GATX Corp (GATX) 2006 Q4 法說會逐字稿

Good morning. My name is Mandy and I will be your conference operator today. At this time, I would like to welcome everyone to the GATX fourth-quarter earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (OPERATOR INSTRUCTIONS).

Ms. Johnson, you may begin the conference.

Thank you, Mandy, and good morning, everyone. Thank you for taking time during the busy earnings season to join us for our fourth-quarter and 2006 year-end conference call. With me today are Brian Kenney, President and CEO of GATX Corporation, Bob Lyons, Vice President and Chief Financial Officer, and Jim Earl, our Chief Operating Officer. I will provide a brief overview of the numbers which were provided in our press release this morning, and then I will turn it over to Brian to provide some comments on the use of the Air sale proceeds and our outlook for 2007. Then we will throw it open to your questions.

Before I begin, I'd like to remind you that any forward-looking statement made on this call represents our best judgment as to what may occur in the future. The Company's actual results will depend on a number of competitive and economic factors, some of which may be outside the control of the Company. I refer you to our Form 10-Ka filing for the year ended December 31, 2005, as filed with the SEC, for a discussion of those most important factors.

Now, let's review the numbers. Today, we reported fourth-quarter 2006 net income from continuing operations of 27.7 million or $0.50 per diluted share. This compares with 2005 fourth-quarter net income of 9.4 million or $0.19 per diluted share, which included 9.9 million or $0.19 per diluted share of expenses associated with the repatriation of foreign earnings under the U.S. Jobs Creation Act.

For the full year 2006, net income from continuing operations was 150.5 million, or $2.63 per diluted share, including 9.9 million or $0.16 per diluted share of benefits from tax rate changes in Canada and derivative activity at an affiliate. In 2005, we reported full-year net income from continuing operations of 105.6 million or $1.94 per diluted share, which included $0.19 per diluted share of foreign earnings repatriation expense I mentioned earlier.

2006 was an outstanding year at GATX, as we capitalized on opportunities in the rail, marine and industrial equipment markets, refocused the Company around those assets, and improved the Company's overall risk-adjusted return. But Brian will discuss these topics in a moment, so let me just provide some highlights from our business segments in 2006. In Rail, net income improved from 82 million in 2005 to 116 million in 2006. Our North American fleet utilization remained at 99% throughout the year, and our renewal success rate remained very high. We found excellent investment opportunities, purchasing more than 6300 cars for our North American fleet, ultimately growing our fleet, net of sales and scraping, by more than 2300 rail cars to 110,500 cars.

Importantly, the strong lease renewal rates continued to provide revenue lift. Renewal rates on the basket of our most common car types increased 19% over the expiring rate in the fourth quarter and were up 14% for the full year, 2006. On top of that, we were able to extend average lease terms on those renewals 70 months in the fourth quarter, compared with 60 months in the fourth quarter of 2005. In addition, Europe continues to pose improving financial results, and we are beginning to see additional fleet growth opportunities in that market, investing more than 45 million in Europe in 2006.

Specialty finance reported 55.1 million in net income in 2006, up 5.8 million from the previous year. Income from the marine joint ventures in 2006 was off the record levels of 2005 but remained solid, generating an excellent return. Our marketing activity, primarily from the managed portfolios, was 28 million in both 2005 and 2006, remarkable gains reflecting the high asset values in today's market. Specialty's owned portfolio of assets grew 14% from investments in industrial equipment and marine vessels.

American Steamship also rounded out the sailing season and a good year, benefiting from the full integration of the six vessels purchased in June and a strong market. Overall, operationally, we had another very positive year and continued a strong financial performance at GATX. While we see some signs in railcar supply that we're monitoring, demand from our customers remains robust, and we expect that the market environment we remain favorable. This gives us confidence as we enter 2007 and we're looking forward to the year ahead.

With that, let me turn over the call to Brian for his comments.

Thanks, Rhonda, and good morning, everybody.

Before I open up to Q&A, I want to quickly address three topics of interest. First is my view on our 2006 performance. The second one is our outlook on 2007. Lastly, I would like to talk about the use of proceeds from the Air sale.

As Rhonda just detailed for you, we did have a strong 2006 from a financial perspective. Our GAAP earnings per share increased 36% from 2005. Our return on equity is approaching 14%, and that's right in the middle of that range that I laid out that would be good for GATX. It's a good return, the 13 to 15% range, given our business mix. Our stock returned to 22.5%, and that beat all relevant indices. So it was a good year financially.

For me, the financial results are actually relatively unfulfilling because, given the underlying strength in the rail market, the marine market and as well as the high asset prices across all of our markets, we should have had strong financial results in 2006. But I am excited about 2007 for other reasons, and the biggest reason is our longer-term strategic objectives that we achieved in 2006. That ranges from the sale of that the Air business, which just got completed last week, to our purchase of the Oglebay Norton fleet for our Great Lakes shipping business. Lastly, we did invest $0.75 billion and we maintained a strict investment discipline while doing so. It excites me because I believe these actions ensure our success for years to come. It was also extremely difficult to accomplish, given the market for investment last year. That's what pleases me most about our 2006 performance.

Now, 2007, we still expect to be operating in a strong rail market, albeit not with the same completely rosy outlook of a year ago. As Rhonda just mentioned and we also mentioned last quarter, there are pockets of weakness in certain freight car types. This became a little more widespread as we approached the end of 2006. Having said that, it didn't impact our financial results at all, and actually proved beneficial to our investment volume in the fourth quarter of 2006. Our railcar prices of some of these affected car types came down a little bit, and we were able to take advantage of those opportunities. But we do have renewals as per some of those affected car types in 2007, so we do have to watch that trend carefully.

Now, all of this has been factored into our guidance for 2007. Speaking of 2007, we expect that railcar lease rates will continue to increase on an absolute basis, as well as compared to the average expiring lease rate. That trend will continue. We also expect renewal success rate and utilization to remain at the very high level that you've seen in the last year or so. Maintenance expense and ownership cost will also increase, so it will offset that a little bit. That's due to compliance in our fleet. Compliance program costs are increasing and our fleet is getting bigger. But overall, we expect Rail to post a significant increase in financial performance in 2007. So it will be another strong year for Rail.

