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

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2007

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

For the transition period from                      to                     .

Trinity Industries, Inc.

(Exact name of registrant as specified in its charter)

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

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

     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 is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ Accelerated filer o Non-accelerated filer o

     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 27, 2007 there were 80,299,109 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			18
Item 3.		Quantitative and Qualitative Disclosures About Market Risk			23
Item 4.		Controls and Procedures			23
PART II		OTHER INFORMATION
Item 1.		Legal Proceedings			25
Item 1A.		Risk Factors			25
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds			25
Item 3.		Defaults Upon Senior Securities			25
Item 4.		Submission of Matters to a Vote of Security Holders			25
Item 5.		Other Information			25
Item 6.		Exhibits			25
SIGNATURES					26
CERTIFICATIONS
By-Laws
Rule 13a-15(e) and 15d-15(e) Certification of CEO
Rule 13a-15(e) and 15d-15(e) Certification of CFO
Certification Pursuant to 18 U.S.C. Section 1350
Certification Pursuant to 18 U.S.C. Section 1350

     All share and per share information at March 31, 2006, including dividends, has been retroactively adjusted to reflect the 3-for-2 stock split.

Item 1. Financial Statements

Trinity Industries, Inc. and Subsidiaries
Consolidated Statements of Operations

		Three Months Ended March 31,
		2007				2006
		(unaudited)
		(in millions, except per share amounts)
Revenues		$	828.5			$	724.7
Operating costs:
Cost of revenues			665.7				598.7
Selling, engineering, and administrative expenses			54.1				50.4
			719.8				649.1
Operating profit			108.7				75.6
Other (income) expense:
Interest income			(3.7	)			(1.0	)
Interest expense			17.5				12.5
Other, net			(1.0	)			(0.1	)
			12.8				11.4
Income from continuing operations before income taxes			95.9				64.2
Provision for income taxes			36.8				25.7
Income from continuing operations			59.1				38.5
Discontinued operations:
Loss from discontinued operations, net of benefit for income taxes of $— and $(1.5)			—				(1.5	)
Net income		$	59.1			$	37.0
Net income per common share:
Basic:
Continuing operations		$	0.76			$	0.51
Discontinued operations			—				(0.02	)
		$	0.76			$	0.49
Diluted:
Continuing operations		$	0.74			$	0.49
Discontinued operations			—				(0.02	)
		$	0.74			$	0.47
Weighted average number of shares outstanding:
Basic			78.0				74.9
Diluted			79.9				78.8
Dividends declared per common share		$	0.06			$	0.05

See accompanying notes to consolidated financial statements.

Trinity Industries, Inc. and Subsidiaries
Consolidated Balance Sheets

		March 31,				December 31,
		2007				2006
		(unaudited)				(as reported)
		(in millions)
Assets
Cash and cash equivalents		$	224.1			$	311.5
Receivables, net of allowance			279.0				252.5
Inventories:
Raw materials and supplies			315.9				316.5
Work in process			147.5				139.1
Finished goods			85.7				73.3
			549.1				528.9
Property, plant, and equipment, at cost			2,477.4				2,318.8
Less accumulated depreciation			(730.8	)			(728.5	)
			1,746.6				1,590.3
Goodwill			463.7				463.7
Assets held for sale and discontinued operations			4.9				10.8
Other assets			238.9				267.9
		$	3,506.3			$	3,425.6
Liabilities and Stockholders’ Equity
Accounts payable and accrued liabilities		$	589.0			$	655.8
Debt:
Recourse			728.8				772.4
Non-recourse			522.6				426.5
			1,251.4				1,198.9
Deferred income			42.3				42.9
Liabilities held for sale and discontinued operations			1.7				7.8
Other liabilities			158.9				116.7
			2,043.3				2,022.1
Stockholders’ equity:
Preferred stock – 1.5 shares authorized and unissued			—				—
Common stock – 100.0 shares authorized			80.3				80.0
Capital in excess of par value			492.5				484.3
Retained earnings			960.0				908.8
Accumulated other comprehensive loss			(68.8	)			(69.2	)
Treasury stock			(1.0	)			(0.4	)
			1,463.0				1,403.5
		$	3,506.3			$	3,425.6

See accompanying notes to consolidated financial statements.

