Welcome to the Trinity Industries' Fourth Quarter Results Conference Call. [Operator Instructions]. 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 includes statements as to estimates, expectations, intentions and predictions of future financial reports. 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 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. It is now my pleasure to turn the conference over to Gail Peck. Please go ahead.

Thank you, Keith. Good morning, everyone. Welcome to the Trinity Industries' fourth quarter 2016 results conference call. I am Gail Peck, Vice President Finance and Treasurer of Trinity. Thank you for joining us today. Similar to the format we have used on our recent earnings calls, we will begin with an update on the highway products litigation matter. We will then follow with our normal quarterly earnings conference call format. Today's speakers are Theis Rice, Senior Vice President and Chief Legal Officer; Tim Wallace, our Chairman, Chief Executive Officer and President, Bill McWhirter, Senior Vice President and Group President of the Construction Products, Energy Equipment and Inland Barge Groups; Steve Menzies, Senior Vice President and Group President of the Rail and Railcar Leasing Groups and James Perry, our Senior Vice President and Chief Financial Officer. Following their comments, 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 Theis Rice.

Thank you, Gail. Good morning, everyone. As previously reported, the False Claims Act judgment entered against Trinity Industries and Trinity Highway Products in June 2015 is currently on appeal to the U.S. Fifth Circuit Court of Appeals. While our argument in the case was heard by the three-judge panel on December 7, 2016, the court could publish its decision at any time. Trinity Industries and Trinity Highway Products have also been named in a number of other suits involving highway products that we believe are groundless and represent opportunistic filings that seek to capitalize on the False Claims Act judgment now on appeal. For a more detailed review of these suits, please see note 18, the financial statements in Trinity's Form 10-K for the period ended the December 31, 2016. Please also refer to ETplusfacts.com for additional information. I will now turn the call over to Tim.

Thank you, Theis and good morning. Trinity's fourth quarter and full-year financial results were slightly better than our expectations. I am pleased with the way our people are confronting challenges associated with today's business environment. A number of different factors, including the oversupply of railcars and barges in North American market, continues to impact order volumes for new railcars and barges. The markets for these products are highly competitive and difficult to predict at this time. We're reducing production volumes in our railcar and barge manufacturing facilities and preparing for the possibility of an extended downturn. We continue to invest in leased railcars which provide a base of earnings for our Company. During 2016, we added new leased railcars, with a value of approximately $1 billion, to our lease fleet and expect to add another $500 million to $600 million of asset value this year. We sold approximately $170 million of leased railcars to our railcar investment vehicle platform last year and we expect to sell another $300 million to $400 million of assets this year. As most of you know, railcar investment vehicles are portfolios of leased railcars developed and managed by TrinityRail that are sold to institutional investors. Demand for the majority of our other manufactured products is being impacted by the current economic climate and political landscape. Generally speaking, we're seeing a unique mixture of uncertainty and optimism in the majority of the end markets our businesses serve. Our customers appear optimistic regarding the future of their businesses, yet they're delaying purchases of large capital equipment as they wait and see which public policies proposed by the new administration will be approved by Congress. The flexible nature of Trinity's business model positions our Company to respond when market conditions shift. Should a major infrastructure spending program be…

Thank you, Tim and good morning, everyone. The performance of our Inland Barge Group during the fourth quarter reflects ongoing weak demand for barges that transport goods along the inland waterways. Year-over-year revenue and profit declined during the quarter due to fewer barges delivered and changes in product mix. We received $18 million in barge orders during the fourth quarter compared to $190 million during the same quarter in 2015, bringing the total backlog to $120 million. We have rationalized our manufacturing footprint and now have two facilities operating. The current weak demand environment follows multiple years of strong demand. The large number of barges manufactured during that time period, coupled with other freight movement factors, has resulted in available barges exceeding demand. Our customers are cautiously optimistic that fleet utilization will begin to improve later this year. At this time, we're projecting a decline in revenues during 2017 of approximately 50% and significantly lower operating profit. As we progress through the year, we expect our operating performance to deteriorate to essentially a breakeven run rate. We have the manufacturing flexibility to respond quickly should demand improve. The financial performance of the Energy Equipment Group during the fourth quarter reflects mixed demand conditions for the end markets our businesses serve. The year-over-year increase in quarterly revenue for this group was primarily due to higher volumes in our wind tower business. The decline in quarterly operating profit was primarily due to weak results in our businesses that serve the oil and gas markets. During 2016, the wind tower business received $1.2 billion of orders, including approximately $200 million added to the backlog in the fourth quarter. Our wind tower backlog now stands at $1.1 billion, providing production visibility and continuity for this business. The production tax credit, along with improved wind…