In the Specialty segment in 2007, we expect that income will decrease. That's solely due to the very high level of remarketing income that we did earn in 2006. Therefore, it really masks what's going on with that portfolio. We do expect, in 2007, that we will grow Specialty's lease income and asset size, like we did in 2006. I also expect strong performance from our marine investment in 2007. I'm also very pleased we were able to make additional investments in marine, especially in new builds, that will be coming online in 2007 and beyond. We think that will provide an extremely attractive return for our shareholders for years to come. So while we expect that income will be down in 2007 in Specialty, it's me really more a reflection of timing, and it hides the fact that the portfolio is growing and remains quite profitable.

So the outlook in Rail and Specialty I just laid out. That will be accompanied by another strong year at American Steamship; that's our Great Lakes shipping company. They will continue to capitalize on their acquisition of the Oglebay Norton fleet in 2006. It will also be accompanied by efficiency savings in SG&A across GATX. We are rationalizing our organizational structure due to the sale of the Air business. At all this operating performance will be combined with the share repurchase program that was recently approved by our Board. The result is that current expectation for 2007 earnings per share from continuing ops is in the range you saw in the press release of $2.90 to $3.10, once again another healthy increase from 2006.

I just mentioned the share repurchase program. That's a good segue to a discussion about the use of proceeds from the sale of our entire Air business. As I said, the final part closed last week. The after-tax proceeds from the sale are approximately $680 million. Half of that was immediately used to pay down short-term debt. We expect to use the majority of the remaining proceeds to repurchase shares. Obviously, this expected repurchase has been factored into our 2007 earnings guidance and even after this repurchase, we still expect leverage to be low, compared to recent history, especially true if you look at our current business mix, which will be less volatile, we believe, due to the sale of GATX Air.

Now, armed with the facts of the Air sale as well as our plan for the use of proceeds, we had a series of discussions with Standard & Poor's regarding our credit rating. Fortunately, it was good timing. The result of that discussion is reflected in the announcement they made this morning stating that GATX had been upgraded to BBB+. Now, we are always thrilled to get upgraded, especially coupled with Moody's recent upgrade of GATX to an equivalent rating. But if you've listened to us in the past, you can understand we are a little bit disappointed that the upgrade wasn't A-. As you've heard us state, that has been our target. But if you read the press release that the S&P put out, given that our expectations regarding the lower leverage that GATX would need to maintain to get to an A- rating, my current view is that it would be much too expensive to the GATX shareholders for us to secure that A- from S&P. So, it is a little disappointing but on the other hand, it gives us the ability to take leverage higher than we otherwise would have been able to when we see the right investment opportunity. I don't want that to be misconstrued; we're not going to run out and use share repurchase to lever up the Company immediately to an unreasonable level, but this decision does allow us to manage the Company for the long-term and gives us the opportunity to invest more freely without the requirement that we maintain the lower leverage target the apparently is needed to get to the A- rating.

That really takes me to my last comment, which is on our rate of growth. I want to make sure all our constituencies correctly interpret what's been happening as far as asset growth in the last year or so. On these calls and in general, we seem to get a lot of comments regarding our perceived low levels of investment. We've been pretty clear over the last two years that we wouldn't invest shareholders' money in growing an underperforming air business, and now we've sold that air business. So in 2006, you really need to look at continuing operations, excluding Air, to get a relevant snapshot of growth. When you do look at it this way, you can see that we grew our continuing operations asset base by almost 11% in 2006. Again, I'm quite pleased with that rate of growth, given the difficult investment market that we are operating in. That's why I thought it was important to put it in perspective for you.

That's all I had. Let's go ahead and open it up to questions.

(OPERATOR INSTRUCTIONS) John Hecht, JMP Securities.

Good morning, guys. I'm just wondering if you guys can deconstruct the share of affiliates' earnings during the quarter. It was off. I know there was some expense accruals that were one-time in nature in there, and then obviously some reduction in the remarketing income. But I'm wondering, if just on a going-forward basis, if we can get some clarity with what are run rates on a recurring basis there, and where might lumpiness come from.

Sure, John, it's Bob Lyons. If you look at where share of affiliates came out for the full year for GATX overall, it was 76.1 million. Whether we are dealing with share of affiliates or remarketing or even net income for that matter at GATX, I tend to gravitate more towards an annual number, and then I'll loop back and talk about the fourth quarter. But we put up 76.1 million for the full year in 2006. We would expect that number to increase a little bit in 2007 again, so we would see that number coming up somewhat.

In the fourth quarter, as you will note, at Specialty, compared to the third quarter, there was a significant decline in share of affiliates' earnings. That's really driven by a couple of things. First of all, in the third quarter, there was some sizable income through remarketing events at certain affiliates in the third quarter. Then in the fourth quarter, we actually took an accrual for a potential litigation event at one of our joint ventures for about 3.5 million after-tax in the fourth quarter. So when you look at the real strong remarketing activity in the third quarter at some of the joint ventures, then later and the fact that we all also took this accrual in the fourth, the comp is a little bit challenging. But on a going-forward basis, we expect that share of affiliate line to continue to move up for GATX.

Okay. In your forecast, what are your expectations in terms of timing for repurchase activity and for tank car purchases in '07?

Well, I would say for-- taking them in reverse order--as far as acquisitions of rail cars go, we tend to go into the year and normally model that fairly evenly without trying to pick points. We actually happened to have a very strong fourth quarter this time in 2006, but we tend to view those fairly evenly.

In terms of the repurchase, you know, we are sitting on a sizable cash balance today, and I never view that as optimal. So, we will try to utilize that as quickly as we can in a reasonable fashion, but you know, from the buyback, it's not something I want to see drag on for an extended period, not when we are sitting on a lot of cash today.

Okay, and last question--understand, given asset pricing in the markets, you may not want to be too specific about other use of capital other than the repurchase program, but I'm wondering if you can tell us, given that you seem a little bit satisfied or at least accepting of a triple B+ rating, if I calculate your recourse leverage right now, it's about--after the repurchase, it's about 3.3, 3.4 times. Where do you feel comfortable, given the debt rating that you would take this to, given your ability to relever up a little bit?

There was a lot of discussion that we had with Standard & Poor's, and you know they won't land on a number for you. It really depends on the circumstances. But if you throw out some comps at the end of 2000--and things were actually headed down at that point so it's not the best comparison. We were levered almost 6-to-1 with a much more volatile business mix than we had the same ratings (indiscernible). Pretty quickly after that, the ratings started to come down but I--so I'm not going to--I don't want to imply that we will go up to 6-to-1 of the point is I do think we have a lot of runway to take advantage of opportunities, investment opportunities as the market comes down. I don't want to throw out a number because that's going to depend on exactly what you are buying and how fast and what the business environment is, but I feel a little better about increasing leverage if I don't have to hit that artificial target for an A- rating.

