SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K/A No. 1
Current Report
Pursuant to Section 13 or 15(d) of The
Securities and Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): October 26, 2001
TRINITY INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
Delaware 1-6903 75-0225040
(State of incorporation) (Commission File No.) (IRS 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
Not Applicable
(Former name or former address, if changed since last report.)
--------------------------------------------------------------------------------
Item 5. Other Events
(a) Trinity Industries, Inc.(the "Company" or "Trinity") is in the process
of finalizing the integration plan for its merger with Thrall Car
Manufacturing Company ("Thrall"). Charges related to restructuring the
railcar group as a result of the merger and certain cost reduction and
other actions are presently expected to be in the range of $50 to $65
million, or $0.75 to $0.97 per share. The charges, which are primarily
non-cash, will be recorded in the quarter ending December 31, 2001.
Net income for the nine months ending December 31, 2001 before these
charges are expected to be in the range of $0.40 to $0.50 per share.
(b) Pursuant to the terms of (i) a Credit Agreement, as amended, between
the Company and JP Morgan Chase Bank, as Administrative Agent, and the
Lenders under the Credit Agreement, as amended, and (ii) a Term Credit
Agreement between the Company and JP Morgan Chase Bank, as
Administrative Agent, and the Lenders under the Term Credit Agreement,
the Company will deliver a Security Agreement effective December 31,
2001 pursuant to which the Company and its material subsidiaries will
grant to JP Morgan Chase Bank, as Collateral Agent, a valid first and
prior lien on all of the accounts receivable and inventory of the
Company and its material subsidiaries. In addition, on or before
February 15, 2002 the Company may be required to deliver an amended and
restated Security Agreement pursuant to which the Company and its
material subsidiaries will grant to the Collateral Agent a valid first
and prior lien on certain property, plant and equipment of the Company
and its material subsidiaries.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Thrall Car Manufacturing Company
(i) Independent auditors report.
(ii) Consolidated Statements of Income for the Years Ended December
31, 2000 and 1999
(iii) Consolidated Balance Sheets as of December 31, 2000 and 1999.
(iv) Consolidated Statements of Cash Flows for the Years Ended
December 31, 2000 and 1999.
(v) Consolidated Statements of Shareholders' Investment for the
Years Ended December 31, 2000 and 1999.
(vi) Notes to Consolidated Financial Statements.
(vii) Unaudited Consolidated Statements of Operations for the Nine
Months Ended September 30, 2001 and 2000.
(viii) Unaudited Consolidated Balance Sheet as of September 30, 2001.
(ix) Unaudited Consolidated Statements of Cash Flows for the Nine
Months Ended September 30, 2001 and 2000.
(x) Unaudited Consolidated Statement of Shareholders' Investment
for the Nine Months Ended September 30, 2001.
(xi) Notes to Unaudited Financial Statements.
(b) Pro Forma Financial Information
On October 26, 2001, Trinity completed its merger transaction between a
wholly-owned subsidiary of Trinity and privately owned Thrall. Thrall is a
leading railcar manufacturer, with operations in both the United States and
Europe. Under terms of the agreement, Trinity paid $165.5 million in cash and
issued 7.15 million shares of its common stock at the closing. Additional
estimated amounts have been accrued related to the working capital adjustment
per the merger agreement ($18.4 million) and transaction fees ($5.2 million). In
addition, Trinity under certain circumstances has agreed to make additional
payments, not to exceed $45 million over five years, based on a formula related
to annual railcar industry production levels. The unaudited pro forma condensed
consolidated financial statements are based on the historical consolidated
financial statements of Trinity and Thrall, adjusted to give effect to the
transactions described herein.
The unaudited pro forma condensed consolidated financial statements consist of
(i) an Unaudited Pro Forma Condensed Consolidated Statement of Operations for
the year ended March 31, 2001; (ii) an Unaudited Pro Forma Interim Condensed
Consolidated Statement of Operations for six months ended September 30, 2001;
and (iii) a Pro Forma Condensed Consolidated Balance Sheet as of September 30,
2001. Both the Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the year
2
ended March 31, 2001 and the Unaudited Pro Forma Interim Condensed Consolidated
Statement of Operations for six months ended September 30, 2001 give effect to
the merger of Thrall as if it had occurred at the beginning of their respective
periods. The Pro Forma Condensed Consolidated Balance Sheet gives effect to the
transaction as if it had occurred as of September 30, 2001.
The merger of Thrall and the related adjustments are described in the
accompanying notes. The pro forma adjustments are based upon available
information and certain assumptions that we believe are reasonable. In our
opinion, all adjustments that are necessary to present fairly the pro forma data
have been made. The unaudited pro forma condensed consolidated financial
statements do not purport to represent what the results of operations or
financial condition would actually have been had the transaction in fact
occurred on such dates or to project the results of operations or financial
condition for any future period or date. The unaudited pro forma condensed
consolidated financial statements should be read in conjunction with the
historical consolidated financial statements of Trinity and Thrall and
Management's Discussion and Analysis of Financial Condition and Results of
Operations. Pro Forma results do not include certain restructuring charges to be
incurred by Trinity as a result of the Thrall merger. The restructuring charges
will be recorded during the quarter ending December 31, 2001.
The merger of Thrall has been accounted for as a purchase and the purchase price
has been allocated to the assets acquired and liabilities assumed based upon
estimated fair market values. The purchase price allocation for the Thrall
merger is subject to change when additional information concerning asset and
liability valuations is obtained.
The historical consolidated financial statements of Trinity and Thrall were
prepared in accordance with generally accepted accounting principles.
3
TRINITY INDUSTRIES, INC.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
(in millions)
Historical
---------------------------------
Trinity Thrall Car
Industries, Manufacturing
Inc. Company Pro Forma Pro Forma
FYE 3/31/01 FYE 12/31/00 Adjustments Results
------------- ------------- ------------- -------------
Revenues $ 1,904.3 $ 658.3 $ -- $ 2,562.6
Operating costs:
Cost of revenues 1,756.7 584.9 -- 2,341.6
Selling, engineering and
administrative expenses 213.7 48.6 -- 262.3
------------- ------------- ------------- -------------
1,970.4 633.5 -- 2,603.9
------------- ------------- ------------- -------------
Operating profit (loss) (66.1) 24.8 -- (41.3)
Interest expense, net 22.0 (2.9) 14.4ab 33.5
Other, net 28.2 (3.9) 3.9c 28.2
------------- ------------- ------------- -------------
50.2 (6.8) 18.3 61.7
------------- ------------- ------------- -------------
Income (loss) before income
taxes (116.3) 31.6 (18.3) (103.0)
Provision (benefit) for income
taxes (41.9) (0.2) 5.0de (37.1)
------------- ------------- ------------- -------------
Net income (loss) $ (74.4) $ 31.8 $ (23.3) $ (65.9)
============= ============= ============= =============
Net income (loss) per common share:
Basic $ (1.98) $ (1.47)
============= =============
Diluted $ (1.98) $ (1.47)
============= =============
Weighted average number of shares outstanding:
Basic 37.5 7.2 44.7
Diluted 37.5 7.2 44.7
The accompanying notes are an integral part of the unaudited pro forma
consolidated financial statements.