Thank you, Bill. Good morning. TrinityRail's performance for the fourth quarter met our expectations. Throughout 2016, our team did an outstanding job transitioning as market conditions deteriorated within the North American railcar industry. Our Rail Group achieved a 14.9% operating profit margin on deliveries of 27,240 railcars in 2016. Our Leasing Group delivered a solid financial performance in 2016, driven by lease fleet growth, high lease fleet utilization and disciplined cost management initiatives. TrinityRail's performance reflects the strength of our integrated railcar manufacturing, leasing and services business model and our operating and financial flexibility. Declining railcar loadings through most of 2016, a large number of idle railcars, excess railcar production capacity and a sluggish industrial economy have resulted in challenging railcar market dynamics. Industrywide, new railcar orders decelerated throughout the year, totaling approximately 22,880 railcars in 2016, the lowest level since 2009 and well below the considered replacement rate for the North American railcar fleet. During the fourth quarter, Trinity's Rail Group received orders totaling 1,985 railcars, primarily from industrial shippers and railroads. Pricing pressure on fourth quarter railcar orders continue to reflect the weakness of most markets. New railcar order inquiries are very weak thus far in 2017. Although, the general uncertainty exhibited by our customers in making capital investment decisions seems to be paired with a sense of optimism stemming from potential stimulative economic and regulatory policies of the new administration; however, it is too early to project the timing of a railcar market recovery. Further, it is unlikely that we will experience meaningful railcar demand improvement until railcar loadings demonstrate sustained increases and the overhang of surplus railcars is greatly reduced. During the fourth quarter, TrinityRail delivered 7,435 railcars. As expected, weaker pricing, product mix changes and costs associated with aligning our manufacturing footprint for a lower…

Thank you, Steve and good morning, everyone. Yesterday, we announced our results for the fourth quarter of 2016. For the quarter, the Company reported revenues of more than $1.1 billion and earnings per share of $0.44, compared to revenues of more than $1.5 billion and EPS of $1.30 for fourth quarter of 2015. The quarterly results were slightly ahead of the expectations that we had previously provided, as most of our businesses performed well during the quarter, given the market conditions. In the fourth quarter, as expected, we did not sell any portfolios of leased railcars. This impacted our year-over-year results, as $480 million in sales of leased railcars during the same quarter in 2015 generated $0.58 of EPS. For the full-year 2016, we generated revenues of almost $4.6 billion and EPS of $2.25, compared to record revenues in EPS of $6.4 billion and $5.08 in 2015. During 2015, our EPS included $1.45 of earnings from the sale of leased railcars compared to $0.21 in 2016. On a year-over-year basis, for both the fourth quarter and the full-year, the decline in our results reflected volume reductions in our rail and barge manufacturing businesses, changes in product mix, a lower level of sales of leased railcars and ongoing uncertainty in the industrial economy. During 2016, we continued to invest in our railcar lease fleet, our manufacturing operations and our corporate infrastructure, as well as continuing to return capital to our shareholders. During the fourth quarter, we invested in new railcars for our wholly-owned lease fleet, with the value of $280 million, bringing our year-to-date total to just over $1 billion. The net cash investment in our wholly-owned fleet totaled $719 million in 2016, after taking into account $172 million of sales of leased railcars during the year and the corresponding deferred…

[Operator Instructions]. We will go first to Matt Elkott with Cowen and Company. Please go ahead.

