UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-6903

Trinity Industries, Inc.

(Exact name of registrant as specified in its charter)

Delaware (State of Incorporation)		75-0225040 (I.R.S. Employer Identification No.)
2525 Stemmons Freeway Dallas, Texas (Address of principal executive offices)		75207-2401 (Zip Code)

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

     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 þ No o.

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). o Yes o No

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ.

     At April 23, 2010 there were 79,269,397 shares of the Registrant’s common stock outstanding.

 

 

TRINITY INDUSTRIES, INC.

FORM 10-Q

TABLE OF CONTENTS

Caption		Page
PART I            FINANCIAL INFORMATION
Item 1. Financial Statements			2
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			25
Item 3. Quantitative and Qualitative Disclosures About Market Risk.			34
Item 4. Controls and Procedures			34
PART II            OTHER INFORMATION
Item 1. Legal Proceedings			35
Item 1A. Risk Factors			35
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			35
Item 3. Defaults Upon Senior Securities			35
Item 5. Other Information			35
Item 6. Exhibits			36
SIGNATURES			37
EX-3.1
EX-31.1
EX-31.2
EX-32.1
EX-32.2

CERTIFICATIONS

Due to the adoption of an accounting pronouncement which became effective January 1, 2010, the Consolidated Balance Sheet as of March 31, 2010, and the Consolidated Statement of Operations and the Consolidated Statement of Cash Flows for the three months ended March 31, 2010, include the financial position and results of operations of TRIP Rail Holdings LLC and its subsidiary. See Notes 1 and 6 to the Consolidated Financial Statements for an explanation of the effect of this pronouncement.

PART I

Item 1. Financial Statements

Trinity Industries, Inc. and Subsidiaries
Consolidated Statements of Operations
(unaudited)

		Three Months Ended
		March 31,
		2010				2009
		(in millions, except per share
		amounts)
Revenues:
Manufacturing		$	332.8			$	571.1
Leasing			121.2				222.4
			454.0				793.5
Operating costs:
Cost of revenues:
Manufacturing			280.9				483.3
Leasing			68.6				165.5
Other			4.1				9.9
			353.6				658.7
Selling, engineering, and administrative expenses:
Manufacturing			31.5				37.1
Leasing			4.4				4.2
Other			12.5				7.6
			48.4				48.9
Total operating profit			52.0				85.9
Other (income) expense:
Interest income			(0.4	)			(0.3	)
Interest expense, including TRIP Holdings of $11.8 for 2010			45.7				29.0
Other, net			1.8				2.0
			47.1				30.7
Income from continuing operations before income taxes			4.9				55.2
Provision for income taxes			0.6				21.2
Income from continuing operations			4.3				34.0
Discontinued operations:
Loss from discontinued operations, net of benefit for income taxes of $0.0 and $0.0			(0.0	)			(0.1	)
Net income			4.3				33.9
Net income attributable to noncontrolling interest			2.3				—
Net income attributable to controlling interest		$	2.0			$	33.9
Net income attributable to controlling interest per common share:
Basic:
Continuing operations		$	0.02			$	0.43
Discontinued operations			(0.00	)			(0.00	)
		$	0.02			$	0.43
Diluted:
Continuing operations		$	0.02			$	0.43
Discontinued operations			(0.00	)			(0.00	)
		$	0.02			$	0.43
Weighted average number of shares outstanding:
Basic			76.6				76.6
Diluted			76.6				76.6
Dividends declared per common share		$	0.08			$	0.08

See accompanying notes to consolidated financial statements.

Trinity Industries, Inc. and Subsidiaries
Consolidated Balance Sheets

		March 31,				December 31,
		2010				2009
		(unaudited)
		(in millions)
Assets
Cash and cash equivalents		$	257.7			$	611.8
Short-term marketable securities			265.1				70.0
Receivables, net of allowance			195.5				159.8
Income tax receivable			11.4				11.2
Inventories:
Raw materials and supplies			126.2				97.1
Work in process			51.3				46.5
Finished goods			105.8				87.9
			283.3				231.5
Property, plant, and equipment, at cost, including TRIP Holdings of $1,081.4 at March 31, 2010			5,099.9				3,973.3
Less accumulated depreciation, including TRIP Holdings of $64.3 at March 31, 2010			(1,029.9	)			(935.1	)
			4,070.0				3,038.2
Goodwill			203.1				180.8
Restricted cash, including TRIP Holdings of $45.9 at March 31, 2010			182.3				138.6
Other assets			175.2				214.5
		$	5,643.6			$	4,656.4
Liabilities and Stockholders’ Equity
Accounts payable		$	92.6			$	76.8
Accrued liabilities			408.8				374.5
Debt:
Recourse, net of unamortized discount of $119.0 and $121.6			647.3				646.0
Non-recourse:
Parent and wholly owned subsidiaries			1,182.2				1,199.1
TRIP Holdings			1,041.2				—
			2,870.7				1,845.1
Deferred income			35.2				77.7
Deferred income taxes			330.4				397.9
Other liabilities			79.9				78.1
			3,817.6				2,850.1
Stockholders’ equity:
Preferred stock – 1.5 shares authorized and unissued			—				—
Common stock – 200.0 shares authorized			81.7				81.7
Capital in excess of par value			600.3				598.4
Retained earnings			1,154.2				1,263.9
Accumulated other comprehensive loss			(100.9	)			(98.0	)
Treasury stock			(39.2	)			(39.7	)
			1,696.1				1,806.3
Noncontrolling interest			129.9				—
			1,826.0				1,806.3
		$	5,643.6			$	4,656.4

See accompanying notes to consolidated financial statements.