All right, thanks. I will get back in queue later.

Bob Napoli, Piper Jaffray.

Thank you. Brian, I like that 6-to-1 number and I totally agree with you.

Yes, if you want to see us get downgraded pretty quickly.

Well, you know, if you do it gradually, it's not really--I don't view it as all that aggressive, given your business mix and certainly compared to peers, it's just not an aggressive number. So, you know, I'm on board with that.

With regards to--you guys have two sets of converts outstanding. I think you have the right to buy those converts back and I just wondered. One is '07. One is in '08. What's your--that is not part of your $300 million stock repurchase, I don't believe. What are your plans with those converts?

Sure, Bob, it's Bob Lyons. The first convert, the 2007 one, which is a February 2 maturity, I believe, is a $175 million principal amount. You can view that 175 million as just a debt instrument. That will be repaid just like any other maturing debt.

The premium, which today is about between 40 and $50 million, that would be issued in common stock, so call it 1 million shares, roughly that would go out in common stock. So conceptually, that would kind of fall back in within the buyback. But the 175, the principal amount, that's not at all related to the $300 million stock repurchase; that's just a debt maturity.

Now, there's 5 million shares approximately associate with that, and I know you have interest expense. I don't think it's hugely accretive, but it's somewhat accretive to buyback that--to redeem that 175 million convert, even combined with the stock issuance, right?

Having the convert go away is a good thing.

Right, undoubtedly. Yes.

Then you have the same--I mean, I know we are a year away but given your capital--I don't think you even needed to sell the Air business to do that, but you would intend to probably do the same thing next year, in '08 with respect (multiple speakers)?

Well, yes, we will certainly analyze it as we go through '07, but that would be a pretty reasonable assumption.

Okay. Now, the tax rate in the fourth quarter was a bit high. You know, what is--you know, we are assuming like a 33, a little over a 33% tax rate in '07. Is that incorrect? What happened with the tax rate in the fourth quarter?

Well, the tax rates tend to move around depending on which jurisdiction the income is coming from. I think if you look on a full year kind of normalized basis, when you take into consideration the tax benefit that we generated up in Canada, you would come out at about 36%.

Is that what you expect for '07?

That's a reasonable assumption going forward, right. Any quarter is going to bump around, purely due to where the income is being generated from. Again, we tend to look at things annually, and that 36% number is pretty reasonable.

Okay. Now, the stock repurchases, how much of that do you anticipate? Do you anticipate completing that relatively quickly or I mean, that's a fair amount of stock for you guys, or is that something, so is that all in--?

You know, as I mentioned before, I don't like sitting on a large cash balance, which is what we have right now. So, we will move as quickly as we can and as reasonable, given the guidelines you need to follow with repurchases, and you know, look at some alternatives for trying to move that along as quickly as we can. I don't want it to drag out, Bob.

Okay, the last question and I will get back in the queue--Europe, you talked just briefly I think a little bit about the potential for growth in Europe. With this additional capital, first of all, if you could just kind of go over the trends that you're seeing in Europe and the outlook for '07 for your European business. Then is that an area where you hope to make some acquisitions, portfolio acquisitions, in 2007?

Bob, it's Jim Earl. Yes, we are pretty positive on the European rail market right now. We are seeing opportunities to make investments there that are attractive. Rental rates are starting to move up, which they had been reasonably flat for some period of time. Because of some regulatory action and just the evolution of that system as it really moves from a nationalized system to more of a commercialized and privatized operation, the regulatory burdens are falling reasonably heavily on small operators. It's starting to move into the model that we experience here, where there are economies of scale associated with size and just having the infrastructure to run a leasing business efficiently. That works in our favor. So we are starting to see some opportunities to--as smaller companies decide they just want to accept that market, there are opportunities to buy small to medium-sized fleets that are pretty attractive.

Longer-term, there may be some bigger opportunities as some of the ownership of the private car fleet shakes out, but right now, it's a pretty interesting market for us, both in the tank car side, which is our wholly-owned business, and also the freight car side of that market, which we conduct through a joint venture.

So you are seeing a number of opportunities to potentially make some acquisitions?

Yes.

There?

Of both customer fleets and hopefully competitor fleets.

What are the returns right now on that business versus the U.S.?

Well, the actual--you know, the economics on the transactions we've seen, over the course of the past year, we've actually seen some stuff come through that has been better than what we've kind of seen on an equivalent basis here in the United States, or in the North American market. So the returns are attractive. I think we noted in the press release, we did about $45 million of investment volume there in 2006. I think we will be disappointed if that doesn't go up substantially in 2007.

Yes, that's on new investment. I agree, the returns look more attractive in the US. As far as the returns on the entire business in Europe, it's not yet to the level of (multiple speakers) the return on equity in U.S., but it's getting better, as Jim said.

Thank you.

Art Hatfield, Morgan Keegan.

Good morning, everybody. Hey, Bob, I want to make sure I understand this as I try and figure out kind of a diluted share account for '07. When you pay off the convertible--and I'm just going to use rough numbers--you currently have 62 million shares outstanding.

Yes?

I assume that takes away 5 million. You've got to add back 1 million for the issuance on the premium. That gets you to roughly 58 million. Then, we would deduct from that fully diluted count based on how many shares you are able to accumulate to the repurchase?

Correct. That's the right math.

So theoretically, by the end of '07, you could be around a 52 to 53 million share, diluted share outstanding count?

It's in that range, right.

Good. Okay. How quickly that gets there just depends on how quickly you repurchase the shares?

That's right, Bob.

Are you just going to do a standard repurchase, just go into the open market when you have windows to do so and buy the shares?

That's the way the repurchase program is set up now, and then also, as you guys know, there's other alternatives for trying to do blocks and potentially do things a little bit quicker, so we're looking at those as well.

Okay, so you thought about the possibility of just doing a Dutch Auction of some sort and getting it done quickly.

Well, we weighed--I wouldn't go the auction route but it certainly, as far as the alternatives go, Art, we've weighed them all. And you know, we're looking to do this in the most efficient manner and in a very reasonable timeframe. It's not something you--you know, I don't want our treasury guys focusing their whole year on a stock repurchase.

Right. I was going to say, you don't want us asking you when you're going to get that done a year from now, right?

Correct.

Okay. Secondly, where do you stand on your committed purchase program? Is that complete or how many cars do you have in '07?

