FreightCar America Inc (RAIL) 2012 Q4 法說會逐字稿

Welcome to FreightCar America's Fourth Quarter 2012 Earnings Conference Call and Webcast. At this time, all participant lines are in a listen-only mode. For those of you participating on the conference call, there will be an opportunity for your questions at the end of today's prepared comments. Please note that this conference is being recorded. An audio replay of the conference call will be available from 1.00 p.m. Eastern Standard Time today until 11.59 p.m. Eastern Daylight Time on March 20, 2013. To access the replay, please dial 1-800-475-6701. The replay passcode is 281877. An audio replay of the call will be available on the Company's website within two days following this earnings call.

I would now like to turn the call over to Joe McNeely, Chief Financial Officer of FreightCar America.

Thank you, and welcome to FreightCar America's Fourth Quarter 2012 Earnings Conference Call and Webcast. Joining me today are Ed Whalen, President and CEO, and Ted Baun, Senior Vice President, Marketing and Sales.

Before we begin, I'd like to remind everyone that statements made during this conference call relating to the Company's expected future performance, future business prospects, or future events or plans may include forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. Participants are directed to FreightCar America's 2011 form 10-K for a description of certain business risks, some of which may be outside the control of the Company that may cause actual results to materially differ from those expressed in the forward-looking statements. We expressly disclaim any duty to provide updates to our forward-looking statements, whether as a result of new information, future events, or otherwise. Our 2011 form 10-K and earnings release for the fourth quarter of 2012 are posted on the Company's website www.FreightCarAmerica.com.

I'd now like to turn the call over to Ed Whalen, our President and CEO for some opening remarks.

Thank you Joe, and good morning. Before we discuss our fourth-quarter and full-year 2012 results, I would like to address an important event for FreightCar. Yesterday, we announced a long-term lease of a new railcar manufacturing capacity in the Shoals region of Northwest Alabama. This facility will enhance our capability and efficiency, and cost competitiveness in the railcar manufacturing segment for years to come. When I returned three years ago, I knew we had to expand our product offerings to lessen our reliance on coal cars. Over the last two years, we introduced several new products, including intermodal well cars, non-intermodal flat cars, and various open-top and gondola cars. In order to produce these new types of railcars efficiently, we need a plant footprint with expanded capabilities.

The Shoals facility will allow us to produce over 7,000 railcars per year when fully operational, and will be our primary facility for manufacturing non-coal car products. To make the facility operational, we will invest approximately $23 million in equipment and tooling. We believe the efficiency afforded by this facility, along with the cost saving to be realized from on-site parts fabrication and product support services to be provided by Navistar, will improve our long-term competitiveness. We are working to make the facility fully operational, so that we can begin production of railcars in the middle of this year. A team has been created to manage the facility startup, and is preparing it for production. We look forward to working with Navistar, the state of Alabama, and the counties and communities in the Shoals area.

I would now like to turn the call over to Ted Baun to give you an update on our markets and commercial activity.

Thank you Ed. Good morning. To recap, 473 new railcars were ordered in the fourth quarter of 2012, compared to 4,481 units ordered in the fourth quarter of 2011. Of which, 3,300 were rebuilds. 225 new railcars were ordered in the third quarter of 2012. For the full-year of 2012, 2,903 railcars were ordered as compared to 12,437 railcars ordered in 2011. As expected, deliveries declined in the fourth quarter of last year to 1,308 railcars, which included 528 new and 780 rebuilt railcars. This compares to 2,489 railcars delivered in the fourth quarter of 2011, of which 2,153 were new railcars, 62 were used, and 274 were leased. There were 1,618 railcars delivered in the third quarter of 2012, of which 998 were new, and 620 were rebuilt. We delivered 8,325 railcars in 2012, which was an increase of 2,137 railcars from 2011.

Our backlog of unfulfilled orders at December 31, 2012, was 2,881 railcars, compared to 8,303 railcars at December 31, 2011. And 3,716 railcars at September 30, 2012. Our current backlog includes a mix of coal and non-coal cars. Industry-wide, 11,066 units were ordered, and 11,815 units were delivered in the fourth quarter of 2012, which were down from both the third quarter of last year and the fourth quarter of 2011. Industry-wide, backlogs also decreased 60,244 units at the end of December. These decreases reflect a strong tank car market, offset by weakness in other freight car types. Non-tank car orders of 4,227 units were 1,400 units lower than the fourth quarter of 2011 and 2,100 units lower than the third quarter of last year. The overall number of railcars in storage increased to roughly 317,000 as of December 31, 2012, an increase of 8,000 railcars when compared to September 30, 2012. We also estimate that the number of coal cars in storage increased from about 22,000 at the end of September to approximately 30,000 currently.