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

		Three Months Ended
		March 31,
		2007				2006
		(unaudited)
		(in millions)
Operating activities:
Net income		$	59.1			$	37.0
Adjustments to reconcile net income to net cash provided by continuing operating activities:
Loss from discontinued operations			—				1.5
Depreciation and amortization			26.5				19.8
Stock-based compensation expense			4.0				2.1
Excess tax benefits from stock-based compensation			(2.3	)			(4.0	)
Deferred income taxes			27.4				5.9
Gain on disposition of property, plant, equipment, and other assets			(1.7	)			(0.2	)
Other			0.8				(1.7	)
Changes in assets and liabilities:
(Increase) decrease in receivables			(26.5	)			(35.4	)
(Increase) decrease in inventories			(20.2	)			(60.7	)
(Increase) decrease in other assets			(7.0	)			(11.2	)
Increase (decrease) in accounts payable and accrued liabilities			(24.0	)			39.3
Increase (decrease) in other liabilities			3.7				5.1
Net cash provided (required) by operating activities – continuing operations			39.8				(2.5	)
Net cash provided (required) by operating activities – discontinued operations			(0.2	)			10.5
Net cash provided by operating activities			39.6				8.0
Investing activities:
Proceeds from disposition of property, plant, equipment, and other assets			11.4				10.1
Capital expenditures – lease subsidiary			(147.4	)			(130.1	)
Capital expenditures – other			(46.1	)			(27.4	)
Payment for purchase of acquisitions, net of cash acquired			—				(2.3	)
Net cash required by investing activities – continuing operations			(182.1	)			(149.7	)
Net cash provided (required) by investing activities – discontinued operations			—				(0.2	)
Net cash required by investing activities			(182.1	)			(149.9	)
Financing activities:
Issuance of common stock, net			5.1				5.2
Excess tax benefits from stock-based compensation			2.3				4.0
Payments to retire debt			(47.6	)			(13.6	)
Proceeds from issuance of debt			100.1				94.9
Dividends paid to common shareholders			(4.8	)			(3.4	)
Dividends paid to preferred shareholders			—				(1.7	)
Net cash provided by financing activities			55.1				85.4
Net decrease in cash and cash equivalents			(87.4	)			(56.5	)
Cash and cash equivalents at beginning of period			311.5				136.0
Cash and cash equivalents at end of period		$	224.1			$	79.5

See accompanying notes to consolidated financial statements.

Trinity Industries, Inc. and Subsidiaries
Consolidated Statements of Stockholders’ Equity

		Common Stock
										Capital
										in								Accumulated
		Shares								Excess								Other								Treasury				Total
(unaudited)		(100.0				$1.00 Par				of Par				Retained				Comprehensive				Treasury				Stock at				Stockholders’
(in millions, except par value)		Authorized)				Value				Value				Earnings				Loss				Shares				Cost				Equity
Balances at December 31, 2006			80.0			$	80.0			$	484.3			$	908.8			$	(69.2	)			(0.0	)		$	(0.4	)		$	1,403.5
Cumulative effect of adopting FIN 48 (see Note 15)			—				—				—				(3.1	)			—				—				—				(3.1	)
Net income			—				—				—				59.1				—				—				—				59.1
Other comprehensive income:
Unrealized gain on derivative financial instruments, net of tax			—				—				—				—				0.4				—				—				0.4
Comprehensive net income																															59.5
Cash dividends on common stock			—				—				—				(4.8	)			—				—				—				(4.8	)
Restricted shares issued			—				—				0.2				—				—				—				—				0.2
Stock options exercised			0.3				0.3				4.8				—				—				—				—				5.1
Income tax benefit from stock options exercised			—				—				2.7				—				—				—				—				2.7
Stock-based compensation expense			—				—				0.4				—				—				—				—				0.4
Other			—				—				0.1				—				—				—				(0.6	)			(0.5	)
Balances at March 31, 2007			80.3			$	80.3			$	492.5			$	960.0			$	(68.8	)			(0.0	)		$	(1.0	)		$	1,463.0

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 subsidiaries (“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, 2007 and the results of operations for the three month periods ended March 31, 2007 and 2006, and cash flows for the three month periods ended March 31, 2007 and 2006, 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, 2007 may not be indicative of expected results of operations for the year ending December 31, 2007. 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, 2006.

