Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 10-Q/A

(Amendment No. 1)

 

 

(Mark One)

 

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

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2012

OR

 

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

For the transition period from              to             .

Commission File Number 1-6903

 

 

Trinity Industries, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   75-0225040

(State or Other Jurisdiction of

Incorporation or Organization)

 

(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 (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.    Yes   x     No   ¨ .

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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes   x     No   ¨

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).

 

Large accelerated filer   x    Accelerated filer   ¨
Non-accelerated filer   ¨   (Do not check if a smaller reporting company)    Smaller reporting company   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ¨     No   x .

At April 13, 2012 the number of shares of common stock outstanding was 80,263,121.

 

 

 

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Explanatory Note: On April 26, 2012, Trinity Industries, Inc. (the “Company”) filed its Quarterly Report on Form 10-Q for the period ended March 31, 2012 (the “Original Form 10-Q”). As a result of an inadvertent error by the Company’s filing service provider, the XBRL exhibits to the Original Form 10-Q did not contain all necessary XBRL information. This Form 10-Q/A contains revised XBRL exhibits, but otherwise is unchanged from the Original Form 10-Q.

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      33   
        Item 4.   Controls and Procedures      33   
PART II   OTHER INFORMATION   
        Item 1.   Legal Proceedings      34   
        Item 1A.   Risk Factors      34   
        Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds      34   
        Item 3.   Defaults Upon Senior Securities      34   
        Item 4.   Mine Safety Disclosures      34   
        Item 5.   Other Information      34   
        Item 6.   Exhibits      35   

SIGNATURES

     36   

CERTIFICATIONS

  

 

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PART I

Item   1 .     Financial Statements

Trinity Industries, Inc. and Subsidiaries

Consolidated Statements of Operations

(unaudited)

 

    

Three Months Ended

March 31,

 
     2012     2011  
     (in millions, except per share amounts)  

Revenues:

    

Manufacturing

   $ 783.2      $ 514.4   

Leasing

     142.1        119.8   
  

 

 

   

 

 

 
     925.3        634.2   

Operating costs:

    

Cost of revenues:

    

Manufacturing

     672.0        431.7   

Leasing

     73.4        60.5   

Other

     11.1        8.1   
  

 

 

   

 

 

 
     756.5        500.3   

Selling, engineering, and administrative expenses:

    

Manufacturing

     36.5        34.0   

Leasing

     6.1        5.7   

Other

     11.3        10.6   
  

 

 

   

 

 

 
     53.9        50.3   

Gain on disposition of property, plant, and equipment:

    

Net gains on railcar lease fleet sales

     3.7        1.1   

Other

     3.8        0.8   
  

 

 

   

 

 

 

Total operating profit

     122.4        85.5   

Other (income) expense:

    

Interest income

     (0.4 )      (0.3 ) 

Interest expense

     47.9        44.5   

Other, net

     (3.0 )      (0.5 ) 
  

 

 

   

 

 

 
     44.5        43.7   
  

 

 

   

 

 

 

Income before income taxes

     77.9        41.8   

Provision for income taxes

     25.6        16.2   
  

 

 

   

 

 

 

Net income

     52.3        25.6   

Net income (loss) attributable to noncontrolling interest

     (0.6 )      1.4   
  

 

 

   

 

 

 

Net income attributable to Trinity Industries, Inc.

   $ 52.9      $ 24.2   
  

 

 

   

 

 

 

Net income attributable to Trinity Industries, Inc. per common share:

    

Basic

   $ 0.66      $ 0.30   

Diluted

   $ 0.66      $ 0.30   

Weighted average number of shares outstanding:

    

Basic

     77.8        77.1   

Diluted

     78.1        77.4   

Dividends declared per common share

   $ 0.09      $ 0.08   

See accompanying notes to consolidated financial statements.

 

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Trinity Industries, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

(unaudited)

 

    

Three Months Ended

March 31,

 
     2012     2011  
     (in millions)  

Net income

   $ 52.3      $ 25.6   

Unrealized loss on derivative financial instruments:

    

Unrealized gains arising during the period

     2.7        14.3   

Reclassification adjustments for losses included in net income

     2.3        0.8   

Funded status of pension liability – amortization of actuarial loss

     0.9        —     
  

 

 

   

 

 

 

Other comprehensive income, before tax

     5.9        15.1   

Income tax expense related to components of other comprehensive income

     2.4        5.4   
  

 

 

   

 

 

 

Other comprehensive income, net of tax

     3.5        9.7   
  

 

 

   

 

 

 

Comprehensive income

     55.8        35.3   

Less: comprehensive income (loss) attributable to noncontrolling interest

     (0.1 )      3.7   
  

 

 

   

 

 

 

Comprehensive income attributable to Trinity Industries, Inc.

   $ 55.9      $ 31.6   
  

 

 

   

 

 

 

See accompanying notes to consolidated financial statements.

 

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Trinity Industries, Inc. and Subsidiaries

Consolidated Balance Sheets

 

     March 31,
2012 		    December 31,
2011 		 
     (unaudited)        
     (in millions)  

Assets

    

Cash and cash equivalents

   $ 304.8      $ 351.1   

Receivables, net of allowance

     367.2        384.3   

Income tax receivable

     1.4        1.6   

Inventories:

    

Raw materials and supplies

     340.8        324.8   

Work in process

     146.2        125.6   

Finished goods

     109.0        99.5   
  

 

 

   

 

 

 
     596.0        549.9   

Restricted cash, including TRIP Holdings of $59.2 and $74.6

     224.0        240.3   

Property, plant, and equipment, at cost, including TRIP Holdings of $1,271.4 and $1,257.7

     5,479.3        5,407.9   

Less accumulated depreciation, including TRIP Holdings of $128.7 and $122.7

     (1,262.0 )      (1,228.4 ) 
  

 

 

   

 

 

 
     4,217.3        4,179.5   

Goodwill

     225.9        225.9   

Other assets

     193.6        188.4   
  

 

 

   

 

 

 
   $ 6,130.2      $ 6,121.0   
  

 

 

   

 

 

 

Liabilities and Stockholders’ Equity

    

Accounts payable

   $ 220.9      $ 207.4   

Accrued liabilities

     384.0        421.3   

Debt:

    

Recourse, net of unamortized discount of $96.8 and $99.8

     461.2        457.7   

Non-recourse:

    

Parent and wholly-owned subsidiaries

     1,575.5        1,616.0   

TRIP Holdings

     890.8        901.2   
  

 

 

   

 

 

 
     2,927.5        2,974.9   

Deferred income

     37.4        38.7   

Deferred income taxes

     465.5        434.7   

Other liabilities

     90.6        95.7   
  

 

 

   

 

 

 
     4,125.9        4,172.7   

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

     633.7        626.5   

Retained earnings

     1,360.4        1,314.7   

Accumulated other comprehensive loss

     (131.0 )      (134.0 ) 

Treasury stock

     (24.9 )      (25.1 ) 
  

 

 

   

 

 

 
     1,919.9        1,863.8   

Noncontrolling interest

     84.4        84.5   
  

 

 

   

 

 

 
     2,004.3        1,948.3   
  

 

 

   

 

 

 
   $ 6,130.2      $ 6,121.0   
  

 

 

   

 

 

 

See accompanying notes to consolidated financial statements.

 

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Trinity Industries, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(unaudited)

 

    

Three Months Ended

March 31,

 
     2012     2011  
     (in millions)  

Operating activities:

    

Net income

   $ 52.3      $ 25.6   

Adjustments to reconcile net income to net cash provided (required) by operating activities:

    

Depreciation and amortization

     49.1        47.6   

Stock-based compensation expense

     6.9        5.3   

Excess tax benefits from stock-based compensation

     (0.3 )      —     

Provision for deferred income taxes

     26.1        11.5   

Net gains on sales of railcars owned more than one year at the time of sale

     (3.7 )      (1.1 ) 

Gain on disposition of property, plant, equipment, and other assets

     (3.8 )      (0.8 ) 

Other

     2.3        2.3   

Changes in assets and liabilities:

    

(Increase) decrease in receivables

     17.1        (75.6 ) 

(Increase) decrease in income tax receivable

     0.2        (0.6 ) 

(Increase) decrease in inventories

     (46.1 )      (82.2 ) 

(Increase) decrease in other assets

     (3.3 )      (1.6 ) 

Increase (decrease) in accounts payable

     13.5        47.0   

Increase (decrease) in accrued liabilities

     (33.4 )      12.2   

Increase (decrease) in other liabilities

     (5.9 )      4.8   
  

 

 

   

 

 

 

Net cash provided (required) by operating activities

     71.0        (5.6 ) 
  

 

 

   

 

 

 

Investing activities:

    

(Increase) decrease in short-term marketable securities

     —          41.0   

Proceeds from sales of railcars owned more than one year at the time of sale

     26.5        10.0   

Proceeds from disposition of property, plant, equipment, and other assets

     12.9        2.9   

Capital expenditures – leasing, net of sold railcars owned one year or less

     (100.0 )      (81.5 ) 

Capital expenditures – manufacturing and other

     (16.4 )      (8.0 ) 
  

 

 

   

 

 

 

Net cash required by investing activities

     (77.0 )      (35.6 ) 
  

 

 

   

 

 

 

Financing activities:

    

Proceeds from issuance of common stock, net

     0.7        1.4   

Excess tax benefits from stock-based compensation

     0.3        —     

Payments to retire debt – other

     (52.6 )      (42.8 ) 

Proceeds from issuance of debt

     2.2        —     

Deferred loan issuance costs

     —          (5.9 ) 

(Increase) decrease in restricted cash

     16.3        1.1   

Dividends paid to common shareholders

     (7.2 )      (6.3 ) 
  

 

 

   

 

 

 

Net cash required by financing activities

     (40.3 )      (52.5 ) 
  

 

 

   

 

 

 

Net decrease in cash and cash equivalents

     (46.3 )      (93.7 ) 

Cash and cash equivalents at beginning of period

     351.1        354.0   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 304.8      $ 260.3   
  

 

 

   

 

 

 

See accompanying notes to consolidated financial statements.

 

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Trinity Industries, Inc. and Subsidiaries

Consolidated Statement of Stockholders’ Equity

(unaudited)

 

    Common Stock                       Treasury Stock                    
    Shares     Amount     Capital in
Excess of
Par Value 		    Retained
Earnings 		    Accumulated
Other
Comprehensive
Loss 		    Shares     Amount     Trinity
Stockholders’
Equity 		    Noncontrolling
Interest 		    Total
Stockholders’
Equity 		 
    (in millions)  

Balances at December 31, 2011

    81.7      $ 81.7      $ 626.5      $ 1,314.7      $ (134.0 )      (1.5 )    $ (25.1 )    $ 1,863.8      $ 84.5      $ 1,948.3   

Net income

    —          —          —          52.9        —          —          —          52.9        (0.6 )      52.3   

Other comprehensive income

    —          —          —          —          3.0        —          —          3.0        0.5        3.5   

Cash dividends on common stock

    —          —          —          (7.2 )      —          —          —          (7.2 )      —          (7.2 ) 

Restricted shares issued, net

    —          —          6.2        —          —          0.0        0.0        6.2        —          6.2   

Stock options exercised

    —          —          0.5        —          —          0.1        0.2        0.7        —          0.7   

Stock-based compensation expense

    —          —          0.5        —          —          —          —          0.5        —          0.5   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances at March 31, 2012

    81.7      $ 81.7      $ 633.7      $ 1,360.4      $ (131.0 )      (1.4 )    $ (24.9 )    $ 1,919.9      $ 84.4      $ 2,004.3   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to consolidated financial statements.

 

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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 its subsidiaries (“Trinity”, “Company”, “we”, or “our”) including its majority-owned subsidiary, TRIP Rail Holdings LLC (“TRIP Holdings”). In our opinion, all normal and recurring adjustments necessary for a fair presentation of the financial position of the Company as of March 31, 2012, and the results of operations and cash flows for the three month periods ended March 31, 2012 and 2011, 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, 2012 may not be indicative of expected results of operations for the year ending December 31, 2012. 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, 2011.

Stockholders’ Equity

In December 2010, the Company’s Board of Directors authorized a $200 million share repurchase program, effective January 1, 2011, which expires on December 31, 2012. No shares were repurchased under this program during the three months ended March 31, 2012.

Recent Accounting Pronouncements

In June 2011, the Financial Accounting Standards Board issued Accounting Standards Update No. 2011-05, “Comprehensive Income (ASC Topic 220): Presentation of Comprehensive Income,” (“ASU 2011-05”) which amended current comprehensive income guidance. ASU 2011-05 became effective for public companies during the interim and annual periods beginning after Dec. 15, 2011 with early adoption permitted. Accordingly, the Company adopted this new standard on January 1, 2012 by including the consolidated statement of comprehensive income with its consolidated financial statements and revising Note 13 Accumulated Other Comprehensive Loss. The adoption of ASU 2011-05 did not have an impact on the Company’s consolidated financial position, results of operations or cash flows as it only requires a change in reporting format with regard to components of other comprehensive income.

Reclassifications

Effective December 31, 2011, the Company adopted the emerging industry policy of recognizing revenue from the sales of railcars from the lease fleet on a gross basis in leasing revenues and cost of revenues if the railcar has been owned by the lease fleet for one year or less at the time of sale. Sales of railcars from the lease fleet which have been owned by the lease fleet for more than one year are recognized as a net gain or loss from the disposal of a long-term asset. Prior year reported balances have been reclassified to conform to this policy resulting in a decrease in revenue of $10.0 million for the three months ended March 31, 2011.

 

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Note 2. Fair Value Accounting

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

 

     Fair Value Measurement as of March 31, 2012  
     (in millions)  
     Level 1      Level 2      Level 3      Total  

Assets:

           

Cash equivalents

   $ 134.8       $ —         $ —         $ 134.8   

Restricted cash

     224.0         —           —           224.0   

Equity call agreement with TRIP Holdings equity investor 1

     —           —           0.7         0.7   

Fuel derivative instruments 1

     —           0.1         —           0.1   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

   $ 358.8       $ 0.1       $ 0.7       $ 359.6   
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

           

Interest rate hedges 2

           

Wholly-owned subsidiary

   $ —         $ 46.2       $ —         $ 46.2   

TRIP Holdings

     —           4.2         —           4.2   

Equity put agreement with TRIP Holdings equity investor 3

     —           —           2.6         2.6   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

   $ —         $ 50.4       $ 2.6       $ 53.0   
  

 

 

    

 

 

    

 

 

    

 

 

 
     Fair Value Measurement as of December 31, 2011  
     (in millions)  
     Level 1      Level 2      Level 3      Total  

Assets:

           

Cash equivalents

   $ 246.6       $ —         $ —         $ 246.6   

Restricted cash

     240.3         —           —           240.3   

Equity call agreement with TRIP Holdings equity investor 1

     —           —           0.7         0.7   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

   $ 486.9       $ —         $ 0.7       $ 487.6   
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

           

Interest rate hedges 2

           

Wholly-owned subsidiary

   $ —         $ 48.9       $ —         $ 48.9   

TRIP Holdings

     —           4.8         —           4.8   

Equity put agreement with TRIP Holdings equity investor 3

     —           —           3.1         3.1   

Fuel derivative instruments 2

     —           0.1         —           0.1   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

   $ —         $ 53.8       $ 3.1       $ 56.9   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

1  

Included in other assets on the consolidated balance sheet.

2  

Included in accrued liabilities on the consolidated balance sheet.

3

Included in other liabilities on the consolidated balance sheet.

Fair value is defined 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. An entity is required to establish a fair value hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. The three levels of inputs that may be used to measure fair values 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 cash are instruments of the United States Treasury or highly-rated money market mutual funds.

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. See Note 6 Derivative Instruments and Note 9 Debt.

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. The equity put and call agreements with the TRIP equity investor are valued based on cash flow projections and certain assumptions regarding the likelihood of exercising the option under the related agreement. See Note 5 Investment in TRIP Holdings.

 

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The carrying amounts and estimated fair values of our long-term debt were as follows:

 

     March 31, 2012      December 31, 2011  
     Carrying
Value 		    Estimated
Fair Value 		     Carrying
Value 		    Estimated
Fair Value 		 
     (in millions)  

Recourse:

         

Convertible subordinated notes

   $ 450.0      $ 490.4       $ 450.0      $ 439.4   

Less: unamortized discount

     (96.8 )         (99.8 )   
  

 

 

      

 

 

   
     353.2           350.2     

Capital lease obligations

     47.9        47.9         48.6        48.6   

Term loan

     54.0        54.6         54.7        55.7   

Other

     6.1        6.1         4.2        4.2   
  

 

 

   

 

 

    

 

 

   

 

 

 
     461.2        599.0         457.7        547.9   

Non-recourse:

         

2006 secured railcar equipment notes

     266.0        283.0         269.3        278.5   

Promissory notes

     459.3        443.1         465.5        448.6   

2009 secured railcar equipment notes

     216.2        240.3         218.4        228.6   

2010 secured railcar equipment notes

     351.3        354.2         354.3        333.1   

TILC warehouse facility

     282.7        282.7         308.5        308.5   

TRIP Holdings senior secured notes

     61.2        62.2         61.2        61.6   

TRIP Master Funding secured railcar equipment notes

     829.6        890.8         840.0        834.9   
  

 

 

   

 

 

    

 

 

   

 

 

 
     2,466.3        2,556.3         2,517.2        2,493.8   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total

   $ 2,927.5      $ 3,155.3       $ 2,974.9      $ 3,041.7   
  

 

 

   

 

 

    

 

 

   

 

 

 

The estimated fair value of our convertible subordinated notes was based on a quoted market price as of March 31, 2012 and December 31, 2011, respectively (level 1 input). The estimated fair values of our 2006, 2009, and 2010 secured railcar equipment notes, promissory notes, TRIP Holdings senior secured notes, TRIP Master Funding secured railcar equipment notes, and term loan are based on our estimate of their fair value as of March 31, 2012 and December 31, 2011, respectively. These values were determined by discounting their future cash flows at the current market interest rate (level 3 inputs). The carrying value of our Trinity Industries Leasing Company (“TILC”) warehouse facility approximates fair value because the interest rate adjusts to the market interest rate and the Company’s credit rating has not changed since the loan agreement was renewed in February 2011 (level 3 input). The fair values of all other financial instruments are estimated to approximate carrying value.

Note 3. Segment Information

The Company reports operating results in five principal business segments: (1) the Rail Group, which manufactures and sells railcars and related parts and components; (2) the Construction Products Group, which manufactures and sells highway products and concrete and aggregates; (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 structural wind towers, tank containers and tank heads for pressure and non-pressure vessels, frac tanks, and utility, traffic, and lighting structures; and (5) the Railcar Leasing and Management Services Group (“Leasing Group”), which provides fleet management, maintenance, and leasing services. The segment All Other includes our captive insurance and transportation companies; legal, environmental, and maintenance costs associated with non-operating facilities; other peripheral businesses; and the change in market valuation related to ineffective commodity hedges. Gains and losses from the sale of property, plant, and equipment which are related to manufacturing and dedicated to the specific manufacturing operations of a particular segment are included in operating profit of that respective segment. Gains and losses from the sale of property, plant, and equipment that can be utilized by multiple segments are included in operating profit of the All Other segment.

Sales and related net profits from the Rail Group to the Leasing 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 taking into consideration quantity, features, and production demand. Amortization of deferred profit on railcars sold to the Leasing Group is included in the operating profits of the Leasing Group. Sales of railcars from the lease fleet are included in the Leasing Group.

 

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Table of Contents

The financial information for these segments is shown in the tables below. We operate principally in North America.

Three Months Ended March 31, 2012

 

     Revenues     Operating  
           Profit  
     External      Intersegment     Total     (Loss)  
     (in millions)  

Rail Group

   $ 341.2       $ 125.9      $ 467.1      $ 40.1   

Construction Products Group

     149.6         5.4        155.0        10.8   

Inland Barge Group

     169.4         —          169.4        30.0   

Energy Equipment Group

     120.1         4.9        125.0        (3.8 ) 

Railcar Leasing and Management

Services Group

     142.1         0.2        142.3        66.5   

All Other

     2.9         12.8        15.7        1.2   

Corporate

     —           —          —          (11.6 ) 

Eliminations – Lease subsidiary

     —           (122.6 )      (122.6 )      (10.9 ) 

Eliminations – Other

     —           (26.6 )      (26.6 )      0.1   
  

 

 

    

 

 

   

 

 

   

 

 

 

Consolidated Total

   $ 925.3       $ —        $ 925.3      $ 122.4   
  

 

 

    

 

 

   

 

 

   

 

 

 

Three Months Ended March 31, 2011

 

     Revenues     Operating  
           Profit  
     External      Intersegment     Total     (Loss)  
     (in millions)  

Rail Group

   $ 131.0       $ 88.8      $ 219.8      $ 9.3   

Construction Products Group

     130.1         3.5        133.6        8.3   

Inland Barge Group

     137.9         —          137.9        21.7   

Energy Equipment Group

     113.2         5.5        118.7        10.5   

Railcar Leasing and Management

Services Group

     119.8         —          119.8        54.7   

All Other

     2.2         10.9        13.1        (0.3 ) 

Corporate

     —           —          —          (10.7 ) 

Eliminations – Lease subsidiary

     —           (85.4 )      (85.4 )      (8.1 ) 

Eliminations – Other

     —           (23.3 )      (23.3 )      0.1   
  

 

 

    

 

 

   

 

 

   

 

 

 

Consolidated Total

   $ 634.2       $ —        $ 634.2      $ 85.5   
  

 

 

    

 

 

   

 

 

   

 

 

 

Effective December 31, 2011, the Company adopted the emerging industry policy of recognizing revenue from the sales of railcars from the lease fleet on a gross basis in leasing revenues and cost of revenues if the railcar has been owned by the lease fleet for one year or less at the time of sale. Sales of railcars from the lease fleet which have been owned by the lease fleet for more than one year are recognized as a net gain or loss from the disposal of a long-term asset. Prior year reported balances have been reclassified to conform to this policy.

