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, 2009

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 (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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o     No o

     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. (Check one):

     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 24, 2009 there were 78,592,859 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			23
Item 3.		Quantitative and Qualitative Disclosures About Market Risk			31
Item 4.		Controls and Procedures			31
PART II		OTHER INFORMATION
Item 1.		Legal Proceedings			32
Item 1A.		Risk Factors			32
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds			32
Item 3.		Defaults Upon Senior Securities			32
Item 4.		Submission of Matters to a Vote of Security Holders			32
Item 5.		Other Information			32
Item 6.		Exhibits.			33
SIGNATURES					34
CERTIFICATIONS
EX-10.18.7
EX-31.1
EX-31.2
EX-32.1
EX-32.2

The Consolidated Balance Sheet as of December 31, 2008 and the Consolidated Statement of Operations and the Consolidated Statement of Cash Flows for the three months ended March 31, 2008 have been adjusted due to the adoption of new accounting pronouncements. See Notes 8 and 14 to the Consolidated Financial Statements for an explanation of the effects of these pronouncements.

PART I

Item 1. Financial Statements

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

		Three Months Ended
		March 31,
		2009				2008
						(adjusted — see
						Notes 8 and 14)
		(in millions, except per share amounts)
Revenues		$	793.5			$	898.9
Operating costs:
Cost of revenues			661.3				716.5
Selling, engineering, and administrative expenses			48.9				56.2
			710.2				772.7
Operating profit			83.3				126.2
Other (income) expense:
Interest income			(0.3	)			(2.3	)
Interest expense			29.0				23.2
Other, net			(0.6	)			(1.1	)
			28.1				19.8
Income from continuing operations before income taxes			55.2				106.4
Provision for income taxes			21.2				42.3
Income from continuing operations			34.0				64.1
Discontinued operations:
Loss from discontinued operations, net of benefit for income taxes of $0.0 and $0.1			(0.1	)			(0.3	)
Net income		$	33.9			$	63.8
Net income per common share:
Basic:
Continuing operations		$	0.43			$	0.79
Discontinued operations			—				—
		$	0.43			$	0.79
Diluted:
Continuing operations		$	0.43			$	0.78
Discontinued operations			—				—
		$	0.43			$	0.78
Weighted average number of shares outstanding:
Basic			76.6				78.9
Diluted			76.6				79.3
Dividends declared per common share		$	0.08			$	0.07

See accompanying notes to consolidated financial statements.

Trinity Industries, Inc. and Subsidiaries
Consolidated Balance Sheets

		March 31,				December 31,
		2009				2008
		(unaudited)				(adjusted —
						see Note 8)
		(in millions)
Assets
Cash and cash equivalents		$	170.4			$	161.8
Receivables, net of allowance			205.8				251.3
Income tax receivable			91.7				98.7
Inventories:
Raw materials and supplies			265.9				353.0
Work in process			93.3				111.2
Finished goods			199.9				147.6
			559.1				611.8
Property, plant, and equipment, at cost			3,848.0				3,843.5
Less accumulated depreciation			(900.3	)			(852.9	)
			2,947.7				2,990.6
Goodwill			504.0				504.0
Assets held for sale and discontinued operations			0.4				0.5
Other assets			290.5				293.4
		$	4,769.6			$	4,912.1
Liabilities and Stockholders’ Equity
Accounts payable and accrued liabilities		$	529.0			$	699.4
Debt:
Recourse			538.3				584.4
Non-recourse, net of unamortized discount of $128.8 and $131.2 at March 31, 2009 and December 31, 2008, respectively			1,177.7				1,190.3
			1,716.0				1,774.7
Deferred income			77.9				71.8
Deferred income taxes			414.5				388.3
Liabilities held for sale and discontinued operations			0.9				0.9
Other liabilities			65.4				64.7
			2,803.7				2,999.8
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			614.3				612.7
Retained earnings			1,454.5				1,427.0
Accumulated other comprehensive loss			(129.9	)			(161.3	)
Treasury stock			(54.7	)			(47.8	)
			1,965.9				1,912.3
		$	4,769.6			$	4,912.1

See accompanying notes to consolidated financial statements.