Stockholders’ Equity

     On May 15, 2006, the Company’s Board of Directors authorized a 3-for-2 stock split of the Company’s common shares. The stock split was issued in the form of a 50% stock dividend. All share and per share information, including dividends, has been retroactively adjusted to reflect the 3-for-2 stock split.

Recent Accounting Pronouncements

     In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. The provisions of SFAS 157 are effective for fiscal years beginning after November 15, 2007. We are currently evaluating the potential impact of the provisions of SFAS 157.

Reclassifications

     Certain prior year balances have been reclassified to conform to the 2007 presentation for discontinued operations.

Note 2. Divestitures

     In June 2006, we sold our weld pipe fittings business (“Fittings”). In August 2006, we also sold our European Rail business (“Europe”). Condensed results of operations relating to Fittings and Europe for the three month period ended March 31, 2006 were as follows:

		Three Months
		Ended
		March 31,
		2006
		(in millions)
		Fittings				Europe
Revenues		$	16.1			$	20.0
Operating costs			13.0				25.0
Other expense			—				0.9
Income (loss) from discontinued operations before income taxes			3.1				(5.9	)
Provision (benefit) for income taxes			1.2				(2.6	)
Net income (loss) from discontinued operations		$	1.9			$	(3.3	)

     In September 2006, we implemented a plan to divest our Brazilian operations. Total net assets of these operations as of March 31, 2007 were $2.4 million. For the three months ended March 31, 2007 and 2006, revenues and net income from discontinued operations were insignificant.

Note 3. Segment Information

     The Company reports operating results in five principal business segments: (1) the Rail Group, which manufactures and sells railcars and component parts; (2) the Construction Products Group, which manufactures and sells highway products, concrete and aggregates, and girders and beams used in the construction of highway and railway bridges; (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 tank heads, structural wind towers, and pressure and non-pressure containers for the storage and transportation of liquefied gases and other liquid and dry products; and (5) the Railcar Leasing and Management Services Group, which provides fleet management, maintenance, and leasing services. The category All Other includes our captive insurance and transportation companies, legal and environmental costs associated with non-operating facilities, other peripheral businesses, and the change in market valuation related to ineffective commodity hedges. Historical segment information has been retroactively adjusted to exclude the divestitures described in Note 2.

     Sales and related profits from the Rail Group to the Railcar Leasing and Management Services Group are recorded in the Rail Group and eliminated in consolidation. Sales of railcars from the lease fleet are included in the Railcar Leasing and Management Services Group. Sales between groups are recorded at prices comparable to those charged to external customers.

     The financial information from continuing operations for these segments is shown in the tables below. We operate principally in the continental United States and Mexico.

Three Months Ended March 31, 2007

		Revenues												Operating
														Profit
		Outside				Intersegment				Total				(Loss)
		(in millions)
Rail Group		$	394.3			$	174.4			$	568.7			$	78.1
Construction Products Group			163.1				0.1				163.2				10.1
Inland Barge Group			108.7				—				108.7				17.4
Energy Equipment Group			88.9				2.5				91.4				10.1
Railcar Leasing and Management Services Group			70.9				—				70.9				27.8
All Other			2.6				13.0				15.6				1.3
Corporate			—				—				—				(10.0	)
Eliminations			—				(190.0	)			(190.0	)			(26.1	)
Consolidated Total		$	828.5			$	—			$	828.5			$	108.7

The following table shows revised segment information for the three month period ended March 31, 2006.

Three Months Ended March 31, 2006

		Revenues												Operating
														Profit
		Outside				Intersegment				Total				(Loss)
		(in millions)
Rail Group		$	371.4			$	148.5			$	519.9			$	62.0
Construction Products Group			148.0				0.5				148.5				9.5
Inland Barge Group			82.0				—				82.0				6.6
Energy Equipment Group			65.6				2.4				68.0				11.1
Railcar Leasing and Management Services Group			56.3				—				56.3				17.6
All Other			1.4				10.0				11.4				(2.9	)
Corporate			—				—				—				(9.8	)
Eliminations			—				(161.4	)			(161.4	)			(18.5	)
Consolidated Total		$	724.7			$	—			$	724.7			$	75.6

Note 4. Railcar Leasing and Management Services Group

     The Railcar Leasing and Management Services Group (“Leasing Group”) provides fleet management, maintenance, and leasing services. Selected combined financial information for the Leasing Group is as follows:

