TRINITY INDUSTRIES INC - 10-Q Quarterly Report

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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FORM 10-Q

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(MARK ONE)
[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002

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 of Incorporation) (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 AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES [X] No [ ].

AT OCTOBER 31, 2002 THERE WERE 45,899,455 SHARES OF THE REGISTRANT'S COMMON
STOCK OUTSTANDING.

TRINITY INDUSTRIES, INC.

FORM 10-Q

TABLE OF CONTENTS

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ITEM 1. FINANCIAL STATEMENTS

TRINITY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

See accompanying notes to consolidated financial statements.

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TRINITY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

See accompanying notes to consolidated financial statements.

4

TRINITY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

See accompanying notes to consolidated financial statements.

5

TRINITY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS CASH FLOWS

See accompanying notes to consolidated financial statements.

6

TRINITY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

See accompanying notes to consolidated financial statements.

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TRINITY INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1. BASIS OF PRESENTATION

The foregoing consolidated financial statements are unaudited and have been
prepared from the books and records of Trinity Industries, Inc. and subsidiaries
("Trinity" or the "Company"). We changed our year-end in 2001 from March 31 to
December 31. In the opinion of management, all adjustments (consisting only of
normal and recurring adjustments) considered necessary for a fair presentation
have been made. Because of seasonal and other factors, the results of operations
for the three-month and nine-month periods ended September 30, 2002 may not be
indicative of expected results of operations for the year ending December 31,
2002. 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
Report for the nine months ended December 31, 2001.

NOTE 2. UNUSUAL CHARGES

In the three months ended March 31, 2001, the Company recorded pretax
charges of $55.8 million, $35.7 million after tax, or $0.97 per share, related
primarily to additional plant closings, severance, asset write downs and a
litigation reserve for an adverse jury verdict announced on May 14, 2001.

Restructuring and other reserve activity for the nine months ended
September 30, 2002 is:

NOTE 3. SEGMENT INFORMATION

As of December 31, 2001, the Company modified its segment reporting to align
the reportable segments with current management responsibilities and internal
reporting.

The new reporting format includes the following business segments: (1) the
Trinity Rail group, which manufactures and sells railcars and component parts;
(2) the Construction Products group, which manufactures and sells highway
guardrail and safety products, concrete and aggregate, girders and beams used in
the construction of highway and railway bridges and weld fittings used in
pressure piping systems; (3) the Inland Barge group, which manufactures and
sells barges and related products for inland waterway services; (4) the
Industrial Products group, which manufactures and sells container heads and
pressure and non-pressure containers for the storage and transportation of
liquefied gases and other liquid and dry products; and (5) the Trinity Railcar
Leasing and Management Services group, which provides services such as fleet
management and leasing. Finally, All Other includes the Company's captive
insurance and transportation companies, structural towers, and other peripheral
businesses.

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Sales from Trinity Rail group to Trinity Railcar Leasing and Management
Services group are recorded in Trinity Rail group and eliminated in
consolidation. Sales of railcars from the lease fleet are included in the
Trinity Railcar Leasing and Management Services group segment. Sales among
groups are recorded at prices comparable to external customers.

THREE MONTHS ENDED SEPTEMBER 30, 2002

THREE MONTHS ENDED SEPTEMBER 30, 2001

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NINE MONTHS ENDED SEPTEMBER 30, 2002

NINE MONTHS ENDED SEPTEMBER 30, 2001

NOTE 4. GOODWILL

The Company adopted SFAS No. 142, Goodwill and Other Intangible Assets,
effective April 1, 2001. Under SFAS No. 142, goodwill is no longer amortized but
reviewed for impairment annually or more frequently if certain indicators arise.
The Company completed the impairment test required upon adoption of SFAS No. 142
and determined there was no impairment to its recorded goodwill balances. There
has been no material change in the carrying amount of the Company's goodwill for
the nine months ended September 30, 2002. While the Company believes the
cyclical downturn of the railcar industry in North America has not permanently
impaired the carrying value of goodwill, impairment tests required by SFAS 142
will be completed in the fourth quarter.

Had the Company been accounting for its goodwill under SFAS No. 142 for the
entire nine months ended September 30, 2001, the Company's net loss and loss per
share would have been reduced by $0.6 million and $0.02 per share.