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

		Three Months Ended
		March 31,
		2009				2008
						(adjusted —
						See Note 8)
		(in millions)
Operating activities:
Net income		$	33.9			$	63.8
Adjustments to reconcile net income to net cash provided by continuing operating activities:
Loss from discontinued operations			0.1				0.3
Depreciation and amortization			40.3				31.8
Stock-based compensation expense			3.9				5.0
Provision for deferred income taxes			8.4				32.4
Gain on disposition of property, plant, equipment, and other assets			(2.6	)			(0.1	)
Other			(14.7	)			(6.3	)
Changes in assets and liabilities:
(Increase) decrease in receivables			45.5				13.0
(Increase) decrease in inventories			52.7				(64.1	)
(Increase) decrease in other assets			4.6				—
Increase (decrease) in accounts payable and accrued liabilities			(119.9	)			(21.6	)
Increase (decrease) in other liabilities			(0.6	)			(15.2	)
Net cash provided by operating activities			51.6				39.0
Investing activities:
Proceeds from sales of railcars from our lease fleet			136.7				49.7
Proceeds from sales of railcars from our lease fleet — sale and leaseback			34.8				—
Proceeds from disposition of property, plant, equipment, and other assets			3.0				0.2
Capital expenditures — lease subsidiary			(112.0	)			(190.2	)
Capital expenditures — manufacturing and other			(19.0	)			(26.9	)
Net cash provided (required) by investing activities			43.5				(167.2	)
Financing activities:
Payments to retire debt			(73.9	)			(44.3	)
Proceeds from issuance of debt			—				100.5
Stock repurchases			(6.3	)			(12.2	)
Dividends paid to common shareholders			(6.3	)			(5.7	)
Net cash (required) provided by financing activities			(86.5	)			38.3
Net increase (decrease) in cash and cash equivalents			8.6				(89.9	)
Cash and cash equivalents at beginning of period			161.8				289.6
Cash and cash equivalents at end of period		$	170.4			$	199.7

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

		Common Stock								Capital in								Accumulated
		Shares								Excess								Other								Treasury				Total
(unaudited)		(200.0				$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, 2008 as originally reported			81.7			$	81.7			$	519.9			$	1,438.7			$	(161.3	)			(2.3	)		$	(47.8	)		$	1,831.2
Cumulative effect of adopting APB 14-1 (see Note 8)			—				—				92.8				(11.7	)			—				—				—				81.1
Balances at December 31, 2008 as adjusted			81.7			$	81.7			$	612.7			$	1,427.0			$	(161.3	)			(2.3	)		$	(47.8	)		$	1,912.3
Net income			—				—				—				33.9				—				—				—				33.9
Other comprehensive income:
Change in unrealized loss on derivative financial instruments, net of tax			—				—				—				—				4.5				—				—				4.5
Change in funded status of pension liability, net of tax			—				—				—				—				27.7				—				—				27.7
Other changes, net of tax			—				—				—				—				(0.8	)			—				—				(0.8	)
Comprehensive net income																															65.3
Cash dividends on common stock			—				—				—				(6.3	)			—				—				—				(6.3	)
Restricted shares issued, net			—				—				1.2				—				—				—				(0.6	)			0.6
Shares repurchased			—				—				—				—				—				(0.8	)			(6.3	)			(6.3	)
Stock-based compensation expense			—				—				0.4				—				—				—				—				0.4
Other			—				—				—				(0.1	)			—				—				—				(0.1	)
Balances at March 31, 2009			81.7			$	81.7			$	614.3			$	1,454.5			$	(129.9	)			(3.1	)		$	(54.7	)		$	1,965.9

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, 2009, the results of operations for the three month periods ended March 31, 2009 and 2008, and cash flows for the three month periods ended March 31, 2009 and 2008 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, 2009 may not be indicative of expected results of operations for the year ending December 31, 2009. 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, 2008. Amounts previously reported have been adjusted as a result of the adoption of accounting pronouncements as explained further under Recent Accounting Pronouncements and Notes 8 and 14.

Stockholders’ Equity

     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 three months ended March 31, 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. Since the inception of this program through March 31, 2009, the Company has repurchased a total of 3,532,728 shares at a cost of approximately $67.5 million.

Fair Value Accounting

     In September 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 introduced a framework for measuring fair value and expanded required disclosure about fair value measurements of assets and liabilities. SFAS 157 for financial assets and liabilities was effective for fiscal years beginning after November 15, 2007. The Company adopted this standard as of January 1, 2008, and the impact of the adoption was not significant.

     SFAS 157 defines fair value 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. SFAS 157 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. SFAS 157 describes three levels of inputs that may be used to measure fair values which 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 and restricted assets, other than cash, are United States Treasury instruments.

     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.

