FreightCar America Inc (RAIL) 2013 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to FreightCar America's fourth-quarter 2013 earnings conference call and webcast. At this time, all participants' 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 PM Eastern Standard Time today until 11:59 AM on March 19, 2014. To access the replay, please dial 800-475-6701; the replay pass code is 318803. 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 to Mr. Chip Avery, Chief Financial Officer of FreightCar America.

Thank you, and welcome to FreightCar America's fourth-quarter 2013 earnings conference call and webcast. Joining me today are Joe McNeely, President and CEO; and Ted Baun, Senior Vice President Marketing and Sales. 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 2012 Form 10-K for a description of certain business risks, some of which may be outside of 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 2012 Form 10-K and earnings release for the fourth quarter of 2013 are posted on the Company's website at FreightCarAmerica.com. Let me now turn the call over to Joe McNeely.

Thank you, Chip. 2013 was a transformational year for FreightCar America, as the Company completed several strategic initiatives designed to grow the long-term value of the Company. The continued soft freight car demand and a number of accounting changes had a negative impact on our financial performance this past quarter. Despite the financial results, which Chip will discuss in more detail shortly, 2013 included a number of successes related to our (inaudible) priorities, the start-up of our Shoals facility, expansion of our product offering, maintaining our status as a market leader in coal car manufacturing, improving the contribution of our services business, and advancing our presence in select international markets.

As we have stated, expanding our product offering is key to our long-term success, and we have made good progress on that front. The current backlog includes a variety of new car types including intermodal well cars, flat cars, and covered hopper railcars, as our new product development team continues to work on designs for several other car types.

The Shoals facility, our primary plant for these new car types, started up on time and is about to complete its third order. The build-out and ramp-up will continue, with the final build-out expected to be completed by mid-year. While this will be an efficient facility once complete, margins as we ramp up will effectively be lower than they will be at normal production volumes.

In our traditional market, 2013 was a difficult year for coal, with loadings, production, and export all down compared to 2012. Ted will have a few comments on this in a moment.

With the continued pressure from natural gas and an unfavorable regulatory environment on new coal-fired power plants, the outlook for newly manufactured Western-style coal cars looks to be soft for some time. However, Eastern railroads continue to replace their fleets; and with the rebuild orders we received in 2013, our Roanoke plant is virtually full. Our Danville plant, however, remains idle; is available if more coal car capacity is needed. As I have stressed before, while we are focused on diversifying our product offerings, we remain committed to maintaining our leadership in the coal car market.

On the services side of the business, the changes we have put in place over the last two years help us improve revenue and operating income over the prior year.

During the quarter, we took a hard look at the contribution from all of our maintenance and repair shops and made a decision to close an underperforming shop in order to improve overall returns. Chip will address the accounting impacts of this decision in his comments.

Our remaining maintenance and repair operations are focused on building momentum achieved in 2013 and growing the value of this business.

Internationally, we won several orders in 2013 for export. We will continue to seek opportunities abroad and plan to grow this part of our business over the long-term.

Our backlog at the end of 2013 was roughly was roughly 6800 railcars. Given we continue to ramp up at the Scholl facility and given the weak cold car market outlook, we projected our delivery for 2014 will be around 7000 railcars.

So far this year, all of our facilities have been negatively impacted by the severe winter weather experienced across most of the US and, as a result, deliveries in the first quarter of 2014 will be at a slower pace than the rest of the year.

While the fourth-quarter and full-year 2013 results fell below expectations, I'm confident that we will effectively continue to diversify our product offering, maintain our coal car market leadership, grow the value from our services business, and expand on our international successes. I believe these efforts will bear fruit in 2014 and provide long-term value for our customers, shareholders, and employees.

Ted will now provide an update on our markets and commercial activities.

Thank you, Joe. To recap order activity for the period, 800 railcars of various types were ordered in the fourth quarter of 2013. This compares to 473 units ordered in the fourth quarter of 2012 and 6001 railcars ordered in the third quarter of 2013. As some of you will recall, third quarter included rebuild orders for approximately 4000 railcars. Fourth-quarter 2013 deliveries of 1101 railcars included 190 new, 99 used, and 812 rebuilt railcars. This compares to 1308 railcars delivered in the fourth quarter of 2012, including 528 new cars and 780 rebuilt railcars. There were 937 railcars delivered in the third quarter of 2013, of which 194 were new and 743 were rebuilds.