		March 31, 2007				December 31, 2006
						(as reported)
		(in millions)
Balance Sheet
Cash		$	14.3			$	13.0
Leasing equipment
Machinery and other			35.1				35.1
Equipment on lease			1,678.8				1,511.5
			1,713.9				1,546.6
Accumulated depreciation			(176.4	)			(163.9	)
			1,537.5				1,382.7
Restricted assets			100.7				111.6
Debt:
Recourse			75.7				119.1
Non-recourse			522.6				426.5

		Three Months Ended
		March 31,
		2007				2006
		( in millions)
Statement of Operations
Revenues		$	70.9			$	56.3
Operating profit			27.8				17.6

     Interest expense, which is not a component of operating profit, was $9.2 million and $6.6 million for the three months ended March 31, 2007 and 2006, respectively. Rent expense, a component of operating profit, was $11.3 million and $11.5 million for the three months ended March 31, 2007 and 2006, respectively.

     Equipment consists primarily of railcars leased by third parties. The Leasing Group purchases equipment manufactured by Trinity’s rail subsidiaries 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 minimum rental revenues on leases in each year are as follows:

		Remaining
		nine months
		of 2007				2008				2009				2010				2011				Thereafter				Total
										(in millions)
Future Minimum Rental Revenues on Leases		$	165.6			$	201.6			$	183.7			$	161.9			$	125.6			$	422.6			$	1,261.0

     Future operating lease obligations of the Leasing Group’s subsidiaries as well as future minimum rental revenues related to these leases due to the Leasing Group are as follows:

		Remaining
		nine months
		of 2007				2008				2009				2010				2011				Thereafter				Total
										(in millions)
Future Operating Lease Obligations of Trusts’ Cars		$	36.3			$	48.5			$	47.6			$	40.7			$	41.7			$	566.0			$	780.8
Future Minimum Rental Revenues of Trusts’ Cars		$	53.0			$	63.4			$	52.6			$	41.6			$	31.9			$	126.1			$	368.6

     The Leasing Group’s debt consists of both recourse and non-recourse debt. See Note 8 for maturities of debt. Equipment with a net book value of $801.5 million is pledged as collateral for Leasing Group debt. Equipment with a net book value of $108.6 million is pledged as collateral against lease obligations.

Note 5. Derivative Instruments

     The Company uses interest rate swaps to fix the LIBOR component of outstanding debt. These swaps are accounted for as cash flow hedges under SFAS 133, Accounting for Derivative Instruments and Hedging Activities. As of March 31, 2007, Trinity had $65.0 million of interest rate swaps outstanding. The amount recorded in the consolidated balance sheet for these instruments was an asset of $0.2 million as of March 31, 2007 with $0.2 million of income in Accumulated Other Comprehensive Loss (“AOCL”). The effect on the consolidated statement of operations for the three month periods ended March 31, 2007 and 2006 was income of $0.2 million and $0.3 million, respectively.

     In anticipation of a future debt issuance, we entered into interest rate swap transactions during 2005 and 2006. These instruments, with a notional amount of $200 million, fixed the interest rate on a portion of a future debt issuance associated with a 2006 railcar leasing transaction 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 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. As of the three months ended March 31, 2007, the balance remaining in AOCL was $4.1 million. The effect of the amortization on the consolidated statement of operations for the three month period ended March 31, 2007 was income of $0.1 million.

     In addition, in anticipation of a future debt issuance, we entered into interest rate swap transactions during the fourth quarter of 2006 and the first quarter of 2007. These instruments, with a notional amount of $250 million, hedge the interest rate on a future debt issuance associated with an anticipated secured borrowing facility in 2007 and will expire in the fourth quarter of 2007. The weighted average fixed interest rate under these instruments is 5.14%. These interest rate swaps are being accounted for as cash flow hedges with changes in the fair value of the instruments of $0.9 million of income recorded in AOCL.

     We continue a program to mitigate the impact of fluctuations in the price of its natural gas and diesel fuel purchases. The intent of the program is to protect our operating profit and overall profitability from adverse price changes by entering into derivative instruments. Since the majority of these instruments do not qualify for hedge accounting treatment, any change in their valuation is recorded directly to the consolidated statement of operations. The amount recorded in the consolidated balance sheet for these instruments was a liability of $0.2 million as of March 31, 2007 with $0.1 million of expense in AOCL. The effect on the consolidated statement of operations for the three month period ended March 31, 2007 was income of $0.9 million and for the three month period ended March 31, 2006 was an expense of $1.3 million.

