Jul 31, 2008
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. [Operator Instructions].
I will now turn the call over to the Vice President of Finance and Treasurer, James Perry. Please go ahead, sir.
James E. Perry
Thank you, Kurtis. Good morning from Dallas, Texas, and welcome to the Trinity Industries’ second quarter 2008 results conference call.
I am 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 will move to the Q&A session.
Also in the room today is Charles Michel, Vice President of 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, August 7th.
The replay number is 402-220-0121. 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 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 June 30, 2008, our borrowings at the corporate level were the $450 million of convertible subordinated notes, $201.5 million of senior notes, and $3.3 million of other indebtedness.
The leasing company’s debt included $570.2 million of promissory notes, $327 million of secured railcar equipment notes, $76.3 million outstanding under our railcar leasing warehouse facility, and $61.4 million of equipment trust certificates. Our total debt-to-total-capital ratio was 47.7% on June 30, 2008, as compared to 46% at June 30, 2007.
Net of cash, on net debt-to-total capital ratio was 44.4% on June 30, 2008, as compared to 41.3% at June 30, 2007. On June 30, 2008 our cash position was $210 million.
In December 2007, Trinity announced authorization for a $200 million share repurchase program through 2009. During the second quarter, we did not purchase any shares under this program, instead using our capital for investments in our Leasing and Manufacturing businesses.
Our cumulative purchase through the second quarter totaled 575,300 shares for $15.1 million. We will provide details of our purchases and we report our results at the end of each quarter.
Now here’s Tim Wallace.
Timothy Wallace
Thank you, James, and good morning everyone. I am very pleased with our results for the second quarter.
Our performance reflects the success of the initiatives that we put in place during the past few years, including expanded diversification of our portfolio. Our Barge and Wind Tower businesses are examples of this.
During the second quarter, our Inland Barge Group earned $27 million and our Energy Equipment Group earned $25 million. These earnings are significantly greater for each group than earnings during the same quarter last year.
Despite a highly competitive railcar market, our Rail Group generated an operating profit of $72 million for the second quarter. This was consistent with our first quarter results.
The Rail Group’s operating margin was a solid 12.3%. Industry orders for railcars in the second quarter were up 5% year-over-year.
Our quarterly order rate was more than double what it was last year during the second quarter and 80% more than the first quarter of this year. I am very pleased with the fact that our railcar backlog increased.
This is a result of our focus on obtaining orders that help us maintain production continuity and minimize line change over. Industry pricing remain highly competitive indicating a challenge in railcar market.
Customers are getting excellent value at current pricing levels. During the next few quarters we expect to see the margins in our Rail Group reflect highly competitive conditions they are experiencing along with material cost increases.
We are not sure how long the decrease demand levels will continue. Fortunately, railway still a very efficient mode of transportation and pleased statistics continue to reflect replacement opportunities.
In the interim, we are taking steps to shift a portion of our production capacity to wind towers. Responding to customer demand levels by shifting production capacity is one of Trinity’s core strengths.
Trinity’s Leasing and Management Services Group had a good second quarter. We continue to invest in our future by increasing the size of our lease fleet.
Our railcar lease fleet surpassed 41,000 railcars. Three years ago at this time, our lease fleet totaled 22,300 units.
We have made significant progress in achieving our goal of increasing the size of our railcar least fleet. Steve will provide more information about Trinity’s Rails performance.
Trinity’s Construction Products Group also had a great second quarter. This group’s operating profit increased by 34% year-over-year from $16 million to $21 million.
We completed another small concrete divestiture during the second quarter. This divestiture was consistent with the steps we took last year, to improve our concrete businesses profitability.
We are in the prime period of the construction season and demand continues to be good. We are exploiting opportunities to expand our concrete business in areas, where demand remains steady.
Our Highway Products business also…our Highways Product business is also been steady during this busy season. We sell our highway products in a number of other countries and in every state in the US.
We have a wide variety of products to offer customers and the ability to shift production as the demand moves from product to product. If the weather continues to cooperate, we expect the balance of the construction season to be inline with normal seasonal activity.
