8-K

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): May 3, 2006

Trinity Industries, Inc.
__________________________________________
(Exact name of registrant as specified in its charter)

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)

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

Not Applicable
______________________________________________
Former name or former address, if changed since last report

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[  ]  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[  ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[  ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[  ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition.

The Registrant hereby furnishes the information set forth in its News Release, dated May 3, 2006, announcing operating results for the three months ended March 31, 2006 a copy of which is furnished as exhibit 99.1 and incorporated herein by reference. On May 4, 2006, the Registrant held a conference call and web cast with respect to its financial results for the three months ended March 31, 2006. The conference call scripts of James E. Perry, Treasurer; Timothy R. Wallace, Chairman, President, and Chief Executive Officer; D. Steven Menzies, Group President, Tank Car, Leasing and Services; and William A. McWhirter II, Vice President and Chief Financial Officer are furnished as exhibits 99.2, 99.3, 99.4, and 99.5 respectively, and incorporated herein by reference. This information in not "filed" pursuant to the Securities and Exchange Act and is not incorporated by reference into any Securities Act registration statements. Additionally, the submission of the report on Form 8-k is not an admission of the ma teriality of any information in this report that is required to be disclosed solely by Regulations FD.

Item 7.01 Regulation FD Disclosure.

The Registrant hereby furnishes the information set forth in its News Release, dated May 3, 2006, announcing operating results for the three months ended March 31, 2006 a copy of which is furnished as exhibit 99.1 and incorporated herein by reference. On May 4, 2006, the Registrant held a conference call and web cast with respect to its financial results for the three months ended March 31, 2006. The conference call scripts of James E. Perry, Treasurer; Timothy R. Wallace, Chairman, President, and Chief Executive Officer; D. Steven Menzies, Group President, Tank Car, Leasing and Services; and William A. McWhirter II, Vice President and Chief Financial Officer are furnished as exhibits 99.2, 99.3, 99.4, and 99.5 respectively, and incorporated herein by reference. This information in not "filed" pursuant to the Securities and Exchange Act and is not incorporated by reference into any Securities Act registration statements. Additionally, the submission of the report on Form 8-k is not an admission of the ma teriality of any information in this report that is required to be disclosed solely by Regulations FD.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	Trinity Industries, Inc.
May 4, 2005	By:	Michael G. Fortado
		Name: Michael G. Fortado
		Title: Vice President and Secretary

Exhibit Index

Exhibit No.	Description
99.1	News Release dated May 3, 2006 with respect to the operating results for the three months ended March 31, 2006.
99.2	Conference call script of May 4, 2006 for James E. Perry, Treasurer.
99.3	Conference call script of May 4, 2006 for Timothy R. Wallace, Chairman, President, and Chief Executive Officer.
99.4	Conference call script of May 4, 2006 for D. Stephen Menzies, Group President, Tank Car, Leasing and Services.
99.5	Conference call script of May 4, 2006 for William A. McWhirter II, Vice President and Chief Financial Officer.

EX-99.1

NEWS RELEASE

Investor Contact:
James Perry, Treasurer
Trinity Industries, Inc.
214/589-8412

FOR IMMEDIATE RELEASE

Trinity Industries Reports Strong Earnings Growth

DALLAS – May 3, 2006 – Trinity Industries, Inc. (NYSE:TRN) today reported financial results for the three months ended March 31, 2006. For the quarter ended March 31, 2006, the Company reported earnings of $37.0 million, or $0.70 per common diluted share, compared with earnings of $6.0 million or $0.11 per common diluted share for the same quarter of 2005. Revenues for the three months ended March 31, 2006 increased 18 percent to $760.9 million compared to revenues of $646.9 million for the same period in 2005.

“The momentum established in 2005 continued, resulting in a strong first quarter,” said Timothy R. Wallace, Trinity’s Chairman, President and CEO.  “Our operating profit was higher during this quarter than any March-ending quarter in the Company’s history. Operating margins in all of our business segments improved as compared to the same quarter last year.”  

Trinity received new orders for 12,941 railcars in North America during the first quarter, the highest quarterly order volume since 1998. The Company shipped 6,164 railcars in North America during the first quarter, the highest quarterly total since 1999. From the total shipments, the Company added more than 1,800 new railcars to its lease fleet during the first quarter, bringing the total number of railcars in the fleet to approximately 26,000. “Our lease fleet continues to be a very important part of our ongoing strategy,” Wallace said.  

