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 MARCH 31, 2003

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 [ ].

INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS AN ACCELERATED FILER
(AS DEFINED IN RULE 12B-2 OF THE EXCHANGE ACT). YES [X] NO [ ]

AT APRIL 30, 2003 THERE WERE 45,972,964 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 STATEMENT OF OPERATIONS

See accompanying notes to consolidated financial statements.

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TRINITY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET

See accompanying notes to consolidated financial statements.

4

TRINITY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT CASH FLOWS

Interest paid for the quarters ended March 31, 2003 and 2002 was $11.5 and
$4.9, respectively. Taxes received, net of payments made for the quarters ended
March 31, 2003 and 2002 were $47.3 and $7.7, respectively.

See accompanying notes to consolidated financial statements.

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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. ("Trinity" or
the "Company"). In the opinion of management, all adjustments, consisting only
of normal and recurring adjustments necessary for a fair presentation of the
financial position of the Company as of March 31, 2003 and the results of
operations and cash flows for the three-month period ended March 31, 2003 and
2002, in conformity with generally accepted accounting principles, have been
made. Because of seasonal and other factors, the results of operations for the
three-month period ended March 31, 2003 may not be indicative of expected
results of operations for the year ending December 31, 2003. 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, 2002.

NOTE 2. UNUSUAL CHARGES

Restructuring reserve activity for the three months ended March 31, 2003
was:

NOTE 3. SEGMENT INFORMATION

The Company reports operating results in 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.

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 those charged external customers.

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THREE MONTHS ENDED MARCH 31, 2003

THREE MONTHS ENDED MARCH 31, 2002

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NOTE 4. STOCK BASED COMPENSATION

The Company has elected to apply the accounting provisions of Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees,"
(APB No. 25) and its interpretations and, accordingly, no compensation cost has
been recorded for stock options. The effect of computing compensation cost in
accordance with Statement of Financial Accounting Standards No. 123, "Accounting
for Stock Based Compensation," and the weighted average fair value of options
granted during the quarter ended March 31, 2003 and 2002 using the Black-Scholes
option pricing method are shown in the accompanying table.

NOTE 5. WARRANTIES

The Company provides for the estimated cost of product warranties at the
time revenue is recognized and assesses the adequacy of the resulting reserves
on a quarterly basis. As of March 31, 2003, the change in the accruals for
warranties was as follows:

NOTE 6. 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 $375 thousand beginning September
30, 2002 through June 30, 2006 and quarterly payments of $36.0 million beginning
on September 30, 2006 through the maturity date. Amounts borrowed under the
revolving commitment bear interest at LIBOR plus 2.00%, (there were no
borrowings on March 31, 2003). Amounts borrowed under the term commitment bear
interest at LIBOR plus 3.25% (4.81% at March 31, 2003). A portion of the
Company's accounts receivable and inventory and a portion of its property, plant
and equipment secure the agreement. 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 March 31, 2003, $148.9

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million was borrowed under this agreement and $193.9 million was available under
the facility. At March 31, 2003, the most restrictive of the debt covenants
based on trailing twelve month calculations as defined by the debt agreements
allow approximately $81.1 million additional principal and approximately $11.3
million additional annual interest expense. The most significant factor in the
Company's debt covenant calculations is earnings for the immediately preceding
twelve months.

In June 2002 Trinity Industries Leasing Company ("TILC") through a newly
formed, wholly owned, business trust entered into a $200 million non-recourse
warehouse facility to finance or refinance railcars acquired or owned by TILC.
Specific railcars and the underlying leases secure the facility. 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 1.375% (2.59% at March
31, 2003). The facility expires June 2003 and advances under the facility are
repayable in six-month increments with the final payment due December 2004. At
March 31, 2003, $29.2 million was available under this facility. The Company is
currently in discussions with long-term lenders to provide permanent financing
for the amount currently outstanding under the facility and to renew the
warehouse facility for future financings or refinancings of railcars acquired or
owned by TILC.