Art, it's Jim. We have a full year for '07, so that will be the full 1500 cars. Then at that point, the 2002 program ends and then for 2008 in 2009, we will be under the program we announced with ARI. That count was 1000 cars per year under that committed program.

Okay, great. Just two other questions, one on--where are we at with regards to cycling through the bottom of the last cycle when the lease rates bottomed out? Have we been through that period or are we still going to see that kind of lapping that period in '07?

Well, rates started to recover towards the last half of 2003 into 2004, and most of it--we didn't have a whole of new cars back then. New cars generally back then were put on for five years but there were a lot of renewals. So basically what I'm saying is we are right--right now, we're getting to the point where we are starting to renew (indiscernible) cars that were there and renewed when things were turning up. I didn't say that very well, but the bottom of the market, as far as renewals, was last year. But still, absolute rates have increased. Absolute rates are higher than the last peak so you'll continue to see lease rate increases.

We will, but I guess for our expectations going forward, though, on the lease rate renewal side, we should see a moderation in the rate of increase. Is that fair to--?

If absolute rates were to cap route, which right now, well, depending on car types, of course, but in general, if absolute rates were to cap out right now, yes, you would see smaller increases over time.

Okay. Then finally, Brian can you talk about a little bit about ethanol? You know, if we look at the industry backlog for new freightcar deals, seems like there's an abundance of cars in that backlog for ethanol. Do you think--I guess, from your prospective, do you think there's too many there? Is that something that you're concerned about for potential excess capacity in that type of car being built over the next few years?

Art, it's Jim. Actually, Brian pointed his finger towards me to answer this one, so you know, we've talked about ethanol quite a bit and that continues to be a very strong market, an awful lot of cars in the backlog being built to satisfy that demand. You know quite frankly, we think there may be a little exuberance in that, but it is a strong rail market. It is good. We will continue to build cars for that service and deploy them as well. We are doing it as thoughtfully as possible and with the customers we think have staying power, kind of regardless of the circumstances.

I think the threat there, in some respects, is simply that the volumes and the way the logistics of that transportation evolve, it's not likely to continue on the same growth rate that it has experienced. I think that's where you simply have the guys who participate driving for efficiency. That will be efficiency in how stuff is distributed, efficiency in how quickly railcars turn, the ability to move stuff from rail to more efficient ways to move this stuff. You know, it's a tremendous volume of liquid and while railcars are efficient, there are other more efficient ways to do this. I think you'll also see consumption and production patterns change, long-term.

So I mean, it's still a very good market. I just think to project the same growth rate that we are experiencing today well into the future might the a little unnecessarily bullish. So we are proceeding thoughtfully and with caution, but also you know, it does represent a good growth market for GATX and for the industry, and we are active in participating in that.

Great, thank you very much.

Richard Shane, Piper Jaffray.

No, with Jefferies & Company. Anyway, thanks, guys for taking my question. Most have been asked but a couple things here, and I think Art was starting to flush this out a little bit. Last quarter you were somewhat circumspect in terms of when you described the backlog at the manufacturers. In fact, we did see the backlog come in slightly. Is it the same situation right now? Do you think that we will see that continue to trend down slightly over the next couple of quarters?

Well, Richard, it's Jim again. You know, I don't know obviously, but think that's kind of a reasonable expectation. On the freightcar side, which is the biggest part of that backlog historically, there is continuing softness in a few car types. You know, coal has slowed down, certainly the equipment that supplies the housing history, center-beam lumber cars for instance, those have fallen off dramatically. Certain boxcars that serve forest products--you know, that area also has dropped off. Intermodal equipment, there has been a real lull in new orders. So I think that's a reasonable expectation. We don't think it's fallen off a cliff, necessarily, but I think a slowing is--that's an appropriate assumption. That being said, tank car backlogs continue to go up and we think that's really driven primarily by ethanol.

Got it, okay. That's helpful. Then Brian, you had mentioned the possibility of deploying additional capital through strategic initiatives. Again, I realize you can't be too specific there in part because you don't want to tip your hand to the market, but in part because you may not know specifically what's out there. But could you at least lay out sort of the parameters of what you would be looking for? What are the types of broad factors that if someone presented you with an idea, you would say gee, this really is a great idea or gosh, we really never want to be in that type of business because we don't like a profile of X, Y, Z?

Sure. It's long-lived (indiscernible) used assets like rail obviously being the primary one, and Specialty assets we can surround with service that are important to the customer. That's the base of what we try to invest in.

The sweet spot for us is something along the lines of the Oglebay Norton fleet acquisition we did last year, when we take on existing assets and not necessarily a platform, because that just helps our economies of scale. So I'm much more interested in taking on fleets and as Jim actually talked about earlier, for instance in Europe, we're doing some customer fleets in bidding on some customer fleets. There might be some competitor fleets to take out, so I'm much more interested in adding large amounts of assets rather than new businesses or new companies.

Got it. I think the service component there is interesting, too. It strikes me that you see that as a way to sort of enhance value and get a little bit of (multiple speakers).

That's the way we have to compete. That's why we got rid of the Air business, one of the main reasons, because that was not a service business.

Just a finance business.

That was a finance business, a commodity business, a cost of capital business. When GE and (indiscernible) have $35 billion of assets and AAA credit ratings, we're not going to do very well. That's why we got out of that business. In rail, we have a leadership position. It's very service-oriented with 80%-plus of the cars being full-service and obviously we compete much more effective there.

The same is really true in our marine business. Although it doesn't have the term necessarily of the rail business, our pool operators are very service-oriented, so we compete in areas where service is very important there as well.

I think I would add to that, too, you know, we routinely get pitched on ideas and one that people ask an awful lot about is containers. You know, we hear that all the time and we sit back and scratch our head a little bit because we couldn't add any value to the container leasing business.

Now, the service business, there's people in it with AAA. It's pure financing, and it just would not fit the profile of critical use assets where there is a service element around it that would be appealing to us.

We are in asset-intensive businesses obviously, and so we benefit when asset prices increase but you generally don't see us speculate like a hedge fund would on just asset prices rising. It has to be some other hook that makes us competitive in that business.

Got it, great. That's very helpful, guys. Thank you very much.

Samuel Crawford, Stone Harbor.

Thank you very much. I was listening to the conversation about the converts with interest and just wanted to check you with on the callable. I believe you all were considering potentially reissuing or buying that back in some fashion or another. I'm wondering if you've come any further down the road on reaching a determination.

We have not yet at this point. We will certainly continue to consider the alternatives in front of us, but we haven't at this point.