My question is about the margin guidance on the rail segment. The margin compression seems a bit steep, almost as much as the one from 2015 to 2016 when you had a lot of product mix shift. But you delivered a lot of your tank cars and energy equipment, crude-specific tank cars. I was just trying to get a sense of what's causing this -- how much more product mix shift and what's causing this margin compression in 2017.

Sure, Matt. This is Steve, thanks for your question. We're really seeing the margin compression from a number of flanks. We're seeing weaker pricing in the marketplace. Keeping in mind that we're dropping down 50% production levels which is fairly indicative of the entire industry, so there's a lot of railcar production capacity out there. The product mix as you cited, has changed quite a bit, fewer tank cars, more freight cars. We still have costs associated with aligning our production footprint to the lower level of production. And again, all that is incorporated into our guidance. We do expect our operating margins to deteriorate into the second half of the year. A lot of that is pushed by the pricing and the mix of the railcars that we'll be producing in the second half.

Got it. And on the overall EPS guidance number, that range is fairly wide. Can you give us some color on what the two outlying scenarios are?

Matt, this is James. Thanks, I'm happy to answer that question. When we look at the guidance range, it's early in the year. We've given you a little more visibility into the first half of the year, in line with our original operating guidance of $0.45 to $0.60 and we've said that will decline as the year goes on. The other piece to keep in mind is now that we've incorporated leased railcar sales of $300 million to $400 million into the guidance later in the year, that's a wide range, the profitability of which has a wide range associated with it as well, as we define those cars and the investors that will purchase those cars from us. So we'll continue to refine the guidance as the year goes on, but at this point $1 to $1.35 is where we're.

So I was just making sure that it does not incorporate two different macro or political scenarios. You're not assuming any change from the current environment.

No, sir.

Okay. Just one last quick question, if I look at your existing facilities, you guys have more facilities and more square footage in the U.S. than Mexico. But correct me if I'm wrong, I think over 80% of your current production is in Mexico. How much time and investment would it require you guys to shift a good number of that production back to the U.S. if you have to, if we see a change in trade policies?

Matt, this is James and I'll introduce a little bit and then let Steve follow-up. We clearly have a balance between the U.S. and Mexico, ample capacity both places. I will correct one thing, we have never indicated 80% of our production or given any stats regarding our production in Mexico. Our employee base, as you see in our numbers, is spread between the United States and Mexico rather evenly. You mentioned the square footage, but a lot of that has to do with certain products that we don't build in Mexico at all, that are simply U.S. products, as well as how the products move back and forth. But in terms of our ability to move and those kind of things, Steve, if you want to touch on that just very briefly?

Just briefly, I think over the last years, we have invested so that we have flexibility in our manufacturing footprint to build most of the products in our product line. So whether we have Mexico facilities or U.S. facilities, they're capable of responding to our customers' demand.

Any clarity on the timeline that would require you to increase your U.S. production capacity by say, 20%?

Really too difficult to say on a hypothetical, but we're certainly making plans and are aware of the potential scenarios.

We will go next to Allison Poliniak with Wells Fargo. Please go ahead.

A lot of optimism is out there and you guys certainly talked about the pressures that you're facing in 2017. But if you're looking at railcars and potentially barges, understanding that orders are weak, do you feel there's a stabilization here in terms of demand that's giving you some sense of comfort that 2017 could be the low point or there's still a lot of uncertainty out there right now?

Allison, good morning. It's James. I think when we look at where we're in market demand, Steve and Bill have given you the indication that the orders have been slow, generally speaking. There's still an oversupply of our major product lines. You have seen, as we've talked about, nice operations in highway, aggregates, wind towers, for example. Bill mentioned a little pickup in the utility structures business that we've been expecting. So I think there remains a lot of uncertainty. I think as folks look to see what's coming with the economy and other types factors, time will tell. But at this point, we continue to see a lot of uncertainty and slowness in the orders as we saw in the fourth quarter.

Okay, great. Just on that topic with barge, I think you said $120 million backlog, but you're looking for $200 million in revenue. What is your comfort there in terms of the order environment being weak and the ability to achieve that number this year?

