Add
TRN to Portfolio
Set Alert
Email to a
Friend
| |||
|
|
Quotes & Info
|
| TRN > SEC Filings for TRN > Form 10-Q on 30-Jul-2009 | All Recent SEC Filings |
30-Jul-2009
Quarterly Report
As of January 2009 As of May 2009 Percent Change
2009 28,300 24,000 (15.2 )%
2010 23,700 15,100 (36.3 )%
2011 41,550 29,150 (29.8 )%
2012 56,050 48,200 (14.0 )%
2013 62,550 59,750 (4.5 )%
|
Our estimate of the Rail Group's fair value (considered to be a level three
fair value measurement) utilized an income approach based on the anticipated
future discounted cash flows of the Rail Group, requiring significant estimates
and judgments related to future revenues and operating profits, exit multiples,
tax rates and consequences, and discount rates based upon market-based capital
costs. Because the estimated fair value of the Rail Group was less than the
carrying amount of its net assets, we performed step two of our goodwill
impairment analysis as required by SFAS 142, by estimating the fair value of
individual assets and liabilities of the Rail Group in accordance with the
provisions of SFAS No. 141(R), Business Combinations and SFAS No. 157, Fair
Value Measurements. The result of our impairment analysis indicated that the
remaining implied goodwill amounted to $122.5 million for our Rail Group as of
June 30, 2009 and, consequently, we recorded an impairment charge of
$325.0 million during the second quarter of 2009. The change in our estimate of
the Rail Group's enterprise value from December 31, 2008 to June 30, 2009 was
driven by economic indicators, including third-party studies that are predicting
that the decline in the railcar industry is likely to extend longer than was
previously expected. In management's opinion, no interim impairment tests were
necessary for our remaining business segments as there has not been a
significant change in market conditions for these segments since the annual
impairment test.
Additionally, we performed an interim test for recoverability of the carrying
value of our Rail Group long-lived assets based on cash flow estimates
consistent with those used in the goodwill impairment test. The carrying value
of long-lived assets to be held and used is considered impaired only when their
carrying value is not recoverable through undiscounted future cash flows and the
fair value of the assets is less than their carrying value. We determined that
there was no impairment of the recoverability of the Rail Group's long-lived
assets as the Rail Group's estimated undiscounted future cash flows exceeded the
carrying value of its long-lived assets.
Given the current economic environment and the uncertainties regarding the
potential impact on our businesses, there can be no assurance that our estimates
and assumptions regarding the duration of the ongoing economic downturn, or the
period or strength of recovery, made for the purposes of the long-lived asset
and goodwill impairment tests during the second quarter of 2009 will prove to be
accurate predictions of the future. If our assumptions regarding forecasted cash
flows are not achieved, it is possible that additional impairments of remaining
goodwill and long-lived assets may be required.
In 2007, Trinity Industries Inc. purchased 20% of the equity in newly-formed
TRIP Rail Holdings LLC ("TRIP Holdings"). TRIP Holdings and its subsidiary, TRIP
Rail Leasing LLC ("TRIP Leasing") provide railcar leasing and management
services in North America. Railcars are purchased from Trinity by TRIP Leasing.
In January 2009, the Company acquired an additional 5% equity ownership in
TRIP Holdings for approximately $9.0 million from another equity investor. As a
result, the Company now owns a 25% equity ownership in TRIP Holdings, increasing
the Company's total commitment by $12.3 million to $61.3 million, of which
$56.3 million has been paid. Trinity's remaining equity commitment exposure to
TRIP Holdings is $5.0 million through June 2010. Trinity's carrying value of its
investment in TRIP Holdings follows:
June 30, December 31,
2009 2008
(in millions)
Capital contributions $ 56.3 $ 35.9
Equity in earnings 1.8 0.5
Equity in unrealized losses on derivative financial instruments (4.3 ) (9.5 )
Distributions (6.0 ) (3.1 )
Deferred broker fees (1.0 ) (0.8 )
$ 46.8 $ 23.0
|
On December 13, 2007, the Company's Board of Directors authorized a
$200 million common stock repurchase program allowing for repurchases through
December 31, 2009. During the six months ended June 30, 2009 and 2008, 813,028
and 471,100 shares were repurchased under this program at a cost of
approximately $6.3 million and $12.2 million, respectively. No shares were
repurchased under this program for the three months ended June 30, 2009 and
2008. Since the inception of this program through June 30, 2009, the Company has
repurchased a total of 3,532,728 shares at a cost of approximately
$67.5 million.