Okay, thanks.

Darius Braun, Citadel Investments.

A point of clarification--I just didn't follow along. On the affiliate earnings, what you are expecting in '07 versus '06, could you run through that again?

Sure. The '06 number for total came out at 76.1 million. You just pick it right off the income statement. What we would look for in 2007 is some continued growth off of that number. You know, despite the fact we had a low number in the fourth quarter due to some--a tough comp with the third quarter and then an accrual we took in the fourth, overall for 2007, we still expect that number to go up.

Okay. Then for remarketing, I think you mentioned, for Specialty, you expect that to be down year-over-year.

Yes.

But what about in the Rail?

In Rail, we would expect--you know, we continue to look out in the market right now at some pools of cars that we think would be attractive to sell, so it's not unreasonable that they will have another good year on the remarketing front at Rail. The reduction overall in remarketing activity would be predominantly in Specialty.

Okay. Then could you quantify for us perhaps, at least in broad terms, anticipating savings you might see from G&A in the sale of the aircraft? Or from the sale of the aircraft, rather?

Sure. In SG&A, it's kind of important to really take a step back and look back at what has occurred here over the course of the last four or five years. You know, during that timeframe, we've taken close to 35 or $40 million of SG&A out of the system, out of the Company, through efficiency measures and also through sales of businesses. When we sold the air business, there was about 6 or $7 million of SG&A that was unallocated or allocated to the Air business. That was really corporate expense that was pushed down to the Air business for legal and tax advice and a whole host of other things. That will all come out. We've identified where that will come out of the system. That's already reflected in the Air sale.

SG&A for the full year came in at just under 150 million. You know, we're looking to try to keep that as much in check as we possibly can going forward, offsetting some of general inflationary increases with more efficiency. So you know, the absolute number may move up a little bit in 2007 on a consolidated basis, but it shouldn't be very substantial at all.

Then can you go through--were those SG&A savings anticipated in the guidance, the $2.90 to $3.10?

Correct. I would hope to do better than kind of what we've laid in for our guidance on SG&A, or four or internal forecast on SG&A. We're hoping to do better than what we've put in, but you know some of that is already in that $2.90 to $3.10.

Jordan Hymowitz, Philadelphia Finance.

First of all, can you talk about what price increases and what asset remarketing income you have at the high and low end of your forecast range?

Well, the assets--it's fairly difficult to (technical difficulty). You know, we don't have specific asset prices set out for, for example, certain rail cars that we may go into the market and sell right now. We have an idea of what we may be able to get. Some of the stuff at Specialty, as you know, Jordan, tends to be pretty opportunistic. So we don't go into the year with X price for this particular asset.

But in aggregate, what is your budget for asset remarketing income at the 2.90 and the 3.10?

Last year, as you know, we put up 48 million and we are not expecting--I don't want to refine the number too much but less than half of that.

If you think about it, Jordan, if you remember, in each of the last two years in Specialty, we've had about 28 million in asset remarketing income. Half of that has come from a single transaction each year, about 13 or 14 million. So we don't anticipate seeing those kind of numbers.

If you think about Specialty's remarketing income in '06 alone, almost all of that except for $800,000 was in the managed portfolio. We don't control the timing of those events. It was a very good year. We had owners of the assets who wanted to sell and we benefited greatly, but we don't control the timing of those. So it is a little bit difficult to predict.

I know the vagueness bothers some people but the fact is we try to act as economically as possible. The best example is we recently sold a delivery position for a ship just because there's--we don't know necessarily what people are going to offer us. In that particular case, we had planned on operating the vessel but we got offers that were so high, we just couldn't see ourselves ever earnings that much, and we will take advantage of that. We're going to act economically, which makes it hard to predict.

So less than half of the 48 million is in the guidance?

That would be the guidance but--.

How about on the price increases For rail? What's the range, would you say, in the guidance?

Well, we haven't--I know we've frustrated you in the past, Jordan, with being a little closer to the vest on rate expectations, you know, because of the nature of the business and the competitive landscape.

I'm happy to be sandbagged but just I'm wondering what (multiple speakers) what the tagging rate is. Is it like 10%, 15%? What's like the range in the numbers?

You know, it's less than the 19 but still pretty healthy.

But still double digits?

Yes.

That's reasonable, yes.

Okay.

There, Jordan, you got us!

Fine. If I just think about it, you're targeting a 15% return on equity in Rail, correct?

Overall, we actually said 13 to 15%. Rail is actually higher than that.

Okay. Again, I'm being a little (indiscernible) to using 15%, but if I assume--and you're not going to deport everything at once but if you gen an extra 300 million of cash, and again whether it's stock buyback or deployed, and I put that out and you grow by 15% a year, is that a right way to think about your earnings power in '08? Do you follow what I'm saying?

I would say no because it depends on how that money gets invested. Share repurchase obviously is the most accretive. Investing with--not necessarily the most attractive longer-term, though, because we try and protect our rail franchising to grow it, and that is not very accounting-accretive for a number of years. So no, that's not a good way to think about it from an accounting perspective.

I didn't mean from an accounting perspective; I mean from a cash-flow perspective, sorry.

Cash-flow perspective? Yes, that's a good way to think about it.

Okay. The final question, because I love this, is that, you know, with Bush talking about more and more nuclear power trends going on, do you have any thoughts on nuclear power pricing for your residuals? You know, how much they've been up year-over-year or what their increase in value could be over your cost?

We don't mark them to market. You know, we don't really have a carrying value on them since it's a shared interest in the residual. You know, obviously, as we've said before, it's a material number but it's also materially out there, in terms of the number of years before we will see those benefits. I think they run through 2015, 2016-type events. But are they going up in value? You know, I haven't looked at them but I would have to believe they are.

Thank you very much and congratulations on being very long-term shareholder-friendly.

Great, thank you.

Mario Gabelli, Gabelli & Company.

Just a quick 101-- what's your cash on--if you took 1000 tanks and put them in the fleet in '07 versus '02, what's your cash-on-cash returns? How do we get a handle on that?

Well--

And then I will ask the accounting question.

The accounting question is easier. It depends on the type of railcar, actually. You know (multiple speakers).

No, I just said tanks. (multiple speakers) double hold ends and whatever.

You know, what was the rate on--generic rate on new ethanol car (inaudible)?

Oh, don't use ethanol; you know they're lower. (LAUGHTER)

You know, it's not railcar rates have not caught up with new railcar prices, so you can assume it's going to be less than 1% per month. But immediately, if you assume 100% utilization, our fleet is almost 100% utilized. It's just straight to the bottom line.