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

		Fair Value Measurement as of March 31, 2009
		(in millions)
		Level 1				Level 2				Level 3				Total
Assets:
Cash equivalents		$	125.5			$	—			$	—			$	125.5
Restricted assets (1)			122.5				—				—				122.5
Total assets		$	248.0			$	—			$	—			$	248.0
Liabilities:
Fuel derivative instruments (2)		$	—			$	0.9			$	—			$	0.9
Interest rate hedges (2)			—				55.2				—				55.2
Total liabilities		$	—			$	56.1			$	—			$	56.1

Recent Accounting Pronouncements

     In December 2007, the FASB issued SFAS No. 141R, “Business Combinations,” and SFAS No. 160, “Accounting and Reporting Noncontrolling Interest in Consolidated Financial Statements, an amendment of ARB No. 51.” These new standards significantly change the accounting for and reporting of business combination transactions and noncontrolling interests (previously referred to as minority interests) in consolidated financial statements. Both standards were effective for fiscal years beginning after December 15, 2008 and are applicable only to transactions occurring after the effective date. The Company adopted this standard as of January 1, 2009; however, for the three months ended March 31, 2009, the Company did not enter into any transactions for which these standards would be applicable.

     In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133 (“SFAS 161”). SFAS 161 changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedge items are accounted for under SFAS No.133, Accounting for Derivative Instruments and Hedging Activities (“SFAS 133”), and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows.

     SFAS 161 is intended to enhance the current disclosure framework in SFAS 133 and requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments, and disclosures about credit-risk related contingent features in derivative agreements.

     The provisions of SFAS 161 were effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Company adopted this standard as of January 1, 2009, and the impact of the adoption was not significant. See Note 5 for required disclosures.

     In May 2008, the 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) (“APB 14-1”). 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 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 Company adopted the provisions of APB 14-1 as of January 1, 2009. See Note 8 for a further explanation of the effects of implementing this pronouncement as it applies to our Convertible Subordinated Notes.

          In June 2008, the FASB issued FASB Staff Position EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities (“FSP EITF 03-6-1”). FSP EITF 03-6-1 applies to the calculation of earnings per share for share-based payment awards with nonforfeitable rights to dividends or dividend equivalents under Statement No. 128, Earnings Per Share and is effective for financial statements issued for fiscal years beginning after December 15, 2008, and all interim periods within those years. The Company adopted the provisions of FSP EITF 03-6-1 as of January 1, 2009. See Note 14 for a further explanation of the effects of implementing this pronouncement.

Note 2. 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 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 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, environmental, and upkeep costs associated with non-operating facilities; other peripheral businesses; and the change in market valuation related to ineffective commodity hedges.

     Sales and related net profits from the Rail Group to the Railcar Leasing and Management Services 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. Sales of railcars from the lease fleet are included in the Railcar Leasing and Management Services Group. See Note 4 Equity Investment for discussion of sales to a company in which we have an equity investment.

     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, 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				(1.9	)
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				(1.4	)
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			$	83.3

Three Months Ended March 31, 2008

														Operating
		Revenues												Profit
		External				Intersegment				Total				(Loss)
		(in millions)
Rail Group		$	347.7			$	220.1			$	567.8			$	77.2
Construction Products Group			165.0				4.3				169.3				12.2
Inland Barge Group			137.8				—				137.8				26.5
Energy Equipment Group			126.2				3.3				129.5				18.2
Railcar Leasing and Management Services Group			119.8				—				119.8				34.1
All Other			2.4				15.8				18.2				(0.3	)
Corporate			—				—				—				(5.4	)
Eliminations — Lease subsidiary			—				(216.7	)			(216.7	)			(31.2	)
Eliminations — Other			—				(26.8	)			(26.8	)			(5.1	)
Consolidated Total		$	898.9			$	—			$	898.9			$	126.2

Note 3. 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,				December 31,
		2009				2008
						(as reported)
		(in millions)
Cash		$	13.8			$	12.7
Leasing equipment:
Machinery and other			37.6				37.0
Equipment on lease			2,929.6				2,973.2
			2,967.2				3,010.2
Accumulated depreciation			(245.9	)			(232.7	)
			2,721.3				2,777.5
Restricted assets			122.5				120.2
Debt:
Recourse			12.9				61.4
Non-recourse			1,177.7				1,190.3

		Three Months Ended
		March 31,
		2009				2008
		(in millions)
Revenues		$	222.4			$	119.8
Operating profit			52.7				34.1

     For the three months ended March 31, 2009 and 2008, revenues of $132.1 million and $37.9 million, respectively, and operating profit of $18.6 million and $5.8 million, respectively, were related to sales of railcars from the lease fleet to a company in which Trinity holds an equity investment. See Note 4 Equity Investment.