 

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Note 4. Railcar Leasing and Management Services Group

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

 

     March 31, 2012  
     Leasing Group              
     Wholly-
Owned
Subsidiaries 		    TRIP
Holdings 		    Manufacturing/
Corporate 		    Total  
     (in millions, unaudited)  

Cash and cash equivalents

   $ 3.7      $ —      $ 301.1      $ 304.8   

Property, plant, and equipment, net

   $ 3,108.6      $ 1,142.7      $ 500.4      $ 4,751.7   

Net deferred profit on railcars sold to the Leasing Group

     (348.0 )      (186.4 )      —        (534.4 ) 
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ 2,760.6      $ 956.3      $ 500.4      $ 4,217.3   

Restricted cash

   $ 164.8      $ 59.2      $ —      $ 224.0   

Debt:

        

Recourse

   $ 101.9      $ —        $ 456.1      $ 558.0   

Less: unamortized discount

     —          —          (96.8 )      (96.8 ) 
  

 

 

   

 

 

   

 

 

   

 

 

 
     101.9        —          359.3        461.2   

Non-recourse

     1,575.5        999.6        —          2,575.1   

Less: non-recourse debt owned by Trinity

     —          (108.8 )      —          (108.8 ) 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total debt

   $ 1,677.4      $ 890.8      $ 359.3      $ 2,927.5   

Net deferred tax liabilities

   $ 557.9      $ 4.6      $ (97.0 )    $ 465.5   

 

     December 31, 2011  
     Leasing Group              
     Wholly-
Owned
Subsidiaries 		    TRIP
Holdings 		    Manufacturing/
Corporate 		    Total  
     (in millions)  

Cash and cash equivalents

   $ 3.2      $ —        $ 347.9      $ 351.1   

Property, plant, and equipment, net

   $ 3,066.0      $ 1,135.0      $ 510.0      $ 4,711.0   

Net deferred profit on railcars sold to the Leasing Group

     (344.5 )      (187.0 )      —          (531.5 ) 
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ 2,721.5      $ 948.0      $ 510.0      $ 4,179.5   

Restricted cash

   $ 165.7      $ 74.6      $ —        $ 240.3   

Debt:

        

Recourse

   $ 103.3      $ —        $ 454.2      $ 557.5   

Less: unamortized discount

     —          —          (99.8 )      (99.8 ) 
  

 

 

   

 

 

   

 

 

   

 

 

 
     103.3        —          354.4        457.7   

Non-recourse

     1,616.0        1,010.0        —          2,626.0   

Less: non-recourse debt owned by Trinity

     —          (108.8 )      —          (108.8 ) 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total debt

   $ 1,719.3      $ 901.2      $ 354.4      $ 2,974.9   

Net deferred tax liabilities

   $ 582.4      $ 4.7      $ (152.4 )    $ 434.7   

See Note 5 Investment in TRIP Holdings and Note 9 Debt for a further discussion regarding the Company’s investment in TRIP Holdings and TRIP Holdings’ debt.

 

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Table of Contents

 

     Three Months Ended March 31,  
     2012     2011     Percent  
     ($ in millions)     Change  

Revenues:

      

Wholly owned subsidiaries:

      

Leasing and management

   $ 98.3      $ 90.3        8.9 % 

Railcar sales (1)

     14.9        —            * 
  

 

 

   

 

 

   
     113.2        90.3        25.4   

TRIP Holdings:

      

Leasing and management

     29.1        29.5        (1.4 ) 

Railcar sales (1)

     —          —          —     
  

 

 

   

 

 

   
     29.1        29.5        (1.4 ) 
  

 

 

   

 

 

   

Total revenues

   $ 142.3      $ 119.8        18.8   

Operating Profit:

      

Wholly owned subsidiaries:

      

Leasing and management

   $ 43.1      $ 36.5     

Railcar sales (1):

      

Railcars owned one year or less at the time of sale

     2.9        —       

Railcars owned more than one year at the time of sale

     4.1        1.0     
  

 

 

   

 

 

   
     50.1        37.5     

TRIP Holdings:

      

Leasing and management

     16.8        17.1     

Railcar sales (1):

      

Railcars owned one year or less at the time of sale

     —          —       

Railcars owned more than one year at the time of sale

     (0.4 )      0.1     
  

 

 

   

 

 

   
     16.4        17.2     
  

 

 

   

 

 

   

Total operating profit

   $ 66.5      $ 54.7     

Operating profit margin:

      

Leasing and management

     47.0 %      44.7 %   

Railcar sales (1)

       *        *   

Total operating profit margin

     46.7        45.7     

Interest and rent expense (2) :

      

Rent expense

   $ 12.7      $ 12.1     

Interest expense:

      

Wholly-owned subsidiaries

   $ 24.6      $ 25.2     

TRIP Holdings:

      

External

     15.2        11.5     

Intercompany

     3.3        —       
  

 

 

   

 

 

   
     18.5        11.5     
  

 

 

   

 

 

   

Total interest expense

   $ 43.1      $ 36.7     

 

*  

Not meaningful

(1)  

Effective December 31, 2011, the Company adopted the emerging industry policy of recognizing revenue from the sales of railcars from the lease fleet on a gross basis in leasing revenues and cost of revenues if the railcar has been owned by the lease fleet for one year or less at the time of sale. Sales of railcars from the lease fleet which have been owned by the lease fleet for more than one year are recognized as a net gain or loss from the disposal of a long-term asset. Prior year reported balances have been reclassified to conform to this policy.

(2)  

Rent expense is a component of operating profit. Interest expense is not a component of operating profit and includes the effect of hedges. Intercompany interest expense arises from Trinity’s ownership of a portion of TRIP Holdings’ Senior Secured Notes and is eliminated in consolidation. See Note 9 Debt.

 

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Table of Contents

Equipment consists primarily of railcars leased by third parties. The Leasing Group purchases equipment manufactured predominantly by the Rail Group 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 are as follows:

 

     Remaining
nine months
of 2012 		     2013      2014      2015      2016      Thereafter      Total  
     (in millions)  

Wholly-owned subsidiaries

   $ 200.4       $ 220.5       $ 168.5       $ 128.1       $ 92.7       $ 188.4       $ 998.6   

TRIP Holdings

     71.4         69.3         48.8         39.6         33.1         62.6         324.8   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 271.8       $ 289.8       $ 217.3       $ 167.7       $ 125.8       $ 251.0       $ 1,323.4   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Debt. The Leasing Group’s debt at March 31, 2012 consists of both recourse and non-recourse debt. As of March 31, 2012, Trinity’s wholly-owned subsidiaries included in the Leasing Group held equipment with a net book value of approximately $2,436.8 million that is pledged as collateral for Leasing Group debt held by those subsidiaries, including equipment with a net book value of $50.6 million securing capital lease obligations. The net book value of unpledged equipment at March 31, 2012 was $575.1 million. See Note 9 Debt regarding Leasing Group debt.

TRIP Holdings. Debt owed by TRIP Holdings and its subsidiaries is nonrecourse to Trinity and TILC and is secured solely by the consolidated assets of TRIP Holdings and the equity interests of TRIP Holdings. In July 2011, TRIP Holdings and its newly-formed subsidiary, TRIP Rail Master Funding LLC (“TRIP Master Funding”), issued $1,032.0 million in new debt and repaid all of the outstanding borrowings of the existing TRIP Warehouse Loan. TRIP Master Funding equipment with a net book value of $1,142.7 million, excluding deferred profit resulting from the sale of railcars to TRIP Master Funding, is pledged as collateral for the TRIP Master Funding debt. See Note 5 Investment in TRIP Holdings for a description of TRIP Holdings.

Off Balance Sheet Arrangements. 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”). Each of the Trusts financed the purchase of the railcars with a combination of debt and equity. In each transaction, the equity participant in the Trust is considered to be the primary beneficiary of the Trust and therefore, the debt related to the Trust is not included as part of the consolidated financial statements. 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.

These Leasing Group subsidiaries had total assets as of March 31, 2012 of $214.6 million, including cash of $85.5 million and railcars of $96.5 million. The right, title, and interest in each sublease, cash, and railcars are pledged to collateralize the lease obligations to the Trusts and are included in the consolidated financial statements of the Company. Trinity does not guarantee the performance of the subsidiaries’ lease obligations. Certain ratios and cash deposits must be maintained by the Leasing Group’s subsidiaries in order for excess cash flow, as defined in the agreements, from the lease to third parties to be available to Trinity. 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 2012 		     2013      2014      2015      2016      Thereafter      Total  
                   (in millions)                       

Future operating lease obligations of Trusts’ railcars

   $ 33.6       $ 45.6       $ 44.8       $ 43.1       $ 40.1       $ 341.3       $ 548.5   

Future contractual minimum rental revenues of Trusts’ railcars

   $ 44.8       $ 44.2       $ 29.7       $ 22.2       $ 14.5       $ 26.1       $ 181.5   

Operating Lease Obligations. Future amounts due as well as future contractual minimum rental revenues related to operating leases other than leases with the Trusts are as follows:

 

     Remaining
nine months
of 2012 		     2013      2014      2015      2016      Thereafter      Total  
                   (in millions)                       

Future operating lease obligations

   $ 6.5       $ 8.4       $ 8.3       $ 8.3       $ 8.1       $ 35.6       $ 75.2   

Future contractual minimum rental revenues

   $ 7.4       $ 9.1       $ 8.6       $ 5.1       $ 4.3       $ 7.6       $ 42.1   

Operating lease obligations totaling $29.2 million are guaranteed by Trinity Industries, Inc. and certain subsidiaries.

 

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See Note 5 of the December 31, 2011 Consolidated Financial Statements filed on Form 10-K for a detailed explanation of these financing transactions.

Note 5. Investment in TRIP Holdings

In 2007, the Company and other third-party equity investors formed 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”), purchased railcars from the Company’s Rail and Leasing Groups funded by capital contributions from TRIP Holdings’ equity investors and borrowings under the TRIP Warehouse Loan. As of March 31, 2012, TRIP Holdings’ subsidiaries had purchased $1,325.2 million of railcars from the Company. Railcars purchased from the Company by TRIP Holdings’ subsidiaries were required to be purchased at prices comparable with the prices of all similar, new railcars sold contemporaneously by the Company and at prices based on third-party appraised values for used railcars.

In July 2011, as a result of refinancing TRIP Holdings’ previous credit facility, TRIP Holdings and its newly-formed subsidiary, TRIP Master Funding, issued $1,032.0 million in new debt. The debt was used by TRIP Master Funding to purchase all of the railcar equipment owned by TRIP Leasing which, in turn, repaid all outstanding borrowings under the existing TRIP credit facility and settled all outstanding related interest rate hedges. See Note 9 Debt regarding TRIP Holdings and its related debt. Additionally, Trinity entered into agreements with an equity investor of TRIP Holdings potentially requiring Trinity, under certain limited circumstances, to acquire from the equity investor an additional 16.3% equity ownership in TRIP Holdings if the option is exercised to its fullest extent. Under the agreement, if exercised, Trinity would be required to pay the equity investor an amount equal to 90% of the equity investor’s net investment in TRIP Holdings. Similarly, at its option, Trinity, under certain limited circumstances, may acquire all of the equity investor’s equity ownership in TRIP Holdings at an amount equal to 100% of the equity investor’s net investment in TRIP Holdings. The agreements expire in July 2014. See Note 2 Fair Value Accounting.

At March 31, 2012, the Company owned 57% of TRIP Holdings with the remainder owned by three other third-party equity investors. The Company receives distributions from TRIP Holdings as an equity investor, when allowed, in proportion to its 57% equity interest, and has an interest in the net assets of TRIP Holdings upon a liquidation event in the same proportion. The terms of the Company’s equity investment are identical to the terms of each of the other equity investors. Other than as described above, Trinity had no remaining equity commitment to TRIP Holdings as of March 31, 2012 and had no obligation to guarantee performance under any TRIP-related debt agreements, guarantee any railcar residual values, shield any parties from losses, or guarantee minimum yields.

The Company’s carrying value of its investment in TRIP Holdings is as follows:

 

     March 31,
2012 		    December 31,
2011 		 
     (in millions)  

Capital contributions

   $ 47.3      $ 47.3   

Equity purchased from investors

     44.8        44.8   
  

 

 

   

 

 

 
     92.1        92.1   

Equity in earnings

     11.2        12.0   

Equity in unrealized losses on derivative financial instruments

     (0.6 )      (1.3 ) 

Distributions

     (7.0 )      (7.0 ) 

Deferred broker fees

     (0.5 )      (0.6 ) 
  

 

 

   

 

 

 
   $ 95.2      $ 95.2   
  

 

 

   

 

 

 

Administrative fees paid to TILC by TRIP Holdings and subsidiaries for the three month periods ended March 31, 2012 and 2011 were $1.3 million and $0.9 million, respectively.

See Note 6 of the December 31, 2011 Consolidated Financial Statements filed on Form 10-K for additional information.

Note 6. Derivative Instruments

We use derivative instruments to mitigate the impact of changes in interest rates and pricing for zinc, natural gas, and diesel fuel prices, 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 that are designated and qualify as cash flow hedges are accounted for in accordance with applicable accounting standards. See Note 2 Fair Value Accounting for discussion of how the Company valued its commodity hedges and interest rate swaps at March 31, 2012.

 

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Table of Contents

Interest rate hedges

 

                  Included in accompanying balance sheet
at March 31, 2012 		 
     Notional
Amount 		     Interest
Rate ( 1) 		    Liability      AOCL –
loss/
(income) 		    Noncontrolling
Interest 		 
     (in millions, except %)  

Interest rate locks:

            

2005-2006

   $ 200.0         4.87 %      —         $ (2.2 )      —     

2006-2007

   $ 370.0         5.34 %      —         $ 9.7        —     

TRIP Holdings

   $ 788.5         3.60 %      —         $ 22.5      $ 16.9   

Interest rate swaps:

            

TRIP Rail Master Funding secured railcar equipment notes

   $ 86.7         2.62 %    $ 4.2       $ 2.4      $ 1.8   

2008 debt issuance

   $ 467.2         4.13 %    $ 46.2       $ 44.4        —     

 

(1)  

Weighted average fixed interest rate

 

Effect on interest expense – increase/(decrease)

 
     Three Months Ended
March 31, 		    Expected effect
during next
twelve
months ( 1) 		 
     2012     2011    
     (in millions)  

Interest rate locks:

      

2005-2006

   $ (0.1 )    $ (0.1 )    $ (0.3 ) 

2006-2007

   $ 0.9      $ 0.9      $ 3.3   

TRIP Holdings

   $ 1.5      $ 7.3      $ 6.0   

Interest rate swaps:

      

TRIP Rail Master Funding secured railcar equipment notes

   $ 0.5      $ —        $ 1.9   

2008 debt issuance

   $ 4.2      $ 4.5      $ 17.4   

 

(1)  

Based on fair value as of March 31, 2012.

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. 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 accumulated other comprehensive loss (“AOCL”) through the date the related debt issuance closed in May 2006. The balance is being amortized over the term of the related debt. The effect on interest expense is due to amortization of the AOCL balance.

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, and were accounted for as cash flow hedges with changes in the fair value of the instruments of $24.5 million recorded as a loss in AOCL through the date the related debt issuance closed in May 2008. The balance is being amortized over the term of the related debt. The effect on interest expense is due to amortization of the AOCL balance.

In May 2008, we entered into an interest rate swap transaction that is being used to fix the Libor component of the debt issuance which closed in May 2008. The effect on interest expense results primarily from monthly interest settlements.

Between 2007 and 2009, TRIP Holdings, as required by its warehouse loan agreement, entered into interest rate swap transactions, all of which qualified as cash flow hedges, to reduce the effect of changes in variable interest rates. In July 2011, these interest rate hedges were terminated in connection with the refinancing of the TRIP Warehouse Loan. Balances included in AOCL at the date the hedges were terminated are being amortized over the expected life of the new debt with $6.0 million of additional interest expense expected to be recognized during the next twelve months following March 31, 2012. Also in July 2011, TRIP Holdings’ wholly-owned subsidiary, TRIP Rail Master Funding, entered into an interest rate swap transaction with a notional amount of $94.1 million to reduce the effect of changes in variable interest rates associated with the Class A-1b secured railcar equipment notes.

 

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Table of Contents

See Note 9 Debt regarding the related debt instruments.

Other Derivatives

 

     Effect on operating
income –
increase/(decrease) 		 
     Three Months Ended
March 31, 		 
     2012     2011  
     (in millions)  

Fuel hedges (1)

    

Effect of mark to market valuation

   $ 0.1      $ 0.5   

Settlements

     0.1        0.0   
  

 

 

   

 

 

 
   $ 0.2      $ 0.5   

Foreign exchange hedges (2)

   $ (0.4 )    $ (0.6 ) 

 

(1)  

Included in cost of revenues in the accompanying consolidated statement of operations.

(2)  

Included in other, net in the accompanying consolidated statement of operations.

Natural gas and diesel fuel

We maintain 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 as of March 31, 2012 for these instruments was not significant.

Foreign exchange hedge

We enter into foreign exchange hedges to mitigate the impact on operating profit of unfavorable fluctuations in foreign currency exchange rates. These instruments are short term with quarterly maturities and no remaining balance in AOCL as of March 31, 2012.

Note 7. Property, Plant, and Equipment

The following table summarizes the components of property, plant, and equipment as of March 31, 2012 and December 31, 2011.

 

     March 31,     December 31,  
     2012     2011  
           (as reported)  
     (in millions)  

Manufacturing/Corporate:

    

Land

   $ 41.6      $ 41.6   

Buildings and improvements

     430.2        429.7   

Machinery and other

     746.4        758.7   

Construction in progress

     17.3        12.8   
  

 

 

   

 

 

 
     1,235.5        1,242.8   

Less accumulated depreciation

     (735.1 )      (732.8 ) 
  

 

 

   

 

 

 
     500.4        510.0   
  

 

 

   

 

 

 

Leasing:

    

Wholly-owned subsidiaries:

    

Machinery and other

     9.6        9.6   

Equipment on lease

     3,497.2        3,429.3   
  

 

 

   

 

 

 
     3,506.8        3,438.9   

Less accumulated depreciation

     (398.2 )      (372.9 ) 
  

 

 

   

 

 

 
     3,108.6        3,066.0   
  

 

 

   

 

 

 

TRIP Holdings:

    

Equipment on lease

     1,271.4        1,257.7   

Less accumulated depreciation

     (128.7 )      (122.7 ) 
  

 

 

   

 

 

 
     1,142.7        1,135.0   
  

 

 

   

 

 

 

Net deferred profit on railcars sold to the Leasing Group

    

Sold to wholly-owned subsidiaries

     (348.0 )      (344.5 ) 

Sold to TRIP Holdings

     (186.4 )      (187.0 ) 
  

 

 

   

 

 

 
   $ 4,217.3      $ 4,179.5   
  

 

 

   

 

 

 

 

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Note 8. Warranties

The changes in the accruals for warranties for the three month periods ended March 31, 2012 and 2011 are as follows:

 

     Three Months Ended
March  31, 		 
     2012     2011  
     (in millions)  

Beginning balance

   $ 13.5      $ 13.2   

Warranty costs incurred

     (2.4 )      (1.3 ) 

Warranty originations and revisions

     3.8        1.6   

Warranty expirations

     (0.4 )      (0.8 ) 
  

 

 

   

 

 

 

Ending balance

   $ 14.5      $ 12.7   
  

 

 

   

 

 

 

Note 9. Debt

The following table summarizes the components of debt as of March 31, 2012 and December 31, 2011:

 

     March 31,     December 31,  
     2012     2011  
           (as reported)  
     (in millions)  

Manufacturing/Corporate – Recourse:

    

Revolving credit facility

   $ —        $ —     

Convertible subordinated notes

     450.0        450.0   

Less: unamortized discount

     (96.8 )       (99.8 ) 
  

 

 

   

 

 

 
     353.2        350.2   

Other

     6.1        4.2   
  

 

 

   

 

 

 
     359.3        354.4   
  

 

 

   

 

 

 

Leasing – Recourse:

    

Capital lease obligations

     47.9        48.6   

Term loan

     54.0        54.7   
  

 

 

   

 

 

 
     101.9        103.3   
  

 

 

   

 

 

 

Total recourse debt

     461.2        457.7   
  

 

 

   

 

 

 

Leasing – Non-recourse:

    

2006 secured railcar equipment notes

     266.0        269.3   

Promissory notes

     459.3        465.5   

2009 secured railcar equipment notes

     216.2        218.4   

2010 secured railcar equipment notes

     351.3        354.3   

TILC warehouse facility

     282.7        308.5   

TRIP Holdings senior secured notes:

    

Total outstanding

     170.0        170.0   

Less: owned by Trinity

     (108.8 )       (108.8 ) 
  

 

 

   

 

 

 
     61.2        61.2   

TRIP Master Funding secured railcar equipment notes

     829.6        840.0   
  

 

 

   

 

 

 

Total non-recourse debt

     2,466.3        2,517.2   
  

 

 

   

 

 

 

Total debt

   $ 2,927.5      $ 2,974.9   
  

 

 

   

 

 

 

We have a $425.0 million unsecured revolving credit facility that matures on October 20, 2016. As of March 31, 2012, we had letters of credit issued under our revolving credit facility in an aggregate principal amount of $72.6 million, leaving $352.4 million available for borrowing. Other than these letters of credit, there were no borrowings under our revolving credit facility as of March 31, 2012, or for the three month period then ended. Of the outstanding letters of credit as of March 31, 2012, a total of $0.4 million is expected to expire in 2012 and the remainder in 2013. The majority of our letters of credit obligations supports the Company’s various insurance programs and generally renews each year. Trinity’s revolving credit facility requires the maintenance of ratios related to minimum interest coverage for the leasing and manufacturing operations and maximum leverage. Borrowings under the amended credit facility bear interest at Libor plus 150.0 basis points or prime plus 50.0 basis points. As of March 31, 2012, we were in compliance with all such financial covenants.

The Company’s 3 7/8% convertible subordinated notes are recorded net of unamortized discount to reflect their underlying economics by capturing the value of the conversion option as borrowing costs. As of March 31, 2012 and December 31, 2011, capital in excess of par value included $92.8 million related to the estimated value of the Convertible

 

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Table of Contents

Subordinated Notes’ conversion options, in accordance with ASC 470-20. 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 Convertible Subordinated Notes for the three months ended March 31, 2012 and 2011 is as follows:

 

     Three Months Ended
March 31, 		 
     2012      2011  
     (in millions)  

Coupon rate interest

   $ 4.4       $ 4.4   

Amortized debt discount

     3.0         2.7   
  

 

 

    

 

 

 
   $ 7.4       $ 7.1   
  

 

 

    

 

 

 

At March 31, 2012, the Convertible Subordinated Notes were convertible at a price of $51.36 per share resulting in 8,761,682 issuable shares. As of March 31, 2012, if the Convertible Subordinated Notes had been converted, no shares would have been issued since the trading price of the Company’s common stock was below the conversion price of the Convertible Subordinated Notes. The Company has not entered into any derivatives transactions associated with these notes.

The $475.0 million TILC warehouse loan facility, established to finance railcars owned by TILC, had $282.7 million outstanding and $192.3 million available as of March 31, 2012. The warehouse loan is a non-recourse obligation secured by a portfolio of railcars and operating leases, certain cash reserves, and other assets acquired and owned by the warehouse loan facility. The principal and interest of this indebtedness are paid from the cash flows of the underlying leases. Advances under the facility bear interest at a defined index rate plus a margin, for an all-in interest rate of 2.25% at March 31, 2012. In February 2011, the warehouse loan facility was renewed for an additional two years and now matures in February 2013. Amounts outstanding at maturity, absent renewal, will be payable in three installments in August 2013, February 2014, and August 2014.

Terms and conditions of other debt, including recourse and non-recourse provisions, are described in Note 11 of the December 31, 2011 Consolidated Financial Statements filed on Form 10-K.