I was just trying to get, you know, cash-on-cash on an incremental 1000 tanks put into the fleet--'07/'02 and I can do that from off-line.

From an accounting point of view, you probably have stepped up the residual values. You're still taking a hit for the P&L in the first year, right?

No, we haven't stepped up the residual value and yes, we do take a hit on the P&L in the first year.

Is that a different hit in '07 versus '02? From an accounting point of view, on a GAAP--has anything changed in the variables? I forget. I'm trying to dust off my new accounting model.

You know, I would say it's a similar--actually, we didn't add a lot of new cars in '02 but it would be a similar return because although lease rates were a lot lower, so were new tank car prices.

Yes, yes.

So you know (multiple speakers).

From an accounting point of view, you still lose money P&L-wise--

Correct.

--in the first year. Where when do you breakeven P&L? Second year?

The third year.

Third year.

So nothing has changed on that model?

Not really.

Okay, now for the even easier question--Goldman Sachs just raised billions and they are doing it every day on various private equity funds. This one to compete with Macquarie on infrastructure. This is obviously a no-brainer for you guys, given that you bring value to the table; they bring just money. Where are you in terms of pursuing raising private equity, you know, with the investment bankers and pursuing, kind of managing it, much like the Hiltons of the world are doing, hotel-wise?

Well, it's similar to what we will invest in ourselves. We're not going to manage infrastructure projects where there is no service involved. When we do have those conversations, and people do march through here and talk about us managing assets for them, generally it's around railcars; almost solely it's around railcars. The thing is, Mario, you can't make people sell you their fleets.

I got it, but they can sell you their bridges. You know, in New York, I'm sure they are selling you (indiscernible) is selling you bridges and they're selling you all other assets you guys are terrific at.

Yes. the problem is, Mario, the only thing I would be good at in a bridge is taking the toll.

That's even better! I love it. That's what Bill Gates said--just give me a nickel every click. (LAUGHTER)

Just one last thought--you know obviously with all the private equity walking around and now that you've made your company so much simpler and easier to understand, do you comment on whether someone is trying to make love to you guys?

I could but my General Counsel would kill me so I (multiple speakers) comment on that.

Goodbye. Thanks very much.

[Ahir Bora], [Endicot].

Just a question on the Marine--if you could--first you made a comment earlier that you had some new vessels possibly coming online in '07. Could you just tell us what they are and sort of what impact you expect? Then second, what are marine rates doing just generally?

Marine rates were lower, in general, in 2006 than they were for most of the vessel types we had in 2005, but still very high and way above what we assumed in the original investment assumptions for pretty much everything we invested in.

What we did see at the end of 2006 is pretty much, especially on the chemical tanker side, LPG and ethylene carriers in particular, rates trended up. They are still pretty high in the first quarter of '07, so I think rates have trended up recently. They are still, like I said, in every case, due to our advantage vessel costs and what we originally assumed going into the investment, it's still extremely attractive returns.

Okay, and the new vessels that you talked about?

Yes, we've done a number of new build programs. I would say, let's see, in the chemical parcel tanker pool that we have, I believe 11 of 14 vessels have now delivered, so there's 3 coming. We also are looking at other new builds and have done some recent new builds. But I don't want to go into too much detail on it because it's somewhat competitive but we are--and you know in a very difficult investment market, we've had--we will take risks to get an advantaged asset cost. We recently signed on to have some vessels built at a relatively new shipyard in China, and we will achieve a very attractive cost there as well. That's what we are really focused on.

Okay. Sounds good. Thank you.

Tom [Clint], UBS Financial.

At the risk of being dog biting an old bone, Brian, do you expect Trinity Industries to be a bigger or smaller factor in the market share pie chart going forward on the leasing of railroad cars?

Tom, it's Jim. Actually, I think it's reasonable to assume they will continue to grow their leasing business. They've shown every sign of doing that. A very high percentage of their total production is being directed to the lease fleet right now, so at least in these market conditions, I think it's reasonable to expect that they will grow and therefore, they will gain market share.

So the question then is, I guess the follow-on question is how important is a vendor to us? How important to them are we as a customer?

Well, I think we will continue to be a meaningful customer to them. They have one more year on the committed purchase program with us. They will build and deliver 1000 tank cars to us in 2007. Beyond that, we don't have committed orders in place with Trinity. I would expect that we will order and take delivery of other cars from them because we also acquire a number of freight cars manufactured by the whole range of builders in North America.

But you know, I think it's reasonable to draw the conclusion that, in these market conditions and given the behavior of Trinity in this market, that the percentage of cars we acquire from Trinity will decline and in these market conditions, the importance of GATX to them is obviously declining, based on their activity.

The only other question I have is, going forward with the Company more simplified now, is there any virtue to considering some kind of other corporate structure, like a REIT or MLP structure going forward, to enhance GATX as an income vehicle? I realize, with ASC as an operating company in capital retention, it's probably more of a problem than I think it is, but has that been considered I guess is what I'm asking?

Yes. We look at every option along those lines. You mentioned ASC. I would say, in terms of conversations, you know, most of the people when they ask that question, they are asking about ASC because it's a natural vehicle. So yes, we look at all of that and I think Bob gets deluged by investment (technical difficulty) on that type of stuff.

I have no shortage of pitch books.

On converting it, you mean, to some kind of different corporate structure?

You know, there seems to be a new vehicle every day, so there's a lot of things out there we do look, but we do like where we are sitting today.

Thank you very much.

Kent Mortensen, Thrivent.

Good morning. Just a couple of quick questions--you know, I know there's--people come down both sides on kind of the ethanol debate and whether it's sustainable or not, and you've talked historically that you can't take current tankers and moving them over to ethanol. I was wondering if the reverse is true, if we are looking at a glut of ethanol and all of a sudden we have a lot of ethanol tanks coming on the market a couple years down the road. Can they be used for other things easily, or would they just be idled?

Well, Kent, it's Jim again. Actually, it's a pretty versatile railcar type, actually and it's a large--it's a 30,000-gallon, which would be a large tank car. It's suitable for a number of lighter-density liquids. That includes a bunch of refined products, a few chemicals, things like that. So it is a reasonably versatile car. In our fleet more than half of our cars of that category are deployed in non-ethanol services. So it does have that capability. You know, if you have too many of them, you're going to have a market impact, and so certainly we worry about that, look at it, think about it as I'm sure others do as well. But it's not a single-product railcar.