Terms and conditions of other debt are described in the Annual Report.

Principal payments on total debt due during the next five years as of
March 31, 2003 are (in millions) for the remaining nine months of 2003 - $60.1;
2004 - $115.4; 2005 - $41.9; 2006 - $83.2; 2007 - $115.7; and $79.9 thereafter.

NOTE 7. SALE/LEASEBACK FINANCING

During the nine months ended December 31, 2001, the Company completed an
off balance sheet financing arrangement for $199.0 million in railcars. Trinity
sold the railcars to an independent trust. The trust financed the purchase of
the railcars with $151.3 million in debt and $47.7 million in equity provided by
large independent financial institutions. The equity investor in the trust has
the risk of ownership of the assets in the trust except for the $6.5 million of
cash collateral discussed herein. Trinity has made no guarantees with respect to
amounts at risk. An independent trustee for the trust has the authority for the
appointment of the railcar fleet manager. Trinity, through a newly formed,
wholly owned, qualified subsidiary, leased railcars from the trust and subleased
the railcars to independent third party customers.

Under the terms of the operating lease agreement, Trinity has the option
to purchase the railcars from the trust at the end of sixteen years at a
predetermined, fixed price. Trinity also has an option to purchase the railcars
at the end of the lease agreement in 2023 at the then fair market value of the
railcars. At the expiration of the operating lease agreement, Trinity has no
further obligation or ownership interest in the assets of the trust.

Included in the Company's accompanying consolidated balance sheet are cash
and company-owned railcars totaling $33.1 million which are in the qualified
subsidiary and pledged as collateral for the duration of the lease obligations
to the trust and additional $6.5 million of cash which is pledged as collateral
for the equity investor's investment. Trinity, under the terms of a servicing
and remarketing agreement, will endeavor, consistent with customary commercial
practice as would be used by a prudent person, to maintain railcars under lease
for the benefit of the trust. Trinity also receives management fees under the
terms of the agreement. Certain ratios must be maintained in order for excess
cash flow, as defined, from the lease to third parties, to be available to
Trinity.

The sale of the railcars by Trinity to the trust was accounted for as a
sale/leaseback transaction. No revenue or profit was recorded at the time of the
transaction and all profit was deferred and is being amortized over the term of
the operating lease. Neither the assets, the liabilities, nor equity of the
trust are reflected on the balance sheet of Trinity.

NOTE 8. DEPOSIT AGREEMENT

The Company has a deposit agreement with Altos Hornos de Mexico, SA de
C.V. ("AHMSA") which provides for funds to be deposited with AHMSA which are
then used along with other funds from the Company to purchase steel from AHMSA.
As of March 31, 2003, total funds on deposit including interest due amounted to
approximately $31.8 million. Since May 1999 AHMSA has been operating under a
judicial declaration of suspension of payments,

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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. The Company's understanding of Mexican law is that all
funds on deposit are required to be returned to the Company regardless of
whether the supplier is able to operate under the declaration of suspension of
payments. Trinity reduced $3.6 million of this deposit through inventory
purchases in the quarter ended March 31, 2003. The timing of future reductions
of the deposit balance will depend on the rate of future steel purchases.