Allison, it's Bill. Obviously, there's a risk associated with not having those orders in the back half. We do have ongoing dialogue with customers regarding potential spots for the back half and we're working very aggressively to sell those spots, albeit highly competitive pricing at this point in time. But definitely there's a risk associated with it.

Okay, great. James, I just want to clarify on your H1 guidance that you gave, the first-half guidance, there was no sales out of the rail -- out of the fleet, but then in the back half, you're assuming there is some. Could some of that push to Q2 theoretically? I know you said none in Q1 though, correct?

Yes, just to parse it, I think you've nailed it rather well. The $0.45 to $0.60, so we were reaffirming is that still a good operational guidance level for the first half, as we previous had provided. The car sales, though, could be the second, third and fourth quarters, so some of that could certainly be second quarter and then throughout the year. So we didn't incorporate that specifically as to how that may fall.

We will go next to [indiscernible] with Citigroup. Please go ahead.

I wanted to ask about the sales from the lease fleet, the $300 million to $400 million. Any color that you could give as to what end markets those might be going to, the composition of that sale book? And then in terms of margin, as a follow up, in terms of profitability, I realize there is a wider range there. But is there a historical period we can look at or something for reference that could give us guideposts as to how we should frame that?

Bershawn, yes, this is James. Thanks for allowing us to add some color there. I think in terms of what the portfolio could look like, we've always -- when we've sold portfolios of size, had well-diversified portfolios in terms of end markets, terminations, customers across the board. And our goal is really to provide our RIV partners, as well as keep our own fleet very diversified and keep a good balance there. In terms of profitability margins, we're not prepared to provide that. I think if you look at the last few years, you've certainly seen a range of where it's been, but our resale is a little bit different. Some of that depends on the age of the cars and when we put the cars into our lease fleet, as well as just those end markets themselves and the market pricing for those type of cars. But as we've said, we enjoy having the earnings and cash flows for those cars when they're in our fleet and then we make sure that the returns make sense for us to sell those cars when they make a transaction.

And turning to the manufacturing side, you noted a little bit of pricing pressure on the orders that are coming in. Do you see where we were in 4Q as maybe a good run rate to think of as a baseline for 2017 on the order side? Or based on the inquiry level, could there be some upside or downside to that?

Steve, you want to take that one?

Sure. As I mentioned in my prepared remarks, we're still seeing inquiries and order levels very weak here in the early onset to 2017, so haven't really seen any improvement in new car orders. I would suggest that one of the things that we look at very carefully with our broad business base is looking for what's happening to the existing fleet of railcars. As we see lease fleet utilization start to firm, when we see it and we have not to date seen lease rates improve and you see the overhang of vital cars start to decrease. Only after that has been sustained for some time might we expect a real meaningful change in the direction of new car orders. So I think the focus really on judging the health of the market needs to be on the existing fleet. Eventually, those new car orders will come, but only after the existing fleet is fully deployed

One last quick one and I'll jump off. In the guidance and I'm sorry if I missed this, is there a share buyback assumption to the guidance range?

We don't provide that in our guidance. We just announce that at the end of each quarter.

We will go next to Matt Brooklier with Longbow Research. Please go ahead.

A couple questions for Steve on the railcar lease side of things. If we look at utilization during fourth quarter, it looked like there was some improvement on a sequential basis. Just curious to hear what drove that improvement.

I'd love to tell you there's big market trends happening, Matt, but it's not the case. I think our team just really did a very effective job of working with customers to keep railcars employed and to assign some of our idle cars, but I wouldn't read any significant market trend out of it. We're seeing some firming of lease rates but at a very low level. And so again, hard to really take away any strong market trends from what we're seeing happening as yet.

Okay. And then just baked into your guidance for the lease fleet in 2017, are you assuming that utilization stays at about current levels? Or are you expecting potential further deterioration? And then if you could maybe comment on your expectations for maybe class-one volume and growth there, if you're expecting for the recent growth that we've seen in class-one volume to continue for the year.