US commodity loadings in the fourth quarter of 2012 were down 4.9% when compared to the fourth quarter of 2011. While railcar loadings of certain commodities such as chemicals, motor vehicles, and equipment exhibited growth, coal loadings continued to be challenged, decreasing 14.2% versus the fourth quarter of 2011. Weakness in loadings for metallic ores and metals, along with agricultural products also contributed to the overall decline in loadings. Intermodal container loadings remained strong for the quarter, increasing by 3.7% versus the same quarter in 2011.

The coal market continued to be mixed. Low electricity demand, low natural gas prices, and the start of another mild Winter have reduced demand for thermal coal, which has resulted in an increase in utility stock piles to 187 million tons, 8% above the year ago stockpile levels. This in turn has resulted in a decrease in coal loadings, and when coupled with an increase in rail velocities, caused the increase in coal cars in storage as noted previously. The coal export market had a very strong year with almost 126 million tons exported, a 17% increase from 2011.

Joe McNeely will address our fourth quarter financial results.

Thank you Ted. Fourth quarter, 2012 results reflect a number of challenges in both of our segments. And on a consolidated basis, the net loss for the fourth quarter of 2012 was $1 million or $0.08 per diluted share, compared to net income for the fourth quarter of 2011 of $8.5 million or $0.71 per diluted share. Net income was $4.8 million, or $0.40 per diluted share for the third quarter of last year. Consolidated revenues were $117 million in the fourth quarter of 2012, which were $70 million lower than the fourth quarter of 2011, and $44 million lower than the third quarter of last year. The decreases in revenue were driven primarily by the lower number of railcars delivered.

For the full-year 2012, consolidated revenues were $677 million, up $190 million or 39% from 2011 levels. Consolidated net income of $19.1 million, or $1.60 per diluted share, was $14.2 million than 2011's consolidated net income of $4.9 million or $0.41 per diluted share. The manufacturing segment was impacted by several factors in the fourth quarter of last year. First, the changeover and start up of production lines negatively impacted our results. In addition, as Ted noted earlier, railcar deliveries were down from both the fourth quarter of 2011 and the third quarter of last year. As a result, the manufacturing segment revenues for the fourth quarter of 2012 were $109 million, down $70 million from the fourth quarter of 2011, and down $43 million from the third quarter of last year.

Operating income for the fourth quarter of 2012 was $6.5 million or 6% of revenues, which was $10 million or 3.2 percentage points lower than the fourth quarter of 2011, and $7.4 million or 3.1 percentage points lower than the third quarter of last year. The decrease in operating income versus prior periods reflects a decrease in deliveries, and the negative impact of the product changeover costs. Our services segment also had a difficult quarter. A decrease in repair volumes and the continued shift in work to lower margin running repairs had a negative impact on repairs and parts sales results for the fourth quarter. Services segment revenues for the fourth quarter of 2012 were $7.3 million, compared to $7.8 million in the fourth quarter of 2011, and $8.1 million in the third quarter of 2012. Operating income for the services segment was approximately $100,000 in the fourth quarter of 2012. This was about $400,000 lower than the fourth quarter of 2011, and $500,000 lower than the third quarter of last year.

Corporate costs for the fourth quarter of 2012 were $6.6 million. These costs were $1 million lower than the fourth quarter of 2011, and lower consulting spending though flat with the third quarter of last year. Income tax expense of $0.8 million in the fourth quarter of 2012, included provisions to reduce deferred tax benefits due too enacted changes and certain state statutory rates and to reflect a reduction in our blended state effective tax rate. The full-year of 2012 effective tax rate was 41.9%. At December 31, 2012, we had 658 railcars on lease, with a book value of $43 million, versus 758 railcars on lease with a book value of $51 million as of September 30, 2012. The decrease in railcars and leased reflect sales of leased railcars in the quarter.

Lastly, our financial position continues to be strong with no outstanding debt, and total cash and short-term investments on hand at the end of December of 2012 of $155 million, which was $11 million higher than the September 30, 2012 balances. We have no current plans to draw upon our revolving credit facility. I will now turn the call back to Ed for some concluding comments.