NOTE 9. OTHER, NET

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

NOTE 10. CONTINGENCIES

The Company, a wholly owned subsidiary of the Company included in the
Inland Barge Group, Trinity Marine Products, Inc. ("TMP") and certain material
suppliers and others, are co-defendants in five separate lawsuits filed by
Florida Marine Transporters, Inc. ("FMT") on May 15, 2002, J. Russell Flowers,
Inc. ("Flowers") on October 7, 2002, ACF Barge Acceptance I, LLC ("ACF") on
December 4, 2002, Marquette Transportation Company and Iowa Fleeting Services,
Inc. ("Marquette") on March 7, 2003, and Waxler Transportation Company, Inc.
("Waxler") on April 7, 2003. The FMT, ACF, Marquette and Waxler cases are
pending in the 25th Judicial District Court in Plaquemines Parish, Louisiana,
and the Flowers case is pending in the U.S. District Court, Northern District of
Mississippi in Greenville, Mississippi. In the Waxler case, the plaintiff has
petitioned the court for certification of a class. If a class action is
certified by the court, the total number of barges involved in the litigation
will increase. Absent certification of a class in the Waxler case, these five
separate suits involve 22 tank barges sold at an approximate average price of
$1.5 million, and 140 hopper barges sold at an approximate average price of
$280,000. Each of the cases set forth allegations pertaining to damages arising
from alleged defects in coating materials supplied by a co-defendant and
workmanship by TMP. The plaintiffs seek both compensatory and punitive damages
and/or recision of the barge purchase contracts. Independent experts
investigating the claims have expressed the opinion that technical arguments
presented in the litigation are without merit. Two of the five plaintiffs owe
TMP approximately $10.9 million, of which $5.2 million is past due, related to
contracts for barges not involved in the litigation. TMP is in the process of
filing suit and a claim for collection of the past due amount.

In March 2003, a jury awarded $163.7 million to an independent
contractor's employee who died following an accident while working at the site
of a Company subsidiary's aggregate mining operation. The presiding judge in the
case has requested the parties mediate pending entry of a final judgement. The
trial court retains the authority to reduce or vacate the award, and the
Company's subsidiary intends to appeal if necessary. Management believes that
the amounts not covered by insurance in this case will not be material to the
Company's financial position.

The Company is also involved in other claims and lawsuits incidental to
its business. As a matter of course the Company will have settlement discussions
from time to time with various plaintiffs. Based on information currently
available, it is management's opinion that the ultimate outcome of litigated
and other claims, through settlement or otherwise, in the aggregate will not
have a material adverse effect on the Company's overall financial condition for
purposes of financial reporting. However, resolution of certain claims or
lawsuits by settlement or otherwise could have a significant impact on the
operating results of the reporting period in which such resolution occurs.

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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 proceedings relating to environmental
matters. The Company has provided reserves amounting to $18.1 million 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.

NOTE 11. 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.

NOTE 12. RECENT ACCOUNTING PRONOUNCEMENTS

In June 2001, the FASB issued Statement No. 143 "Accounting for Asset
Retirement Obligations" (SFAS 143). SFAS 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. It applies to legal
obligations associated with the retirement of long-lived assets that result from
the acquisition, construction, development and/or the normal operations of a
long-lived asset, except for certain obligations of lessees. SFAS 143 is
effective for financial statements issued for fiscal years beginning after June
15, 2002. The Company adopted SFAS 143 on January 1, 2003 and it did not have a
material effect on its consolidated financial statements.

In June 2002, the FASB issued Statement No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities" (SFAS 146). SFAS 146 nullifies
Emerging Issues Task Force Issue No. 94-3 "Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in a Restructuring)." SFAS 146 applies to costs
associated with an exit activity that does not involve an entity newly acquired
in a business combination or with a disposal activity covered by SFAS 144. SFAS
146 is effective for exit or disposal activities that are initiated after
December 31, 2002, with earlier application encouraged. The Company adopted SFAS
146 and while it did not have a material impact on its consolidated financial
statements it will impact the timing of charges, which could impact the
comparability of results among reporting periods.