“Our Construction Products businesses had a solid quarter, in part stemming from the federal highway bill passed in 2005,” Wallace continued.  “Our Inland Barge Group also performed well as a result of steady demand.  Manufacturing efficiencies improved in our Energy Equipment Group, contributing to its strong results.  Our backlog in the wind tower business continues to grow as demand builds for new energy sources.  Overall, I am pleased with the performance in all of our business segments and encouraged by the depth of our Company-wide backlog.”

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 Energy Equipment Group. Trinity’s web site may be accessed at http://www.trin.net.

Some statements in this release, which are not historical facts, are “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements about Trinity’s estimates, expectations, beliefs, intentions or strategies for the future, and the assumptions underlying these forward-looking statements. Trinity uses the words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “forecasts,” “may,” “will,” “should,” and similar expressions to identify these forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from historical experience of our present expectations. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward looking statements, see “Forward-Looking Statements” in the Company’s Annual Report on Form 10-K for the most recent fiscal year.

- TABLES TO FOLLOW -

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

	Three Months Ended March 31,
	2006		2005
Revenues	$	760.9	$	646.9
Operating profit	$	73.6	$	17.9
Other expense		12.3		8.3
Income before income taxes		61.3		9.6
Provision for income taxes		24.3		3.6
Net income		37.0		6.0
Dividends on Series B preferred stock		—		(0.8	)
Net income applicable to common shareholders	$	37.0	$	5.2
Net income applicable to common shareholders per common share:
Basic	$	0.74	$	0.11
Diluted	$	0.70	$	0.11
Weighted average number of shares outstanding:
Basic		49.9		47.0
Diluted		52.5		47.8

Trinity Industries, Inc.
Condensed Segment Data
(in millions)

	Three Months Ended
	March 31,
Revenues:	2006			2005
Rail Group	$	539.9		$	434.4
Construction Products Group		164.6			143.1
Inland Barge Group		82.0			44.9
Energy Equipment Group		68.2			46.7
Railcar Leasing and Management Services Group		56.3			52.5
All Other		11.3			9.4
Eliminations		(161.4	)		(84.1	)
Total Revenues	$	760.9		$	646.9

Operating profit (loss):	Three Months Ended
	March 31,
	2006			2005
Rail Group	$	57.0		$	8.8
Construction Products Group		12.4			6.7
Inland Barge Group		6.6			(3.4	)
Energy Equipment Group		11.1			5.2
Railcar Leasing and Management Services Group		17.6			13.6
All Other		(2.8	)		(1.9	)
Corporate		(9.8	)		(6.6	)
Eliminations		(18.5	)		(4.5	)
Consolidated	$	73.6		$	17.9

Trinity Industries, Inc.
Condensed Consolidated Balance Sheet
(in millions)

	March 31,			December 31,
	2006			2005
Cash and equivalents	$	93.6		$	150.9
Accounts receivable		275.2			250.1
Inventories		506.1			444.2
Net property, plant and equipment, at cost (1)		1,256.8			1,121.1
Other assets		631.9			620.2
	$	2,763.6		$	2,586.5
Accounts payable and accrued liabilities	$	666.2		$	629.9
Debt (2)		770.3			689.0
Deferred income		44.7			45.2
Other liabilities		58.9			49.3
Series B preferred stock		—			58.7
Stockholders’ equity		1,223.5			1,114.4
	$	2,763.6		$	2,586.5
(1) Property, Plant and Equipment
Corporate/Manufacturing:
Property, plant and equipment	$	877.1		$	861.2
Accumulated depreciation		(607.1	)		(592.5	)
		270.0			268.7
Leasing:
Equipment on lease		1,141.5			998.3
Accumulated depreciation		(154.7	)		(145.9	)
		986.8			852.4
	$	1,256.8		$	1,121.1
(2) Debt
Corporate/Manufacturing — Recourse
Revolving commitment	$	—		$	—
Senior notes		300.0			300.0
Other		3.0			2.6
		303.0			302.6
Leasing – Recourse
Equipment trust certificates		119.8			130.1
		119.8			130.1
Leasing – Non-recourse
Warehouse facility		347.5			256.3
		347.5			256.3
	$	770.3		$	689.0