Thanks Joe. 2012 was a good year for FreightCar, despite significant coal market headwinds. In addition to solid financial results as presented by Joe, a number of key objectives were accomplished. We delivered three new non-coal car types meeting our customers stringent delivery and quality expectations. We are successfully executing the largest rebuild order in the Company's history. We completed investments to improve our ability to manufacture new railcar types. We made a number of improvements to our repair facilities and their operating systems. We strengthened our already strong balance sheet. And very importantly, we positioned the Company through the lease of the Shoals facility too efficiently produce our non-coal car products.

For 2013, we had two clear priorities. First, effectively manage the business in what will be a challenging year for our traditional coal car business. While I remain confident that the Eastern coal car fleet will continue to be replaced, it is becoming more apparent that the recovery of the Western coal market will take some time. The addition of our Shoals facility will give us a solid platform from which to aggressively pursue a broad range of non-coal car business. However, with the reduced near-term outlook for the Western coal market and a lackluster market for several non-coal car types, we expect our 2013 railcar deliveries to be in the 4,000 to 6,000 car range. This will require us to closely manage our costs, and maximize the efficiency of our facilities.

Second, we will advance our long-term strategic goals to further expand our non-coal car product offerings, grow our participation in the railcar parts and service business, and continue our effort to obtain value for our expertise in the rail transportation of both materials in international markets. Over the past three years, we have shown tremendous resilience in the face of significant headwinds for coal. We remain well-positioned to address the recovery in the coal car market when it occurs. I'm confident that with the addition of the Shoals facility, we will successfully achieve our strategic objectives and grow value for our shareholders.

This ends our prepared comments. We are now ready to address your questions.

Thank you.

(Operator Instructions)

Michael Gallo of CL King.

Hello. Good morning. What kind of cars will you be able to produce out of Shoals? Will you be able to produce tanks or just intermodals and some of the other car types?

Presently, we're only planning to produce dry freight cars.

Okay. Second question I have is, when will you be able to start taking orders for Shoals? Is that something we'll have to wait till the second half of the year to see? Or are you currently be in discussions with customers now? Or just help us just with the --

We're ready to take orders immediately, and we're planning to commence production in the second half of this year.

Okay. Great. and then final question, how much were the changeover costs in the fourth quarter related to some of the line change overs?

Michael, as you know, we don't give out details. Although, as you look at the March dependent absence, the changeover costs, we would expect margins to be in line with prior quarters.

Okay. That's very helpful. Thanks very much.

Justin Long of Stephens.

Hello, good morning guys. I was curious what the driver to making the decision to expand capacity through this Navistar plan was versus just adjusting your two existing facilities to serve some of the non-coal railcar demand. Was it primarily driven by the location and some of the advantages from the supply side of the equation? Or something else?

This was primarily driven by the physical configuration of our existing plants. Due to the nature of the facilities, it would be very difficult to manufacture tall and long cars in those facilities. They are also geographically constrained, and it would take considerable capital investment to modify those facilities to manufacture those cars. So, this was primarily driven by the physical capability of this other facility.

And then while not as big a driver as that, the other is the close proximity of suppliers in the area. And including having the relationship with Navistar there to provide stuff on site, we think helps make that facility an efficient facility.

Got you. That make sense. And from a margin perspective, I know it's obviously still very early, but is there anything structurally in this new operation that would lead you to believe that gross margins would be outside of the 8% to 11% normalized range that you guys have talked about historically in your core business?

Yes Justin, as you know we don't give guidance on margins. But there's nothing at that facility that thinks that this would change our margin profile.

Okay. Got you. And when you talk about the facility becoming fully operational and having capacity for about 7,000 units annually, what's the timeline on ramp? I know you're expecting the first deliveries to start in the middle part of this year. But, when do you think you'll be in a position where you could operate near those capacity levels?

That could be -- that could take place over the next two years. But a lot will depend on where the order clerk is and where the railcar market is at.

Got you,. And maybe in terms of that, how has your visibility trended? I know it was a little bit cloudy when we talked to you last quarter, but we've been through the Winter months now. Typically, you see some seasonal orders in those months, but how have inquiry levels trended, and maybe both the coal car side and for some of the non-coal cars?

Yes, hello Justin, this is Ted. I would say that the inquiries are about the same level as they were in the fourth quarter. So there hasn't been much change. We're seeing some activity in the non-coal car arena. And as we know, the coal car area is a bit lumpier and right now, it's quiet.

Okay. Great. That's helpful. And I think my last question is maybe for Joe. In terms of the guidance for 4,000 to 6,000 railcar deliveries this year, how much of that guidance is from the Alabama plant? Does that include shipments from that plant, and can you break that out?