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NOTE 5. DEBT

In June 2002, the Company completed a secured credit agreement for $425
million. The agreement includes a $275 million 3-year revolving commitment and a
$150 million 5-year term commitment. The agreement calls for quarterly payments
of principal on the term debt in the amount of $0.375 million beginning
September 30, 2002 through June 30, 2006 and $36.0 million beginning on
September 30, 2006 and ending on the maturity date. Amounts borrowed under the
revolving commitment bear interest at LIBOR plus 2.00% (3.89% at September 30,
2002). Amounts borrowed under the term commitment bear interest at LIBOR plus
3.00% (4.92% at September 30, 2002). The agreement is secured by a portion of
the Company's accounts receivable and inventory and a portion of its property,
plant and equipment. The agreement limits the amount of capital expenditures
related to the Company's leasing business, requires maintenance of ratios
related to interest coverage, leverage, asset coverage, and minimum net worth
and restricts the amount of dividend payments. At September 30, 2002, $245.6
million was borrowed under this agreement and $125.2 million was available under
the facility, net of letters of credit outstanding under the agreement. At
September 30, 2002, the most restrictive of the debt covenants based on trailing
twelve month calculations as defined by the debt agreements allow approximately
$70.6 million additional principal and approximately $17.9 million additional
annual interest expense. The Company's projections for the next twelve months
indicate compliance with all covenants.

In June 2002 the Company's wholly-owned subsidiary Trinity Industries
Leasing Company ("TILC") through a newly formed, wholly owned, business trust
entered into a $200 million nonrecourse warehouse facility to finance or
refinance railcars acquired or owned by TILC. The facility is secured by
specific railcars and the underlying leases. Advances under the facility may not
exceed 75% of the fair market value of the railcars securing the facility less
any excluded assets as defined by the agreement. Advances under the facility
bear interest at LIBOR plus 1.775% (3.47% at September 30, 2002) and are due no
later than 30 months from the commencement date of the facility. At September
30, 2002, $124.2 million was available under this facility.

In February 2002 TILC sold $170,000,000 of 2002-1 Pass Through Certificates
with interest at 7.755%, commencing on August 15, 2002 and due semiannually
thereafter. Equipment notes issued by TILC for the benefit of the holders of the
Pass Through Certificates are collateralized by interest in certain railcars
owned by TILC and the leases pursuant to which such railcars are leased to
customers. The equipment notes, including the obligations to

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make payments of principal and interest thereon are direct obligations of TILC
and are fully and unconditionally guaranteed by Trinity Industries, Inc. as
guarantor. The proceeds of $170 million from the issuance of the equipment notes
were used to repay outstanding indebtedness of Trinity as of December 31, 2001.

On October 15, 2002, Standard & Poor's Rating Services placed the Company's
investment grade rating on credit watch with negative implications and indicated
it would meet with Company management to discuss its strategy to deal with the
downturn in the railcar industry and other relevant issues. A downgrade below
investment grade in the Company's credit rating would have the effect of
increasing the interest rate under the Company's bank lines by 1/4% which is
approximately $610 thousand of additional interest expense per year based on
debt levels at September 30, 2002, restricting up to $12 million of future cash
flows from the Company's off-balance sheet railcar financing arrangement, and in
the current environment, could impact interest rates on any new financing
arrangements but would not result in acceleration of any obligations. As the
term of the Company's existing bank facility runs through June 2005, the Company
does not have any current plans or requirements to refinance existing debt
arrangements.

Principal payments due during the next five years as of September 30, 2002,
including the above Pass Through Certificates, are (in millions) 2003 - $11.0;
2004 - $51.3; 2005 - $162.5; 2006 - $47.6; 2007 - $151.7; and $79.9 thereafter.
For amounts due under the sale/leaseback financing see footnote 9 in the Annual
Report.

NOTE 6. STOCKHOLDERS' EQUITY

On March 6, 2002, Trinity privately placed a total of 1.5 million
unregistered shares of its common stock for net proceeds of $31.2 million.
Trinity has now registered these shares.

NOTE 7. DEPOSIT AGREEMENT

The Company is a party to a deposit agreement with Altos Hornos de Mexico,
SA de C.V. ("AHMSA") which provides for funds to be deposited by the Company
with AHMSA which are then used along with other funds from the Company to
purchase steel from AHMSA. As of September 30, 2002, total funds on deposit
amounted to approximately $31.1 million. The Company recovered approximately
$8.5 million of this deposit through inventory purchases during the nine months
ended September 30, 2002. Since May 1999 AHMSA has been operating under a
judicial declaration of suspension of payments, which under applicable Mexican
law, allows companies in Mexico to (1) seek a debt restructuring agreement with
their creditors in an orderly fashion; (2) continue their operations; and (3)
avoid declaration of bankruptcy and liquidation of assets. Should AHMSA not be
able to operate under the declaration of suspension of payments because of its
financial condition, AHMSA's creditors have no access to the funds on deposit
and all funds on deposit with AHMSA under Mexican law should be returned to the
Company.