In May 2008, the Financial Accounting Standards Board ("FASB") issued FASB
Staff Position No. APB 14-1, Accounting for Convertible Debt Instruments That
May Be Settled in Cash upon Conversion (including Partial Cash Settlement) ("FSP
APB 14-1"). FSP APB 14-1 requires that issuers of certain convertible debt
instruments that may be settled in cash upon conversion to separately account
for the liability and equity components in a manner that will reflect the
entity's nonconvertible debt borrowing rate when interest expense is recognized
in subsequent periods. The effective date of FSP APB 14-1 is for financial
statements issued for fiscal years and interim periods beginning after
December 15, 2008 and does not permit earlier application. The pronouncement
requires that all periods presented be adjusted. The Company adopted the
provisions of FSP APB 14-1 as of January 1, 2009 and has accordingly adjusted
amounts previously reported with respect to Debt, Other assets, Capital in
excess of par value, Deferred income taxes and Interest expense. See Note 9 of
the Consolidated Financial Statements for a further explanation of the effects
of implementing this pronouncement as it applies to our Convertible Subordinated
Notes.
In May 2009, Trinity Industries Leasing Company ("TILC"), a wholly-owned
subsidiary of Trinity, renewed its railcar leasing warehouse facility through
February 2011. This facility, which was set to mature in August 2009, was
established to finance railcars owned by TILC. Additionally, TILC completed
several other financings during the second quarter totaling $87.1 million. See
Financing Activities.
The economic and financial crisis experienced by the United States economy
during 2008 and into 2009 has impacted our businesses. New orders for railcars
and barges continued to drop significantly in the first six months of 2009 as
the transportation industry saw a significant decline in the shipment of
freight. The 2009 outlook for the transportation industry is for a continued
significant downturn. Orders for structural wind towers have been slow since
mid-2008 when green energy companies experienced tightened credit markets
coupled with lower prices for electricity and natural gas sales. The slowdown in
the residential and commercial construction markets impacted our Construction
Products Group as well. We continually assess our manufacturing capacity and
take steps to align our production capacity with demand. As a result of our
assessment, we idled a significant amount of our railcar production capacity and
one structural wind tower production facility during the fourth quarter of 2008
and the first quarter of 2009.
Overall Summary for Continuing Operations
Revenues
Three Months Ended June 30, 2009 Three Months Ended June 30, 2008
Revenues Revenues Percent
External Intersegment Total External Intersegment Total Change
($ in millions)
Rail Group $ 159.4 $ 143.9 $ 303.3 $ 334.9 $ 255.7 $ 590.6 (48.6 )%
Construction Products
Group 152.2 1.1 153.3 214.3 4.9 219.2 (30.1 )
Inland Barge Group 136.7 - 136.7 150.9 - 150.9 (9.4 )
Energy Equipment Group 132.6 1.8 134.4 154.3 3.0 157.3 (14.6 )
Railcar Leasing and
Management Services
Group 133.5 - 133.5 86.4 - 86.4 54.5
All Other 1.7 8.7 10.4 4.7 13.7 18.4 (43.5 )
Eliminations - lease
subsidiary - (138.8 ) (138.8 ) - (252.6 ) (252.6 )
Eliminations - other - (16.7 ) (16.7 ) - (24.7 ) (24.7 )
Consolidated Total $ 716.1 $ - $ 716.1 $ 945.5 $ - $ 945.5 (24.3 )
Revenues
Six Months Ended June 30, 2009 Six Months Ended June 30, 2008
Revenues Revenues Percent
External Intersegment Total External Intersegment Total Change
($ in millions)
Rail Group $ 322.1 $ 265.1 $ 587.2 $ 682.6 $ 475.8 $ 1,158.4 (49.3 )%
Construction Products
Group 273.2 3.6 276.8 379.3 9.2 388.5 (28.8 )
Inland Barge Group 293.7 - 293.7 288.7 - 288.7 1.7
Energy Equipment Group 259.3 3.6 262.9 280.5 6.3 286.8 (8.3 )
Railcar Leasing and
Management Services
Group 355.9 - 355.9 206.2 - 206.2 72.6
All Other 5.4 19.4 24.8 7.1 29.5 36.6 (32.2 )
Eliminations - lease
subsidiary - (255.3 ) (255.3 ) - (469.3 ) (469.3 )
Eliminations - other - (36.4 ) (36.4 ) - (51.5 ) (51.5 )
Consolidated Total $ 1,509.6 $ - $ 1,509.6 $ 1,844.4 $ - $ 1,844.4 (18.2 )
|
Our revenues for the three and six month periods ended June 30, 2009 decreased due to fewer railcar sales and lower pricing from certain segments resulting from lower material costs and competitive pricing pressures.