Our backlog of unfulfilled orders at December 31, 2013 is 6826 railcars, slightly down from 7129 railcars at September 30, 2013. Our backlog at December 31, 2012 was 2881 railcars. As Joe said, we have made good progress on our new product development efforts, and close to half of the current backlog is comprised of non-coal railcars.

Industrywide, 14,865 units were ordered and 15,776 units were delivered in the fourth quarter of 2013. Orders and deliveries were up from the fourth quarter of 2012 as well as the third quarter of 2013.

Industrywide backlog was 72,937 units at the end of December, relatively flat compared to the end of September and up from a year ago. After a year dominated by a strength in the energy market, approximately 75% of the year-end backlog consists of tank cars. Non-tank car demand improved with 9949 railcars ordered in the fourth quarter compared to 7603 railcars ordered in the third quarter.

A large portion of the fourth-quarter orders were for covered hopper cars. Deliveries for non-tank cars also increased slightly to 7336 units from 5100 units in the third quarter. These aforementioned industry figures do not include rebuilt order and delivery activity. The overall number of railcars in storage was roughly 278,000 as of December 31, 2013, a decrease of 19,000 railcars when compared to September 30, 2013.

We estimate that the number of coal cars in storage declined to about 16,500 railcars compared to 21,000 railcars at the end of the third quarter. This is the lowest level since early 2012. While we may see further reduction due to severe weather impacts on rail velocities, coal burn, and stockpiles, it is unclear if this will result in any near-term incremental coal car demand. US commodity loadings in the fourth quarter of 2013 were essentially flat when compared to the fourth quarter of 2012.

While railcars loadings of certain commodities such as petroleum products, crushed stone, sand and gravel, and nonmetallic minerals continued to exhibit growth, coal loadings continued to be challenged, decreasing 5% versus the fourth quarter of 2012. Intermodal container loadings remained strong for the quarter, increasing by 7.7% versus the same quarter in 2012.

The coal market continues to show mixed results. Utility coal stockpiles decreased to 153 million tons, 17% below the year-ago stockpile levels. However, US coal production was down 2.2% versus 2012 levels, and US coal exports for November were down 6.5% to 108 million tons.

2013, total electricity generation in areas where coal competes as fuel was flat when compared to 2012.

Now I would like to turn the call over to Chip to address our fourth-quarter financial results.

Thank you, Ted. For the fourth quarter of 2013, consolidated revenues were $79.7 million, compared to $116.6 million in the fourth quarter of 2012. The net loss for the fourth quarter of 2013 was $12.3 million, or a loss of $1.03 per diluted share. The net loss for the fourth quarter of 2012 was $1 million, or $0.08 per diluted share.

Fourth quarter of 2013 results included several notable charges. We booked a total of $10.5 million of restructuring and non-cash impairment charges in the fourth quarter. Included in these charges was an impairment charge of $7.6 million to write down certain assets at the Danville facility. This charge was taken based on the current industry outlook for the coal car market and does not indicate any plans to close that facility. We also recorded a $1.9 million charge for the closure of our Clinton, Indiana, maintenance and repair shop. Corporate costs included severance expense totaling $1.3 million.

For the fourth quarter -- for the full year of 2013, consolidated revenues were $290 million, compared to $677 million in 2012. Consolidated net loss was $19.3 million, or a loss of $1.61 per diluted share, compared to net income of $19.1 million, or income of $1.60 per diluted share. The manufacturing segment revenues for the fourth quarter of 2013 were $72 million, compared to $109 million in the fourth quarter of 2012. Year-over-year decrease in revenues reflects a lower number of cars delivered and lower average revenue per car given the high number of rebuilds in 2013.

The operating loss for the manufacturing segment for the fourth quarter of 2013 was $8.7 million, including the restructuring and impairment charges previously mentioned. This compares to operating income of $6.5 million in the fourth quarter of 2012. The fourth quarter of 2013 results included a $1.7 million charge for projected costs in excess of selling price related to an order to be delivered in 2014. Customer lead times on this order required us to source key components from higher-price suppliers in order to meet the customer's delivery requirements.

Danville carrying costs and under-absorption of overhead costs due to low start-up volumes and costs associated with ramping up the labor force at Shoals totaled $3.6 million in the quarter.

Lastly, the manufacturing segment results in the fourth quarter of 2013 were negatively impacted by production and efficiencies and higher operating costs.