Trinity Industries, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(unaudited)

		Three Months Ended
		March 31,
		2010				2009
		(in millions)
Operating activities:
Net income		$	4.3			$	33.9
Adjustments to reconcile net income to net cash provided by continuing operating activities:
Loss from discontinued operations			—				0.1
Depreciation and amortization			48.1				40.3
Stock-based compensation expense			3.5				3.9
Provision for deferred income taxes			1.9				8.4
Gain on disposition of railcars from our lease fleet			(2.1	)			(16.9	)
Gain on disposition of property, plant, equipment, and other assets			(2.2	)			(2.6	)
Other			0.7				2.2
Changes in assets and liabilities:
(Increase) decrease in receivables			(25.8	)			45.5
(Increase) decrease in income tax receivable			(0.2	)			7.0
(Increase) decrease in inventories			(36.6	)			52.7
(Increase) decrease in restricted cash			(0.6	)			(0.6	)
(Increase) decrease in other assets			11.6				(1.8	)
Increase (decrease) in accounts payable			13.3				(87.5	)
Increase (decrease) in accrued liabilities			(21.6	)			(32.4	)
Increase (decrease) in other liabilities			(11.4	)			(0.5	)
Net cash (required) provided by operating activities – continuing operations			(17.1	)			51.7
Net cash required by operating activities – discontinued operations			—				(0.1	)
Net cash (required) provided by operating activities			(17.1	)			51.6
Investing activities:
Investment in short-term marketable securities			(195.1	)			—
Proceeds from sales of railcars from our lease fleet			8.1				136.7
Proceeds from sales of railcars from our lease fleet – sale and leaseback			—				34.8
Proceeds from disposition of property, plant, equipment, and other assets			2.8				3.0
Capital expenditures – lease subsidiary			(37.8	)			(112.0	)
Capital expenditures – manufacturing and other			(6.2	)			(19.0	)
Acquisition, net of cash acquired			(39.9	)			—
Net cash (required) provided by investing activities			(268.1	)			43.5
Financing activities:
Issuance of common stock, net			0.3				—
Payments to retire debt – assumed debt of Quixote			(40.0	)			—
Payments to retire debt – other			(22.9	)			(73.9	)
Stock repurchases			—				(6.3	)
Dividends paid to common shareholders			(6.3	)			(6.3	)
Net cash required by financing activities			(68.9	)			(86.5	)
Net (decrease) increase in cash and cash equivalents			(354.1	)			8.6
Cash and cash equivalents at beginning of period			611.8				161.8
Cash and cash equivalents at end of period		$	257.7			$	170.4
Noncash investing and financing activity:
During the three months ended March 31, 2009, the Company acquired $12.9 million of equipment on lease through the assumption of capital lease obligations.

See accompanying notes to consolidated financial statements.

Trinity Industries, Inc. and Subsidiaries
Consolidated Statement of Stockholders’ Equity
(unaudited)

																		Accumulated												Controlling
										Capital in								Other												Interest								Total
		Common Stock								Excess of				Retained				Comprehensive				Treasury Stock								Stockholders’				Noncontrolling				Stockholders’
		Shares				Amount				Par Value				Earnings				Loss				Shares				Amount				Equity				Interest				Equity
		(in millions)
Balances at December 31, 2009			81.7			$	81.7			$	598.4			$	1,263.9			$	(98.0	)			(2.5	)		$	(39.7	)		$	1,806.3			$	—			$	1,806.3
Cumulative effect of consolidating TRIP Holdings (see Notes 1 and 6)			—				—				—				(105.4	)			—				—				—				(105.4	)			129.9				24.5
Balances at December 31, 2009 as adjusted			81.7				81.7				598.4				1,158.5				(98.0	)			(2.5	)			(39.7	)			1,700.9				129.9				1,830.8
Net income			—				—				—				2.0				—				—				—				2.0				2.3				4.3
Other comprehensive income (loss):
Change in unrealized loss on derivative financial instruments, net of tax			—				—				—				—				(4.0	)			—				—				(4.0	)			(2.3	)			(6.3	)
Other changes, net of tax			—				—				—				—				1.1				—				—				1.1				—				1.1
Comprehensive net loss																															(0.9	)			—				(0.9	)
Cash dividends on common stock			—				—				—				(6.3	)			—				—				—				(6.3	)			—				(6.3	)
Restricted shares issued, net			—				—				1.9				—				—				—				—				1.9				—				1.9
Stock options exercised			—				—				(0.2	)			—				—				—				0.5				0.3				—				0.3
Stock-based compensation expense			—				—				0.2				—				—				—				—				0.2				—				0.2
Balances at March 31, 2010			81.7			$	81.7			$	600.3			$	1,154.2			$	(100.9	)			(2.5	)		$	(39.2	)		$	1,696.1			$	129.9			$	1,826.0

See accompanying notes to consolidated financial statements.

Trinity Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(unaudited)

Note 1. Summary of Significant Accounting Policies

Basis of Presentation

     The foregoing consolidated financial statements are unaudited and have been prepared from the books and records of Trinity Industries, Inc. and its subsidiaries and variable interest entities for which it is the primary beneficiary (“Trinity”, “Company”, “we”, or “our”). In our opinion, all normal and recurring adjustments necessary for a fair presentation of the financial position of the Company as of March 31, 2010, and the results of operations and cash flows for the three month periods ended March 31, 2010 and 2009, have been made in conformity with generally accepted accounting principles. Because of seasonal and other factors, the results of operations for the three month period ended March 31, 2010 may not be indicative of expected results of operations for the year ending December 31, 2010. These interim financial statements and notes are condensed as permitted by the instructions to Form 10-Q and should be read in conjunction with the audited consolidated financial statements of the Company included in its Form 10-K for the year ended December 31, 2009. Certain prior year balances have been reclassified in the consolidated financial statements to conform to the 2010 presentations.