It does include the shipments from the plant. As I think we said in our press release, we expect to be delivering cars in the second half of the year. But we don't give out delivery specifics by any of our plants.

Okay. Got you. And then also, in terms of the lease plant payment, are you going to be disclosing what that amount is at any point?

No. We do not do that.

Okay. Great. Well I guess that's all for me. I appreciate the time.

Steve Barger at KeyBanc.

Hello, good morning guys. I know that Shoals facility is really world-class in terms of its manufacturing infrastructure. Can you just give us in big buckets what the $23 million will be spent on? I think it was more like a turnkey when I had seen it.

The cost is really for production tooling and equipment, including purchasing some of the equipment that exists there today from Navistar.

I see. Okay. So you're actually going to take ownership of some, but you're leasing part of the facility?

The facility is being leased. The equipment that will be there that we're operating for the most part will be owned by us.

Got it. You said dry freight cars, but do you intend to focus on covered hoppers? Because that's obviously the biggest overall in segment, or are flat cars the focus to take advantage of your intermodal car design? Are you agnostic and you're just kind of casting the net?

Our primary focus is going to be on intermodal flat cars, open top cars of various types, and gondola cars.

Okay. And I think you said, maybe I missed it, you don't have orders for those new car types now, but you're ready to take orders today? Is that right?

Yes, we have inquiries for car types, and we're prepared to take orders for the plant right now.

Okay. And I know you didn't want to talk about gross margins, what they might look like coming out of the Shoals plant, but just how should we think about the return on investment in the near-term? Or is there any way for us to frame up how you're thinking about the return on the $23 million that you're spending?

In terms of the return, we're not going to get into specifics on that, but we do feel it has a positive return and it's positive for our business for the long term.

Right. Okay. So you're just looking at the facility, really as being a more efficient way to make those specific car types. And as you think you model out the mix of cars that you could ship and where you think you can put the economics, you think it justifies that $23 million?

Yes. Absolutely.

Okay. And sorry if I missed this, how long is the agreement for in years for the lease?

It is a 9-year lease with an option to renew.

Got it. Okay, I think that's all I have. Thanks.

Peter Nesvold with Jefferies.

Morning guys. So I guess I just wanted to clarify. It sounds like you don't have anything in the backlog yet for the Shoals facility, but it's -- am I reading into it too much? It sounds like you have commitments that are close and that's what put you over the line to sign the lease?

At this point, we have not assigned any work to the facility. We're out there actively seeking work for all of our plants right now. And we expect to have an order to assign there shortly.

Okay. I'm going to illustrate my ignorance here. You mentioned dry freight, but then you also talked about open top hoppers and gondolas. Is that for dry freight? Or I would have thought that that's not for dry freight?

That's for dry -- I mean non-tank cars.

Non-tank cars, okay. Let's see, you mentioned that it's 7,000 a unit capacity facility, is that just the 25% that you're leasing right now, or does that assume you take over the entire facility?

That is just the portion that we're leasing.

Okay. Okay. I think that does it for me then. Thank you.

Sal Vitale with Sterne, Agee.

Well good morning gentlemen. So just a quick question, Joe, I know you mentioned that you can't give too much additional color on the product changeover costs. But in your response, and I apologize if I missed it, you said just to look at prior periods percentage of something or other. Was it prior periods margins you said that we should assume going forward?

Yes. What I said is, absent those, we'd expect the margin percentages to be comparable to prior quarters.

Okay. So in other words, should we think about the product changeover being a one-quarter phenomenon and it's pretty much worked its way through?

Yes. As a matter of fact, the subsequent following on orders that we have started up in that facility, we have about -- we are operating within our budget expectations.

Okay. That's fine. Now, in terms of getting -- ramping up the new facility, the Shoals facility, should we also expect, I guess, in 2Q or 3Q should we expect some start-up costs to impact the margin?

That would be a fair expectation, yes.

Okay. Do you think it might be of the same order of magnitude as what happened in 4Q? Or any clarity?

The start up cost in the 4Q were specifically related to three orders that we had, and not entirely related to the start up of the facility in terms of the activation of equipment and that type of thing. So I would not expect to repeat our experience in the fourth quarter.

Okay. Got it. That make sense. And then just looking at the guidance of the range of 4,000 to that 6,000, I guess what is the variable that could cause that difference, that could account for that 2,000 car difference? Is it basically just the coal market recovering, and you getting additional orders in the first couple of quarters of this year? Or are there -- how much of that range is due to the number of orders for cars that you get for the new facility?

