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Company Overview Report

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Company Overview Report

Introduction

Trinity Industries Incorporation is a branched out industrial company with complementary marketplace-leading ventures that provide goods and services to the agriculture, energy, transport, chemical, and construction areas. The company has five business groups. These include Construction Products Group, Rail Group, Energy Equipment Group, Inland Barge Group, and Railcar Management and Leasing Group. The Rail Group manufactures railroad cars and their components; the Construction Products Group creates aggregates, beams, concrete, and girders, the Inland Barge Group makes hopper and dry barges. The Energy Group makes propane tanks, tank heads and containers, and structural wind towers, while the Railcar Leasing and Management provides leasing services and fleet management and maintenance. All these businesses are interconnected to add value to the stakeholders(Schultze, 2011). The purpose of this paper is to examine Trinity Industries, its size, location, market, organizational structure, performance, and its management and culture.

Organization Structure

Trinity Industries was incorporated on August 4, 1986. As mentioned above, it is diversified and owns businesses that provide products and services for the energy, agriculture, transport, chemical, and construction sectors. The goods and services include railcars and railcar parts, stalls components, the management, leasing, and maintenance of railcars, construction aggregates, highway products, and inland barges. They also have structural windtowers, steel utility structures, trench shields and shoring products, and storage and distribution containers(Schultze, 2011). It also has an all another segment, which includes captive insurance and transport, and other peripheral businesses.

Rail Group

Trinity Industries’ Rail Group manufactures tank and freight railcars, which manufacturers use to carry gases, a range of liquids, and dry cargo. Its line of railcarsincludesauto rack cars that transport finished vehicles, light trucks, and sport utility vehicles, boxcars that carry a broad range of cargo including auto parts, food and paper products. The company also has hopper cars, which transport goods such as dry fertilizers and plastics, industrial cement and sand, gondola cars used for coal service, and those that carry largeproducts such as ores and finished steel, scrap metal, and aggregate. The Rail Group also offers intermodal cars that transport shipping containers in astackedconfiguration and truck trailers. The other products are open hopper cars that transport coal and aggregates, and tank cars that are both pressurized and non-pressurized. The non-pressurized tank cars transport liquids commodities, food products, petroleum products, and chemicals. Pressurized vehicles, on the other hand, transport liquefied gases. Trinity Industries also manufactures railcar axles, as well as coupling devices, sells various railcar parts used in wagonproduction and repairs, and provides maintenance services to various facilities in the US.

Railcar Leasing and Management Service Group

The Rail Leasing and Management is a provider of rail industry services. TRN has subsidiaries including Trinity Industries Leasing Company (TILC), RIV Rail Holding 2013 LLC, and TRIP Rail Holdings LLC (TRIP) which offer operating leases for freight and tank rail cars. Besides, TILC introduced and manages railcar leases for third-party investor-owned funds and provided fleet management and maintenance services for shippers. The rail cars in the contractare given to industrial railroads and shippers. The organizations operate in some markets including agricultural, chemical, and automotive and energy industries(Schultze, 2011). As of December 31, 2016, the rail leasing fleet of TRN’s subsidiaries included 85, 110 owned, as well as leased rail cars.

Construction Group

The Construction Products Group, through the subsidiaries, manufactures products for the construction of highways, along with steel products for mines, infrastructure-related projects, and construction aggregates. Trinity Industries’ road products include guardrail, crash cushion, and other barriers manufacture. Its guardrail products, barriers, and crash cushion include products made under license from particular private and public research organizations and inventors and companyheld patents. It produces and distributes natural lightweight aggregates, including clay and expanded shale, sand and gravel, crushed stones, asphalt rock, and various products in Western and the Southwestern United States. The construction aggregates customers are residential, highway, and commercial contractors who are concrete producers, masonry products manufacturers, and state and local governments(McCollum, 2004). The group also manufactures a line of shoring and trench shields products for the construction industry.

