Greenbrier Companies Inc (GBX) 2006 Q4 法說會逐字稿

Hello and welcome to The Greenbrier Companies fourth quarter and fiscal year end 2006 Earnings Release Conference Call. Following today's presentation we will conduct a question and answer session. Until that time, all lines will be in listen-only. At the request of Greenbrier Companies, this conference is being recorded for instant replay purposes.

At this time, I would like to turn the conference over to Mr. Mark Rittenbaum, Senior Vice President and Treasurer. Mr. Rittenbaum, you may begin.

Good morning, and welcome to Greenbrier's fiscal 2006 fourth quarter conference call. I'm joined today by our CEO, Bill Furman. I'll make a few comments about our earnings release and the quarter that just ended and then I'll turn it over to Bill and then we'll open it up for your questions.

As always, matters discussed in this conference call include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of '95. Throughout our discussion today we will describe some of the important factors that could cause Greenbrier's actual results in 2007 and beyond to differ materially from those expressed in any forward-looking statement made by or on behalf of Greenbrier.

Today Greenbrier reported another solid quarter and the second consecutive year of record earnings. True to what we'd anticipated at the outset of the year and relatively flat revenues, earnings grew by 33% and EBITDA grew by 27% driven by significant margin expansion in all lines of our business.

Manufacturing margins of 11.4% grew 30% during the year and leasing and services margins of 59% grew by 16% during the year. For the quarter, net earnings were $12.3 million or $0.76 per diluted share. Net earnings for the quarter included a tax benefit in the fourth quarter of $3.7 million or $0.23 per diluted share for realization of the deferred tax asset relating to net operating loss carried forward to Mexico.

Our new railcar manufacturing backlog as of the end of the year was 14,700 units valued at $1 billion. About half of the backlog by unit count is double stacked intermodal cars.

We continue to see strong margins in operating momentum during the quarter. As well, we made significant headway on the strategic front with a lot of activity that culminated in three strategic initiatives that were announced after the year end.

I'd like to spend a few moments discussing some of the factors which impacted fourth quarter results but which should be a net positive for longer term profitability. New railcar deliveries for the quarter were 3,200 units and gains on equipment sales of $0.3 million were both lower than previously anticipated at the outset of the quarter.

This was [inaudible] due to timing differences that some leased indication and equipment sale activities were deferred. More specifically, there were about 250 railcars produced during the quarter and held in railcars held for sale for which we have deferred the sale and therefore the revenue recognition and margin into 2007.

We also deferred some of the sales out of our lease fleet, which had embedded gains as there was only $0.3 million of gains on equipment sales during the quarter. Additionally, the lease fleet continued to grow and the production out of our own manufacturing facilities [inaudible] higher than [inaudible] guidance.

New additions to the lease fleet for the year were nearly 120 million compared to our earlier expectations of 110 million of net additions. During the quarter, over 300 cars that were produced at Greenbrier's facilities were added to the lease fleet. These factors again had a damping effect on the fourth quarter results but should improve our longer term profitability and these factors were also mitigated in part by the continued expansion of manufacturing margins and leasing margins as a result of operating leverage.

The overall effect -- we expect the [inaudible] overall that our lease fleet [inaudible] records will drive longer term profitably and contribute to stable earnings going forward outweighing the short-term effect of deferring revenues from Q4 2006 into future periods.

Let's turn to more detail on the operating performance. Manufacturing revenues for the quarter were $242 million, flat with Q4 2005. As I just mentioned, our deliveries for the quarter were 3,200 units compared to 3,300 units in Q4 of '05. The current quarter deliveries have a slightly higher unit value due to a change in mix. About 60% of our deliveries for the quarter were double stacked intermodal platforms. Q4 2005 deliveries were over 70% double stacked. Double stacks have a lower unit value than conventional rail cars.

We continue to see margin expansion during the quarter as margins grew to 11.2% as compared to 10.4% in both Q4 of last year and Q3 of this year. These margins exceeded our earlier guidance and incurred despite line changeovers, deliveries of left double stacks, and introductions of new car types.

Deliveries for all of 2006 were 11,400 units compared to 13,200 units in fiscal '05. This is, of course, a decrease of 1,800 units, and this decrease occurred for three principal reasons. We had a subcontracting relationship end during the year. That subcontracting relationship generated 800 more units delivered in '05 versus '06. Also our European deliveries were down by about 400 units due to a slower European market place, and this year we took in more than 500 units of production in our lease fleet, that is 500 more units than '05, so this, of course, decreased third party deliveries.