4
TRINITY INDUSTRIES, INC.
Unaudited Pro Forma Interim Condensed Consolidated Statement of Operations
Six Months Ended September 30, 2001
(in millions)
Historical
----------------------------
Trinity Thrall Car
Industries, Manufacturing Pro Forma Pro Forma
Inc. Company Adjustments Results
---------- ------------ ---------- ----------
Revenues $ 840.5 $ 174.2 $ (1.0)a $ 1,013.7
Operating costs:
Cost of revenues 716.6 166.0 (3.5)bc 879.1
Selling, engineering and
administrative expenses 82.5 27.0 -- 109.5
---------- ---------- ---------- ----------
799.1 193.0 (3.5) 988.6
---------- ---------- ---------- ----------
Operating profit (loss) 41.4 (18.8) 2.5 25.1
Interest expense, net 12.2 1.5 2.6de 16.3
Other, net (income) expense 1.1 (3.1) 3.1f 1.1
---------- ---------- ---------- ----------
13.3 (1.6) 5.7 17.4
---------- ---------- ---------- ----------
Income (loss) before income
taxes 28.1 (17.2) (3.2) 7.7
Provision (benefit) for income
taxes 10.6 -- (7.7)gh 2.9
---------- ---------- ---------- ----------
Net income (loss) $ 17.5 $ (17.2) $ 4.5 $ 4.8
========== ========== ========== ==========
Net income (loss) per common share:
Basic $ 0.47 $ 0.11
========== ==========
Diluted $ 0.47 $ 0.11
========== ==========
Weighted average number of
shares outstanding:
Basic 37.0 7.2 44.2
Diluted 37.1 7.2 44.3
The accompanying notes are an integral part of the unaudited pro forma
consolidated financial statements.
5
Notes to Unaudited Pro Forma Consolidated Statements of Operations
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the year
ended March 31, 2001 for Trinity and the year ended December 31, 2000 for Thrall
Note 1: Pro Forma Adjustments
The following pro forma adjustments have been applied to the accompanying
historical condensed consolidated statement of operations of Trinity and Thrall
to give effect to the Thrall merger and related financing transaction as if they
had all occurred on April 1, 2000 for Trinity and January 1, 2000 for Thrall:
(a) Increase interest expense related to financing the cash portion of the
purchase price - $11.5 million.
(b) Eliminate interest income related to Thrall investments and loan portfolios
not included in the transaction - $2.9 million.
(c) Eliminate unrealized gains related to Thrall investments and loan
portfolios not included in the transaction.
(d) Record tax effect @ 36.0% of Thrall historical income before tax. As a
qualified subsidiary of a Sub Chapter S corporation, Thrall's historical
statement of operations is not required to record a federal income tax
provision.
(e) Record tax effect @ 36.0% of pro forma income before tax.
Trinity historical results for the year ended March 31, 2001 include pretax
unusual charges of approximately $173.3 million ($110.9 million after tax)
primarily related to the restructuring of Trinity's railcar operations,
investment and asset write downs, litigation reserves, and other charges. Of the
$173.3 million charges, $125.3 million is included in cost of revenues, $15.6
million in selling, engineering and administrative expenses, and $32.4 million
in other, net.
6
Unaudited Pro Forma Interim Condensed Consolidated Statement of Operations for
six months ended September 30, 2001
Note 1: Pro Forma Adjustments
The following pro forma adjustments have been applied to the accompanying
historical condensed consolidated statement of operations of Trinity and Thrall
to give effect to the Thrall merger and related financing transaction as if they
had all occurred on April 1, 2001:
(a) Eliminate revenues from a non-rail subsidiary not included in the
transaction.
(b) Eliminate cost of revenues from the non-rail subsidiary referenced in (a)
that was not included in the transaction - $1.0 million.
(c) Eliminate the costs of a Thrall facility not included in the transaction
subsequent to it's shutdown at the end of March 2001 - $2.5 million.
(d) Increase interest expense related to financing the cash portion of the
purchase price - $4.1 million.
(e) Eliminate interest expense related to Thrall investments and loan
portfolios not included in the transaction - $1.5 million.
(f) Eliminate unrealized gains related to Thrall investments and loan
portfolios not included in the transaction.
(g) Record tax effect @ 37.5% of Thrall historical income before tax. As a
qualified subsidiary of a Sub Chapter S corporation, Thrall's historical
statement of operations is not required to record a federal income tax
provision.
(h) Record tax effect @ 37.5% of pro forma income before tax.
7
TRINITY INDUSTRIES, INC.
Pro Forma Condensed Balance Sheet
September 30, 2001
(in millions)
Historical
--------------------------------
Trinity Thrall Car
Industries, Manufacturing Pro Forma Pro Forma
Inc. Company Adjustments Results
------------- ------------- ------------- -------------
ASSETS
Cash and equivalents $ 3.0 $ 22.1 $ (22.1)a $ 3.0
Receivables 241.8 38.5 -- 280.3
Inventories 323.0 32.6 -- 355.6
Property, plant and equipment,
at cost 1,495.3 171.2 (133.8)b 1,532.7
Less accumulated depreciation (559.2) (96.5) 96.5c (559.2)
------------- ------------- ------------- -------------
936.1 74.7 (37.3) 973.5
Goodwill 73.1 16.8 336.3d 426.2
Other assets 166.0 17.4 (13.3)e 170.1
------------- ------------- ------------- -------------
$ 1,743.0 $ 202.1 $ 263.6 $ 2,208.7
============= ============= ============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Bank debt $ 409.0 $ -- $ 165.5f $ 574.5
Accounts payable and accrued
liabilities 364.7 77.5 39.3g 481.5
Long-term debt 24.2 13.6 (13.6)h 24.2
Deferred income taxes 26.4 -- 26.4
Other liabilities 37.3 -- -- 37.3
Stockholders' equity 881.4 111.0 72.4i 1,064.8
------------- ------------- ------------- -------------
$ 1,743.0 $ 202.1 $ 263.6 $ 2,208.7
============= ============= ============= =============
The accompanying notes are an integral part of the unaudited pro forma
consolidated financial statements.
8
Notes to Unaudited Pro Forma Consolidated Balance Sheet (in millions)
The following pro forma adjustments have been applied to the accompanying
historical balance sheet of Trinity and Thrall to give effect to merger and
financing transaction as if they had occurred on September 30, 2001.
