Trinity Industries Inc (TRN) 2011 Q2 法說會逐字稿

Before we get started, let remind you that today's conference call contains forward-looking statements as defined by the Private. securities litigation Reform Act of 1995, and includes statements as to estimates, expectations, intentions and predictions of future financial performance. Statements that are not historical facts are forward-looking. Participants are directed to Trinity's form 10-K and other SEC filings for a description of certain of the business issues and risks, a change in any of which could cause actual results, or outcomes, to differ materially from those expressed in the forward-looking statements. Please note today's call is being recorded.

Now, I would like to turn it over to Gail Peck. Please go ahead.

Thank you, Beth. Good morning from Dallas Texas. Welcome to the Trinity Industries second quarter 2011 results conference call. I am Gail Peck, Treasurer of Trinity. Thank you for joining us today. Following the introduction, you hear from Tim Wallace, our Chairman, Chief Executive Officer, and President. After Tim, our business group leaders will provide overviews of the businesses within their respective groups.

Our speakers are Steve Menzies, Senior Vice President and Group President of the rail and rail car leasing groups; Antonio Carrillo, Senior Vice President and Group President of the Energy Equipment Group; and Bill McWhirter, Senior Vice President and Group President of the Construction Products and Inland Barge Group. Following their comments, James Perry, our Senior Vice President and Chief Financial Officer will provide the financial summary and guidance. We will then move to the Q&A session. Mary Henderson, our Vice President and Chief Accounting Officer is also in the room with us today.

I will now turn the call over to Tim Wallace for his comments.

Thank you, Gail, and good morning to everyone. Our business has continued to confront a variety of scenarios. We anticipate that each quarter will have its own unique challenges and opportunities. I am very pleased with the recent debt refinancing in our railcar leasing business. We were successful in obtaining long-term financing for Trip Holdings, our majority owned railcar leasing subsidiary. James will provide more information about this transaction during his comments.

Demand for rail cars in North America remained strong during the second quarter. I am pleased that our railcar business significantly increased its order backlog during the second quarter. Our rail car manufacturing facilities are ramping up production according to the rail car delivery schedules we described in our first quarter conference call. Our rail car leasing business is continuing to see strong demand for rail cars. During high demand periods, this business is able to obtain better lease rates and extended lease terms.

Our barge business increased its order backlog during the second quarter. Our barge facility in Missouri that was damaged by severe flooding in May, is now well under way towards full recovery. I'm very pleased by the way our personnel responded to the challenges associated with the flood.

Our structural wind towers business has been in the process of switching its production lines to accommodate a change in product mix towards larger wind towers. We are experiencing additional costs associated with this transition. As the wind energy continues to evolve, we expect our customers will enhance their designs to obtain more efficient models. We view our flexibility, and our other core competencies, as differentiators which reinforce our position as market leader for our wind tower customers.

Our highway products businesses continue -- are continuing to build momentum as they normally do during the construction season. We expect levels of uncertainty to surface as our political leaders work through federal highway spending legislation. Our businesses that rely on highway funding are prepared to respond to shifts in demand for their products. In summary, we are a very flexible company, and will continue to adjust as the business climate shifts and demand fluctuates for our products and services.

Our overall performance reflects the talents and hard work of our people, the diversification of our businesses, our emphasis on operational excellence, and the strength of our market leadership positions. We are fortunate to have a highly seasoned group of employees who are extremely capable.

I will now turn it over to Steve Menzies for his comments.

Thank you, Tim, good morning. Second quarter operating results for the rail group and leasing group reflect increased railcar production and improved operating performance amidst strong rail car demand. Our rail group posted a 66% increase in operating profit, while shipping approximately 39% more new rail cars during the second quarter, compared to the first quarter of 2011. Our rail car order backlog increased its highest level since the second quarter of 2008. Our leasing group experienced a 21% increase in operating profit, compared to the second quarter 2010, due to increased utilization, lower fleet maintenance expenses, and profit from lease fleet sales.