Turning to leasing and services revenues, for the quarter they were down about $1 million, but after you exclude gains on sales, which were $0.3 million in this year compared to $2.5 million in the prior year's fourth quarter, we saw both revenue and margin growth.

For the year as a whole, our leasing and services revenues grew by nearly $20 million as a result of three factors. Additions to our lease fleet that I had previously discussed added about $11 million of revenues. We also had $4 million of additional gains on sales and we also had nearly $3 million of additional rent from holding railcars held for sale for longer periods of time and increasing our activities and railcars held for sale and in syndications.

The margin expansion that we saw for the year was due to many of the same factors that drove growth. We also experienced higher rental rates and we changed the profile of the fleet to younger equipment with lower operating cost. Our own fleet utilization is now 97% and we have 9,000 units in our fleet. As a result of that active portfolio management during the year and the investments that we made during the year, we decreased the average age of the fleet to 16.4 years from 21.7 years, and we drew our average remaining lease term to 3.3 years from 2.7 years.

Interest in foreign exchange, turning to that, of the quarter was $7.5 million. That includes an FX loss, a foreign exchange loss, of $0.3 million, so the interest expense itself was about $7.2, consistent with our earlier expectations.

I'm now going to turn to specific guidance for the quarter, which is included in our earnings release, and then I'll turn it over to Bill who will put some color around these numbers and share what we are seeing in the market today to give us confidence in these numbers.

As we look into 2007, we are optimistic in our ability to continue to grow revenues into earnings. Today we gave guidance of annual earnings in the range of $3.10 to $3.40 per diluted share on revenues of $1.2 to $1.3 billion. This represents earnings growth of between 27 and 37% from 2006 levels.

Included in our annual guidance range are several implied variables, including the expected range of new railcar deliveries and new railcar margins. We're optimistic that we can keep the momentum going on the margin front as we continue to maximize production in the U.S. and Mexico, benefit from global sourcing and leading with manufacturing initiatives, and we see improvement in Europe.

However, we expect this margin improvement to be partially offset as we continue to see margin pressure up in Canada due to a weaker U.S. dollar compared to the Canadian dollar and a weaker forest products market where we had focused production up in Canada.

Our near term focus will be on integrating our recent acquisitions, RCA and Meridian, and getting our new joint venture in Mexico started up. As we said on our last conference call, these initiatives should be accretive to earnings in the range of somewhere of around $0.60 to $0.65 per share in 2007 on revenues of about $250 million.

For the year we expect manufacture and cap ex to run about $20 million, similar to '05. Net additions to the lease fleet are expected to run about $45 to $50 million. That's gross cap ex minus equipment sales. This compares to $120 million this past year and as we said on our last conference call, we are anticipating that we are going to pair down our lease in cap ex this year to help pay for the acquisitions, but this should not be taken to be a long-term trend to pair down the lease in cap ex.

Depreciation and amortization for the year should run about $30 million. We expect interest for the year to run about $32 million or so with it being higher in earlier quarters until we start paying down debt from the operating cash flow as a result of the acquisitions.

Our tax rate should run in the mid to upper 30% range. We expect the earnings momentum to build up during the year, both as we pay down debt and integrate our acquisitions.

With that I'm going to turn it over to Bill, and then we'll open it up for questions.

Thank you, Mark. I'm pleased with our financial performance for fiscal 2006 and also with execution on a number of strategic fronts, and I'm going to direct my remarks to an overview of Greenbrier strategy this morning.

Our recent acquisitions, of course, include not only the recently announced RailCar America and Meridian Rail, but also some important strategic initiatives in efficiency areas, global sourcing, lien manufacturing, and the GIMSA joint venture in Mexico, which will significantly improve our North American railcar manufacturing footprint and give us additional production options.

Our strategy is to continue to build our integrated business model enhancing competitiveness in all of our operational segments in integrating these important strategic initiatives we've recently announced. This morning I'm going to keep my prepared comments as short as possible and leave time for questions, but I do want to cover a few subjects quickly and then follow-up in a Q&A session.

In 2007 and beyond as Mark has indicated, we intend to do more of the same. We intend to build on each aspect of our business model including freight car manufacturing and design or engineering, the leasing of freight cars, management services, and repair and refurbishment.

Our major objectives in 2007 and into 2008 will be absorbed as significant changes we are making in the mix of our revenue base and margins from in the past being more heavily dependent on new car manufacturing, and we are moving this to a more diversified base.