Inland Barge

The Inland Barge Group has subsidiaries that manufacture fiberglass and inland barge covers. It produces a range of dry barges such as deck barges and covered and open hopper barges that transport some commodities including coal, grain, and aggregates. It also makes tank barges that transport liquids such as chemicals and various petroleum products. The customers use the fiberglass reinforced lift covers for grain barges. Most customers for the inland barge group are commercial marine transportation companies.

Energy Equipment Group

Trinity Energy Equipment Group segment through its subsidiaries produces structural wind towers, utility steel structures for transmission and distributions of electricity, tank heads for pressure and non-pressure vessels, and storage and distribution containers. The wind energy market uses the structural wind towers, and the customers are turbine producers. Municipalities, local, and state governmental authorities, and other public and private utilities use Trinity Industries’ steel utility structures for electricity distribution and transmission. TRN manufactures part of its distribution and storage containers in Mexico under TATSA(MacKinnon & Gough, 2014). The storage and distribution containers support gas, oil, and chemical industries and are used by Industrial utilities, Plants, residences, and small businesses in the suburb and rural areas. It also manufactures fertilizer storage and distribution containers for farm and bulk storage, as well as the distribution and application of anhydrous ammonia. The Energy Group also manufactures cryogenic trailers and tanks for the distribution of liquefied and industrial gases. The storage and distribution containers’ size is between nine gallons of motor fuel or 1.8 million gallon bulk storage ones. The Group sells containers to industrial users and dealers and installs and fills them. It also manufactures and sells gas and oil equipment and pressed metal tank heads, both pressure and non-pressure rated, depending on the intended use(Plunkett, 2009). TRN uses some of the tank heads to produce railcars, along with storage and distribution containers and sells some to a range of manufacturers.

Yearly Performance

As of August 2016, the number of employees in TRN rose to 22, 030 in all the entities. Then market capital rose to 3.76 billion, am enterprise value of 5.08 billion, and the trading price to $24.67(Schultze, 2011). Unlike its competitor American Railcar Industries Inc., which operates three segments including railcar manufacturing, car services, and leasing. The company has eight plants that assemble and fabricate raw materials mainly steel into car components, cars, and industrial components. It also has eight railcar repair plants, Mini repair shops, and 11 mobilemaintenance. The company also leases tank railcars and maintains leased cars through the refurbishment and repair facilities. As of December 31, 2016, American Railcar Industries Inc. had 11268 cars in its leasing fleet(McCollum, 2004). Its revenue and net earnings of $4.6 billion and $343.6 million respectively. The current liquidity of $378.6 million, which includes $200.0 million available under the credit facility. TRN’s other competitors include Greenbrier Companies Inc., whose revenue in 2016 was $2679 million. There are also Freight Car America Inc. whose annual revenue as of December 2016 was $135.52 and Westinghouse Air Brake Technologies Corpwhich recorded a revenue of 2931 million as of December 31, 2016 (MacKinnon & Gough, 2014). Apart from American Railcar Industries, which carries out business across manufacturing, construction, energy, agriculture, and transportation, most of TRN’s peers are not multi-industry holding companies(Plunkett, 2009). TRN aspires to become more creative and innovative by creating superior shareholder value through high-quality production and workers’ talent. Others include thestrength of business leadership, how deep the professional expertise is, and the ability to make better returns and earnings.

Organization Culture

Trinity Industries is based on professionalism, honesty, fairness, dedication to excellence, consideration, reliability, and trustworthiness. TRN’s culture is founded on solid values including operational experience, entrepreneurialism, operational flexibility, can do attitude, result oriented, continuous improvement, loyalty, collaboration, work ethics, and substantial leverage. TRN’s manufacturing is based on cost efficiency and flexibility. The production scale and presence in the southern United States market along with vertical integration provides practical benefits across various segments. It also has an enrichment value focus, which focuses on collaboration across differentsectors. The approach is intended to generate asynergy that enriches value and eventually provides benefits for the business to remain competitive (MacKinnon, & Gough, 2014). Its operational focus areas include customer sharing, facility optimization, internal components sourcing, centralized cost savings, and shared best manufacturing practices.

