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Trinity Industries Inc. Reports Operating Results (10-Q)

July 30, 2009 | About:
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Trinity Industries Inc. (TRN) filed Quarterly Report for the period ended 2009-06-30.

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 $1.18 billion; its shares were traded at around $15 with a P/E ratio of 4.8 and P/S ratio of 0.3. The dividend yield of Trinity Industries Inc. stocks is 2.1%. Trinity Industries Inc. had an annual average earning growth of 176.1% over the past 5 years.

Highlight of Business Operations:

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 exposure to TRIP Holdings is $5.0 million through June 2010. Trinity’s carrying value of its investment in TRIP Holdings follows:

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 six months ended June 30, 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. No shares were repurchased under this program for the three months ended June 30, 2009 and 2008. Since the inception of this program through June 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 $28.5 million and $57.2 million, respectively, for the three and six month periods ended June 30, 2009 compared to $26.0 million and $46.9 million (as adjusted — see Note 9 of the Consolidated Financial Statements), respectively, for the same periods last year. Interest income decreased $0.7 million over the same quarter last year and $2.7 million over the same six 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 $1.8 million and $7.6 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 decrease in Other, net for the three and six month periods ended June 30, 2009 was primarily due to gains recognized on property dispositions in 2008.

The total amount of the backlog dedicated to the Leasing Group is supported by lease agreements with external customers. The final amount dedicated to the Leasing Group may vary by the time of delivery. Results for the three and six month periods ended June 30, 2009 included $75.0 million and $113.0 million, respectively, in railcars sold to TRIP Leasing, that resulted in a gain of $6.2 million and $11.2 million, respectively, of which $1.6 million and $2.8 million, respectively, in profit was deferred based on our 25% equity interest. Results for the three and six month periods ended June 30, 2008 included $83.0 million and $229.0 million, respectively, in railcars sold to TRIP Leasing, that resulted in a gain of $19.2 million and $44.8 million, respectively, of which $3.8 million and $8.9 million, respectively, in profit was deferred based on our 20% equity interest. See Note 5 Equity Investment of the Consolidated Financial Statements for information about TRIP Leasing.

Operating profit for the Rail Group decreased $401.1 million and $484.1 million, respectively, for the three and six month periods ended June 30, 2009 compared to the same periods last year. This decrease was primarily due to a $325 million goodwill impairment charge during the quarter ended June 30, 2009 (see Note 1 of the Consolidated Financial Statements). Additionally, a significantly reduced volume of railcars were delivered during the period amid a lower pricing and unit demand environment.

In the three months ended June 30, 2009, railcar shipments included sales to the Leasing Group of $138.8 million compared to $252.6 million in the comparable period in 2008 with a deferred profit of $8.8 million compared to $23.1 million for the same period in 2008. In the six months ended June 30, 2009, railcar shipments included sales to the Leasing Group of $255.3 million compared to $469.3 million in the comparable period in 2008 with a deferred profit of $17.7 million compared to $54.3 million for the same period in 2008. Sales to the Leasing Group and related profits are included in the operating results of the Rail Group but eliminated in consolidation.

Read the The complete ReportTRN is in the portfolios of Robert Rodriguez of FPA Capital, John Keeley of Keeley Fund Management, Kenneth Fisher of Fisher Asset Management, LLC.

Rating: 4.0/5 (3 votes)

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