Then in terms of acquisitions, you know, you've talked pretty heavily about Europe. How about Asia?

We do look at those different markets. We're more likely--more not likely to make an acquisition over there, as opposed to following a customer over there.

Okay.

As I said, we are--for instance, we do have investments to a large extent over there in our marine business, because a lot of those ships operate in those areas. As I said earlier on the call, we have a number of vessels that are being built in China.

When we have been successful in new regions, it has typically been either with a customer or with somebody who is already there. We would take an interest in somebody and get our foot in the door that way, similar to what we did in Europe.

Can you just give us a feel for like the average age of your leases right now? I know that you're bringing on leases in the 70-month range. What would have been the average lease age in Rail in, like, '06 versus '05? I don't know if you even care to give an estimate of where '07 would wind up.

It's really hard to do that, Kent, because it takes a lot of quarters to move that needle on the entire fleet. So it's typically--you know, it was a little bit under four years a couple of years ago. Now, it's probably a little teeny tiny bit over four years, but on average, we're going to be rolling over and touching about a quarter of the fleet each year. That's not going to change until you see some more meaningful number of quarters behind us where we've extended the term on more and more leases.

So it will be building through '07 and probably even in '08?

That's the expectation, yes.

Yes, that would be the expectation. Part of that depends on obviously what plays out in the market.

Okay, thank you very much.

[Al Douglas], Merrill Lynch.

Gentlemen? My question is about the dividend pay--or the dividend policy going forward. Now with the sale of Air and we have a much less-volatile business, and as I recall in the past, when we were mainly Rail, the payout was--we were paying out approximately 50% of earnings to dividend. Could you give me some flavor for what you are thinking about going forward with the dividend policy?

Sure, Al, it's Bob Lyons. We revisit the dividend as you may recall. You've followed the Company a long time. So we typically revisit it at this point in the year at one of our early Board meetings, typically in February. We set the policy or set the dividend for that quarter. But as it rolls through the balance of the year, that's when we would typically look at any increase. So we're coming up on that timeframe; we will do that again. You know, the payout ratio has declined as the income has come back very strongly here in the last couple of years, much stronger than we anticipated when we cut the dividend a number of years ago.

We want to be able to continue to pay a reasonable amount of the income out to our shareholders, provide an attractive yield, better than market (indiscernible) yield to our shareholders and also be in a position where we don't have to revisit the dividend again in terms of a reduction like we did a number of years ago.

The dividend is extremely important to us and to our shareholders. As you know, we've paid it every quarter since 1919. That matters to us, and it matters to our shareholders. So I'm not going to give you a specific payout ratio that we've pegged, but we recognize the materiality of it to our shareholders, the stability of the business we have going forward. That will be factored into anything that the Board considers.

Charlie Park, Findlay Park.

Yes, good morning. As far as I can see, your '07 guidance is something like 20% below what the Street was at, given the fact that you're buying back--(indiscernible) a lot of shares here. You've given us some guidance on the top line that looks quite straightforward. So is the difference more in the ownership cost side, or in the other costs and expenses line that's creating that difference?

Well, I don't know where the 20% difference comes from, but I would say, if there is any difference at all, it probably is in--on the remarketing side, remarketing income, which was a very big number in 2005 and in 2006. As we've indicated right now, our expectation is that would be less than half of what it was in the 2006.

Thank you. But as you said, that's a timing issue, not a fundamental? I mean, that's just a (multiple speakers).

Absolutely, correct. It's really--it's part of being GATX--fee generated remarketing income, and it tends to move around from quarter to quarter and from year to year.

Okay, so this is something that might or might not come back in '08, depending on the pricing of your assets, basically?

Correct.

Okay. All right, thank you very much.

Gregory DiMarzio, Century Capital Management.

Guys, great quarter. It looks like the fundamentals continue to improve. Could you take a stab at the ROE by segment and kind of, Bob, if you could, talk about with and without the cash glut that you have? Then my second question is going to probably before Jim in terms of the number of railcars and scrapping and that sort of thing.

Sure. The ROE in Specialty is almost tough to talk about because it has been so high, upwards of 70, 80%. So it's really not--you've got to look more. While we would expect that to come down (indiscernible) return to something a little bit more reasonable.

Rail, you know, we are in the 20% range, and that's a real good number for Rail and for GATX to be generating out of that business. I think at our peak the last around, it was a little bit higher leverage in the rail business. We did about 23 or 24% ROE.

American Steamship, which is--carries very low leverage, given its operating nature, it's a little north of 15% overall. As I mentioned, on a consolidated basis, we have felt that 13 to 15%, we are inching, we are at 14% and hopefully we will continue to move that up in '07 but it's right in that range of what we think is attractive for us on a risk-adjusted basis long-term.

The $0.13 to $0.15 implies the cash is still on the balance sheet.

No, that's getting redeployed into the business over time.

Okay. Separately, you lay out in here investment volumes and you acquired 6300 cars. You scrapped 4000 cars. I guess you can only be optimistic on the buying of railcars. But what is kind of the minimum you are looking at buying? Then on the scrapping side, how is the pipeline coming in terms of scrapping more or less cars? Do you think you've scrapped most of the cars you need to?

Let me answer the scrapping question and then I will turn the buy side over to Jim. We don't have an awful lot to scrap. You know, we have about 1600 idle cars right now. Some of those are going to be going back into service. Just in an ordinary year, we are probably going to scrap anywhere between 2500 and 2700 cars as they kind of roll--as they reach the end of their useful life. But there isn't a lot of access beyond that. So you know, I wouldn't look for another year of real big scrapping activity. It's just there's not that much available to scrap aside from the usual runoff.

Jim can tackle the other side of that.

Yes. You know, on the acquisition side, we know the minimum number of cars we're going to buy, which is under the committed purchase program, which would be 1500 cars. We expect that we will be able to acquire some additional number of new cars that will be newly manufactured. Then we're very active in the secondary markets buying from other lessors but also where it makes sense from our customers, where they will do a sale leaseback and we will add service around those assets, or a number of other opportunities where we are able to buy existing cars that are out there. You know, I think the numbers we presented in the press release give you some idea for that balance of business in '06. I really don't expect that '07 should be materially different than that from a mix perspective.