Trinity Industries, Inc.
Reconciliation of EBITDA
(in millions)

“EBITDA” is defined as net income (loss) plus income taxes, interest expense, and depreciation and amortization. EBITDA is not a calculation based on generally accepted accounting principles. The amounts included in the EBITDA calculation, however, are derived from amounts included in the historical statements of operations data. In addition, EBITDA should not be considered as an alternative to net income or operating income as an indicator of our operating performance, or as an alternative to operating cash flows as a measure of liquidity. We have reported EBITDA because we regularly review EBITDA as a measure of our ability to incur and service debt. In addition, we believe our debt holders utilize and analyze our EBITDA for similar purposes. We also believe EBITDA assists investors in comparing a company’s performance on a consistent basis without regard to depreciation and amortization, which can vary significantly depending upon many factors. However, the EBITDA measure presented in this press release may not always be comparable to similarly titled measures by other companies due to differences in the components of the calculation.

	Three Months Ended March 31,
	2006		2005
Net income	$	37.0	$	6.0
Add:
Provision for income taxes		24.3		3.6
Depreciation and amortization expense		21.4		19.7
Stock-based compensation expense		2.1		1.0
Interest expense		12.5		10.4
Earnings before income taxes, interest expense, and depreciation and amortization	$	97.3	$	40.7

• END -

Exhibit 99.2

First Quarter 2006 Results Conference Call
James E. Perry, Treasurer
May 4, 2006 — Final

Thank you, Holly.

Good morning from Dallas, Texas and welcome to the Trinity Industries’ First Quarter 2006 Results Conference Call. I’m James Perry, Treasurer for Trinity. Thank you for being with us today.

In addition to me, you will hear today from :

• Tim Wallace, Chairman, President and Chief Executive Officer

• Steve Menzies, Group President, Tank Car, Leasing and Services; and

• Bill McWhirter, Vice President and Chief Financial Officer

Following that, we’ll move to the Q&A session.

A replay of this conference call will be available starting one hour after the conference call ends today through midnight on Thursday, May 11th. The replay number is (402) 220-0116.

I would also like to welcome our audio web cast listeners today. Replay of this broadcast will also be available on our website located at www.t-r-i-n.net.

Before we get started, let me remind you that:

“Today’s conference call contains forward looking statements as defined by the Private Securities Litigation Reform Act of 1995 and includes statements as to estimates, 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.”

At March 31st, our borrowings at the corporate level were the 300 million dollars of senior notes and 3 million dollars of other indebtedness. The Leasing Company’s debt included the 119.8 million dollars of Equipment Trust Certificates and 347.5 million dollars outstanding under our railcar leasing warehouse facility. Our debt to total capital ratio was 38.6 percent, up from the comparable amount of 37 percent at December 31, 2005, principally due to lease fleet expansion.

At March 31st, our cash position was 93.6 million dollars.

Now, here’s Tim Wallace.

Tim

Steve

Bill

Thanks, Bill. Now our operator will prepare us for the Q & A session.

Q & A Session

Thank you, Holly. This concludes today’s conference call.

Remember, a replay of this call will be available starting one hour after this call ends today through midnight, Thursday, May 11th. The access number is (402) 220-0116. Also, this replay will be available on our website located at www.t-r-i-n.net.

We look forward to visiting with you again on our next conference call. Thank you for joining us this morning.

Exhibit 99.3

Trinity Industries, Inc.
Earnings Release Conference Call
Comments of Tim Wallace, Chairman, President and CEO
May 4, 2006

FINAL

Thank you James, and good morning everyone. 

We had a solid first quarter and I’m pleased with our progress. All of our business segments improved their profitability over the lst quarter last year.

The European railcar market is showing some signs of recovery. Our backlog of orders at the end of the lst quarter in Europe was approximately 790 units compared to 334 units at the end of the 4th quarter of 2005. We shipped 190 units during the lst quarter versus 513 units in the 4th quarter of 2005. We expect our shipments for the next two quarters to remain between 250 and 325 units. We are closely monitoring our European railcar business activities as we review our strategic alternatives.