Note 1. Merger
A summary of the purchase price and related preliminary purchase price
allocation follows:
Cash paid at closing ....................................................... $ 165.5
Estimated cash adjustment for working capital .............................. 18.4
Stock issued at closing (7.15 million shares) ............................. 183.4
Estimated transaction fees ................................................. 5.2
------------
Aggregate purchase price ................................................. 372.5
Book value of Thrall net assets acquired ................................... (63.0)
------------
309.5
Adjustments to record assets and liabilities at fair
market values: (a)
Severance, facility closing expenses, other exit costs
to be incurred in connection with the merger, and
other accrued liabilities and reserves ........................ 36.2
Intangible assets - patents ....................................... (2.9)
Railcar contract reserves ......................................... 6.3
Warranty and other ................................................ 4.0
------------
Goodwill related to Thrall acquisition ......................... $ 353.1
============
The aggregate purchase price has been allocated as of September 30, 2001 to the
net assets acquired on the basis of preliminary estimates of fair values as
follows (in millions):
Receivables and inventory ......................................... $ 71.1
Property, plant and equipment ..................................... 37.4
Other assets ...................................................... 4.1
Accounts payable and accrued liabilities .......................... (93.2)
Goodwill .......................................................... 353.1
------------
$ 372.5
============
(a) Upon completion of the analysis of the fair values of the acquired
assets and liabilities, the allocation of the purchase price may differ
from that presented above. Other assets may be identified that would
require allocation of a portion of the purchase price.
Note 2. Pro Forma Adjustments to Unaudited Condensed Consolidated Balance Sheet
(a) Thrall cash not included in purchase ........................ $ (22.1)
============
9
(b) Changes in property, plant and equipment, at cost are:
Adjustment for facility not included in transaction ......... $ (32.7)
Adjustment to record write-down of Thrall fixed assets
to fair value .............................................. (25.8)
Reclassification of historical accumulated depreciation...... (75.3)
------------
Total adjustments to property, plant and equipment ...... $ (133.8)
============
(c) Changes in accumulated depreciation are:
Adjustment for facility not included in transaction ......... $ 21.2
Reclassification of historical accumulated depreciation...... 75.3
------------
Total adjustments to accumulated depreciation ........... $ 96.5
============
(d) Changes in goodwill are:
Goodwill related to Thrall acquisition ...................... $ 353.1
Eliminate Thrall historical goodwill ........................ (16.8)
------------
Net adjustments to goodwill ................................ $ 336.3
============
Changes in other assets are:
(e) Purchase price adjustment to record intangible assets
acquired ................................................... $ 2.9
Other assets not included in transaction .................... (16.2)
------------
Net adjustments to other assets ........................... $ (13.3)
============
(f) Borrowings to fund cash portion of purchase price ............ $ 165.5
============
(g) Changes in accounts payable and accrued liabilities are:
Accrued liabilities not assumed in transaction .............. $ (5.0)
Estimated transaction fees .................................. 5.2
Estimated adjustment for working capital .................... 18.4
To record liabilities assumed for severance, exit costs,
warranty, and other ........................................ 20.7
------------
Total adjustments to accounts payable and accrued
liabilities ............................................. $ 39.3
============
(h) Long-term debt not assumed in transaction .................... $ (13.6)
============
(i) Changes in stockholders' equity are:
Effect of excluding certain assets, liabilities and
a facility in the transaction ............................... $ (48.0)
Common stock issued as portion of purchase price -
7,150,000 shares @$25.65 .................................... 183.4
Elimination of Book value of Thrall net assets
acquired .................................................... (63.0)
------------
Total adjustments to stockholders' equity .................. $ 72.4
============
10
Item 7 - continued
(c) Exhibits
Exhibit
Number Description
23 Consent of Independent Auditors
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Trinity Industries, Inc.
By: /s/ Jim S. Ivy
------------------------
Jim S. Ivy
Vice President and
Chief Financial Officer
December 28, 2001
11
INDEX TO FINANCIAL STATEMENTS
Consolidated Financial Statements of Thrall Car Manufacturing Company:
AUDITED
Report of Arthur Andersen LLP, Independent
Public Accountants. . . . . . . . . . . . . . . . . . . . . F-2
Consolidated Statements of Income for the Years Ended
December 31, 2000 and 1999. . . . . . . . . . . . . . . . . F-3
Consolidated Balance Sheets as of December 31, 2000
and 1999. . . . . . . . . . . . . . . . . . . . . . . . . . F-4
Consolidated Statements of Cash Flows for the Years
Ended December 31, 2000 and 1999 . . . . . . . . . . . . . F-6
Consolidated Statements of Shareholders' Investment for
the Years Ended December 31, 2000 and 1999. . . . . . . . . F-7
Notes to Consolidated Financial Statements December 31,
2000 and 1999 . . . . . . . . . . . . . . . . . . . . . . . F-8
UNAUDITED
Unaudited Consolidated Statements of Income for Nine
Months Ended September 30, 2001 and 2000. . . . . . . . . . F-21
Unaudited Consolidated Balance Sheet as of September 30,
2001. . . . . . . . . . . . . . . . . . . . . . . . . . . . F-22
Unaudited Consolidated Statements of Cash Flows for Nine
Months Ended September 30, 2001 and 2000. . . . . . . . . . F-23
Unaudited Consolidated Statement of Shareholders'
Investment for Nine Months Ended September 30, 2001 . . . . F-24
Notes to Unaudited Consolidated Financial Statements . . . . F-25
F-1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of
Thrall Car Manufacturing Company:
We have audited the accompanying consolidated balance sheets of THRALL CAR
MANUFACTURING COMPANY (an Illinois corporation) AND SUBSIDIARIES as of December
31, 2000 and 1999, and the related consolidated statements of income, cash flows
and shareholders' investment for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Thrall Car
Manufacturing Company and Subsidiaries as of December 31, 2000 and 1999, and the
results of their operations and their cash flows for the years then ended, in
conformity with accounting principles generally accepted in the United States.