NOTE 8. OTHER, NET

Other (income) expense consists of the following items (in millions):

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NOTE 9. CONTINGENCIES

In May, 2002, a lawsuit was filed against the Company, a coating
manufacturer and several other parties by a tank barge customer, Florida Marine
Transporters, Inc., seeking recovery of damages related to the customer's
corrosion problem with eighteen tank barges purchased from the Company's Inland
Barge Group. The plaintiffs seek damages and/or recision of the purchase
contract. The purchase price of the barges was $27.6 million. This customer
presently owes the Company $3.1 million in connection with the purchase of other
barges. A second case involving similar legal and factual issues was filed on
October 7, by another customer, J. Russell Flowers, Inc., against the Company,
the coating manufacturer and several other parties regarding fifty-six hopper
barges with a claimed value of approximately $14 million seeking damages,
including punitive damages, and/or recision of the purchase contract. This
customer, pursuant to a separate contract, presently owes the Company $7.2
million in connection with tank barges purchased from the Company. An officer of
J. Russell Flowers Inc. is also a board member of Florida Marine Transporters,
Inc. Outside experts, after investigation, expressed the opinion the technical
claims presented in both cases are without merit. Issues raised in these cases
have created uncertainty in the industry regarding barge corrosion and its
causes. As a result, Trinity Marine has had communications with customers
ranging from inquiries to concerns of corrosion problems. Although this
litigation is in the early stages and the ultimate resolution is uncertain,
management believes, based on this data, the effect of this litigation and
issues raised by the litigation on the Company's financial position and results
of operations will not be material for financial reporting purposes.

In May of 2001, a judgment in the amount of $14.8 million was entered
against the Company in a lawsuit brought for an alleged breach of contract
involving the proposed production of a composite component for a refrigerated
railcar for the Company. The amount of the judgment was accrued by the Company
in fiscal 2001. The judgement is currently under appeal by the Company.

The Company is subject to federal, state, local and foreign laws and
regulations relating to the environment and to work places. The Company believes
that it is currently in substantial compliance with such laws and the
regulations promulgated thereunder.

The Company is involved in various actions relating to environmental
matters. The Company has provided reserves to cover probable and estimable
liabilities of the Company with respect to such investigations and cleanup
activities, taking into account currently available information and the
Company's contractual rights of indemnification. However, estimates of future
response costs are necessarily imprecise. Accordingly, there can be no assurance
that the Company will not become involved in future litigation or other
proceedings or, if the Company were found to be responsible or liable in any
litigation or proceeding, that such costs would not be material to the Company.

The Company is involved in various other claims and lawsuits incidental to
its business. In the opinion of management, their claims and suits in the
aggregate will not have a material adverse effect on the Company's consolidated
financial statements.

NOTE 10. NET INCOME (LOSS) PER SHARE

Diluted net income per common share is based on the weighted average
shares outstanding plus the assumed exercise of dilutive stock options less the
number of treasury shares assumed to be purchased from the proceeds using the
average market price of Trinity's common stock. Basic net income per common
share is based on the weighted average number of common shares outstanding for
the period. The numerator for both basic net income (loss) per common share and
diluted net income per common share is net income (loss). The difference between
the denominator in the basic calculation and the denominator in the diluted
calculation is attributable to the effect of employee stock options.

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NOTE 11. ACCOUNTING CHANGES

In October 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, which is effective for fiscal years
beginning after December 15, 2001. SFAS 144 addresses accounting and reporting
of long-lived assets, except goodwill, that are held and used or disposed of
through sale or other means. The Company adopted SFAS 144 as of January 1, 2002.
There was no impact to the Company's financial statements.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

GENERAL

The following discussion should be read in conjunction with the unaudited
consolidated financial statements and related notes thereto appearing elsewhere
in this document

In October 2001, we completed our merger transaction with privately owned
Thrall Car Manufacturing Company (Thrall). Due to the integration of Trinity and
Thrall's operations, separate financial information for Thrall only is not
available.

During the quarter ended June 30, 2002 the Company signed a managed services
contract to implement a new financial system and to outsource certain accounting
and processing activities. While expected to produce overall savings, this
project is expected to add ten to fifteen cents per share in incremental costs
related to training and other transition costs. The timing of the charges will
depend on project progress. During the quarter ended September 30, 2002 the
Company accrued $600 thousand in severance pay related to its outsourcing of
certain administrative functions.

During the quarter ended September 30, 2002 the Company signed a Share
Purchase Agreement to sell 100% of the shares held by the Company in one of its
Romanian railcar facilities. The Agreement provides for cash at closing and
installment payments totaling approximately $7.6 million. The Company also is
entitled to compensation from certain earn-out payments tied to post-closing
cash flows. At the time of closing, no gain will be recognized and a gain of
approximately $6.0 million will be recognized when payments are received.