Our 1st quarter North American railcar shipments totaled 6164 units. We expect our quarterly shipments to fluctuate between 6200 and 6600 units during the balance of the year. Our short term objectives for our North American rail businesses are to: continue productivity initiatives, pursue orders that extend our production lines, launch new production lines in Mexico and enhance our ability to make quick, efficient product line changeovers. We’re in the process of producing our first group of railcars in our new facility in Mexico. Everything is going as we planned.

Demand for railcars in North America was robust during the lst quarter. Industry orders were 37,311 units as compared to 17,600 units during the first quarter of 2005 and 26,700 units during the fourth quarter of 2005. As you see, the quarterly industry order level can be rather lumpy. We don’t expect the quarterly order level for the balance of the year to remain at such a high level.

As we reported in March at our last quarterly conference call, we have been receiving a steady stream of inquiries on a variety of railcar types. We sold 12,941 railcars in North America during the lst quarter. Our orders increased more than 300% compared to the lst quarter of last year and a 66% increase over the 4th quarter of 2005. In part, this is due to the fact that the industry lead times are much longer than a year ago. This is prompting customers to plan ahead to ensure their railcars are delivered when they need them. We continue to see the demand for railcars in North America as resembling a plateau on a demand chart rather than a short term spike.

Our railcar parts and components businesses are performing well. We are North America’s largest manufacturer of railcar axles and coupling devices. I recently toured our components facilities and was impressed with their level of productivity. We have a lot of positive momentum moving in these businesses.

As for the company as a whole, I remain very optimistic about our current opportunities and those on the horizon. Our barge business is maintaining a strong backlog. Industry demand has been steady for barges. We are currently taking steps to review a variety of alternatives to increase our barge production capacity. Fortunately, we have some production flexibility and we can shift our mix between tank and hopper barges. Bill will provide statistics on our backlog in his report.

Our construction products businesses are performing well. Weather conditions in the southwestern part of the United States were typical for the lst quarter. We are currently entering into the normal, construction friendly weather time of the year. Demand remains strong in our concrete and aggregate businesses. We are continuing to enhance the overall value of these businesses by adding some strategic, new, green-field operations.

Our highway safety products businesses are beginning to see the early signs of increased spending due to the transportation bill that was signed last summer. We are experiencing a good demand for our construction products during its peak season.

I am very pleased with the way we are growing our structural wind towers business. We have a good backlog of orders and we expect this business to make a significant contribution to our profits in 2006 and 2007. These products require specialized manufacturing equipment and we are in the process of upgrading our operations. The current increase in demand for wind tower structures fits very well within our overall growth plans.

Trinity’s leasing company had a great first quarter. Our railcar leasing company performs a vital, strategic benefit to our company. The demand for railcar leasing remains strong and we are maximizing our opportunities. Steve Menzies will provide more details about this in his report. As you can tell, I am pleased with the performance of our company. We expect to continue to improve our performance as we go through the year. We have excellent market leadership positions and a momentum that is building as we transition through the year. I remain very optimistic about our opportunities for 2006.

I’ll now turn it over to Steve Menzies to make his comments.

Exhibit 99.4

Trinity Industries, Inc
Analysts Conference Call
May 4, 2006
Comments by Steve Menzies

Thank you, Tim. Good morning! I am going to make a few comments about the railcar market followed by a few remarks about our leasing and management services business.

Industry demand for railcars in North America remained robust in the 1st quarter of 2006. This was a continuation of the strong pace set in early 2004 that continued throughout 2005. More than 26,700 railcars were ordered industry-wide during the 4^th quarter of 2005 and the 1^st quarter of 2006 outpaced that figure as 37,311 railcars were ordered. This order level is significantly greater than the quarterly average of 21,000 railcar orders over the last nine quarters. Large railcar orders tend to be sporadic and we do not expect quarterly order levels to continue at the first quarter of 2006 pace. However, we do expect railcar demand to remain strong as a result of solid fundamentals such as continued railcar loadings growth and rail transportation’s increased modal share as well as long term railcar replacement demand.