I think the range is primarily driven by the amount of uncertainty and what's happening in the general economy. If you look at carloadings, as Ted pointed out, and various commodities, some are stronger that others. And there isn't a very demonstratable trend right now in any of those product areas. And so the range is a function of the uncertainty in what's going to happen to loadings and the general economy at this point.

Okay. And then just last question on what you said about the types of cars that you expect to produce at the Shoals facility. I think you mentioned Intermodal flats, open tops, and gondolas. So those are car types that you do not currently produce, correct?

Well, we've recently produced some here in the fourth quarter. But we have not produced a large quantity of those cars in recent years. No.

Okay. So it's more you're basically being able to produce those types of cars on a larger scale essentially?

And, on a more efficient basis than in our existing facilities.

Right. Okay. I guess there's just one other question, Joe, I'm not sure if you can answer this. But on the $23 million investment, I think you said a portion of that will be to purchase new equipment. Can you give us a sense for what the depreciation expense on that would be annually?

It will be -- this is all fairly very new equipment. So it would be amortized over [slides] and our policy as we amortize the straight line, so depending on the piece of equipment, that's going to be anywhere from 3 years to 15 years.

Okay. Thank you very much.

You're welcome.

Mike Baudendistel with Stifel.

Thanks, and good morning. Just wanted to ask on with the new facility, does that increase the ongoing capital requirements on an annual basis after you get past the $23 million initial investment?

It shouldn't. There's always capital required to run a facility. But this is a very new facility. So in terms of what our typical CapEx in terms of maintenance capital, it should be a lot less than historical levels.

Okay. And how many production lines do you anticipate running on that facility?

We expect to operate two production lines in that facility.

Okay. Two productions lines at any one time. And then just in early 2013, I guess to follow-up on the last analyst's questions, should we expect with the changeover activities behind you that the rate of production will rebirth back to where was through most of 2012, say mid- 2012?

In terms of the rate of production, we don't give out specifics on cadence of orders. Although, we know our backlog will we built out through the third quarter of this year.

Okay. Great. And then, maybe just one last question. The 473 units ordered in the fourth quarter, can you just give us a sense how many of those were coal cars and how many were the other types of cars that you just discussed?

Yes, Mike. The vast majority of those were non-coal cars.

Okay. Great. Those were the questions I have. Thank you.

Matt Brooklier at Longbow Research.

Hello. Thanks. Good morning. So we're increasing production with the new facility, two new production lines. How should we think about the production lines at your two existing facilities at this point in time if we're in a period of lower historical coal car demand, and we're getting into some other equipment types. Just curious, what your manufacturing footprint potentially looks like in 2013 all in?

Well, as we've said in the past, we essentially operate our facilities to meet our customer's delivery requirements. And we're going to continue to do that. So we're aggressively seeking orders for all of our facilities whether they're coal or non-coal cars. And that process will continue this year.

Okay. So you're -- I guess the question is, that your sense is you're going to maintain current capacity at your two existing facilities. Hopefully, we get a rebound on the coal side. And then we're also getting incremental orders on the non-coal side. Is that how we should be thinking about it?

Well, I think as we've mentioned in the past, we size our facilities to the orders that we have. And if we don't receive orders, we're going to reduce our capability at the given facilities, depending on costs and customer delivery requirements, and so forth and so we --

Okay. Got you. And then maybe, what are some of the other potential costs reduction buckets that you're focused on as we move through this year?

Well of course we're aggressively looking at our SG&A to make sure we keep that at the lowest level possible. And we're going to continue to manage our facilities that are operational at the lowest cost possible. It's a continual challenge to address operational costs in this business. And that's what we've done, and that's what we're going to continue to do.

Okay. Very good. Thank you for the time.

Matthew Dodson with Jay West LLC.

Hello. Can you talk -- just I'm trying to understand better, so you said you haven't put any work or haven't received orders for the new facility yet, but the 473 cars were not coal cars. So are you actually building things beside coals cars in your existing footprint?

Yes, we are. Actually, we built some in the fourth quarter and we're continuing to build some today.

Got it. May I just understand this, when this facility comes up in the second half, then if you got those 473 orders that were for the fourth quarter, would they be going to that new facility then?

Our assignment of products to facilities are based on the cost of production of that particular car type at that facility. The customers, the delivery requirements, and essentially transportation costs. So depending on those factors, we will assign the production to the appropriate facility at the time we receive the order.