You know, the other thing I would say, the numbers that we present as far as sales, cars that are scrap and sold, not all of those cars that we show there are scrapped. There have been some selective sales of assets where there are cars in our fleet that for a variety of reasons we think the market conditions support a sale now. That may be an asset that has some volatile characteristics that has, in our view, has reached a peak in value and it's a great time to sell. So we are active in looking for those opportunities. It's not something that will have huge numbers attached to it, but it can be pretty valuable, depending on timing.

Jim Kieffer, Artesian Partners.

I joined the call a bit late; I apologize for the question. There's a lot of excitement in the REIT world about rollover of leases, the potential there--office, so forth. I know this is a theoretical exercise but can you give us a feel for the earnings potential inherent in your portfolio where all the leases to be marked to today's rates?

Marked entirely to today's rates?

That's fine.

I wouldn't--I would be a little comfortable hazarding I guess at that because it's just so far from the way the business really works. You know, I will tell you what--we will rollover about 20,000 cars again in 2007. And by and large, those are going to be coming into new leases that are up from where they are embedded in the portfolio right now. What we saw in the 2006, for the full year, was that rollover rate on our basket of our most common cars was 14% positive. It was 19% in the fourth quarter. So you know, we are expecting to see another really good year in terms of--we are excited as well about rollover, not just the REITs. But as far as marking the whole portfolio to market, I would be a little uncomfortable hazarding I guess on that.

How about if rates stayed where they are right now for the next five years? What sort of ballpark impact then?

Again, without having run that out in front of me, I don't want to try to throw a guess out there. If rates stay where they are at right now, what you would see from an absolute basis is that the percentage increase that we're getting will narrow over the course of the next five years. It would still be positive in the first few years; I'm certain of that. In years four and five, we may be shrinking down back closer to 0. But you know, that's without putting a lot science around that answer.

Okay, it was worth a try. Thanks.

Bob Napoli, Piper Jaffray.

Wow, these calls used to take 15 minutes! (LAUGHTER) I just have quickly--the--first of all, it seems like your ROE target is probably on the conservative side as we sit here with the mix of businesses that are all above your target ROE right now. Granted, this is a good segment of the market but you're still even above the target with very--relatively cautious leverage ratios. Is that a fair assessment?

Well, one thing you need to consider, Bob, is when we look at Rail and Specialty and American Steamship, don't forget the other column, right, which is primarily--it would generate a loss because that's where a lot of the corporate SG&A and everything else is embedded. It's a bit of a balancing factor to the individual business ROE.

Yes, I would say, given the moves we've made over the last few years, it's time just to look at GATX's ROE.

Okay, but one thing maybe added--in today's day and age, there's a lot of different type of equity-like securities. You guys have a pretty clean common equity section. So there may be some perpetual preferreds or some things like that that I'm sure the investment bankers are pitching you as well, that may be to help you enhance the leverage from an economic perspective without enhancing it--increasing it from a rating agency perspective that could add to that as well. Is that fair?

Yes. As I said, there's different instruments coming out every day. We have good relationships with the banks and we get to see all of that product flow. We do look at it all.

The last question--you guys talked about weakness in the freight cars. So how much of your business is in the sectors that are weaker, that have shown weakness? You don't do a lot in the building materials-type space, I don't think.

No, that's a relatively small part of the fleet, Bob, particularly center-beams. I mean, we have a couple thousand, I would estimate, but generally, they are deployed on relatively long-term leases and they are not exposed as--they don't all come off-lease at the time the market is taking any kind of move up or down. You know, we have a reasonable coal fleet. But again, you know, our philosophy has always been to have a well-diversified fleet that is diversified across car types, across commodities, across markets. So you do work to avoid that kind of volatility in those selected segments.

Great. Thanks, and congratulations on everything.

John Hecht, JMP Securities.

Yes, real quick, can you tell me what your on and off balance is in your specialty portfolio, your on and off balance sheet levels were in the management portfolio?

The wholly-owned portfolio, as we said in the press release, is around 500 million. That's on and off-balance sheet in Specialty, and the managed portfolio is about 470.

That 500 if I'm not mistaken is up from last quarter?

Yes, it is.

What was--what were the investments in the quarter? Can you characterize them?

Primarily in the industrial equipment area.

Okay. Then this is the next question--I guess probably to Jim. It's talking about more of sort of your--how you balance the backlog and the growing backlog in tank cars specifically. Obviously, your growing backlog suggests sticky prices for the time being. But at some point, do you look at it and think it may bear more risk on the market as additional capacity comes on? I'm just interested in your thoughts regarding that as what time does it--what is the timing in terms of how you get comfortable with respect to current lease rates and maybe increases in those versus concerns about additional capacity coming online?

Well, I think looking at the backlog is one of several things we watch very closely. In that market especially, we are exceptionally close to the market and our customers. So you look at a lot of things, including our renewal success rate which really speaks to customer alternatives and how well we are satisfying those needs. You know, so a host of things to try to gauge where we are in a market cycle. Backlog is part of it. As that moves around, it certainly gives you an indication of what is going on and what people are thinking. Although backlog, by definition, includes an element of speculation by people who are betting on the future, particularly as that backlog extends and they are now ordering cars that we will be delivering two-plus years in the future. So that's one of several things you try to look at and balance as you think about investment.

Okay. So I guess--I know my question is confusing but given that the backlog now, from what I understand, is three years, historically does that tell you pricing? Given that length of backlog, is pricing sticky for a certain period, or does it increase risk that there's too much speculation from your perspective?

Oh, you know, it probably is a little of both, actually. I think this also gets to--when you look at backlog, we are pretty focused on the quality of the backlog and how much of that is actually--are they ordered to meet customer demand? Actually people who would use the railcars, or is it associated with lessor demand and trying to understand that.

To the extent more of that backlog is tied to customers than actual need for the railcars and transportation, then I think you have some confidence that the market remains pretty strong and that that would have pretty good implications for rental rates. To the extent that speculation increases in that, then I think you have to be concerned about oversupply.

Okay, thanks.

Jordan Hymowitz, Philadelphia Finance.

Bob asked most of my other questions. My last remaining question is, in looking at price increases over the past few years, almost all the price increases for the big spike has been in the past two years. Would it be fair to think, by that, that about 40% of your fleet has been replaced at market? It doesn't mean that the other 60 was but at the bottom of the market but if that 40 reflect close plus or minus 10% of market values?

I think that's a reasonable estimate. Yes.

Okay, thank you.

At this time, there are no further questions.

Thanks very much, everyone. This was a nice, long call for the day. I will be around the rest of the day if you want to call me with any additional questions.

Thank you.

This concludes today's conference. You may now disconnect.