In 2007, we anticipate that almost two-thirds of gross margin will come from businesses other than the manufacturing of new freight cars in North America. The other business units include a growing marine operation based here in Portland and a new railcar manufacturing operation, which is not new to us. We've had it for a number of years in Europe, which is strengthening.

More significantly, those businesses include an array of railcar services, which are in very high demand, leasing, management services, repair and refurbishment including wheels. These are a high opportunity business in the time of growing constraints on North American rail operating capacity.

I think it's important to recognize that our industry is changing. The rail industry is changing. The transportation industry is changing. Some of these changes are going to happen dramatically, challenging shippers and suppliers who have not anticipated the changes and prepared for them. We believe Greenbrier's business model is well-equipped, in fact, uniquely well-equipped for a company traditionally thought of as a railcar builder to take advantage of these industry changes.

The changes include increased emphasis on railroad velocity, safety, and efficiency. More fundamentally there will occur, and are occurring now, important policy shifts in how railroads will want to operate and how public policy should allow them to operate in an industry stressed by heavy traffic demand. In a system with finite physical capacity, new applications will be required. Our business model is designed for exactly this kind of environment.

For 2007, we expect railcar demand to be robust, even in the slowing economic environment, but the nature of that demand is shifting. In new freight car construction, we will continue to broaden our product offerings and improve cost-efficiency. We will continue to shift production to the facilities in the U.S. and Mexico and North America in light of the stronger Canadian dollar.

We will protect the important double stack car market with production at our facility in Portland, Oregon. New intermodal car orders have been relatively weak in the second half of 2006 as the result of improvements in railroad train operating efficiencies even in the face of record intermodal traffic and growth and a large number of orders and deliveries during the past two years.

However, continued growth is expected to remain strong, very strong, as a result of secular forces which continue to favor intermodal. In 2007, we expect our intermodal production to be comparable to although down somewhat from 2006. However, the timing and mix of intermodal sales is expected to be weighted to the second half of our fiscal year. In order to protect our market share, we will build some cars for lease fleet and this will affect revenue recognition in the first half of the year. We will run conventional car lines for the first half of the year, which will offset some of that revenue recognition on the intermodal side and particularly increase the output of our marine operations where demand and backlog is very, very strong.

In 2007, we expect stronger financial performance from our European unit and weaker financial performance from our Canadian North American manufacturing operation. These two forces will somewhat offset each other as compared to fiscal 2006. We will place considerable emphasis on absorption of the recent acquisitions and on cost reductions including lien manufacturing, global sourcing, and a tight focus on G&A and close management of cash flow and liquidity.

We will expand our management services and our leasing and repair businesses by organic growth improving both revenue and margins and EBITDA efficiency in these high potential businesses. These are good businesses for the changing railroad environment where outsourcing and service design and operational reliability and safety are paramount, but they also play to our strengths in business integration. We will redesign and re-engineer freight cars, buy them, lease them, service them in a growing network of shops which will serve railroad shipper and car owner needs.

We plan to put major emphasis in these opportunities during the next few years, especially with organic growth. Mindful of economic cycles, we have put into effect a plan which will allow us to have some of the cyclical risks of the new car manufactured [inaudible] capturing the true growth opportunities in our sector.

We plan to be an active partner with our customers in problem solving for an increasingly stressed rail operating environment. We expect to provide high valued solutions through engineering, refurbishment, leasing, manufacturing, and enhanced service design.

Once again, I want to thank all of those who helped us in this fiscal year just passed and express appreciation to the shareholders who have chosen to invest with us. I want to also take a moment to thank our employees and customers for a very good year. We executed our plan well. We have an excellent franchise we're building on the qualities of safety, quality, reliability, engineering excellence and efficiency that distinguished us from our competitors.

We still have lots to do. Finally, I want to thank our suppliers and others in the various communities in which we operate for their continued confidence in Greenbrier. Mark, back to you.

Thank you, Bill, and Operator, we will open it up for questions now.

Thank you. [OPERATOR INSTRUCTIONS]

John Barnes of BB&T Capital Markets, you may ask your question.

Hey, good morning, guys.

Hi, John.

Just a couple of things. Number one, in talking about Europe deliveries being down again this year and the drag from Canada, given that everything else seems to be moving in the right direction, is it time to start thinking about more draconian measures when it comes to those operations and maybe even the outright abandonment of those questions.

Mark will clarify. Actually, maybe I misspoke, John, but we expect our European operations to really bounce back in 2007. In fact, with the assimilation of the Eastern European countries into the EU growing strength in the Russian and Ukrainian markets, we see that as a brighter spot and we're very profitable over there. So, we don't expect any changes there.