Arthur Andersen LLP
Chicago, Illinois
March 2, 2001
F-2
THRALL CAR MANUFACTURING COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
(DOLLARS IN THOUSANDS)
2000 1999
---------- ----------
NET SALES $ 658,290 $ 736,646
COST OF SALES 584,890 619,581
---------- ----------
GROSS PROFIT 73,400 117,065
SELLING AND ADMINISTRATIVE EXPENSES 40,915 50,128
MANAGEMENT FEES 7,680 6,942
---------- ----------
OPERATING INCOME 24,805 59,995
OTHER INCOME (EXPENSE):
Interest expense (7,669) (4,183)
Interest income 10,597 6,098
Other, net 3,832 5,209
---------- ----------
Other income, net 6,760 7,124
---------- ----------
INCOME BEFORE TAXES 31,565 67,119
STATE INCOME TAX BENEFIT (PROVISION) 204 (793)
---------- ----------
NET INCOME $ 31,769 $ 66,326
========== ==========
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-3
THRALL CAR MANUFACTURING COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2000 AND 1999
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
ASSETS 2000 1999
---------- ----------
CURRENT ASSETS:
Cash and cash equivalents $ 28,758 $ 45,999
Short-term investments 129,100 131,976
Accounts receivable (net of allowance for doubtful accounts of $75
in 2000 and $140 in 1999) 25,735 25,934
Inventories, net 38,582 29,362
Prepaid expenses and other current assets 10,366 9,324
---------- ----------
Total current assets 232,541 242,595
PROPERTY, PLANT AND EQUIPMENT, net of accumulated
depreciation of $88,745 in 2000 and $78,804 in 1999 81,076 71,495
INTANGIBLE ASSETS, net of accumulated amortization of $1,207 in
2000 and $777 in 1999 18,216 6,457
OTHER ASSETS 2,362 2,559
ADVANCES AND NOTES RECEIVABLE DUE FROM RELATED PARTIES 41,508 36,458
---------- ----------
TOTAL ASSETS $ 375,703 $ 359,564
========== ==========
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
F-4
THRALL CAR MANUFACTURING COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2000 AND 1999
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
LIABILITIES AND SHAREHOLDERS' INVESTMENT 2000 1999
---------- ----------
CURRENT LIABILITIES:
Bank overdrafts $ 13,534 $ 8,836
Accounts payable 44,384 42,733
Current maturities of long-term debt 87 --
Accrued expenses 42,555 35,884
---------- ----------
Total current liabilities 100,560 87,453
ADVANCE DUE TO RELATED PARTY 5,761 8,862
LONG-TERM DEBT, less current maturities 113,583 113,378
OTHER LIABILITIES 31 42
SHAREHOLDERS' INVESTMENT:
Common stock, $.01 par value; 10,000 shares authorized; 8,080
shares issued and outstanding -- --
Additional paid-in capital 23,464 23,464
Foreign currency translation adjustment (615) (251)
Retained earnings 132,919 126,616
---------- ----------
Total shareholders' investment 155,768 149,829
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT $ 375,703 $ 359,564
========== ==========
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
F-5
THRALL CAR MANUFACTURING COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
(DOLLARS IN THOUSANDS)
2000 1999
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 31,769 $ 66,326
Adjustments to net income--
Depreciation and amortization 10,371 9,897
Changes in assets and liabilities, net of the effect of business
acquisitions--
Receivables 3,932 5,014
Inventories (6,000) 222
Prepaid expenses and other current assets 298 (592)
Accounts payable and accrued expenses (142) 3,240
Other liabilities (11) 2,809
---------- ----------
Net cash provided by operating activities 40,217 86,916
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of business (9,680) (1,859)
Change in short-term investments 2,876 (118,096)
Change in advances and term note due from related parties
(includes noncash transactions) (20,221) 13,817
Additions to property, plant and equipment, net of the effect of
business acquisitions (5,842) (22,274)
Change in other assets (650) (61)
---------- ----------
Net cash used in investing activities (33,517) (128,473)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in advance due to related party (3,101) (1,126)
Change in long term debt 292 100,228
Dividends (includes noncash transactions) (25,466) (56,226)
---------- ----------
Net cash (used in) provided by financing activities (28,275) 42,876
---------- ----------
Effect of exchange rate change on cash and cash equivalents (364) 68
---------- ----------
Net cash flow (21,939) 1,387
CASH AND CASH EQUIVALENTS, net of bank overdraft, beginning
of year 37,163 35,776
---------- ----------
CASH AND CASH EQUIVALENTS, net of bank overdraft, end of year $ 15,224 $ 37,163
========== ==========
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-6
THRALL CAR MANUFACTURING COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
(DOLLARS IN THOUSANDS)
ADDITIONAL FOREIGN COMPRE-
COMMON PAID-IN CURRENCY RETAINED HENSIVE
SHARES STOCK CAPITAL TRANSLATION EARNINGS INCOME
-------- -------- ---------- ----------- -------- -------
December 31, 1998 8,080 $ -- $ 23,464 $ (319) $116,516
Net income -- -- -- -- 66,326 $66,326
Foreign currency
translation -- -- -- 68 -- 68
Dividends--cash
($4.84 per share) -- -- -- -- (39,136) --
Dividends--noncash
($2.12 per share) -- -- -- -- (17,090) --
-------- -------- ---------- ----------- -------- -------
Comprehensive
income $66,394
=======
December 31, 1999 8,080 $ -- $ 23,464 $ (251) $126,616
Net income -- -- -- -- 31,769 $31,769
Foreign currency
translation -- -- -- (364) -- (364)
Dividends--cash
($3.15 per share) -- -- -- -- (25,466) --
-------- -------- ---------- ----------- -------- -------
Comprehensive
income $31,405
=======
December 31, 2000 8,080 $ -- $ 23,464 $ (615) $132,919
======== ======== ========== =========== ========
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-7
THRALL CAR MANUFACTURING COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
(DOLLARS IN THOUSANDS)
1. BASIS OF PRESENTATION
CORPORATE ORGANIZATION AND BUSINESS DESCRIPTION
Thrall Car Manufacturing Company ("TCMC") and its subsidiaries (the
"Company"), a Sub-Chapter S corporation incorporated in Illinois, are
engaged in the manufacturing of railroad freight cars and associated
products and services.
The Company's world headquarters is located in Chicago Heights, Illinois,
and the Company has U.S manufacturing operations in Chicago Heights, IL,
Cartersville, GA, Winder, GA, Clinton, IL, a parts operation in Harvey, IL
and has international operations in the United Kingdom and the Czech
Republic.
2. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of TCMC and its
subsidiaries. All significant intercompany transactions have been
eliminated.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
SHORT-TERM INVESTMENTS
The Company's short-term investments are comprised of fixed income and
equity securities, which are all classified as trading securities and are
carried at fair market value. Net realized and unrealized gains and losses
on trading securities are included in net earnings for the period. In
determining realized gains or losses, the cost of securities sold is based
on the specific identification method.
REVENUE RECOGNITION
The Company recognizes revenue when title passes to the customer, cars are
certified or services are provided.
F-8
RESEARCH AND DEVELOPMENT
Expenses for research and development are charged to income as incurred.
Such expenses were $3,409 and $2,598 for 2000 and 1999, respectively.
INVENTORIES
Inventories are stated at the lower of cost or market. Inventory costs
include material, labor, and factory overhead. Cost is determined using
the last-in, first-out ("LIFO") method for the Company's domestic
operations and represents approximately 79.8% and 81.7% of inventories at
December 31, 2000 and 1999, respectively. Foreign inventories use the
first-in, first-out ("FIFO") cost method.
Inventory reserves are primarily reserves for inventory shrink and excess
& obsolete inventory. Such reserves are determined on a
location-by-location basis. Shrink reserves are based on historical
experience and excess & obsolete reserves are determined on a specific
identification basis. Such reserves are based on the carrying cost of the
related inventory.