UNUSUAL CHARGES

During the three months ended March 31, 2001, Trinity recorded special
pretax charges of approximately $55.8 million, $35.7 million net of tax or $0.97
per share, related primarily to additional plant closings, severance, asset
write downs and a litigation reserve for an adverse jury verdict announced May
14, 2001. All of these charges were charged to operating profit. These charges
are reflected in the following income statement categories and segments for the
nine months ended September 30, 2001. (in millions).

THREE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED WITH THREE MONTHS ENDED SEPTEMBER
30, 2001 -- RESULTS OF OPERATIONS

Revenues increased $14.7 million to $387.6 million for the three months
ended September 30, 2002 compared to $372.9 million for the three months ended
September 30, 2001, an increase of 3.9%. The increase in revenues was
attributable to Trinity Rail Group's European operations acquired last year with
the Thrall acquisition offset by the reduction in domestic railcar shipments,
reduced revenues in the Construction Products due to exiting certain lines of
business, and reduced revenues in the wind towers business.

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The following table reconciles the revenue amounts discussed under each
segment with the consolidated total revenues (in millions).

Operating profit decreased $5.1 million to $13.7 million for the three
months ended September 30, 2002 compared to $18.8 million for the same period in
2001. Reduced revenues and unabsorbed overhead due to lower North American
railcar volumes caused operating losses in the Rail group. Operating profit for
the Inland Barge group was adversely impacted by $0.7 million in cost incurred
related to litigation initiated by a tank barge customer in May.

Selling, engineering and administrative expenses decreased $0.7 million to
$39.1 million for the three months ended September 30, 2002 compared to $39.8
million for the comparable period in 2001, a decrease of 1.8%. The decrease was
a result of lower head count and cost reduction efforts.

Interest expense, net of interest income, increased $2.5 million to $8.8
million for the three months ended September 30, 2002 compared to $6.3 million
for the same period in 2001, an increase of 39.7%. The increase was attributable
to higher interest rates and higher debt levels.

Other, net was income of $3.4 million for the three months ended September
30, 2002 compared to expense of $0.1 million for the comparable period in 2001.
The income in the current quarter was primarily due to gains on sales of
property, plant and equipment.

Net income for the three months ended September 30, 2002 was $6.2 million,
or $0.14 per diluted share as compared to net income of $7.9 million, or $0.21
per diluted share, for the same period in 2001.

TRINITY RAIL GROUP

Revenues increased 9.4% for the three months ended September 30, 2002
compared to the same period in 2001. This increase in revenues was attributable
to the European operations acquired last year as part of the Thrall acquisition
offset by the current downturn in the North American railcar market. North
American railcar shipments of approximately 1,200 cars dropped approximately 31%
compared to the prior year. Operating profit margins were

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impacted by the lower production levels and price pressures in the current
competitive environment. Based on current run rates, our North American
shipments are expected to be 4,000 to 5,000 in 2002.

In the three months ended September 30, 2002, railcar sales to Trinity
Industries Leasing Company included in the Rail Group results were $31.1 million
compared to $46.6 million in the comparable period in 2001 with operating profit
of $2.6 million compared to $2.3 million for the same period in 2001. Sales to
Trinity Industries Leasing Company and related profits are eliminated in
consolidation.

CONSTRUCTION PRODUCTS GROUP

Revenues declined 3.2% for the three months ended September 30, 2002
compared to the same period in 2001. The decrease in revenues was due to exiting
certain non-core product lines. Even though revenues declined, operating profit
margins were flat due to gains in operation efficiencies and lower raw material
costs.

INLAND BARGE GROUP

Revenues declined 5.7% for the three months ended September 30, 2002
compared to the same period in 2001. The decline in revenues was primarily
attributable to decreased deliveries of hopper and tank barges. Operating profit
was adversely impacted by $0.7 million in cost incurred related to litigation
initiated by a tank barge customer in May 2002 and related issues.

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INDUSTRIAL PRODUCTS GROUP

Revenues increased 3.5% for the three months ended September 30, 2002
compared to the same period in 2001. The increase in revenues is primarily due
to an increase in Mexico LPG transport equipment sales offset by lower heads
revenues. Margins in this business improved due to manufacturing efficiencies.

