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TRN > SEC Filings for TRN > Form 10-Q on 25-Oct-2012All Recent SEC Filings

Show all filings for TRINITY INDUSTRIES INC

Form 10-Q for TRINITY INDUSTRIES INC


25-Oct-2012

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity, and certain other factors that may affect our future results. Our MD&A is presented in the following sections:
•Executive Summary
•Results of Operations
•Liquidity and Capital Resources
•Contractual Obligations and Commercial Commitments
•Recent Accounting Pronouncements
•Forward-Looking Statements

Our MD&A should be read in conjunction with the unaudited consolidated financial statements of Trinity Industries, Inc. and subsidiaries ("Trinity", "Company", "we", or "our") and related notes in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Executive Summary

The Company's revenues for the three and nine months ended September 30, 2012 were $937.5 million and $2,891.2 million, respectively, representing an increase of 19% and 36%, respectively, over the same periods in 2011. Operating profit for the three and nine months ended September 30, 2012 totaled $141.9 million and $419.2 million, respectively, compared with $105.4 million and $286.3 million, respectively, for the same periods in 2011. While all of our business segments reported increases in revenues for the nine months ended September 30, 2012 when compared to the prior year, the largest contributors to the increase were our Rail, Inland Barge, and Leasing Groups. The increase in revenues in our Rail and Inland Barge Groups was primarily due to higher shipment volumes while the increase in revenues in our Leasing Group was due to higher railcar sales from the lease fleet, higher rental revenues from lease fleet additions, and an increase in rental rates. Operating profit and margin grew for the nine months ended September 30, 2012 when compared with the prior year, primarily due to higher shipment levels in our Rail and Inland Barge Groups and from revenue growth in our Leasing Group. Our Construction Products Group experienced a decline in operating margin primarily as a result of competitive pricing pressures. Net income attributable to Trinity Industries, Inc. common stockholders for the three and nine months ended September 30, 2012 increased $31.3 million and $97.8 million, respectively, or 98% and 114%, respectively, over the same periods in 2011.

Our Rail and Inland Barge Groups and our structural wind towers and containers businesses operate in cyclical industries. Results in our Construction Products and Energy Equipment Groups are subject to seasonal fluctuations with the first quarter historically being the weakest quarter. Railcar sales from the lease fleet are the primary driver of fluctuations in results in the Railcar Leasing and Management Services Group. Following an extended period of weak demand for new railcars through 2010, demand for new railcars recovered sharply, primarily due to an increase in the shipment of commodities, replacement of older railcars, and federal tax benefits received from taking delivery of railcars in 2011 and 2012. While moderating from the accelerated pace in the first half of 2011, demand conditions and corresponding order levels for new railcars in the first nine months of 2012 continued to be favorable, particularly from the oil, gas, and chemicals industries. Rail Group operating results include certain costs associated with the repositioning of a portion of the Company's production capacity to meet railcar demand. Orders for structural wind towers have been slow since mid-2008 when energy development companies encountered tightened credit markets, lower demand for electricity, and heightened competition arising from declining natural gas prices and imports from foreign manufacturers. The continued slowdown in the commercial construction markets negatively impacted the results of our Construction Products Group as well. We continually assess our manufacturing capacity and take steps to align our production capacity with demand for our products. Due to improvements in demand, we have increased production staff at certain facilities since late 2010.


Our backlog at September 30, 2012 compared with prior period was approximately as follows:

                          September 30, 2012      September 30, 2011
                                         (in millions)
Rail Group
External Customers       $            2,526.6    $            1,939.0
Leasing Group                           815.4                   431.7
                         $            3,342.0    $            2,370.7
Inland Barge             $              536.5    $              564.4
Structural wind towers   $              754.3    $              929.5

For the nine months ended September 30, 2012, our rail manufacturing businesses received orders for approximately 16,730 railcars. The orders in our backlog from the Leasing Group are supported by lease commitments with external customers. The final amount dedicated to the Leasing Group may vary by the time of delivery. For multi-year barge agreements, deliveries scheduled for 2013 are included in the backlog at this time; deliveries beyond 2013 are not included in the backlog if specific production quantities for future years have not been determined. Approximately $412.5 million of the structural wind towers backlog is subject to litigation with a structural wind towers customer for the customer's breach of a long-term supply contract for the manufacture of towers.