The services segment had revenues of $7.7 million, compared to revenue of $7.3 million in the fourth quarter of 2012 and $9 million in the third quarter of 2013. The operating loss for the services segment was $2.4 million in the fourth quarter of 2013, including the restructuring and impairment charges. This compares to operating income of $100,000 in the same period the prior year and $700,000 of operating income in the third quarter of 2013.

The sequential decrease in revenues and earnings reflects lower repair volumes caused by increased utilization of trains and lower margin running repairs versus program work in the fourth quarter. Corporate costs for the fourth quarter of 2013 were $7 million, which were $300,000 higher than the fourth quarter of 2013.

The fourth quarter of 2013 corporate costs included $1.3 million of severance expenses related to several organizational changes. These costs were partially offset by the reduction in incentive awards, as we did not meet our annual financial objectives.

The effective tax rate was 33.4% benefit for the quarter and a 22.3% benefit for the full year. The tax rate for the full year was impacted by a valuation allowance charge recorded as a result of idling the Danville facility and the change in the state tax apportionment factor.

Turning to our balance sheet, at December 31, 2013, we had 748 leased railcars with a book value of $53 million, compared to 648 railcars with a book value of $43 million at the end of 2012. The leased fleet was 100% utilized at the end of 2013.

Our financial position is strong, with no outstanding debt and $192 million in cash and short-term investments at year-end. The increase in cash and investments from $155 million at the end of 2012 was driven by an $89 million customer deposit we received late in the fourth quarter, partially offset by the investment in the Shoals facility, changes in working capital, and additions to the lease fleet. Our $50 million revolving credit facility remains undrawn.

This ends our prepared comments, and we are now ready to address your questions.

(Operator Instructions) Michael Gallo, CL King.

Just a couple of questions. Wanted to drill in a little on the gross margin line, a little more of what happened there in the quarter. Obviously you had this order that you had some projected costs that were higher. So a little background -- more background there on kind of what happened, whether we should view this as an isolated event. And then also on that front, how much was the Clinton facility losing, and how much do you expect the closure of that to help from a margin standpoint going forward? Thanks.

Let me take the first part, and Chip can address the Clinton. As it relates to the manufacturing costs, the one item that Chip noted in his comments was in order, where we had really tight deadlines and to work with the customer, we had to force product where we normally wouldn't. So I wouldn't expect to see that repeat itself again. Chip also mentioned that there were some other production inefficiencies in cost. In the quarter, there were certain maintenance costs, operating supply costs, et cetera, that were higher than we would have expected and higher than prior quarters.

(multiple speakers) I was going to say just as a follow-up on that first part, should we expect, then, more -- when you look at the way the backlog looks today and the production runs that we should see perhaps gross margins more at a similar level what you saw in the third quarter? Obviously getting better as revenues move up?

Again, without giving specific financial guidance, margins probably go back to looking more where they have in the past. But, again, that depends on the [car] mix that's out there. And remember, in 2014, as Ted said, half the backlog is our rebuilts, which have lower revenue numbers but have the same kind of margin percentage, then margin dollars will be lower.

Right. No, I understand that. But just in general. And then I guess the second part on Clinton?

Sure. So the Clinton facility -- as we look at the drag in 2013, it's a very small facility. Top line was about $2 million; off the operating loss was slightly less than $1 million in 2013. So, again, we see that going away. The facility is held for sale, and it's been written down; and a big part of the charge at year-end was an impairment or write-down of the facility to book value. So that's the release during 2014.

And in terms of the $2 million, would you expect to be able to pick up any of that revenue in your other facilities, or do you expect just that revenue will go away?

I expect it to go away. It's in a different part of the country than our two Nebraska facilities, so I expect most of that goes away.

All right. Okay. Thank you.

Justin Long, Stephens.

I was wondering if you could talk about the marketing efforts for Shoals. I'm just curious how much of your efforts have been on the product development side versus going out and marketing these new products with some of the big customers. And any detail you have on initial feedback from customers purchasing the railcars in this facility would be helpful as well.

Sure, Justin. This is Ted. We really -- it's an effort. When we look to fill Shoals and develop products, it's obviously outside sales, it's marketing, and it's a large part of engineering resources. So we're moving ahead on all fronts; as we said in the prepared remarks, it's covered hopper cars, a variety of different sizes, further intermodal flat cars that we're looking to develop and ultimately put into that plant. And I would say that customers have been very receptive to our design efforts, our end product, and the prospects for the plant.