We do see a structural difficulty with the Canadian dollar, which Mark spoke about. Would you like to add anything to that?

No, I would echo what you say up in Canada that we're taking a -- we are taking a closer look at operations up there and we are using that as more of a specialized facility today and to your question as to draconian measures out there, I think we just continue to evaluate putting production out there and evaluate continuing to just use that as a [inaudible].

But, John, we have to look at it a real hard-nosed way. Currencies come and go. Looking out in the future it's likely that the Canadian dollar will continue to be strong given the resources bases and energy derived values that are going on there. So we're going to continue to look at our North American footprint. I think you can see the direction we're heading. Whether we would ever want to exit the Canadian market, we're the only car builder that has a footprint in each of the three NAFTA countries. I think that's valuable.

Sure.

But we definitely are positive on Europe. It gives us a lot of global sourcing kick and we're really getting our range over there. John Nussrallah's done a good job since he's been over there expanding our tank car business and some of the service businesses, parts businesses, and other businesses that that factory is capable of doing.

Okay. In terms of Europe, what signs are you seeing already? Are you beginning to see an increase in your European backlog that's giving you some confidence that that's going to rebound in '07 or is it just preliminary discussions with buyers or can you just give us something a little bit more tangible that you're hanging that prediction on?

We have seen a pick up both in backlog and in deliveries right now in Europe, John, while backlog, of course, bounces around from quarter to quarter as compared to this time last year, our backlog was nearly -- was put on by about 50 to 60% over there. I hesitate in breaking down our backlog, but we have pretty good visibility going into '07 over in Europe.

Okay. Very good. All right, then my second question, with regards to the guidance that you provided today for your fiscal '07, the 310 to 340, I'm just trying to -- based on my estimates in terms of the accretion of some of the acquisitions you've done and some of the math that we've done, to me that looks awfully achievable, conservative. I guess the question that I have is is there some part of your business that gives you more cause for concern that's causing you to keep these numbers a little bit lighter than quite honestly I was prepared for? I'm in kind of the 370 range and maybe I'm a little bit more on the aggressive side, but I'm just trying to get an understanding is there something in your '07 outlook --

Yeah, I think I get the drift from your question. If you go back and look at the guidance we provided in -- our company follows a very conservative financial policy, and I think if you go back and look at our performance versus what we publicly say we aspire to, every year we seem to do better than we have claimed, but you've got to do it every single year.

As far as your second part of your question, I think these are achievable. This is a certainly achievable range and maybe it's a little too cautious, but there are a number of forces, as I said, acting on the industry. We all read the same stuff and there could be some softening in the economy so I think we're just being a little cautious in looking at the range.

I'm very, very positive about these new changes that we've made in 2006, so I suppose the thing that we really want to be sure we are doing now are blocking and tackling and assimilating these -- and integrating these acquisitions and really taking out of the system those efficiencies that we should be getting. We noted that our G&A has gone up a bit and has gone up a bit in anticipation of these acquisitions, but we really need to fine tune this.

Generally speaking, on a business side though we see a very, very and good picture in 2007.

Okay. Then last question, in terms of your total backlog, yours seems to move around a little bit more. I know that a lot of the orders that have come in have been on hopper and tank haulers and that kind of thing, your primary products. When do you expect to see a resurgence in those orders and maybe a little bit more meaningful build up in the backlog for third party customers?

Well, in particular, the intermodal market seems to have forces that act on it completely different than the other parts of the market. The timing of the orders since the market is fairly concentrated is fully dependent on customers' decisions. I think that the backlog in that area has declined somewhat, but we see very robust continuing container growth has been growing at 8%. That's from last year's 655,000 containers that have to be moved if we look at the total double stack fleet of 125,000 units and apply even a more cautious number, which we don't expect to occur, you see a need for growth in the 8,000 range. That's what industry sources are predicting. We think that's directionally correct.

In order to maintain our market share, we have to be able to build more of ours in 2007 than frankly with other car types that we're building and our marine activity that we're able to build. So, I can't tell you when the orders will come, but I'm confident that they will be there.

Okay. Very good. Guys, thanks for your time.

Thank you, John.

Our next question comes from Art Hatfield of Morgan Keegan.

Good morning, guys. Just a few questions. Just to clarify, your backlog of 14,700, that is for third party consumption, correct?

That is correct.

Okay. And then the deliveries you reported in Q4, the 3,200, that again is for third party consumption?