Lease rates and renewal trends continue to strengthen, while our lease fleet continues to grow. Rail car demand during the past several quarters, and current order inquiries, have been strong. Rail cars serving shallow oil production and natural gas packing expansion, are in high demand, as are rail cars serving the chemical and petrochemical industries. These industries are benefiting from abundant, low-price natural gas feed stock, encouraging North American production is expansion. We are also seeing strong demand for rail cars that transport fertilizer, minerals, and agricultural products as export shipments of these commodities expand. Demand for rail cars that serve the lumber, paper, and coal industries continues to be weak.

The overhang of idle cars in North America is still declining with some rail car types in tight supply. During the second quarter, the North American rail car manufacturing industry received orders to build 16,900 new rail cars, while delivering approximately 10,600 rail cars. The industry backlog now stands at more than 57,300 rail cars. TrinityRail received orders for approximately 7,860 new rail cars during the second quarter, while delivering approximately 3,115 rail cars, bringing our year-to-date delivery total to 5,355.

Our second quarter orders were from industrial shippers, railroads, and third party lessors. TrinityRail's rail car production backlog was approximately 27,2400 rail cars at the end of the second quarter, up 21% from the end of the first quarter. Approximately 13% of the units in our production backlog are for customers of our leasing business. Based upon our backlog, and current new rail car inquiry levels, we project a further increase in rail car production during the third and fourth quarters. For the year 2011, we are projecting delivery of between 13,800 and 14,200 new rail cars. As a point of comparison, we delivered 4,750 rail cars in 2010, and slightly more than 9,100 rail cars in 2009.

We were successful securing orders during the second quarter that fit very well with our production plans. We continue to focus on orders that optimize production at our facilities currently in operation, minimize line changeovers, and reflect stronger pricing levels. Our second quarter orders should position us to obtain increased operating leverage. However, we are uncertain as to the precise timing of efficiency improvements. Hiring, training, and retaining skilled labor for such a steep ramp up in production is challenging. The length of time required to bring our labor force up to speed will impact the timing and scope of our production efficiencies.

Component supplies, while tight, has not, thus far, impeded our ability to meet delivery commitments to our customers. We appreciate the responsiveness and support of our key suppliers as we ramp up production. Our success in maintaining our supply chain reflects the effectiveness of our forecasting, and the close working relationship we enjoy with key suppliers through long-term supply agreements. Our strong supply-chain relationships enhance our flexibility to bring on additional rail car production when market conditions support sustainable demand and strong pricing levels.

We added 900 new rail cars to our lease portfolio during the second quarter, bringing our wholly-owned lease fleet to more than 53,700 rail cars, a 5.4% increase compared to the second quarter 2010. Our lease fleet utilization at the end of second quarter 2011 was 99.3%, our average remaining lease term remained at 3.4 years. The average age of our rail cars in the fleet was 6.3 years. The TRIP lease fleet totals 14,605 rail cars, operating at 99.9% utilization. As a reminder, Trinity owns 57% of TRIP, and manages the portfolio.

As I mentioned earlier, lease renewal trends are favorable. A high percentage of our lessees are renewing their expiring contracts, therefore lowering our re-marketing expenses. Renewal rates are showing strong increases. In the near term we continue to focus on obtaining longer lease terms, as we now have the opportunity to re-price assets in a strong lease renewal market. An increase in our fleet average remaining lease term will take time, as we only renew a small percentage of our lease fleet each quarter. Higher, new rail car prices driven by increased demand and rising steel costs, are helping to raise the ceiling on lease rates for existing rail cars thus supporting stronger lease renewal trends.

In summary, current railcar market conditions remain favorable for improved lease fleet returns and increased rail car production. Our operations team is highly focused on maximizing our operating leverage of sustaining production efficiencies. We will open additional rail car production a sustainable demand prescribes. We continue to grow our lease fleet to meet customer needs as returns support additional fleet investment.

I will now turn it over to Antonio.