As Tim mentioned, we see strong, long term railcar demand reflected across multiple key market segments supporting our view that we are experiencing a market plateau as opposed to a short term spike. For example, demand remains strong for both Powder River Basin and eastern coal as utilities expand generating capacity using coal as the preferred fuel. Demand for covered hoppers that transport cement and agricultural products is also high. The growth in renewable fuels, particularly ethanol and bio-diesel, has also caused a surge in both tank car and hopper car demand. With the current number of plants under construction, undergoing expansion or in the planning stages, we believe the demand for railcars to support the transportation of renewable fuels including their feedstocks and co-products will remain strong through 2008.

During the 1st quarter of 2006, Trinity received 12,941 railcar orders including autoracks. All orders that we report are firm and without contingencies. We continue to focus our sales efforts on orders that meet our pricing requirements and extend our existing production lines. We received orders during the 1st quarter that will extend production lines for a variety of railcars. Specifically, we received orders for covered hoppers for agricultural products, resins and cement; coal cars; railcars for scrap steel, box cars, tank cars and autoracks. Our customer mix was diverse as agricultural and industrial shippers, railroads and third party lessors placed orders with us during the quarter. Current inquiry levels indicate strong momentum for orders for a variety of railcars continuing throughout 2006 and 2007, supporting our production and sales strategies.

The industry-wide production backlog at the end of the 1st quarter increased 27% to more than 88,100 from 69,400 railcars at the end of 2005. This is the largest industry backlog reported since 74,000 railcars in the third quarter of 1998 and the largest industry backlog since the early ‘80s. Industry backlog has increased each of the past five quarters. This indicates that industry order levels are actually outpacing increased industry production. However, we believe tight supplies of railcar castings are a critical variable for further increases in production beyond current levels. Trinity’s railcar production backlog in North America increased 36% from the end of 2005 to 25,541 railcars at the end of the 1^st quarter of 2006.

Trinity Industries Railcar Leasing and Management Services Group continued to grow its railcar fleet during the 1st quarter, taking delivery of 1,829 new railcars. This represents about 30 % of Trinity’s North American 1st quarter shipments. Our operating lease fleet now includes a diversified portfolio of more than 26,000 railcars as compared to the 21,000 railcars that were in our fleet on March 31, 2005. In addition, we manage more than 60,000 railcars that are part of our customers’ fleets. The growth of our leasing business helps us to develop solid, long term relationships with the end users of our railcars and results in a significant, long-term, stable earnings stream.

Our committed lease backlog at the end of the 1st quarter increased to 11,419 railcars or 45% of Trinity’s North American production backlog. This backlog extends into 2007. Our fleet utilization decreased slightly to 99.2% at the end of the first quarter of 2006. The average age of the railcars in our lease fleet is 4.8 years. Our average remaining lease term is more than six years. Lease rates continue to rise as a result of high fleet utilization, strong levels of new car building and rising new car prices. Our renewal rate, the number of leases renewed as a percentage of expiring leases, has been higher than normal reflecting strong demand for existing railcars. Our average fleet lease rate has continued to increase quarter over quarter reflecting the high number of lease renewals and rising lease rates.

I’ll now turn it over to Bill McWhirter.

Exhibit 99.5

Trinity Industries, Inc.
Earnings Release Conference Call
Comments of William McWhirter, Vice President and Chief Financial Officer
May 4, 2006

Thank you Steve and good morning everyone!

My comments relate primarily to the first quarter of 2006. We will file our Form 10-Q this morning. You will find more details there for the quarter ended March 31, 2006. During my remarks, I will provide earnings per share guidance for the second quarter and the full year. Additionally, I will provide new guidance with respect to operating margins in our Rail and Inland Barge groups.

We are pleased with our first quarter 2006 earnings of 70 cents per share. These results compare with earnings of 67 cents per share in the fourth quarter of 2005, excluding the 18 cent change associated with the European write-down. In the first quarter of the previous year, we reported earnings of 11 cents per share. Revenues for the first quarter increased 18% over the same quarter last year to $760 million. Our earnings of 70 cents per share exceeded the top end of our previous first quarter guidance by 5 cents per share. The higher results are primarily due to strong operating performance in our North American Rail Car production facilities.

At this time I will discuss the performance of our individual business segments.

Construction Products Group
Our Construction Products group, which plays a key part in our earnings diversification strategy, provided revenues which were up by 15% when compared to the same quarter of the previous year. Operating profit increased by $5.7 million and margins improved from 4.7% during the same quarter last year to 7.5% this year.