The remaining principal payments under existing debt agreements as of March 31, 2012 are as follows:

 

     Remaining
nine
months of
2012 		     2013      2014     2015      2016      Thereafter  
     (in millions)  

Recourse:

  

Manufacturing/Corporate

   $ 1.3       $ 1.7       $ 2.4      $ 0.2       $ 0.2       $ 450.3   

Leasing – capital lease obligations (Note 4)

     2.1         2.9         3.1        3.3         3.5         33.0   

Leasing – term loan (Note 4)

     2.1         3.0         3.3        3.5         42.1         —     

Non-recourse – leasing (Note 4):

                

2006 secured railcar equipment notes

     10.2         15.1         16.9        18.6         21.9         183.3   

Promissory notes

     19.5         29.0         26.2        23.2         361.4         —     

2009 secured railcar equipment notes

     7.0         10.2         9.9        9.6         6.5         173.0   

2010 secured railcar equipment notes

     9.7         14.6         14.0        15.3         15.0         282.7   

TILC warehouse facility

     6.4         7.8         4.3        —           —           —     

TRIP Holdings senior secured notes:

                

Total outstanding

     —           —           170.0        —           —           —     

Less: owned by Trinity

     —           —           (108.8 )      —           —           —     
                
           61.2           

TRIP Master Funding secured railcar equipment notes

     30.6         41.1         40.2        35.9         29.4         652.4   

Facility termination payments:

                

TILC warehouse facility

     —           87.6         176.6        —           —           —     
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total principal payments

   $ 88.9       $ 213.0       $ 358.1      $ 109.6       $ 480.0       $ 1,774.7   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

 

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Table of Contents

Note 10. Other, Net

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

 

     Three Months Ended
March  31, 		 
     2012     2011  
     (in millions)  

Foreign currency exchange transactions

   $ (2.0 )    $ 0.3   

Gain on equity investments

     (0.1 )      (0.5 ) 

Other

     (0.9 )      (0.3 ) 
  

 

 

   

 

 

 

Other, net

   $ (3.0 )    $ (0.5 ) 
  

 

 

   

 

 

 

Note 11. Income Taxes

The provision for income taxes results in effective tax rates different from the statutory rates. The following is a reconciliation between the statutory United States Federal income tax rate and the Company’s effective income tax rate:

 

     Three Months Ended  
     March 31,  
     2012     2011  

Statutory rate

     35.0 %      35.0 % 

State taxes

     1.9        2.4   

Changes in tax reserves, net of settlements

     (4.6 )      1.2   

Other, net

     0.6        0.2   
  

 

 

   

 

 

 

Effective rate

     32.9 %      38.8 % 
  

 

 

   

 

 

 

During the first quarter of 2012, we settled our audit with the Internal Revenue Service (“IRS”) for the 2004-2005 tax years. As a result of closing this audit, we recognized a $3.5 million tax benefit primarily related to favorable claims filed and approved by the IRS in the final audit settlement. The statute of limitations for this audit cycle will remain open until September 30, 2012.

In addition, we are currently under examination by the IRS for the years ended December 31, 2006 through 2008. Certain issues have been tentatively agreed upon by us and the IRS and certain issues will be challenged by us. We expect to settle all 2006-2008 issues within the next 12 months except for any potential transfer pricing adjustments. Due to the length of the appeals process, we cannot determine when the 2006-2008 cycle will close. Thus, we are unable to determine how long the statute of limitations for years after December 31, 2005 will remain open.

We have various subsidiaries in Mexico which file separate tax returns and thus are subject to examination by taxing authorities at different times. The 2003 tax year of one of our Mexican subsidiaries is still under review and its statute of limitations remains open through June 2014. Another Mexican subsidiary’s 2005 statute remains open through July 2013. The remaining entities are open for their 2006 tax years and forward.

Our various European subsidiaries, including subsidiaries that were sold in 2006, are impacted by various statutes of limitations. The statute of limitations for our discontinued operations in Romania, the Czech Republic, Slovakia, and Switzerland through the year of disposition are now closed. Our two remaining Swiss subsidiaries, one of which is a holding company and the other which is dormant, have been audited by the taxing authorities through 2008 and 2009. The statute of limitations in Switzerland is generally five years from the end of the tax year, but can be extended up to 15 years in certain cases if the audit has commenced during the original five year period.

We also currently have sales offices in Europe and Canada that are subject to various statutes.

Generally, states’ statutes of limitations in the United States are open from 2003 forward due to the use of tax loss carryforwards in certain jurisdictions.

 

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The change in unrecognized tax benefits for the three months ended March 31, 2012 and 2011 was as follows:

 

     Three Months Ended  
     March 31,  
     2012     2011  
     (in millions)  

Beginning balance

   $ 52.5      $ 36.8   

Additions for tax positions related to the current year

     1.0        0.9   

Additions for tax positions of prior years

     —          2.6   

Reductions for tax positions of prior years

     (1.1 )      —     

Settlements

     (3.0 )      —     

Expiration of statute of limitations

     (0.1 )      (0.1 ) 
  

 

 

   

 

 

 

Ending balance

   $ 49.3      $ 40.2   
  

 

 

   

 

 

 

Additions for tax positions related to the current year in the amounts of $1.0 million and $0.9 million recorded in the three months ended March 31, 2012 and 2011, respectively, were amounts provided for tax positions that will be taken for Federal and state income tax purposes when we file the 2012 tax returns.

Additions for tax positions of prior years for the three months ended March 31, 2011 of $2.6 million are primarily due to Federal tax positions taken on prior year returns that have been proposed by the IRS but not previously reserved. These items are primarily timing differences and thus we would be allowed a future tax deduction. During 2011, we recorded a corresponding deferred tax asset for the future reduction of taxes related to these adjustments.

The reduction in tax positions of prior years of $1.1 million for the three months ended March 31, 2012, was primarily related to new guidance issued by the IRS regarding the capitalization of fixed assets that was issued in March 2012 as well as state taxes.

Settlements during the three months ended March 31, 2012, primarily related to the settlement of our 2004-2005 IRS audit.

The total amount of unrecognized tax benefits including interest and penalties at March 31, 2012 and 2011, that would affect the Company’s effective tax rate if recognized was $17.5 million and $14.8 million, respectively. There is a reasonable possibility that unrecognized Federal and state tax benefits will decrease by March 31, 2013 due to a lapse in the statute of limitations for assessing tax. Amounts subject to a lapse in statute by March 31, 2013 total $5.6 million. Further, there is a reasonable possibility that the unrecognized Federal tax benefits will decrease by March 31, 2013 due to settlements with taxing authorities. Amounts expected to settle by March 31, 2013 total $26.0 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, 2012 and December 31, 2011 was $12.4 million and $13.3 million, respectively. Income tax expense for the three months ended March 31, 2012, included a decrease in income tax expense of $0.9 million in interest expense and penalties related to uncertain tax positions. Income tax expense for the three months ended March 31, 2011, included a decrease in income tax expense of $0.9 million in interest expense and penalties related to uncertain tax positions.

Note 12. Employee Retirement Plans

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

 

     Three Months Ended
March  31, 		 
     2012     2011  
     (in millions)  

Service cost

   $ 0.2      $ 0.3   

Interest

     4.8        4.9   

Expected return on plan assets

     (5.6 )      (5.7 ) 

Actuarial loss

     0.9        0.5   
  

 

 

   

 

 

 

Defined benefit expense

     0.3        0.0   

Profit sharing

     2.6        2.3   
  

 

 

   

 

 

 

Net expense

   $ 2.9      $ 2.3   
  

 

 

   

 

 

 

Trinity contributed $6.1 million and $5.6 million to the Company’s defined benefit pension plans for the three month periods ended March 31, 2012 and 2011, respectively. Total contributions to the Company’s defined benefit pension plans in 2012 are expected to be approximately $17.3 million.

 

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Table of Contents

Note 13. Accumulated Other Comprehensive Loss

Changes in accumulated other comprehensive loss for the three months ended March 31, 2012 are as follows:

 

     Currency
translation
adjustments 		    Unrealized
loss on
derivative
financial
instruments 		    Funded
status of
pension
liability 		    Accumulated
Other
Comprehensive
Loss 		 
     (in millions)  

Balance at December 31, 2011

   $ (17.1 )    $ (46.2 )    $ (70.7 )    $ (134.0 ) 

Other comprehensive income

     —        2.4        0.6        3.0   
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance at March 31, 2012, net of tax benefit of $0.2, $33.1, $41.4 and $74.7

   $ (17.1 )    $ (43.8 )    $ (70.1 )    $ (131.0 ) 
  

 

 

   

 

 

   

 

 

   

 

 

 

See Note 6 Derivative Instruments for information on the reclassification of amounts in accumulated other comprehensive loss into earnings.

Note 14. Stock-Based Compensation

Stock-based compensation totaled approximately $6.9 million and $5.3 million for the three months ended March 31, 2012 and 2011, respectively.

Note 15. Earnings Per Common Share

Basic net income attributable to Trinity Industries, Inc. per common share is computed by dividing net income attributable to Trinity remaining after allocation to unvested restricted shares by the weighted average number of basic common shares outstanding for the period. Except when the effect would be antidilutive, the calculation of diluted net income attributable to Trinity 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 antidilutive stock options were 3.1 million shares and 2.9 million shares for the three month periods ended March 31, 2012 and 2011, respectively.

The computation of basic and diluted net income attributable to Trinity Industries, Inc. is as follows:

 

     Three Months Ended
March 31, 2012 		     Three Months Ended
March 31, 2011 		 
     (in millions, except per share amounts)  
     Income
(Loss) 		    Average
Shares 		     EPS      Income
(Loss) 		    Average
Shares 		     EPS  

Net income attributable to Trinity Industries, Inc.

   $ 52.9            $ 24.2        

Unvested restricted share participation

     (1.7 )            (0.9 )      
  

 

 

         

 

 

      

Net income attributable to Trinity Industries, Inc. – basic

     51.2        77.8       $ 0.66         23.3        77.1       $ 0.30   
       

 

 

         

 

 

 

Effect of dilutive securities:

Stock options

     —          0.3            —          0.3      
  

 

 

   

 

 

       

 

 

   

 

 

    

Net income attributable to Trinity Industries, Inc. – diluted

   $ 51.2        78.1       $ 0.66       $ 23.3        77.4       $ 0.30   
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Note 16. Contingencies

Railworthiness Directive

As previously reported, in 2011 the Company received the approval of the Federal Railroad Administration (“FRA”) to implement a voluntary recertification of 948 tank cars owned or managed by the Company’s wholly-owned, railcar leasing subsidiary and used in transporting poison inhalation hazard (“PIH”) materials. The recertification process is underway and being performed in conjunction with the normal 3 to 5 year, federally mandated inspection cycle for tank cars in PIH service. Maintenance costs associated with this recertification process are expensed as incurred. The additional costs estimated to be incurred for compliance with the directive are not expected to be significant.

 

21

Table of Contents

Other Matters

As previously reported, Trinity Structural Towers, Inc., a wholly-owned subsidiary of the Company, is in litigation with a structural wind tower customer for the customer’s breach of a long-term supply contract for the manufacture of towers. While the customer partially performed the contract, it ultimately defaulted its purchase obligation and did not remedy such default. Discovery in this litigation is underway.

The Company is involved in claims and lawsuits incidental to our business arising from various matters including product warranty, personal injury, environmental issues, workplace laws, and various governmental regulations. The Company evaluates its exposure to such claims periodically and establishes accruals for these contingencies when a range of loss can be reasonably estimated. The range of loss for such matters, taking into consideration our rights in indemnity and recourse to third parties is $4.3 million to $20.5 million. Total accruals of $9.3 million, including environmental and workplace matters described below, are included in accrued liabilities in the accompanying consolidated balance sheet. The Company believes any additional liability would not be material to its financial position or results of operations.

Trinity is subject to Federal, state, local, and foreign laws and regulations relating to the environment and the workplace. The Company has reserved $6.8 million to cover our probable and estimable liabilities with respect to the investigations, assessments, and remedial responses to such matters, taking into account currently available information and our contractual rights to indemnification and recourse to third parties. However, estimates of liability arising from future proceedings, assessments, or remediation are inherently imprecise. Accordingly, there can be no assurance that we will not become involved in future litigation or other proceedings involving the environment and the workplace 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. We believe that we are currently in substantial compliance with environmental and workplace laws and regulations.

 

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Table of Contents

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 month period ended March 31, 2012 were $925.3 million representing an increase of $291.1 million or 46% over the same period in 2011. Operating profit for the three month period ended March 31, 2012 totaled $122.4 million compared with $85.5 million for the same period in 2011. While all of our business segments reported an increase in revenues for the three month period ended March 31, 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 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, an increase in rental rates, and higher utilization. Operating profit grew for the three month period ended March 31, 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 business segments reported an increase in operating margins due to higher volumes and improved efficiencies with the exception of our Energy Equipment Group whose decline in operating margin resulted from competitive pricing pressures and additional costs related to product mix changes. Net income attributable to Trinity Industries, Inc. common stockholders for the three month period ended March 31, 2012 increased $28.7 million or 119% over the same period 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 quarter of 2012 continued to be favorable. 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 residential and 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 March 31, 2012 compared with prior period was approximately as follows:

 

     March 31, 2012      March 31, 2011  
     (in millions)  

Rail Group

     

External Customers

   $ 2,008.2       $ 1,534.2   

Leasing Group

     553.7         272.4   
  

 

 

    

 

 

 
   $ 2,561.9       $ 1,806.6   

Inland Barge

   $ 512.1       $ 460.5   

Structural wind towers

   $ 884.6       $ 974.0   

 

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Table of Contents

For the three months ended March 31, 2012, our rail manufacturing businesses received orders for approximately 3,255 railcars. The total amount of orders in our backlog from the Leasing Group was 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, the deliveries for 2012 are included in the backlog at this time; deliveries beyond 2012 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 tower 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 March 31, 2012     Three Months Ended March 31, 2011        
     Revenues     Revenues     Percent  
     External      Intersegment     Total     External      Intersegment     Total     Change  
                  ($ in millions)                     

Rail Group

   $ 341.2       $ 125.9      $ 467.1      $ 131.0       $ 88.8      $ 219.8        112.5 % 

Construction Products Group

     149.6         5.4        155.0        130.1         3.5        133.6        16.0   

Inland Barge Group

     169.4         —          169.4        137.9         —          137.9        22.8   

Energy Equipment Group

     120.1         4.9        125.0        113.2         5.5        118.7        5.3   

Railcar Leasing and Management Services Group

     142.1         0.2        142.3        119.8         —          119.8        18.8   

All Other

     2.9         12.8        15.7        2.2         10.9        13.1        19.8   

Eliminations – Lease subsidiary

     —           (122.6 )      (122.6 )      —           (85.4 )      (85.4 )   

Eliminations – Other

     —           (26.6 )      (26.6 )      —           (23.3 )      (23.3 )   
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Consolidated Total

   $ 925.3       $ —        $ 925.3      $ 634.2       $ —        $ 634.2        45.9   
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

Operating Profit (Loss)

 

     Three Months Ended
March 31, 		 
     2012     2011  
     (in millions)  

Rail Group

   $ 40.1      $ 9.3   

Construction Products Group

     10.8        8.3   

Inland Barge Group

     30.0        21.7   

Energy Equipment Group

     (3.8 )      10.5   

Railcar Leasing and Management Services Group

     66.5        54.7   

All Other

     1.2        (0.3 ) 

Corporate

     (11.6 )      (10.7 ) 

Eliminations – Lease subsidiary

     (10.9 )      (8.1 ) 

Eliminations – Other

     0.1        0.1   
  

 

 

   

 

 

 

Consolidated Total

   $ 122.4      $ 85.5   
  

 

 

   

 

 

 

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

 

     Three Months Ended
March 31, 		 
     2012     2011  
     (in millions)  

Interest income

   $ (0.4 )    $ (0.3 ) 

Interest expense

     47.9        44.5   

Other, net

     (3.0 )      (0.5 ) 
  

 

 

   

 

 

 

Consolidated Total

   $ 44.5      $ 43.7   
  

 

 

   

 

 

 

Interest expense for the three month period ended March 31, 2012, increased $3.4 million over the prior year period due to TRIP Holdings debt refinancing completed in 2011. Interest income was substantially unchanged from the same three month period last year. The increase in Other, net expense for the three month period ended March 31, 2012 was primarily due to higher foreign currency translation gains over the prior period.

 

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Income Taxes. The provision for income taxes results in effective tax rates different from the statutory rates. The following is a reconciliation between the statutory United States Federal income tax rate and the Company’s effective income tax rate:

 

     Three Months Ended  
     March 31,  
     2012     2011  

Statutory rate

     35.0 %      35.0 % 

State taxes

     1.9        2.4   

Changes in tax reserves, net of settlements

     (4.6 )      1.2   

Other, net

     0.6        0.2   
  

 

 

   

 

 

 

Effective rate

     32.9 %      38.8 % 
  

 

 

   

 

 

 

During the first quarter of 2012, we settled our audit with the Internal Revenue Service (“IRS”) for the 2004-2005 tax years. As a result of closing this audit, we recognized a $3.5 million tax benefit primarily related to favorable claims filed and approved by the IRS in the final audit settlement. The statute of limitations for this audit cycle will remain open until September 30, 2012.

Rail Group

 

     Three Months Ended March 31,  
     2012     2011     Percent  
     ($ in millions)     Change  

Revenues:

      

Rail

   $ 426.4      $ 177.8        139.8 % 

Components

     40.7        42.0        (3.1 ) 
  

 

 

   

 

 

   

Total revenues

   $ 467.1      $ 219.8        112.5   

Operating profit

   $ 40.1      $ 9.3     

Operating profit margin

     8.6 %      4.2 %   

Railcar shipments increased by 2,770 railcars to approximately 5,010 railcars during the three month period ended March 31, 2012 when compared to approximately 2,240 railcar shipments during the same period in 2011.

As of March 31, 2012, our Rail Group backlog was as follows:

 

     As of March 31,  
     2012      2011  
     (in millions, except railcars)  

External Customers

   $ 2,008.2       $ 1,534.2   

Leasing Group

     553.7         272.4   
  

 

 

    

 

 

 

Total

   $ 2,561.9       $ 1,806.6   
  

 

 

    

 

 

 

Number of railcars

     27,245         22,490   

For the three months ended March 31, 2012, our rail manufacturing businesses received orders for approximately 3,255 railcars. The total amount of the backlog dedicated to the Leasing Group was supported by lease commitments with external customers. The final amount dedicated to the Leasing Group may vary by the time of delivery.

Operating profit for the Rail Group increased $30.8 million for the three months ended March 31, 2012 compared to the same period last year. This increase was primarily due to a significantly higher volume of railcars with higher sales prices delivered during the period.

In the three months ended March 31, 2012, railcar shipments included sales to the Leasing Group of $122.6 million compared to $85.4 million in the comparable period in 2011 with a deferred profit of $10.9 million compared to $8.1 million for the same period in 2011. Sales to the Leasing Group and related profits are included in the operating results of the Rail Group but are eliminated in consolidation.

 

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Construction Products Group

 

     Three Months Ended March 31,  
     2012     2011     Percent  
     ($ in millions)     Change  

Revenues:

      

Concrete and Aggregates

   $ 41.5      $ 49.6        (16.3 )% 

Highway Products

     102.5        79.7        28.6   

Other

     11.0        4.3             * 
  

 

 

   

 

 

   

Total revenues

   $ 155.0      $ 133.6        16.0   

Operating profit

   $ 10.8      $ 8.3     

Operating profit margin

     7.0 %      6.2 %   

 

* not meaningful

Revenues increased for the three month period ended March 31, 2012 compared to the same period in 2011 primarily due to higher volumes in our Highway Products business and other product lines partially offset by lower revenues in our Concrete and Aggregates business resulting from the divestiture of our Central Texas Region ready mix concrete facilities in April 2011. Operating profit and operating margin increased for the three months ended March 31, 2012 compared to the same period in 2011 primarily as a result of acquisitions made in our Highway Products business in prior years and the Central Texas Region divestiture along with improved efficiencies in our Concrete and Aggregates business and higher volumes in other product lines.

Inland Barge Group

 

     Three Months Ended March 31,  
     2012     2011     Percent  
     ($ in millions)     Change  

Revenues

   $ 169.4      $ 137.9        22.8 % 

Operating profit

   $ 30.0      $ 21.7     

Operating profit margin

     17.7 %      15.7 %   

Revenues and operating profit increased for the three month period ended March 31, 2012 compared to the same period in the prior year due to higher volumes of hopper and tank barges and a change in the mix of tank barge types. Operating profit for the three months ended March 31, 2012 includes a $3.4 million net gain from sales of barges previously included in property, plant, and equipment which were under lease to third-party customers. The two barges remaining in the Company’s barge lease fleet are both currently under lease.

As of March 31, 2012, the backlog for the Inland Barge Group was approximately $512.1 million compared to approximately $460.5 million as of March 31, 2011. For multi-year barge agreements, the deliveries for 2012 are included in the backlog at this time; deliveries beyond 2012 are not included in the backlog if specific production quantities for future years have not been determined.

Energy Equipment Group

 

     Three Months Ended March 31,  
     2012     2011     Percent  
     ($ in millions)     Change  

Revenues:

      

Structural wind towers

   $ 52.8      $ 66.5        (20.6 )% 

Other

     72.2        52.2        38.3   
  

 

 

   

 

 

   

Total revenues

   $ 125.0      $ 118.7        5.3   

Operating profit (loss)

   $ (3.8 )    $ 10.5     

Operating profit margin (loss)

     (3.0 )%      8.8 %   

Revenues for the three month period ended March 31, 2012 increased compared to the same period in 2011 as a result of higher shipments of tank containers, tank heads, and utility structures offsetting lower structural wind tower shipments. Operating profit for the three month period ended March 31, 2012 decreased when compared to the same period in 2011 due to transition issues arising from changes in product mix in the structural wind towers business as well as competitive pricing on structural wind towers, partially offset by increased operating profit in other product lines. As of March 31, 2012, the backlog for structural wind towers was approximately $884.6 million compared to approximately $974.0 million as of March 31, 2011. Approximately $412.5 million of this backlog is subject to litigation with a structural wind tower customer for the customer’s breach of a long-term supply contract for the manufacture of towers.

 

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Railcar Leasing and Management Services Group

 

     Three Months Ended March 31,  
     2012    2011    Percent  
     ($ in millions)    Change  

Revenues:

       

Wholly owned subsidiaries:

       

Leasing and management

   $ 98.3      $90.3      8.9 % 

Railcar sales (1)

     14.9      —        *   
  

 

 

   

 

     
     113.2      90.3      25.4   

TRIP Holdings:

       

Leasing and management

     29.1      29.5      (1.4 ) 

Railcar sales (1)

     —        —        —     
  

 

 

   

 

     
     29.1      29.5      (1.4 ) 
  

 

 

   

 

     

Total revenues

   $ 142.3      $119.8      18.8   

Operating Profit:

       

Wholly owned subsidiaries:

       

Leasing and management

   $ 43.1      $36.5   

Railcar sales (1):

       

Railcars owned one year or less at the time of sale

     2.9      —     

Railcars owned more than one year at the time of sale

     4.1      1.0   
  

 

 

   

 

     
     50.1      37.5   

TRIP Holdings:

       

Leasing and management

     16.8      17.1   

Railcar sales (1):

       

Railcars owned one year or less at the time of sale

     —        —     

Railcars owned more than one year at the time of sale

     (0.4 )    0.1   
  

 

 

   

 

     
     16.4      17.2   
  

 

 

   

 

     

Total operating profit

   $ 66.5      $54.7   

Operating profit margin:

       

Leasing and management

     47.0 %    44.7%   

Railcar sales (1)

     *      *   

Total operating profit margin

     46.7      45.7   

Fleet utilization:

       

Wholly-owned subsidiaries

     99.4 %    99.2%   

TRIP Holdings

     99.9 %    99.8%   

Total fleet

     99.5 %    99.4%   

 

*  

Not meaningful

(1)  

Effective December 31, 2011, the Company adopted the emerging industry policy of recognizing revenue from the sales of railcars from the lease fleet on a gross basis in leasing revenues and cost of revenues if the railcar has been owned by the lease fleet for one year or less at the time of sale. Sales of railcars from the lease fleet which have been owned by the lease fleet for more than one year are recognized as a net gain or loss from the disposal of a long-term asset. Prior year reported balances have been reclassified to conform to this policy.