     On January 1, 2010, the Company adopted the provisions of a new accounting standard requiring the inclusion of the consolidated financial statements of TRIP Rail Holdings LLC (“TRIP Holdings”) and subsidiary in the consolidated financial statements of the Company as of January 1, 2010. Prior to January 1, 2010, the Company’s investment in TRIP Holdings was accounted for using the equity method. Accordingly, the consolidated balance sheet of the Company as of March 31, 2010 and the consolidated statements of operations, cash flows, and stockholders’ equity for the three months ended March 31, 2010 include the accounts of TRIP Holdings and all majority owned subsidiaries. Prior periods were not restated. As a result of adopting this pronouncement, we determined the effects on Trinity’s consolidated financial statements as if TRIP Holdings had been included in the Company’s consolidated financial statements from TRIP Holdings’ inception and recorded a charge to retained earnings of $105.4 million, net of $57.7 million of tax benefit, and a noncontrolling interest of $129.9 million as of January 1, 2010. All significant intercompany accounts and transactions have been eliminated including the deferral of profits on sales of railcars from the Rail or Leasing Group to TRIP Holdings. These deferred profits will be amortized over the life of the related equipment. Additionally, any future profits on the sale of railcars to TRIP Holdings will be deferred and amortized over the life of the related equipment. The noncontrolling interest represents the non-Trinity equity interest in TRIP Holdings. See Note 6 Investment in TRIP Holdings for further discussion.

Stockholders’ Equity

     On December 8, 2009, the Company’s Board of Directors authorized an extension of its stock repurchase program. This extension allows for the repurchase of the Company’s common stock through December 31, 2010. The repurchase program commenced in 2007 when $200 million of shares were authorized for repurchase. No shares were repurchased under this program for the three months ended March 31, 2010. Since the inception of this program through March 31, 2010, the Company has repurchased a total of 3,532,728 shares at a cost of approximately $67.5 million.

Recent Accounting Pronouncements

     In June 2009, the Financial Accounting Standards Board (“FASB”) issued a new accounting standard (Accounting Standards Codification Subtopic 810-10) that amends the previous accounting rules for consolidation of variable interest entities. The new standard replaces the quantitative-based risks and rewards calculation for determining which enterprise has a controlling financial interest in a variable interest entity with an approach focused on identifying which enterprise has the power to direct the activities of a variable interest entity that most significantly affect its economic performance and the obligation to absorb losses of the entity or the right to receive benefits from the entity. Additionally, the new standard provides more timely and useful information about an enterprise’s involvement with a variable interest entity. This standard was effective for annual reporting periods beginning after November 15, 2009. Accordingly, the Company adopted this new standard on January 1, 2010. See Note 6 Investment in TRIP Holdings for a further explanation of the effects of implementing this pronouncement as it applies to our investment in TRIP Holdings.

Note 2. Acquisitions

     In February 2010, pursuant to a tender offer, the Company acquired the outstanding stock of Quixote Corporation (“Quixote”) at a total cost of $58.1 million, including $17.1 million in cash balances. In addition, the Company acquired $40.0 million in debt that was subsequently retired in the first quarter of 2010. Quixote is a leading manufacturer of energy-absorbing highway crash cushions, truck-mounted attenuators, and other transportation products. In connection with the acquisition, Trinity recorded goodwill of $22.3 million based on its preliminary valuation of the net assets acquired. As a

result of the acquisition, the Company recorded transaction-related expenses of $4.3 million including a $1.5 million write-down of its pre-acquisition investment in Quixote classified as other selling, engineering, and administrative costs. In addition to the transaction-related expenses listed above, there was a $1.8 million reclassification of previously-recognized charges from Accumulated Other Comprehensive Loss (“AOCL”) to earnings representing the decline in fair value of the Company’s pre-acquisition investment in Quixote, included in other, net in the consolidated statement of operations. See Note 11 Other, Net and Note 14 Accumulated Other Comprehensive Loss.

Note 3. Fair Value Accounting

     Assets and liabilities measured at fair value on a recurring basis are summarized below:

		Fair Value Measurement as of March 31, 2010
		(in millions)
		Level 1				Level 2				Level 3				Total
Assets:
Cash equivalents		$	187.1			$	—			$	—			$	187.1
Short-term marketable securities			265.1				—				—				265.1
Restricted cash			182.3				—				—				182.3
Total assets		$	634.5			$	—			$	—			$	634.5
Liabilities:
Fuel derivative instruments (1)		$	—			$	0.1			$	—			$	0.1
Interest rate hedges (2)
Parent and wholly owned subsidiaries			—				37.9				—				37.9
TRIP Holdings			—				42.0				—				42.0
Total liabilities		$	—			$	80.0			$	—			$	80.0

     The carrying amounts and estimated fair values of our long-term debt at March 31, 2010 were as follows:

		Carrying				Estimated
		Value				Fair Value
		(in millions)
Convertible subordinated notes		$	331.0			$	357.8
Senior notes			201.5				203.5
Term loan			59.2				59.2
2006 secured railcar equipment notes			297.5				292.8
TILC warehouse facility			140.0				140.0
Promissory notes			509.1				487.2
2009 secured railcar equipment notes			235.6				244.0
TRIP Holdings warehouse loan			1,041.2				1,016.2
Capital lease obligations			53.0				53.0
Other			2.6				2.6
Total		$	2,870.7			$	2,856.3

     The estimated fair values of our convertible subordinated notes and senior notes are based on quoted market prices as of March 31, 2010. The estimated fair values of our 2006 and 2009 secured railcar equipment notes, promissory notes, and TRIP Holdings warehouse loan are based on our estimate of their fair value as of March 31, 2010 determined by discounting their future cash flows at a current market interest rate. The carrying values of our TILC warehouse facility and term loan approximate fair value because the interest rates adjust to market interest rates and there has been no change in the Company’s credit rating since the loan agreements were entered into during 2009. The fair values of all other financial instruments are estimated to approximate carrying value.

     Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market to that asset or liability in an orderly transaction between market participants on the measurement date. An entity is required to establish a fair value hierarchy which maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. The three levels of inputs that may be used to measure fair values are listed below:

     Level 1 – This level is defined as quoted prices in active markets for identical assets or liabilities. The Company’s cash equivalents, short-term marketable securities, and restricted cash are instruments of the United States Treasury, United States government agencies, or fully-insured certificates of deposit.

     Level 2 – This level is defined as observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. The Company’s fuel derivative instruments, which are commodity options, are valued using energy and commodity market data. Interest rate hedges are valued at exit prices obtained from each counterparty.

     Level 3 – This level is defined as unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Note 4. Segment Information

     The Company reports operating results in five principal business segments: (1) the Rail Group, which manufactures and sells railcars and related parts and components; (2) the Construction Products Group, which manufactures and sells highway products, concrete and aggregates, and asphalt; (3) the Inland Barge Group, which manufactures and sells barges and related products for inland waterway services; (4) the Energy Equipment Group, which manufactures and sells products for energy related businesses, including structural wind towers, tank containers and tank heads for pressure and non-pressure vessels, and propane tanks; and (5) the Railcar Leasing and Management Services Group (“Leasing Group”), which provides fleet management, maintenance, and leasing services. The category All Other includes our captive insurance and transportation companies; legal, environmental, and upkeep costs associated with non-operating facilities; other peripheral businesses; and the change in market valuation related to ineffective commodity hedges. Gains and losses from the sale of property, plant, and equipment which are related to manufacturing and dedicated to the specific manufacturing operations of a particular segment are recorded in the cost of revenues of that respective segment. Gains and losses from the sale of property, plant, and equipment which can be utilized by multiple segments are recorded in the cost of revenues of the All Other segment.

     Sales and related net profits from the Rail Group to the Leasing Group are recorded in the Rail Group and eliminated in consolidation. Sales between these groups are recorded at prices comparable to those charged to external customers giving consideration for quantity, features, and production demand. Amortization of deferred profit on railcars sold to the Leasing Group is included in the operating profits of the Leasing Group. Sales of railcars from the lease fleet are included in the Leasing Group. Revenues and operating profits of the Leasing Group for the three months ended March 31, 2010 include the operating results of TRIP Holdings. Total assets of the Leasing Group, including the assets of TRIP Holdings, amounted to $4,365.7 million as of March 31, 2010. See Note 1 Summary of Significant Accounting Policies – Basis of Presentation for further discussion.

     The financial information from continuing operations for these segments is shown in the tables below. We operate principally in North America.

Three Months Ended March 31, 2010

														Operating
		Revenues												Profit
		External				Intersegment				Total				(Loss)
		(in millions)
Rail Group		$	32.2			$	41.4			$	73.6			$	(7.9	)
Construction Products Group			111.6				6.8				118.4				2.7
Inland Barge Group			97.4				—				97.4				17.8
Energy Equipment Group			89.1				1.0				90.1				10.4
Railcar Leasing and Management Services Group			121.2				—				121.2				48.2
All Other			2.5				7.2				9.7				(2.6	)
Corporate			—				—				—				(12.5	)
Eliminations – Lease subsidiary			—				(38.0	)			(38.0	)			(3.6	)
Eliminations – Other			—				(18.4	)			(18.4	)			(0.5	)
Consolidated Total		$	454.0			$	—			$	454.0			$	52.0

Three Months Ended March 31, 2009

														Operating
		Revenues												Profit
		External				Intersegment				Total				(Loss)
						(in millions)
Rail Group		$	162.7			$	121.2			$	283.9			$	(5.8	)
Construction Products Group			121.0				2.5				123.5				(1.7	)
Inland Barge Group			157.0				—				157.0				38.9
Energy Equipment Group			126.7				1.8				128.5				18.3
Railcar Leasing and Management Services Group			222.4				—				222.4				52.7
All Other			3.7				10.7				14.4				1.0
Corporate			—				—				—				(7.6	)
Eliminations – Lease subsidiary			—				(116.5	)			(116.5	)			(8.9	)
Eliminations – Other			—				(19.7	)			(19.7	)			(1.0	)
Consolidated Total		$	793.5			$	—			$	793.5			$	85.9

Note 5. Railcar Leasing and Management Services Group

     The Railcar Leasing and Management Services Group provides fleet management, maintenance, and leasing services. Selected consolidating financial information follows:

		March 31, 2010
		Leasing Group
		Wholly
		Owned				TRIP				Manufacturing/
		Subsidiaries				Holdings				Corporate				Total
		(in millions, unaudited)
Cash, cash equivalents, and short-term marketable securities		$	4.9			$	—			$	517.9			$	522.8
Property, plant, and equipment, net			2,860.8				1,218.3				520.6				4,599.7
Net deferred profit on railcars sold to the Leasing Group			(328.5	)			(201.2	)			—				(529.7	)
			2,532.3				1,017.1				520.6				4,070.0
Restricted cash			136.4				45.9				—				182.3
Debt:
Recourse			112.2				—				654.1				766.3
Less: unamortized discount			—				—				(119.0	)			(119.0	)
			112.2				—				535.1				647.3
Non-recourse			1,182.2				1,041.2				—				2,223.4
Total debt		$	1,294.4			$	1,041.2			$	535.1			$	2,870.7