I remain very optimistic about our structural Wind Towers business. We continue to explore additional ways to expand our participation in the wind energy market.
We are very pleased with the Texas Public Utility Commission’s decision to fund additional transmission lines for wind energy. Texas is at the heart of our market and we expect the TUC’s action will encourage our customers to pursue additional wind farms.
We have targeted Mexico and the central part of the United States, as our key markets. Order enquiries remain very strong and we expect our backlog to grow, as we progress through the year.
A large backlog enables us to stage our growth and maximize our efficiencies. Later this year, we will start converting two existing railcar facilities to Wind Tower production.
This is part of an expansion plan that we have in progress to satisfy the growing demand for wind towers. Our ability to convert a facility from one product to another is a key strength in our company.
It allows us to aggressively pursue orders for a variety of products. We can select products, which provide the best returns and then quickly ramp up facilities.
Our highly skilled workforce makes this possible. A raw materials market remains very dynamic.
Global demand for steel remains very strong; as a result some steel products are now vacation. Fortunately Trinity has a lengthy track record, as a steel buyer and we purchase a significant volume of steel on a consolidated basis.
We are one of the largest purchasers of plate steel in North America. We are currently focusing on securing the steel sources we need for 2009 and beyond, because demand is so great, pricing is a major challenge in the plate steel market.
The prices of the key raw materials required to produce steel are increasing at a rapid pace and impacting steel prices. The entire supply chain in the capital goods market is being challenged to absorb another round of commodity cost increases.
As our products absorbed a higher cost of raw materials, we must be able to pass these increases on to our customers. It is too early to predict the full economic effect of steel cost increases.
The majority of the long-term orders in our backlog have some type of provision for cost increases. Some do not however, and in those instances our margins will be reduced unless we can lower our costs.
We have intended to take this into account in the forward looking or earnings estimates and margin guidance figures that we provide. We will update this information on our quarterly earnings conference calls.
From an overall perspective I continue to be very pleased with the performance of our company. We remain highly focused on our cost and strategic opportunities, as we confront the challenges associated with the tough national economy and volatile capital goods market.
We expect to continue to benefit from the investments we have made during the past and we are exploring additional investments that should benefit us in the future. Our momentum continues.
I’ll now turn it over to Steve Menzies to make his comments.
D. Stephen Menzies
Thank you, Tim. Good morning.
TrinityRail had another solid performance during the second quarter of 2008. Operating profits and margins held steady as continued gains in productivity help to offset the impact of the competitive pricing environment and increases in raw materials cost.
Operating margins for the second quarter were 12.3% compared to 16.1% a year earlier and 13.6% during the first quarter of 2008. We have been able to keep our volumes stable, which has enabled us to retain the production efficiencies we gained during the last few years.
We anticipate continued benefits from lean manufacturing initiatives at our production service as well. Our highway seasoned operations group was doing an outstanding job driving further efficiencies and cost reductions.
We do however expect our operating margins to decline over the balance of 2008 in that highly competitive sales environment and rising raw materials cost. The cost to build a railcar will continue to rise in 2009, driven by further significant increases in raw material cost.
During the second quarter, TrinityRail shipments were 3,580 railcars, 9.5% greater than the 6,110 railcars shipped in the first quarter of 2008 and 5.7% less than the shipments in the second quarter 2007. We expect combined shipments of between 14,000 and 15,000 railcars during the third and fourth quarters of 2008.
Some of these shipments will come from our finished goods inventory railcars built in advance of customers needs. We are currently reviewing our 2009 production plans.
Based upon our current view of market demand, we anticipate decreasing our total production footprint going into2009. Mostly in our view, the anticipated decline in Tank Car production in 2008.
Year-over-year industry Tank Car production will be significantly less than in 2008 and 2007. Ethanol production growth has slowed and many idle new Tank Cars have yet to be observed by the market.
In fact as Tim mentioned, we are converting two railcar production facilities to Wind Tower production and we are evaluating additional opportunities. These facilities and the men and women were doing them and by the way the operating flexibility competency, we strive to achieve at Trinity.