Total revenues increased for the three month period ended March 31, 2012 compared to the same period last year due to increased railcar sales from the lease fleet, as well as rental revenues related to additions to the lease fleet, higher rental rates, and increased utilization.

Operating profit increased for the three month period ended March 31, 2012 compared to the same period in 2011 due to profit from lease fleet sales, lease fleet additions, higher rental rates, lower maintenance expenses, and increased utilization.

To fund the continued expansion of its lease fleet to meet market demand, the Leasing Group generally uses its non-recourse $475 million warehouse facility or excess cash to provide initial financing for a portion of the purchase price of the railcars. After initial financing, the Leasing Group generally obtains long-term financing for the railcars in the lease fleet through non-recourse asset-backed securities, long-term non-recourse operating leases pursuant to sales/leaseback transactions, or long-term recourse debt such as equipment trust certificates. See Financing Activities .

 

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Information regarding the Leasing Group’s lease fleet as of March 31, 2012 follows:

 

     No. of cars      Average age      Average remaining
lease term 		 

Wholly-owned subsidiaries

     55,485         6.7         3.4   

TRIP Holdings

     14,470         4.5         3.1   
  

 

 

       

Total fleet

     69,955         6.2         3.3   

All Other

 

     Three Months Ended March 31,  
     2012      2011     Percent  
     ($ in millions)     Change  

Revenues

   $ 15.7       $ 13.1        19.8 % 

Operating profit (loss)

   $ 1.2       $ (0.3 )   

The increase in revenues and operating profit for the three month period ended March 31, 2012 compared to the same period last year was primarily due to an increase in intersegment sales by our transportation company.

Corporate

 

     Three Months Ended March 31,  
     2012      2011      Percent  
     ($ in millions)      Change  

Operating costs

   $ 11.6       $ 10.7         8.4 % 

Liquidity and Capital Resources

Cash Flows

The following table summarizes our cash flows from operating, investing, and financing activities for the three months ended March 31, 2012 and 2011:

 

     Three Months Ended
March 31, 		 
     2012     2011  
     (in millions)  

Total cash provided by (required by)

    

Operating activities

   $ 71.0      $ (5.6 ) 

Investing activities

     (77.0 )      (35.6 ) 

Financing activities

     (40.3 )      (52.5 ) 
  

 

 

   

 

 

 

Net decrease in cash and cash equivalents

   $ (46.3 )    $ (93.7 ) 
  

 

 

   

 

 

 

Operating Activities . Net cash provided by operating activities for the three months ended March 31, 2012 was $71.0 million compared to net cash required by operating activities of $5.6 million for the three months ended March 31, 2011. Cash flow provided by operating activities increased due to higher operating profits in 2012, a decrease in receivables during the first quarter of 2012 compared with an increase in receivables during the first quarter of 2011, and lower increases in inventories in 2012 compared with 2011.

Receivables at March 31, 2012 decreased by $17.1 million or 4.4% since December 31, 2011, primarily due to lower receivables from the Energy Equipment Group partially offset by higher receivables in the Rail Group. Raw materials inventory at March 31, 2012 increased by $16.0 million or 5% since December 31, 2011 primarily attributable to higher levels in our Rail Group required to meet production demands. Finished goods inventory at March 31, 2012 increased by $9.5 million or 10% since December 31, 2011 primarily attributable to higher levels of production in our Construction Products Group arising from increased shipping volumes in our Highway Products business. Accounts payable increased by $13.5 million or 7% since December 31, 2011 primarily due to higher production levels in the business groups mentioned. Accrued liabilities decreased by $33.4 million or 8% from December 31, 2011 due to the normal settlement of certain year end liabilities. We continually review reserves related to bad debt as well as the adequacy of lower of cost or market valuations related to accounts receivable and inventory.

Investing Activities. Net cash required by investing activities for the three months ended March 31, 2012 was $77.0 million compared to $35.6 million for the three months ended March 31, 2011. Capital expenditures for the three months ended March 31, 2012 were $116.4 million, of which $100.0 million were for additions to the lease fleet. This compares to $89.5 million of capital expenditures for the same period last year, of which $81.5 million were for additions to the lease fleet. Capital expenditures for 2012 are projected to be approximately $400.0 to $475.0 million, including $300.0 to $350.0

 

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Table of Contents

million in net lease fleet additions. Proceeds from the sale of property, plant, and equipment and other assets totaled $39.4 million for the three months ended March 31, 2012 composed primarily of railcar sales from the lease fleet owned more than one year at the time of sale totaling $26.5 million. This compares to $12.9 million for the same period in 2011 composed primarily of railcar sales from the lease fleet owned more than one year at the time of sale totaling $10.0 million.

Financing Activities. Net cash required by financing activities during the three months ended March 31, 2012 was $40.3 million compared to $52.5 million of cash required by financing activities for the same period in 2011. During the three months ended March 31, 2012 and 2011, we retired $52.6 million and $42.8 million, respectively, in debt. We intend to use our cash and committed credit facilities to fund the operations, expansions, and growth initiatives of the Company.

Other Financing Activities

At March 31, 2012 and for the three month period then ended, there were no borrowings under our $425.0 million revolving credit facility that matures on October 20, 2016. Interest on the revolving credit facility is calculated at Libor plus 150.0 basis points or prime plus 50.0 basis points. After subtracting $72.6 million for letters of credit outstanding, $352.4 million was available under the revolving credit facility as of March 31, 2012.

The $475.0 million TILC warehouse loan facility, established to finance railcars owned by TILC, had $282.7 million outstanding and $192.3 million available as of March 31, 2012. The warehouse loan is a non-recourse obligation secured by a portfolio of railcars and operating leases, certain cash reserves, and other assets acquired and owned by the warehouse loan facility. The principal and interest of this indebtedness are paid from the cash flows of the underlying leases. Advances under the facility bear interest at a defined index rate plus a margin, for an all-in interest rate of 2.25% at March 31, 2012. In February 2011, the warehouse loan facility was renewed for an additional two years and now matures in February 2013. Amounts outstanding at maturity, absent renewal, will be payable in three installments in August 2013, February 2014, and August 2014.

In December 2010, the Company’s Board of Directors authorized a $200 million share repurchase program, effective January 1, 2011, which expires on December 31, 2012. No shares were repurchased under this program during the three months ended March 31, 2012.

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 quarter of 2012 continued to be favorable. 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 residential and 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.

Equity Investment

See Note 5 of the Consolidated Financial Statements for information about the investment in TRIP Holdings.

Future Operating Requirements

We expect to finance future operating requirements with cash on hand, cash flows from operations, and depending on market conditions, short-term and long-term debt, and equity. Debt instruments that the Company has utilized include its revolving credit facility, the TILC warehouse facility, senior notes, convertible subordinated notes, asset-backed securities, and sale-leaseback transactions. The Company has also issued equity at various times. As of March 31, 2012, the Company had unrestricted cash balances of $304.8 million, $352.4 million available under its revolving credit facility, and $192.3 million available under its TILC warehouse facility. The Company believes it has access to adequate capital resources to fund operating requirements and is an active participant in the credit markets.

Off Balance Sheet Arrangements

See Note 4 of the Consolidated Financial Statements for information about off balance sheet arrangements.

Derivative Instruments

We use derivative instruments to mitigate the impact of changes in interest rates and pricing for zinc, natural gas, and diesel fuel prices, as well as to convert a portion of our variable-rate debt to fixed-rate debt. Additionally, we use derivative

 

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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 that are designated and qualify as cash flow hedges are accounted for in accordance with applicable accounting standards. See Note 2 Fair Value Accounting for discussion of how the Company valued its commodity hedges and interest rate swaps at March 31, 2012.

Interest rate hedges

 

                  Included in accompanying balance sheet
at March 31, 2012 		 
     Notional
Amount 		     Interest
Rate ( 1) 		    Liability      AOCL –
loss/
(income) 		    Noncontrolling
Interest 		 
     (in millions, except %)  

Interest rate locks:

            

2005-2006

   $ 200.0         4.87 %      —         $ (2.2 )      —     

2006-2007

   $ 370.0         5.34 %      —         $ 9.7        —     

TRIP Holdings

   $ 788.5         3.60 %      —         $ 22.5      $ 16.9   

Interest rate swaps:

            

TRIP Rail Master Funding secured railcar equipment notes

   $ 86.7         2.62 %    $ 4.2       $ 2.4      $ 1.8   

2008 debt issuance

   $ 467.2         4.13 %    $ 46.2       $ 44.4        —     

 

(1)  

Weighted average fixed interest rate

 

Effect on interest expense – increase/(decrease)  
     Three Months Ended
March 31, 		    Expected effect
during next
twelve
months ( 1) 		 
     2012     2011    
     (in millions)  

Interest rate locks:

      

2005-2006

   $ (0.1 )    $ (0.1 )    $ (0.3 ) 

2006-2007

   $ 0.9      $ 0.9      $ 3.3   

TRIP Holdings

   $ 1.5      $ 7.3      $ 6.0   

Interest rate swaps:

      

TRIP Rail Master Funding secured railcar equipment notes

   $ 0.5      $ —        $ 1.9   

2008 debt issuance

   $ 4.2      $ 4.5      $ 17.4   

 

(1)  

Based on fair value as of March 31, 2012.

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. 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 accumulated other comprehensive loss (“AOCL”) through the date the related debt issuance closed in May 2006. The balance is being amortized over the term of the related debt. The effect on interest expense is due to amortization of the AOCL balance.

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 and were accounted for as cash flow hedges with changes in the fair value of the instruments of $24.5 million recorded as a loss in AOCL through the date the related debt issuance closed in May 2008. The balance is being amortized over the term of the related debt. The effect on interest expense is due to amortization of the AOCL balance.

In May 2008, we entered into an interest rate swap transaction that is being used to fix the Libor component of the debt issuance which closed in May 2008. The effect on interest expense results primarily from monthly interest settlements.

Between 2007 and 2009, TRIP Holdings, as required by its warehouse loan agreement, entered into interest rate swap transactions, all of which qualified as cash flow hedges, to reduce the effect of changes in variable interest rates. In July 2011, these interest rate hedges were terminated in connection with the refinancing of the TRIP Warehouse Loan. Balances included in AOCL at the date the hedges were terminated are being amortized over the expected life of the new debt with $6.0 million of additional interest expense expected to be recognized during the next twelve months following March 31,

 

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2012. Also in July 2011, TRIP Holdings’ wholly-owned subsidiary, TRIP Rail Master Funding, entered into an interest rate swap transaction with a notional amount of $94.1 million to reduce the effect of changes in variable interest rates associated with the Class A-1b secured railcar equipment notes.

See Note 9 Debt for a discussion of the related debt instruments.

Other Derivatives

 

     Effect on operating
income –
increase/(decrease) 		 
     Three Months Ended
March 31, 		 
     2012     2011  
     (in millions)  

Fuel hedges (1)

    

Effect of mark to market valuation

   $ 0.1      $ 0.5   

Settlements

     0.1        0.0   
  

 

 

   

 

 

 
   $ 0.2      $ 0.5   

Foreign exchange hedges (2)

   $ (0.4 )    $ (0.6 ) 

 

(1)  

Included in cost of revenues in the accompanying consolidated statement of operations.

(2)  

Included in other, net in the accompanying consolidated statement of operations.

Natural gas and diesel fuel

We maintain 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 as of March 31, 2012 for these instruments was not significant.

Foreign exchange hedge

We enter into foreign exchange hedges to mitigate the impact on operating profit of unfavorable fluctuations in foreign currency exchange rates. These instruments are short term with quarterly maturities and no remaining balance in AOCL as of March 31, 2012.

Contractual Obligation and Commercial Commitments

As of March 31, 2012, other commercial commitments related to letters of credit decreased slightly to $72.6 million from $74.1 million as of December 31, 2011. Refer to Note 9 of the Consolidated Financial Statements for changes to our outstanding debt and maturities. Other commercial commitments that relate to operating leases including sale/leaseback transactions were basically unchanged as of March 31, 2012.

Recent Accounting Pronouncements

See Note 1 of the Consolidated Financial Statements for information about recent accounting pronouncements.

Forward-Looking Statements

This quarterly report on Form 10-Q (or statements otherwise made by the Company or on the Company’s behalf from time to time in other reports, filings with the Securities and Exchange Commission (“SEC”), news releases, conferences, World Wide Web postings or otherwise) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements contained herein that are not historical facts are forward-looking statements and involve risks and uncertainties. These forward-looking statements include expectations, beliefs, plans, objectives, future financial performances, estimates, projections, goals, and forecasts. Trinity uses the words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “forecasts,” “may,” “will,” “should,” and similar expressions to identify these forward-looking statements. Potential factors, which could cause our actual results of operations to differ materially from those in the forward-looking statements include, among others:

 

•  

market conditions and demand for our business products and services;

 

•  

the cyclical nature of industries in which we compete;

 

•  

variations in weather in areas where our construction products are sold, used, or installed;

 

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•  

naturally-occurring events and disasters causing disruption to our manufacturing, product deliveries, and production capacity, thereby giving rise to an increase in expenses, loss of revenue, and property losses;

 

•  

the timing of introduction of new products;

 

•  

the timing and delivery of customer orders or a breach of customer contracts;

 

•  

the credit worthiness of customers and their access to capital;

 

•  

product price changes;

 

•  

changes in mix of products sold;

 

•  

the extent of utilization of manufacturing capacity;

 

•  

availability and costs of steel, component parts, supplies, and other raw materials;

 

•  

competition and other competitive factors;

 

•  

changing technologies;

 

•  

surcharges and other fees added to fixed pricing agreements for steel, component parts, supplies and other raw materials;

 

•  

interest rates and capital costs;

 

•  

counter-party risks for financial instruments;

 

•  

long-term funding of our operations;

 

•  

taxes;

 

•  

the stability of the governments and political and business conditions in certain foreign countries, particularly Mexico;

 

•  

changes in import and export quotas and regulations;

 

•  

business conditions in emerging economies;

 

•  

costs and results of litigation; and

 

•  

legal, regulatory, and environmental issues.

Any forward-looking statement speaks only as of the date on which such statement is made. Trinity undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made.

 

32

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

There has been no material change in our market risks since December 31, 2011 as set forth in Item 7A of our 2011 Form 10-K. Refer to Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, for a discussion of debt-related activity and the impact of hedging activity for the three months ended March 31, 2012.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

The Company maintains controls and procedures designed to ensure that it is able to collect the information it is required to disclose in the reports it files with the SEC, and to process, summarize, and disclose this information within the time periods specified in the rules of the SEC. The Company’s Chief Executive and Chief Financial Officers are responsible for establishing and maintaining these procedures and, as required by the rules of the SEC, evaluating their effectiveness. Based on their evaluation of the Company’s disclosure controls and procedures which took place as of the end of the period covered by this report, the Chief Executive and Chief Financial Officers believe that these procedures are effective to ensure that the Company is able to collect, process, and disclose the information it is required to disclose in the reports it files with the SEC within the required time periods.

Internal Controls

The Company maintains a system of internal controls designed to provide reasonable assurance that: transactions are executed in accordance with management;s general or specific authorization; transactions are recorded as necessary (1) to permit preparation of financial statements in conformity with generally accepted accounting principles, and (2) to maintain accountability for assets; access to assets is permitted only in accordance with management’s general or specific authorization; and the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

During the period covered by this report, there have been no changes in the Company’s internal controls over financial reporting that have materially affected or are reasonably likely to materially affect the Company’s internal controls over financial reporting.

 

33

Table of Contents

PART II

Item 1 . Legal Proceedings

The information provided in Note 16 of the Consolidated Financial Statements is hereby incorporated into this Part II, Item 1 by reference.

Item 1A. Risk Factors

There have been no material changes from the risk factors previously disclosed in Item 1A of our 2011 Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

This table provides information with respect to purchases by the Company of shares of its Common Stock during the quarter ended March 31, 2012:

 

Period

   Number  of
Shares
Purchased (1) 		     Average
Price
Paid  per
Share  (1) 		     Total
Number of
Shares (or
Units)
Purchased
as
Part of
Publicly
Announced
Plans or
Programs  (2) 		     Maximum
Number (or
Approximate
Dollar Value)
of
Shares (or
Units)
that May Yet
Be
Purchased
Under the
Plans
or Programs (2) 		 

January 1, 2012 through January 31, 2012

     1,670       $ 31.53         —         $ 200,000,000   

February 1, 2012 through February 29, 2012

     6,907       $ 33.49         —         $ 200,000,000   

March 1, 2012 through March 31, 2012

     1,537       $ 35.00         —         $ 200,000,000   
  

 

 

       

 

 

    

Total

     10,114       $ 33.39         —         $ 200,000,000   
  

 

 

       

 

 

    

 

(1) These columns include the following transactions during the three months ended March 31, 2012: (i) the deemed surrender to the Company of 8,353 shares of Common Stock to pay the exercise price and satisfy tax withholding in connection with the exercise of employee stock options, (ii) the surrender to the Company of 1,659 shares of common stock to satisfy tax withholding obligations in connection with the vesting of restricted stock issued to employees, and (iii) the purchase of 102 shares of common stock by the Trustee for assets held in a non-qualified employee profit sharing plan trust.
(2) In December 2010, the Company’s Board of Directors authorized a $200 million share repurchase program, effective January 1, 2011, which expires on December 31, 2012. No shares were repurchased under this program during the three months ended March 31, 2012.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95 to this Form 10-Q.

Item 5. Other Information

None.

 

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Table of Contents

Item 6. Exhibits

 

Exhibit Number

  

Description

3.2    Amended and Restated By-Laws of Trinity Industries, Inc., as amended March 8, 2012 (filed herewith).
10.1    Trinity Industries, Inc. Supplemental Retirement Plan Trust (filed herewith).
31.1    Rule 13a-15(e) and 15d-15(e) Certification of Chief Executive Officer (filed herewith).
31.2    Rule 13a-15(e) and 15d-15(e) Certification of Chief Financial Officer (filed herewith).
32.1    Certification pursuant to 18 U.S.C., Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
32.2    Certification pursuant to 18 U.S.C., Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
95    Mine Safety Disclosure Exhibit (filed herewith).
101.INS    XBRL Instance Document (filed electronically herewith) *
101.SCH    XBRL Taxonomy Extension Schema Document (filed electronically herewith) *
101.CAL    XBRL Taxonomy Extension Calculation Linkbase Document (filed electronically herewith) *
101.LAB    XBRL Taxonomy Extension Label Linkbase Document (filed electronically herewith) *
101.PRE    XBRL Taxonomy Extension Presentation Linkbase Document (filed electronically herewith) *
101.DEF    XBRL Taxonomy Extension Definition Linkbase Document (filed electronically herewith) *

 

*  

Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.

 

35

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

   TRINITY INDUSTRIES, INC.    By /s/ JAMES E. PERRY
   Registrant   

 

James E. Perry

      Senior Vice President and
      Chief Financial Officer
      April 27, 2012

 

36

Table of Contents

INDEX TO EXHIBITS

 

Exhibit Number

  

Description

  3.2    Amended and Restated By-Laws of Trinity Industries, Inc., as amended March 8, 2012 (filed herewith).
  10.1    Trinity Industries, Inc. Supplemental Retirement Plan Trust (filed herewith).
  31.1    Rule 13a-15(e) and 15d-15(e) Certification of Chief Executive Officer (filed herewith).
  31.2    Rule 13a-15(e) and 15d-15(e) Certification of Chief Financial Officer (filed herewith).
  32.1    Certification pursuant to 18 U.S.C., Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
  32.2    Certification pursuant to 18 U.S.C., Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
  95    Mine Safety Disclosure Exhibit (filed herewith).
  101.INS    XBRL Instance Document (filed electronically herewith) *
  101.SCH    XBRL Taxonomy Extension Schema Document (filed electronically herewith) *
  101.CAL    XBRL Taxonomy Extension Calculation Linkbase Document (filed electronically herewith) *
  101.LAB    XBRL Taxonomy Extension Label Linkbase Document (filed electronically herewith) *
  101.PRE    XBRL Taxonomy Extension Presentation Linkbase Document (filed electronically herewith) *
  101.DEF    XBRL Taxonomy Extension Definition Linkbase Document (filed electronically herewith) *

 

*  

Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.

 

37

Exhibit 3.2

As Amended Effective March 8, 2012

BYLAWS

OF

TRINITY INDUSTRIES, INC.

ARTICLE I.

Offices

Section 1. The registered office shall be located in the City of Wilmington, County of New Castle, State of Delaware.

Section 2. The corporation may also have offices at such other places within or without the State of Delaware as the Board of Directors may from time to time determine, or as the business of the corporation may require.

ARTICLE II.

Meetings of Stockholders

Section 1. Meetings of the stockholders for any purpose shall be held at such time and place, either within or without the State of Delaware, as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting or in a duly executed waiver of notice thereof.

Section 2. The annual meeting of stockholders shall be held on such date and at such time as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting. At such meeting, the stockholders entitled to vote thereat shall elect by a plurality vote a Board of Directors. Nominations for election to the Board of Directors shall be made at such meeting only by or at the direction of the Board of Directors, by a nominating committee or person

appointed by the Board of Directors, or by a stockholder of the corporation entitled to vote for the election of directors at the meeting who complies with the notice procedures set forth in this Section 2. Such nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary of the corporation. To be timely, a stockholder’s notice shall be delivered to, or mailed and received at, the principal executive offices of the corporation not less than sixty days nor more than ninety days prior to the anniversary date of the immediately preceding annual meeting of stockholders; provided , however , that in the event that the annual meeting is called for a date that is not within thirty days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the later of (i) the sixtieth day prior to such annual meeting or (ii) the tenth day following the day on which public announcement of the date of such meeting is first made. For purposes of these Bylaws, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or a comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act. Such stockholder’s notice to the Secretary shall set forth (a) as to each person whom the stockholder proposes to nominate for election or re-election as a director, (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class and number of shares of capital stock of the corporation which are beneficially owned by the person, and (iv) any other information relating to the person that is required to be disclosed in solicitations for proxies for election of directors pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended; and (b) as to the stockholder giving the notice, (i) the name and record address of the stockholder, (ii) the class and number of shares of capital stock of the corporation which are beneficially owned by the

 

2

stockholder, (iii) a description of all arrangements or understandings between such stockholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by such stockholder, (iv) a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate the persons named in its notice and (v) any other information relating to such stockholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. The corporation may require any proposed nominee to furnish such other information as may reasonably be required by the corporation to determine the eligibility of such proposed nominee to serve as director of the corporation. No person shall be eligible for election as a director of the corporation unless nominated in accordance with the procedures set forth herein.

The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedure, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded.