Operating Profit (Loss)
Three Months Ended June 30, Six Months Ended June 30,
2009 2008 2009 2008
(in millions)
Rail Group $ (328.7 ) $ 72.4 $ (334.5 ) $ 149.6
Construction Products Group 15.5 21.1 13.6 33.3
Inland Barge Group 30.3 27.2 69.2 53.7
Energy Equipment Group 25.2 25.4 43.5 43.6
Railcar Leasing and Management Services Group 35.2 36.0 87.9 70.1
All Other (1.7 ) 5.8 (3.1 ) 5.5
Corporate (7.8 ) (11.8 ) (15.4 ) (17.2 )
Eliminations - lease subsidiary (8.8 ) (23.1 ) (17.7 ) (54.3 )
Eliminations - other (1.5 ) (3.0 ) (2.5 ) (8.1 )
Consolidated Total $ (242.3 ) $ 150.0 $ (159.0 ) $ 276.2
|
Operating profit for the three and six month periods ended June 30, 2009
decreased as a result of a goodwill impairment charge of $325 million and lower
revenues coupled with reduced pricing driven by lower material costs and highly
competitive markets.
Other Income and Expense. Interest expense, net of interest income, was
$28.5 million and $57.2 million, respectively, for the three and six month
periods ended June 30, 2009 compared to $26.0 million and $46.9 million (as
adjusted - see Note 9 of the Consolidated Financial Statements), respectively,
for the same periods last year. Interest income decreased $0.7 million over the
same quarter last year and $2.7 million over the same six month period last year
as a result of lower interest rates more than offsetting the effect of an
increase in cash available for investment. Interest expense increased
$1.8 million and $7.6 million, respectively, over the same periods last year due
to an increase in debt levels, including $544.6 million of promissory notes for
the Leasing Group entered into in May 2008, and expense related to the
ineffective portion of interest rate hedges. The decrease in Other, net for the
three and six month periods ended June 30, 2009 was primarily due to gains
recognized on property dispositions in 2008.
Income Taxes. The effective tax rates for continuing operations for the three
and six month periods ended June 30, 2009 were 21.4% and 16.9%, respectively,
and varied from the statutory rate of 35.0% due primarily to the goodwill
impairment charge not being fully deductible for income tax purposes, the
recording of a $6.3 million valuation reserve related to the utilization of
foreign tax credits, state income taxes and discrete adjustments related to
foreign and state taxes. The prior year effective tax rates for continuing
operations for the three and six month periods ended June 30, 2008 were 38.2%
and 38.9%, respectively, and varied from the statutory rate of 35.0% due
primarily to state income taxes and discrete adjustments related to foreign and
state taxes.
Rail Group
Three Months Ended June 30, Six Months Ended June 30,
2009 2008 Percent 2009 2008 Percent
($ in millions) Change ($ in millions) Change
Revenues:
Rail $ 271.1 $ 545.6 (50.3 )% $ 521.9 $ 1,071.5 (51.3 )%
Components 32.2 45.0 (28.4 ) 65.3 86.9 (24.9 )
Total revenues $ 303.3 $ 590.6 (48.6 ) $ 587.2 $ 1,158.4 (49.3 )
Operating profit
(loss) $ (328.7 ) $ 72.4 $ (334.5 ) $ 149.6
Operating profit
(loss) margin (108.4 )% 12.3 % (57.0 )% 12.9 %
|
Railcar shipments decreased 53% to approximately 3,080 and 51% to approximately 6,130 during the three and six month periods ended June 30, 2009, compared to the same periods in 2008. As of June 30, 2009, our Rail Group backlog consisted of approximately 3,780 railcars as compared to approximately 28,680 railcars as of June 30, 2008. The railcar backlog dollar value as of June 30, 2009 and June 30, 2008 was as follows:
As of June 30,
2009 2008
(in millions)
External Customers $ 162.1 $ 748.8
TRIP Leasing - 237.1
Leasing Group 163.8 1,384.5
Total $ 325.9 $ 2,370.4
|
The total amount of the backlog dedicated to the Leasing Group is supported
by lease agreements with external customers. The final amount dedicated to the
Leasing Group may vary by the time of delivery. Results for the three and six
month periods ended June 30, 2009 included $75.0 million and $113.0 million,
respectively, in railcars sold to TRIP Leasing, that resulted in a gain of
$6.2 million and $11.2 million, respectively, of which $1.6 million and
$2.8 million, respectively, in profit was deferred based on our 25% equity
interest. Results for the three and six month periods ended June 30, 2008
included $83.0 million and $229.0 million, respectively, in railcars sold to
TRIP Leasing, that resulted in a gain of $19.2 million and $44.8 million,
respectively, of which $3.8 million and $8.9 million, respectively, in profit
was deferred based on our 20% equity interest. See Note 5 Equity Investment of
the Consolidated Financial Statements for information about TRIP Leasing.