PROPERTY PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost less accumulated
depreciation. Expenditures for maintenance and repairs are charged
directly against income. When properties are retired or otherwise disposed
of, the original cost and accumulated depreciation are removed from the
respective accounts and the profit or loss resulting from the disposal is
reflected in income. Major renewals and betterments are capitalized.
It is the Company's policy to depreciate the cost of property, plant and
equipment over the estimated useful lives of the assets primarily using
the straight-line method. The estimated useful lives are as follows:
ASSET DESCRIPTION LIFE
------------------------------------- -------------
Buildings and leasehold improvements 10-30 years
Machinery and equipment 5-12 years
=============
GOODWILL & OTHER INTANGIBLE ASSETS
Intangible assets primarily consist of goodwill and patents. Goodwill
represents the excess of the cost of purchased businesses over the fair
value of their net assets acquired. Goodwill and patents are being
amortized using the straight-line method over 15 years.
LONG-LIVED ASSETS
The Company continually evaluates whether circumstances have occurred that
indicate the remaining estimated useful life of its long-lived assets may
warrant revision or that the remaining balance of such assets may not be
recoverable. When factors indicate that such assets should be evaluated
for possible impairment, the Company uses an estimate of the undiscounted
cash flows over the remaining life of the asset in measuring whether the
asset is recoverable.
F-9
PRODUCT WARRANTY
Product warranty costs include labor and material costs associated with
repairs through the end of the expressed warranty period, generally
one-year. These costs are accrued considering historical warranty cost
experience and a periodic assessment of expected warranty costs associated
with each sale.
Unreimbursed costs to repair equipment after the warranty period are
incurred solely at the discretion of management and are expensed as
incurred.
WORKERS' COMPENSATION AND PRODUCT AND GENERAL LIABILITY COSTS
The financial statements include estimated costs, including costs not
reimbursable under insurance contracts, of settling workers' compensation
and product and general liability claims. These estimates are determined
from historical claims incurred experience, using actuarial computations
of the estimated ultimate settlement cost of such claims, including claims
incurred but not yet reported. The Company maintains stop-loss insurance
provisions to mitigate severe losses related to such costs.
SIGNIFICANT CUSTOMERS
Because there are a limited number of customers (railroads, leasing
companies and large shippers) that purchase freight cars, sales to
particular customers may be significant in an individual year or years.
Sales to customers that purchased greater than 10% of the Company's sales
accounted for 39% (three customers) and 52% (three customers) of total
revenues for the years ended December 31, 2000 and 1999, respectively.
Sales are generally made on open trade credit terms. Operating revenues
and the collection of receivables are substantially dependent upon the
economies of the railroad industry in general.
INCOME TAXES
The Company is a Sub-Chapter S Corporation. Accordingly, federal income
tax expense has not been recognized in the Company's results of
operations. However, the Company does provide for state income tax expense
in the consolidated statements of income. It is the Company's policy to
pay dividends to its shareholders to allow for the payment of taxes
related to the results of the Company's operations.
FOREIGN CURRENCY TRANSLATION
Net assets of non-U.S. subsidiaries whose functional currencies are other
than the U.S. dollar are translated into U.S. dollars at current rates of
exchange. Income and expense items are translated at the average exchange
rate for the year. The resulting translation adjustments are recorded
directly as a separate component of shareholders' investment and shown as
a component of other comprehensive income. Gains and losses resulting from
foreign transactions are included in the consolidated statements of
income.
F-10
DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instrument held by the Company:
CURRENT ASSETS AND CURRENT LIABILITIES--The carrying value
approximates fair value due to the short maturity of these items.
LONG-TERM DEBT--The fair value of the Company's long-term debt is
based on secondary market indicators. Because the Company's debt is
not quoted, estimates are based on each obligation's
characteristics, including remaining maturities, interest rate,
credit rating, collateral, amortization schedule and liquidity. The
carrying amount of the Senior Notes is approximately $369 higher
than its estimated market value.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to
make estimates and assumptions that affect the reported amounts and
disclosures. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain amounts in the 1999 financial statements and accompanying
footnotes have been reclassified to conform to the current year's
financial statement presentation.
NEW ACCOUNTING STANDARDS
In 1999, the Company adopted Statement of Position 98-5, which provides
guidance on the financial reporting of start-up costs and organization
costs. This statement, which requires the costs of start-up activities and
organization costs to be expensed as incurred, did not have a material
effect on the financial statements.
In June, 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"). SFAS No. 133
establishes accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments embedded
in other contracts) be recorded in the balance sheet as either an asset or
liability measured at its fair value. SFAS No. 133 requires that changes
in a derivative's fair value be recognized currently in earnings unless
specific hedge accounting criteria are met. Special accounting for
qualifying hedges allows a derivative's gains and losses to offset the
related results on the hedged item in the income statement, and requires
that a company must formally document, designate and assess the
effectiveness of transactions that receive hedge accounting.
SFAS No. 133, as amended, is effective for all fiscal quarters of fiscal
years beginning after June 15, 2000. SFAS No. 133 must be applied to (a)
derivative instruments and (b) certain derivative instruments embedded in
hybrid contracts that were issued, acquired or substantively modified
after December 31, 1997. The Company did not have any derivative
instruments that qualified for special accounting treatment under SFAS No.
133 at December 31, 2000.
F-11
3. CORPORATE DEVELOPMENT
Thrall Europa ("TE"), a United Kingdom unlimited liability company and
subsidiary of TCMC, has a five-year supply agreement with a rail freight
transportation company that operates in the United Kingdom. Under the
terms of this agreement, TE supplies a minimum of 500 railcars over five
years, which commenced on July, 1998.
On December 9, 1999, the Company entered into an agreement with Solimar
Inc. ("Solimar") to purchase the outstanding stock of Solimar for
approximately $1,500. Under a separate agreement with the previous owner,
the Company acquired patents in the amount of $650, which are being
amortized over 5 years. The purchase agreement requires additional future
payments to the seller.
On March 8, 2000, the Company acquired a 45% interest in Thrall Vagonka
Studenka ("TVS"), a Czech Republic company, which manufactures railroad
freight cars, for $326. On December 27, 2000, the Company acquired another
49% share of the entity for $9,354. The acquisition of TVS was accounted
for under the purchase method of accounting. The results of operations of
TVS were consolidated effective December 27, 2000. The value of the
preliminary purchase price in excess of the fair value of the net assets
of $10,790 is being amortized over a 15-year life.
The initial allocation of purchase price to the assets and liabilities
acquired is as follows:
ALLOCATION OF PURCHASE PRICE
Current assets $ 8,293
Property & equipment 13,680
Other assets 552
Goodwill 10,790
Liabilities (23,635)
--------
Total Purchase Price $ 9,680
========
The allocation of the purchase price is subject to adjustment based on the
terms of the agreement.