RAILCAR LEASING AND MANAGEMENT SERVICES GROUP

Operating profit (loss) improved to a $12.7 million profit for the nine
months ended September 30, 2002 compared to a loss of $16.8 million for the same
period in 2001. Special charges for the nine months ended September 30, 2001
were $55.8 million. Reduced revenues and unabsorbed overhead due to lower North
American railcar volumes caused operating losses in the Rail group. Operating
profit for Inland Barge group was adversely impacted by $1.8 million in cost
incurred related to litigation and related issues initiated by a tank barge
customer in May. The operating loss in the Industrial Products group was
impacted by a $2.2 million reserve established for a long-term LPG equipment
lease receivable from a customer who began operating under bankruptcy protection
during the second quarter. Improved operating profits in the Construction
Products and All Other groups were due to exiting unprofitable product issues.

Selling, engineering and administrative expenses decreased $13.8 million to
$120.3 million for the nine months ended September 30, 2002 compared to $134.1
million for the comparable period in 2001, a decrease of 10.3%. The decrease was
a result of lower head count, cost reduction efforts and special charges
recorded in the prior year.

Interest expense, net of interest income increased $7.1 million to $25.5
million for the nine months ended September 30, 2002 compared to $18.4 million
for the same period in 2001, an increase of 38.6%. The increase was attributed
to higher interest rates, to charging off debt issuance costs of $1.3 million
related to debt that was replaced with other credit facilities in the current
period and lower interest income.

Other, net was income of $2.0 million for the nine months ended September
30, 2002 compared to income of $1.2 million for the comparable period in 2001.
The increase was due to gains on sale of property, plant and equipment in the
current period compared to the same period last year and foreign exchange losses
in the current period compared to gains in the prior year period.

Net loss for the nine months ended September 30, 2002 was $8.1 million, or
$0.18 per diluted share as compared to a net loss of $22.2 million, or $0.60 per
diluted share, the same period in 2001.

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TRINITY RAIL GROUP

Revenues declined 30.7% for the nine months ended September 30, 2002
compared to the same period in 2001. This decline is due to the current downturn
in the North American railcar market. North American railcar shipments dropped
approximately 61% compared to the prior year to approximately 3,400 cars.
Operating profit (loss) margins were impacted by of lower production levels and
price pressures in the current competitive environment.

In the nine months ended September 30, 2002, railcar sales to Trinity
Industries Leasing Company included in the Rail Group results were $88.4 million
compared to $207.7 million in the comparable period in 2001 with operating
profit of $4.8 million in 2002 compared to $10.7 million for the same period in
2001. Sales to Trinity Industries Leasing Company and related profits are
eliminated in consolidation.

CONSTRUCTION PRODUCTS GROUP

Revenues declined 5.0% for the nine months ended September 30, 2002 compared
to the same period in 2001. The decrease in revenues was primarily attributable
to closing under performing concrete and aggregate locations in Louisiana in the
second quarter and exiting the sheet pile, flange and valve businesses.
Operating profit margins increased as a result of cost reductions in the
concrete and aggregate, elimination of unprofitable products, and efficiency
improvements in the bridge business partially offset by steel cost increases in
the highway and safety business not passed on to customers.

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INLAND BARGE GROUP

Revenues increased 5.1% for the nine months ended September 30, 2002
compared to the same period in 2001. The increase in revenues was primarily
attributable to increased deliveries of hopper barges. Operating profit was
lower primarily due to cost incurred related to litigation initiated by a tank
barge customer in May 2002 and related issues and higher prior year margins on
deck barges.

INDUSTRIAL PRODUCTS GROUP

Revenues decreased 4.2% for the nine months ended September 30, 2002
compared to the same period in 2001. The decrease in revenues is primarily due
to a reduction in heads sales offset by an increase in Mexico LPG transport
equipment sales. Operating income in 2002 was impacted by a $2.2 million reserve
established for a long-term, LPG equipment lease receivable from a customer who
began operating under bankruptcy protection during the second quarter.

RAILCAR LEASING AND MANAGEMENT SERVICES GROUP

Revenues for this group include railcar lease revenue and management fees as
well as sales of railcars from our lease fleet. Railcar lease revenue and
management fees increased $16.8 million over prior year due to the increase in
the size of the lease fleet that includes both on-balance sheet railcars and
railcars we lease under operating leases. Operating profit is down due to the
increased size of the fleet that we lease compared to the fleet we own. This
shift resulted from the fact that, in the March quarter a year ago, we were
building a substantial portfolio of lease cars that were subsequently moved from
owned cars to leased cars later in the year in a sale and leaseback transaction
described in our report on Form 10-K. The reason that leased cars result in
lower operating profit margins is that

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operating lease expense on the railcars we lease includes both a depreciation
component and an interest component that is charged to operating expense. For
owned cars, only a depreciation component is charged to operating expense.
Selling, engineering and administrative expense also increased due to our
strategy to grow both the lease fleet and the managed car fleet.