     The Leasing Group’s interest expense, which is not a component of operating profit and which includes the effects of hedges related to the Leasing Group’s debt, was $18.3 million and $13.0 million for the three months ended March 31, 2009 and 2008, respectively. Rent expense, which is a component of operating profit, was $11.5 million and $11.2 million for the three months ended March 31, 2009 and 2008, 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 contractual minimum rental revenues on leases in each year are as follows:

		Remaining
		nine months
		of 2009				2010				2011				2012				2013				Thereafter				Total
		(in millions)
Future Contractual Minimum Rental Revenues on Leases		$	167.4			$	205.4			$	164.3			$	133.0			$	103.9			$	276.6			$	1,050.6

     The Leasing Group’s debt at March 31, 2009 consists of both recourse and non-recourse debt. In February 2009, the Company repaid in full the $61.4 million of recourse debt outstanding at December 31, 2008 while incurring $12.9 million of new recourse debt in the form of capital lease obligations. See Note 8 for the form, maturities, and descriptions of the debt. Leasing Group equipment with a net book value of approximately $1,575.9 million is pledged as collateral for Leasing Group debt. Leasing Group equipment with a net book value of approximately $106.6 million is pledged as collateral against operating lease obligations.

     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”). 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. See Note 4 of the December 31, 2008 Consolidated Financial Statements filed on Form 10-K for a detailed explanation of these financing transactions. 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 2009				2010				2011				2012				2013				Thereafter				Total
		(in millions)
Future Operating Lease Obligations of Trusts’ Cars		$	35.7			$	40.7			$	41.7			$	44.9			$	46.1			$	475.0			$	684.1
Future Contractual Minimum Rental Revenues of Trusts’ Cars		$	40.9			$	46.8			$	38.7			$	31.8			$	21.4			$	68.9			$	248.5

Note 4. Equity Investment

     In 2007, the Company and five other equity investors unrelated to the Company or its subsidiaries formed TRIP Rail Holdings LLC (“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”) purchases railcars from the Company’s Rail and Leasing Groups funded by capital contributions from TRIP Holdings’ equity investors and third-party debt. The Company agreed to provide 20% of the total of all capital contributions required by TRIP Holdings up to a total commitment of $49.0 million in exchange for 20% of the equity in TRIP Holdings. In June 2008, the Company entered into an agreement with an equity investor of TRIP Holdings potentially requiring Trinity to acquire from the equity investor up to an additional 5% equity ownership in TRIP Holdings. In January 2009, the equity investor exercised the option requiring the Company to acquire an additional 5% equity ownership in TRIP Holdings for approximately $9.0 million. 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 $51.4 million has been paid. The exercising of this agreement does not change the accounting treatment of TRIP Holdings in the Company’s consolidated financial statements. The Company receives 25% of the distributions made from TRIP Holdings to equity investors and has a 25% interest in the net assets of TRIP Holdings upon a liquidation event. The terms of the Company’s 25% equity investment are identical to the terms of each of the other five 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, Trinity Industries Leasing Company (“TILC”), a wholly owned subsidiary of Trinity, 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 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. During the three months ended March 31, 2009, Trinity funded $15.5 million pursuant to Trinity’s 25% equity ownership obligation, totaling a $51.4 million investment in TRIP Holdings as of March 31, 2009. Trinity’s remaining equity commitment exposure to TRIP Holdings is $9.9 million through June 2009. 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 are expensed on a pro rata basis as railcars are purchased from the Company. For the three months ended March 31, 2009, $2.6 million of these structuring and placement fees were expensed, leaving a net unamortized balance of $1.5 million as of March 31, 2009. Such expense is treated as sales commissions included in operating costs in the Company’s Consolidated Statements of Operations. As of March 31, 2009, TRIP Leasing had purchased $1,158.0 million of railcars from the Company and has the capacity to purchase an additional $242.0 million. 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.

Sales of railcars to TRIP Leasing and related gains for the three month periods ended March 31, 2009 and 2008 are as follows:

		Three Months Ended
		March 31,
		2009				2008
		(in millions)
Rail Group:
Sales of railcars to TRIP Leasing		$	38.0			$	146.0
Gain on sales of railcars to TRIP Leasing		$	5.0			$	25.6
Deferral of gain on sales of railcars to TRIP Leasing based on Trinity’s equity interest		$	1.2			$	5.1
TILC:
Sales of railcars to TRIP Leasing		$	132.1			$	37.9
Recognition of previously deferred gain on sales of railcars to TRIP Leasing		$	24.8			$	7.2
Deferral of gain on sales of railcars to TRIP Leasing based on Trinity’s equity interest		$	6.2			$	1.4

     Administrative fees paid to TILC by TRIP for the three month periods ended March 31, 2009 and 2008, were $1.4 million and $1.2 million, respectively.