During January 2003, the FASB issued Interpretation No. 46 "Consolidation
of Variable Interest Entities" (FIN 46). The consolidation requirements of FIN
46 apply immediately to variable interest entities created after January 31,
2003 and apply to existing variable interest entities in the first fiscal year
or interim periods beginning after June 15, 2003. Until now, one company
generally has included another entity in its consolidated financial statements
only if it controlled the entity through voting interests. Interpretation 46
requires a variable interest entity to be consolidated by a company if that
company is subject to a majority of the risk of loss from the variable interest
entity's activities or entitled to receive a majority of the entity's residual
returns or both. A company that consolidates a variable interest entity is
called the primary beneficiary of that entity. Certain of the disclosure
requirements apply in all financial statements issued after January 31, 2003,
regardless of when the variable interest entity was established. The Company is
evaluating whether or not it would be designated the primary beneficiary of the
independent trust which purchases railcars from the Company in a sale/leaseback
transaction as described in Note 7. Currently, the Company believes that it is
not the primary beneficiary and therefore will not be required to consolidate
the Trust.

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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.

Trinity is one of the nation's leading diversified industrial companies
providing a variety of products and services for the transportation, industrial,
construction, and energy sectors of the marketplace.

In March 2003, Trinity terminated its previously announced agreement to
sell its railcar repair business. Trinity will continue to operate its existing
network of repair facilities.

THREE MONTHS ENDED MARCH 31, 2003 COMPARED WITH THREE MONTHS ENDED MARCH 31,
2002 -- RESULTS OF OPERATIONS

Revenues decreased $95.2 million to $289.1 million for the three months
ended March 31, 2003 compared to $384.3 million for the three months ended March
31, 2002, a decrease of 24.8%. The decline in revenues was due to the reduction
in railcar revenue due to product mix, a reduction in the construction products
and all other groups due to exiting several lines of business and general market
declines, offset by an increase in leasing revenues resulting from an increase
in the lease fleet.

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

Operating loss increased $7.2 million to $11.4 million for the three
months ended March 31, 2003 compared to $4.2 million for the same period in
2002. This was primarily due to a decrease in revenues due to lower unit sales
and competitive pricing pressures, the implementation of a new financial system,
and the impact of under absorbed overhead costs offset slightly by a decrease in
selling, engineering and administrative expenses. During the year ended December
31, 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 in future years, this project is
expected to increase selling, engineering and administrative costs in 2003 by
approximately fifteen cents per share compared to the prior year. During the
quarter ended March 31, 2003 the Company's incremental costs were approximately
$2.6 million or $.04 per share.

Selling, engineering and administrative expenses decreased $1.0 million to
$39.5 million for the three months ended March 31, 2003 compared to $40.5
million for the comparable period in 2002, a decrease of 2.5%. The decrease
primarily consisted of the benefits of the Company's cost reduction efforts
including lower headcounts offset by the incremental costs associated with the
implementation of the new financial system.

Interest expense, net of interest income, increased $2.7 million to $9.4
million for the three months ended March 31, 2003 compared to $6.7 million for
the same period in 2002, an increase of 40.3%. This increase was due to higher
average debt levels and slightly higher interest rates.

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Other, net was income of $0.8 million for the three months ended March 31,
2003 compared to expense of $0.5 million for the comparable period in 2002. The
increase was due to a larger amount of gains on sale of property, plant and
equipment in the current period compared to the same period last year.

The current year effective tax rate of 27.5% was due to the absence of tax
benefits on certain foreign losses.

Net loss for the three months ended March 31, 2003 was $14.5 million, or
$0.32 per diluted share as compared to a net loss of $8.6 million, or $0.19 per
diluted share, for the same period in 2002

TRINITY RAIL GROUP

Railcar units shipped in North America increased 37.1% to approximately
1,700 cars during the three months ended March 31, 2003 compared to the same
period in 2002. Revenues declined 12.9% for the three months ended March 31,
2003 compared to the same period in 2002 due to the product mix of units sold in
North America. Railcar units shipped in Europe decreased by 23.9% to
approximately 460 units. A reduction in the repair business also contributed to
the year over year decline in revenues. Operating margins improved slightly due
to improved efficiencies from an increase in volume.