Revenues from the sale of railcars from the lease fleet were $1.7 million in
the nine months ended September 30, 2002 and $7.9 million in the same period in
2001. Operating profits on these sales were $0.3 million for the nine months
ended September 30, 2002 and $1.4 million in the same period in 2001.

ALL OTHER

Revenues in All Other decreased to $31.9 million in the nine months ended
September 30, 2002 from $82.8 million for the nine months ended September 30,
2001. This decrease is primarily due to discontinuing the concrete mixer and
related products business in 2001. Additionally, a decline in the wind tower
business contributed to lower revenues and operating profits.

Operating loss was $4.9 million for the nine months ended September 30,
2002, and $19.9 million in the same period in 2001. Restructuring charges
included in the nine months ended September 30, 2001 were $8.0 million primarily
related to exiting the concrete mixer and related products business referred to
above and environmental liabilities. Excluding restructuring charges, a larger
operating loss was recorded in the same period in 2001 due primarily to
operating losses associated with concrete mixer and related products business.

RANGE OF EXPECTED LOSSES FROM OPERATIONS

Our outlook for the year is a consolidated loss per share in the range of
25 to 40 cents per share reflecting the seasonal nature of the Construction
Products Group businesses.

LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operating activities for the nine months ended
September 30, 2002 was $58.1 million compared to $111.7 million for the same
period in 2001. Capital expenditures for the nine months ended September 30,
2002 were $123.2 million, of which $96.4 million were for additions to the lease
portfolio. This compares to $229.2 million of capital expenditures for the same
period last year, of which $200.6 million was for additions to the lease
portfolio. Proceeds from the sale of property, plant and equipment were $13.9
million for the nine months ended September 30, 2002 composed primarily of the
sale of closed facilities in 2002, compared to $146.1 million for the same
period in 2001 consisting of sales of railcars from the lease fleet in a
sale/leaseback financing for $126.7 million.

In June 2002, the Company completed a secured credit agreement for $425
million. The agreement includes a $275 million 3-year revolving commitment and a
$150 million 5-year term commitment. The agreement calls for quarterly payments
of principal on the term debt in the amount of $375 thousand beginning September
30, 2002 through June 30, 2006 and $36.0 million beginning on September 30, 2006
and ending on the maturity date. Amounts borrowed under the revolving commitment
bear interest at LIBOR plus 2.00% (3.89% at September 30, 2002). Amounts
borrowed under the term commitment bear interest at LIBOR plus 3.00% (4.92% at
September 30, 2002). The agreement is secured by a portion of the Company's
accounts receivable and inventory and a portion of its property, plant and
equipment. The agreement limits the amount of capital expenditures related to
the Company's leasing business, requires maintenance of ratios related to
interest coverage, leverage, asset coverage, and minimum net worth and restricts
the amount of dividend payments. At September 30, 2002, $245.6 million was
borrowed under this agreement and $125.2 million was available under the
facility. At September 30, 2002, the most restrictive of the debt covenants
based on trailing twelve month calculations as defined by the debt agreements
allow approximately $70.6 million additional principal and approximately $17.9
million additional annual interest expense. The Company's projections for the
next twelve months indicate compliance with all covenants.

In June 2002 TILC through a newly formed, wholly owned, business trust
entered into a $200 million nonrecourse warehouse facility to finance or
refinance railcars acquired or owned by TILC. The facility is secured by
specific railcars and the underlying leases. Advances under the facility may not
exceed 75% of the fair market value of the railcars securing the facility less
any excluded assets as defined by the agreement. Advances under the facility
bear interest at LIBOR plus 1.775% (3.47% at September 30, 2002) and are due no
later than 30 months

22

from the commencement date of the facility. At September 30, 2002, $124.2
million was available under this facility.

In February 2002 TILC, sold $170,000,000 of 2002-1 Pass Through Certificates
with interest at 7.755%, commencing on August 15, 2002 and due semiannually
thereafter. Equipment notes issued by TILC for the benefit of the holders of the
Pass Through Certificates are collateralized by interest in certain railcars
owned by TILC and the leases pursuant to which such railcars are leased to
customers. The equipment notes, including the obligations to make payments of
principal and interest thereon are direct obligations of TILC and are fully and
unconditionally guaranteed by Trinity Industries, Inc. as guarantor.