Our Concrete and Aggregate business accounted for 55% of this group’s revenues.

Our Highway Products business, which accounted for 28% of the group’s revenues, is also performing well. Revenues from this unit’s proprietary line of products continue to be strong.

Our Fittings and Bridge businesses account for the remainder of revenues. Both of these businesses are performing well.

Inland Barge Group
The Inland Barge group’s first quarter performance was consistent with our guidance, posting revenues of $82 million and operating profit of $6.6 million. Our March 31, 2006 backlog of work is approximately $327 million versus $89 million one year ago. This backlog does not include any barges associated with the announced multi-year contract with Ingram. We continue to have a very strong inquiry list at this time.

We anticipate Inland Barge revenues of approximately $75 to
$90 million per quarter during 2006. Operating profit margins are expected to range between 9% and 11% for the 12 months ending December 31, 2006. The first quarter margins represented orders in our backlog with less pricing strength than those which will be delivered in the remainder of the year.

Energy Equipment Group
Now moving to the Energy Equipment group, we are very pleased with the group’s first quarter performance. On a quarter-over-quarter basis, revenue increased approximately 46% to $68 million and operating profit improved by $5.9 million, bringing the quarterly margin to 16.3%. Our current backlog for Structural Windtowers continues to be strong. We anticipate the revenues from our Windtower business will grow to over $120 million in 2006 compared with approximately $67 million in 2005 and $11 million in 2004.

Leasing
In our Railcar Leasing and Management Services business, we reported revenues of $56.3 million, which were up $3.8 million on a quarter over quarter basis. Eliminating the effect of railcar sales from the fleet, revenues have increased by 24%, reflecting our commitment to growing our lease fleet. Total operating profit increased by $4.0 million due to the additions to the fleet and increased lease rates. We plan to invest between $450 and $550 million in net fleet additions during 2006.

Rail Group
In our Rail group, revenues were 24% higher on a quarter over quarter basis. Rail group sales to Trinity’s Leasing group were $148 million in the first quarter of 2006 with profits of $18.5 million, or approximately 22 cents per diluted share. This compares to sales to our Leasing group in the first quarter of 2005 of $72 million with profits of $4.5 million, or 6 cents per diluted share. These inter-company sales and profits are eliminated in consolidation.

Our European rail business continues to suffer from a depressed market. The total incurred loss was approximately $5 million for the first quarter. At our current build rate, we expect to incur a second quarter loss of between $3.0 and $4.0 million.

Our margin results for the rail segment were 10.6%. When you remove the effect of our European operations, North America achieved an operating margin of 11.9%.

Based on our current operating performance and the quality of our backlog, we are providing annual operating margin guidance for the North American Rail group of between 10% and 12%. This guidance is based on the following assumptions:

• continued production efficiencies in North America, and

• no significant supply problems in steel or other basic materials.

The effect of the European operating results should reduce the Rail segment margin between 1% and 1.5%.

Our North American backlog as of March 31, 2006 consisted of 25,541 railcars with an estimated sales value of approximately $1.9 billion. The backlog is subject to a variety of escalation provisions and firm raw material contracts. Together these items are referred to internally as cost coverage. Cost coverage of the current backlog is approximately 91%.

Consolidated

Moving to consolidated results:

Non-leasing capital expenditures are currently projected to be approximately $115.0 million for 2006.

We anticipate consolidated earnings for the second quarter to range between 78 and 85 cents per share.

Overall, our company guidance for 2006 has been improved. The new guidance is for earnings of between $2.90 and $3.10 for the full year on a fully diluted basis. Included in our assumptions for 2006 are:

• the deferral of approximately $69 million in profit on railcar sales from our Rail group to our Leasing group, or roughly 85 cents per diluted share

results in our European rail operations as discussed earlier

• continuing to achieve production efficiencies in North America

• no significant supply problems in steel or components

• normal weather conditions, and

• no unanticipated adverse resolution of legal matters.

In our earnings release yesterday, we provided a reconciliation of the non-GAAP term EBITDA. EBITDA for the first quarter of 2006 was approximately $97 million.

At this time I will turn the presentation back to James for the question and answer session.