That is correct, Art. For both of those we'd only include third party and did not include with those in our lease fleet.

That's what I thought. I just wanted to confirm that. The 250 cars that you had mentioned, Mark, that were deferred, do you have expectations on when those will be delivered?

Q1 and Q2 they will be delivered. They're cars that get filtered in and out of that line item rail cars held for sale that those specific cars would be Q1 and Q2 of this year.

Okay. Then the guidance range you gave this year, within that what are your expectations for deliveries this year?

We did not give that and we specifically did not give that. I guess embedded if you look at -- one thing if you look at the mixes of earnings that -- even if one assumes flat new railcar manufacturing revenues, the deliveries would be down slightly because of the mix and specifically with our Auto-Max railcar, which has a very high unit value. That would imply a lower mix so again on -- if you assume flat revenues, that would imply deliveries would be down a bit from this year and if you -- and at the higher end of the range they would be up from the 11,000 units roughly that we had this year.

Okay. So at the lower end of the range it would be fair to assume kind of flat revenue with lower car deliveries, but a higher price per unit?

Correct.

Okay. Quickly, well staying with the guidance too, is there anything in '07 for the GIMSA joint venture?

Very nominal, Art. That comes on in our third fiscal quarter and it has a very -- it's really an immaterial impact on revenue and earnings for this year. Going forward, we expect it to be much more material in '08.

Okay. So as we look out to our numbers, really as we move into '08, you're going to get additional accretion for the couple months that Meridian is not in '07, plus a much bigger impact from GIMSA. Is that fair?

Absolutely.

Okay. Then just two other things and then I'll pass it on --

[Inaudible] I think there is some real upside potential in the second half with that movement in GIMSA. We have the capacity to do some very interesting things with that footprint, so we're very pleased about that.

But the major impact will really come in '08?

Yes.

Okay. In Q4, you had a little bit of a step up in SG&A. Can you talk a little bit about what happened there and if that's something that as we look out that maybe 20 to 21 million's a more normal number?

Well, of course, in going forward here, Art, too we'll be picking up our two acquisitions and increased activity related to GIMSA. So, by definition we'll see some pickup in G&A. We did have some activities in Q4 and in the second half of the year overall related to our strategic initiatives both with our own travel and with third party expenses. We're going to see more of that in the first quarter, but we would -- we are going to be focused on a static say pre-acquisition and bringing that G&A expense number back down so that the 20 million that you saw last quarter we'd like to bring back down closer to the 17 to 18 million level pre-acquisition or pre-picking up those other two entities.

Okay. Then finally, the lease fleet, you were talking about you had extended the average lease term to 3.3 years from 2.7. Another one of your peers in that business was seeing rollovers into six years. Have you been looking at trying to get more extended terms to lock up that revenue for a longer period of time given the environment we're in right here?

Yes, we absolutely have been, and part of the two-fold is both investing in newer equipment and rolling out some and selling some of the very old assets, but secondly on lease renewals to extend the lease terms. We've got a history of being more in the three to the five year range, but as we've been renewing leases, we have been looking closer at five to seven year extensions.

Okay, and are you able to do that without much degradation and lease rates?

Yes.

Okay. Great. Thank you, guys.

Thank you.

Our next question comes from [Rait Bisque] from the Pilot Advisors.

Yes, hi. Good morning, guys.

Good morning, [inaudible].

I just wanted clarification. I guess right now there are around 125,000 double stack units in the system?

Approximately, yeah.

You see growth, I guess -- did you say 80,000 over the next two years? Is that --

No, I'm sorry. I said 8,000 --

Eight thousand?

-- wells is directionally correct and that's approximately what the industry is forecasting. Global Insight, for example has a little more than that for 2007.

So that's just 8,000 more for '07?

Yeah, wells. But that wouldn't be necessarily -- that would have to be divided up among other -- all of the car builders. We have a high market share in that business but it just indicates the size of the market. I think they've got 8,500 or 8,600 to be more precise.

Okay. Sure. Then just a clarification I guess. You sold -- there were 300 cars that were added to our lease fleets. That's different than the 250 cars that are just being deferred is that --

That's correct.

Okay. Then lastly, for fiscal year '07, you mentioned there was going to be less, I guess, sales -- asset sales out of your lease fleet. Is that also what you said?

We expect slightly less gain -- we expect less gains on sales out of our lease fleet, but we also said that the net additions to the lease fleet would be down this year as compared to last year. The net additions last year were close to $120 million and we'd expect the net additions this year to be about $50 million.