This competency allows us to optimize our product mix, in this case to take advantage of the strong market demand for wind towers. With regard to the railcar market, industry railcar orders during the second quarter continued at a moderate pace.
Approximately 12,150 railcar orders replaced industry wide during the second quarter. This brings the industry totaled for the first six months of 2008 to over 22,300 railcars.
At quarter end, the total industry backlogs totaled approximately 62,320 railcars down 6% compare to the end of the first quarter. However, this is still a healthy backlog from an historical perspective and represents almost one year’s production at today’s industry operating levels.
Recent order inquiries indicate third quarter 2008 industry orders, could again be inline with second quarter order levels. Industry orders seem to have reached a stable level as a range of 10,000 to 12,000 railcars orders in each quarters, is evidence by the last six quarters.
Independent forecast place 2009 industry railcar production in the 40,000 to 50,000 car range, which is consistent with the market and personal review. While making broad generous statements about the railcar market is attempting, it is more valuable to examine demand for various railcar types, serving discrete end use markets.
As you know railcar demand shifts periodically from car type to car type. Order and inquiry levels in the second quarter reflected steady demand for auto racks.
The consumer shift to smaller or fuel efficient autos, as positive demand for tri-level auto racks, currently in short supply. Replacement of the first-generation auto racks is also driving demand for new auto racks.
Demand also strengthened for multiple types of covered hoppers used to transport agricultural products and for coal cars, both driven in large part by export demand and improve railroad system fluidity. With the continued weak demand in select market such as intermodal, plastic pellet, center-beam and box cars, reflecting weakness in housing, automobile and consumer spending.
We are also see slowing demand for tank cars, although replacement of smaller less efficient tank cars and pending regulatory actions regarding as it is commodity base per demand in the near-term. In the second quarter 2008, TrinityRail received approximately 7,430 railcars orders, raising our order total for the first half of 2008, to slightly more than the 11,500 railcars.
Many of these orders extend car production lines for variety of railcars. Specifically, we received orders from third-party leasing companies, rail roads, industrial service and utilities, for covered hoppers, coal car, open top hoppers, rail gondolas, auto racks and tank cars.
The diversity of our orders reflects the breadth of TrinityRails product lines and customer base. At the end of the second quarter, TrinityRails’ front order backlog was approximately 28,680 railcars, an increase of 2.6% over the first quarter of 2008.
A strong order backlog, which comprises 46% of the industry total, extends through 2009. This visibility enables an effective production planning, material sourcing and positions us to pursue additional operating efficiencies.
Our Railcar Leasing and Management Services Group continue to grow with low cost fleet during the second quarter. TrinityRail shipped 3,170 new railcars to customers of our leasing company during the second quarter all subject to firm, non-cancelable leases.
This represented about 48% of TrinityRails second quarter railcar shipments. Our lease fleet has grown 18.5% to over 41,100 railcars compared to approximately 34,670 railcars in our lease fleet at the end of the second quarter of 2007.
Demand for railcars leasing continues to increase as evidenced by our strong leasing backlog. Our committed lease backlog as of June 30, 2008 was approximately 17,000 railcars or 60% 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 lease fleet utilization remained at more than 99% at the end of the second quarter 2008.
The average age of the railcars in our lease fleet is 4.6 years and the average remaining lease term is approximately 5.1 years. These two key operating metrics underscore our ability to maintain high fleet utilization.
During the market downturn, our newer, highly productive railcars are less likely to be returned from lessees, when they these expires. Customers typically return older, less efficient railcars when they downsize their fleets.
Our high average remaining lease term provides a hedge against short-term market downturns, therefore mitigating some remarketing risks. In summary, market demand, excess industry capacity, and increase in raw materials cost are creating a highly competitive environment.
The initiatives Trinity we all put into place the last few years have helped position us well operationally to be successful in the highly competitive environment. Gains in operating efficiencies, however, will only partially offset raw materials cost increases.
We must successfully raise the price of our railcars and our lease rates to reflect the rapidly rising railcar costs. The scale of our 41,100 railcar lease fleet, and has continued growth, provides financial stability, greater customer access, and flexibility and placing railcars into the market.
Leasing has been and it will continue to be an important strategic tool, integral to our successful performance. I will now turn it over to Bill McWhirter.
William McWhirter
Thank you, Steve, and good morning everyone. My comments relate primarily to the second quarter of 2008.
We filed our Form 10-Q this morning. For the second quarter of 2008, we reported earnings of $1.06 per diluted share from continuing operations.
This compares with $0.85 per share from continuing operations same quarter of 2007. Revenues for the second quarter of 2008 increased 5.9% over the same quarter last year.
Earnings from continuing operations exceeded the high-end of our guidance by $0.16 per share. $0.11 of this performance was associated with the gains on divestitures and profits recognized on hedging activities.
The remainder can be attributed to the strong operating performance in all of the manufacturing groups. These gains were somewhat offset by a $0.02 per share charge for anticipated losses on future sales in our Rail Group.
Moving to our Rail Group, revenues for this group declined on a quarter-over-quarter basis by 1.4%. Rail Group sales include its Leasing and Management Services Group were $253 million in the second quarter of 2008, with profits of $23.1 million or approximately $0.19 per share.
This compares with sales to our leasing group in the first quarter of 2007 of $283 million with profits of $50.3 million or $0.41 per diluted share. These inter-company’s sales and profits are eliminated in consolidation.
Our margin results for the Rail Group were 12.3%. At this time, we anticipate margins for the Rail Group of between 6% and 8% for the third quarter.
As we looked forward, we expect margins of between 3% and 5% for the fourth quarter. This projected margin level represents the competitive pricing environment, the mix of car types to be built and anticipated raw material price increases.
The Rail Group backlog as of June 30, 2008 consisted of 28,680 railcars with an estimated sales value of $2.4 billion. Our railcar backlog is broken down approximately as follows; backlog to our leasing company, $1.4 billion; backlog to TRIP $200 million; and backlog to third parties $750 million.
During the second quarter, our finished goods inventory increased as we produce railcars ahead of the contracted delivery dates to maintain production continuity. We anticipate the deliveries will exceed production in the third and fourth quarter, as we deliver these railcars from our finished inventories.
Now, turning to our Inland Barge Group. The Inland Barge Group second quarter performance was very strong, posting revenues of $151 million and operating profit of $27.2 million.
The results for the Inland Barge Group continue to reflect a high level of operational excellence. This group’s backlog as of June 30, 2008, totaled approximately $755 million, this compares with $677 million one year ago.
We anticipate Inland Barge revenues between $150 million and $160 million per quarter for the remainder of 2008. Operating profit margin was expected to range between 16% and 17.5% for the same period.
Now, moving to the Energy Equipment Group. During the second quarter, this group’s revenues were $157 million.
Operating profits were $25.4 million, with our operating profit margin was 16.1%. The Energy Equipment Group’s revenue growth continues to be driven by our structural wind tower business.
Wind tower revenues should account for approximately $425 million in 2008. Reverences from our Construction Products Group grew by 11%, when compared with the same quarter of the previous year.
Operating profit was $21.1 million for the quarter, representing a 33% improvement over last year. We are pleased with these results and believe our portfolio adjustments in the segment have been successful.
Our Railcar Leasing and Management Services Group reported revenues of $86.4 million, compared with $162 million in the same quarter 2007. The higher 2007 revenues reflect $95 million in railcars sales from the fleet, which makes quarterly comparisons difficult.
Operating profit for the second quarter of 2008 was $36 million with $1.9 million resulting from railcar sales. During the second quarter, car sales from the fleet were $9 million.
TRIP accounted for $8.3 million of those sales. In addition, TRIP purchased $83 million worth of railcars from our manufacturing companies during the quarter of 2008.
For 2008, we anticipate between $700 million and $800 million in net additions to our leave 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 $160 million and $170 million. During the second quarter, we expect to defer approximately $285 million in revenue and between $12 million and $14 million in operating profit, as we grow our own leasing business and sell cars to TRIP.
This represents between $0.10 and $0.12 per diluted share. We anticipate earnings from continuing operations for the third of 2008 to range between $0.91 and $0.96 per diluted share.
Our 2008 full-year guidance has been refined from $3.45 to $3.55 per diluted share. Included in our assumptions for 2008 are normal weather conditions and no unanticipated adverse resolution of legal matters.
In our earnings release yesterday, we provided a reconciliation of the non-GAAP term EBITDA. EBITDA from continuing operations for the second quarter of 2008 was approximately $197 million as compared to $153 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
Thanks, Bill. Now, the operator will prepare us for a Q&A session.
Question and Answer
Operator
[Operator Instructions]. Our first question comes from John Barnes with BB&T Capital Markets.
Your line is now open.
John Barnes
Hi, thanks. Good morning guys.
Bill last quarter you provided us a little bit of a margin outlook and I apologize if I missed it. I got pulled into another call briefly, market outlook for the balance of the year in the rail sector.
Can you just talk through what you are anticipating and how much of that is an issue with raw material cost versus how much of is a mix issue?
William McWhirter
Yes, we gave two sets of guidance John for rail margins, 6% to 8% in the third quarter and 3% to 5% in the fourth quarter. I have stated that’s the combination of really three events kind of the deferred pricing environment, the mix of cars to be produced and raw materials price increases that we anticipate running to the system.
I don’t think we are comfortable of saying…one is a third and one is a fourth etcetera, so when put it all of those together and that’s the guidance that rose up to the annual guidance for the company.
John Barnes
Okay. Do you recall the guidance you gave on margins for the second quarter?
William McWhirter
Yes, with the second quarter I said that it would be between 6% and 9% for the rest of the year. So, 6% and 9% for the rest of the year and this breaks it down to a little more refined giving you both quarters.
John Barnes
Okay, fine, very good. I appreciate that.
Sorry, I missed that in your prepared comments. One think, even if we look at some margin degradation in the second quarter with your whole business in your third quarter versus the second quarter.
I am getting a kind of consolidated operating margin maybe 15.5% or little bit higher. I know you are up against the tough comp in the third quarter from a year ago, where we had 25% revenue growth, but even If I modeled low single-digit revenue growth with kind of still a mid-teens margin in your tax rate.
I am coming up with something that’s still in excess of your third quarter guidance. And I think more importantly, as I go back and look at the first quarter and the second quarter you significantly exceeded your guidance on both measures.
I am just curious, I mean what in the third and fourth quarter are you most concerned about…to issue…what on from our viewpoint is a little bit more conservative?
William McWhirter
Yeah John, I think a couple of things to keep in mind. One is that…interest expense for the company as long as we have grown the leasing business, so when you see the top line growth leasing business and the operating profit you need to be [inaudible] the interest expense grows with that.
Obviously a two point margin range in the Rail Group between 6 and 8 can give you some bad calculation in the overall number and that’s going to have a lot to do with…how we perform at the current level and how successful we are, in some of the raw material price litigation strategy. So, the guidance is what the guidance is, but I can understand how the model could give me a range of numbers.
John Barnes
Okay, alright. Two other small questions, one on kind of refining your production footprint on the railcar side, can you give us a little bit more color behind…how many facilities are you talking about this potentially impacting or we talking about taking a facility completely offline.
As you look at it, can you give us an idea of what percentage of cars in ‘09 you are anticipating being produced in Mexico versus the US, just any more color you can on that thought process?
Timothy Wallace
Steve, why don’t you answer that one?
D. Stephen Menzies
Yes, sure. John first of all, we really are looking at our 2009 production plans, as we speak.
So, as well starts to become a little more clear to, perhaps in next quarters’ call we’ll be able to shed a little bit more light on our 2009 production plan. With respect to, that the two plants that we’re converting, those are plans that are marking railcars today, we [Inaudible] fleets will particularly be making very smooth transition to producing wind towers and this capacity we don’t see demand for railcar market going forward at least couple of years and we have considerable demand for wind towers.
So, I think it’s a great opportunity for us to utilize our skilled labor force, when you make planned transitions, which we again, believe it’s a competency of our company it seems do well. So, these two plans were taken down and we will continue to look at our plans for 2009 as we move forward.
John Barnes
Alright and then I can’t let you off the phone, unless I ask you about Texas decision the $4.5 billion being spent on the generation lines and West Texas into Dallas forth [inaudible] in his comments recently on wind tower and we heard numbers range on demand in West Texas and it is vary from 2700 towers to 7800 towers. Can you just elaborate it all as to I mean this is in your backyard, can you elaborate it all, as to what that potentially means for you wind tower business is…your current backlog reflective of any of that development already or if this new incremental demand on the marketplace.
Timothy Wallace
Well, this is Tim. We sell to the wind turbine manufacturers and provide towers to them and we have all of them talking with our management, leadership and sales people in our Wind Energy business about a number of different opportunities and we don’t go back through them to try to determine which farms their towers that they are buying from it, at this stage when they are buying out there in ‘09, in the ‘10 and ‘11 time period.
We are just dealing with them on contract issues as well as the quantities and the run rate. So, we don’t have an ability to reconcile wind farms to towers that we produce.
We do know though that, we have a largest producer of wind towers in the country. And as you said, this right in our backyard and that’s why as Steve said and I said in my prepared remarks, we have plans of converting a couple of our facilities and we’re looking at other opportunities in our company in a number of different areas.
We just have a real strong team of people that are dedicating 24/7 their energy and activities towards helping us to pursue the business opportunities there, and is very robust right now.
John Barnes
Okay, alright. And then I am sorry one last thing.
In third quarter of ‘08, excuse me, third quarter of ‘07, you gave your initial 2008 full year guidance and outlook should we expect some more when you report third quarter numbers. Do you think you’ll have a good enough hand alone kind of the redefining of your production footprint on the rail side and that type of thing actually provide some ‘09 guidance at that point?
William McWhirter
Yes, John, this is Bill. At this time, we are just undecided as to whether we will provide that guidance in Q3.
So, as soon as we know we’ll post that number and we will provide in Q3.
Timothy Wallace
Yeah, we were fortunate in last year and many of our product lines, we have long backlogs and commitments from customers and it gave us the opportunity to provide the outlook that we could in the third quarter. If we still have a lot of balls up in the air and space that we’re trying to fill then it just a best guess, at that time and we preferred when we provide long-term outlooks to have as much substance as possible to provide those figures.
John Barnes
Very, good. Hey, nice quarter guys.
Thanks for your time.
Operator
Our next question comes from Steve Barger with KeyBanc Capital. Your line is now open.
Steve Barger
Hi, good morning.
Timothy Wallace
Good morning.
Steve Barger
Did you mention where those plants are that you’re converting to the wind tower plants?
Timothy Wallace
No.
Steve Barger
Is that something that you would tell us?
Timothy Wallace
Well, no, it’s not really public information at this stage. We’re in the planning stage and taking some steps and we don’t really talk plant by plant until we are well underway in the construction project of converting them.
Steve Barger
Okay. Fair enough.
Can you talk about the CapEx associated with doing a switchover like that per plant?
William McWhirter
Yes. I think from a cash base perspective, we think it’s very fortunate that the flexibility in a lot of these plants, obviously when we look at converting a plant, we look for the plant that fits the product as best as possible.
So, the CapEx is baked into our overall projections right now for the year which is $160 million to $170 million total CapEx.
Steve Barger
Alright, when you talk about the timing of the current backlog, if you have the capacity to make…to monetize the entire backlog now, is that…would it theoretically be deliverable over four quarters, or is that a multi-year contractual setup?
Timothy Wallace
Specifically which product are you talking?
Steve Barger
I’m sorry, wind towers.
William McWhirter
Yes. With regard to Wind Tower, Wind Tower has certain delivery dates, which match up with projects; you could not deliver the entire backlog at one time.
Steve Barger
Okay. And given that you’ve taken the expectation for Wind Tower revenues up for ‘08 to 425 now, did that also mean that your, is it fair think that you would accelerate the target of the 8 to 900 million in revenues on an annual basis?
William McWhirter
Yeah I don’t think it really related the 425 is much more reflected of some successful ramp up in one of our newer facilities and a little more production this year that we had anticipated based on our ramp up. So, the 8 million to 900 is a little more strategic view of what we see in this industry as we go forward.
So, 445 is a near term efficiency they are plant to be able to produce for us.
Steve Barger
Well, I guess just to ask in another way, I mean 8 to $900 million is a five year plan, which implies 2012 or 13. So, is given the conversion and of the two points that we were talking about and the other opportunities as you talked about is it physically possible for you to get the 8 to $900 million faster than that five year plan?
William McWhirter
As you’ve seen in the past as Tim talking and whether was that bringing up our Barge lines or railcar lines or the wind energy, the wind tower business lines. A lot of times things happened faster than we can anticipate, but then there is other times where you have situations would occur that you don’t obtain the goals this fast.
I think it’s very realistic to think that we will obtain those targets that we set out there and it’s probably safe to assume that the people continue performing like to have in the past that we should be able to beat them as well.
Steve Barger
That’s great and then just kind of one procedural question about the wind turbine backlog. Can you talk about the typical lag between a turbine OEM announcing in order and when tower might hit the books, is there any kind of consistency there or how does is that work?
William McWhirter
There’s really no correlation. At this time the wind tower, OEMs, booking space, so they can then commit to their customers on the quantities that they have and it’s in a very dynamic market like this, they have a lot of factors there, coming into play and so there is really not a correlation there.
Steve Barger
Alright, thanks very much. I hop back in line.
Operator
And our next question comes from Paul Bodnar with Longbow Research. Your line is now open.
Paul Bodnar
Hey, good morning, congratulation on the good quarter. Questions you had on the lease fleet I guess, the timing some of the orders there.
As you guys have booked those to the past, obviously booked of periods when car prices were lower we had an increase of raw material cost, that it lease prices you can’t go back to that customer, assuming and reprice those leases, so those now become unprofitable or what happens to those straight actions I guess a little color on that?
Timothy Wallace
Well, the leasing business is just like the high-rise building, where your leasing space and when you build the building sometimes you will make special deals with people to get the building filled up and then you get renewal rates. We use our leasing company for launching new products from time to time and we have been launching some new coal car in there.
And we have had lease rates that encourage customers to take that coal car, we are getting very good feedback on the use of it. And that provides a lot of good strategic information to us and then there is other competitive issues Steve and his people spend a lot of time working over the strategies on all the various car types that we have.
So, Steve I don’t there is simple answer to this.
D. Stephen Menzies
I guess Paul, when we are talking about railcar prices and lease rates. The price of a new railcar set the feeling of this risk.
And in today’s environment, we have high price railcars and the price of railcars continue to increase based upon raw material cost. So, that typically raises at least raise for all car types of an existing car lease rate is discounted to a new car rate, as new car rates move up, our existing car rates move up as well.
So, the car that we put it in our lease fleet a couple of years ago and it must lower the capital of cost, as that car comes up for renewal or we assign we have the opportunity to increase those mix rates in a stronger lease rate environment based on the higher new car prices.
Paul Bodnar
Yes, yes, I guess my question more than 17,000 cars in your backlog going to lease fleet. And I assume that many of these leases were signed over the past 6 to 12 months or so, obviously when prior to steel price is going up.
Now if steel prices is going up the cost to produce that cars you definitely increased, so are you in a contract there now on 17,000 or 15,000 of cars, where that the cost of produced that car is not going to generate a good return on capital or even in a potential part.
D. Stephen Menzies
Yes, most of those transactions have escalation provisions in our leasing agreements as well.
Paul Bodnar
Okay. That was my question exactly.
So, you can pass that to the lease. That was my guess.
D. Stephen Menzies
Yes.
Paul Bodnar
And then secondly was so in TRIP in the quarter, I just noticed [inaudible] delivered 92 million there. Last quarter I just think at the end of the backlog you said and you have $500 million in the backlog going there now that’s 250.
Any kind of the reason for the difference there if delivered 92, I mean you should stop 400 bucks in the backlog, could you just reallocate that you’re currently leave there, what’s going on there.
William McWhirter
Yes, this is Bill. We did make some allocation adjustment associated with TRIP in our backlog.
We will do that from time to time just on certain diversification issues whether it diversification of car type customer or credit risk. So, we did make an adjustment that lowered leasing rates of the Trinity Leasing Company backlog.
Paul Bodnar
Okay thanks a lot I appreciate it.
Operator
And our next question comes from Barry Haimes with Sage Asset. Your line is now open.
Barry Haimes
Hi Good morning. I had just a clarification relating to some of the leasing numbers I think it was mentioned that $253 million of the sales in the current quarter went to the lease company and then $83 million for TRIP is the $83 million embedded in the $253 million or are those two separate numbers that need to be added together to get the total lease… the total amount of cars that went to the lease entities.
William McWhirter
You never add the two numbers together they are two separate pieces of business.
Barry Haimes
Got it, okay. And then so in doing that it looks like about 57% of revenue in round numbers went to the two leasing entities and to have it straight… on a backlog basis about looks to be 60% or 90% [ph] of the backlog is contracted by the two leasing entities.
So does that sound about right?
William McWhirter
It sounds about right but keep in mind they were we are viewing TRIP as a third party entity not a Trinity entity. We own 20% of that entity, we have pretty robust footnote within our Q that I think walks you through those pieces of business.
Barry Haimes
Got it. Okay thanks so much.
I appreciate the clarification.
Operator
And our next question comes from Lewis Shapiro [ph] with Oppenheimer. Your lines are now open
Lewis Shapiro
Thank you very much. Would you kindly indicate how much more stock you have authorized to buy in the existing approved authorization?
William McWhirter
Yeah, there is authorization was for 200 million, we purchase around 15 million, so there is 185 remaining under the authorization.
Lewis Shapiro
Is there any price limit or level?
William McWhirter
There is no price limit or levels
Lewis Shapiro
Who are your principle competitors in the wind tower business?
D. Stephen Menzies
Well…we can go ahead.
William McWhirter
Yeah, now this is Bill, I think from our wind tower perspective again that I keep in mind that we have some other regional focus, be the central corridor of the US and inside Mexico and so within that region there are competitors. We don’t want to spend a lot of time talking about our competitors, on the conference call.
But they are both public and private sectors competitors in that general geographic area.
Lewis Shapiro
The indication is that T. Boone Pickens has a plan to from Texas all the way upto the Canadian border.
Do you expect that you will be participating in that to any extent?
William McWhirter
Well I think as Tim mentioned earlier a lot of this position is primarily with the wind turbine manufacturer and so to the extent that wind turbine manufactures are about contracting on that particular piece of business and since they are operating model as well facilities are I’d anticipate there are wind tunnel folks who are… they are quite aggressive and I’m sure that they will be pursuing all of the opportunities and profit from this business
Timothy Wallace
And if you look at the corridor that he is talking about and referring to is the central part of the United States and that’s the target market that we have identified as the corridor that we are pursuing business as well.
Lewis Shapiro
As I recall you set up a plant in Iowa, is that correct?
Timothy Wallace
That’s correct Newton, Iowa.
Lewis Shapiro
Now the last question is, is there any delay in delivery of turbines from GE?
Timothy Wallace
Well, we are not purchasing turbines from GE, so that’s not something that our people are monitoring its… GE is buying towers from us to set up with there turbines and so you probably would have to talk to one of their customers and somebody in the industry to get understanding of the delivery delays there.
Lewis Shapiro
Thank you, very much. I appreciate the response.
Operator
And at this time it appears we have further questions. Mr.
Perry I will turn it back over to you.
James E. Perry
Thank you, Kurtis. This concludes today’s conference call.
Remember a replay of this call will be available starting one hour after the call ends today through midnight, Thursday, August 7th. The access number is 402-220-0121.
Also, this replay will be available on our website 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 this does conclude today’s teleconference. You may disconnect your line at any time.
Have a great day