		December 31, 2009
		Leasing Group
		Wholly
		Owned				TRIP				Manufacturing/
		Subsidiaries				Holdings				Corporate				Total
		(in millions, unaudited)
Cash, cash equivalents, and short-term marketable securities		$	6.7			$	—			$	675.1			$	681.8
Property, plant, and equipment, net			2,850.1				—				517.1				3,367.2
Net deferred profit on railcars sold to the Leasing Group			(329.0	)			—				—				(329.0	)
			2,521.1				—				517.1				3,038.2
Restricted cash			138.6				—				—				138.6
Debt:
Recourse			113.4				—				654.2				767.6
Less: unamortized discount			—				—				(121.6	)			(121.6	)
			113.4				—				532.6				646.0
Non-recourse			1,199.1				—				—				1,199.1
Total debt		$	1,312.5			$	—			$	532.6			$	1,845.1

     For the three months ended March 31, 2009, revenues of $132.1 million and operating profit of $18.6 million were related to sales of railcars from the lease fleet to TRIP Holdings. There were no sales to TRIP Holdings during the three months ended March 31, 2010. See Note 6 Investment in TRIP Holdings.

     The Leasing Group’s interest expense, which is not a component of operating profit and includes the effects of hedges related to the Leasing Group’s debt, was $34.8 million and $18.3 million for the three months ended March 31, 2010 and 2009, respectively, including $11.8 million of TRIP Holdings’ interest expense for the three months ended March 31, 2010. Rent expense, which is a component of operating profit, was $12.1 million and $11.5 million for the three months ended March 31, 2010 and 2009, respectively.

     Equipment consists primarily of railcars leased by third parties. The Leasing Group purchases equipment manufactured by the Rail Group and enters into lease contracts with third parties with terms generally ranging between one and twenty years. The Leasing Group primarily enters into operating leases. Future contractual minimum rental revenues on leases are as follows:

		Remaining
		nine
		months of
		2010				2011				2012				2013				2014				Thereafter				Total
		(in millions)
Future contractual minimum rental revenues on leases:
Wholly owned subsidiaries		$	168.2			$	186.7			$	149.7			$	113.1			$	80.9			$	204.0			$	902.6
TRIP Holdings			80.0				98.4				79.5				53.3				37.8				121.5				470.5
		$	248.2			$	285.1			$	229.2			$	166.4			$	118.7			$	325.5			$	1,373.1

     Debt. The Leasing Group’s debt at March 31, 2010 consists of both recourse and non-recourse debt including debt owed by TRIP Holdings which is secured solely by the assets of TRIP Holdings. See Note 10 Debt for the form, maturities, and descriptions of the debt. As of March 31, 2010, Trinity’s wholly owned subsidiaries included in the Leasing Group held equipment with a net book value of approximately $1,856.1 million that is pledged as collateral for Leasing Group debt held by those subsidiaries, including equipment with a net book value of $53.5 million securing capital lease obligations. TRIP Holdings equipment with a net book value of $1,218.3 million, excluding deferred profit on railcars sold to TRIP Holdings, is pledged as collateral for the TRIP Holdings warehouse loan. Certain wholly owned subsidiaries of the Company, including Trinity Industries Leasing Company (“TILC”), are guarantors of the Company’s senior debt and certain operating leases. See Note 6 Investment in TRIP Holdings and Note 18 Financial Statements for Guarantors of the Senior Debt for further discussion.

     Off Balance Sheet Arrangements. In prior years, the Leasing Group completed a series of financing transactions whereby railcars were sold to one or more separate independent owner trusts (“Trusts”). Each Trust financed the purchase of the railcars with a combination of debt and equity. In each transaction, the equity participant in the Trust is considered to be the primary beneficiary of the Trusts and therefore, the debt related to the Trusts is not included as part of the consolidated financial statements. The Leasing Group, through newly formed, wholly owned, qualified subsidiaries, leased railcars from the Trusts under operating leases with terms of 22 years, and subleased the railcars to independent third party customers under shorter term operating rental agreements.

     These Leasing Group subsidiaries had total assets as of March 31, 2010 of $230.7 million, including cash of $85.7 million and railcars of $104.5 million. The right, title, and interest in each sublease, cash, and railcars are pledged to collateralize the lease obligations to the Trusts and are included in the consolidated financial statements of the Company. Trinity does not guarantee the performance of the subsidiaries’ lease obligations. Certain ratios and cash deposits must be maintained by the Leasing Group’s subsidiaries in order for excess cash flow, as defined in the agreements, from the lease to third parties to be available to Trinity. Future operating lease obligations of the Leasing Group’s subsidiaries as well as future contractual minimum rental revenues related to these leases due to the Leasing Group are as follows:

		Remaining
		nine
		months of
		2010				2011				2012				2013				2014				Thereafter				Total
		(in millions)
Future operating lease obligations of Trusts’ railcars		$	30.0			$	41.3			$	44.6			$	45.8			$	44.9			$	425.5			$	632.1
Future contractual minimum rental revenues of Trusts’ railcars		$	42.3			$	47.1			$	38.2			$	25.9			$	16.8			$	57.6			$	227.9

     Operating Lease Obligations. Future amounts due as well as future contractual minimum rental revenues related to operating leases other than leases with the Trusts are as follows:

		Remaining
		nine
		months of
		2010				2011				2012				2013				2014				Thereafter				Total
		(in millions)
Future operating lease obligations		$	4.3			$	5.0			$	4.4			$	4.4			$	4.4			$	17.0			$	39.5
Future contractual minimum rental revenues		$	3.8			$	4.5			$	3.8			$	3.3			$	3.1			$	9.3			$	27.8

See Note 5 of the December 31, 2009 Consolidated Financial Statements filed on Form 10-K for a detailed explanation of these financing transactions.