Great. Thank you very much.

Thank you.

Our next question comes from Peter Nesvold of Bear Stearns.

Good morning, guys.

Good morning, Peter.

I joined late, so if you addressed this, my apologies in advance. Did you outline in the prepared comments or in the early Q&A how much of the '07 earnings guidance -- how much earnings accretion from the recent portfolio actions is discounted into the range of 310 to 340?

Peter, if I understand your question correctly, we said that with the two recent acquisitions would add about $0.60 to $0.65 a share on revenues of about $250 million this year, and then recognizing that -- and then the third piece being the GIMSA piece, we said that that we did not expect to have much effect this fiscal year, but then when you look into '08 that we'd get a full year of GIMSA and also a full year of Meridian rather than ten months and so we anticipate the accretion in '08 to be substantially greater than that.

All right. It's always dangerous when I try to do math without my HP calculator, but if I take the midpoint of your range, 310 to 340, that's about 325 midpoint. If I strip out $0.60 to $0.65 from recent portfolio acquisitions putting aside what you're doing down in Mexico, I mean, that's only implying $0.05 to $0.10 per share of organic earnings growth. Number one, is that the right way to think about it, and number two, why would you expect the organic business to -- organically, why would the business be flattish only slightly up in fiscal '07?

Peter, we did discuss that a little bit. I think at the lower end of the range you're right and at the upper end of the range of guidance that we gave it's greater than that and I think as Bill had commented, we tend to try to be cautious, conservative at the beginning of the year. We have to go out each day and prove the business and earn the business. The greatest variable in all of this is new railcar deliveries and new railcar margins we're optimistic we can keep the margin momentum going, but that implies the biggest variable is deliveries.

At the lower end of the range because of the change in product mix, particularly with Auto-Max where that has a higher unit value, that implies that deliveries would be down a little bit from this year whereas at the upper end of the range deliveries would be greater than this year, but it's just being cautious on the delivery front probably is the biggest factor.

Okay. And last question and I'll hand it off, did you talk about your gross margin expectations in manufacturing next year? Because even if -- I mean, you've been doing a great job expanding those margins and even as deliveries are flat, wouldn't we expect to see the manufacturing business growing on some margin improvement there?

We are optimistic -- we didn't give specific guidance on the margin, Peter, but you're correct that we're optimistic that we can keep the momentum going. We do have a number of initiatives as you've pointed out, global sourcing and lean in shifting production to the U.S. and Mexico. Of course, the other piece that's going to affect that is deliveries and production rates, but this year we originally gave a guidance of margins in the 9 to 11% range and we came in at 11.4%, and we are optimistic that we can keep improving in this area.

In the past you sort of signed off on a low teens number is feasible/achievable at some point in the mid cycle. Do you still feel comfortable signing off on that?

I think -- yes.

Okay. Okay. Thanks for the time.

Sure. Thank you.

Our next question comes from Frank Magdlen from The Robins Group.

Good morning.

Good morning.

Just to add some more clarity to the backlog, of the 14,700 units, what is actually scheduled to be built in the coming '07 year?

That 14,700 you're referring to [inaudible] to that we have a multi year order that 7,700 units in the backlog will be for delivery after a calendar at 2007. That number does not change substantially. It's a similar number after fiscal '07 as well. It may be slightly, slightly less than that but 75 to 7,700 cars for delivery after the fiscal year as well.

Okay. Then, Mark, going back to the fact that you have additional interest expense in the first several quarters and you suggested the back end would be -- the earnings would be back end loaded this year. Are you willing to give us a little bit of a range on that? Is it a 40/60 split or a 30/70 or --

I think that's [inaudible]. The difficult part in that Frank, and the reason that we try to stay away from the quarterly has probably more due to our leasing operations and gains on sale and how we want our syndication business and then Bill mentioned this year too that it'd be weighted more to the second half because we beat building in order to protect our market share we bid on some intermodal cars in the first half that we'd expect the revenue recognition to come in the second half, so there's a lot of variables there, but I would suspect that it would be closer to somewhere between 30 to 35% in the first half of the year and the balance in the second half of the year from what we see right now.

All right. Thank you very much.

Thank you.

Our last question comes from Kim Burkhardt from Burkhardt Research Services.

Hi, good morning.

Hi.

My questions have actually been answered, so I don't have any more questions for you.

Thank you.

Okay.

Operator, do we have any other questions?

No further questions in queue.

Thank you.

Okay. Thank you for your participation in today's call. Have a good day. Bye-bye.