Note 6. Property, Plant, and Equipment

     The following table summarizes the components of property, plant, and equipment as of March 31, 2007 and December 31, 2006.

		March 31,				December 31,
		2007				2006
						(as reported)
		(in millions)
Corporate/Manufacturing:
Land		$	35.9			$	35.8
Buildings and improvements			327.2				329.2
Machinery and other			536.3				538.6
Construction in progress			60.4				39.5
			959.8				943.1
Less accumulated depreciation			(554.4	)			(564.6	)
			405.4				378.5
Leasing:
Machinery and other			35.1				35.1
Equipment on lease			1,678.8				1,511.5
			1,713.9				1,546.6
Less accumulated depreciation			(176.4	)			(163.9	)
			1,537.5				1,382.7
Deferred profit on railcars sold to the Leasing Group			(196.3	)			(170.9	)
		$	1,746.6			$	1,590.3

Note 7. Warranties

     The Company provides for the estimated cost of product warranties at the time revenue is recognized and assesses the adequacy of the resulting reserves on a quarterly basis. The change in the accruals for warranties for the three month periods ended March 31, 2007 and 2006 was as follows:

		Three Months Ended
		March 31,
		2007				2006
		(in millions)
Beginning balance		$	28.6			$	36.8
Warranty costs incurred			(2.6	)			(6.7	)
Product warranty accrual			2.5				2.9
Currency translation			—				0.2
Ending balance		$	28.5			$	33.2

     The warranty balance as of March 31, 2007 includes certain amounts that we believe to be sufficient to cover remaining obligations related to the divestiture of Trinity’s European Rail operations.

Note 8. Debt

     The following table summarizes the components of debt as of March 31, 2007 and December 31, 2006.

		March 31,				December 31,
		2007				2006
						(as reported)
		(in millions)
Corporate/Manufacturing — Recourse:
Revolving commitment		$	—			$	—
Convertible subordinated notes			450.0				450.0
Senior notes			201.5				201.5
Other			1.6				1.8
			653.1				653.3
Leasing — Recourse:
Equipment trust certificates			75.7				119.1
			728.8				772.4
Leasing — Non-recourse:
Secured railcar equipment notes			344.4				347.5
Warehouse facility			178.2				79.0
			522.6				426.5
Total debt		$	1,251.4			$	1,198.9

     Trinity’s $350 million revolving credit facility matures April 2011. The agreement requires maintenance of ratios related to interest coverage for Trinity’s leasing and manufacturing operations, leverage, and minimum net worth. At March 31, 2007, there were no borrowings under the revolving credit facility. After $113.2 million was considered for letters of credit, $236.8 million was available under the revolving credit facility.

     Trinity Industries Leasing Company’s (“TILC”) $375 million non-recourse warehouse facility, established to finance railcars owned by TILC, had $178.2 million outstanding as of March 31, 2007. Advances under the facility bear interest at a defined index rate plus a margin, for an all in rate of 6.19% at March 31, 2007. At March 31, 2007, $196.8 million was available under this facility.

     Terms and conditions of other debt are described in our 2006 Annual Report on Form 10-K.

     The remaining principal payments under existing debt agreements as of March 31, 2007 are as follows:

		Remaining
		nine months
		of 2007				2008				2009				2010				2011				Thereafter
										(in millions)
Recourse:
Corporate/Manufacturing		$	0.8			$	0.7			$	0.1			$	—			$	—			$	651.5
Leasing – equipment trust certificates (Note 4)			—				14.2				61.5				—				—				—
Non-recourse:
Leasing –secured railcar equipment notes (Note 4)			10.3				16.5				15.3				16.4				14.9				271.0
Leasing –warehouse facility (Note 4)			4.3				115.9				58.0				—				—				—
Total principal payments		$	15.4			$	147.3			$	134.9			$	16.4			$	14.9			$	922.5

Note 9. Other, Net

     Other, net consists of other (income) expense of the following items:

		Three Months Ended
		March 31,
		2007				2006
		(in millions)
Gain on disposition of property, plant, and equipment		$	(1.7	)		$	(0.2	)
Foreign currency exchange transactions			0.7				0.4
Loss (gain) on equity investments			0.1				(0.1	)
Other			(0.1	)			(0.2	)
Other, net		$	(1.0	)		$	(0.1	)

Note 10. Employee Retirement Plans

     The following table summarizes the components of net periodic pension cost for the Company:

		Three Months Ended
		March 31,
		2007				2006
		(in millions)
Service cost		$	2.8			$	3.1
Interest			4.9				4.5
Expected return on assets			(4.4	)			(4.5	)
Amortization and deferral			1.1				1.0
Profit sharing			1.6				1.3
Net expenses		$	6.0			$	5.4

     Trinity contributed $2.4 million and $1.5 million to the Company’s defined benefit pension plans for the three month periods ended March 31, 2007 and 2006, respectively. Total contributions to our pension plans in 2007 are expected to be approximately $14.9 million.

Note 11. Accumulated Other Comprehensive Loss

     Comprehensive net income is as follows:

		Three Months Ended
		March 31,
		2007				2006
		(in millions)
Net income		$	59.1			$	37.0
Other comprehensive income:
Change in currency translation adjustment:
Change in currency translation adjustment, net of tax benefit of $ — and $(1.2)			—				3.0
Change in unrealized gain on derivative financial instruments, net of tax benefit of $(0.3) and $(1.3)			0.4				2.1
Comprehensive net income		$	59.5			$	42.1

     The components of accumulated other comprehensive loss are as follows:

		March 31,				December 31,
		2007				2006
						(as reported)
		(in millions)
Currency translation adjustments		$	(17.5	)		$	(17.5	)
Unrealized gain on derivative financial instruments			3.2				2.8
Funded status of pension plans			(54.5	)			(54.5	)
		$	(68.8	)		$	(69.2	)

Note 12. Stock-Based Compensation

     On January 1, 2006, we adopted SFAS No. 123R Share-Based Payment which requires companies to recognize in their financial statements the cost of employee services received in exchange for awards of equity instruments. These costs are based on the grant date fair-value of those awards. Stock-based compensation includes compensation expense, recognized over the applicable vesting periods, for both new share-based awards and share-based awards granted prior to, but not yet vested, as of January 1, 2006. Stock-based compensation totaled approximately $3.9 million and $2.0 million for the three months ended March 31, 2007 and 2006, respectively.

Note 13. Net Income Per Common Share

     Basic net income per common share is computed by dividing net income by the weighted average number of common shares outstanding for the period. Except when the effect would be anti-dilutive, the calculation of diluted net income per common share includes the impact of shares that could be issued under outstanding stock options. There were no anti-dilutive stock options for the three month periods ended March 31, 2007 and 2006.

     The computation of basic and diluted net income applicable to common shareholders is as follows:

		Three Months Ended												Three Months Ended
		March 31, 2007												March 31, 2006
		(in millions except per share amounts)
						Average												Average
		Income				Shares				EPS				Income				Shares				EPS
Income from continuing operations – basic		$	59.1				78.0			$	0.76			$	38.5				74.9			$	0.51
Effect of dilutive securities:
Stock options			—				1.9								—				2.1
Series B preferred stock			—				—								—				1.8
Income from continuing operations – diluted		$	59.1				79.9			$	0.74			$	38.5				78.8			$	0.49
Loss from discontinued operations, net of taxes – basic		$	—				78.0			$	—			$	(1.5	)			74.9			$	(0.02	)
Effect of dilutive securities:
Stock options			—				1.9								—				2.1
Series B preferred stock			—				—								—				1.8
Loss from discontinued operations, net of taxes – diluted		$	—				79.9			$	—			$	(1.5	)			78.8			$	(0.02	)

Note 14. Contingencies

     Barge Litigation

     The Company and its wholly owned subsidiary, Trinity Marine Products, Inc. (“TMP”), and certain material suppliers and others, are co-defendants in a lawsuit filed by Waxler Transportation, Inc. The plaintiff has petitioned the court for certification of a class which, if certified, could significantly increase the total number of barges at issue. The current class representative owns four tank barges on which allegedly defective coatings were applied. These four barges were sold at an approximate average price of $1.4 million. Legal counsel for the Company and TMP have each advised that factual disputes exist regarding the legal merits of class certification. Discovery is underway in the case but no date has been set for a class certification hearing or trial. Independent experts investigating the claims for the Company and TMP have opined that the plaintiffs’ assertion the coating applied to the barges is a food source for microbiologically influenced corrosion is without merit. The Company and TMP are defending the Waxler case vigorously.