Well, as far as utilization is concerned, I'm counting on our operating team to be successful in remarketing the cars that we have expiring during the year. And as I noted, we don't have anything extraordinary from a renewal standpoint, very consistent with what we've experienced the last few years. So we'll see where utilization falls out over the course of the year. With respect to class-one railcar loadings, we've seen some blips here in last couple of weeks. We still need to see a sustained long term trend and increase in railcar loadings to really have it impact the use of railcars today. I still think we're a ways away from seeing that activity.

Okay, so it said in your guide you're being pretty conservative and you're not expecting a snap back in terms of railcar loadings this year?

I think that's a fair characterization, Matt, yes.

We will go next to Gordon Johnson with Axiom Capital. Please go ahead.

This is James Bardowski in for Gordon. Thank you for taking my question. First in the Rail Group, if we assume that no change sequentially in the fourth quarter component services revenue, I think the blended ASP was a little under 400,000 railcars, certainly above 3Q's ASP, but down year over year. Just asking, could you give little color about this or a little color to it?

Sure, James. The implied average sale price of our orders during the fourth quarter is impacted by a number of considerations, including the adjustment to the backlog value on the GATX order. And we also removed some other cars from our backlog, as noted in our 10-K. But in fairness, pricing compared to prior periods is definitely down and continues to be very, very weak.

And just on that note regarding the adjustment with the agreement you have with GATX, would you be able to tell us how much the adjustment was for, as well as how often you guys get together and renegotiate?

Yes, well we will not provide the specifics of the changes that are pertinent to our customer contract, but this is all very much expected in the mechanisms of the contract. It was a one-time adjustment that was provided for in the contract. And I would also add that we have a very good relationship with GATX. They're a valued customer and we're continuing to work effectively together as we look forward to doing additional business. Also, you mentioned that you expect your lease fleets to grow in 2017. So then of the total 14,000 to 15,000 railcars you expect to deliver in that year, how many, give or take, would you say are earmarked for the Leasing Group?

James, it's about one third or so this year. We've got those numbers disclosed in our 10-K. So when we talk about the 14,000 to 15,000, that is roughly the number we're talking about going into the lease fleet. We talked about our Rail Group revenues of $1.6 billion and you got $480 million of eliminations we've talked about which reflects that leasing. So that gets you to about the third.

Excellent. Of that guidance, given the decline from 2016 which markets are seeing the biggest fall?

As far as in the railcar sector, James?

Yes, sir. As far as basically embedded in your guidance.

We're really seeing across-the-board weakness on virtually all car types. Perhaps we're still supporting -- areas of perhaps a little light is still supporting the growth in the petrochemical complex down in the Gulf Coast with covered hoppers for resins. And the automotive industry still seems to have a little legs, but much beyond that is pretty weak across-the-board.

And then one more and thank you very much for your time. During the fourth quarter, what lease renewal rates as well as renewal terms were you seeing? And also could you provide a little color to 2017?

Lease renewals in the fourth quarter were down, as far as the lease rates themselves, are down significantly, in part because we're looking at comps from leases that were originated at a peak period in time. So we're coming off some very high lease rates and renewing in a weak economic environment, so you would expect lease rate decreases. But again, at lower lease rates, we were successful to improve our fleet utilization during the fourth quarter.

We will go next to Justin Long with Stephens. Please go ahead.

First thing I wanted to ask about, I was wondering if you could provide some more color on what's driving the expected reduction in Energy Equipment margins. It looks like your 2017 guidance of 10% is down about 300 basis points from last year on a fairly flat top line, with wind tower demand and production feeling a little bit better. Could you just provide a little bit more clarity on what's driving that margin pressure?

Sure, Justin. This is Bill. The guidance provided is an estimate at this point in time, but behind that really is a drag on the segment from the businesses that serve the oil and gas markets. Those businesses are not performing particularly well and we don't really have an encouraging view of those in the near term. That is coupled with a competitive environment and I discussed a little bit of it in my script, for pricing on both wind tower and utility structures business. So while those businesses have good volume, the price point has definitely come in. And a lot of the price point coming in on the wind tower relates to the phase-out of the PTC and the need for the for supply chain to get a little more cost competitive with natural gas.

And then, secondly, I wanted to ask about the corporate expense guidance for this year. I believe you said it was $130 million to $140 million. If I go back to 2011 when you had a similar level of production to what you're guiding for in 2017, corporate expenses were closer to that $40 million to $50 million range. I know there have been some acquisitions, but this number still feels pretty high to me, given the demand environment today. So I'm just curious, is there more room for a reduction on this corporate expense line item going forward?

Justin, it's James. Thanks. I'd point to a few things, I think It's hard to compare it to another exact period in time. We're coming off a very strong year in 2015 and a nice year of production levels, especially in the fourth quarter in 2016. So you have to work your way down from that. And we're certainly taking the initiative that we can to reduce expenses across the board, not just the corporate level, from an SG&A perspective. You did see SG&A drop pretty substantially year over year overall and corporate is indicative to some degree. But I would remind you of a couple things. We certainly have elevated legal expenses ongoing in our projection, given the pieces that Theis talked about with our ongoing litigation. The majority of that falls into the corporate segment, as we've talked about before, given that these are enterprise-level Trinity Industries' issues. I would also point to we have made investments, as you talked about, with our expansion into our infrastructure, both from an IT perspective, from a building infrastructure perspective and that comes with depreciation and so forth. So to your point, we certainly challenge ourselves to reduce costs were we can and that's an ongoing initiative. But the $130 million to $140 million is where we see things right now as we start the year.

We will go next to Steve Barger with KeyBanc Capital. Please go ahead.

Going back to the conversation about the delivery guidance, did you say what percentage of the guided 14,000 to 15,000 are currently in backlog?

I think I did. Steve, this is Steve. I didn't and that number is about 85%.

85%, so you're assuming very few book and ship orders for 2017. What's the lowest that's ever gotten to in past down cycles? Do you know?

As far as quarterly orders or annual?

Yes, the number of cars that you would take that are ordered and shipped in any given year.

Oh gosh. This is Tim answering that question. We go through some pretty lean time periods where we operated where we only had maybe two, three months' worth of backlog and we were out beating the bushes pretty hard to get whatever orders were out there. We feel fortunate this year to have the backlog that we have, as well as it extends into next year into that area. So we can operate in both types of environments.

Steve, this is James. I would mention one thing just in terms of how you look at that. Given our production planning where we have things, lead time for materials and planning car builds, you're taking orders now deeper into 2017; you're not just a few weeks or even a couple months out. So as we look at the order environment this year, the deeper into the year you get, the later in the year you get that you have the opportunity for delivery. Then you may be looking into next year a couple quarters out. So part of that comes down to timing as well.

Steve, I could add one more thing for you. When we look back historically, we have been down into the hundreds of railcar orders, so that would not be unusual to see something go to those depths, although that's not what we're contemplating here for 2017. The other thing I'd like to point out is while we still have what we think a modest amount of to-be-sold for 2017, should order levels improve beyond that, we have the ability to increase production levels to seize those as well. So we perhaps are being a little conservative given our projections of the market right now and current market circumstances.

Understood. And in the past, you have been willing to give up some market share, I think, in the bottom of the cycle to keep slots open for better pricing. Is that a though process that's directing your market strategy right now?

I think we have been really consistent over the years and we don't really drive our commercial decisions based upon market share. And in particular, when you're talking about these low levels of new car orders, one order can really skew market-share perspectives. So it's really not something we focus on very much.

We're more focused on production lines and keeping our people employed and going after specific orders than we're an overall -- Companywide instead of a market-share percentage.

Right, more value-based orders than market share.

Yes.

And shifting gears, you talked about wanting to create value through acquisitions, but multiples are higher than you want. If we just forget valuation for a minute, how may targets are you actively working on that fit the profile you want? And what's the revenue size range from small to big?

There is a variety of companies and businesses and products that we target and we look at on an ongoing basis and we can think big and we can think small. So it really just depends on what the Company brings to the table and the timing, like I said in my prepared talk.

I understand that. You haven't done a deal for quite a while. I'm just asking do you have one or two deals that you're looking at or are there 20 deals in the pipeline? And again, what's the range of revenue?

Well, I will just tell you that we have a fairly robust pipeline and it has some small ones and it's got some big ones in it.

Small being $10 million and big being $1 billion? Can you help us at all just think about what could happen if you can complete deal?

Well, James told you that our -- the liquidity that we have as a Company is $2 billion and that's not meaning that we're looking at a couple of billion-dollar company. But we've looked more about the quality of the company and the fit and what it will do for us, than we get engaged with conversations with our Board as to what our capital plans are. And we have a fairly aggressive appetite once we see that the business fits really well.

The fortunate position we have, as we mentioned, is we're able to invest our capital in our lease fleet which gives us very good returns rather than just cash returns. And then we can liquidate some of those investments through debt or sales. So it's a very nice place for us to put our cash and generate some attractive returns for our shareholders.

Yes, I completely agree. I'm just trying to get a sense for timing and size. I know that timing is always difficult, but for the amount of liquidity you have, it's really a big opportunity. And if we do get further into 2017 and you can't get a deal done, is it reasonable to think that you would complete that buyback authorization? $215 relative to the level of liquidity you have is nothing.

Yes, Steve. I think it's just hard to project what we may do. As Tim said, we've got a pipeline and we've got all these things on the table in terms of how we invest our capital. And we work with our Board closely to make those decisions daily, weekly and monthly.

We will go next to Bascome Majors with Susquehanna. Please go ahead.

Just a follow-up on another side of Steve's question. Against the backdrop of high valuations that you're seeing for U.S. industrial companies and railcar leasing businesses, how do you balance the goal of, that you've long stated that you like to diversify and grow via acquisition with what might be some potential near term opportunities to create more value as a seller instead of a buyer here?

This is James, Bascome. I think it's hard to distinguish, to your point, what we consider value creation in terms of buying and selling. As Tim mentioned, we look at all sizes of things on the purchasing side. You have seen us sell businesses over the years. But right now, the sales have been out of the lease fleet primarily. We have added some investment in our aggregates business. For example, we talked about last year and see those type of opportunities as attractive as well. I don't think we mean to imply that valuations high keep us out of the market; it just has to have the right strategic long term fit for the Company and fit the model and were' actively seeking those opportunities.

Yes, this is Tim. We're looking at purchases of secondary market railcars that would enhance our leasing fleet. We look at opportunities in the aggregate business that fit that sector of our business and then we look at all types of various types of industrial manufacturing companies. And then we also do analysis ourselves to keep in touch with what the valuations of the various businesses that we have. And as James has said, over the last 20 years we have -- or 30, 40 years, we don't hesitate when there is an opportunity to divest the business and it makes sense, we will do that. So, we look at a real broad spectrum of opportunities and engage in those discussions and analysis with our Board.

I appreciate that color from both of you. Maybe taking a step back and asking it more simply, if we put it another way, are Trinity's management and your Board actively considering ways to unlock value by making the portfolio smaller instead of making it bigger?

We're considering a variety of different options to generate value for our shareholders; we have and we always will, but we're really not going to comment on any specific transaction or idea that we have until we get closer to the execution point.

I appreciate that. Back to the rail cycle, if I could follow up. You've talked a lot about needing to see -- or your customers needing to see consistent growth and better growth in underlying rail before there is a need to order again. I'm just curious, do you have any, A, maybe how long do you think the -- or with the size of the overhang from parked cars and the current backlog right now, how long do you think we need to see more material growth in rail before customers will start making those calculations and maybe sharpening their pencils a little bit more? And is there a situation where you might have an opportunity to perhaps lower pricing and incentivize some of these speculative orders that tend to go out and fill backlogs in weaker parts of the cycle before it turns?

So generally speaking, this is Tim, our customers usually will buy railcars because they've got growth needs in their business and they can't get the railcars out of the supply that is available at that point or they have replacement needs. And we do have a number of customers that like to make strategic buys at the bottom of the market and we're pretty good at being able to negotiate transactions with them at that time. And so the other thing that happens is market, a lot of times, will shift and change fairly rapidly. The supply gets consumed and then the next thing you know, they're back out there buying. And we've been through a number of down cycles where it's like a north wind blowing through that things change really quick and that's why our flexible manufacturing approach is what enables us to be able to respond quickly.

Just one final question here. Your rail guidance, from a delivery standpoint, is roughly 50% down on the number of railcar deliveries year over year. Can you just give us a little color on where that capacity is coming out? Is it a certain facility specifically or as a broad-based? Just anything you can help us with there, as we think about how the manufacturing portfolio looks in 2017 and 2018. Thanks.

Bascome, this is Steve. As we really try to optimize our production footprint, we're still working off across a number of plants where we reduced our capacity at existing facilities and we also have idle facilities. It really starts to become very product specific and production-line specific when we get down into this details of plans. But generally, we have reduced our production footprint to meet the current market conditions.

We will go next to Kristine Kubacki with CLSA. Please go ahead.

Real quick, a bigger picture question here. Just wondering on the pricing environment, obviously had some new competitors come in at this time and it sounds like you guys have been the ones pulling capacity out of the market at this point. Is pricing where you would expect it to be at this point of the cycle or is it more aggressive because there is new entrants and much more idle capacity?

Kristine, this is Steve. I really haven't seen anything unusual at these production levels from a competitive standpoint. Manufacturers are generally very intent upon filling production plans and are going after business plans very aggressively. The new entrants I haven't seen really make a difference in that equation.

And then just a question on the secondary market. Obviously, it remains really strong and given that it looks like the lease terms are still out pretty far, you mentioned about three-and-half years I believe. Is it the fact that the market maybe falls off a little bit as interest rates rise or as lease durations start to shrink? How long do you think that secondary market can last, stay hot?

Certainly, an investment business like this has some sensitivity to interest rates. It's probably different for different countries companies. But what I think is really driving the secondary market is the abundance of capital. So many institutional investors are looking to invest surplus capital and are broadening their interest into these type of alternative assets. So we think we're very well positioned to capitalize on that trend and working with institutional investors on a long term basis. It's an important part of our RIV strategy and growing our leasing business.

We will go next to Bill Baldwin with Baldwin Anthony Securities. Please go ahead.

One housekeeping question, Steve and I apologize if I missed it, but did you indicate how many railcars were shipped to the lease fleet here in the fourth quarter?

Was it 20? Just a minute, Bill, we'll get you the -- I did not say. We added 2,610 new railcars to our lease portfolio in the fourth quarter.

And Bill, what color can you offer us as to what we need to see in terms of developments or drivers to give us a more constructive outlook on the utility structures business looking out over the next several years?

Bill, I think on the utility structures business, the forecasts that are available would suggest strong demand as it moves out into latter part of 2017 and into 2018. This forecast tends to be one of these where projects have a tendency to slide a little bit. Some of the regulatory environment, particularly FERC 1000, has been a little difficult and challenging for the utilities to move projects. So maybe in an environment with slightly less regulatory focus, things may come to the forefront a little quicker.

Is the need primarily for upgrade of existing equipment that's out there or are we looking for new construct being the new driver?

A little bit of everything. The reliability which is really the upgrades and duplicative lines and then certainly the new utilities as well, that's a piece of it that ties in very well to our wind tower business. And then anytime they're putting in new wind tower facilities, they're having to run lines as well.

It appears we have no further questions. I would like to return the program to Gail Peck for closing remarks.

Thank you, Keith. Before we conclude today's conference call, I would like to take a minute to discuss some changes we're making in our investor relations program. I am pleased to announce that Jessica Greiner will be assuming the role of Executive Director of Corporate Strategic Planning, assisting both Tim and James. And Preston Bass, who has been with Trinity for the past six years in various finance roles, will be our new Director of Investor Relations. Over the next few months, Preston will be taking on more of a lead role in our investor relations program, while Jessica will be available to assist in the transition. For the last five years, Jessica has done a fantastic job in her role and will bring valuable insights to our strategic planning process. And now for some final housekeeping items, a replay of today's call will be available after 1 o'clock Eastern standard time through midnight on February 24. The access number is 402-220-0868. 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.

And this will conclude today's program. Thank you for your participation. You may now disconnect.