4. SHORT-TERM INVESTMENTS
Short-term investments are as follows at December 31:
2000 1999
---------- ----------
Equity securities $ 64,305 $ 37,073
Commercial paper -- 24,903
Fixed income 64,795 70,000
---------- ----------
$ 129,100 $ 131,976
========== ==========
F-12
Gains recorded in the consolidated statements of income for the years
ended December 31, 2000 and 1999 were $3,278 and $4,811, respectively.
5. INVENTORIES
Inventories consist of the following at December 31:
2000 1999
-------- --------
Finished goods and work-in-process $ 26,249 $ 19,159
Raw materials 20,682 18,544
-------- --------
46,931 37,703
Less - LIFO reserve (8,349) (8,341)
-------- --------
$ 38,582 $ 29,362
======== ========
6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following at December 31:
2000 1999
--------- ---------
Land and buildings $ 72,167 $ 63,205
Machinery and equipment 97,654 87,094
--------- ---------
169,821 150,299
Less - Accumulated depreciation (88,745) (78,804)
--------- ---------
$ 81,076 $ 71,495
========= =========
Depreciation expense for the years ended December 31, 2000 and 1999 was $9,941
and $9,468, respectively.
7. INTANGIBLE ASSETS
Intangible assets consist of the following at December 31:
2000 1999
-------- --------
Goodwill $ 18,698 $ 6,509
Patents 725 725
Accumulated amortization (1,207) (777)
-------- --------
$ 18,216 $ 6,457
======== ========
Amortization expense as of December 31, 2000 and 1999 was $430 and $429,
respectively.
F-13
8. ACCRUED EXPENSES
Accrued expenses consists of the following at December 31:
2000 1999
-------- --------
Accrued payroll & employee benefits $ 11,974 $ 10,883
Accrued Warranty 12,381 10,272
Other 18,200 14,729
-------- --------
$ 42,555 $ 35,884
======== ========
9. DEBT
Long-term debt consists of the following at December 31:
2000 1999
---------- ----------
Variable rate industrial revenue bonds $ 13,150 $ 13,150
Private placement debt 100,000 100,000
Other 520 228
---------- ----------
Total 113,670 113,378
Less - Current maturities 87 --
---------- ----------
Long-term debt $ 113,583 $ 113,378
========== ==========
Long-term debt maturing in each of the next five years is as follows:
2001 $ 87
2002 113
2003 153
2004 20,167
2005 --
Thereafter 93,150
--------
$113,670
========
Industrial revenue bonds consist principally of variable rate debt
averaging approximately 4.3% and 3.5% for 2000 and 1999, respectively. The
bonds are convertible to a fixed interest rate based upon market on the
conversion date. These bonds require principal repayment starting in 2008
through 2023. In connection with the industrial revenue bonds, the Company
has $13,749 of outstanding letters of credit to secure the payment of
principal and interest on the bonds. Interest expense related to these
instruments was $567 and $462 in 2000 and 1999, respectively.
On June 1, 1999, the Company entered into a $100,000 note purchase
agreement with a number of private investors. The note has four series
with interest rates ranging from 6.47% to 7.02% and repayment dates from
2004 to 2014. The agreement contains warranties and covenants which, among
other things, requires the maintenance of ratios related to consolidated
net worth, fixed charge coverage and consolidated indebtedness. At
December
F-14
31, 2000, the Company was in compliance with all covenants. Interest
expense related to these notes was $6,811 and $2,849 in 2000 and 1999,
respectively.
On June 4, 1999, the Company entered into a new three-year $50,000
unsecured revolving credit agreement with a group of five banks, replacing
its existing credit facility of $60,000. The agreement provides that the
Company may select among interest rate options which include the London
Interbank Offered Rate plus the then-applicable margin or Domestic Rate
(base rate) plus the then applicable margin. The revolving credit
agreement contains warranties and covenants, which, among other things,
require the maintenance of ratios, related to consolidated net worth,
fixed charge coverage and consolidated indebtedness. At year-end, the
Company was in compliance with all covenants of the agreement. At December
31, 2000 and 1999, the Company had no outstanding borrowings under either
revolving credit agreement, and no revolving credit loans were made to the
Company during 2000 or 1999.
10. LEASES
The Company leases office space, certain operating and warehouse
facilities, transportation equipment and manufacturing equipment under
operating leases expiring in various years through 2006. Renewal options
at fair market values are generally available for all leases. The total
rent expense under all operating leases was $2,830 and $2,900 for 2000 and
1999, respectively.
Minimum future lease payments under noncancelable operating leases as of
December 31, 2000 for each of the next five years are as follows:
2001 $2,202
2002 1,322
2003 996
2004 537
2005 211
Thereafter 96
------
$5,364
======
11. RESTRUCTURING
In December 2000, the Company announced a planned reduction in work force
at its Chicago Heights and Winder plants (the "Plan") to adjust its
operating capacity related to decreasing customer demand. The Plan
involves idling production lines at both plants. This resulted in the
severing of related hourly and salary personnel identified with those
lines.
As a result of the Plan, the Company recorded a charge of $3,118 in
December 2000. The charge consists of $1,698 in severance costs to be paid
to approximately 150 hourly and salaried employees and a curtailment loss
of $1,420 associated with the pension plan covering the hourly employees
terminated under the plan. The curtailment loss was recorded as part of
net periodic pension cost (see Note 12). The charge was accounted for in
accordance with Emerging Issues Task Force Consensus 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other Costs to
Exit an Activity.
F-15
As of December 31, 2000 the restructuring reserve balance was $3,118.
Management expects to make all severance payments in 2001.
12. PENSION PLANS
The Company maintains defined contribution plans for all salaried
employees and certain hourly employees. The Company may make
profit-sharing contributions to the salaried employees' plan which are
discretionary and are allocated to the participants' accounts based on
years of service and compensation. The Company may also make discretionary
matching contributions equal to 50% of the first 4% of a participant's
salary reduction contribution. Profit-sharing contributions for the plan
relating to the years ended December 31, 2000 and 1999, were $2,956 and
$3,450, respectively.
The Company also sponsors a number of defined benefit plans covering
specific union and nonunion employees. Benefits are based upon years of
service and a rate negotiated by a bargaining unit, if applicable. It is
the Company's policy to meet the funding requirements of the Employee
Retirement Income Security Act of 1974. Plan assets consist primarily of
equity and fixed income investments.
The net periodic pension cost (income), included in the Company's
consolidated statements of income, for the defined benefit plans includes
the following components:
2000 1999
---------- ----------
Service cost $ 748 $ 909
Interest cost 1,097 1,040
Expected return on plan assets (2,238) (2,071)
Amortization of net transition assets, prior service
costs and net actuarial gain (459) (211)
Recognition due to curtailment 1,420 --
---------- ----------
Net periodic pension cost (income) $ 568 $ (333)
========== ==========
The assumed long-term rate of return used in determining pension cost was
9% for both 2000 and 1999. As of December 31, 2000 and 1999, the assumed
discount rate used to determine the projected benefit obligation was 7.75%
and 8.0%, respectively.