     See Note 5 of the December 31, 2008 Consolidated Financial Statements filed on Form 10-K for additional information.

Note 5. Derivative Instruments

     We use derivative instruments to mitigate the impact of increases in zinc, natural gas, and diesel fuel prices and interest rates, 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 designated as hedges are accounted for as cash flow hedges under SFAS 133, as amended.

     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 are accounted for as cash flow hedges with changes in the fair value of the instruments of $24.5 million recorded as a loss in Accumulated Other Comprehensive Loss (“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, 2009, the balance remaining in AOCL was $20.8 million. The effect on interest expense for the three months ended March 31, 2009, was an increase of $1.0 million due to amortization of the AOCL balance. The effect on interest expense for the three months ended March 31, 2008, was an increase of $2.2 million due to the ineffective portion of the hedges primarily associated with hedged interest payments that will not be made. It is expected that $3.9 million in losses will be recognized in earnings during the next twelve months from amortization of the AOCL balance.

     In May 2008, we entered into an interest rate swap transaction which 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, 2009 in the consolidated balance sheet was a liability of $52.3 million, with $51.5 million of expense in AOCL. The effect on interest expense for the three months ended March 31, 2009 was an increase of $5.0 million, which primarily related to the monthly settlement of interest.

     During the fourth quarter of 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, 2009 was 1.798%. The amount recorded for these instruments as of March 31, 2009 in the consolidated balance sheet was a liability of $2.9 million. The effect on interest expense for the three months ended March 31, 2009 was an increase of $1.1 million, which included the mark to market valuation on the interest rate swap transactions and the monthly settlement of interest.

     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, 2009, the balance remaining in AOCL was $3.3 million. The effect of the amortization on interest expense for each of the three month periods ended March 31, 2009 and 2008 was a decrease of $0.1 million.

     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 in the consolidated balance sheet for these instruments was a liability of $0.9 million as of March 31, 2009 and $0.2 million of income in AOCL. 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. The effect on the consolidated statement of operations for the three month period ended March 31, 2008 was operating income of $1.4 million, including gains of $1.3 million resulting from the mark to market valuation for the three month period ended March 31, 2008.

     Foreign Exchange Hedge

     During the first quarter of 2009, we entered into a foreign exchange hedge to mitigate the impact on operating profit of unfavorable fluctuations in foreign currency exchange rates. This instrument is short term with quarterly maturities and no remaining balance in AOCL. The effect on the consolidated statement of operations for the three months ended March 31, 2009 was expense of $0.2 million included in other, net on the consolidated statement of operations.

     Zinc

     In 2008, we continued a program to mitigate the impact of fluctuations in the price of zinc purchases. The intent of this program was to protect our operating profit from adverse price changes by entering into derivative instruments. These instruments were short term with monthly maturities and no remaining balances in AOCL. The effect on the consolidated statement of operations for the three months ended March 31, 2008 was operating income of $0.5 million. We have not entered into any new zinc derivative instruments in 2009.

Note 6. Property, Plant, and Equipment

     The following table summarizes the components of property, plant, and equipment as of March 31, 2009 and December 31, 2008.

		March 31,				December 31,
		2009				2008
						(as reported)
		(in millions)
Corporate/Manufacturing:
Land		$	38.1			$	38.1
Buildings and improvements			420.5				401.4
Machinery and other			717.6				685.4
Construction in progress			33.1				50.7
			1,209.3				1,175.6
Less accumulated depreciation			(654.4	)			(620.2	)
			554.9				555.4
Leasing:
Machinery and other			37.6				37.0
Equipment on lease			2,929.6				2,973.2
			2,967.2				3,010.2
Less accumulated depreciation			(245.9	)			(232.7	)
			2,721.3				2,777.5
Deferred profit on railcars sold to the Leasing Group			(328.5	)			(342.3	)
		$	2,947.7			$	2,990.6

Note 7. Warranties

     The Company provides warranties against workmanship and materials defects 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, 2009 and 2008 were as follows:

		Three Months Ended
		March 31,
		2009				2008
		(in millions)
Beginning balance		$	25.7			$	28.3
Warranty costs incurred			(2.3	)			(1.3	)
Product warranty accrual			(0.8	)			1.6
Ending balance		$	22.6			$	28.6

Note 8. Debt

     The following table summarizes the components of debt as of March 31, 2009 and December 31, 2008.