Results of Operations

Overall Summary

Revenues
                        Three Months Ended September 30, 2012          Three Months Ended September 30, 2011
                                       Revenues                                       Revenues                      Percent
                        External       Intersegment      Total         External       Intersegment      Total        Change
                                                           ($ in millions)
Rail Group           $      328.3     $      129.6     $  457.9     $      227.7     $      93.2      $  320.9        42.7  %
Construction
Products Group              148.2              6.1        154.3            161.1             3.7         164.8        (6.4 )
Inland Barge Group          166.5                -        166.5            143.2               -         143.2        16.3
Energy Equipment
Group                       131.0              4.6        135.6            107.3             4.3         111.6        21.5
Railcar Leasing
and Management
Services Group              159.3              0.6        159.9            147.4               -         147.4         8.5
All Other                     4.2             20.4         24.6              4.4            13.6          18.0        36.7
Eliminations -
Lease subsidiary                -           (125.9 )     (125.9 )              -           (87.9 )       (87.9 )
Eliminations -
Other                           -            (35.4 )      (35.4 )              -           (26.9 )       (26.9 )
Consolidated Total   $      937.5     $          -     $  937.5     $      791.1     $         -      $  791.1        18.5


                           Nine Months Ended September 30, 2012             Nine Months Ended September 30, 2011
                                         Revenues                                         Revenues                       Percent
                         External        Intersegment       Total         External        Intersegment       Total       Change
                                                              ($ in millions)
Rail Group            $     1,049.7     $      392.2     $ 1,441.9     $       556.0     $      265.4     $   821.4        75.5 %
Construction
Products Group                449.4             16.7         466.1             439.2              8.5         447.7         4.1
Inland Barge Group            509.8                -         509.8             398.9                -         398.9        27.8
Energy Equipment
Group                         377.7             13.6         391.3             335.6             12.2         347.8        12.5
Railcar Leasing and
Management Services
Group                         493.7              2.7         496.4             395.4                -         395.4        25.5
All Other                      10.9             50.2          61.1               8.5             36.9          45.4        34.6
Eliminations -
Lease subsidiary                  -           (380.8 )      (380.8 )               -           (252.8 )      (252.8 )
Eliminations -
Other                             -            (94.6 )       (94.6 )               -            (70.2 )       (70.2 )
Consolidated Total    $     2,891.2     $          -     $ 2,891.2     $     2,133.6     $          -     $ 2,133.6        35.5


Operating Profit (Loss)
                                           Three Months Ended              Nine Months Ended
                                              September 30,                  September 30,
                                           2012            2011           2012            2011
                                                             (in millions)
Rail Group                            $      35.2      $     18.2     $     128.3     $     42.9
Construction Products Group                  12.7            17.8            38.7           42.2
Inland Barge Group                           26.9            26.0            93.5           66.8
Energy Equipment Group                        9.5            (1.9 )           9.7            9.8
Railcar Leasing and Management
Services Group                               85.1            64.2           228.0          178.6
All Other                                    (2.0 )          (0.3 )          (7.1 )         (0.8 )
Corporate                                   (12.4 )         (11.5 )         (33.6 )        (30.6 )
Eliminations - lease subsidiary             (14.1 )          (8.1 )         (37.2 )        (23.3 )
Eliminations - other                          1.0             1.0            (1.1 )          0.7
Consolidated Total                    $     141.9      $    105.4     $     419.2     $    286.3

Other Income and Expense. Other income and expense is summarized in the following table:

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