Note 6. Investment in TRIP Holdings

     In 2007, the Company and five other equity investors unrelated to the Company or its subsidiaries formed TRIP Holdings for the purpose of providing railcar leasing and management services in North America. TRIP Holdings, through its wholly-owned subsidiary, TRIP Rail Leasing LLC (“TRIP Leasing”), purchased railcars from the Company’s Rail and Leasing Groups funded by capital contributions from TRIP Holdings’ equity investors and third-party debt from 2007 through June 2009. The Company provided 20% of the total of all capital contributions required by TRIP Holdings in exchange for 20% of the equity in TRIP Holdings. In 2009, the Company acquired an additional 8.16% equity ownership in TRIP Holdings for approximately $16.2 million from another equity investor increasing the Company’s equity investment to $63.5 million. The Company receives 28.16% of the distributions made from TRIP Holdings to equity investors and has a 28.16% interest in the net assets of TRIP Holdings upon a liquidation event. The terms of the Company’s equity

investment are identical to the terms of each of the other four equity investors. Railcars purchased from the Company by TRIP Leasing are required to be purchased at prices comparable with the prices of all similar railcars sold by the Company during the same period for new railcars and at prices based on third party appraised values for used railcars. The manager of TRIP Holdings, TILC, may be removed without cause as a result of a majority vote of the non-Company equity members.

     In 2008 and 2007, the Company contributed $14.6 million and $21.3 million, respectively, in capital to TRIP Holdings equal to its 20% pro rata share of total capital received during those years by TRIP Holdings from the equity investors of TRIP Holdings. In 2009, Trinity contributed $11.4 million to TRIP Holdings pursuant to Trinity’s equity ownership obligation, totaling a $63.5 million investment in TRIP Holdings as of December 31, 2009 after considering equity interests purchased by Trinity from another equity owner. No contributions were made by Trinity to TRIP Holdings during the three months ended March 31, 2010. Trinity’s remaining equity commitment to TRIP Holdings is $5.5 million through June 2010. In 2007, the Company also paid $13.8 million in structuring and placement fees to the principal underwriter in conjunction with the formation of TRIP Holdings that were expensed on a pro rata basis as railcars were purchased from the Company. The balance was fully amortized as of December 31, 2009. Such expense was treated as sales commissions included in operating costs in the Company’s consolidated statement of operations. As of March 31, 2010, TRIP Leasing had purchased $1,284.7 million of railcars from the Company. Under TRIP Leasing’s debt agreement, the lenders’ availability period to finance additional railcar purchases ended in June 2009. The Company has no obligation to guarantee performance under the debt agreement, guarantee any railcar residual values, shield any parties from losses, or guarantee minimum yields. The Company’s carrying value of its investment in TRIP Holdings is as follows:

		March 31,				December 31,
		2010				2009
		(millions)
Capital contributions		$	47.3			$	47.3
Equity purchased from another investor			16.2				16.2
			63.5				63.5
Equity in earnings			3.9				3.0
Equity in unrealized losses on derivative financial instruments			(4.1	)			(3.2	)
Distributions			(6.0	)			(6.0	)
Deferred broker fees			(1.0	)			(1.0	)
		$	56.3			$	56.3

     On January 1, 2010, the Company adopted the provisions of a new accounting pronouncement which amended the rules regarding the consolidation of variable interest entities. Under this new standard, which changed the criteria for determining which enterprise has a controlling financial interest, the Company was determined to be the primary beneficiary of TRIP Holdings because of its combined role as both equity member and manager/servicer of TRIP Holdings. Accordingly, the consolidated balance sheet of the Company as of March 31, 2010 and the consolidated statements of operations, cash flows, and stockholders’ equity for the three months ended March 31, 2010 include the accounts of TRIP Holdings. Prior periods were not restated. As a result of adopting this pronouncement, we determined the effects on Trinity’s consolidated financial statements as if TRIP Holdings had been included in the Company’s consolidated financial statements from TRIP Holdings’ inception and recorded a charge to retained earnings of $105.4 million, net of $57.7 million in tax benefit, and a noncontrolling interest of $129.9 million as of January 1, 2010. All significant intercompany accounts and transactions have been eliminated including the deferral of profits on sales of railcars from the Rail or Leasing Group to TRIP Holdings. These deferred profits will be amortized over the life of the related equipment. Additionally, any future profits on the sale of railcars to TRIP Holdings will be deferred and amortized over the life of the related equipment. The noncontrolling interest represents the non-Trinity equity interest in TRIP Holdings. The assets of TRIP Holdings may only be used to satisfy liabilities of TRIP Holdings and the liabilities of TRIP Holdings have recourse only to TRIP Holdings’ assets.

     Prior to January 1, 2010, profit on equipment sales to TRIP Leasing was recognized at the time of sale to the extent of the non-Trinity interests in TRIP Holdings. The deferred profit on the sale of equipment to TRIP Leasing pertaining to TILC’s interest in TRIP Holdings was being amortized over the depreciable life of the related equipment. All other fee income to TILC earned from services provided to TRIP Holdings was recognized by TILC to the extent of the non-Trinity interests in TRIP Holdings. Effective January 1, 2010, amortization of the deferred profit on the sale of equipment is recorded as if the entire profit on equipment sales to TRIP Leasing was deferred at the time of the sale and amortized over the depreciable life of the related equipment. All fee income to TILC earned from services provided to TRIP Holdings has been eliminated for the three months ended March 31, 2010.

     Sales of railcars to TRIP Leasing and related gains for the three month periods ended March 31, 2010 and 2009 are as follows:

		Three Months Ended
		March 31,
		2010				2009
		(in millions)
Rail Group:
Sales of railcars to TRIP Leasing		$	—			$	38.0
Gain on sales of railcars to TRIP Leasing		$	—			$	5.0
Deferral of gain on sales of railcars to TRIP Leasing based on Trinity’s equity interest		$	—			$	1.2
TILC:
Sales of railcars to TRIP Leasing		$	—			$	132.1
Recognition of previously deferred gain on sales of railcars to TRIP Leasing		$	—			$	24.8
Deferral of gain on sales of railcars to TRIP Leasing based on Trinity’s equity interest		$	—			$	6.2

     Administrative fees paid to TILC by TRIP Holdings and TRIP Leasing for the three month periods ended March 31, 2010 and 2009, were $0.9 million and $1.4 million, respectively.