On October 15, 2002, Standard & Poor's Rating Services placed the Company's
investment grade rating on credit watch with negative implications and indicated
it would meet with Company management to discuss its strategy to deal with the
downturn in the railcar industry and other relevant issues. A downgrade below
investment grade in the Company's credit rating would have the effect of
increasing the interest rate under the Company's bank lines by 1/4% which is
approximately $610 thousand of additional interest expense per year based on
debt levels at September 30, 2002, restricting up to $12 million of future cash
flows from the Company's off-balance sheet railcar financing arrangement, and in
the current environment, could impact interest rates on any new financing
arrangements but would not result in acceleration of any obligations. As the
terms of the Company's existing bank facility runs through June, 2005, the
Company does not have any current plans or requirements to refinance existing
debt arrangements.

On March 6, 2002, we privately placed a total of 1.5 million unregistered
shares of our common stock for net proceeds of $31.2 million. We have registered
these shares.

We expect to finance future operating requirements with cash flows from
operations, and, depending on market conditions, long-term and short-term debt
and privately placed equity.

CONTRACTUAL OBLIGATION AND COMMERCIAL COMMITMENTS

As of September 30, 2002 other commercial commitments related to letters of
credit has increased to $88.9 million from $81.2 as of December 31, 2001. Other
commercial commitments related to operating leases under sale/leaseback
transactions were unchanged.

RECENT PRONOUNCEMENTS

In April 2002, the FASB issued Statement of Financial Accounting Standards
No. 145 ("FAS 145"):, "Rescission of FASB Statements No. 4, 44 and 64, Amendment
of FASB Statement No. 13, and Technical Corrections." FAS 145 rescinds both
Statement of Financial Accounting Standards No. 4, "Reporting Gains and Losses
from Extinguishment of Debt" ("FAS 4") and Statement of Financial Accounting
Standards No. 64, "Extinguishments of Debt Made to Satisfy Sinking Fund
Requirements." In so doing, FAS 145 eliminates the requirement that gains and
losses from the extinguishment of debt be aggregated, and if material,
classified as an extraordinary item, net of the related income tax effect,
unless the criteria in Accounting Principles Board Opinion No. 30, "Reporting
the Results of Operations -- Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions" are met. FAS 145 amends Statement of Financial Accounting
Standards No. 44 which was issued to establish accounting requirements for the
effects of transition to the provisions of the Motor Carrier Act 1980. Because
the transition has been completed, FAS 44 is no longer necessary. FAS145 amends
Statement of Financial Accounting Standards No. 13, "Accounting for Leases"
("FAS 13") to require that certain lease modifications that have economic
effects similar to sale-leaseback transactions are accounted for in the same
manner as sale-leaseback transactions. FAS 145 also amends other existing
authoritative pronouncements to make various technical corrections, clarify
meanings or describe their applicability under changed conditions. The
provisions of FAS 145 related to the rescission of FAS 4 are effective for
fiscal years beginning after May 15, 2002. The provisions of FAS 145 related to
the amendment of FAS 13 are effective for transactions occurring after May 15,
2002. All other provisions of FAS 145 are effective for financial statements
issued on or after May 15, 2002. The provisions of this new standard are
generally applied prospectively. The adoption of this standard had no material
impact on the Company's operations.

In June 2002, the FASB issued SFAS No. 146 "Accounting for Costs Associated
with Exit or Disposal Activities" (FAS 146). This statement supercedes Emerging
Issues Task Force (EIFT) Issue No. 94-3 "Liability

23

Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)". FAS 146
requires that a liability for a cost associated with an exit or disposal
activity be recognized when the liability is incurred. Under EITF 94-3, a
liability is recognized at the date an entity commits to an exit plan. FAS 146
also establishes that the liability should initially be measured and recorded at
fair value. The provisions of FAS 146 will be effective for any exit and
disposal activities initiated after December 31, 2002.

FORWARD LOOKING STATEMENTS

This quarterly report on Form 10-Q 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 performance,
estimates, projections, goals and forecasts. Potential factors which could cause
our actual results of operations to differ materially from those in the
forward-looking statements include:

o market conditions and demand for our products;

o the cyclical nature of both the railcar and barge industries;

o abnormal periods of inclement weather in areas where construction products
are sold and used;

o the timing of introduction of new products;

o the timing of customer orders;

o price erosion;

o changes in mix of products sold;

o the extent of utilization of manufacturing capacity;

o availability of supplies and raw materials;

o price competition and other competitive factors;

o changing technologies;

o steel prices;

o interest rates and capital costs;

o taxes;

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

o changes in import and export quotas and regulations;

o business conditions in emerging economies; and

o 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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There has been no material change in our market risks since December
31, 2001.