Operating profit for the Rail Group decreased $401.1 million and
$484.1 million, respectively, for the three and six month periods ended June 30,
2009 compared to the same periods last year. This decrease was primarily due to
a $325 million goodwill impairment charge during the quarter ended June 30, 2009
(see Note 1 of the Consolidated Financial Statements). Additionally, a
significantly reduced volume of railcars were delivered during the period amid a
lower pricing and unit demand environment.
In the three months ended June 30, 2009, railcar shipments included sales to
the Leasing Group of $138.8 million compared to $252.6 million in the comparable
period in 2008 with a deferred profit of $8.8 million compared to $23.1 million
for the same period in 2008. In the six months ended June 30, 2009, railcar
shipments included sales to the Leasing Group of $255.3 million compared to
$469.3 million in the comparable period in 2008 with a deferred profit of
$17.7 million compared to $54.3 million for the same period in 2008. Sales to
the Leasing Group and related profits are included in the operating results of
the Rail Group but eliminated in consolidation.
Construction Products Group
Three Months Ended June 30, Six Months Ended June 30,
Percent Percent
2009 2008 Change 2009 2008 Change
($ in millions) ($ in millions)
Revenues:
Concrete and Aggregates $ 85.9 $ 126.3 (32.0 )% $ 163.8 $ 230.8 (29.0 )%
Highway Products 64.9 84.4 (23.1 ) 108.0 141.7 (23.8 )
Other 2.5 8.5 (70.6 ) 5.0 16.0 (68.8 )
Total revenues $ 153.3 $ 219.2 (30.1 ) $ 276.8 $ 388.5 (28.8 )
Operating profit $ 15.5 $ 21.1 $ 13.6 $ 33.3
Operating profit margin 10.1 % 9.6 % 4.9 % 8.6 %
|
The decrease in revenues for the three and six month periods ended June 30, 2009 compared to the same periods in 2008 was primarily attributable to the overall decline in the economic conditions related to the markets served by this segment including a reduction in state funding of highway construction. Operating profit for the three and six months ended June 30, 2009 compared to the same periods in 2008 decreased as a result of lower volumes. Additionally the Construction Products Group recorded a $1.1 million write down of surplus inventory quantities at June 30, 2009 resulting in a total inventory write-down of $2.8 million for the six months ended June 30, 2009.
Inland Barge Group
Three Months Ended June 30, Six Months Ended June 30,
Percent Percent
2009 2008 Change 2009 2008 Change
($ in millions) ($ in millions)
Revenues $ 136.7 $ 150.9 (9.4 )% $ 293.7 $ 288.7 1.7 %
Operating profit $ 30.3 $ 27.2 $ 69.2 $ 53.7
|
Revenues decreased while operating profit increased for the three month
period ended June 30, 2009 compared to the same period in the prior year due to
fewer barges shipped offset by lower operating expenses. Revenues and operating
profit increased for the six month period ended June 30, 2009 compared to the
same period in the prior year due to a change in the mix of barges sold.
Operating profit for the three and six months ended June 30, 2009 included the
refund of $0.7 million and $1.6 million, respectively, in unclaimed settlement
funds related to a legal settlement and for the six months ended June 30, 2008
included the refund of $2.0 million in unclaimed settlement funds related to the
same settlement. As of June 30, 2009, the backlog for the Inland Barge Group was
approximately $349.5 million compared to approximately $754.9 million as of June
30, 2008.
Energy Equipment Group
Three Months Ended June 30, Six Months Ended June 30,
Percent Percent
2009 2008 Change 2009 2008 Change
($ in millions) ($ in millions)
Revenues:
Structural wind towers $ 100.3 $ 106.4 (5.7 )% $ 192.1 $ 190.4 0.9 %
Other 34.1 50.9 (33.0 ) 70.8 96.4 (26.6 )
Total revenues $ 134.4 $ 157.3 (14.6 ) $ 262.9 $ 286.8 (8.3 )
Operating profit $ 25.2 $ 25.4 $ 43.5 $ 43.6
Operating profit margin 18.8 % 16.1 % 16.5 % 15.2 %
|
Revenues decreased for the three and six month periods ended June 30, 2009 compared to the same periods in 2008 due to overall lower volumes partially offset by change in the mix of structural wind towers sold. Operating profit for the three and six months ended June 30, 2009 compared to the same periods in 2008 remained relatively unchanged as the effects of lower volumes were offset by a change in the sales mix and lower operating costs both related to . . .
|
|