At each annual meeting of the stockholders, only such business shall be conducted as shall have properly been brought before the meeting. To be properly before the meeting, the business to be conducted must be specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, otherwise properly brought before the meeting by or at the direction of the Board of Directors, or otherwise properly brought before the meeting by a stockholder entitled to vote at the meeting. In addition to any other applicable requirements, for business to be properly brought before the meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the corporation. To be timely, a

 

3

stockholder’s notice shall be delivered to, or mailed and received at, the principal executive offices of the corporation not less than sixty days nor more than ninety days prior to the anniversary date of the immediately preceding annual meeting of stockholders; provided , however , that in the event that the annual meeting is called for a date that is not within thirty days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the later of (i) the sixtieth day prior to such annual meeting or (ii) the tenth day following the day on which public announcement of the date of such meeting is first made. A stockholder’s notice to the Secretary of the corporation shall set forth as to each matter that the stockholder proposes to bring before the annual meeting, (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and record address of the stockholder proposing such business, (iii) the class and number of shares of the corporation which are beneficially owned by the stockholder, (iv) a description of all arrangements or understandings between such stockholder and any other person or persons (including their names) in connection with the proposal of such business by such stockholder and any material interest of such stockholder in such business and (v) a representation that such stockholder intends to appear in person or by proxy at the annual meeting to bring such business before the meeting. Notwithstanding the foregoing provisions of this Section 2, a stockholder seeking to have a proposal included in the corporation’s proxy statement shall comply with the requirements of Regulation 14A under the Securities Exchange Act of 1934, as amended (including, but not limited to, Rule 14a-8 or its successor provision).

Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at the annual meeting except in accordance with the procedures set forth in this Section 2; provided, however, that nothing in this Section 2 shall be deemed to preclude discussion by any stockholder of any business properly brought before the annual meeting in accordance with the procedures set forth in this Section 2.

 

4

The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that the business sought to be so conducted was not properly brought before the meeting in accordance with the provisions of this Section 2, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted.

Section 3. Special meetings of the stockholders may be called by the chief executive officer or a majority of the Board of Directors.

Section 4. Written or printed notice stating the place, day and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting, either personally or by mail, by or at the direction of the President, the Secretary, or the officer or person calling the meeting, to each stockholder of record entitled to vote at such meeting.

Section 5. Business transacted at any special meeting shall be confined to the purposes stated in the notice thereof.

Section 6. The holders of a majority of the shares entitled to vote, represented in person or by proxy, shall constitute a quorum at meetings of stockholders except as otherwise provided by any applicable statute. If, however, a quorum shall not be present or represented at any meeting of the stockholders, the presiding officer at the meeting or the stockholders present in person or represented by proxy, shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be

 

5

transacted which might have been transacted at the meeting as originally notified. In addition, the presiding officer at any meeting of stockholders shall have the power to adjourn the meeting at the request of the Board of Directors if the Board of Directors determines that adjournment is necessary or appropriate to enable stockholders to consider fully information which the Board of Directors determines has not been made sufficiently or timely available to stockholders or to otherwise exercise effectively their voting rights.

Section 7. Except as provided in Section 2 hereof with respect to the election of the Board of Directors, at a meeting at which a quorum is present, the vote of the holders of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote shall be the act of the stockholders’ meeting, unless the vote of a greater number is required by law or the Certificate of Incorporation.

Section 8. Each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of stockholders, except to the extent that the voting rights of the shares of any class are limited or denied by the Certificate of Incorporation.

Section 9. At any meeting of the stockholders, every stockholder having the right to vote may vote either in person, or by proxy appointed by an instrument in writing as to a particular meeting and any adjournment or adjournments thereof subscribed by such stockholder or by his duly authorized attorney-in-fact. A proxy shall be revocable unless expressly provided therein to be irrevocable and unless otherwise provided by law.

Section 10. The officer or agent having charge of the stock transfer books shall make, at least ten (10) days before each meeting of stockholders, a complete list of the stockholders entitled to vote at such meeting or any adjournment thereof, arranged in alphabetical order, with the address of and number of shares held by each, which list, for a period of ten (10) days prior to such meeting,

 

6

shall be kept on file at the principal place of business of the corporation, and shall be subject to inspection by any stockholder at any time during usual business hours. Such list shall also be produced and kept open at the time and place of the meeting, and shall be subject to the inspection of any stockholder during the whole time of the meeting. The original stock transfer books shall be prima facie evidence as to who are the stockholders entitled to examine such list or transfer book or to vote at any such meeting of stockholders.

Section 11 . Notwithstanding any inconsistent provision which may be contained in these Bylaws, in order that the corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date on which the resolution fixing the record date is adopted by the Board of Directors, and which date shall not be more than ten days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. Any stockholder of record seeking to have the stockholders authorize or take corporate action by written consent shall, by written notice to the Secretary, request the Board of Directors to fix a record date. The Board of Directors shall promptly, but in all events within ten days after the date on which such a request is received, adopt a resolution fixing the record date. If no record date has been fixed by the Board of Directors within ten days of the date upon which such a request is received, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by applicable law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the corporation by delivery to its registered office in the State of Delaware, its principal place of business, or any officer or agent of the corporation having custody of the book in which proceedings of stockholders’ meeting are recorded, to the attention of the Secretary of the corporation. Delivery

 

7

shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by applicable law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the date on which the Board of Directors adopts the resolution taking such prior action.

ARTICLE III.

Directors

Section 1. The number of directors of the corporation shall be twelve (12). The directors shall be elected at the annual meeting of the stockholders, except as provided in Section 2 of this Article, and each director elected shall hold office until his successor is elected and qualified; provided, any director may be removed at any time, with or without cause, by the holders of a majority of the shares entitled to vote, represented in person or by proxy, at any duly constituted meeting of stockholders called for the purpose of removing any such director or directors. Directors need not be residents of the State of Delaware or stockholders of the corporation.

Section 2. Any vacancy occurring in the Board of Directors may be filled by the affirmative vote of a majority of the remaining directors though less than a quorum of the Board of Directors. A director elected to fill a vacancy shall be elected for the unexpired term of his predecessor in office. Any newly created directorship(s) resulting from an increase in the authorized number of directors elected by all stockholders entitled to vote as a single class shall be filled by the affirmative vote of a majority of the remaining directors, even though less than a quorum of the proposed Board of Directors.

Section 3. The business and affairs of the corporation shall be managed by its Board of Directors which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute, the Certificate of Incorporation, or these Bylaws directed or required to be exercised and done by the stockholders.

 

8

Section 4. Meetings of the Board of Directors, regular or special, may be held either within or without the State of Delaware.

Section 5. The first meeting of each newly elected Board of Directors shall be held at such time and place as shall be fixed by the vote of the stockholders at the annual meeting, and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present. In the event of the failure of the stockholders to fix the time and place of such first meeting of the newly elected Board of Directors, or in the event such meeting is not held at the time and place so fixed by the stockholders, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the Board of Directors, or as shall be specified in a written waiver signed by all of the directors.

Section 6. Regular meetings of the Board of Directors may be held at such time and at such place as shall from time to time be determined by the Board. Special meetings of the Board of Directors may be called by the Secretary on the written request of two directors.

Section 7. Written notice of regular meetings of the Board of Directors shall not be required. Special meetings of the Board of Directors may be called upon twenty-four (24) hours’ notice to each director, or such shorter period of time as the person calling the meeting deems appropriate in the circumstances, either personally or by mail, telephone or telegram. Neither the business to be transacted at, nor the purposes of, any special meeting of the Board of Directors need be specified in the notice or waiver of notice of such special meeting.

 

9

Section 8. A majority of the directors shall constitute a quorum for the transaction of business, and the act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors, unless a greater number is required by the Certificate of Incorporation. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.

Section 9. The Board of Directors, by resolution adopted by a majority of the whole Board, may designate three or more directors to constitute an executive committee, which committee, unless its authority shall be otherwise expressly limited by such resolution, shall have and may exercise all of the authority of the Board of Directors in the business and affairs of the corporation except where action of the Board of Directors is specified by statute. Vacancies in the membership of the committee shall be filled by the Board of Directors at a regular or special meeting of the Board of Directors. The executive committee shall keep regular minutes of its proceedings and report the same to the Board when required. The designation of such committee and the delegation thereto of authority shall not operate to relieve the Board of Directors, or any member thereof, of any responsibility imposed upon it or him by law.

ARTICLE IV.

Notices

Section 1. Except as otherwise provided in these Bylaws, notices to directors and stockholders shall be in writing, and delivered personally or mailed to the directors or stockholders at their addresses appearing on the books of the corporation. If mailed, such notice shall be deemed to be given when deposited in the United States mail with postage thereon prepaid. Notice to directors may also be given by telegram.

Section 2. Whenever any notice is required to be given to any stockholder or director under the provisions of the statutes, the Certificate of Incorporation or these Bylaws, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be equivalent to the giving of such notice.

 

10

Section 3. Attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened.

ARTICLE V.

Officers

Section 1. The elected officers of the corporation shall consist of a President, one or more Vice Presidents, a Secretary and a Treasurer and may include a Chairman of the Board, one or more Senior Vice Presidents and one or more Executive Vice Presidents, each of whom shall be elected by the Board of Directors.

Section 2. The Board of Directors, at its first meeting after each annual meeting of stockholders, shall choose a President, one or more Vice Presidents, a Secretary and a Treasurer, none of whom need be a member of the Board, and may appoint one of their number Chairman of the Board.

Section 3. Such other officers and assistant officers and agents as may be deemed necessary may be appointed by the chief executive officer of the corporation, including a Chairman, a President, and one or more Vice Presidents of the respective Divisions. The President or the Vice Presidents of the Division who, in the order of their seniority, unless otherwise determined by the chief executive officer of the corporation, shall perform the duties of the Chairman or President, as the case may be, of the Division in the absence or disability of the Chairman or President, as the case may be, of that Division. Each President or Vice President, as the case may be, of a Division

 

11

shall perform such other duties and have such other powers as the chief executive officer of the corporation or the Chairman or President, as the case may be, of that Division shall prescribe. Division officers shall hold office until their respective successors shall have been chosen and shall have qualified. Any Division officer appointed by the chief executive officer may be removed by the chief executive officer whenever, in his judgment, the best interests of the corporation will be served thereby. Any vacancy occurring in any office of a Division by death, resignation, removal or otherwise shall be filled by the chief executive officer of the corporation.

Section 4. The salaries of all elected officers of the corporation shall be fixed by the Board of Directors or by a committee of one or more directors, the members of which shall be selected by the Board of Directors and which, unless its authority shall be otherwise limited by resolution of the Board of Directors, shall have the power to fix the salaries of all elected officers of the corporation. Section 5. The elected officers of the corporation shall hold office until their respective successors shall have been chosen and shall have qualified. Any officer or agent or member of the executive committee elected or appointed by the Board of Directors may be removed by the Board of Directors whenever, in its judgment, the best interests of the corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Any vacancy occurring in any elected office of the corporation by death, resignation, removal or otherwise shall be filled by the Board of Directors.

Section 6. The Board of Directors may designate whether the Chairman of the Board, if such an officer shall have been appointed, or the President, shall be the chief executive officer of the corporation. The officer so designated as the chief executive officer shall preside at all meetings of the stockholders and the Board of Directors, and shall have such other powers and duties as usually pertain to such office or as may be delegated by the Board of Directors. The President shall have

 

12

such powers and duties as usually pertain to such office, except as the same may be modified by the Board of Directors. Unless the Board of Directors shall otherwise delegate such duties, the chief executive officer shall have general and active management of the business of the corporation and shall see that all orders and resolutions of the Board of Directors are carried into effect.

Section 7. The chief executive officer or his designee shall have the authority to execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed, and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the corporation.

Section 8. The Vice Presidents, in the order of their seniority, unless otherwise determined by the Board of Directors, shall, in the absence or disability of the President, perform the duties and exercise the powers of the President. The Vice Presidents shall also have the authority to execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed, and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the corporation. The Vice Presidents shall perform such other duties and have such other powers as the Board of Directors or the chief executive officer of the corporation shall prescribe.

Section 9. The Secretary shall attend all meetings of the Board of Directors and all meetings of the stockholders and shall record all the proceedings of the meetings of the stockholders and of the Board of Directors in a book to be kept for that purpose and shall perform like duties for the standing committees, when requested. He shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors and shall perform such other duties

 

13

as may be prescribed by the Board of Directors or the President, under whose supervision he shall be. He shall keep in safe custody the seal of the corporation, and, when authorized by the Board of Directors or directed by the President or any Vice President, affix the same to any instrument requiring it and, when so affixed, it shall be attested by his signature or by the signature of the Treasurer or any Assistant Secretary.

Section 10. The Assistant Secretaries, in the order of their seniority, unless otherwise determined by the Board of Directors, shall, in the absence or disability of the Secretary, perform the duties and exercise the powers of the Secretary. They shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe.

Section 11. The Treasurer shall be the financial officer of the corporation. He shall have the custody of the corporate funds and securities and shall deposit all monies and other valuable effects in the name and to the credit of the corporation in such depositaries as may be designated from time to time by the Board of Directors. He shall disburse the funds of the corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the President and the Board of Directors at its regular meetings, or when the Board of Directors so requires, an account of all his transactions as Treasurer. He shall also perform such other duties as may be assigned to him by the Board of Directors.

Section 12. If required by the Board of Directors, the Treasurer shall give the corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his office and for the restoration to the corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation.

 

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Section 13. The Assistant Treasurers, in the order of their seniority, unless otherwise determined by the Board of Directors, shall, in the absence or disability of the Treasurer, perform the duties and exercise the powers of the Treasurer. They shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe.

ARTICLE VI.

Indemnification of Directors and Officers

Section 1. The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was or has agreed to become a director, officer or Division officer of the corporation, or is or was serving or has agreed to serve at the request of the corporation as a director, officer or Division officer of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity, against costs, charges, expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with such action, suit or proceeding and any appeal therefrom, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful.

 

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Section 2. The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was or has agreed to become a director, officer or Division officer of the corporation, or is or was serving or has agreed to serve at the request of the corporation as a director, officer or Division officer of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity, against costs, charges and expenses (including attorneys’ fees) actually and reasonably incurred by him or on his behalf in connection with the defense or settlement of such action or suit and any appeal therefrom, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of such liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such costs, charges and expenses which the Court of Chancery or such other court shall deem proper.

Section 3. Notwithstanding the other provisions of this Article, to the extent that a director, officer or Division officer of the corporation has been successful on the merits or otherwise, including, without limitation, the dismissal of an action without prejudice, in defense of any action, suit or proceeding referred to in Sections 1 and 2 of this Article, or in defense of any claim, issue or matter therein, he shall be indemnified against all costs, charges and expenses (including attorneys’ fees) actually and reasonably incurred by him or on his behalf in connection therewith.

 

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Section 4. Any indemnification under Sections 1 and 2 of this Article (unless ordered by a court) shall be paid by the corporation unless a determination is made (1) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (3) by the stockholders, that indemnification of the director, officer, employee or agent is not proper in the circumstances because he has not met the applicable standard of conduct set forth in Sections 1 and 2 of this Article.

Section 5. Costs, charges and expenses (including attorneys’ fees) incurred by a person referred to in Sections 1 and 2 of this Article in defending a civil or criminal action, suit or proceeding shall be paid by the corporation in advance of the final disposition of such action, suit or proceeding; provided , however , that the payment of such costs, charges and expenses incurred by a director, officer or Division officer in his capacity as a director, officer or Division officer (and not in any other capacity in which service was or is rendered by such person while a director, officer or Division officer) in advance of the final disposition of such action, suit or proceeding shall be made only upon receipt of an undertaking by or on behalf of the director, officer or Division officer to repay all amounts so advanced in the event that it shall ultimately be determined that such director, officer or Division officer is not entitled to be indemnified by the corporation as authorized in this Article. The Board of Directors may, in the manner set forth above, and upon approval of such director, officer or Division officer of the corporation, authorize the corporation’s counsel to represent such person, in any action, suit or proceeding, whether or not the corporation is a party to such action, suit or proceeding.

 

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Section 6. Any indemnification under Sections 1, 2 and 3, or advance of costs, charges and expenses under Section 5 of this Article, shall be made promptly, and in any event within 60 days, upon the written request of the director, officer or Division officer. The right to indemnification or advances as granted by this Article shall be enforceable by the director, officer or Division officer in any court of competent jurisdiction, if the corporation denies such request, in whole or in part, or if no disposition thereof is made within 60 days. Such persons’ costs and expenses incurred in connection with successfully establishing his right to indemnification, in whole or in part, in any such action shall also be indemnified by the corporation. It shall be a defense to any such action (other than an action brought to enforce a claim for the advance of costs, charges and expenses under Section 5 of this Article where the required undertaking, if any, has been received by the corporation) that the claimant has not met the standard of conduct set forth in Sections 1 or 2 of this Article, but the burden of proving such defense shall be on the corporation. Neither the failure of the corporation (including its Board of Directors, its independent legal counsel, and its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he has met the applicable standard of conduct set forth in Sections 1 or 2 of this Article, nor the fact that there has been an actual determination by the corporation (including its Board of Directors, its independent legal counsel, and its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct.

Section 7. The indemnification and advancement of costs, charges and expenses provided by this Article shall not be deemed exclusive of any other rights to which a person seeking indemnification or advancement of costs, charges and expenses may be entitled under any law (common or statutory), agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding office or while employed by or acting as agent for the corporation, and shall continue as to a person who has ceased

 

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to be a director, officer or Division officer as to actions taken while he was such a director, officer or Division officer, and shall inure to the benefit of the estate, heirs, executors and administrators of such person. All rights to indemnification under this Article shall be deemed to be a contract between the corporation and each director, officer or Division officer of the corporation who serves or served in such capacity at any time while this Article is in effect. Any repeal or modification of this Article or any repeal or modification of relevant provisions of the Delaware General Corporation Law or any other applicable laws shall not in any way diminish any rights to indemnification of such director, officer or Division officer or the obligations of the corporation arising hereunder.

Section 8. In addition to the specific indemnification provided for herein, the corporation shall indemnify each person who is or was or has agreed to become a director, officer or Division officer of the corporation, or is or was serving or has agreed to serve at the request of the corporation as a director, officer or Division officer of another corporation, partnership, joint venture, trust or other enterprise, to the fullest extent authorized or permitted (i) by the General Corporation Law of Delaware, or any other applicable law, or by any amendment thereof or other statutory provisions in effect on the date hereof, or (ii) by the corporation’s Certificate of Incorporation as in effect on the date hereof. The corporation shall also advance expenses to any of the foregoing individuals to the fullest extent authorized or permitted (i) by the General Corporation Law of Delaware, or any other applicable law, or by any amendment thereof or other statutory provision in effect on the date hereof, or (ii) by the corporation’s Certificate of Incorporation as in effect on the date hereof.

 

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Section 9. Notwithstanding the foregoing, the corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was or has agreed to become a director, officer or Division officer of the corporation, or is or was serving at the request of the corporation as a director, officer or Division officer of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him or on his behalf in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of this Article.

Section 10. If this Article or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the corporation shall nevertheless indemnify each director, officer or Division officer of the corporation as to costs, charges and expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement with respect to any action, suit or proceeding, whether civil, criminal, administrative or investigative, including an action by or in the right of the corporation, to the full extent permitted by any applicable portion of this Article that shall not have been invalidated and to the full extent permitted by applicable law.

ARTICLE VII.

Certificates for Shares

Section 1. Shares of stock of the corporation may be certificated or uncertificated as provided under the General Corporation Law of the State of Delaware. The corporation shall deliver, upon request, certificates representing all shares to which stockholders are entitled; and such certificates shall be signed by the President or a Vice President, and the Secretary or an Assistant Secretary of the corporation, and may be sealed with the seal of the corporation or a facsimile thereof. No certificate shall be issued for any share until the consideration therefor has been fully paid. Each certificate representing shares shall state upon the face thereof that the corporation is organized under the laws of the State of Delaware, the name of the person to whom issued, the number and class and the designation of the series, if any, which such certificate represents, and the

 

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par value of each share represented by such certificate or a statement that the shares are without par value. Except as otherwise provided by law, the rights and obligations of holders of uncertificated shares and the rights and obligations of holders of certificated shares of the same class and series shall be identical.

Section 2. The signatures of the President or Vice President, and the Secretary or Assistant Secretary, upon a certificate may be facsimiles if the certificate is countersigned by a transfer agent, or registered by a registrar, other than the corporation itself or an employee of the corporation. In case any officer who has signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer at the date of the issuance.

Section 3. The Board of Directors may direct a new certificate or certificates to be issued or may register uncertificated shares in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost or destroyed. When authorizing such issue of a new certificate or certificates or the registration of uncertificated shares, the Board of Directors may, in its discretion and as a condition precedent to the issuance or registration thereof, require the owner of such lost or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost or destroyed.

Section 4. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the corporation to issue a new certificate or register

 

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uncertificated shares to the person entitled thereto, cancel the old certificate, and record the transaction upon its books. Upon the receipt of proper transfer instructions of uncertificated shares by the holders thereof in person or by their duly authorized legal representatives, such uncertificated shares shall be cancelled, issuance of new equivalent certificated shares or registration of uncertificated shares shall be made to the stockholder entitled thereto and the transaction shall be recorded on the books of the corporation.

Section 5. For the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of stockholders for any other proper purpose, the Board of Directors may provide that the stock transfer books shall be closed for a stated period but not to exceed, in any case, sixty (60) days. If the stock transfer books shall be closed for the purpose of determining stockholders entitled to notice of or to vote at a meeting of stockholders, such books shall be closed for at least ten (10) days immediately preceding such meeting. In lieu of closing the stock transfer books, the Board of Directors may fix in advance a date as the record date for any such determination of stockholders, such date in any case to be not more than sixty (60) days, and, in case of a meeting of stockholders, not less than ten (10) days prior to the date on which the particular action requiring such determination of stockholders is to be taken. If the stock transfer books are not closed and no record date is fixed for the determination of stockholders entitled to notice of or to vote at a meeting of stockholders or any adjournment thereof, or stockholders entitled to receive payment of a dividend, or in order to make a determination of stockholders for any other proper purpose, the close of business on the day next preceding the day on which notice of the meeting of stockholders is given shall be the record date with respect to such meeting, and the close of business on the day on which the Board of Directors adopts a resolution declaring a dividend or

 

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with respect to any other proper purpose, as the case may be, shall be the record date for the determination of stockholders with respect thereto. When a determination of stockholders entitled to vote at any meeting of stockholders has been made as provided in this section, such determination shall apply to any adjournment thereof, except where the determination has been made through the closing of stock transfer books and the stated period of closing has expired.

Section 6. The corporation shall be entitled to recognize the exclusive rights of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Delaware.

ARTICLE VIII.

General Provisions

Section 1. The Board of Directors may declare and the corporation may pay dividends on its outstanding shares in cash, property, or its own shares pursuant to law and subject to the provisions of its Certificate of Incorporation.

Section 2. The Board of Directors may by resolution create a reserve or reserves out of earned surplus for any purpose or purposes, and may abolish any such reserve in the same manner.

Section 3. The Board of Directors must, when requested by the holders of at least one-third of the outstanding shares of the corporation, present written reports of the business and financial affairs of the corporation.

Section 4. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate as provided in these Bylaws.

 

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Section 5. The fiscal year of the corporation shall be fixed by resolution of the Board of Directors.

Section 6. The corporate seal shall have inscribed thereon the name of the corporation and may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.

ARTICLE IX.

Amendments

These Bylaws may be altered, amended or repealed at any regular or special meeting of, or by the unanimous written consent of, the Board of Directors.

 

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Exhibit 10.1

 

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Table of Contents

 

        Page   

1.

   CONTINUATION OF TRUST      1   

2.

   PAYMENTS TO PLAN PARTICIPANTS AND THEIR BENEFICIARIES      2   

3.