Thanks, Ted. That's helpful. And in terms of the increase for Shoals, what do they look like as it relates to size? Are you typically seeing inquiries in the hundreds of units, or are they smaller than that?

I'm not going to comment on any particular size of inquiry. But I will say that, on average, we are seeing inquiries about where they were through Q3 and Q4 and a slight uptick as we enter 2014. So we are seeing a bit of improvement across the board with freight car inquiries. And, obviously, we will decide where to put those via Shoals, Roanoke, or potentially Danville as we move forward.

And just, Justin, very -- just one thing to elaborate a little more. The car types that are going into Shoals are different than our traditional coal car types, [what] have been ordered in the thousands. The expectation is that the order lots are probably, on average, smaller than what we would have experienced in the past.

Okay, great. If you think about your guidance for about 7000 railcar deliveries this year, is there a way to break that out between what you expect to deliver in Roanoke versus Shoals?

We don't comment on specific plants' productions and backlog, Justin.

Okay. Fair enough. And I had one question on the balance sheet. If you could provide some detail on your CapEx expectations for this year. And just given the current backlog, what is your expectations for the cash balance is as we move throughout the year as well would be helpful.

So in terms of the 2014 CapEx, our expectations are around $10 million for the full year. We're looking at between $6 million and $7 million for the final build-out of Shoals, which basically takes us through mid-year; and then a couple million dollars in maintenance capital and some [new] product development spending. Those numbers are inclusive of any decisions we make in terms of build on the lease fleet. So those are just the sort of the internal ones, per se.

Okay, perfect.

In terms of the balance sheet, we obviously have forecasts and so on with very large deposits taken at year-end. That will be used, as you would expect, to purchase inventory for that order, and we expect that to come down over the year. So as we project out, I guess the long-term is we like to be kind of right in the $100 million range. And, again, there will be a large consumption as we -- from the $192 million as we buy the inventory for the order.

Okay, great. So excluding that customer deposit, the cash balance doesn't sound like it should change much.

Don't think so. But you've got to remember, Justin, a lot of it depends on where you end up with your backlog in your plant production going into the next year and how much inventory you have to have on the ground and pay for. So that's a long look out at this point just with the caveat that could change a lot at any point in time.

Right. That's understandable. And maybe one last one. I was wondering if you've seen any significant orders subsequent to quarter-end. Listened to Norfolk Southern's capital budget plans and their commentary for 2014; it sounds like they could be in the market for some new coal cars. So I'm just wondering if that's an opportunity at some point, or if that could be reflected in the current -- or if that's reflected in the current backlog.

No, there's a number of opportunities that I think Ted talked about. There's a lot of inquiries out there for a lot of different car types. At this point, there is nothing subsequent to year-end that we're ready to discuss.

Okay, great. I'll leave it at that. I appreciate the time this morning.

Matt Brooklier, Longbow Research.

How should we think about Shoals start-up costs moving out? Are we kind of all the way there in terms of getting the facility staffed up and ready to start cranking out railcars in 2014? Or is there still more cost and more work to kind of get up the curve in terms of being fully at your all-in manufacturing capabilities?

It's Chip. The spending, we are really looking at CapEx; just south of $7 million between -- basically between now and mid-year. So in terms of the ramp-up both in terms of equipment and the lines, in terms of staffing, it's on a pretty steep slope here in terms of being complete by mid-year. So as you look at the start-up costs that I mentioned, sort of the labor efficiencies as we bring new people on, we really expect that to sort of taper down to mid-year and basically go away at mid-year. But, again, at that point time, it's going to be truly subject to volume and orders in the books. So, again, as we project it out, that's kind of what we're looking at is sort of fully operational and staffed by mid-year.

Okay. So it's -- I guess to follow up on that, where are we from a staffing perspective? And then it sounds like we're going to see some incremental start-up costs in the first half of 2014 but maybe not to the same degree that we saw in the second quarter of 2013. Is that a fair way of thinking about it?

Yes, so I'll take the first half on the costs. We do expect a tapering of those and also a reduction in Danville as well because of the write-down. We haven't split those two pieces out; we've kept them together. But, again, we do see those decreasing and with the impairment at Danville.

Got it.