In the three months ended March 31, 2003 railcar sales to Trinity
Industries Leasing Company included in the Rail Group results were $64.3 million
compared to $20.4 million in the comparable period in 2002 with profit of $3.9
million compared to $0.9 million for the same period in 2002. Sales to Trinity
Industries Leasing Company and related profits are eliminated in consolidation.

CONSTRUCTION PRODUCTS GROUP

Revenues declined 8.5% for the three months ended March 31, 2003 compared
to the same period in 2002. The decrease in revenues was primarily attributable
to exiting certain non-core product lines since the first quarter of 2002, a
loss of working days due to weather, and reduced volume and competitive pricing
pressures in the fittings business. Operating profit margin decreased as a
result of the increased costs associated with fuel and insurance, exiting
non-core product lines, reduced volume and competitive pricing pressures,
partially offset by a reduction in expenses due to efficiency improvements.

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INLAND BARGE GROUP

Revenues decreased 27.9% for the three months ended March 31, 2003
compared to the same period in 2002. This was primarily due to a decrease in
hopper barge sales. During the current quarter 77 hopper barges were delivered
versus 145 during the same quarter of 2002, a 46.9% decrease or $14.9 million of
revenue. Due to weather conditions, two fewer tank barges were delivered in the
current quarter comprising the remaining decrease in revenues. Operating profit
decreased $2.7 million to a loss of $0.8 million for the current quarter. This
decline was primarily due to the decrease in hopper and tank barge units
produced, unabsorbed overhead costs resulting from lower production levels and
expenses related to barge corrosion issues ($0.6 million for the three months
ended March 31, 2003 versus $0.3 million for the same quarter last year).

INDUSTRIAL PRODUCTS GROUP

Revenues declined 8.9% for the three months ended March 31, 2003 compared
to the same period in 2002. The decline in revenues was primarily due to reduced
head sales, lower average pricing on certain Mexico products, offset by improved
sales of tanks and truck tanks. The decline in operating profit was primarily
due to reduced sales in the head division, lower average pricing on certain
Mexico products, partially offset by improved margins on Mexico truck tanks.

TRINITY RAILCAR LEASING AND MANAGEMENT SERVICES GROUP

Revenues increased 6.7% to $28.5 million in the current quarter. This
increase was primarily due to an increase in rental revenues from additions to
the lease fleet. Included in the results of this group are revenues from the
sale of railcars from the lease fleet of $0.8 million in the three months ended
March 31, 2003 and $1.0 million in the same period in 2002. Operating profit
increased $1.5 million to $8.6 million in the current quarter. This increase was

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primarily due to the additions to the lease fleet, partially offset by an
increase in operating and administrative expenses due to regulatory mandated
repairs and railroad charges. Operating profits on the sale of railcars from the
lease fleet were $0.1 million for both quarters.

ALL OTHER

Revenues in All Other decreased to $7.3 million in the three months ended
March 31, 2003 from $9.2 million for the three months ended March 31, 2002. This
was primarily due to a decline in the structural tower business. Operating loss
was $0.9 million for the three months ended March 31, 2003, and $2.9 million in
the same period in 2002. The decrease in the operating loss was primarily due to
the sale of inventory in the structural tower business.

LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operating activities for the three months ended March
31, 2003 increased to $87.6 million compared to $16.7 million for the same
period in 2002. This was due to the collection of a $47.6 million tax refund, a
decrease in inventory and accounts receivable of $21.1 million, offset by a net
loss in the current period. Capital expenditures for the three months ended
March 31, 2003 were $68.4 million, of which $65.5 million was for additions to
the lease subsidiary. This compares to $29.4 million of capital expenditures for
the same period last year, of which $20.4 million was for additions to the lease
subsidiary. Proceeds from the sale of property, plant and equipment were $2.5
million for the three months ended March 31, 2003 composed primarily of the sale
of non-operating assets, compared to $1.5 million for the same period in 2002.