     On October 15, 2009, TILC loaned TRIP Holdings $14.5 million to resolve a collateral deficiency. The note has a balance of $3.6 million as of March 31, 2010, and is eliminated in consolidation along with the related interest. The note is repayable monthly from TRIP Holdings’ excess cash flow plus accrued interest at 11% and is expected to be repaid in full on or before June 30, 2010.

     See Note 6 of the December 31, 2009 Consolidated Financial Statements filed on Form 10-K for additional information.

Note 7. Derivative Instruments

     We use derivative instruments to mitigate the impact of increases in interest rates and zinc, natural gas, and diesel fuel prices, as well as to convert a portion of our variable-rate debt to fixed-rate debt. Additionally, we use derivative instruments to mitigate the impact of unfavorable fluctuations in foreign currency exchange rates. We also use derivatives to lock in fixed interest rates in anticipation of future debt issuances. Derivative instruments that are designated and qualify as cash flow hedges are accounted for in accordance with accounting standards issued by the FASB. See Note 3 Fair Value Accounting for discussion of how the Company valued its commodity hedges and interest rate swaps at March 31, 2010.

     Interest rate hedges

     In anticipation of a future debt issuance, we entered into interest rate swap transactions during the fourth quarter of 2006 and during 2007. These instruments, with a notional amount of $370 million, hedged the interest rate on a portion of a future debt issuance associated with an anticipated railcar leasing transaction, which closed in May 2008. These instruments settled during the second quarter of 2008. The weighted average fixed interest rate under these instruments was 5.34%. These interest rate swaps were accounted for as cash flow hedges with changes in the fair value of the instruments of $24.5 million recorded as a loss in AOCL through the date the related debt issuance closed with a principal balance of $572.2 million in May 2008. The balance is being amortized over the term of the related debt. On March 31, 2010, the balance remaining in AOCL was $16.9 million. The effect on interest expense for each of the three month periods ended March 31, 2010 and 2009 was an increase of $1.0 million due to amortization of the AOCL balance. It is expected that $3.7 million in interest expense will be recognized during the next twelve months from amortization of the AOCL balance.

     In May 2008, we entered into an interest rate swap transaction that is being used to fix the LIBOR component of the debt issuance which closed in May 2008. The fixed interest rate under this instrument is 4.126%. The amount recorded for this instrument as of March 31, 2010 in the consolidated balance sheet was a liability of $35.9 million, with $33.8 million of expense in AOCL. The effect on interest expense for the three months ended March 31, 2010 and 2009 was an increase of $5.2 million and $5.0 million, respectively, which related to the monthly settlement of interest. See Note 10 Debt. Based on the fair value of the interest rate hedge as of March 31, 2010, it is expected that $18.7 million will be included in interest expense during the next twelve months.

     During 2008, we entered into interest rate swap transactions, with a notional amount of $200 million, which are being used to counter our exposure to changes in the variable interest rate associated with our warehouse facility. The weighted average fixed interest rate under these instruments at March 31, 2010 was 1.798%. The amount recorded for these

instruments as of March 31, 2010 in the consolidated balance sheet was a liability of $2.0 million. The effect on interest expense for the three months ended March 31, 2010 and 2009 was an increase of $0.4 million and $1.1 million, respectively, which included the mark to market valuation on the interest rate swap transactions and the monthly settlement of interest. Based on the fair value of the interest rate hedges as of March 31, 2010, it is expected that $2.0 million in interest expense will be recognized in 2010. These interest rate hedges are due to expire during the fourth quarter of 2010.

     During 2005 and 2006, we entered into interest rate swap transactions in anticipation of a future debt issuance. These instruments, with a notional amount of $200 million, fixed the interest rate on a portion of a future debt issuance associated with a railcar leasing transaction in 2006 and settled at maturity in the first quarter of 2006. The weighted average fixed interest rate under these instruments was 4.87%. These interest rate swaps were being accounted for as cash flow hedges with changes in the fair value of the instruments of $4.5 million in income recorded in AOCL through the date the related debt issuance closed in May 2006. The balance is being amortized over the term of the related debt. At March 31, 2010, the balance remaining in AOCL was $2.9 million. The effect of the amortization on interest expense for each of the three month periods ended March 31, 2010 and 2009 was a decrease of $0.1 million. It is expected that $0.4 million in earnings will be recognized during the next twelve months from amortization of the AOCL balance.

     Between 2007 and 2009, TRIP Holdings entered into interest rate swap transactions, all of which qualify as cash flow hedges. As of March 31, 2010, maturities for cash flow hedges ranged from 2011-2023. The total notional value of cash flow hedges outstanding at March 31, 2010 was $877.5 million, with a weighted average interest rate of 3.64%. The amount recorded in the consolidated balance sheet for these instruments was a liability of $42.0 million as of March 31, 2010, with $6.2 million of expense recorded in accumulated other comprehensive loss and $33.1 million recorded in noncontrolling interest. The effect of the TRIP Holdings’ interest rate swaps on interest expense for the three month period ended March 31, 2010 was an increase of $7.5 million. Based on the fair value of interest rate hedges as of March 31, 2010, it is expected that $27.0 million will be included in interest expense during the next twelve months.