		March 31,				December 31,
		2009				2008
						(adjusted)
		(in millions)
Corporate/Manufacturing — Recourse:
Revolving commitment		$	—			$	—
Convertible subordinated notes			450.0				450.0
Less: unamortized discount			(128.8	)			(131.2	)
			321.2				318.8
Senior notes			201.5				201.5
Other			2.7				2.7
			525.4				523.0
Leasing — Recourse:
Other			12.9				—
Equipment trust certificates			—				61.4
			538.3				584.4
Leasing — Non-recourse:
Secured railcar equipment notes			316.4				320.0
Warehouse facility			310.2				312.7
Promissory notes			551.1				557.6
			1,177.7				1,190.3
Total debt		$	1,716.0			$	1,774.7

     On January 1, 2009, we adopted the provisions of APB 14-1 as applicable to the Company’s 3 7/8% Convertible Subordinated Notes issued June 2006. APB 14-1 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. APB 14-1 requires retrospective application to all periods presented and does not grandfather existing instruments.

     As a result of adopting APB 14-1, on January 1, 2009, we recorded the following adjustments to amounts previously reported in our December 31, 2008 Consolidated Balance Sheet:

						Increase/(Decrease)
										Adjustments to
										income from debt
										issuance date
						Adjustments as of				through December
		Originally reported				debt issuance date				31, 2008				Adjusted
		(In millions)
Other assets		$	297.1			$	(3.2	)		$	(0.5	)		$	293.4
Deferred income taxes		$	341.9			$	56.6			$	(10.2	)		$	388.3
Debt		$	1,905.9			$	(152.6	)		$	21.4			$	1,774.7
Capital in excess of par value		$	519.9			$	92.8			$	—			$	612.7
Retained earnings		$	1,438.7			$	—			$	(11.7	)		$	1,427.0

     These adjustments, required by APB 14-1, record the effects of (1) reclassifying $152.6 million to capital in excess of par value with an offsetting reduction to debt in the form of unamortized discount, the amount of the proceeds received from the issuance of the Convertible Subordinated Notes attributable to their conversion options; (2) reclassifying $3.2 million in debt origination costs related to the Convertible Subordinated Notes from other assets to capital in excess of par value; (3) recognizing additional amortization of debt discount and debt origination costs as an increase to interest expense for the period from the issuance of the Convertible Subordinated Notes through December 31, 2008; and (4) the corresponding effect of these adjustments on deferred tax expense and deferred tax liability.

     Additionally, interest expense for the three months ended March 31, 2008 was increased by $2.2 million from amounts originally reported to include amortization of debt discount and debt origination costs with an offsetting tax benefit of $0.7 million. The effect of these adjustments for the three months ended March 31, 2008 was to decrease basic net income from continuing operations and in total per common share by $0.02 and to decrease diluted net income from continuing operations and in total per common share by $0.01. There was no change to the discontinued operations per common share data.

     As of March 31, 2009 and December 31, 2008, as adjusted, 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 Subordinated Convertible Notes for the three months ended March 31, 2009 and 2008 is as follows:

		Three Months Ended
		March 31,
		2009				2008
		(in millions)
Coupon rate interest		$	4.4			$	4.4
Amortized debt discount			2.3				2.2
		$	6.7			$	6.6

     Trinity’s revolving credit facility requires maintenance of ratios related to interest coverage for the leasing and manufacturing operations, leverage, and minimum net worth. Interest on the revolving credit facility is calculated at prime or LIBOR plus 75 basis points. At March 31, 2009, there were no borrowings under our $425 million revolving credit facility that matures on October 19, 2012. After $91.2 million was considered for letters of credit, $333.8 million was available under the revolving credit facility.

     The $600 million warehouse facility, established to finance railcars owned by TILC, had $310.2 million outstanding as of March 31, 2009. The warehouse facility matures August 2009 and, unless renewed, will be payable in three equal installments in February 2010, August 2010, and February 2011. Advances under the facility bear interest at a defined index rate plus a margin, for an all-in interest rate of 1.76% at March 31, 2009. At March 31, 2009, $289.8 million was available under this facility.

     Terms and conditions of other debt, including recourse and non-recourse provisions, are described in Note 10 of the December 31, 2008 Consolidated Financial Statements filed on Form 10-K.