The status of the defined benefit pension plans is as follows at
December 31:
2000 1999
---------- ----------
Benefit obligation $ (15,140) $ (14,069)
Plan assets at fair value 24,212 26,921
---------- ----------
Funded status 9,072 12,852
Unrecognized net gain (5,705) (10,670)
Unrecognized prior service cost 35 1,918
Unrecognized net asset at transition (605) (764)
---------- ----------
Prepaid pension cost at year-end $ 2,797 $ 3,336
========== ==========
F-16
During 2000, the Company curtailed a portion of the plan as a result of a
reduction in workforce at its Chicago Heights plant. The reduction in
hourly employees covered by the plan resulted in a charge of $1,420 (see
Note 11).
13. SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental disclosure of cash flow information is as follows at
December 31:
2000 1999
---------- ----------
Noncash transactions--
Distribution of investment to
shareholders (see Note 15) $ -- $ 17,090
Cash paid during the year for--
Interest 7,337 1,334
Income taxes $ 824 $ 645
========== ==========
14. CONTINGENCIES AND COMMITMENTS
From time to time, the Company is subject to claims from third parties and
employees and administrative proceedings, including environmental-related
matters, resulting from the conduct of its business. These matters are
brought on behalf of both private persons and governmental agencies. The
Company maintains an accrued liability representing its present estimate
of the total cost to resolve all of these matters. In the opinion of
management, the ultimate disposition of these matters will not have a
material adverse effect on the financial position or results of operations
of the Company.
15. TRANSACTIONS WITH RELATED PARTIES
The Company is a member of the Duchossois affiliated companies, whose
principal members are TCMC, Duchossois Industries, Inc. ("DII"), a holding
company, and Duchossois Technology Partners, L.L.C. ("DTEC"). The
principal subsidiary of DII is Chamberlain Manufacturing Corporation
("CMC"), a manufacturer of consumer goods and a defense contractor.
Transactions with these related parties are as follows at December 31:
2000 1999
---------- ----------
Advances due from related parties-
Revolving note with CMC $ 30,000 $ 30,000
Accrued interest on revolving note with CMC 710 641
Demand note receivable with DTEC -- 1,150
Related-party receivable with DTEC 118 58
Notes receivable due from shareholder, including interest
of $454 and $57 at December 31, 2000 and 1999,
respectively 10,680 4,609
---------- ----------
Total advances due from related parties $ 41,508 $ 36,458
========== ==========
The Company and CMC have a revolving demand note, which allows each entity
to borrow from the other up to a maximum balance of $50,000. Interest is
payable quarterly and
F-17
computed based on a major bank's prime rate. At December 31, 2000 and
1999, the Company had outstanding balances of $30,000 due from CMC.
The Company and DTEC have a revolving credit demand note which allows DTEC
to borrow up to $15,000 from the Company. Interest is payable quarterly
and is computed based on a major bank's prime interest rate. At December
31, 2000 and 1999, the Company had outstanding balances of $0 and $1,150,
respectively, due from DTEC.
During 1999, the Company distributed noncash assets of $17,090 to its
shareholders.
Interest income on obligations due from related parties totaled $3,245 and
$4,185 for 2000 and 1999, respectively, and is included in interest
income.
Advance due to related party is as follows as of December 31:
2000 1999
-------- --------
Payable due to CMC $ 5,761 $ 5,674
Note due to affiliate -- 3,188
-------- --------
Payable due to related party $ 5,761 $ 8,862
======== ========
The management fees of $7,680 and $6,942 for 2000 and 1999, respectively,
include costs of CMC, which are allocated to the Company based on a
service agreement. The management fee covers legal, finance, treasury,
tax, accounting, human resources and other corporate services.
16. SEGMENT INFORMATION
Effective for the year ended December 31, 1999, the Company adopted
Statement of Financial Accounting Standards No. 131, Disclosures about
Segments of an Enterprise and Related Information (SFAS 131). SFAS 131
requires presentation of segment information consistent with information
utilized by management for purposes of allocating resources and evaluating
business performance.
Management evaluates its business based on the location of its operations:
North America and Europe. Management does not evaluate its business based
on product or service lines. As such, disclosure of segment information at
the product or service line level is not practical. For geographic segment
reporting purposes, the Company has three segments: the U.S., Great
Britain and the Czech Republic.
F-18
The following table presents required disclosures by reportable segments.
RAIL CAR MANUFACTURING
--------------------------------------------
DECEMBER 31, 2000: N. AMERICA EUROPE TOTAL
------------------ ---------- -------- ---------
Net sales, external $ 609,700 $ 48,590 $ 658,290
Depreciation and amortization 9,100 1,271 10,371
Interest income 10,597 -- 10,597
Interest expense 7,669 -- 7,669
Income tax benefit 204 -- 204
Total assets 339,300 36,403 375,703
Capital expenditures $ 5,079 $ 763 $ 5,842
DECEMBER 31, 1999:
------------------
Net sales, external $ 671,380 $ 65,266 $ 736,646
Depreciation and amortization 8,623 1,274 9,897
Interest income 6,098 -- 6,098
Interest expense 4,183 -- 4,183
Income tax (expense) (793) -- (793)
Total assets 353,812 5,752 359,564
Capital expenditures $ 21,691 $ 583 $ 22,274
The following table presents required geographic information. Net sales
are based on final shipment destination and long-lived assets are based on
physical location. Long lived assets include property, plant and
equipment, intangible assets and other assets.
GREAT CZECH
DECEMBER 31, 2000 U.S. BRITAIN REPUBLIC TOTAL
----------------- -------- ------- -------- --------
Net sales, external $609,700 $48,590 $ -- $658,290
Long-lived assets $ 70,132 $ 6,500 $ 25,022 $101,654
DECEMBER 31, 1999
-----------------
Net sales, external $671,380 $65,266 $ -- $736,646
Long-lived assets $ 73,222 $ 7,289 $ -- $ 80,511
17. SUBSEQUENT EVENTS (UNAUDITED)
On July 19, 2001, the Company completed a restructuring pursuant to which
it became a wholly owned subsidiary of Thrall Car Management Company, Inc.
("Management"). On August 13, 2001 the Company and Trinity Industries,
Inc. ("Trinity") announced that they had entered into a definitive
agreement whereby the Company would merge with Trinity's railcar
F-19
business in exchange for cash and common stock of Trinity. The merger
closed on October 26, 2001.
In connection with the merger agreement, the Company repaid the $100,000
private placement debt and related interest and other costs of $1,094 in
September 2001. To fund the payment, the Company used proceeds of $28,138
from the sale of equity securities, $36,360 from the sale of fixed income
securities, $29,549 of proceeds received in settlement of the revolving
note receivable from CMC (see Note 15) and $7,047 in cash and equivalents.