In terms of the staffing side, we continue to ramp up. We were fully staffed at one production line at the end of the year, and continue to start preparing to ramp up second production line, but that's still in process. And we're bringing people in today and getting them trained -- hired and trained. So we're going to see those costs continue here. But as we get fully staffed up here this spring, that will then -- the training costs will start to taper off.

Okay. And with two lines going and being fully staffed up, were -- you guys are kind of at max capacity at Shoals?

Well, it will be at max capacity for the staffing levels. Again, we're taking a pretty cautious view on production to make sure that we don't overstretch ourselves and we produce good quality products for these new car types.

Okay. But I guess my question being if the demand is there, you are ready to -- you're able to take all of those orders and produce something close to the maximum of what that facility potentially can do from a delivery perspective?

A lot of that is going to depend on how customers are designed; how quickly everybody gets at full coal production and capacity in terms of their skill sets down there. I think we'll stick with for this year -- with the guidance I gave on the number of cars we think we're going to get built and delivered.

Okay, very helpful. Thank you.

Sal Vitale, Sterne, Agee.

So just first, a clarification on what was said earlier in the call. I may of missed it. Did you mention how many of the 700 non-coal car orders received in Q4 were for covered hoppers?

We did not. We don't break out that level of detail, Sal.

Is that a significant number, or is that just not nominal at this point?

It was a good portion of the 700.

Okay. And is it fair to say that the margins on the covered hoppers in general were higher than the coal cars?

Then coal cars? Our margins, as we talked about this year, are going to be a lot of [our] function of our startup down in Shoals. Long-term, we think, as we did before, for our new car types the margins to be comparable to coal, although long-term. But this year, as I mentioned, we're going to have the drag of just the start up [pull] the margins down.

Right. But the actual contribution margin for the individual car you're saying is about similar to coal?

We expect that over the long-term, yes. When we're fully operational and have a number of these produced in our back pocket.

Okay. And then the -- just looking at the breakdown of the $5.3 million in costs that was identified. I think you said $3.6 million -- was that purely Shoals start-up cost? I may have missed that.

Yes, no, that was a combination -- we haven't broken out, and we're not breaking out the Danville, call it -- Danville is idle currently. The Danville carrying cost as well as the Shoals start-up costs, we haven't broken those out. But of the $5.3 million, I think, it was $3.6 million in total for those two items. And the Shoals item is the larger of the two. And, as I said, the Danville one drops pretty dramatically with the asset write-down, the impairment at year-end.

Right. And so that remaining $1.7 million, what was that again?

So that's the one Joe had discussed in terms of the lead times on the material. So the $1.7 million was fundamentally -- it's 2014 production. But in terms of the lead time requirements, we had to go -- we had to buy materials at prices that were substantially higher than sort of the normal lead times. And so, fundamentally, we booked the charge in 2013 for that difference.

Okay. And just to drill down a little bit on that -- on that particular order. So are the contractual terms for that particular order, are they any different than the rest of your contractual terms? I guess what I'm getting at is there something that could reoccur in the future?

Sal, I think as I said before, this was that unique situation driven a customer demand. There's nothing unique, I would say, in the contract that we would expect to see this again.

Okay, that's fair. And then just the last thing as I'm looking at your guidance -- so if I look at the backlog of 6800 cars, I assume that's all slated for 2014 delivery at this point?

Sal, yes, the majority of it is.

The majority of it is. Okay. So then, Joe, earlier you mentioned that in your conversations with the Eastern railroads that there's still intention to replace the aging coal car fleet more on the re-bodied side -- on the rebuild side, rather. So I guess if we look, you received an order for 4000 cars in 3Q, but would you expect to receive some more significant-sized orders in -- throughout the various quarters of 2014?

Sal, this is Ted. We're not going to comment on future specific orders. But what we will say is that we continue to believe in the Eastern replacement story (multiple speakers), and will just leave it at that.

Okay. And then if I just look beyond 2014 (technical difficulty) --

Hey, John, there's some background on the call. (technical difficulty) Sal, you still there?

(technical difficulty) question. I apologize. So if I look, I see your guidance for 2014 -- and I understand you don't provide any guidance at this point for 2015. But assuming that your order flow for -- in your Shoals facility for your non-coal car types continued to accelerate, is it reasonable to assume that you are going to have more than 7000 deliveries in 2015?

Sal, we're not going to comment on that. That visibility that far out is as tough, as you know. Especially on the coal car side, our orders come in big lumps; and as we have talked in the past, we can go a year without a big order, and then get years, like we did last year, with multiple big orders. So that visibility path right now into 2015 is unknown.