     The remaining principal payments under existing debt agreements as of March 31, 2009 are as follows:

		Remaining
		nine months
		of 2009				2010				2011				2012				2013				Thereafter
										(in millions)
Recourse:
Corporate/Manufacturing		$	0.6			$	0.4			$	0.3			$	0.3			$	0.2			$	652.4
Leasing (Note 3)			0.3				0.5				0.6				0.6				0.6				10.3
Non-recourse:
Leasing — secured railcar equipment notes (Note 3)			11.7				16.5				14.9				13.7				15.4				244.2
Leasing — warehouse facility (Note 3)			8.4				2.7				—				—				—				—
Leasing — promissory notes (Note 3)			19.8				27.6				29.0				30.9				28.8				415.0
Total principal payments excluding termination of warehouse facility			40.8				47.7				44.8				45.5				45.0				1,321.9
Warehouse facility termination payments			—				199.4				99.7				—				—				—
Total principal payments		$	40.8			$	247.1			$	144.5			$	45.5			$	45.0			$	1,321.9

Note 9. Other, Net

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

		Three Months Ended
		March 31,
		2009				2008
		(in millions)
Gain on disposition of property, plant, and equipment		$	(2.6	)		$	(0.1	)
Foreign currency exchange transactions			2.7				(0.7	)
Gain on equity investments			(0.6	)			(0.2	)
Other			(0.1	)			(0.1	)
Other, net		$	(0.6	)		$	(1.1	)

Note 10. Income Taxes

     The change in unrecognized tax benefits for the three months ended March 31, 2009 and 2008 were as follows:

		Three Months Ended
		March 31,
		2009				2008
		(in millions)
Beginning balance		$	32.9			$	23.7
Additions for tax positions related to the current year			0.7				—
Additions for tax positions of prior years			0.3				3.9
Reductions for tax positions of prior years			(1.1	)			(1.0	)
Ending balance		$	32.8			$	26.6

     The additions for the three months ended March 31, 2009, were amounts provided for tax positions previously taken in foreign jurisdictions and tax positions taken for federal and state income tax purposes as well as deferred tax liabilities that have been reclassified to uncertain tax positions.

     The reduction for tax positions of prior years for the three months ended March 31, 2009 related primarily to the completion of state audits in which the Company’s tax position was not challenged by the state and for which the position is now effectively settled.

     The total amount of unrecognized tax benefits including interest and penalties at March 31, 2009 that would affect the Company’s effective tax rate if recognized was $16.5 million. There is a reasonable possibility that unrecognized federal and state tax benefits will decrease by March 31, 2010 due to a lapse in the statute of limitations for assessing tax. Amounts subject to a lapse in statute by March 31, 2010 are $0.1 million. Further, there is a reasonable possibility that the unrecognized federal tax benefits will decrease by March 31, 2010 due to settlements with taxing authorities. Amounts expected to settle by March 31, 2010 are $11.3 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 March 31, 2009 and December 31, 2008 was $11.8 million and $10.6 million, respectively.

     Income tax expense for the three months ended March 31, 2009 and 2008, included $1.2 million and $2.3 million, respectively, 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 and 2004 through 2005, 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 three months and expect the majority of issues on the 2004 through 2005 examination to be resolved within the next several months. There are certain issues upon which the IRS and the Company currently disagree, thus the statute related to the 2004 through 2005 examination may remain open for an undeterminable period.

     In addition, statutes of limitations governing the right of Mexico’s tax authorities to audit the tax returns of our operations in Mexico remain open for the 2002 tax year forward. Our Mexico subsidiaries are currently under audit for the 2002 and 2003 tax years. Additionally, our Swiss subsidiary is under audit for the 2006 tax year. We expect these examinations to be completed within the next three months. Our various European subsidiaries, including subsidiaries that were sold in 2006, are impacted by various statutes of limitations which are generally open from 2003 forward. An exception to this is our discontinued operations in Romania, which have been audited through 2004. Generally, states’ statutes in the United States are open from 2002 forward.

     In the preparation of the 2008 income tax returns, the Company expects that the ultimate income tax refund will be $91.7 million. This has been adjusted from the previous expectation of $98.7 million. This refund is primarily due to expected tax losses that will be carried back and applied against previous years’ tax liabilities resulting in a refund of taxes previously paid. The Company expects to receive these refunds in 2009.