Thank you, Steve, and good morning. The wind industry continues to face a number of issues. Including low natural gas prices, transmission constraints, and uncertainty about the extension of the production tax credit. To make wind energy more competitive our customers are increasing the energy output of their turbines. One way to do this is by using taller wind towers.

Beginning in may, and throughout June, some of our facilities began transitioning our production lines to manufacture 100 meter, as opposed to 80 meter, towers. The change created a steep learning curve that resulted in operational inefficiencies greater than we anticipated. The impact of this was reflective in our operating margins for the second quarter, and will continue through at least the third quarter. At this time, it is difficult to precisely predict the point at which we will get past this learning curve. I see positive momentum occurring in this area. I am confident that our people will overcome these challenges.

In summary, wind energy technology is evolving rapidly. At this point, we are committed to working closely with our customers as they develop more efficient models. As a result, there may be brief periods of time when we have to make quick transitions within our production operations to support our customers competitive positioning. We view our flexibility and competencies in this area as strategic differentiator's.

I will now turn the call over to Bill for his comments.

Thank you, Antonio, and good morning everyone. Our Construction Products Group had a good second quarter. This segment produced a profit of $16.1 million for the quarter, compared to $17.7 million during the same quarter a year ago. The quarter last year included $2.8 million of profits generated by our asphalt business, which we divested in August of 2010.

During the second quarter we made a small acquisition in our highway business. Additionally, a few weeks ago we acquired a small galvanizing business located here in Texas. These acquisitions are part of an overall strategy to leverage our competencies and expand our construction products segment. Two acquisitions will increase revenue by approximately $30 million per year.

Our concrete business continues to be challenged by low demand for residential and commercial building. We have adjusted our portfolio ready mix assets to achieve the best results possible in the current market. Our highway business is continuing to perform well during the peak construction season.

Moving to our barge segment. The flooding of our plant in Missouri was worse than we had estimated. Flood waters rose to 7 feet in the plant, resulting in lost production for 7 weeks. We are currently running about 50% of production, and expect to fully recover sometime in September. Our people have done a great job of getting us to this point, in a relatively short period of time. During the quarter we signed $151 million in new barge orders, increasing our backlog to $494 million, as compared to $350 million a year ago. Recent market discussions with our customers are encouraging. The barge movement of chemicals, coal, and grains continues to be strong. Overall, I am pleased with the performance of our barge business.

At this time I will turn the call presentation over to James.

Thank you, Bill, and good morning everyone. My comments relate primarily to the second quarter of 2011. We will file our form 10-Q later today. For the second quarter of 201, Trinity reported earnings of $0.37 per common diluted share. A more than 60% of improvement over the $0.23 per common diluted share that we earned of the second quarter of 2010.

Revenues for the second quarter of 2011 increased to $711 million, compared to $543 million in the same quarter last year. Trinity's EBITDA during the second quarter increased to $144 million from $128 million in the same quarter of 2010. The reconciliation of EBITDA was provided yesterday in our press release. Included in our results for the second quarter of 2011, were $8.4 million in costs, net of estimated insurance recoveries, associated with the flood in our Missouri barge facility. As Bill mentioned, we have resumed operations, and expect to fully recover at this facility in September. We were able to partially offset the second quarter impact with $4 million of insurance proceeds related to last year's flood at our Tennessee barge facility, as that claim process continues.

In early July, we completed the refinancing of our TRIP warehouse line. The refinancing included $857 million of medium and long-term, asset-backed securitized debt. We are very pleased with the terms of the transaction, which was well received by the capital market, and repositions TRIP for future growth. The refinancing also included $175 million of three year senior secured notes of which Trinity holds $112 million. At June 30th, our balance of unrestricted cash and short-term marketable securities totaled $299 million. When combined with available capacity, under our corporate revolver, and Trinity Leasing's warehouse facility, our liquidity positions sit at approximately $1 billion at the end of the second quarter.

I will now discuss our forward-looking guidance. For the third quarter of 2011, we expect earnings per common diluted share for the company to be between $0.32 and $0.37. We expect earnings per common diluted share of between $1.35 and $1.45 for the full year of 2011. We anticipate that the Rail Group will report revenues of between $360 million and $380 million, with an operating margin of between 5% and 7% for the third quarter of 2011, as the businesses within this group continue to ramp up production to meet demand. We expect deliveries of rail cars through our leasing company will result in a third quarter elimination of approximately $100 million to $110 million in consolidated revenues, and in between $0.06 and $0.08 per diluted share. For the full year, we expect to deliver rail cars to our lease fleet, with a value of approximately $330 million to $350 million.

Inland Barge revenues are expected to be between $130 million and $140 million in the third quarter, with an operating margin in the range of 13% to 15%, as this business ramps back up from the flood in Missouri. Revenues for the Energy Equipment Group are expected to be approximately $125 million to $135 million in the third quarter, with margins of between 2% and 3%. In large part, due to anticipated learning curve costs associated with building larger wind towers.

Our earnings guidance also includes the step up in interest expense related to the TRIP refinancing, which will be realized for the first time during the third quarter. We anticipate interest expense on a consolidated basis to increase approximately $5 million per quarter from prior levels. After eliminating interest from the amounts owed on the $112 million of senior secured notes that are held by Trinity. Our previous guidance incorporated this additional level of interest expense. However, we expect to incur an estimated additional one-time expense in the third quarter of approximately $0.03 per share, related to the refinancing that was not included in prior guidance. On a consolidated basis, we expect TRIP to be slightly accretive to Trinity's earnings beginning in the fourth quarter of 2011.

Where we fall within our ranges of earnings guidance will depend on a number of factors. Including, the level of operating leverage that we achieve as our rail businesses ramp up production in response to increased demand, the impact of product mix changes in our wind towers business, the impact of weather conditions on our construction products business, and the rate of recovery from the flood at our Missouri barge facility.

Our operator will now prepare us for the question-and-answer session.

Thank you.

(Operator Instructions)

Now we'll take our first question from Steve Barger with Keybanc Capital Markets. Go ahead please.

Hello, good morning guys.

Good morning.

So, James, going back to the guidance that you just walked through, I just want to reconcile that. I've got a lot of questions on this today. If I assume that you are in $0.30 and 1Q, $0.40 recurring in 2Q, and then you're going to have a $0.03 impact that is nonrecurring in 3Q, then just making it apples to apples to your GAAP guidance, doesn't that make it look more like $1.40 to $1.50?

Well, again, when we report the guidance and we look at historical earnings, we're looking at the earnings that we had in the first 2 quarters of $0.33 and $0.37, so, the $0.70 to date. We had the $0.32 to $0.37 guidance in the third quarter and the $1.35 to $1.45. We are not making any non-GAAP type adjustments on recurring type earnings, we're simply comparing GAAP earnings to GAAP earnings.

Okay, I understand. I just wanted to make sure that we were reconciling that correctly. And, turning to the Rail Group, your total backlog is 27,000 cars right now. I know some of that is a multi-year contract. Based on current visibility, can you tell us how much of that is scheduled to go in 2012?

Steve, you want to take that one?

Yes. Well, I have given you, or provided you guidance, on the number of cars we will manufacture in the second half of this year, the third and fourth quarters. And, aside from the long-term contract, which we announced during the second quarter, the balance of our backlog will improve for 2012.

Okay. So, the balance will go in 2012, okay. That's great. And, just going back to the delivery cadence in the back half. So, at the midpoint, if I heard it correctly, it's going to be about 14,000 cars for the year, so, that implies around 8,000 cars for the back half.

We have been talking about ramp costs for awhile now, and the guidance, James, that you gave for 3Q is 5% to 7%. If you are not able to get better EPS conversion on what is a pretty nice unit increase, why not ramp a little bit more slowly? Do you risk losing those orders if you don't get those cars out that quickly? Or can you talk through why the ramp costs -- or why you are accelerating production if you are seeing is ramp costs persist?

Steve?

Yes, that's a good question, Steve. Keep in mind that a number of the orders that we received in 2011 were to be delivered by the end of 2011, to take advantage of the 100% bonus depreciation in the year.

So, there was a sense of urgency to meet certain delivery requirements in 2011. But, I think you will see in our production in the third and fourth quarter will start to level off, and, I think you'll start to see us start to realize the operating efficiencies we're looking for.

And, presumably, as your backlog filled, in anticipation of that, what, did pricing improve as people -- as you were slotting those 2011 deliveries? And, will that start to flow through as well?

We did see strong pricing as availability for production slots in 2011 became scarce. Some of that has carried over into 2012.

Okay. And so, not to put words in your mouth, but if I heard you correctly, you do expect to start see that operating leverage really take up in 3Q?

We certainly expect to see improvements in operating leverage in the second half of the year, yes.

Okay, great. I will get back in line. Thanks.

Thank you. Our next question comes from Allison Poliniak with Wells Fargo. Go ahead please.

Hi, good morning.

Good morning.

Just going back to the rail brief, Steve. I think that you guys are opening another line, and it actually should have been opened in July, and we had 3 out 10 of your facilities open, and I know you are still ramping up. What should we think about when we're looking at that margin? Are there more lines to be open, or more facilities for the back half of the year?

Steve?

Well, again, our production plans are pretty solid for the balance of the year. We have told you what we are going to make for the rest of the year. And, we will look at additional increases in our production as demand warrants, and as we see our pricing levels improve. But, we are confident we can meet current demand at the facilities that we are currently operating.

Great. And, can you talk a lot order progression in Q2, in terms of did it accelerate or stay linear? Just trying to get a sense of how orders were coming through in Q2 if you can.

Orders were very consistent in Q2 with Q1. Obviously, we have taken some large orders from third party lessors who have entered the marketplace. We did not see them in prior years. So, that has had an impact on our order levels. And, I would say that Q3 order levels are coming in fairly consistent with what we saw in Q1 and Q2.

Great. And, Bill, I think you said you did a small acquisition on the highlight products side. Can you give us a little more color on that?

Bill? Go ahead.

Sure, Tim. We made a small acquisition of highway products that was just a natural expansion of products, steel related, we don't want to go into a lot of details about the particular product, but it folds into our business very, very well.

And then, early in the third quarter, we made an acquisition on the galvanizing side, and that is an expansion into the custom galvanizing, which is galvanizing for other businesses, not just internal galvanizing. Both relatively small, total $30 million in revenue a year.

Great, thank you.

Thank you.

(Operator Instructions)

We will take our next question from Tom Albrecht with BB&T Capital Markets. Go ahead, please.

Hello, good morning everyone. I just wanted to clarify couple of things. So, on that $0.03 one-time cost, James, should that just be viewed as refinancing costs?

Yes, it's our current estimate of the charge we will take in the third quarter due to the refinancing of TRIP.

And then, so as we think about our own model going forward, so, we'll have interest expense. Are you going to show a separate line item for the interest income on the $112 million debt that you bought from TRIP?

That will all be eliminated. The interest expense and the interest income from the TRIP bit that we owned will simply be eliminated when you see that at the consolidated level.

Okay. And then, on the barge, it has certainly been adventuresome for you there, but, I guess I am a little curious on the guidance on the margin front being 13% to 15%. I guess because the barge margin, despite all the challenges that you had, was so good in the June quarter.

And, your guidance at that time had been 11% to 13% and even with the flood impact, it was still a little over 16%. Can you just talk about why your guidance is 13% to 15%, and maybe, overall, about what is happening with barge pricing?

James, why don't you handle the first question, and Bill you can take care of the pricing.

Sure, Tom, and this is James first. Again, as we look at our third quarter, we're continuing to ramp our facility back up. It's hard to get it to a normalized margin in the second quarter, as you alluded to, given you know what the income was, but you don't have a sense for where the revenue would have been.

Insurance, certainly helped us cover some of our costs we had from the loss of some of that business. We'll continue to see some of that flow through the third quarter. The timing of some of the insurance recovery we will learn as we go along.

But, given the pricing of the barges that are in the backlog now, that we intended to deliver in the third quarter, and where we see the operations right now, the guidance we provided is the current view. I will let Bill talk about industry trends on barge pricing that we've been seeing in recent orders and going forward.

Yes, Tom, this is Bill. On pricing, if we continue to have a big mix of products that we produce, from a Hopper to a 30K tank, and a 30K tank with heat. So, pricing volatility is pretty big when you look at the overall mix of products that we produce.

Steel continues to be a big driver. It is a highly competitive market, and I would say that, at this time, Hopper has kind of ranged near that $500,000 zone.

Okay. That is helpful. And then, back on the energy for a moment. Antonio, I couldn't quite tell if you were trying to say that the challenges should be largely done by the end of the third quarter, or whether there would be, possibly, a little bit of a spillover on the production and product mix changes at the wind towers?

Antonio?

Well, what I said is that at this time, it is very difficult to precisely predict when we will be done with this learning curve. And, as I mentioned, there are -- the industry is evolving so fast and there's technology changes that are happening that make it hard to predict at this moment.

Okay. That's fair. I just wanted to make sure I heard that. And then, lastly, what is the average age of the fleet at TRIP and the lease term there? Usually you give that besides the core Trinity leasing.

James, do you have that information?

We will have some detail on that, Tom, as we release our financials. The TRIP fleet, it had 1 more quarter of aging in the second quarter from the prior quarter. We are not adding cars to TRIP right now. So, that will age one quarter each quarter.

Okay.

And, for right now it's about 3.8 years, a little under 4 years, with a remaining lease term of right around where the overall Trinity fleet is about 3.5 years.

Okay. Thank you.

Thank you. Our next question comes from Art Hatfield with Morgan Keegan. Go ahead, please.

Thank you. Good morning, everyone. Just, if I could go back to the Rail Group real quick. Just a quick question on potential costs in Q2. As we all know, cash products have been a problem in shortage this year. Can you talk about where that stands, and if that created any unusual costs in Q2 that would go away going forward?

Steve you want to take that?

Yes. Thanks, Art, for the question. As I mentioned in my comments, to date we have not had interruptions in our supply chain on cast products. We have been able to meet our delivery commitments thus far. That, in large part, is because of our forecasting and long-term supply agreements that we have with providers.

I would also tell you that some of it has been an opportunity for us on our own components business. Having an opportunity to supply additional customers with some of our capacity for various forging. So, it has not interrupted our rail car manufacturing business, but it has presented some opportunities for parts and components business.

Okay, thanks. Sorry, I missed that. Just a couple others. On the energy business, I appreciate the comments made about the learning curve, but are you finding anything, at this point in time, that is inherent in the taller towers that you are finding that makes 100 meter towers just less profitable than the 80 meter towers, or is it too early to tell on anything like that?

James?

Sure, Art, this is James. I think, as we go through the learning curve process right now associated with the costs and inefficiencies in our plant, I would not say that there is inherently a difference in the product itself, but that is something that we continue to work with the customer on and understanding the new designs as they make the changes, and being sure that we make the appropriate changes within our factory.

Okay, thanks. And then, finally, just a follow-up again on the interest expense. I think, James, you had said going forward, that relative to prior periods, the interest expense should be $5 million higher, and that is related to the refinancing of TRIP. But, in Q3, there is that additional $3 million in cost of refinancing, or $0.03 in earnings in the cost of refinancing, and that is in your guidance for the quarter.

That's correct, Art.

Great that's all I got today. Thanks.

Thank you, Art.

Thank you. Our next question comes from Sal Vitale with Stern Agee. Go ahead, please.

Good morning, gentlemen.

Good morning.

I just have a question, and I just want to make sure that I understand the changes in the guidance. The first question is for the second quarter, there was in the barge business, there was that $4 million of recoverage that offset -- that helped offset the $8.4 million in costs. Was that $4 million baked into the original guidance of $1.30 to $1.50?

No, Sal, this is James Perry. No, it was not. As you recall, the guidance we gave for the second quarter, which would have been incorporated into the full year guidance, had $6 million of impact from the flood.

That $6 million was actually a $8.4 million, we then had fortunate timing in the quarter of a $4 million recovery from last year's flood, not knowing the certainty or timing of that, the $4 million would not have been included in that guidance.

Okay, and then, originally the net amount was -- the net cost that was included in the guidance was $6 million, and the net result ended up being, I guess, a $4.4 million cost. Correct?

That math is correct, Sal.

Okay. And, so you said on the $0.03 charge, due to the TRIP refinancing, that is excluded from the original guidance. Right?

That was not included in prior guidance that we have given, it is included in the current guidance for Q3 and for the year.

Correct. Okay. And then, the only other change, I guess, would be the production and efficiencies in the wind towers business. Correct?

Yes, Sal, this is still James. As we've talked about, we have given you margin guidance for the different businesses in the third quarter. There are several moving parts right now, but the primary difference, as you talked about, is the inefficiencies that we experienced in the second quarter, and expect to going forward for a little while in the energy business.

Okay, very good. Then, if I could just a shift over to the rail car leasing business. You talked about strong pricing environment and potential for up pricing on lease renewals. Can you pinpoint, for the second quarter in particular, what the positive revenue impact was from repricing?

James?

Sure, Sal, this is James. We don't specifically get into the pricing itself. You will see as you dive into the 10-Q, the operational profit continued to improve in that business. Utilization has moved up over the last several quarters.

Lease rates have continued to move up, and we have also had good success in renewing cars with the same lessee, which reduces some re-marketing expenses. That moves quarter to quarter, but those trends have all lead towards, over the last several quarters, what you now see is very positive momentum in that business.

We also had, in the second quarter, profitability from car sales. That is a piece of the business that we periodically have as the market is favorable. That generated profits of about $3.4 million in the second quarter, that is detailed in the 10-Q that we will release after this call.

Okay, that's helpful. And, can give a sense for, on the railcar leasing business, just, roughly ballpark, what percentage of the book of leases rolls over every year for the next couple of years, or quarterly, or however you want to do it?

Sure, Sal, this is still James. When you look at the average remaining term of our fleet, you end up with about 1/7, call it 15%, ballpark. Of our fleet, in a given year, 15% to 20% of the fleet may roll over. We don't have any near-term periods where there's an inordinate amount of cars coming up for renewal.

Okay, that's helpful. And then, just one last question on the rail car business. What is it -- after opening the July -- the facility that you alluded to earlier, that is being opened in July. What is your production rail car production capacity?

Steve, would you handle that? I'm kind of lost with this facility in July.

Yes, Sal, Steve Menzies. We have not made any announcements about opening facilities in July. We currently operate our production footprint and feel, again, that is satisfactory to meet our current order backlog and demand.

I'm sorry, I must have misunderstood a comment that was made earlier. So, the current production capacity is there -- can you give that? Or, is that something you don't disclose?

We typically don't disclose that, and there is a lot of variables that affect capacity. But, again, very confident that our current production footprint meets current demand, and as we see demand continue to increase and pricing strengthen, we'll consider looking at additional production capacity to bring on stream.

Okay fair enough. Thank you.

Thank you. At this time there are no further questions. I'd like to turn it back to our speakers for any closing remarks.

Thank you. That concludes today's conference call. A replay of this call will be available after 1.00 Eastern Standard Time today, through midnight on August 3, 2011. The access number is 402-220-0119. Also, the replay will be available on the website located at www.trin.net. We look forward to visiting with you again on our next conference call. Thank you for joining us this morning.

Your conference is now concluded. You may disconnect at any time. Thank you for joining us and enjoy the rest of your day.