   APPOINTMENT OF INDEPENDENT COMMITTEE      3   

4.

   TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO TRUST BENEFICIARY WHEN COMPANY IS INSOLVENT      3   

5.

   PAYMENTS TO THE COMPANY      4   

6.

   INVESTMENT AUTHORITY      5   

7.

   DISPOSITION OF INCOME      7   

8.

   PROXIES      7   

9.

   CORPORATE ACTIONS      7   

10.

   CLASS ACTION LITIGATION      8   

11.

   RECORDS; ANNUAL ACCOUNT      9   

12.

   RESPONSIBILITY OF TRUSTEE      10   

13.

   INDEMNIFICATION      11   

14.

   COMPENSATION AND EXPENSES OF THE TRUSTEE      12   

15.

   RESIGNATION AND REMOVAL OF TRUSTEE      13   

16.

   APPOINTMENT OF SUCCESSOR      13   

17.

   AMENDMENT OR TERMINATION      14   

18.

   MISCELLANEOUS      14   

EXHIBIT A LIST OF PLANS COVERED BY THIS AGREEMENT

     21   

EXHIBIT B SECRETARY’S CERTIFICATE

     17   

EXHIBIT C BENEFIT PAYMENT SERVICES TO BE PROVIDED BY THE TRUSTEE

     18   

EXHIBIT D INFORMATION TO BE PROVIDED FOR BENEFIT PAYMENT SERVICES

     19   

EXHIBIT E ELECTRONIC ACCESS

     20   
SCHEDULE 1 SCOPE OF SERVICES      22   

 

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TRINITY INDUSTRIES, INC. SUPPLEMENTAL RETIREMENT PLAN TRUST

 

This Agreement ( “Agreement” ) effective as of the             day of March, 2012 by and between Trinity Industries, Inc. ( “Company” ) and JPMorgan Chase Bank, N.A. ( “Trustee” );

RECITALS

(A) The Company has adopted the Trinity Industries, Inc. Supplemental Retirement and Director Retirement Plan.

(B) The Company has incurred or expects to incur liability under the terms of such Plan(s) with respect to the individuals participating in such Plan(s);

(C) The Company wishes to continue a trust (hereinafter called “Trust”) previously established and wishes to contribute to the Trust assets that shall be held therein, subject to the claims of the Company’s creditors in the event of the Company’s Insolvency, as herein defined, until paid to Plan participants and their beneficiaries in such manner and at such times as specified in the Plan(s);

(D) The Company desires to appoint JPMorgan Chase Bank, N.A. as trustee of the Trust pursuant to resolutions of the Company’s governing body. The Company shall provide the Trustee with a certified copy of such resolutions substantially in the form annexed hereto as Exhibit B;

(E) It is the intention of the parties that this Trust shall constitute an unfunded arrangement and shall not affect the status of the Plan(s) as an unfunded plan maintained for the purpose of providing deferred compensation for a select group of management or highly compensated employees for purposes of Title I of the Employee Retirement Income Security Act of 1974;

(F) It is the intention of the Company to make contributions to the Trust to provide itself with a source of funds to assist it in the meeting of its liabilities under the Plan(s);

(G) The Company and the Trustee desire to amend and restate the instrument governing the Trust in its entirety.

AGREEMENT

 

1. Continuation of Trust

(a) The Company and the Trustee hereby amend and restate the instrument governing the Trust and continue the Trust as the funding vehicle for the Plan, upon the terms and conditions set forth below. “Trust Fund” means all assets held by the Trustee in the Trust under the provisions of this Agreement at the time of reference.

(b) The Trust hereby continued shall be irrevocable by the Company.

(c) The Trust is intended to be a grantor trust, of which the Company is the grantor, within the meaning of subpart E, part I, subchapter J, chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended, and shall be construed accordingly.

(d) The principal of the Trust, and any earnings thereon, shall be held separate and apart from other funds of the Company and shall be used exclusively for the uses and purposes of Plan participants and general creditors as herein set forth. Plan participants and their beneficiaries shall have no preferred claim on, or any beneficial ownership interest in, any assets of the Trust. Any rights created under the Plan(s) and this Agreement shall be mere unsecured contractual rights of Plan participants and their beneficiaries against the Company. Any assets held by the Trust will be subject to the claims of the Company’s general creditors under federal and state law in the event of the Company’s Insolvency, as defined in Section 3(a) herein.

(e) The Company, in its sole discretion, may at any time, or from time to time, make additional deposits of cash or other property acceptable to the Trustee in trust with the Trustee to augment the principal to be held, administered and disposed of by the Trustee as provided in this Agreement; provided, however, that each 12-month period ending December 31, the Company shall contribute to the Trust an amount of cash or property at least equal in value to the total amount of deferrals and contributions credited to the Accounts of participants employed by the Company pursuant to the Supplemental Profit Sharing Plan during such 12-month period, and the Company shall contribute to the Trust each

 

 

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12-month period ending December 31 an amount of cash or property at least equal in value to the total amount of deferrals credited to the Accounts of participants pursuant to the Director Plan during such 12-month period. In lieu of all or a portion of the contribution to the Trust required by this paragraph, the Company may make contributions in the form of premium payments on insurance policies that are assets of the Trust in such amount and in such manner as determined by the Company.

The Company may, in its sole discretion, but shall not be obligated to, make additional deposits of cash or other property acceptable to the Trustee in trust with the Trustee to augment the principal to be held, administered and disposed of by the Trustee for purposes of funding the benefits of certain participants pursuant to any Plan other than the Supplemental Profit Sharing Plan or the Director Plan.

(g) Upon a Change in Control, as defined in the Plans, the Company shall (i) as soon as possible, but in no event more than two business days following the date of such Change in Control, notify the Trustee in writing that a Change in Control has occurred, (ii) as soon as possible, but in no event more than two business days following the date of such Change in Control, make an irrevocable contribution to the Trust in an amount, as determined by an Independent Committee, as defined below, which when added to the total value of the assets under the Trust at such time equals 125% of the total amount credited to all Accounts under the Supplemental Profit Sharing Plan and the Director Plan as of the date on which the Change in Control occurred, and (ii) on and after the date of the Change in Control, make monthly contributions to the Trust in amounts sufficient, as determined by the Independent Committee, to maintain the total value of the assets at an amount equal to 125% of the total amount credited to all Accounts under the Supplemental Profit Sharing Plan and the Director Plan.

Notwithstanding the preceding provisions of this Section 1(g), such funding after a Change in Control shall be prohibited if the Change in Control occurs in connection with a change in the Company’s financial health, within the meaning of Internal Revenue Code Section 409A(b)(2).

(h) Notwithstanding any provision of this Agreement to the contrary, the Company shall not contribute funds to the Trust during any “restricted period,” as defined in Internal Revenue Code

Section 409A(b)(3)(B), in relation to a single-employer defined benefit pension plan sponsored by the Company or any affiliate in a “controlled group” with the Company under Internal Revenue Code Section 414(b) and (c).

(i) Neither the Trustee nor any Plan participant or beneficiary shall have any right to compel deposits to the Trust.

 

2. Payments to Plan Participants and their Beneficiaries

(a) The administrative committee appointed by the Company (“Plan Committee”) shall deliver to the Trustee a schedule (the “Payment Schedule” ) that indicates the amounts payable in respect of each Plan participant (and his or her beneficiaries) or that provides other instructions acceptable to the Trustee for determining the amounts so payable, the form in which such amount is to be paid (as provided for or available under the Plan), and the time of commencement for payment of such amounts. Except as otherwise provided herein, the Trustee shall make payments to the Plan participants and their beneficiaries in accordance with such Payment Schedule and will provide the services identified in Exhibit C ( “Benefit Payment Services” ). The Company shall provide the Trustee with written instructions as to the aggregate amount of any federal, state and local taxes that may be required to be withheld with respect to the payment of benefits from the Trust, and the Trustee shall remit such amounts to the Company for payment and reporting to the appropriate taxing authorities by the Company.

(b) The entitlement of a Plan participant or his or her beneficiaries to benefits under the Plan(s) shall be determined by the Plan Committee or such party as it shall designate under the Plan(s) (which party shall not be the Trustee), and any claim for such benefits shall be considered and reviewed under the procedures set out in the Plan(s).

(c) The Company or the Plan Committee shall provide the Trustee with the data listed in Exhibit D in a format reasonably acceptable to the Trustee before the cut-off times specified in Exhibit D. The Company and the Plan Committee shall be solely responsible for the accuracy of the data provided to the Trustee.

(d) The Plan Committee shall review promptly any reports relating to the Benefit Payment Services produced by the Trustee for accuracy and completeness and after such

 

 

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review, shall bear the responsibility for the contents of reports (including but not limited to past and future periodic payments to participants and their beneficiaries). The Company shall pay the Trustee a reasonable fee for correcting any report which is incorrect due to the Trustee being provided inaccurate information. The Trustee shall have no Liability, as hereinafter defined, to the Company, the Plan Committee, any participant or beneficiary, or governmental agency or entity, including, without limitation, for the collection of, or any claim, lawsuit, penalties, consequential damages or reimbursement to the Plan or participant(s) or beneficiary(ies) arising out of any past or future incorrect payments, or past or future overpayments made to a participant or beneficiary or erroneous information reports filed with any party or governmental agency or entity in the event that the Company or Plan Committee fails to notify the Trustee of any errors in any such reports within sixty (60) days after receipt thereof.

(e) Subject to the provisions of Article 12, the Trustee’s Liability with respect to any one incident or any series of related incidents with respect to the Benefit Payment Services pursuant to this Section 2 shall be limited to an amount not in excess of one quarter of the annual fee paid for such Benefit Payment Services.

(f) The Company may make payment of benefits directly to its Plan participants or their beneficiaries as they become due under the terms of the Plan(s), in lieu of payment from the Trust. In such event, the Company may direct the Trustee to reimburse the Company for its payment of Plan benefits or other expenses paid by the Company upon the Company’s written certification that it has made such payment and the amount to be reimbursed. The Trustee shall notify the Company where principal and earnings are not sufficient to comply with the Company’s specific payment instructions.

(g) The Trustee shall have no duty to question the propriety of any direction of the Company to make payments, reimbursements or transfers, to account for funds retained in or disbursed from any accounts to which payments or transfers are made, to see to the application of payments, reimbursements or transfers, or to ascertain whether the Company’s directions to make payments, reimbursements or transfers comply with the terms of the Plan(s). The Trustee shall not incur any Liabilities hereunder and shall be fully protected by the Company against any

Liabilities from its making payments, reimbursements or transfers pursuant to the Company’s direction or failure to make any payments, reimbursements or transfers in the absence of directions if the Trustee’s action or inaction, as the case may be, is not the result of the Trustee’s fraud, negligence, or willful misconduct.

(g) Any provision of this Agreement to the contrary notwithstanding, upon and after a Change in Control, the Trustee shall make payments to Plan participants or their beneficiaries in accordance with the direction of the Independent Committee rather than the Plan Committee, regardless of whether the Trustee has received a Payment Schedule or any other form of direction from the Plan Committee to make such payments. In this case, the Trustee shall not make any payments until thereafter instructed by the Independent Committee.

 

3. Appointment of Independent Committee.

(a) Any provision of this Agreement to the contrary notwithstanding, upon a Change in Control, the Independent Committee shall:

(1) determine the amount of the irrevocable contributions to be made pursuant to Section 1(g) hereof;

(2) determine in accordance with the Plans the amounts payable with respect to each Plan participant (and his or her beneficiaries), the form in which such amounts are to be paid, and the time of commencement for payment of such amounts pursuant to Section 2(a) hereof;

(3) determine the entitlement of Plan participants and beneficiaries to benefits under the terms of the Plans pursuant to Section 2(b) hereof;

(4) direct the Trustee to make payments to Plan participants and their beneficiaries pursuant to Section 2 hereof; and

(5) select a successor trustee for the Trust if the Trustee resigns or is removed on or after the date of a Change in Control pursuant to Section 12.(b).

4. Trustee Responsibility Regarding Payments to Trust Beneficiary When the Company Is Insolvent

(a) The Trustee shall cease payment of benefits to Plan participants and their

 

 

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beneficiaries if the Company is Insolvent. The Company shall be considered “ Insolvent ” for purposes of this Agreement if (i) the Company is unable to pay its debts as they become due, or (ii) the Company is subject to a pending proceeding as a debtor under the United States Bankruptcy Code.

(b) At all times during the continuance of this Trust, as provided in Section 1(d) hereof, the principal and income of the Trust shall be subject to claims of general creditors of the Company under federal and state law as set forth below.

(1) The Plan Committee and the Chief Executive Officer of the Company shall have the duty to inform the Trustee in writing of the Company’s Insolvency. If a person claiming to be a creditor of the Company alleges in writing to the Trustee that the Company has become Insolvent, the Trustee shall determine whether the Company is Insolvent and, pending such determination, the Trustee shall discontinue payment of benefits to the Company’s participants or their beneficiaries.

(2) Unless the Trustee has actual knowledge of the Company’s Insolvency, or has received notice from the Company or a person claiming to be a creditor alleging that the Company is Insolvent, the Trustee shall have no duty to inquire whether an Company is Insolvent. The Trustee may in all events rely on such evidence concerning the Company’s solvency as may be furnished to the Trustee and that provides the Trustee with a reasonable basis for making a determination concerning the Company’s solvency. The Trustee shall not be considered to have knowledge or received notice of an Company’s Insolvency unless and until the knowledge or notice is actually received by:

(i) The individual, or his successor, last identified in writing by the Trustee as the proper party to receive notices; or

(ii) The individuals held out to the Company as being responsible for the day to day administration of this Agreement; or

(iii) The manager of the department in which the individuals described in Subsection (ii) above perform their duties with respect to this Agreement.

(3) If at any time the Trustee has determined that the Company is Insolvent, the Trustee shall discontinue payments to Plan participants or their beneficiaries and shall hold the assets of the Trust for the benefit of the Company’s general creditors.

Nothing in this Agreement shall in any way diminish any rights of Plan participants or their beneficiaries to pursue their rights as general creditors of the Company with respect to benefits due under the Plan(s) or otherwise.

(4) The Trustee shall resume the payment of benefits to Plan participants or their beneficiaries in accordance with Section 2 of this Agreement only after the Trustee has determined that the Company is not Insolvent (or is no longer Insolvent).

(c) Provided that there are sufficient assets, if the Trustee discontinues the payment of benefits from the Trust pursuant to Section 4(b) hereof and subsequently resumes such payments, the first payment following such discontinuance shall include the aggregate amount of all payments due to Plan participants or their beneficiaries under the Payment Schedule for the period of such discontinuance, less the aggregate amount of any payments made to Plan participants or their beneficiaries by the Company in lieu of the payments provided for hereunder during any such period of discontinuance.

 

5. Payments to the Company

To the extent that the Plan Committee at any time determines, based upon information provided to the Committee by the Trustee, that the value of the assets under the Trust exceeds 125% of the amounts credited to Plan Accounts for which the Company is liable as of the most recent valuation date plus any deferrals or contributions made since that date, upon the written direction of the Plan Committee, the Trustee shall pay such amounts as directed in writing to the Company upon receipt of written request therefor; provided, however, that no such payment of excess assets to the Company shall be directed on or after the date of a Change in Control without the written approval of two-thirds of the participants who maintain an Account pursuant to a Plan, as determined by the Independent Committee and confirmed by the Independent Committee in writing to the Trustee.

Except as provided in (i) Section 2(a) with respect to remittance to the Company of withheld taxes, (ii) Section 2(e) with respect to reimbursement to the Company of benefits paid directly to the Plan participant or his or her beneficiary and expenses paid by the Company, (iii) the above provisions of this Section 5 with respect to excess funding; and (iv) Section 17 with respect to amendment and termination the Company shall have no right or

 

 

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power to direct the Trustee to return to the Company or to divert to others any of the Trust assets before all payment of benefits have been made to Plan participants and their beneficiaries pursuant to the terms of the Plan(s). The Trustee shall not be required to independently determine whether all benefit payments have been made to Plan participants and beneficiaries pursuant to the terms of the Plan(s) and may rely upon written notification to such effect as provided by the Company.

 

6. Investment Authority

(a) The Trustee shall have no discretion or authority with respect to the investment of Trust assets, but shall act solely as a directed Trustee, and shall invest and reinvest the principal and income of the Trust and keep the Trust invested in such investments as directed by the Company or one or more investment managers appointed by the Company in accordance with Section 6(b); provided, however, that on and after the date of a Change in Control, the Independent Committee, rather than the Company, shall have the sole authority to direct the Trustee with regard to the investment of Trust assets. The Trustee shall have no duty to question any action or direction or failure to give directions of the Company or any duly appointed investment manager as to the investment, reinvestment, management, disposition or distribution of Trust assets. To the extent necessary to carry out the directions of the Company or any duly appointed investment manager, the Trustee is authorized and empowered, but not by way of limitation, with the following powers, rights and duties:

(1) to invest any part or all of the Trust without distinction between principal and income and in such securities or any kind of property, real or personal, wherever situated, including, but not limited to, common or preferred stocks, warrants, rights, securities of any open-end or closed-end management type investment company or investment trust registered under the Investment Company Act of 1940, as amended (including any such investment company or investment trust to which the Trustee or an affiliate provides services and/or from which it receives fees as investment advisor, custodian, transfer agent or sub-transfer agent, registrar, administrator or sub-administrator, or in any other capacity), exchange funds, real estate investment trusts, limited partnerships, venture capital funds, private equity investments, closely held companies, and corporate or government bonds, notes,

debentures and other evidence of indebtedness or ownership.

(2) to invest and reinvest or otherwise deposit the Trust assets in savings accounts, time deposit accounts, certificates of deposit, money market funds, or other evidences of deposit issued by the Trustee and/or any other national bank, savings and loan institution, state member bank, state non-member bank, or other depository institution, including any such entity which now or in the future is an affiliate of the Trustee.

(3) to retain in cash or cash equivalents so much of the Trust as may be required for liquidity needs of the Plan(s) and to deposit any such cash held in the Trust with any bank or savings institution, including its own banking department, without liability for interest on such cash deposits.

(4) to exercise any exchange privileges, conversion privileges and conversion rights available under any security or other property held in the Trust; consent to or dissent from the reorganization, consolidation, merger or the readjustment of the finances of, or the sale, mortgage, pledge, or lease of the property of any entity that has issued any security held in the Trust; deposit any securities or other property held in the Trust with any protective, reorganization, or similar committee and delegate discretionary power to that committee; do any other act in connection with matters described in this Section, including exercising options, making agreements or subscriptions, or paying expenses, assessments, or subscriptions which the Trustee believes is necessary or advisable.

(5) to vote any stock or other security and exercise any right appurtenant to any stock, security or other property held in the Trust, either in person or by general or limited proxy, power of attorney or other instrument.

(6) to settle, compromise, or submit to arbitration any claims, debts or damages due to or owing from the Trust, commence and defend suits or legal proceedings and represent the Trust in all suits or legal proceedings, except that the Trustee may not exercise any of the powers referred to in this Subsection without the consent of the Company if the matter relates solely to the rights or status under the Plan(s) of a participant or beneficiary or any other person.

(7) to manage, operate, repair, or improve and collect the income from any real or personal property held in the Trust.

 

 

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(8) to renew or extend, or participate in the renewal or extension of, any debt owing to the Trust and agree to a reduction in the rate of interest on any such debt or to any other modifications or changes to the terms of any mortgage or of any guarantee pertaining thereto; waive any default whether in the performance of any covenant or condition of any evidence of any debt or mortgage or in the performance of any guarantee or to enforce any rights available to the Trustee because of any default; exercise and enforce any and all rights of foreclosure, bid in property on foreclosure, take a deed in lieu of foreclosure, with or without consideration, and release the obligation on any note or other evidence of debt secured by that mortgage; and exercise and enforce in any action, suit or other proceeding at law and in equity any rights or remedies in respect to any such debt, mortgage or guarantee.

(9) to hold securities in bulk or bearer form, or deposit them with any central depository authorized under applicable law, in its own name or in the name of a nominee without the addition of words indicating that the property is held in a fiduciary capacity.

(10) to join in or oppose the reorganization, recapitalization, consolidation, sale or merger of corporations or properties, including those in which it is interested as Trustee.

(11) to make, execute and deliver, as Trustee, with or without providing for no individual liability on behalf of the Trust, any and all conveyances, mortgages, contracts, waivers, releases, leases, assignments, powers of attorney or other written instruments considered necessary and appropriate in the administration of the Trust.

(12) to lend securities to banks and broker-dealers approved by the Company, consistent with regulations issued by applicable regulatory authorities, and under the terms of a written agreement between the Company and the Trustee.

(13) except as otherwise provided in this Agreement or under applicable law, execute all instruments, engage in all proceedings and exercise all rights, powers and privileges considered necessary and appropriate to discharge the purposes of this Agreement.

(b) The Company may appoint one or more investment managers ( “Investment Managers” ), pursuant to a written investment management agreement describing the powers and duties of

the Investment Manager, to direct the investment and reinvestment of all or a portion of the Trust. The Company shall furnish the Trustee with written notice of the appointment of each Investment Manager hereunder in the form as provided by the Trustee and of the termination of any such appointment and shall cause each Investment Manager to provide the Trustee with written certification of its capacity in the form as provided by the Trustee. Such notice shall specify the assets which shall constitute the Investment Account. The Trustee shall be fully protected in relying upon the effectiveness of such appointment and the Investment Manager’s continuing satisfaction of the requirements set forth above until it receives written notice from the Company to the contrary.

(c) Any instructions received from the Company or an Investment Manager under this Section will remain in effect and will be binding until they are revoked or amended in writing or otherwise in accordance with the Trustee’s prescribed procedures and delivered to the Trustee. The Trustee is not responsible for the propriety of any directed investment, will not be required to consult with or advise the Company or Investment Manager regarding the investment quality of any directed investment, and shall have no obligation to review or make recommendations with respect to any investment made at the direction of the Company or Investment Manager. The Trustee will retain custody of any securities or other property acquired as a result of any investment directions received from the Company or Investment Manager until the Company or Investment Manager, as the case may be, directs the Trustee, in writing or otherwise in accordance with prescribed procedures, to dispose of them.

(d) The Trustee may invest in securities (including stock or rights to acquire stock) or obligations issued by the Company. All rights associated with assets of the Trust shall be exercised by the Trustee or the person designated by the Trustee, and shall in no event be exercisable by or rest with Plan participants.

The Company shall have the right, at any time, and from time to time in its sole discretion, to substitute assets acceptable to the Trustee of equal fair market value for any asset held by the Trust; provided, however, that on and after the date of a Change in Control, any assets transferred to the Trust in substitution for assets held by the Trust must consist of cash or marketable securities acceptable to the

 

 

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Independent Committee and the fair market value of the respective assets shall be determined by the Trustee. This right is exercisable by the Company in a nonfiduciary capacity without the approval or consent of any person in a fiduciary capacity.

 

7. Disposition of Income

During the term of this Trust, all income received by the Trust, net of expenses and taxes, shall be accumulated and reinvested.

 

8. Proxies

(a) The Trustee will monitor information distributed to holders of securities or other property about upcoming shareholder meetings, promptly notify the applicable Investment Manager (or the Company in the case of a Company directed account) of such information and, subject to Section 7(c), act in accordance with the instructions of the Investment Manager (or the Company, as the case may be) in relation to such meetings (the “Proxy Voting Service” ).