In June 2002 TILC through a newly formed, wholly owned, business trust
entered into a $200 million non-recourse warehouse facility to finance or
refinance railcars acquired or owned by TILC. Specific railcars and the
underlying leases secure the facility. 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 1.375% (2.59% at March 31, 2003). The facility
expires June 2003 and advances under the facility are repayable in six-month
increments with the final payment due December 2004. At March 31, 2003, $29.2
million was available under this facility. The Company is currently in
discussions with long-term lenders to provide permanent financing for the amount
currently outstanding under the facility and to renew the warehouse facility for
future financings or refinancings of railcars acquired or owned by TILC. The
Company can make no assurances that permanent financing will be obtained.

On April 1, 2003, Moody's Investors Service announced that it had placed
the Company's credit rating under review for a possible downgrade. If the
Company's credit rating is downgraded, it would result in a 1/4% increase in the
Company's interest rate on the revolving commitment. If further downgrades by
any credit agency were to occur, the interest rate on the Company's credit
facilities would not increase further.

We expect to finance future operating requirements with cash flows from
operations, and depending on market conditions, debt and/or privately or
publicly placed equity.

CONTRACTUAL OBLIGATION AND COMMERCIAL COMMITMENTS

As of March 31, 2003 other commercial commitments related to letters of
credit have increased to $114.3 million from $110.2 million as of December 31,
2002. Other commercial commitments that relate to operating leases under
sales/leaseback transactions were basically unchanged.

RECENT PRONOUNCEMENTS

In June 2001, the FASB issued Statement No. 143 "Accounting for Asset
Retirement Obligations: (SFAS 143). SFAS 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. It applies to legal
obligations associated with the retirement of long-lived assets, except for
certain obligations of lessees. SFAS 143 is effective for financial statements
issued for fiscal years beginning after June 15, 2002. The Company adopted SFAS
143 on January 1, 2003 and it did not have a material effect on its consolidated
financial statements.

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

16

Certain Employee Termination Benefits and other Costs to Exit an Activity
(including Certain Costs Incurred in an Restructuring)." SFAS 146 applies to
costs associated with an exit activity that does not involve an entity newly
acquired in a business combination or with a disposal activity covered by SFAS
144. SFAS 146 is effective for exit or disposal activities that are initiated
after December 31, 2002, with earlier application encouraged. The Company
adopted SFAS 146 and while it did not have a material impact on its consolidated
financial statements it will impact the timing of charges, which could impact
the comparability of results among reporting periods.

During January 2003, the FASB issued Interpretation No. 46 "Consolidation
of Variable Interest Entities" (FIN 46). The consolidation requirements of FIN
46 apply immediately to variable interest entities created after January 31,
2003 and apply to existing variable interest entities in the first fiscal year
or interim periods beginning after June 15, 2003. Until now, one company
generally has included another entity in its consolidated financial statements
only if it controlled the entity through voting interests. Interpretation 46
requires a variable interest entity to be consolidated by a company if that
company is subject to a majority of the risk of loss from the variable interest
entity's activities or entitled to receive a majority of the entity's residual
returns or both. A company that consolidates a variable interest entity is
called the primary beneficiary of that entity. Certain of the disclosure
requirements apply in all financial statements issued after January 31, 2003,
regardless of when the variable interest entity was established. The Company is
evaluating whether or not it would be designated the primary beneficiary of the
independent trust which purchases railcars from the Company in a sale/leaseback
transaction as described in Note 7. Currently, the Company believes that it is
not the primary beneficiary and therefore will not be required to consolidate
the Trust.

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,
2002.

17

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, evaluate
their effectiveness. Based on their evaluation of the Company's disclosure
controls and procedures which took place as of a date within 90 days of the
filing date of 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 principals, 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.

Since the date of the most recent evaluation of the Company's internal
controls by the Chief Executive and Chief Financial Officers, there have been no
significant changes in such controls or in other factors that could have
significantly affected those controls, including any corrective actions with
regard to significant deficiencies and material weaknesses.

