orders. Given what we continue to see in current order inquiries from railroads, shippers and third party leasing companies, we believe 2004 railcar orders reflect strong, broad-based demand and will support production plans through 2005. Beyond the sheer volume of new railcar orders, we find the diversity among car types and customers to be reassuring that a broad-based railcar market recovery is underway. Orders received during the 3^rd quarter came from railroads, shippers and 3^rd party leasing companies. We have seen significant demand for many different railcar types such as covered hoppers which are used to carry agricultural, mineral and cement products from customers upgrading their railcar fleets to current designs and capacities. During the 3^rd quarter, Trinity received orders for over 2,500 covered hopper cars and, year-to-date, we have received over 50% of the orders placed for covered hopper cars. We received orders for boxcars and coal cars as demand continues to remain high for these car types, as well. Demand for intermodal flat cars also remains strong as TTX continues its significant capital investment program and intermodal volumes grow at double-digit rates. In addition, we received a large order for 1,500 intermodal platforms from a Class 1 railroad allowing us to improve our penetration into the intermodal market capturing approximately 30% of 3^rd quarter intermodal orders and we received additional orders for autoracks. Tank car orders are on pace to significantly surpass order levels from 2003. Increased tank car demand is reflective of general economic activity in the chemical sector and replacement of older, smaller tank cars. As you can see from the diversity of car types ordered and variety of customers placing orders, the railcar market recovery appears to be well underway.

Trinity Industries Leasing Company continues to grow its railcar fleet taking delivery of approximately 530 new railcars representing approximately 13% of TrinityRail’s 3^rd quarter shipments. Our operating lease fleet has grown to over 19,700 railcars from 17,700 railcars a year ago. Our committed lease backlog as of September 30 is approximately 2,300 railcars or 11.7% of TrinityRail’s total production backlog reflecting the positive response we are receiving from industrial shippers and railroads for our leasing services. We believe TILC is uniquely positioned to respond to the demand to replace older railcars as shippers seek to benefit from the trend toward larger, more efficient railcars. Our fleet utilization increased to 98.5% at the end of the 3^rd quarter reflecting the strong overall demand for railcars. With growing demand for new railcars at higher prices and lease rates and high utilization of existing lease fleets, lease rates and terms have strengthened.

As John mentioned, we have filed our Form 10-Q for the quarter this morning and you will find more details there.

Revenues for the third quarter of 2004 grew 56% over the third quarter of 2003 as sales volume increased again in every business segment. Earnings per diluted share was at break-even compared to 2 cents for the same quarter last year. As Tim mentioned, steel and material cost increases continue to be a major issue for us. On a consolidated basis, continuing steel cost increases over costs anticipated at the beginning of the year negatively impacted earnings by approximately $19.5 million in the third quarter. We expect steel cost increases over costs anticipated at the beginning of the year to impact the fourth quarter by approximately $16 million, bringing the total impact on 2004 earnings to approximately $54 million. I will discuss the impact on individual business segments as I discuss each segment.

First, our Rail Group. North American railcar revenues grew 101% during the third quarter of 2004 compared to the third quarter of 2003. Shipments of new railcars grew to 4,150 cars compared to approximately 2,200 in the third quarter last year and approximately 3,200 in the 2^nd quarter of 2004. Rail Group sales to the Leasing & Management Services Group were $34.3 million in the third quarter of 2004 with profits of $2.0 million compared to sales in the third quarter of 2003 of $63.6 million with profits of $4.9 million. These intercompany sales and profits are eliminated in consolidation. European rail revenues were down in the third quarter due to a plant shutdown for maintenance. Component revenues were flat year over year.

Steel cost increases for the third quarter in the Rail Group totaled approximately $17 million more than we expected at the beginning of the year bringing the year-to-date impact to $24 million. The 3^rd quarter figure includes contract losses of $4.6 million related to railcars to be delivered in the 4^th quarter of 2004 and during 2005. We expect steel cost increases during the fourth quarter to total $13 million more for the Rail Group than we anticipated at the beginning of the year.

Of the 19,800 railcars in our North American backlog, approximately 71% of the units and 66% of the revenues are subject to escalation clauses intended to pass on steel cost increases. Some escalation clauses are more effective than others, however, depending upon several factors, including how steel mills and vendors pass on cost increases to us. Throughout the year, we have been fine-tuning these escalation clauses to pass on to our customers as much of our materials cost increase as possible.

At the beginning of the year, none of our contracts included escalation clauses. Each quarter, as we deliver railcars on older orders and add new orders with escalation clauses, our exposure to fixed sales price contracts diminishes. Around 25% of the railcar deliveries expected in the 4^th quarter are under contracts with escalation clauses. Most of these contracts were negotiated individually with various customers earlier in the year when steel pricing first began increasing rapidly. Our Rail Group estimates that escalation clauses impacting billings in the 4^th quarter will range from 100% effective to 50% effective in passing through material cost increases. On an overall basis for the 4^th quarter, effectiveness is expected to be around 66%. We expect our effectiveness percentage to improve in each subsequent quarter. In the first quarter of 2005, for example, we expect effectiveness to be 75% and in the second quarter - - 84%. Again, changing prices of specific materials may impact these percentages – up or down. We will report escalation clause effectiveness on a quarterly basis.