Okay. Fair enough. Thanks.

Doug Dyer, Heartland Funds.

Could you please have a brief discussion as to where you think there may be capacity to deliver cars on a quick turn? Who would have that capacity now if anyone does?

You mean in the industry overall?

Yes.

Again, without knowing the order books of my competitors, I know the [tank] car size -- their backlogs are well out. And I think we've heard, and Ted can comment anecdotally, some of the covered hoppers is out a bit, but there's capacity this year. As we've talked about, we have capacity in our Danville facility for certain car types, of course. So there is some capacity out there. But, again, quick is a relative term because lead times are three to six months, depending on the car types or materials.

Okay. It seems like the train system and the network has become a little bit congested lately. Obviously some of that is whether. Do you think there is a little bit more at work than that? Is -- are we kind of running at a high-capacity rate on the rails, or is everything, from what you can see, just weather-related as of now?

Doug, I think it's -- if you listen to the class-ones, they are going to tell you that they see a pick-up in economic activity. And they are also going to tell you that the first six weeks of this year have been tough from a network operations standpoint. So it's a little bit of both. But I think they tend to be more optimistic for 2014 than maybe they have been in the past. So that's -- we look at that as a positive event, obviously.

Sure. Okay. You addressed your cashier saying that, without that customer deposit, you think that your number will kind of be fairly stable throughout the year. It seems to me like there would be some cash available to do some share buybacks. I think now would be an opportune time to do so if it looks like we're going into the business -- I'm sorry, a mode of business here where things are improving. It looks like improving rather well, if you listen to the class-ones.

Yes. And, Doug, we understand that and understand your firm's position on that. I think where we are at, we're still in our strategic initiatives. We're still -- need to finish out the Shoals. We still need to invest on new product development. Still need to invest in growing the value of our services business. So we discussed this at the Board meetings on a regular basis, but right now, again, we will maintain a conservative position on our cash.

Okay. All right, one last one. Your lease fleet, what does that consist of? Is that all coal cars?

The vast majority of it is coal cars.

Is there more interest in that as we have got cars coming of storage?

I would say that cars coming out of storage is a recent phenomenon. We're tracking it. Obviously that's good news as well, but we're hoping it's sustainable and not just a function of the cold winter much of the US has seen. So certainly a positive turn of events that will -- if that continues, it will help renewal rates and term -- getting the least terms extended outward.

Do you have many of those coming up for renewal this year?

I would say no more than normal. There's usually the average 15% to 20% renewals that take place on a year-over-year basis.

All right. Think you very much.

(Operator Instructions) Mike Baudendistel, Stifel.

Thanks. With the closure of one of the repair shops, is there more to do there with additional shops that you would close?

No, no. I think our strategy is going to remain [as] the same in growing that. The facility we closed is in a different geographic -- it didn't have the dynamics of being in a high-volume quarter like our shops out in Nebraska are. So it's a different decision. I think our other shops, though, we still like -- we still see an opportunity to grow value from those.

Okay. That's good detail. And then the covered hopper orders -- covered hoppers; a lot of different sizes move a lot of different types of freight. Which markets are being targeted there?

If you look at where the lion's share of covered hoppers are in; they're in the small capacity for cement and sand, and medium capacity for grain and larger. Some plastics. I think Ted can comment on inquiries; we're seeing inquiries kind of for all three of those as you get out in the future.

Okay. And then I just want to make sure I'm interpreting some of your earlier comments correctly -- with the 7000 units delivered in 2014 already has 1600 in backlog. So I guess, to one of the earlier questions, the reason you're not expecting more orders to come in in 2014 that you can deliver in 2014 is because most of those orders will be outside of coal. And Shoals is already at full capacity, which is somewhere in the neighborhood of 3500 because it's half of the 7000 you expect to be delivered. Are all those things sort of roughly correct?

Yes, I think definitely roughly correct. When we look at the coal market, that's where Danville would be -- the type of cars that would go in there. And the visibility there just isn't there. And Shoals, we're being cautious on what we can expect there, given we're in start-up mode still.

Great. That's all I had this morning. Thank you.

We have no additional questions in queue.

Right. This concludes today's conference call. Thank you for joining. A replay of this call will be available beginning at 1:00 PM Eastern today at 1-800-475-6701; pass code 318803. Thanks.