18

PART II

ITEM 1. LEGAL PROCEEDINGS

The Company, a wholly owned subsidiary of the Company included in the
Inland Barge Group, Trinity Marine Products, Inc. ("TMP") and certain material
suppliers and others, are co-defendants in five separate lawsuits filed by
Florida Marine Transporters, Inc. ("FMT") on May 15, 2002, J. Russell Flowers,
Inc. ("Flowers") on October 7, 2002, ACF Barge Acceptance I, LLC ("ACF") on
December 4, 2002, Marquette Transportation Company and Iowa Fleeting Services,
Inc. ("Marquette") on March 7, 2003, and Waxler Transportation Company, Inc.
("Waxler") on April 7, 2003. The FMT, ACF, Marquette and Waxler cases are
pending in the 25th Judicial District Court in Plaquemines Parish, Louisiana,
and the Flowers case is pending in the U.S. District Court, Northern District of
Mississippi in Greenville, Mississippi. In the Waxler case, the plaintiff has
petitioned the court for certification of a class. If a class action is
certified by the court, the total number of barges involved in the litigation
will increase. Absent certification of a class in the Waxler case, these five
separate suits involve 22 tank barges sold at an approximate average price of
$1.5 million, and 140 hopper barges sold at an approximate average price of
$280,000. Each of the cases set forth allegations pertaining to damages arising
from alleged defects in coating materials supplied by a co-defendant and
workmanship by TMP. The plaintiffs seek both compensatory and punitive damages
and/or recision of the barge purchase contracts. Independent experts
investigating the claims have expressed the opinion that technical arguments
presented in the litigation are without merit. Two of the five plaintiffs owe
TMP approximately $10.9 million, of which $5.2 million is past due, related to
contracts for barges not involved in the litigation. TMP is in the process of
filing suit and a claim for collection of the past due amount.

In March 2003, a jury awarded $163.7 million to an independent
contractor's employee who died following an accident while working at a Company
subsidiary's aggregate mining operation. The presiding judge in the case has
requested the parties mediate pending entry of a final judgement. The trial
court retains the authority to reduce or vacate the award, and the Company's
subsidiary intends to appeal if necessary. Management believes that the amounts
not covered by insurance in this case will not be material to the Company's
financial position.

The Company is also involved in other claims and lawsuits incidental to
its business. As a matter of course the Company will have settlement discussions
from time to time with various plaintiffs. Based on information currently
available, it is management's opinion that the ultimate outcome of litigated and
other claims, through settlement or otherwise, in the aggregate will not have a
material adverse effect on the Company's overall financial condition for
purposes of financial reporting. However, resolution of certain claims or
lawsuits by settlement or otherwise could have a significant impact on the
operating results of the reporting period in which such resolution occurs.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None

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

(a) Exhibits.

Exhibit Number Description

10.11.2 Amendment No. 3 to Deferred Plan for Directors
Fees, dated April 1, 2003. *

99.1 Certification pursuant to 18 U.X.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.

* Management compensatory plan arrangement.

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.

19

(b) Reports on Form 8-K

(1) Trinity filed a Current Report on Form 8-K dated March 31, 2003,
reporting, under Item 5, press release to clarify issues regarding a
jury award in Beaumont, Texas. Pursuant to Form 8-K:

(i) under Item 7, the news release dated March 31, 2003 was filed.

20

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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/ JIM S. IVY
Registrant
Jim S. Ivy
Senior Vice President and
Chief Financial Officer
May 8, 2003

21

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 facts
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 presents 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
we 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;

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not 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: May 8, 2003

/s/ Timothy R. Wallace

Timothy R. Wallace
Chairman, President and Chief Executive Officer

22

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 facts
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 presents 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
we 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;

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not 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: May 8, 2003

s/ Jim S. Ivy

Jim S. Ivy
Senior Vice President and Chief Financial Officer

23

INDEX TO EXHIBITS

* Management compensatory plan arrangement.