ITEM 4. CONTROLS AND PROCEDURES

As of September 30, 2002, an evaluation was performed under the
supervision and with the participation of the Company's management, including
the CEO and CFO, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures. Based on that evaluation, the
Company's management, including the CEO and CFO, concluded that the Company's
disclosure controls and procedures were effective as of September 30, 2002.
There have been no significant changes in the Company's internal controls or in
other factors that could significantly affect internal controls subsequent to
September 30, 2002.

24

PART II

ITEM 1. LEGAL PROCEEDINGS

On May 15, 2002, Florida Marine Transporters, Inc. and JAR Assets, Inc.
filed suit in the 22nd Judicial Court, St. Tammany Parish, Louisiana against the
Company, its wholly owned subsidiary Trinity Marine Products, Inc. ("Trinity
Marine"), a coating manufacturer, a coating distributor, and three insurance
companies seeking damages related to corrosion problems with eighteen tank
barges purchased from Trinity Marine. The plaintiffs seek damages and/or
recision of the purchase contract. The purchase price of the barges was $27.6
million. A second case involving similar legal and factual issues was filed on
October 7, 2002 in the U.S. Northern District Court of Mississippi by J. Russell
Flowers, Inc. against the Company, Trinity Marine, a coating manufacturer and a
coating distributor involving fifty-six hopper barges with a claimed value of
$13,977,578. Punitive damages are sought against the Company. Issues raised in
these cases have created uncertainty in the industry regarding barge corrosion
and its causes. As a result, Trinity Marine has had communications with
customers ranging from inquiries to concerns of corrosion problems. Outside
experts, after investigation, expressed the opinion the technical claims
presented in both cases are without merit. As of this date, the Company has
found there is no scientific basis for the assertion that the coating material
is a food source for bacteria, or is causing or contributing to corrosion.
Although these cases are in early stages and the ultimate resolution is
uncertain, management believes, based on this data, the effect of this
litigation and issues raised by the litigation on the Company's financial
position and results of operations will not be material for financial reporting
purposes.

On August 30, 2002, the Company entered into a Consent Agreement and Final
Order ("CAFO") with the United States Environmental Protection Agency ("EPA")
relating to allegations that the Company failed to make certain submissions
timely to the EPA resulting in a violation of the Emergency Planning Community
Right to Know Act. The CAFO provides for the payment of a civil administrative
penalty of $90,351.

25

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a) Exhibits.

Exhibit Number Description

99.1 Certification pursuant to 18 U.S.C., Section 1350,
as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.

99.2 Certification pursuant to 18 U.S.C., Section 1350,
as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.

Notice: A copy of Exhibits omitted from the reproduction will be furnished
upon written request to Neil Shoop, Treasurer, Trinity Industries, Inc.,
P.O. Box 568887, Dallas, Texas 75356-8887. We may impose a reasonable fee
for our expense in connection with providing the above-referenced
Exhibits.

(b) Reports on Form 8-K

(1) Trinity filed a Current Report on Form 8-K dated August 13,
2002, that furnished to the Securities and Exchange
Commission, under Item 9, the statements under oath of its
Principal Executive Officer and its Principal Financial
Officer pursuant to the Commission's order of June 27, 2002
requiring the filing of sworn statements pursuant to Section
21(a)(1) of the Securities Exchange Act of 1934.

(2) Trinity filed a Current Report on Form 8-K dated August 30,
2002, reporting under Item 5, restated quarterly segment
information that aligns the reportable segments with current
management responsibilities and internal reporting.

(3) Trinity filed a Current Report on Form 8-K dated October 15,
2002, that reported an update to the issues raised in a
previously reported lawsuit filed against Trinity and a
coating manufacturer seeking recovery of damages related to
corrosion problems with eighteen barges manufactured by
Trinity.

26

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this Annual Report to be
signed on its behalf by the undersigned, thereunto duly authorized.

TRINITY INDUSTRIES, INC. By: /s/ Jim S. Ivy
Registrant ---------------------

Jim S. Ivy
Senior Vice President and
Chief Financial Officer
November 7, 2002

27

CERTIFICATION

I, Timothy R. Wallace, Chairman, President and Chief Executive Officer, certify
that:

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

2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state 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 quarterly report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:

a) designed such disclosure controls and procedures 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 quarterly report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and

c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):

a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.

Date: November 7, 2002

/s/ Timothy R. Wallace

Timothy R. Wallace
Chairman, President and Chief Executive Officer

28

CERTIFICATION

I, Jim S. Ivy, Senior Vice President and Chief Financial Officer, certify that:

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

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state 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 quarterly report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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
quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:

a) designed such disclosure controls and procedures 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 quarterly report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and

c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.

Date: November 7, 2002

/s/ Jim S. Ivy

Jim S. Ivy
Senior Vice President and Chief Financial Officer

29

EXHIBIT INDEX