     Other Litigation

     Our subsidiary, Transit Mix Concrete and Materials Company, Inc. (“Transit Mix”), is named as a defendant in a case involving the death of an employee of an independent contractor who was working at a Transit Mix facility. Following a jury verdict in favor of the plaintiff, the presiding judge entered a final judgment that, together with fees, costs, and judgment interest, totaled $46.8 million. This case was appealed by Transit Mix and its insurers. In October 2006, the original trial court judgment was reversed and a take-nothing judgment was rendered by the Eleventh Court of Appeals, State of Texas. Plaintiffs filed a motion for rehearing in such court, which was denied. On March 22, 2007, Plaintiffs filed their Petition for Review with the Texas Supreme Court.

     We are also involved in other claims and lawsuits incidental to our business. Based on information currently available, it is management’s opinion that the ultimate outcome of all current litigation and other claims, including settlements, in the aggregate will not have a material adverse effect on the Company’s overall financial condition for purposes of financial reporting. However, resolution of certain claims or lawsuits by settlement or otherwise could have a significant impact on the operating results of the reporting period in which such resolution occurs.

     We are subject to federal, state, local, and foreign laws and regulations relating to the environment and the workplace. We believe that we are currently in substantial compliance with such laws and regulations.

     We are involved in various proceedings relating to environmental matters. We have reserved $12.5 million to cover our probable and estimable liabilities with respect to investigation, assessment, and remedial response to such matters, taking into account currently available information and our contractual rights to indemnification and recourse to third parties. However, estimates of future remedial response costs are inherently imprecise. Accordingly, there can be no assurance that

we will not become involved in future environmental litigation or other proceedings or, if we are found to be responsible or liable in any such litigation or proceeding, that such costs would not be material to the Company.

Note 15. Accounting for Uncertainty in Income Taxes

     In July 2006, the FASB issued FASB Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109 (“SFAS 109”). This interpretation, which became effective for fiscal years beginning after December 15, 2006, introduces a new approach that significantly changes how enterprises recognize and measure tax benefits associated with tax positions and how enterprises disclose uncertainties related to income tax positions in their financial statements.

     This interpretation applies to all tax positions within the scope of SFAS 109 and establishes a single approach in which a recognition and measurement threshold is used to determine the amount of tax benefit that should be recognized in the financial statements. FIN 48 also provides guidance on (1) the recognition, derecognition, and measurement of uncertain tax positions in a period subsequent to that in which the tax position is taken; (2) the accounting for interest and penalties; (3) the presentation and classification of recorded amounts in the financial statements; and (4) disclosure requirements.

     On January 1, 2007, Trinity adopted the provisions of FIN 48. As a result, we recorded a $3.1 million charge to the January 1, 2007 balance of retained earnings. This amount is inclusive of penalties and interest, net of deferred tax assets that were recorded against uncertain tax positions related to state income taxes and federal and state interest expense that was accrued.

     Prior to the adoption of FIN 48, the Company had recorded $8.3 million of tax contingency reserves. Additionally, $20.7 million of deferred tax liabilities had been recorded for items that have been identified as uncertain tax positions that have now been reclassified as a FIN 48 liability. Upon the adoption of FIN 48, we identified an additional $3.0 million of taxes related to uncertain tax positions which increased our total FIN 48 balance on January 1, 2007 to $32.0 million.

     The change in unrecognized tax benefits for the three months ended March 31, 2007 is as follows (in millions):

Balance at January 1, 2007		$	32.0
Additions for tax positions of prior years			0.5
Settlements			(0.5	)
Balance at March 31, 2007		$	32.0

     The total amount of unrecognized tax benefits at January 1, 2007, that would affect the Company’s effective tax rate if recognized was determined to be $9.0 million. There is a reasonable possibility that unrecognized tax benefits will decrease significantly by March 31, 2008 due to a lapse in the statute of limitations for assessing tax. Further, there is a reasonable possibility that the unrecognized tax benefits will decrease significantly by March 31, 2008 due to settlements with taxing authorities. Amounts expected to settle by March 31, 2008 are $15.2 million.