The price increases we have experienced have not only created some contract losses but have eroded margins in the backlog. Our North American backlog as of September 30, 2004 has an estimated sales value of approximately 1.3 billion. Of the $1.3 billion in revenues, $850 million is subject to escalation and $450 million is not subject to escalation. Because the older contracts without escalation will generally ship earlier, the gross profit margins to be realized are lower in the 4^th quarter of 2004 and will increase with each succeeding quarter. By the end of June 2005 we will only have approximately 450 railcars (or, approximately $55 million in revenue) yet to be delivered that are not subject to escalation. The orders we received during the 3^rd quarter of 2004 have an estimated gross profit margin approximately double that of the overall backlog. These estimates are based on current steel costs, include improved pricing and are also subject to escalation.
The point of what I have been saying regarding margin in the backlog, contracts with escalation clauses, and the effectiveness of the escalation clauses is that all these factors are all moving in the right direction.
In our Construction Products Group this quarter, revenues were up year-over-year due to volume and pricing in our fittings and highway safety businesses and recent acquisitions in the concrete business. Operating profit followed revenues and was also impacted by efficiencies resulting from the increased volumes.

Our Inland Barge Group was adversely affected by steel cost increases of $2.5 million and barge litigation costs of $1.0 million. The total estimated impact of steel price increases during 2004 on barge profitability is approximately $20 million, of which $4.1 million was recorded in the fourth quarter of 2003. Approximately $3 million of the expected steel cost increases will be recognized in the 4^th quarter of 2004, resulting in lower margins on those contracts.

Revenues in the Leasing & Management Services Group in the third quarter of 2004 were up $6.6 million due to growth in the size of the lease fleet and improved utilization of the fleet as Steve mentioned. Because the sale/leaseback transaction Steve and John have already discussed affects the comparability of our leasing operations at the operating profit line, we have added a comparative disclosure to our Form 10-Q which presents a non-GAAP measure we call EBITDAR. EBITDAR can be calculated by adding back depreciation and railcar lease expense to operating profit. EBITDAR represents the results of leasing and management operations on a consistent basis for the railcars leased out to third parties whether the cars are on or off balance sheet.

On a consolidated basis, SE&A expenses have increased in total amount but have declined to 7.7% of revenues from 10.8% of revenues in the third quarter of 2003. Interest expense is up in connection with the $300 million bond offering in March 2004. Interest income of $8.1 million was earned in prior periods in connection with a deposit with a steel supplier, but was not recognized as income until collected because the supplier was operating under Chapter 11 equivalent court protection. Investment in working capital grew primarily due to increasing sales and production volumes as well as increased steel and material costs. While the inventory and accounts receivable totals are up, as you would expect when top line revenues are growing, the turnover rates are improved for accounts receivable and slightly deteriorated for inventory due, in part, to inventory cost increases.
Steel and materials cost and availability will continue to be issues. Including the estimate of steel cost increases affecting the 4^th quarter that I mentioned previously of $16 million, our expectation for 4th quarter earnings per share is a range of from a 10-cent loss to a 5-cent profit per share.
While we are not providing guidance regarding any period in 2005, the first quarter, which is a seasonally down quarter for the Construction Products Group, is expected to have about $125 million of North American railcar revenues not subject to escalation so exposure to cost increases which can not be passed through continues into that quarter. In the second quarter of 2005, railcar revenues not subject to escalation drops to an estimated $30 million.


Delaware	1-6903	75-0225040
_____________________ (State or other jurisdiction	_____________ (Commission	______________ (I.R.S. Employer
of incorporation)	File Number)	Identification No.)

2525 Stemmons Freeway, Dallas, Texas		75207-2401
_________________________________ (Address of principal executive offices)		___________ (Zip Code)


	Trinity Industries, Inc.

November 3, 2004	By:	Michael G. Fortado

		Name: Michael G. Fortado
		Title: Vice President and Secretary


Exhibit No.		Description

99.1		News Release of Registrant dated November 2, 2004 with respect to the operating results for the third quarter of 2004.
99.2		Conference call script of November 3, 2004 of Neil O. Shoop, Treasurer.
99.3		Conference call script November 3, 2004 of John L. Adams, Executive Vice President.
99.4		Conference call script of November 3, 2004 of Timothy R. Wallace, Chairman, President and Chief Executive Officer.
99.5		Conference call script of November 3, 2004 of D. Steven Menzies, President and Trinity Industries Leasing Company.
99.6		Conference call script of November 3, 2004 of Jim S. Ivy, Senior Vice President and Chief Financial Officer.


Media Contact:		Investor Contact:
Nancy Farrar Farrar Public Relations (817)937-1557		Neil Shoop Treasurer (214)589-8561


Date of Report (Date of Earliest Event Reported):		November 2, 2004


Registrant’s telephone number, including area code:		214-631-4420


In summary: