May 1, 2008
Executives
James E. Perry - VP - Finance and Treasurer Timothy R.
Wallace - Chairman, President and CEO William A. McWhirter II - Sr.
VP and CFO D. Stephen Menzies - Sr.
VP and Group President, TrinityRail
Analysts
John Barnes - BB&T Capital Markets Alexander Blanton - Ingalls & Snyder Steve Barger - Keybanc Capital Markets
Operator
Good day, and welcome to today's teleconference. At this time, all participants are in a listen-only mode.
Later, there will be an opportunity to ask questions during our Q&A session. Please note, this call may be recorded.
And now, I'd like to turn the program over to James Perry, Vice President, Finance and Treasurer. Please go ahead.
James E. Perry - Vice President - Finance and Treasurer
Thank you, Kevin. Good morning from Dallas, Texas, and welcome to the Trinity Industries’ first quarter 2008 results conference call.
I'm James Perry, Vice President of Finance and Treasurer for Trinity. Thank you for being with us today.
In addition to me, you will hear today from Tim Wallace, Chairman, Chief Executive Officer and President; Steve Menzies, Senior Vice President and Group President of the Rail Group; and Bill McWhirter, Senior Vice President and Chief Financial Officer. Following that, we'll move to the Q&A session.
Also in the room today is Charles Michel, Vice President, Controller and Chief Accounting Officer. A replay of this conference call will be available starting one hour after the conference call ends today through midnight on Thursday, May 8th.
The replay number is 402-220-0116. I would also like to welcome to our call our audio webcast listeners today.
Replay of this broadcast will also be available on our website located at www.trin.net. Before we get started, let me remind you that today's conference call contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995 and include 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.
On March 31st, 2008, our borrowings at the corporate level were the $450 million of convertible subordinated notes, $201.5 million of senior notes and $2.9 million of other investments. Our leasing company's debt included $330.5 million of secured railcar equipment notes, $61.4 million of equipment trust certificates and $384.1 million outstanding under our railcar leasing warehouse facility.
Our total debt to total capital ratio was 44.8% on March 31st, 2008 as compared to 46.1% at March 31st, 2007. Net of cash, our net debt to total capital ratio was 41.1% on March 31st, 2008 as compared to 41.3% at March 31st, 2007.
On March 31st, 2008, our cash position was $199.7 million. In December 2007, Trinity announced authorization for a $200 million share repurchase program through 2009.
During the first quarter, we purchased 471,100 shares of stock in the open market for $12.2 million. Our cumulative purchase in the first quarter totaled 575,300 shares for $15.1 million.
We will provide details of our purchases when we report our results at the end of each quarter. Now, here is Tim Wallace.
Timothy R. Wallace - Chairman, President and Chief Executive Officer
Thank you, James, and good morning everyone. I'm pleased with our first quarter financial results.
Trinity's businesses are performing well in a challenging economy. We are benefiting from the diversity of our multi-industry portfolio, our sizeable order backlogs as well as production efficiencies.
Each of our business segments except the Rail Group increased its first-quarter profits over last year. Our Rail Group's profitability was within 2% of last year's record results.
This was a great accomplishment on the North American Rail Group's part in light of the slowdown in the demand for railcars in North America. We continue to invest capital to increase… to enhance and improve our competitive positions in all of our businesses.
Trinity's overall position is stronger as a result of our investments in a variety of initiatives designed to reduce cost, diversify our product lines and increase manufacturing flexibility. We are positioned to compete in virtually any operating environment.
General economic downturns like the one the United States is currently experiencing often cause highly competitive pricing. In these types of markets, our businesses aggressively pursue orders to maintain production continuity and efficiencies.
We have been an aggressive competitor in all of our businesses for decades. Our businesses strive to have a low-cost basis, which provides them flexibility.
During the past decade, we have transitioned much of our manufacturing capacity from higher cost facilities to lower cost operations. We currently have a number of different products being manufactured in our Mexico facilities.
By consolidating manufacturing operations for several of our businesses in Mexico, we are able to spread our fixed cost over several product lines. This makes a significant difference in highly competitive markets.
Another challenge we're confronted with today is inflationary pricing in the supply side of our business. We're seeing another round of inflationary pricing beginning to creep into our raw materials.
Steel prices are on the move again. We have experienced sourcing personnel in our businesses who are working diligently to maintain our low-cost structure.
Each of our businesses are attempting to pass through material cost increases via product pricing. This may not be possible in a few select markets where industry supply exceeds demand.
To avoid compression of our margins, we are working in these businesses to reduce our other cost at a rate faster than raw material cost increase. In some businesses, we expect to have decreased margins as we begin using higher priced raw materials.
This is a very dynamic situation and is very difficult to precisely predict the total impact that cost increases could have on our margins. We have tried to incorporate our assumptions for these variables into our forward-looking guidance figures.
We will provide an update on this at our second quarter conference call. Historically, during tough markets, we have become a stronger company, and I'm confident we will repeat this again as we navigate through the current challenging times.
On a company-wide basis, with large backlog of... with large backlogs of orders in place, the timing is now ideal for us to extract additional efficiencies from our operations by utilizing the principles of lean manufacturing.
This year we are expanding lean manufacturing initiatives throughout many of our companies. We continue to strengthen our multi-industry footprint by pursuing a broad spectrum of opportunities.
We are expanding our structural wind towers business and our railcar leasing business. Our investments in growing these businesses will help diversify our sources for future earnings.
We have grown our leasing business revenues from operating activities a 150% during the past five years. This has helped diversify our revenue stream and strengthen our relationships with the end-users of railcars.
Revenue from structural wind towers business has grown 70% over the last 12 months. We're very bullish on our opportunities to continue to grow this business.
We also consider product development a high priority and plan to continue launching a variety of new and enhanced products in our railcar and highway products businesses. We have teams of people working on a variety of initiatives to design...
a design to utilize the full potential of the synergies we have as a company. Our multi-industry portfolio of market-leading manufacturing businesses provides us numerous opportunities to share best practices.
The cumulative effect of these initiatives enhances Trinity's position as a multi-industry company. At this point, I'll cover some high level points about several of our businesses.
I'll start with our Rail Group. Overall demand for railcars in North America was not as strong in the first quarter as it was in the first quarter of last year.
We continue to see this as a moderate down cycle as opposed to a deep trough like we experienced at the beginning of the decade. Despite difficult industry conditions, our Rail Group generated operating profit of $77.2 million for the first quarter.
This level of profitability was the fourth highest in the company's history. I believe this was quite an accomplishment on their part and reflects the benefits associated with several of the initiatives I mentioned earlier.
This year I expect our Rail Group's performance will illustrate the strength and depth of its manufacturing flexibility along with the benefits of having a broad product offering. Steve Menzies will provide more details in his report.
Trinity's Inland Barge Group continues to perform well. I'm very pleased with this group's substantial increase in profitability during the first quarter.
Our momentum is strong in this business. The value of our barge backlog increased slightly and our customers continue to visit with us about opportunities for future business.
Our Construction Products Group had a good first quarter. The portfolio restructuring that took place last year in our concrete business is producing good results.
These changes along with the other initiatives have helped us improve our year-over-year profitability. Demand remained steady for construction products as we enter the prime season of this segment.
Our structural wind towers business continues to both improve and grow as illustrated by our revenue and profit improvements over the last year. I'm very excited about the potential for this business.
Demand for structural wind towers remains robust. Our order backlog more than doubled during the first quarter and into an all-time record of more than $1.6 billion.
I'm very proud of the way our people have approached the growth opportunities in this market. Our new wind tower manufacturing facility in Mexico will increase its production during the next 12 months.
We recently negotiated terms for a structural wind towers factory in Newton, Iowa and expect to begin shipping towers during the first half of 2009. We continue to expect a learning curve for this business as our expansion program ramps up.
It will take us a couple of more years to reach optimum production for this business segment. I'm very excited about the opportunities for this… this business provides for Trinity and its shareholders.
Trinity's Railcar Leasing and Management Services Group had a good first quarter. We continue to grow the size of our lease fleet.
Railcar Leasing and Management Services continue to be a key component of our overall growth statistics. Steve will provide more detail in his report.
From an overall prospective, I'm very pleased with the performance of our company and our unique position with the… within the industries we serve. We have excellent market leadership positions and healthy backlogs that allow us to continue our focus on improving our performance.
The internal expansion activities we initiated during the past several years have enhanced our competitive positions. We are closely monitoring the demand levels in our markets as we search for opportunities.
We expect our markets to be challenging and dynamic until the economy begins to recover. I remain optimistic about Trinity's ability to effectively compete as we leverage off the strengths within our multi-industry platform.
I'll now turn it over to Steve Menzies for his comments.
D. Stephen Menzies - Senior Vice President and Group President, TrinityRail
Thank you, Jim. Good morning.
Trinity Rail continued to perform well during the first quarter of 2008. Operating profits and margins held steady as continued gains in productivity helped to offset the impact of a competitive pricing environment and materials cost increases.
Trinity Rail shipments decreased 8.5% to 6,010 railcars compared to the first quarter of 2007. At this time, we expect our production levels to remain stable with combined shipments of between 13,000 and 14,000 railcars through the second and third quarters of 2008.
One of our operating goals is to retain the production efficiencies we gained during the last few years. By keeping our production volumes stable, we should be able to accomplish this.
Instead, continued improvements in operating efficiencies have partially offset the downward pricing pressures we anticipated during 2008. Our operations group is doing an outstanding job generating further efficiencies and cost reductions.
We're beginning to see benefits from lean manufacturing initiatives at our production facilities. We do however expect our operating margins to decline over the course of 2008 amid a highly competitive environment and rising raw material costs.
With regard to the overall railcar market, industry railcar orders during the first quarter continued at a moderate pace. Approximately 10,900 railcar orders were placed industry-wide during the first quarter.
At quarter-end, the total industry backlogs stood at approximately 66,300 railcars compared to a backlog of 76,700 railcars at the end of the fourth quarter. Trinity's order backlog comprises 42% of the total industry backlog.
Recent order inquiry levels indicate second quarter 2008 orders could be in line with first quarter order levels. Independent forecasts place 2008 railcar production in the low 50,000 car range, which is consistent with the market influence we continue to review.
As you know, railcar demand shifts periodically from car type to car type and fluctuates from quarter-to-quarter. Order levels in the first quarter reflects the steady demands for auto racks and multiple types of covered hoppers, improving demand for coal cars and continued weak demand in select markets such as intermodal and boxcars.
Demand for tank cars this quarter was lower than recent levels. Unique to this railcar cycle is the demand to replace older, smaller and less efficient railcars.
This is particularly the case with tank cars and covered hoppers. Larger more efficient railcars allow the railroads to increase system capacity without infrastructure spending in the high price [inaudible] deal encourages railcar owners to scrap all the railcars.
The replacement cycle for the aging North American railcar fleet will be a consistent driver for railcar demand. During the first quarter of 2008, TrinityRail received approximately 4,080 railcar orders.
Many of these orders extend current production lines for a variety of railcars. Specifically, we received orders from third-party leasing companies, railroads, industrial shippers and utilities for covered hoppers, coal cars, open-top hoppers, new gondolas, flat cars, auto racks and tank cars.
The diversity of our orders reflects the broad breadth of TrinityRail's product line and customer base. At the end of the first quarter, TrinityRail's firm order backlog was approximately 27,960 railcars compared to approximately 31,870 at the end of the fourth quarter 2007.
The March 31st, 2008 backlog reflects the removal of 1,970 railcars due to uncertainty associated with the bankruptcy of a customer from whom we had an order to produce tank cars and covered hoppers in 2009. Our strong order backlog, which extends through 2009, produces good visibility for our production costs.
This visibility enables effective production planning and positions us to pursue additional operating efficiencies. Our production facilities are operating at very high efficiency levels.
This reflects the benefits of our strategy to maintain our current production levels. As I reported last quarter, our planned production for 2008 includes a number of open slots weighted towards the second half of the year.
I am pleased to report today that we have reduced the number of open production slots remaining in the second half of the year as a result of our sales efforts. We will continue to aggressively pursue additional orders and to extent the existing production lines to maintain current production rates.
A key component of our marketing strategy is ensuring railcars are available when our customers need them. Thus far we have been very successful in anticipating the needs of our customers.
Our ability [ph] to meet customer delivery requirements often at short notice is a key competitive factor. We’re [inaudible] railcars to hold for future sales to meet those customers’ needs and to bridge or extend production continuity.
Our broad product line, operating flexibility and ability to deliver railcars when our customers require them provides us a competitive advantage to secure orders and sustain production. Our Railcar Leasing and Management Services Group continued to grow its railcars produced during the first quarter.
TrinityRail shipped 2,530 new railcars to customers of our leasing company during the first quarter, all subject to firm, non-cancelable leases. This represented about 42% of TrinityRail's first quarter railcar shipments.
During the first quarter, we sold approximately 560 railcars from our lease fleet. As a result of these first quarter sales and our fleet additions, our lease fleet grew to approximately 38,030 railcars compared to approximately 32,500 at the end of the first quarter 2007.
Demand for railcar leasing continues to increase as evidenced by our strong lease backlog. Trinity's committed lease backlog as of March 31st, 2008 was approximately 13,065 railcars or 47% of our total production backlog.
We continue to see a long-term trend for railroads and industrial producers to use their capital resources to acquire assets, which are core to their businesses, while relying on leasing for operating assets such as railcars. Our least fleet integration remained at more than 99% at the end of the first quarter 2008.
The average age of the railcars in our lease fleet is 4.8 years, and the average remaining lease term is approximately 5.2 years. These two key operating metrics underscore our ability to maintain high fleet utilization.
Our newer, highly productive railcars are less likely to be returned from lessees upon lease expiration during a market downturn. Customers typically return older, less-efficient railcars as they downsize their fleets during the economic cycle.
Our high average remaining lease term provides a hedge against short-term market downturns, therefore mitigating some of the marketing risks. In summary, I'm very pleased with the overall performance of TrinityRail.
While we are facing a challenging marketing environment, our highly competitive cost structure, gross product line and focus organization positions us well to be successful. Our operating, marketing and leasing strategies are showing good results.
And I'll turn it over to Bill McWhirter.
William A. McWhirter II - Senior Vice President and Chief Financial Officer
Thank you, Steve, and good morning everyone. My comments relate primarily to the first quarter of 2008.
We've filed our Form 10 -Q this morning. You will find more details there about our first quarter.
For the first quarter of 2008, we reported earnings of $0.81 per diluted share from continuing operations. This compares with $0.74 per share from continuing operations in the same quarter of 2007.
Revenues for the first quarter of 2008 increased 8.5% over the same quarter last year. Earnings from continuing operations exceeded the high-end of our guidance by $0.07 per share.
These positive results were primarily due to the following; excellent operational performance in our Rail and Inland Barge Groups and improved results in our structural wind tower business. Moving to our Rail Group, revenues for this group were flat on a quarter-over-quarter basis.
Rail Group's sales to Trinity's Leasing and Management Services Group were $217 million in the first quarter of 2008 with profits of $31.2 million or approximately $0.25 per diluted share. This compares with sales to our leasing group in the first quarter of 2007 of $173 million with profits of $28.2 million or $0.23 per diluted share.
These inter-company's sales and profits are eliminated in consolidation. Our margin results for the Rail Group were 13.6%.
At this time, we anticipate margins for the Rail Group of between 11% and 12% for the second quarter. As we look forward, we expect margins of between 6% and 9% for the second half of the year.
This margin level represents the competitive pricing environment, the mix of car types to be built during the year and recently announced raw material price increases. The Rail Group backlog as of March 31st, 2008 consisted of 27,960 railcars with an estimated sales value of $2.4 billion.
Our railcar backlog is broken down approximately as follows; backlog to our leasing company, $1.1 billion; backlog to TRIP, $500 million; and backlog to third parties, $750 million. Now, turning to our Inland Barge Group.
The Inland Barge Group's first quarter performance was once again very strong, posting revenues of $138 million and operating profit of $26.5 million. $2million of the operating profit was a result of unclaimed damages in the class action lawsuit for which Trinity received a refund.
The results of the Inland Barge Group continue to reflect a high level of operational excellence. This group's backlog as of March 31st, 2008 totaled $790 million.
This compares to $569 million one year ago. We anticipate Inland Barge revenues of between $140 million and $150 million per quarter for the reminder of 2008.
Operating profit margins are expected to range between 15% and 17% for the same period. Now, moving to the Energy Equipment Group.
During the first quarter, this group's revenues were $130 million. Operating profits were $18.2 million, and operating profit margin was 14.1%.
The Energy Equipment Group's revenue growth continues to be driven by our structural wind tower business. The first quarter operating profit margin represents some operational improvements in our newer plants.
We see annual revenue for 2008 of between $580 million and $600 million for this segment. Wind tower revenue should account for approximately $390 million of this total.
Revenues for our Construction Products Group grew slightly when compared to the same quarter of the previous year. Operating profit was $12.2 million for the quarter, representing a 21% improvement over last year.
Our Railcar Leasing and Management Services Group reported revenues of $120 million compared to $71 million in the same quarter of 2007. Operating profit was $34 million with $7.4 million resulting from car sales.
During the first quarter, car sales from the fleet were $49.7 million. TRIP accounted for $38 million of those sales.
In addition, TRIP purchased $146 million worth of railcars from our manufacturing companies during the quarter. For 2008, we anticipate between $650 million and $750 million in net fleet additions to our Trinity Leasing Fleet.
As a form of clarity, net fleet additions are the fair market value of cars added to our fleet, less the proceeds of cars sold from the fleet. Moving to our consolidated results, for 2008 we expect non-leasing capital expenditures of between $180 million and $190 million.
During the second quarter, we expect to defer approximately $250 million in revenue and between $28 million and $32 million in operating profit as we grow our own leasing business and sell cars to TRIP. This represents between $0.23 and $0.26 per diluted share.
We anticipate earnings from continuing operations for the second quarter of 2008 to range between $0.85 and $0.90 per diluted share. Our 2008 full-year guidance is $3.20 to $3.45 per diluted share.
Included in our assumptions for 2008 are normal weather conditions, no unanticipated adverse resolution of legal matters, and railcar demand remaining at moderate levels. Clearly, Trinity is a large buyer of steel products.
As many of you are aware, there have been recent announcements regarding increased pricing in the steel marketplace. Trinity's cost coverage program includes a combination of customer contracts with escalation clauses, firm purchase order contracts with our suppliers, and the use of raw materials and inventory.
Cost pressures for the steel industry surrounding, scrap, iron ore and coal have resulted in a new round of negotiation with the OEM community. As a matter of policy, we do not discuss the details of our conference or the negotiations with our suppliers.
However, we do see this as a challenging steel buying environment. Our overall company guidance range represents our estimate of the likely outcomes surrounding this issue and all other projected data at this time.
In our earnings release yesterday, we provided a reconciliation of the non-GAAP term EBITDA. EBITDA from continuing operations for the first quarter of 2008 was approximately $161.4 million as compared to $139.9 million in the same quarter last year.
At this time, I'll turn the presentation back to James for the question-and-answer session.
James E. Perry - Vice President - Finance and Treasurer
Thanks, Will. Now, our operator will prepare us for the Q&A session.
Question and Answer
Operator
[Operator Instructions]. We'll take our first question from John Barnes, BB&T Capital Markets.
Please go ahead.
John Barnes - BB&T Capital Markets
Hi, guys. Good morning.
First, on your raw material cost, can you talk a little bit about what kind of increase you have seen in steel prices and... maybe through the quarter and where it's today?
And then, can you also elaborate a little bit as to what percentage of your total business… and I'm talking railcar, wind tower, construction products, you name it, anything that require steel, what percentage of your business or your contracts or backlog is covered by raw material escalators?
William A. McWhirter II - Senior Vice President and Chief Financial Officer
John, Bill McWhirter. Good question.
Obviously, in my script today we covered what we call cost coverage, which is the escalation of the firm purchase order contracts and the use of raw materials. We are not going to dive into the details of what percent of contracts have any one of those particular types of coverage.
As I stated, it is included in our guidance, our expectation of the likely outcome just from a spot basis of where steel is today. And steel today has risen from… anywhere from the $700, $800 upwards to close to a $1000 a ton, just to give you kind of magnitude of steel pricing.
John Barnes - BB&T Capital Markets
Okay. And how much steel are you actually buying on spot or how much...
how far out do you commit to buying under contract, given… you have got some pretty decent visibility in your business with the backlog, so far out are you going ahead and committing to lock in better rates in the... not be as exposed to kind of the spot rates?
William A. McWhirter II - Senior Vice President and Chief Financial Officer
Yes. John again, all of our products are different.
Clearly, the bigger the products, the more likely they are to have long-term contracts associated with them. We do use a variety of the steel distribution system for a lot of different reasons, in some cases we're buying parts that are already [inaudible] to that extent.
So again, we're not going to go into the details other than to tell you that it is included in our guidance for the full-year.
John Barnes - BB&T Capital Markets
Okay. There seems to be kind of… some M&A activity kind of heating up.
I mean, there is a couple of larger lease fleets out there that books are out on in other services type businesses. Can you talk a little bit about your appetite for any acquisitions?
And also from a lease fleet perspective being for sale, does that give you any kind of… does it put up any kind of roadblock in terms of more railcar orders in the near-term, just from the perspective that a lease fleet being sold is less likely to buy or is that adding to what's already kind of a weaker railcar market or does that have any impact at all?
Timothy R. Wallace - Chairman, President and Chief Executive Officer
John, this is Tim Wallace. As far as potential acquisitions, be it companies or cars that may be available in certain lease fleets, we are always in the market looking at a variety of different transactions and we don't make any public statements on any of these transactions unless we are completed with the negotiations of the transaction and we have a firm contract.
So, we are not really going to disclose anything that we may be currently looking at other than the fact that as a company Trinity has always been an active acquirer of assets of all types. What was your other question related to?
John Barnes - BB&T Capital Markets
In terms of lease fleets available for sale right now that books are out on, given that there are couple of larger ones out there, is that... do you see that being an impediment to railcar orders from the standpoint that maybe a fleet that's for sale is not engaged in purchasing railcars while it’s shopping itself and kind of puts another hurdle on what’s already a tough railcar market?
Have you ever seen fleets as far as being sold and therefore really don't have any kind of basis to know?
Timothy R. Wallace - Chairman, President and Chief Executive Officer
I think it's a little too early to try to speculate on what may happen because leasing companies at annual plans and a lot of times they have their orders placed for months and a year or two out and this is all just fresh new information.
John Barnes - BB&T Capital Markets
Okay. All right.
And then lastly, I don't have the information. I can't find it.
I don’t know if I overlooked it if you have not provided it yet. But do you have where your rail...
your wind tower backlog was a year ago, just to give us an idea of kind of that magnitude of increase?
Timothy R. Wallace - Chairman, President and Chief Executive Officer
Well, we have where the wind tower backlog was at the end of the year and where was it a year ago. I don't think we’ve disclosed it back then.
We started disclosing it in the third quarter I believe and it was in the $700 million range, $750 million, and then it went to $700 million and now it's at the $1.6 billion.
John Barnes - BB&T Capital Markets
Okay, very good. Is there any...
are you beginning to hit any constraint issues on that side? I know you've taken on a couple of new facilities on the wind tower side, and maybe you could update us on the status of those, but any further constraints that you see right now in terms of delivering that backlog?
Timothy R. Wallace - Chairman, President and Chief Executive Officer
No. We don't see any major constraints.
We've been very successful thus far at bringing on additional capacity in the wind tower structure industry and we don't really see any constraints on a go-forward basis. As I said in my prepared comments, we're extremely pleased and I'm very proud of the capabilities in the execution that our wind tower...
wind structured tower people folks have been able to perform. They're doing a really good job.
John Barnes - BB&T Capital Markets
Yes. I’ve got to congratulate you on that because I never would have expected your wind tower backlog to begin to rival the railcar backlog.
So you guys ought to be congratulated for that. It was a nice quarter.
Thank you for your time.
Timothy R. Wallace - Chairman, President and Chief Executive Officer
Thank you.
Operator
[Operator Instructions]. We move next to Alex Blanton from Ingalls & Snyder.
Please go ahead. Your line is open.
Alexander Blanton - Ingalls & Snyder
Good morning. I'm having a little problem seeing how the guidance stays where it is, three… what is it, $3.20 to $3.40?
William A. McWhirter II - Senior Vice President and Chief Financial Officer
$3.20 to $3.45.
Alexander Blanton - Ingalls & Snyder
Okay. Because you just reported $0.81 and you said, the margins in the railcar is expected to drop to 6% to 9% in the second half and 11% to 12% for the second quarter.
So if I assume sales flat on the railcar side and I put those margins on, that's a reduction, I believe, of about $0.09 in the second quarter from that lower margin and then $0.25 for each of the next two quarters just from the lower margins on the railcar side? Now, your guidance for the year assumes that the $0.80 sort of continues per quarter.
Four times $0.81 would be $3.24. So how do you make up for the decline in the margin side in the Railcars, which I assume is coming from the fact that you won't be able to recover all these fuel cost increases?
And that's understandable, but… and those steel cost increases must be affecting other parts of your business too. So, what is the effect there?
It's at… it has a big impact on the margin for the Railcar side. Would it have an equally big impact on the barges and some of the other products?
It's hard for me to see how this all fits together.
Timothy R. Wallace - Chairman, President and Chief Executive Officer
Bill, I think you need to handle that question.
William A. McWhirter II - Senior Vice President and Chief Financial Officer
Yes Alex, I mean I think you… obviously you’ve asked a very detailed question about each particular business segment. As we give company guidance, consistent with our past practices, each quarter we try and better the overall range down so that we are a little more consistent as we go into the year.
Now, given the current marketed demand for our Rail products, the competitive pricing environment and the raw material pressures, we believe the guidance as a whole, $3.20 to $3.45, is representative of our best estimates of the total company's performance. We're not willing to break into a dialog, just extract each individual business segment [inaudible] commentary within those segments.
Alexander Blanton - Ingalls & Snyder
Also, you're not going to say how you expect to make up for the decline on the Railcar side then?
William A. McWhirter II - Senior Vice President and Chief Financial Officer
Well, what we're going to say is that we believe the earnings pattern and the margin guidance that we provided coupled with kind of overall tax rate, interest expense, etcetera, will bring us to $3.20 to $3.45 range, and then in the next conference call we'll try to refine that guidance even further.
Alexander Blanton - Ingalls & Snyder
Okay.
Timothy R. Wallace - Chairman, President and Chief Executive Officer
Alex, this is Tim Wallace. We have a really elaborate forecasting system that all of our businesses report in to us on a monthly basis how they are performing, and when we prepare for a conference call, we use the April forecasting system that we have for information and it's fairly complicated.
So it's not easy for us to break it down into as many businesses as we have and moving parts to give the numbers. So, we...that's why we provide the annual guidance that lets everybody get a look into what our system is saying to us.
Alexander Blanton - Ingalls & Snyder
Okay. A couple of smaller points, when you say the highest profitability, are you talking about margins, is that what you mean?
The fourth highest in history I think you said to the railcar--.
Timothy R. Wallace - Chairman, President and Chief Executive Officer
No, we were talking operating profit for the quarter and dollars.
Alexander Blanton - Ingalls & Snyder
You're not talking margins when you say profitability?
Timothy R. Wallace - Chairman, President and Chief Executive Officer
No.
Alexander Blanton - Ingalls & Snyder
You're talking operating, okay, and I just what a definition there. On the backlog of wind towers, you said that in the release that was several years.
How many… can you narrow that down a bit? How many years are we talking in the backlog area?
Did you envision that sort of being a flat or a ramp-up of some kind?
Timothy R. Wallace - Chairman, President and Chief Executive Officer
This is Tim Wallace. When you have multiple facilities that are growing at the rate that our facilities are growing as well as some of the lean manufacturing initiatives that we have going in our facilities that’s freeing out additional capacity for us.
It's a very dynamic scheduling metrics and it's very similar to what we have in our barge business as well as our railcar business. We have multiple facilities producing products, and you have the flexibility that we have there.
We don't have one facility that has... that… we don't have a total number that we can say, our backlog stretches out through this time period.
And that's why we give our backlog in dollars and then we focus on growing as aggressively as we can to remain... retain the efficiency levels that we have to be able to meet it.
And for competitive reasons, we really don't want to disclose the time frame as well.
Alexander Blanton - Ingalls & Snyder
Okay. Thank you.
Operator
[Operator Instructions]. We will move next to Giles Wanpra [ph] from Atlantic Investment.
Please go ahead.
Unidentified Analyst - Atlantic Investment
Just a quick housekeeping question, if I may. The tax rate was higher than I expected in the first quarter.
What are you expecting for the remainder of the year?
William A. McWhirter II - Senior Vice President and Chief Financial Officer
Giles, we’ve typically said, we look for a tax rate in the 37% and 38% range. It was a little higher this quarter.
We had a… kind of a one-time tax [inaudible]. So, I look for it to be something… [inaudible].
Unidentified Analyst - Atlantic Investment
Thank you.
Operator
And we will move next to Steve Barger from Keybanc. Go ahead please.
Steve Barger - Keybanc Capital Markets
Hi, good morning.
Timothy R. Wallace - Chairman, President and Chief Executive Officer
Good morning.
William A. McWhirter II - Senior Vice President and Chief Financial Officer
Good morning Steve.
Steve Barger - Keybanc Capital Markets
I was up and around on another call, so sorry if I missed any of this. But can you...
in the... what is the theoretical capacity on a dollar basis in the wind business, once you get all those facilities ramped?
I just got at the end of the last, so sorry if you covered this.
Timothy R. Wallace - Chairman, President and Chief Executive Officer
Well, Bill probably should address that.
William A. McWhirter II - Senior Vice President and Chief Financial Officer
Yes. We haven't addressed the theoretical capacity.
What we had provided are two looks at forward guidance. One is the current year where we said that we are anticipating around $390 million in revenue.
That's up from $245 million last year to give you a perspective on growth. But even more important than that going forward, Tim Wallace provided on our annual conference call our five-year targeted run-rate for revenues between $800 million and $900 million.
So there obviously is significant growth still ahead of us.
Steve Barger - Keybanc Capital Markets
Right. Okay.
Presumably, that lease facility wasn't included in the $800 million to $900 million contemplated on last quarter or was it?
Timothy R. Wallace - Chairman, President and Chief Executive Officer
Yes. From a strategic point of view, we anticipated that we would have growth through additional facilities.
Steve Barger - Keybanc Capital Markets
Okay. Will the… will including that lease facility is...
are there more implied in the $800 million to $900 million or is this it?
D. Stephen Menzies - Senior Vice President and Group President, TrinityRail
Well, I think in the $800 million to $900 million, we are not going to get into the details of how many facilities or what facilities, a lot of our facilities have the potential just to be expanded within themselves as well as the opportunity to look at other facilities. The $800 million to $900 million is a strategic plan more representative of the marketplace and Trinity's leading position in the marketplace.
Steve Barger - Keybanc Capital Markets
Okay. What...
can you talk about the operating margin spread between wind towers and the storage tanks?
D. Stephen Menzies - Senior Vice President and Group President, TrinityRail
No. We don't talk about the spread between that.
We disclosed the spread for the segment and the segment was 41.1% for the quarter.
Steve Barger - Keybanc Capital Markets
Right, now I understand that, okay. In barge, can you breakout volume versus price for the quarter?
Timothy R. Wallace - Chairman, President and Chief Executive Officer
No. We don't break out that.
We… for competitive reasons, in this business we prefer to talk in dollars. We currently have production lines set up building various types of barges and we feel that it's much easier to talk with the investment community in a dollar figure and Bill provides the guidance number.
So you have an idea of what that business will look like from a financial standpoint.
Steve Barger - Keybanc Capital Markets
Okay. Thanks for that.
Can you talk about the coal market? I think in your earlier comment you'd said something about improving, but East versus West utilization rates by car type, and are you seeing a mix in the geographic usage of coal that's potentially going drive coal car orders?
Timothy R. Wallace - Chairman, President and Chief Executive Officer
Okay. Steve, why don’t you handle that one.
D. Stephen Menzies - Senior Vice President and Group President, TrinityRail
Yes, I guess we're seeing two phenomenon in the coal market, Steve. One is continued replacement of steel coal cars, certainly in the West with… lighter aluminum cars are also starting to see some replacement of the first-generation of aluminum cars, which are a little smaller and a little heavier.
I think the other dynamic we are seeing, in part driven by the weaker U.S. dollar, is the significant exports of coal.
Those seem to be going both offshore from the East and West Coast ports, and that has driven additional demand for coal cars to support that export growth.
Steve Barger - Keybanc Capital Markets
Do you have any idea how many cars are in storage right now, and what the outlook is for utilization in East versus West, if you just have kind of an explicit number?
D. Stephen Menzies - Senior Vice President and Group President, TrinityRail
I don't have an explicit number. Our sense is that we are seeing some of the newer cars that works towards beginning to be placed into service and I think some of that overhang is evaporating.
Steve Barger - Keybanc Capital Markets
Okay, great. Thanks.
I'll get back in line.
Operator
[Operator Instructions].
James E. Perry - Vice President - Finance and Treasurer
Kevin, if there are no more questions, we will go ahead and conclude today's conference call. Thank you.
And remember to everyone, a replay of this call will be available starting one hour after the call ends today through midnight, Thursday, May 8th. The access number is 402-220-0116.
Also, this replay will be available on our 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.
Operator
And once again, this does conclude today's teleconference. You may disconnect at any time.
Thank you for your participation, and everyone have a wonderful day.