     Natural gas and diesel fuel

     We continue a program to mitigate the impact of fluctuations in the price of natural gas and diesel fuel purchases. The intent of the program is to protect our operating profit from adverse price changes by entering into derivative instruments. For those instruments that do not qualify for hedge accounting treatment, any changes in their valuation are recorded directly to the consolidated statement of operations. The amount recorded for these instruments in the consolidated balance sheet as of March 31, 2010 was a liability of $0.1 million. The effect on the consolidated statement of operations for the three month period ended March 31, 2010 was operating expense of $0.1 million, which includes the mark to market valuation resulting in a loss of $0.1 million. The effect of both derivatives on the consolidated statement of operations for the three month period ended March 31, 2009 was operating expense of $1.8 million including losses of $0.5 million resulting from the mark to market valuation for the three month period ended March 31, 2009.

     Foreign Exchange Hedge

     During the three months ended March 31, 2010 and 2009, we entered into foreign exchange hedges to mitigate the impact on operating profit of unfavorable fluctuations in foreign currency exchange rates. These instruments are short term with quarterly maturities and no remaining balance in AOCL as of March 31, 2010. The effect on the consolidated statement of operations for the three months ended March 31, 2010 and 2009 was expense of $0.6 million and $0.2 million, respectively, included in other, net on the consolidated statement of operations.

     Zinc

     We maintain a program to mitigate the impact of fluctuations in the price of zinc purchases. The intent of this program is to protect our operating profit from adverse price changes by entering into derivative instruments. During the fourth quarter of 2009 and the first quarter of 2010, we entered into derivative instruments which expired on March 31, 2010. The effect of these derivative instruments on the 2010 consolidated financial statements was not significant. We did not enter into any new zinc derivative instruments during the first quarter of 2009.

Note 8. Property, Plant, and Equipment

     The following table summarizes the components of property, plant, and equipment as of March 31, 2010 and December 31, 2009:

		March 31,				December 31,
		2010				2009
						(as reported)
		(in millions)
Manufacturing/Corporate:
Land		$	40.1			$	39.1
Buildings and improvements			422.9				405.9
Machinery and other			705.3				708.1
Construction in progress			10.5				12.2
			1,178.8				1,165.3
Less accumulated depreciation			(658.2	)			(648.2	)
			520.6				517.1
Leasing:
Wholly owned subsidiaries:
Machinery and other			38.1				38.1
Equipment on lease			3,130.1				3,098.9
			3,168.2				3,137.0
Less accumulated depreciation			(307.4	)			(286.9	)
			2,860.8				2,850.1
TRIP Holdings:
Equipment on lease			1,282.6				—
Less accumulated depreciation			(64.3	)			—
			1,218.3				—
Net deferred profit on railcars sold to the Leasing Group
Sold to wholly owned subsidiaries			(328.5	)			(329.0	)
Sold to TRIP Holdings			(201.2	)			—
		$	4,070.0			$	3,038.2

Note 9. Warranties

     The Company provides warranties against manufacturing defects generally ranging from one to five years depending on the product. The warranty costs are estimated using a two-step approach. First, an engineering estimate is made for the cost of all claims that have been filed by a customer. Second, based on historical claims experience, a cost is accrued for all products still within a warranty period for which no claims have been filed. The Company provides for the estimated cost of product warranties at the time revenue is recognized related to products covered by warranties and assesses the adequacy of the resulting reserves on a quarterly basis. The changes in the accruals for warranties for the three month periods ended March 31, 2010 and 2009 are as follows:

		Three Months Ended
		March 31,
		2010				2009
		(in millions)
Beginning balance		$	19.6			$	25.7
Warranty costs incurred			(0.7	)			(2.3	)
Warranty originations and revisions			1.6				1.1
Warranty expirations			(0.9	)			(1.9	)
Ending balance		$	19.6			$	22.6

Note 10. Debt

     The following table summarizes the components of debt as of March 31, 2010 and December 31, 2009:

		March 31,				December 31,
		2010				2009
						(as reported)
		(in millions)
Manufacturing/Corporate – Recourse:
Revolving commitment		$	—			$	—
Convertible subordinated notes			450.0				450.0
Less: unamortized discount			(119.0	)			(121.6	)
			331.0				328.4
Senior notes			201.5				201.5
Other			2.6				2.7
			535.1				532.6
Leasing – Recourse:
Capital lease obligations			53.0				53.6
Term loan			59.2				59.8
			647.3				646.0
Leasing – Non-recourse:
2006 secured railcar equipment notes			297.5				304.7
2009 secured railcar equipment notes			235.6				237.6
TILC warehouse facility			140.0				141.4
Promissory notes			509.1				515.4
TRIP Holdings warehouse loan			1,041.2				—
			2,223.4				1,199.1
Total debt		$	2,870.7			$	1,845.1

     On January 1, 2009, we adopted the provisions of a new accounting pronouncement that is applicable to the Company’s 3 7/8% Convertible Subordinated Notes issued June 2006. The pronouncement requires that the accounting for these types of instruments reflect their underlying economics by capturing the value of the conversion option as borrowing costs and recognizing their potential dilutive effects on earnings per share. This pronouncement required retrospective application to all periods presented and did not grandfather existing instruments.

     As of March 31, 2010 and December 31, 2009, capital in excess of par value included $92.8 million related to the estimated value of the Convertible Subordinated Notes’ conversion options. Debt discount recorded in the consolidated balance sheet is being amortized through June 1, 2018 to yield an effective annual interest rate of 8.42% based upon the estimated market interest rate for comparable non-convertible debt as of the issuance date of the Convertible Subordinated Notes. Total interest expense recognized on the Convertible Subordinated Notes for the three months ended March 31, 2010 and 2009 is as follows:

		Three Months Ended
		March 31,
		2010				2009
		(in millions)
Coupon rate interest		$	4.4			$	4.4
Amortized debt discount			2.5				2.3
		$	6.9			$	6.7