Trinity Industries Inc. (TRN) filed Quarterly Report for the period ended 2009-09-30.
Trinity Industries Inc. is engaged in the manufacture marketing and leasing of a wide variety of products consisting of the following business segments or groups: Railcar Group Inland Barge Group Parts and Services Group Highway Construction Product Group Concrete & Aggregate Group Industrial Group and others. ``Others`` includes transportation services the company's captive insurance company and other peripheral businesses. Trinity Industries Inc. has a market cap of $1.33 billion; its shares were traded at around $16.72 with a P/E ratio of 6.4 and P/S ratio of 0.4. The dividend yield of Trinity Industries Inc. stocks is 2%. Trinity Industries Inc. had an annual average earning growth of 176.1% over the past 5 years.
Highlight of Business Operations:
Our estimate of the Rail Group’s fair value (considered to be a level three fair value measurement) utilized an income approach based on the anticipated future discounted cash flows of the Rail Group, requiring significant estimates and assumptions related to future revenues and operating profits, exit multiples, tax rates and consequences, and discount rates based upon market-based capital costs. Because the estimated fair value of the Rail Group was less than the carrying amount of its net assets, we performed step two of our goodwill impairment analysis as required by generally accepted accounting principles, by estimating the fair value of individual assets and liabilities of the Rail Group in accordance with the provisions of the accounting standards pertaining to business combinations and fair value measurements. The result of our impairment analysis indicated that the remaining implied goodwill amounted to $122.5 million for our Rail Group as of June 30, 2009 and, consequently, we recorded an impairment charge of $325.0 million during the second quarter of 2009. The change in our estimate of the Rail Group’s enterprise value from December 31, 2008 to June 30, 2009 was driven by economic indicators, including third-party studies that predicted the decline in the railcar industry was likely to extend longer than was previously expected. In management’s opinion, no interim impairment tests are necessary for our remaining business segments as there has not been a significant change in market conditions for these segments since the 2008 annual impairment test. Additionally, there have been no significant changes in our Rail Group business during the third quarter of 2009 which, in management’s opinion, would require an adjustment to the previously recorded impairment charge of $325.0 million.
In January 2009, the Company acquired an additional 5% equity ownership in TRIP Holdings for approximately $9.0 million from another equity investor. As a result, the Company now owns a 25% equity ownership in TRIP Holdings, increasing the Company’s total commitment by $12.3 million to $61.3 million, of which $56.3 million has been paid. Trinity’s remaining equity commitment to TRIP Holdings is $5.0 million through June 2010. On October 15, 2009, TILC loaned TRIP Holdings $14.5 million to resolve a collateral deficiency. The note is repayable monthly from TRIP Holdings’ excess cash flow plus accrued interest at 11% and is expected to be repaid in full by June 2010.
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 nine months ended September 30, 2009, 813,028 shares were repurchased under this program at a cost of approximately $6.3 million. No shares were repurchased under this program for the three months ended September 30, 2009. During the three months and nine months ended September 30, 2008, 150,000 and 621,100 shares were repurchased under this program at a cost of approximately $3.8 million and $16.0 million, respectively. Since the inception of this program through September 30, 2009, the Company has repurchased a total of 3,532,728 shares at a cost of approximately $67.5 million.
Other Income and Expense. Interest expense, net of interest income, was $31.3 million and $88.5 million, respectively, for the three and nine month periods ended September 30, 2009 compared to $26.6 million and $73.5 million (as adjusted — see Note 10 of the Consolidated Financial Statements), respectively, for the same periods last year. Interest income decreased $1.0 million over the same quarter last year and $3.7 million over the same nine month period last year as a result of lower interest rates more than offsetting the effect of an increase in cash available for investment. Interest expense increased $3.7 million and $11.3 million, respectively, over the same periods last year due to an increase in debt levels, including $544.6 million of promissory notes for the Leasing Group entered into in May 2008, and expense related to the ineffective portion of interest rate hedges. The increase in Other, net for the three month period ended September 30, 2009 was primarily due to a $3.7 million gain recognized on the sale of one of our equity investments. The increase in Other, net for the nine month period ended September 30, 2009 was primarily due to the $3.7 million gain recognized on the sale of one of our equity investments partially offset by foreign currency translation losses.
TRN is in the portfolios of Robert Rodriguez of FPA Capital, John Keeley of Keeley Fund Management, Kenneth Fisher of Fisher Asset Management, LLC.
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