Management

Unlike many other companies, Trinity employees tend to stay. There are some reasons why this is the case. First, the management believes in encouraging staff through change and rewards. Also, the growing business portfolio provides a broad range of opportunities for career advancement and diversity. TRN is now a multi-billion dollar company but has deliberately worked to maintain the feeling of a small business. The company has a strong work ethic, and the groups work collaboratively to share best practices, optimize the workforce, and leverage synergies. Besides, the company prides itself on creating quality industrial products and providing superior solutions in a high integrity environment that believe in doing the right thing all the time. The company is creating new positions and offers employees various cross-business opportunities to grow and enhance skills (McCollum, 2004). Besides, it is always on the lookout for employees it can groom to be the company’s future leaders.

Internal Controls

The Sarbanes-Oxley of 2002 has forced Trinity Industries among others to examine their spreadsheets in financial reporting (EY., 2014). Surveys had shown that financial reporters use spreadsheets in corporate financial reporting. The same research also revealed that the large spreadsheets have numerous errors and those of material size are common. The first SOX assessment raised concern about spreadsheets accuracy. Also, spreadsheet fraud is easy to perpetrate, and most corporations lacked adequate internal controls to address these errors, along with fraud. For TRN to have an effective internal control, it would have to maintain books of accounts and records to ensure that the transactions reflect accurately and equitably. For the company to succeed, it needs to devise and maintain internal controls that provide satisfactory assurance that the transactions are in agreement with the management’s approval. The transactions should be recorded as necessary, and there is permission to access the assets according to the management’s authorization (Leskeia& Logan, 2003). Section 103 requires the PCAOB to meet the set standards where the auditor reports on the range of testing internal control process and arrangement of the issuer.

There are a variety of internal control processes that Trinity Industries can implement to mitigate some of the concerns in the organization. These include first, increasing the level of awareness amongst the top management. Sensitization can be done in several ways, which include putting IT employees through a crash program in internal controls. The company can also utilize a new internal audit methodology also known as control self-assessment. The second is aligning internal control goals with those of the company. The company’s investment in IT should be in support of the firm’s objectives. Due to the esoteric skills requires the development and maintenance of computer systems, most organizations perceive IT as apart from the other business units. The perception is reinforced by the presence of highly small and specialized jobs of IT workers(Schultze, 2011). There is also the sense of separation which causes misalignment between company’s goals, IT department, and individual goals.

The company can address this problem by sending IT developers and analysts to other business units. The intention behind this strategy is to allow the system designers, along with analysts to put themselves in the shoes of the user for whom they design and develop the system. This shuffling would help the IT worker gain an understanding of the processes they support and obtain knowledge of the usability and efficiency of the systems they support and design while decreasing the gap between the IT worker and business units. The last is encouraging the IT workers to learn about business processes and internal controls. The company can incorporate seminars, college courses, and in-house training in the IT employees’ career development plan and provide the appropriate incentives to help achieve professional development goals. TRN can also use the internal audit department as consultants. This department has the expertise that the firm needs to develop a plan for internal control (Plunkett, 2009). They may not be in a position to design internal control for use in the company’s business processes, but they can provide timely and less expensive advice.

Material weakness

Like many other companies, Trinity Industries encountered a material weakness which is defined as a defect in the internal control system. The material error could not be corrected or stopped. The fault may have occurred in the period through the interim financial reporting. In Trinity, the material weakness resulted from inadequate duties segregation. In Trinity’s case, the same person who received the sales commission approved loan agreement and reconciled thebank account. Besides, the firm lacked employees with sufficient expertise to prepare those financial statements accurately. Besides, Trinity Industries failed to reconcile substantial account balances, a weakness that it did not recognize. The material weakness resulted in problems with the company’s financial reports, and the problem was not identified until the Board examined the books of accounts. If the problem is not addressed as early as it is detected, it is likely to influence the final decisions of the firm(EY., 2014). It means that the decisions made by the management would be lacking since the do not have accurate information to help them make the most important decision.