Okay. That helps me understand that better. The $23 million that you talked about, you basically said it differentiates between the equipment. But if I just did the 15 year straight line, that's about $1.5 million as added cost to the P&L going forward. Is there anything more that we should think about when that facility comes on from a D&A standpoint? Are there any other costs that you have besides the variable costs of the employees that are fixed costs that have come on?

Our cost structure is usually pretty variable around in the biggest component of our cost structure is the [rough] car production cost itself. The material and the labor, that which is variable cost.

Right. Exactly. But you don't have to hire new sales guys to sell these type of cars as opposed to coal cars. Is that fair?

No, our existing sales force is currently marketing on the coal and non-coal products.

So, is that $1.5 million to $2 million a good range for the D&A or fixed costs that are going to -- you said the P&L because of the new plant? Or, do you not want to talk about that?

Yes. I prefer not to talk about that.

Yes. I figured. Okay. The next question I have for you is, can you just talk a little bit about when you're going into these new products, how are you competing? Because there's already people that make those type of products. Are your products just better? Are you competing on price? Or, how do you break into a business like that, I guess, when you have entrenched competitors?

We compete in our markets on quality, price, and delivery.

Okay. Got it. And then the last question I have for you, the $23 million, what else do you have in CapEx this year?

In total, on top of that, for the other facilities, $4 million to $5 million, I believe.

$4 million to $5 million. Okay. Got it. And I do have one last and you probably won't answer this one. But at the low end of your range on a delivery with the 4,000 cars, do you burn cash? And I assume you don't make any money at 4,000. Is that right? Or can you bring the costs down at your other facility enough to stop the red ink or the burn?

Yes Matthew, that's -- we don't give guidance. And so I will not respond to that.

Okay. All right. Thank you.

Peter Nesvold of Jefferies.

Hello guys. I knew there was another one I wanted to ask. I'm going to ask the question and I hope you answer, and then maybe you can rephrase it if you don't like the way I ask it. I think people are just trying to get a sense of the breakeven point here. Both on an operating income basis and a cash flow basis. Because it looked like you were sort of breakeven on both terms in this quarter on this production run rate. And this production run rate, if I just annualized it, was the midpoint or the forward range. Is there anything unusual about the seasonality of 4Q, or any other factors? I think you mentioned couple start-up costs on three contracts. Anything that's unusual about this particular quarter that we should keep in mind as we frame out 2013 estimates, and keeping in mind that the production numbers in this quarter are kind of the production numbers you have for the year?

Not going to comment on that, other than saying in terms of the quarter, there was nothing unusual going on other than what Ed had talked about on these production start-up costs.

And so there isn't any kind of unusual seasonality? Do you get a lot of shutdowns around Christmas, and Thanksgiving, or is that not really a factor outside of the other three quarters?

There is a normal shutdown around Christmas, but it's not going to have a significant impact for your purposes.

Okay. All right, well thank you guys.

Steve Barter with KeyBanc.

Hello. Sorry if I missed this. Did you say what the incremental SG&A related to Shoals is?

No, we did not.

And you won't, is that right?

I think the question was asked are we -- do we need to staff up salespeople and the like. And Ed responded that our existing sales team can handle and currently markets these car types.

Got it. Thanks. That's all I had.

Sal Vitale with Sterne, Agee.

Just a quick follow-up question. Did you mention on your current backlog of 2,881 cars, how much of that is re-bodied?

We did not, but that number is 1,900 of that total.

Okay. And then, just if you could refresh my memory. And I know we discussed this at some point during 2012, can you give us a sense for what the gross margin is on re-bodies? Or, I forget if was that you gave some kind of indication on the gross margin or the gross profit dollars are actually similar to the new cars.

What we said is the gross margin percentages are similar to existing new cars.

Okay. And is there any change to that since you said that originally?

No.

No. As I mentioned earlier, we have successfully and we are successfully executing the rebuild project.

Okay, thank you.

Thank you.

(Operator Instructions)

And gentlemen, at this time there are no further questions in queue from the phones.

Thank you. This concludes today's conference call. Thank you for joining. A replay of this call will be available beginning at 1.00 p.m. Eastern Time today at 1-800-475-6701, passcode 281777, good day.

Thanks everybody. Have a good day.

thank you. And ladies and gentlemen, that does conclude your conference for today. Thank you for your participation and for using AT&T Executive Teleconference. You may now disconnect.