(b) The Proxy Voting Service is available only in certain markets, details of which are available from the Trustee on request. Provision of the Proxy Voting Service is conditional upon receipt by the Trustee of any additional documentation that may be required for certain markets.

(c) The Proxy Voting Service does not include physical attendance at shareholder meetings. Requests for physical attendance at shareholder meetings can be made but they will be evaluated and agreed to by the Trustee on a case by case basis.

(d) The Company acknowledges that the provision of the Proxy Voting Service may be precluded or restricted under a variety of circumstances. These circumstances include, but are not limited to:

(i) the securities or other property being on loan or out for registration;

(ii) the pendency of conversion or another Corporate Action (as hereinafter defined);

(iii) the securities or other property being held in a margin or collateral account at the Trustee or another bank or broker, or otherwise in a manner which affects voting;

(iv) local market regulations or practices, or restrictions by the issuer; and

(v) the Trustee being required to vote all shares held for a particular issue for all of the

Trustee’s customers on a net basis (i.e., a net yes or no vote based on voting instructions received from all its customers). Where this is the case, the Trustee will notify the applicable Investment Manager (or the Company in the case of a Company directed account).

 

9. Corporate Actions

“Corporate Action” means any subscription right, bonus issue, stock repurchase plan, redemption, exchange, tender offer, or similar matters with respect to any securities or other property that requires discretionary action by the Trust Fund, but does not include rights with respect to class action litigation or proxy voting.

(a) The Trustee will act in accordance with local market practice to obtain information concerning Corporate Actions that is publicly available in the local market. The Trustee also will review information obtained from sources to which it subscribes for information concerning such Corporate Actions. The Trustee will promptly provide that information (or summaries that reflect the material points concerning the applicable Corporate Action) to the applicable Investment Manager (or the Company in the case of a Company directed account). The Trustee does not commit, however, to provide information concerning Corporate Actions relating to securities or other property being held at the applicable Investment Manager’s (or the Company’s, as the case may be) request in a name not subject to the control of the Trustee.

(b) The Trustee will act in accordance with the instructions of the Investment Manager (or the Company, as the case may be) in relation to such Corporate Actions. If the Investment Manager (or the Company, as the case may be) fails to provide the Trustee with timely instructions with respect to any Corporate Action, neither the Trustee nor its nominees will take any action in relation to that Corporate Action, except as otherwise agreed in writing by the Trustee and the applicable Investment Manager (or the Company, as the case may be) or as may be set forth by the Trustee as a default action in the notification it provides under Section 8(a) with respect to that Corporate Action.

(c) In the event that, as a result of holding of securities or other property in an omnibus account, the Trust receives fractional interests in securities or other property arising out of a Corporate Action or class action litigation, the Trustee is directed to credit the Trust Fund with the amount of cash the Trust Fund would have

 

 

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received had the securities or other property not been held in an omnibus account, and the Trust Fund shall relinquish to the Trustee its interest in such fractional interests. If some, but not all, of an outstanding class of securities or other property is called for redemption, the Trustee may allot the amount redeemed among the respective beneficial holders of such class of securities or other property on a pro rata basis or in a similar manner the Trustee deems to be fair and equitable.

 

10. Class Action Litigation

(a) (i) Any notices received by the Trustee’s corporate actions department about settled securities class action litigation that requires action by affected owners of the underlying securities or other property will be promptly notified to the Company if the Trustee, using reasonable care and diligence in the circumstances, identifies that the Trust Fund was a shareholder and held the relevant securities or other property in the Trust Fund with the Trustee at the relevant time. The services set forth in this Section 9 are available only in certain markets, details of which are available from the Trustee on request.

(ii) Except as otherwise provided in this Section 9, the Trustee will provide the following administrative services with respect to notifications of securities class actions that the Trustee may receive from time to time with regard to the Trust Fund’s accounts:

(A) preparing and submitting claims and supporting documentation on the Trust’s behalf in respect of securities class action notifications relating to the securities held in the Trust Fund’s Accounts during the relevant class period;

(B) responding to inquiries from claims administrators arising from the Trust’s participation in securities class actions and making changes to the filings of claim forms as needed to address such inquiries. Where additional information is required to make such changes, the Trustee will promptly contact the Company;

(C) communicating with claims administrators from time to time, in the Trustee’s discretion, with regard to the status of the Trust Fund’s claims; and

(D) crediting the Trust Fund upon receipt of claim proceeds from the claims administrator.

(ii) Schedule 1 lists those markets, types of securities class actions and limitations, if any, under which the Trustee provides the class action services under this Section 9. The Trustee may from time to time, in the Trustee’s discretion, modify such Schedule upon notice to the Company.

(iv) Except as otherwise expressly agreed by the parties, the services shall only be provided in respect of securities class action notifications listed on Schedule 1.

(v) When the Trustee completes and files claim forms or other documentation on the Trust Fund’s behalf, the Trustee shall be acting solely in a clerical capacity as the Company’s agent and shall not be a fiduciary to the Plan with respect to the performance of the services in the Section 9, even though, in its capacity as trustee, it may act separately as a fiduciary. The Trustee is not making any representation or warranty as to the advisability of the Trust participating in the securities class action; the Trustee is not representing any view of the Trustee in relation to the securities class action; and the Trustee is not making any representation or warranty as to the likely outcome of any class action, participation in which is wholly at the Company’s request and for the Trust Fund’s risk.

(vi) The Trustee will not file claims in respect of the Trust Fund’s securities transactions whilst such securities were held at other trustees or custodians or in a name that was not under the control of the Trustee during the relevant class period unless otherwise agreed in writing. If the Company so requests the Trustee to include such transactions, the Company represents that such information provided to the Trustee is true, correct and complete and agrees to indemnify and hold the Trustee harmless from any and all liabilities that may result from such transactions.

(vii) The Trustee shall not be obliged to file a claim or take any action in any securities action where the Trustee reasonably determine such securities class action proceeding does not conform with the standards or market practices prevailing in the relevant market.

(viii) The Trustee shall not be obliged to file a claim or take any action in any securities class action where such securities class action would require the Trustee to file a claim in its own name due to applicable law, regulation or market practice in the relevant market. The Trustee will promptly inform the Company in writing each time such a situation arises.

 

 

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(b) (i) When the Trustee has received in accordance with market practice a securities class action notification, the Trustee shall, as contemplated by this Agreement, research records of accounts to identify the Trust’s interest, if any, with respect to any such securities class action notification and shall notify the Committee of the same by posting such notice on the Trustee’s website.

(ii) The Company shall instruct the Trustee prior to its standard cut-off time whether the Committee disagrees with any of the information provided by the Trustee under Clause 2(a) or if the Company does not wish the Trustee to proceed with filing a claim on the Trust’s behalf, as applicable in such market.

(iii) Except with respect to securities issued by the Company, unless the Trustee has received Instructions not to file a claim on the Trust’s behalf at its central securities class actions department by the cut-off time, the Trustee shall, to the extent applicable in such market, be under standing instructions to complete and file the required claim forms for the particular securities class action with the claims administrator. The Trustee will not file claims in respect of securities issued by the Company but will assist the Company in completing any documentation reasonably necessary for the Company to file such claim.

(iv) The Trustee shall present with the claim any supporting information that the Trustee has in its possession and that is required as part of the filing as set out in the securities class action notification. The Trustee shall be authorized to disclose such information regarding the Trust Fund as may be reasonably required to complete and file claims on the Trust’s behalf.

(c) (i) The Company will provide the Trustee with such information and documentation as the Trustee may reasonably require in connection with the services under this Section 9.

(ii) The Company acknowledges that in relation to any securities class action it is important that only one claim is filed on the Trust’s behalf in respect of a custodial holding or securities transaction. If, in the same securities class action, multiple claims are submitted on the Trust’s behalf for the same custodial holding, then all such claims might be rejected by the claims administrator. Therefore, where a claim is to be submitted by the Trustee as set out in a

notification, as provided by this authorization, no other party should submit a claim on the Trust’s behalf for the same custodial holding or securities transaction in the same securities class action and the Trustee shall have no duty to check whether any other claims have been filed by any third party on the Trust’s behalf in the same securities class action. Subject to Subsection (d) the Trustee will have no responsibility in the event that a claim is rejected on the basis that a duplicate claim has been filed by the Company or another party.

(iii) Should the Company engage a third party to make a claim on the Trust’s behalf in respect of a custodial holding or securities transaction with the Trustee, the Company shall be responsible for instructing the Trustee not to file a claim on the Trust’s behalf by the deadline referred to in the relevant notification.

(d) In the event that the Trustee is notified by the claims administrator that it has rejected a claim, the Trustee will use reasonable endeavors to contact the Company and discuss, in good faith, how to cure the rejected claim, if possible.

(e) The Company agrees that the Trustee’s annual aggregate liability with respect to losses arising out of the Additional Services provided under this Schedule (whether for breach of contract, tort, or otherwise, but excluding losses caused by fraud, negligence, or willful misconduct on the part of the Trustee) that may be incurred during any calendar year shall not exceed USD 100,000 and that this shall be the Company’s and the Trust’s exclusive remedy. No action, regardless of form, arising out of or pertaining to the Additional Services may be brought more than six years after the cause of action has accrued.

 

11. Records; Annual Account

The Trustee shall maintain appropriate records pertaining to administration of the Trust and the Trust Fund and any other records that the Company requests and which the Trustee agrees to maintain. At any time during the Trustee’s normal business hours, the Company or any person designated by the Company may audit and inspect the accounts, books and records of the Trustee maintained in connection with the Trust Fund. Within 90 days following the close of each fiscal year of the Trust and within 90 days following the effective date of the removal or resignation of the Trustee or termination of the Trust, the Trustee shall file with the Company a written accounting of all Trust Fund transactions since the most recent report was filed. The

 

 

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Company may approve this accounting by giving written notice of approval to the Trustee. The Company will be deemed to have approved any accounting to which it has not objected by giving the Trustee written notice of its objection within 60 days after receiving the accounting. If the Company approves the accounting in writing (or fails to object, in writing, within 60 days after receiving the accounting), the Trustee shall be released and discharged as to all items, matters and things included in that accounting (except as to any item, matter or thing that (i) is attributable to the Trustee’s fraud, gross negligence, criminal violation, or willful misconduct, or (ii) could not have been discovered by a reasonably diligent review of the accounting). The Trustee also may have its accounts settled by judicial proceedings. In such event, only the Trustee and the Company shall be necessary parties although the Trustee, in its discretion, may join as defendants any other person or persons who may have or claim an interest in the Trust Fund. Except as otherwise provided by applicable law, only the Company may require the Trustee to prepare an accounting under this Section or may institute an action or proceeding against the Trustee with respect to any accounting delivered under this Section.

 

12. Responsibility of Trustee

(a) The Trustee shall perform those duties under this Agreement that constitute it as a fiduciary under ERISA in accordance with the standard of care set forth in Section 404(a) of ERISA; the Trustee shall exercise reasonable care with respect to its remaining duties and obligations under this Agreement.

(b) The Trustee shall not be required to defend any suit or other action against the Trust Fund unless it holds assets in the Trust Fund sufficient for, or has been indemnified to its satisfaction for, its reasonable counsel fees, costs, disbursements and all other reasonable associated expenses and liabilities to which it may, in its judgment, be subjected on account of that suit or other action. The Trustee may seek reimbursement for such expenses from the Company as described in Section 13(a) or may apply any asset of the Trust Fund to meet those expenses and liabilities.

(c) The Trustee has the right, but not the obligation, to consult with counsel of its own choosing, who also may be counsel for the Trustee or the Company, and to act or decline to act in

accordance with such counsel’s advice. The Trustee may also act or decline to act in accordance with the opinion or determination of the Company’s auditor with respect to matters within the authority of the auditor. To the extent permitted by law, the Trustee shall have no Liability in any respect for any action taken, suffered or omitted in good faith by the Trustee either in accordance with the advice of counsel chosen by the Trustee, or in accordance with any opinion of counsel to the Company addressed and delivered to the Trustee, or in accordance with the opinion or determination of the Company’s auditor provided that the Trustee reasonably took or omitted to take action pursuant to such advice.

(d) The Trustee may use third party delivery services and providers of information regarding matters such as pricing, proxy voting, Corporate Actions and class action litigation and use local agents to provide extraordinary services such as attendance at annual meetings of issuers of securities or other property). Provided that the Trustee satisfies the applicable standard of care under Section 11(a) of this Agreement in the selection and retention of such third party providers and local agents, it will not be responsible for any errors or omissions made by them in providing the relevant information or services.

(e) The Trustee may hire agents, accountants, actuaries, investment advisors, financial consultants or other professionals to assist it in performing any of its duties or obligations hereunder. The Trustee shall not be liable for any acts or omissions of any such person provided that the Trustee selects and supervises that person in accordance with the standard of care set forth in Section 11(a) of this Agreement.

(f) Subject to the terms of this Agreement, the Trustee shall have, without exclusion, all powers conferred on trustees by applicable law, unless expressly provided otherwise herein, provided, however, that if the Trustee agrees to hold an insurance policy as an asset of the Trust, the Trustee shall have no responsibility to review the policy or the creditworthiness of the issuer thereof at any time or from time to time or to determine the amount of premium to be paid, and no power to name a beneficiary of the policy other than the Trust, to assign the policy (as distinct from conversion of the policy to a different form) other than to a successor Trustee, or to loan to any person the proceeds of any borrowing against such policy. The Company may make premium payments directly to the insurance carrier with respect to any insurance policy held as an asset of the Trust.

 

 

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(g) Each direction, notice, request, or approval by the Company (whether or not certified to the Trustee in writing) shall constitute a certification by the Company to the Trustee that such direction conforms with the Plan(s) and applicable law.

(h) The Trustee shall not be under any duty to require payment of any contributions to the Trust, or to see that any payment made to it is computed in accordance with the provisions of the Plan(s), or otherwise be responsible for the adequacy of the Trust to meet and discharge any liabilities under the Plan(s).

(i) Notwithstanding any powers granted to the Trustee pursuant to this Agreement or to applicable law, the Trustee shall not have any power that could give this Trust the objective of carrying on a business and dividing the gains therefrom, within the meaning of section 301.7701-2 of the Procedure and Administrative Regulations promulgated pursuant to the Internal Revenue Code.

(j) Unless otherwise specifically required by this Agreement, directives, instructions and other communications under this Agreement or relating to the Trust Fund (including, without limitation, instructions regarding the investments of the Trust Fund and directions to make benefit payments and other disbursements) must be provided in writing or by telex, fax or facsimile transmission, bank wire or other teleprocess or electronic or trade information system acceptable to the Trustee.

(k) “Security Procedure” means security procedures to be followed by the Company upon the issuance of an instruction and/or by the Trustee upon the receipt of an instruction, so as to enable the Trustee to verify that such instruction is authorized, as set forth in service level documentation in effect from time to time between the parties with respect to the services set forth in this Agreement, or as otherwise agreed in writing by the parties. A Security Procedure may, without limitation, involve the use of algorithms, codes, passwords, encryption or telephone call backs, and may be updated by the Trustee from time to time upon notice to the Company. The Company acknowledges that Security Procedures are designed to verify the authenticity of, and not detect errors in, instructions. For the avoidance of doubt, the parties agree that a SWIFT message issued in

the name of the Trust through any third party utility agreed upon by the parties as being a method for providing instructions and authenticated in accordance with that utility’s customary procedures, shall be deemed to be an authorized instruction.

(l) The duties and obligations of the Trustee shall be limited to those expressly imposed upon it by this Agreement or subsequently agreed upon by the parties in writing, notwithstanding any reference herein to the Plan(s), or to the provisions thereof, it being expressly agreed that the Trustee is not a party to the Plan(s). The Trustee has no responsibility for the application of the terms or administration of the Plan(s), including, without limitation, the determination of matters relating to the eligibility of any employee to become a participant or remain a participant, the amount of benefit which a participant or beneficiary is entitled to receive, whether a distribution to a participant or beneficiary is appropriate, or the size and type of any insurance policy to be purchased from any insurer for any participant; the Company has these responsibilities under the Plan(s).

 

13. Indemnification

(a) The Company shall indemnify and hold harmless the Trustee, its affiliates, and their respective nominees, directors, officers, employees and agents (each an “Indemnified Person” ) from and against any and all Liability to which any Indemnified Person may be subjected as a result of this Agreement or the Trustee’s performance of services hereunder, including, but not limited to, any Liability arising from (i) any action or failure to act resulting from compliance with proper instructions of the Company or any other person authorized by the Company to give directions to the Trustee, or (ii) by reason of any breach of any statutory or other duty owed to the Plan(s) or Plan participants by the Company, or any of its officers, directors, employees, or agents; provided that the Trustee does not participate knowing in, or knowingly undertake to conceal, any act or omission of any such person acting as a fiduciary to the Plan(s), knowing such act or omission to be a breach of fiduciary responsibility by such person.

(b) The Trustee, its affiliates, and their officers, agents and employees may bring action against the Company to contribute to the satisfaction of any Liability to the extent that the Liability (i) is not subject to indemnification under Subsection (a);and (ii) is caused by the culpable

 

 

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conduct of the Company or any of its affiliates or agents, including but not limited to, any Investment Manager.

(c) The Trustee will be liable for the Trust’s or the Company’s direct damages to the extent they result from the Trustee’s fraud, negligence or willful misconduct in performing its duties as set out in this Agreement. Nevertheless, under no circumstances will the Trustee be liable for any indirect, incidental, consequential or special damages (including, without limitation, lost profits) of any form incurred by any person or entity, whether or not foreseeable and regardless of the type of action in which such a claim may be brought, with respect to the Accounts, the Trustee’s performance under this Agreement, or the Trustee’s role as trustee. In addition, the Trustee shall reimburse the Company and the Committee (collectively, the “Company Indemnitees”) for any other Liability payable by the Company Indemnitees to a third party to the extent such Liability is determined by a final, unappealable judgment of a court of competent jurisdiction to be attributable to the Trustee’s negligence, fraud, or willful misconduct, provided, however, that the Trustee shall not be obligated to reimburse any Company Indemnitee for Liability that constitute consequential, special or incidental damages of any party and provided further that the Company Indemnitees have taken reasonable steps to mitigate damages.

(d) The foregoing rights of indemnification and contribution shall not supersede any common law or equitable rights or remedies which may be available.

(e) For purposes of this Agreement, “Liabilities” means any liabilities, losses, claims, costs, damages, penalties, fines, obligations, taxes (other than taxes based solely on the Trustee’s income) or expenses of any kind whatsoever (including, without limitation, reasonable attorneys’, accountants’, consultants’ or experts’ fees and disbursements).

(f) The provisions of this Section 13 shall survive the termination of this Agreement.

 

14. Compensation and Expenses of the Trustee

(a) The Trustee shall be paid such reasonable compensation as shall from time to time be agreed upon by the Company and the Trustee. Such compensation and all reasonable and proper expenses of administration of the Trust, (including, without limitation, counsel fees

and legal fees and tax or related fees incidental to processing charged directly or indirectly by governmental authorities, issuers, or their agents) shall be withdrawn by the Trustee out of the Trust Fund unless paid by the Company, but such compensation and expenses shall be paid by the Company if the same cannot by operation of law be withdrawn from the Trust Fund. All payments under this Article 13 may be made from the Trust Fund without approval of or instructions from the Company in the event that the Company have not paid the same or notified Trustee in writing of their intent to pay by the billing period subsequent to the charge. If the Company disputes an invoice it shall nevertheless pay, or allow the Trustee to deduct on or before the date that payment is due, such portion of the invoice that is not subject to a bona fide dispute. The Trustee shall be entitled, as an additional part of its compensation under this Agreement, to the earnings derived from use of funds (“float”) that may be held (i) as uninvested trust cash, (ii) as a result of failed securities transactions or (iii) in demand deposit or other non-interest bearing accounts established for the payment of benefits or Plan disbursements or that are otherwise maintained for similar purposes in administering the Trust Fund. The float period is as follows: (i) for benefit disbursements the period commences on the date of the check in payment of such benefits and ends on the date the check is presented to the Trustee for payment; (ii) for failed securities transactions the period commences on the contractual settlement date and ends on the date the transaction is settled or cancelled at the direction of the Investment Manager, Plan Administrator or the Employer, as the case may be; (iii) for uninvested cash the period commences when such cash is received and end on the date such cash is invested pursuant to instructions. There is no specific rate that the Trustee earns on float. Rather, the Trustee takes amounts held in all of its customers’ deposit accounts and may invest all or a portion of such amounts in a variety of financial instruments including, but not limited to loans to customers and investment securities. Any remaining funds are held at the Federal Reserve overnight and earn the Federal Funds Effective Rate less FDIC insurance and any other associated costs, if any. With respect to non-US dollar accounts, remaining funds are held at the central bank of the country where the account is held and earn interest at that central bank’s overnight rate less any costs associated with such monies.

 

 

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(b) The Trustee is authorized to advance cash or securities to effect the orderly processing and settlement of securities and other financial market transactions and the distribution of funds from the Trust in accordance with the Trustee’s established settlement policies and procedures for overdraft protection services. The Trustee shall be entitled to immediate repayment of any such advanced funds plus the Trustee’s customary overdraft charges and shall bear interest at the applicable rate charged by the Trustee from time to time, which, as of the date of this Agreement, is the Federal Funds rate plus two hundred basis points, for such overdrafts, from the date of such advance to the date of payment. Whenever such an advance is made, the Trustee shall have a security interest in and a lien on the securities or other property to the extent and for the duration of such advance until repaid and all the rights of a secured party under the New York Uniform Commercial Code. Except with respect to real estate and deferred capital contributions to investments in alternative assets, securities or other property shall not be subject to any encumbrance or security interest that has priority over the security interest, lien and rights of set off granted to the Trustee under this Agreement over securities or other property, to secure fees and charges in the ordinary course of business (including costs of purchases of securities or other property) or returned items and charge backs in the ordinary course of business. The Company undertakes that it will not create or permit to subsist any such encumbrance or security interest to the extent provided in this Subsection (b) over such securities or other property. The Trust shall be deemed to be in default with respect to any such overdraft upon the occurrence of any event with respect to the Company of the type specified in section 365(e)(1) of the U. S. Bankruptcy Code, as amended from time to time.

(c) Without prejudice to the Trustee’s rights under Applicable Law, the Trustee may set off against any indebtedness any amount standing to the credit of any of the Company’s or Trust Fund’s accounts (whether deposit or otherwise) with any Trustee branch or office or with any Affiliate of the Trustee. For this purpose, the Trustee shall be entitled to accelerate the maturity of any fixed term deposits.

 

15. Resignation and Removal of Trustee

(a) The Trustee may resign at any time by giving written notice to the Company at least 60

days before its effective date unless the Company and the Trustee agree to reduce this period.

(b) The Company may remove the Trustee at any time by giving written notice to the Trustee at least 60 days before its effective date unless the Company and the Trustee agree to reduce this period.

(c) Upon resignation or removal of the Trustee and appointment of a successor Trustee, the resigning or removed Trustee shall transfer and deliver all assets to the successor Trustee after reserving such reasonable amount as it shall deem necessary to provide for any expenses and payments then chargeable against the Trust Fund for which the Trust Fund may be liable, or for payment of the retiring Trustee’s fees and expenses in connection with the settlement of its account or otherwise. If the assets so withheld shall be insufficient or excessive for such purposes, the retiring Trustee shall be entitled to reimbursement for any deficiency out of the Trust Fund from the successor Trustee, or shall deliver the excess to the successor Trustee, as the case may be.