Top-Down Approach

PCAOB No. 2 calls for a top-down approach, which is against external auditors’ view. Most people prefer the bottom-up control centric approach. However, the cost of using this approach is enormous. The top-down approach, on the other hand, requires an equal number of diagnostic tests and steps, regardless of the information collected there before. The top-down risk-based approach results in massive costs, business disruptions and time outlays. Among the many control processes identified, the top-down risk-based approaches were not used effectively. An effective internal control approach devotes its resources on the greatest risk areas and avoids giving insignificant accounts and controls equal attention without assessing the level of risk (MacKinnon & Gough, 2014). A top-down approach requires management to apply cumulative knowledge, judgment, and experience in identifying the areas of significant risk.

Bottom-Up Approach

In their review, PCAOB directors learned that some auditors, to some degree, preferred the bottom-up approach to internal control. Theplan focused on performing various tests and controlsof the process, application levels, and transactions. Auditors using the bottom-up approach usually spent more time than necessary completing their audit. PCAOB inspectors also observed that the auditors did not change their testing controls at the transaction, process, and application level in response to the testing results. According to the SEC, the bottom-up approach is neither efficient nor effective. Some corporate failures such as WorldCom and Enron can be attributed to weaknesses in internal control (Schultze, 2011). The risk in bottom-up approach is that auditors pay insufficient attention to the control environment while control is the foundation of all the components of internal control.

The top-down and bottom-up approaches are all significant in helping the firm identify and decide the best way to integrate the capabilities of the management into the environment. The bottom-up approach has an enormous impact on the enterprise and investments while the top-down approach has delayed returns on investment. Also, the implications of the top-down approach are not as much as those of the bottom-up approach. TRN should use the top-down approach. Although it has delayed returns, it eventually shows the impact after several years. It also helps the firm comply with SOX. The two methods have different effects on different companies (Leskeia& Logan, 2003). The bottom-up approach can change the organizational structure. However, the top-down approach has no impact on the structure of the organization.

SOX-Related Expenses: Software System

In a pilot project by the PCAOB, several processes were identified as needing to be changed from various locations. The plansrequired documentation, testing, and control from multiple control environments. The pilot project, which complied with SOX, resulted in the formation of a steering committee and the Oracle Project (Ingram, 2014). Trinity Industries relies on several companies to maintain its control system. Oracle is one of the sales management software selected for Trinity. This is one of the most effective tools in helping organizations manage their control environment. The software also offers the best sales management solutions. Unlike many other SOX-related software systems such as SalesForce, Oracle can use the company’s sales to enhance transactions. Also, unlike Sales Force, Oracle offers customer management platforms. Another SOX-related software is Rimini Streets, which carries an effective mobile UI. However, it lacks the predictive analytics found on Oracle, which helps companies create a good sales workforce. After examining the different types of software, Oracle would be the best choice for Trinity Industries (Ingram, 2014). First, it offers a range of services including cloud storage where the company can store unlimited data. Second, it helps the firm create a reliable and predictable sales workforce. Therefore, Oracle should be the software that Trinity maintains.

In conclusion, Trinity Industries Inc. is a multi-billion dollar company that deals with services in sectors such as railcar manufacturing and leasing, transport, energy, and construction. The company’s yearly performance indicates an increase in production, which has resulted in an increase in employment opportunities. Trinity Industries greatest competitor is American Railcar Industries, which manufactures, sells and leases similar products. However, Trinity Industries has shown several material weaknesses that indicate a problem with the firm’s internal control. This paper provides four strategies that the company can use to enhance the control environment, as well as plans to speed up return on investment and lower the cost of production and internal control. The four strategies include increasing the level of risk awareness, aligning control goals with the firm’s goals, utilizing internal auditors as consultants, and encouraging IT workers to learn about the business by interacting with employees in other departments. The two approaches include top-down and bottom-up, where the top-down would be the most appropriate for TRN Industries. Finally, it proposes a software system that would help the management keep track of the sales workforce; hence improve its outreach to potential and current customers.

References

EY. (2014). The Sarbanes-Oxley Act at 10. EY. Retrieved from http://www.ey.com/Publication/vwLUAssets/The_Sarbanes-Oxley_Act_at_10_-_Enhancing_the_reliability_of_financial_reporting_and_audit_quality/$FILE/JJ0003.pdf