Greenbrier Companies, Inc. (The) (GBX)

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The Greenbrier Companies Earnings (GBX)

F4Q08 EarningsCall

November 06, 2008 11:00 am

Executives

Mark Rittenbaum – Executive Vice President, Chief Financial Officer, and Treasurer

Bill Furman – President, Chief Executive Officer

William Glenn – Vice President, Strategic Planning

Analysts

Wendy Caplan - Wachovia Securities

Steve Barger - KeyBanc Capital Markets

Frank Magdlen - The Robins Group

J.B. Groh - D.A. Davidson & Co.

Todd Maiden - BB&T Capital Markets

Young Kwon - Barclays

Matt Reams - Buckhead Capital

Presentation

Operator

Welcome to the Greenbrier Company's fourth quarter and fiscal year end 2008 earnings release conference call. (Operator Instructions). At this time, I would like to turn the conference over to Mr. Mark Rittenbaum, Executive Vice President, Chief Financial Officer and Treasurer. Mr. Rittenbaum, you may begin.

Mark Rittenbaum

Thank you all for joining our fourth quarter conference call. On today's call, we will discuss our results and make a few remarks about the quarter that just ended and provide an outlook for 2009 and beyond. And I am joined this morning by Bill Furman, our CEO. After that we will open it up for questions.

As always, matters discussed in this conference call include forward-looking statements within the Private Securities Litigation Reform Act of 1995. Throughout our discussion today, we will describe some of the important factors that could cause Greenbrier's actual results in 2009 and beyond to differ materially from those expressed in the forward-looking statement made by or on behalf of Greenbrier.

Today we reported fourth-quarter net earnings of $0.45 per share on revenues of $362 million. I'm going to provide a little bit more detail on that later on in the call, but first I would like to turn it over to Bill and then turn it back to me and open it up for questions.

Bill Furman

Thank you, Mark, and good morning ladies and gentlemen. On today's call I am going to talk about our markets, our strategic position and the outlook and just a few backward-looking comments about the year just ended. And I'm going to go back to Mark to discuss our financial results in more detail.

We are pleased to report net earnings of $7.4 million or $0.45 per diluted share for the quarter. Obviously these are very unusual times, and much of our financial performance for this quarter was driven by solid performance in our refurbishment and parts business, our leasing and services segments, and improved performance from our European operation. We also have increased our backlog in our marine operation, and that business is performing well.

Looking back on fiscal 2008, it was a year of a number of challenges and certainly nothing more challenging than what we've all seen in the financial markets and the global economy during the last 30 to 60 days. Despite current turbulence, Greenbrier is in a very strong liquidity position. We especially are happy to not have a rollover issue with any of our significant domestic credit lines. We have a small exposure in Europe, but we have positioned the company with its capital structure to weather this current economy and the turbulence in that economy.

However, the cycle for the commodities going way up or coming way down certainly creates a number of issues and a number of interesting opportunities. Our basic strategy in 2008 and beginning in 2007 was diversification into less cyclical businesses, but businesses which were very integrated to the life of a freight car, which we continue to manufacture.

Greenbrier has three manufacturing facilities in North America and Concarril in Mexico, our new GIMSA joint venture in Monclova, Mexico, and we have our core facility here in Oregon at Gunderson, Inc. We also operate out of a manufacturing business in Poland, Marine Manufacturing business at our Gunderson facility. With the exception of our Marine business, which is quite strong, the non-manufacturing businesses are continuing to deliver strong performance.

As a result of the strategic diversification efforts that we've made over the past several years, almost half or over half of Greenbrier's revenues and most of our margins are now derived from businesses outside of new rail car manufacturing. Refurbishment, parts, service, all operate on an installed base of freight cars in North America which is aging at a time when demographics for railroads are improving.

This installed base can follow the life of freight of a 40-year asset to provide services, repair work, and other management services on that fleet. And that is why we need to continue our footprint in manufacturing.

Looking forward, we believe that the rail and marine transportation markets will compare favorably to other modes of transportation. Fundamental problems of highway congestion, environmental impacts of trucking, and deteriorating infrastructure will continue to drive traffic to rail and marine, and being a supplier to these industries remains an exciting opportunity.

It has been a difficult year in our manufacturing segment. Two of our major product areas, forest products and double stack markets, have declined. We have substituted other freight cars. We are currently building boxcars and doing repair work at our Gunderson facility in Portland, and in Mexico we are manufacturing our Auto-Max automobile carrier car, gondola cars, covered hoppers, and a wide variety of products for the European market, which has in the past six months developed an interesting resurgence.

We have no doubt that the coming year 2009 will present challenges in manufacturing. However, there are also very good opportunities; our rail car backlog remains healthy. Our GIMSA startup operation and the introduction of the tank car line should bring strength in the second half of the year, and we have a backlog of about 16,000 units on the order books valued at $1.4 billion.

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