     Trinity accounts for interest expense and penalties related to income tax issues as income tax expense. Accordingly, interest expense and penalties associated with an uncertain tax position are included in the income tax provision. The total amount of accrued interest and penalties as of January 1, 2007 is $5.8 million. Income tax expense for the three months ended March 31, 2007 includes $0.4 million in interest expense and penalties related to uncertain tax positions.

     We are currently under Internal Revenue Service (“IRS”) examination for the tax years ended 1998 through 2002, thus our statute remains open from the year ended March 31, 1998, forward. We expect the 1998 through 2002 examination to be completed within the next twelve months. In addition, statutes of limitations governing the right of Mexico tax authorities to audit the tax returns of our Mexican operations remain open for the 2002 tax year forward. Our various European subsidiaries, including the subsidiaries that were sold during 2006, are impacted by various statutes of limitations which are generally open from 2001 forward. An exception to this is our Romanian operations, which have been audited through 2004. Generally, states’ statutes in the United States are open from 2002 forward.

Note 16. Financial Statements for Guarantors of the Senior Notes

     The Company’s Senior Notes were issued by Trinity Industries, Inc. (“Parent”) which includes the corporate operations and certain operations of the Construction Products Group. The Senior Notes are fully and unconditionally and jointly and severally guaranteed by certain of Trinity’s wholly owned subsidiaries: Transit Mix Concrete & Materials Company, Trinity Industries Leasing Company, Trinity Marine Products, Inc., Trinity Rail Group, LLC, Trinity North American Freight Car, Inc., Trinity Tank Car, Inc., and Trinity Parts & Components, LLC. No other subsidiaries guarantee the Senior

Notes. As of March 31, 2007, assets held by the non-guarantor subsidiaries include $100.7 million of restricted assets that are not available for distribution to the Parent, $671.5 million of assets securing certain debt and $108.6 million of assets securing certain lease obligations held by the non-guarantor subsidiaries, and $225.3 million of assets located in foreign locations.

Statement of Operations
For the Three Months Ended March 31, 2007

										Combined
						Combined				Non-
						Guarantor				Guarantor
		Parent				Subsidiaries				Subsidiaries				Eliminations				Consolidated
		(in millions)
Revenues		$	45.4			$	559.0			$	338.3			$	(114.2	)		$	828.5
Cost of revenues			65.4				443.3				271.2				(114.2	)			665.7
Selling, engineering, and administrative expenses			11.1				26.5				16.5				—				54.1
			76.5				469.8				287.7				(114.2	)			719.8
Operating profit (loss)			(31.1	)			89.2				50.6				—				108.7
Other (income) expense			(82.0	)			16.3				11.3				67.2				12.8
Income from continuing operations before income taxes			50.9				72.9				39.3				(67.2	)			95.9
Provision (benefit) for income taxes			(8.2	)			29.9				15.1				—				36.8
Income from continuing operations			59.1				43.0				24.2				(67.2	)			59.1
Loss from discontinued operations, net of provision for income taxes of $ —			—				—				—				—				—
Net income		$	59.1			$	43.0			$	24.2			$	(67.2	)		$	59.1

Statement of Operations
For the Three Months Ended March 31, 2006

										Combined
						Combined				Non-
						Guarantor				Guarantor
		Parent				Subsidiaries				Subsidiaries				Eliminations				Consolidated
		(in millions)
Revenues		$	109.5			$	471.5			$	263.6			$	(119.9	)		$	724.7
Cost of revenues			111.8				395.8				211.0				(119.9	)			598.7
Selling, engineering and administrative expenses			18.4				22.5				9.5				—				50.4
			130.2				418.3				220.5				(119.9	)			649.1
Operating profit (loss)			(20.7	)			53.2				43.1				—				75.6
Other (income) expense			(48.3	)			(1.3	)			3.6				57.4				11.4
Income from continuing operations before income taxes			27.6				54.5				39.5				(57.4	)			64.2
Provision (benefit) for income taxes			(9.4	)			23.4				11.7				—				25.7
Income from continuing operations			37.0				31.1				27.8				(57.4	)			38.5
Loss from discontinued operations, net of benefit for income taxes of $1.5			—				—				(1.5	)			—				(1.5	)
Net income		$	37.0			$	31.1			$	26.3			$	(57.4	)		$	37.0