Additionally, the Company repaid all outstanding Industrial Revenue Bonds
in October 2001. Prior to completion of the merger, certain assets and
liabilities of the Company were distributed to Management.
As a result of continued reductions in customer demand in 2001, the
Company suspended operations in Chicago Heights and Winder and reduced its
workforces in its Cartersville and Clinton facilities.
F-20
THRALL CAR MANUFACTURING COMPANY AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
(DOLLARS IN THOUSANDS)
2001 2000
---------- ----------
NET SALES $ 290,821 $ 488,888
COST OF SALES 278,281 435,009
---------- ----------
GROSS PROFIT 12,540 53,879
SELLING AND ADMINISTRATIVE EXPENSES 32,977 30,987
MANAGEMENT FEES 3,978 3,631
---------- ----------
OPERATING INCOME (24,415) 19,261
OTHER INCOME (EXPENSE):
Interest expense (5,854) (5,742)
Interest income 4,096 8,390
Other, net (759) (192)
---------- ----------
Other income, net (2,517) 2,456
---------- ----------
INCOME BEFORE TAXES $ (26,932) $ 21,717
========== ==========
The accompanying notes to consolidated financial statements are an
integral part of these statements.
F-21
THRALL CAR MANUFACTURING COMPANY AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2001
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
ASSETS 2001
---------
CURRENT ASSETS:
Cash and cash equivalents $ 1,707
Short-term investments 20,398
Accounts receivable (net of allowance for doubtful accounts of
$131) 38,469
Inventories, net 32,578
Prepaid expenses and other current assets 4,956
---------
Total current assets 98,108
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of $96,467 74,748
INTANGIBLE ASSETS, net of accumulated amortization of $1,913 17,510
OTHER ASSETS 2,309
ADVANCES AND NOTES RECEIVABLE DUE FROM RELATED PARTIES 9,379
---------
TOTAL ASSETS $ 202,054
=========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Bank overdrafts $ 7,328
Accounts payable 32,123
Current maturities of long-term debt 94
Accrued expenses 37,239
---------
Total current liabilities 76,784
ADVANCE DUE TO RELATED PARTY 682
LONG-TERM DEBT, less current maturities 13,582
OTHER LIABILITIES 13
SHAREHOLDERS' INVESTMENT:
Common stock, $.01 par value; 10,000 shares authorized; 8,080
shares issued and outstanding --
Additional paid-in capital 23,464
Foreign currency translation adjustment (1,154)
Retained earnings 88,683
---------
Total shareholders' investment 110,993
---------
TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT $ 202,054
=========
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
F-22
THRALL CAR MANUFACTURING COMPANY AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
(DOLLARS IN THOUSANDS)
2001 2000
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ (26,932) $ 21,717
Adjustments to net income-
Depreciation and amortization 8,428 7,727
Changes in assets and liabilities, net of the effect of business
acquisitions--
Receivables (12,734) (1,605)
Inventories 6,004 (10,751)
Prepaid expenses and other current assets 5,410 3,791
Accounts payable and accrued expenses (17,577) 2,483
Other liabilities (18) (7)
---------- ----------
Net cash provided by operating activities (37,419) 23,355
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Change in short-term investments 108,702 17,560
Change in advances and term note due from related parties
(includes noncash transactions) 32,129 (17,256)
Additions to property, plant and equipment, net of the effect of
business acquisitions (1,394) (4,266)
Change in other assets 53 (2,770)
---------- ----------
Net cash used in investing activities 139,490 (6,732)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in advance due to related party (5,079) (5,354)
Change in long term debt (99,994) --
Dividends (includes noncash transactions) (17,304) (23,846)
---------- ----------
Net cash used in financing activities (122,377) (29,200)
---------- ----------
Effect of exchange rate change on cash and cash equivalents (539) (706)
---------- ----------
Net cash flow (20,845) (13,283)
CASH AND CASH EQUIVALENTS, net of bank overdraft, beginning
of year 15,224 37,163
---------- ----------
CASH AND CASH EQUIVALENTS, net of bank overdraft, end of year
$ (5,621) $ 23,880
========== ==========
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-23
THRALL CAR MANUFACTURING COMPANY AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF SHAREHOLDERS' INVESTMENT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
(DOLLARS IN THOUSANDS)
ADDITIONAL FOREIGN COMPRE-
COMMON PAID-IN CURRENCY RETAINED HENSIVE
SHARES STOCK CAPITAL TRANSLATION EARNINGS INCOME
-------- -------- ---------- ----------- -------- --------
December 31, 2000 8,080 $ -- $ 23,464 $ (615) $132,919
Net loss -- -- -- -- (26,932) $(26,932)
Foreign currency
translation -- -- -- (539) -- (539)
Dividends--cash
($2.14 per share) -- -- -- -- (17,304) --
-------- -------- ---------- ----------- -------- --------
Comprehensive
income $(27,471)
========
September 30, 2001 8,080 $ -- $ 23,464 $ (1,154) $ 88,683
======== ======== ========== =========== ========
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-24
THRALL CAR MANUFACTURING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2001
GENERAL
The foregoing consolidated financial statements are unaudited and have been
prepared from the books and records of Thrall Car Manufacturing Company
("Thrall" or the "Company"), a wholly-owned subsidiary of Duchossois Industries.
In the opinion of management, all adjustments necessary for a fair presentation
of the financial position of the Company as of September 30, 2001, the results
of operations and cash flows for the nine months ended September 30, 2001 and
2000, in conformity with generally accepted accounting principles, have been
made. These financial statements and notes are condensed as permitted by the
instructions to Form 8-K, and should be read in conjunction with the audited
consolidated financial statements of the Company included herein for the years
ended December 31, 2000 and 1999.
CONTINGENCIES
The Company is involved in various claims and lawsuits incidental to its
business. In the opinion of management, these claims and suits in the aggregate
will not have a material adverse effect on the Company's consolidated financial
statements.
SUBSEQUENT EVENTS
On October 26, 2001, the Company merged into a wholly-owned subsidiary of
Trinity Industries, Inc. ("Trinity") pursuant to which Trinity tendered to the
Company's shareholder consideration of $165.6 million in cash (subject to an
adjustment relating to the level of the Company's working capital at the closing
date) and 7.15 million shares of its common stock. In addition, Trinity agreed
to make additional payments, not to exceed $45 million over five years, based on
a formula related to annual railcar industry production levels. Prior to the
merger, the Company repaid its $100.0 million private placement debt and its
$13.0 million Industrial Revenue Bonds at par, and distributed to its
shareholder certain non-operating assets including cash, investments and real
estate, and the shareholder assumed specified liabilities associated with the
distributed assets and with previously discontinued operations of the Company.
F-25
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- -----------
23 Consent of Independent Auditors