Note 11. Employee Retirement Plans

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

		Three Months Ended
		March 31,
		2009				2008
		(in millions)
Service cost		$	2.2			$	2.4
Interest			5.5				5.2
Expected return on plan assets			(4.0	)			(5.0	)
Amortization and deferral			1.9				0.5
Curtailment			(0.3	)			—
Profit sharing			3.0				2.0
Net expenses		$	8.3			$	5.1

     During the first quarter of 2009, the Company amended its Supplemental Retirement Plan (the “Supplemental Plan”) to reduce future retirement plan costs. This amendment provides that all benefit accruals under the Supplemental Plan shall cease effective March 31, 2009, and the Supplemental Plan will be frozen as of that date. In addition, the Company amended the Trinity Industries, Inc. Standard Pension Plan (the “Pension Plan”). The amendment was designed to reduce future pension costs and provides that, effective March 31, 2009, all future benefit accruals under the Pension Plan will automatically cease for all participants, and the accrued benefits under the Pension Plan will be determined and frozen as of

that date. Accordingly, as a result of these amendments, accrued pension liability was reduced by $44.1 million with an offsetting reduction in funded status of pension liability included in AOCL.

     Trinity contributed $8.5 million and $3.5 million to the Company’s defined benefit pension plans for the three month periods ended March 31, 2009 and 2008, respectively. Total contributions to the Company’s pension plans in 2009 are expected to be approximately $19.1 million.

Note 12. Accumulated Other Comprehensive Loss

     Comprehensive net income is as follows:

		Three Months Ended
		March 31,
		2009				2008
		(in millions)
Net income		$	33.9			$	63.8
Other comprehensive income (loss):
Change in funded status of pension liability, net of tax expense of $16.4 and $—			27.7				—
Change in unrealized loss on derivative financial instruments, net of tax expense (benefit) of $2.4 and $(6.9)			4.5				(12.9	)
Other changes, net of tax (benefit) of $(0.5) and $—			(0.8	)			—
Comprehensive net income		$	65.3			$	50.9

The components of accumulated other comprehensive loss are as follows:

		March 31,				December 31,
		2009				2008
						(as reported)
		(in millions)
Currency translation adjustments		$	(17.1	)		$	(17.1	)
Unrealized loss on derivative financial instruments			(52.3	)			(56.8	)
Funded status of pension liability			(58.7	)			(86.4	)
Other changes			(1.8	)			(1.0	)
		$	(129.9	)		$	(161.3	)

Note 13. Stock-Based Compensation

     Stock-based compensation totaled approximately $3.9 million and $5.0 million for the three months ended March 31, 2009 and 2008, respectively.

Note 14. Net Income Per Common Share

     On January 1, 2009, we adopted the provisions of FSP EITF 03-6-1 requiring that unvested share-based payment awards containing non-forfeitable rights to dividends be considered participating securities and included in the computation of earnings per share pursuant to the two-class method. FSP EITF 03-6-1 requires that, upon adoption, all prior period earnings per share data presented be adjusted retrospectively. The effect of adopting FSP EITF 03-6-1 for the three months ended March 31, 2008 was to decrease basic and diluted net income from continuing operations and in total per common share by $0.02. There was no change to the discontinued operations per common share data.

     Basic net income per common share is computed by dividing net income remaining after allocation to unvested restricted shares 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 net impact of unvested restricted shares and shares that could be issued under outstanding stock options. Total weighted average restricted shares and stock options having an antidilutive effect on diluted earnings per share were 3.8 million shares and 2.4 million shares for the three month periods ended March 31, 2009 and 2008, respectively.

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

		Three Months Ended												Three Months Ended
		March 31, 2009												March 31, 2008
		(in millions, except per share amounts)
		Income				Average								Income				Average
		(Loss)				Shares				EPS				(Loss)				Shares				EPS
Income from continuing operations		$	34.0											$	64.1
Income allocable to unvested restricted shares			(1.1	)											(1.9	)
Income from continuing operations —basic			32.9				76.6			$	0.43				62.2				78.9			$	0.79
Effect of dilutive securities:
Stock options			—				0.0								—				0.4
Income from continuing operations — diluted		$	32.9				76.6			$	0.43			$	62.2				79.3			$	0.78
Loss from discontinued operations, net of taxes		$	(0.1	)										$	(0.3	)
Loss allocable to unvested restricted shares			0.0												0.0
Loss from discontinued operations, net of taxes — basic		$	(0.1	)			76.6			$	0.00			$	(0.3	)			78.9			$	0.00
Effect of dilutive securities:
Stock options			—				0.0								—				0.4
Loss from discontinued operations, net of taxes — diluted		$	(0.1	)			76.6			$	0.00			$	(0.3	)			79.3			$	0.00