(d) If the Trustee resigns or is removed, a successor shall be appointed, in accordance with Section 15 hereof, by the effective date of resignation or removal under paragraphs (a) or (b) of this Section. If no such appointment has been made, the Trustee may apply to a court of competent jurisdiction for appointment of a successor or for instructions. All expenses of the Trustee in connection with the proceeding shall be allowed as administrative expenses of the Trust.

 

16. Appointment of Successor

(a) If the Trustee resigns or is removed in accordance with Section 14(a) or (b) hereof, the Company may appoint as successor any third party, such as a bank trust department or other party that may be granted corporate trustee powers; provided, however, that if the Trustee resigns or is removed on or after the date of a Change in Control, the Independent Committee shall select a successor trustee in accordance with this Section 16. The appointment of a successor shall be effective when accepted in writing by the new trustee, who shall have all of the rights and powers of the former trustee, including ownership rights in the Trust assets. The former trustee shall execute any instrument necessary or reasonably requested by the Company or the successor trustee to evidence the transfer.

 

 

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(b) The successor trustee need not examine the records and acts of any prior trustee, and may retain or dispose of existing Trust assets, subject to Sections 10 and 11 hereof. The successor trustee shall not be responsible for, and the Company shall indemnify and defend the successor trustee from, any claim or liability resulting from any action or inaction of any prior trustee or from any other past event or any condition existing at the time it becomes successor trustee.

(c) Any corporation into which the Trustee or any successor corporate trustee hereunder may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Trustee or any successor trustee may be a party, or any corporation to which all or substantially all the trust business of the Trustee or any successor trustee may be transferred, shall thereupon become and be the trustee of the Trust with the same effect as though specifically so named and without the filing of any instrument or performance of any further act.

 

17. Amendment or Termination

(a) This Agreement may be amended by a written instrument executed by the Trustee and the Company. Notwithstanding the foregoing, (i) no such amendment shall make the Trust revocable, and (ii) this Trust Agreement may not be amended on or after the date of a Change in Control without the written consent of a majority of the participants in the Plans.

(b) The Trust shall not terminate until the date on which Plan participants and their beneficiaries are no longer entitled to benefits pursuant to the terms of the Plan(s). Upon termination of the Trust, any assets remaining in the Trust shall be returned to the Company.

Upon written approval of all of the participants (including any beneficiaries of deceased participants entitled to payment of benefits pursuant to the terms of the Plans) (as determined solely by the Company), the Company may notify the Trustee of such written approval and direct the Trustee to terminate this Trust prior to the time all benefit payments under the Plans have been made. Upon termination of the Trust, any assets remaining in the Trust shall be returned to the Company.

 

18. Miscellaneous

(a) Any provision of this Agreement prohibited by law shall be ineffective to the extent of any such prohibition, without invalidating the remaining provisions hereof.

(b) Benefits payable to Plan participants and their beneficiaries under this Agreement may not be anticipated, assigned (either at law or in equity), alienated, pledged, encumbered or subjected to attachment, garnishment, levy, execution or other legal or equitable process.

(c) This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to its choice of law rules, except that the foregoing shall not reduce any statutory right to choose New York law or forum. The United States District Court for the Southern District of New York shall have the sole and exclusive jurisdiction over any lawsuit or other judicial proceeding relating to or arising from this Agreement. If that court lacks federal subject matter jurisdiction, the Supreme Court of the State of New York, New York County shall have sole and exclusive jurisdiction. Either of these courts shall have proper venue for any such lawsuit or judicial proceeding, and the parties waive any objection to venue or their convenience as a forum. The parties agree to submit to the jurisdiction of any of the courts specified and to accept service of process to vest personal jurisdiction over them in any of these courts. The parties further hereby knowingly, voluntarily and intentionally waive, to the fullest extent permitted by applicable law, any right to a trial by jury with respect to any such lawsuit or judicial proceeding arising or relating to this Agreement or the transactions contemplated hereby. To the extent that in any jurisdiction Company may now or hereafter be entitled to claim, for itself or its assets, immunity from suit, execution, attachment (before or after judgment) or other legal process, Company shall not claim, and it hereby irrevocably waives, such immunity.

 

 

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(d) The Company shall certify to the Trustee the names and specimen signatures of those persons entitled to act on behalf of the Company or any affiliate of the Company who adopts the Plan pursuant to subsection (i) below (an “Employer”) (in the form as provided by the Trustee) (“Authorized Persons”). Such certificates will be conclusive proof of the authority of those named until the Trustee is provided with a subsequent certificate stating that such authority is withdrawn. The Trustee may rely upon any instrument, certificate or document it reasonably believes to be genuine and to have been signed or presented by an authorized person. The Trustee shall not be required to inquire into or to determine the validity of the Plan(s), this Agreement or any other document, instruction or authorization which it believes to be genuine, or their proper execution or adoption by the Company.

(e) The Company, or its designated agent, are responsible for the timely and accurate provision of any necessary information to the Trustee to enable the Trustee to perform its duties hereunder, including, but not limited to information relating to distributions to participants. The Trustee shall not be responsible for the completeness and accuracy of the material and information provided to it under this Agreement.

(f) The terms and conditions, procedures, and rights and obligations of the parties with respect to the Trustee’s provision of record keeping, funds transfer, depository, banking, and other services for or on behalf of the Plan(s) or Trust may from time to time be described in and/or subject to separate written procedures, agreements, user guides, service terms or other instruments (“Services Documents” ), which are hereby incorporated by reference and made a part hereof. In the event of a conflict between this Agreement and any Services Documents, the provisions of the Services Documents shall control with respect to the subject matter thereof, subject at all times to the provisions of applicable law.

(g) The Trustee will maintain and update from time to time and implement, when necessary, business continuation and disaster recovery procedures with respect to its directed trustee business that it determines from time to time meet reasonable commercial standards. The Trustee will have no liability, however, for any damage,

loss, expense or liability of any nature that any Person may suffer or incur, caused by an act of God, fire, flood, civil or labor disturbance, war, terrorism, act of any governmental authority or other act or threat of any authority (de jure or de facto), legal constraint, fraud or forgery (other than on the part of the Trustee or its employees), malfunction of equipment or software (except where such malfunction is primarily and directly attributable to the Trustee’s negligence in maintaining the equipment or software), failure of or the effect of rules or operations of any external funds transfer system, inability to obtain or interruption of external communications facilities, or any other cause beyond the reasonable control of the Trustee (including without limitation, the non-availability of appropriate foreign exchange).

(h) In the event that a dispute arises between a Plan participant or beneficiary and the participant’s Employer, the Company or the Trustee with respect to the payment of amounts from the Trust and the participant or beneficiary is successful in pursuing a benefit to which he or she is entitled under the terms of the Plans and this Trust against the participant’s Employer, the Company, the Trustee or any other party in the course of litigation or otherwise and incurs attorneys’ fees, expenses and costs in connection therewith, the participant’s Employer shall reimburse the participant or beneficiary for the full amount of any such attorneys’ fees, expenses and costs.

(i) Upon the written consent of the Company delivered to the Trustee, any other affiliate of the Company that adopts the Supplemental Profit Sharing Plan may become a party to this Trust by delivering to the Trustee a certified copy of a resolution of its board of directors or other governing authority adopting this Trust. For purposes of this Trust, any such affiliate that adopts this Trust with the written consent of the Company shall be an Employer hereunder.

(j) Only the Company and the Trustee are necessary parties to any action arising under or in connection with this Agreement and notice of any action need not be given to any participant, beneficiary or other person claiming an interest in the Trust Fund. However, the Trustee or the Company may join as a defendant any participant, beneficiary or other person claiming an interest in the Trust Fund. Any judgment entered or settlement reached on any matter affecting the Trust Fund will be conclusive upon all persons claiming an interest in the Trust Fund, whether or not they were notified of or joined as a party to the action.

 

 

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(k) With respect to Securities and Exchange Commission Rule 14b-2 under the U.S. Shareholder Communications Act, regarding disclosure of beneficial owners to issuers of securities, Trustee is instructed not to disclose the name, address or security positions of the Trust in response to shareholder communications requests regarding the Account.

(l) If the Company has agreed to access information concerning the Trust Fund through the Trustee’s Internet site, the Trustee may make any notifications required under this Agreement, other than notifications pursuant to Section 14, by posting it on the Internet site. Any notices given under Section 14 of this Agreement shall be sent or served by registered mail, nationally recognized delivery services, such as Federal Express (FedEx) or United Parcel Service (UPS), etc., courier services or hand delivery to the address of the respective parties as set out on the signature page of this Agreement, unless notice of a new address is given to the other party in writing. Each party to this Agreement shall notify all other parties of any change in its address in the manner provided in this Section.

(m) Access by the Company and any Investment Manager to certain applications or products of the Trustee via the Trustee’s web site or otherwise shall be governed by this Agreement and the terms and conditions set forth in Exhibit E.

(n) Section 326 of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 ( “USA PATRIOT Act” ) requires the Trustee to implement reasonable procedures to verify the identity of any person that opens a new account with it. Accordingly, the Company acknowledges that Section 326 of the USA PATRIOT Act and the Trustee’s identity verification procedures require the Trustee to obtain information which may be used to confirm the Company’s identity including without limitation the Company’s name, address and organizational documents ( “identifying information” ). The Company may also be asked to provide information about its financial status such as its current audited and unaudited financial statements. The Company agrees to provide the Trustee with and consents to the Trustee obtaining from third parties any such identifying and financial information required as a condition of opening an account with or using any service provided by the Trustee.

 

 

IN CONSIDERATION OF THE FOREGOING, the parties have caused this Agreement to be executed and delivered by their duly authorized officers as of the day and year first above written.

 

Trinity Industries, Inc.        JPMorgan Chase Bank, N.A.
By:    /s/ S. Theis Rice      By:   /s/ Kevin R. Cahill
  

 

      

 

Name:    S. Theis Rice      Name:   Kevin R. Cahill
  

 

      

 

Title:    SVP, HR & CLO      Title:   Vice President
  

 

      

 

Address:    2525 Stemmons      Address:  
  

 

      
   Dallas, TX 75207       
  

 

      

Company Tax Identification Number:

   

 

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EXHIBITS AND SCHEDULES

EXHIBIT B Secretary’s Certificate

[COMPANY]

Secretary’s Certificate

The undersigned does hereby certify that he/she is the duly elected and qualified Secretary of [Company] (the “Company”).

I further certify that the following is a true copy of resolutions duly adopted by the governing body (“Board”) of the Company:

WHEREAS, the Company sponsors one or more non-qualified deferred compensation plans and desire to establish a trust (the “Trust”); and

WHEREAS, the Company desires to appoint a trustee for the Trust, and in connection therewith to enter into a trust agreement; and

WHEREAS, the Board has reviewed a form of trust agreement (together with the exhibits, schedules and ancillary documents) provided by JPMorgan Chase Bank, N.A. (“J.P. Morgan”) for use in connection with the opening of one or more trust accounts and the conduct of such other transactions between the Company and J.P. Morgan as referred to therein. The form of trust agreement had been reviewed by an officer of the Company, and the indemnities given to J.P. Morgan in the trust agreement were noted. The Board considered the form of the trust agreement.

NOW, THEREFORE, IT IS RESOLVED that the Board hereby approves the Company’s amendment and restatement of the provisions of the Trust in the form of trust agreement (together with the exhibits, schedules and ancillary documents) completed in the manner and form presented to the Board.

FURTHER RESOLVED, that J.P. Morgan is appointed as trustee of the Trust effective upon the delivery of the assets of the Trust to J.P. Morgan.

I further certify that the individuals whose names, titles and specimen signatures appear below are duly elected, qualified and acting officers of the Company holding the positions set forth opposite their names, that their signatures as set forth below are true and genuine and that they have been duly authorized by the Board, in accordance with our By-Laws, to execute the trust agreement, tax documents and any related documentation with respect to our trust account(s) with J.P. Morgan.

 

            Name                                 Title                                 Signature             
               
               

IN WITNESS WHEREOF, I have subscribed my name this ________ day of ____________________, 20______.

 

     Secretary

(Affix Seal)

OR

¨ Organization has no Seal

 

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EXHIBIT C Benefit Payment Services to be Provided by the Trustee

[INCLUDE ONLY IF BENEFIT PAYMENT SERVICES PROVIDED – IF NOT, ENTER “N/A”]

 

  •  

Issue monthly annuity and lump sum payments either by check or electronic funds transfer (EFT)

 

  •  

Produce and mail advices for all EFT payments (unless otherwise directed)

 

  •  

Notify Company regarding all outstanding payments over 90 days

 

  •  

Supply monthly reporting through InfoWeb

 

  •  

Supply check photocopies

 

  •  

In the event of a forged endorsement, make a payment demand for the amount of the item on any honoring bank (and furnish such bank with appropriate documentation for the payment demand). Trustee shall not be required to undertake any recovery litigation.

 

  •  

Process levies, wage garnishments and other withholding orders as directed the Company.

 

  •  

Notify the Company of any levy or other withholding order received directly and comply with the same, as directed by the Company.

 

  •  

As directed by the Company, contest any levy or other withholding order upon the Company’s agreement to indemnify Trustee for its reasonable fees and expenses (including reasonable attorneys’ fees) which it may incur in contesting such levy or other withholding order.

 

  •  

Make available semi-annual SAS70 or SSAE16 independent auditor controls report, as applicable

 

  •  

Provide electronic access to plan sponsor and participant applications as listed in Schedule 1 to Exhibit E

[MAKE UPDATES AS NECESSARY]

 

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EXHIBIT D Information to be Provided for Benefit Payment Services

[INCLUDE ONLY IF BENEFIT PAYMENT SERVICES PROVIDED – IF NOT, ENTER “N/A”]

Information to be Provided by the Company or Plan Committee

 

  •  

All payee information and payment direction including:

 

  •  

Adds, changes and terminations

 

  •  

Stop and reissue requests

 

  •  

Photocopy requests

 

  •  

Authorized signature cards

 

  •  

Completed Security Administrator Form

 

  •  

Completed user access application forms, as required

 

  •  

Funding is required to the custody account at least five business days prior to the benefit payment date or such other date as is notified to the Company or Plan Committee.

Information to be Provided by Trustee

 

  •  

Cut-off times-As set forth in Trustee’s monthly processing calendar

 

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EXHIBIT E Electronic Access

1. The Trustee may permit the Company and its Authorized Persons to access certain electronic systems, applications and Data (as defined below) in connection with the Agreement (collectively, the “Products”). The Trustee may, from time to time, introduce new features to the Products or otherwise modify or delete existing features of the Products in its sole discretion. The Trustee shall endeavor to give the Company reasonable notice of its termination or suspension of access to the Products, but may do so immediately if the Trustee determines, in its sole discretion, that providing access to the Products would violate applicable law or that the security or integrity of the Products is at risk. Access to the Products shall be subject to the Security Procedures.

2. In consideration of the fees paid by the Company or the Trust Fund to The Trustee and subject to any applicable software license addendum in relation to Trustee-owned or sublicensed software provided for a particular application and applicable law, the Trustee grants to the Company a non-exclusive, non-transferable, limited and revocable license to use the Products and the information and data made available through the Products (the “Data”) for the Company’s and the Trust Fund’s internal business use only. The Company may download the Data and print out hard copies for its reference, provided that it does not remove any copyright or other notices contained therein. The license granted herein will permit use by Company’s Authorized Persons, provided that such use shall be in compliance with the Agreement, including this Exhibit.

3. The Company acknowledges that there are security, corruption, transaction error and access availability risks associated with using open networks such as the Internet, and the Company hereby expressly assumes such risks. The Company is solely responsible for obtaining, maintaining and operating all software (including antivirus software, anti-spyware software, and other Internet security software) and personnel necessary for the Company to access and use the Products. All such software must be interoperable with the Trustee’s software. Each of the Company and the Trustee shall be responsible for the proper functioning, maintenance and security of its own systems, services, software and other equipment.

4. In cases where the Trustee’s web site is unexpectedly down or otherwise unavailable, the Trustee shall, absent a force majeure event, provide other appropriate means for the Company or its Authorized Persons to instruct the Trustee or obtain reports from the Trustee. The Trustee shall not be liable for any Liabilities arising out of the Company’s use of, access to or inability to use the Products via the Trustee’s web site in the absence of the Trustee’s gross negligence or willful misconduct.

5. Use of the Products may be monitored, tracked, and recorded. In using the Products, the Company hereby expressly consents to such monitoring, tracking, and recording. Individuals and organizations should have no expectation of privacy unless local law, regulation, or contract provides otherwise. The Trustee shall own all right, title and interest in the data reflecting Company usage of the Products or the Trustee’s web site (including, but not limited to, general usage data and aggregated transaction data). The Trustee may use and sublicense data obtained by it regarding the Company’s use of the Products or the Trustee’s website, as long as the Trustee does not disclose to others that the Company was the source of such data or the details of individual transactions effected using the Products or web site.

6. The Company shall not knowingly use the Products to transmit (i) any virus, worm, or destructive element or any programs or data that may be reasonably expected to interfere with or disrupt the Products or servers connected to the Products; (ii) material that violates the rights of another, including but not limited to the intellectual property rights of another; and (iii) “junk mail”, “spam”, “chain letters” or unsolicited mass distribution of e-mail.

7. The Company shall promptly and accurately designate in writing to the Trustee the geographic location of its users upon written request. The Company further represents and warrants to the Trustee that the Company shall not access the service from any jurisdiction which the Trustee informs the Company or where the Company has actual knowledge that the service is not authorized for use due to local regulations or laws, including applicable software export rules and regulations. Prior to submitting

 

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any document which designates the persons authorized to act on the Company’s behalf, the Company shall obtain from each individual referred to in such document all necessary consents to enable the Trustee to process the data set out therein for the purposes of providing the Products.

8. The Company will be subject to and shall comply with all applicable laws, rules and regulations concerning restricting collection, use, disclosure, processing and free movement of the Data (collectively, the “Privacy Regulations”). The Privacy Regulations may include, as applicable, the Federal “Privacy of Consumer Financial Information” Regulation (12 CFR Part 30), as amended from time to time, issued pursuant to Section 504 of the Gramm-Leach-Bliley Act of 1999 (15 U.S.C. §6801, et seq.), the Health and Insurance Portability and Accountability Act of 1996 (42 U.S.C. §1320d), The Data Protection Act 1998 and Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to processing of personal data and the free movement of such data.

9. The Company shall be responsible for the compliance of its Authorized Persons with the terms of the Agreement, including this Exhibit.

 

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SCHEDULE 1

Scope of Services

The following table shows the markets and types of Class Actions for which J.P. Morgan will provide the Services.

 

MARKET   

SETTLED / NOT

SETTLED

  

INSTRUCTION

REQUIRED TO

PARTICIPATE

U.S.A.    Settled    N

 

Rabbi Trust – December 2010    Page 22

Exhibit 31.1

CERTIFICATION

I, Timothy R. Wallace, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Trinity Industries, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusion about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 26, 2012

/s/ Timothy R. Wallace

Timothy R. Wallace

Chairman, Chief Executive Officer, and President

Exhibit 31.2

CERTIFICATION

I, James E. Perry, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Trinity Industries, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusion about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 26, 2012

/s/ James E. Perry

James E. Perry

Senior Vice President and Chief Financial Officer

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Trinity Industries, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Timothy R. Wallace, Chairman, Chief Executive Officer, and President of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company, as of, and for, the periods presented in the Report.

/s/ Timothy R. Wallace

Timothy R. Wallace

Chairman, Chief Executive Officer, and President

April 26, 2012

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Trinity Industries, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James E. Perry, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company, as of, and for, the periods presented in the Report.

/s/ James E. Perry

James E. Perry

Senior Vice President and Chief Financial Officer

April 26, 2012

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 95

Information Concerning Mine Safety Violations or Other Regulatory Matters Required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act

The Company, through a wholly owned subsidiary, owned or operated a total of twelve (12) sand, gravel, and aggregate quarries in Texas, Arkansas, and Louisiana during the three month period ended March 31, 2012. Section 1503 of the Dodd-Frank Wall Street Reform and Consumer Protection Act requires that we disclose in our periodic reports filed pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 specific information about each of our quarries comprised of notices, violations, and orders made by the Federal Mine Safety and Health Administration (“MSHA”) pursuant to the Federal Mine Safety and Health Act of 1977 (the “Mine Act”). The following table sets forth the reportable information required for quarries operated during the three month period ended March 31, 2012.

 

Mine or Operating
Name/MSHA
Identification
Number

   Section
104
S&S
Citations
(#) 		     Section
104(b)
Orders
(#) 		     Section
104(d)
Citations
and
Orders
(#) 		     Section
110(b)(2)
Violations
(#) 		     Section
107(a)
Orders
(#) 		     Total Dollar
Value of
MSHA
Assessments
Proposed
($) 		     Total
Number
of
Mining
Related
Fatalities
(#) 		     Received
Notice of
Pattern
of
Violation
Under
Section
104(e)
(yes/no) 		     Received
Notice
of
Potential
to Have
Pattern
under
Section
104(e)
(yes/no) 		     Legal
Actions
Pending
as of
Last
Day of
Period
(#) 		     Legal
Actions
Initiated
During
Period
(#) 		     Legal
Actions
Resolved
During
Period
(#) 		 

Rye

(4102547)

     0         0         0         0         0       $ 0.00         0         No         No         0         0         0   
Belton (4101043)      0         0         0         0         0       $ 0.00         0         No         No         0         0         0   
Malloy Bridge (4102946)      0         0         0         0         0       $ 0.00         0         No         No         0         0         0   
Cottonwood (4104553)      0         0         0         0         0       $ 0.00         0         No         No         0         0         0   

Wills Point

(4104113)

     0         0         0         0         0       $ 0.00         0         No         No         0         0         0   

Waco-Angerman

(4103492)

     0         0         0         0         0       $ 0.00         0         No         No         0         0         0   
Indian Village (1600348)      0         0         0         0         0       $ 100.00         0         No         No         0         0         0   
Lockesburg (0301681)      0         0         0         0         0       $ 0.00         0         No         No         0         0         0   
Kopperl (4104450)      0         0         0         0         0       $ 0.00         0         No         No         0         0         0   

Wills Point II

(4104071)

     0         0         0         0         0       $ 0.00         0         No         No         0         0         0   

Paradise

(4103253)

     0         0         0         0         0       $ 0.00         0         No         No         0         0         0   

Anacoco

(1600543)

     1         0         0         0         0       $ 127.00         0         No         No         0         0         0   

A. Anacoco – 1 S&S Citation – electric box was not labeled so as to indicate the device controlled

B. Indian Village – 1 non-S&S Citation – a bottle of antifreeze did not have a label on it

NOTES:

(i) Violations that are likely to cause reasonably serious injury are labeled “S&S” – significant and substantial. Penalties for S&S violations are based on a formula that considers six factors: 1) history of previous violations; 2) size of operator’s business; 3) any negligence by the operator; 4) gravity of the violation; 5) the operator’s good faith in trying to correct the violation promptly; and 6) effect of the penalty on the operator’s ability to stay in business. These factors are determined from the inspector’s findings, MSHA records, and information supplied by the operator.

(ii) Alvord and Beckett operations were suspended in 2011 and are deemed “abandoned” for reporting purposes under Mine Safety and Health Act.