Greenbrier Companies, Inc. (The) (GBX)

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The Greenbrier Companies, Inc. (GBX)

F4Q09 Earnings Call

November 12, 2009 11:00 am ET


Mark J. Rittenbaum – Chief Financial Officer, Executive Vice President & Treasurer

William A. Furman – President, Chief Executive Director & Officer


Steve Barger – Keybanc Capital Markets

John Parker – Jefferies

Frank Magdlen – The Robins Group

J. B. Groh – D. A. Davidson & Co.

Arthur W. Hatfield – Morgan Keenan & Company, Inc.



Welcome to the Greenbrier Companies fourth quarter and fiscal yearend earnings conference call. Following today’s presentation we will conduct a question and answer session. Until that time, all lines will on a listen only mode. At the request of the Greenbrier Companies, this conference call is being recorded for instant replay purposes. At this time I would like to turn the conference over to Mr. Mark Rittenbaum, Executive Vice President and Chief Financial Officer. Mr. Rittenbaum you may begin.

Mark J. Rittenbaum

Welcome to our fourth quarter conference call. I’m joined today by Bill Furman, our CEO. We will both have prepared remarks and then we’ll open it up for some questions. As a reminder, matters discussed on this conference call include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of ’95. Throughout the discussion today we will describe some of the important factors that could cause Greenbrier’s actual results in 2010 and beyond to differ materially from those expressed in any forward-looking statement made by or on behalf of Greenbrier.

Today we reported our results for our fourth quarter ended August 31, 2009. Net earnings were $6.7 million or $0.37 per share on revenues of $230 million. Results for the quarter included severance costs, right off of loan fees and warrant amortization expense aggregating $2.5 million net of tax or $0.14 per share. The results also include tax benefits of $6.8 million or $0.37 per share related to reversal of a deferred tax liability and a deemed liquidation of a foreign subsidiary of tax purposes.

We continue to manage the company with an eye towards cash flow and liquidity and our cash balances at the end of the quarter were $76 million. We had $106 million of committed additional borrowing capacity. During the quarter we reduced net debt by an additional $35 million bringing the total net debt reduction for the year to $102 million. We expect to remain out of our domestic lines of credit until market conditions improve or until appropriate opportunities avail themselves.

Now, let me address some highlights for the quarter. I will not go in to detail as each segment as that information was provided in the earnings release. Summing up, our aggregated gross margins reached 14% for the quarter, the highest level this year. The sequential increase over Q3 was primarily due to stronger performance from our manufacturing and leasing and services segments. Margin for the second half of the year nearly doubled that of the first half.

In our refurbishment and parts segment we experienced a sequential decline in revenue principally as a result of lower wheel volumes and current economic environment. Our gross margin of 13.1% was a slight improvement from Q3 and we currently anticipate margins should stabilize around 12% to 14% range in 2010.

Our manufacturing operations experienced a significant improvement on gross margin on a sequential basis on a slight increase in revenue and our performance exceeded our expectations. The sequential margin improvements was the result of continued strong performance by marine and improved performance in both our North American and European new rail car operations. During the quarter we consolidated new rail car production in North America at our joint venture facility in Mexico Gunderson GIMSA and we temporarily closed our Concarril facility until market conditions improve. In our facility here in Portland Oregon we will continue to focus on railcar refurbishment and marine during these down times.

By consolidating our new railcar production in North America, we realized continued efficiencies from operating at high production rates in GIMSA while minimizing overhead costs at our Concarril facility which is a leased facility. Based on our current production plans, approximately 2,400 units in our backlog are scheduled for delivery in fiscal 2010. We shipped 3,700 cars in 2009 and obviously we do have open production space for more orders in 2010. In 2010 we would hope to achieve low to mid single digit margins in our manufacturing segment.

Turning now to leasing and services, our fleet utilization was 88.3% at the end of the quarter compared to 92.1% at the end of our third fiscal quarter and 95.2% at the end of our fourth quarter of ’08. Performance of the lease fleet remains under pressure from the effects of a weak economy as there still remains a large number of units in North America overall that are idle and we have a strong focus on keeping our cars on lease and we believe that our lease fleet utilization is stabilizing.

Our leasing and services margin of 48.1% increased significantly from Q3 margin of 34.1%. This increase was due in part of gains on sales of equipment of $1.2 million in the current quarter compared to a loss of $.4 million in the prior quarter. Again, that loss in the prior quarter was a bit of an anomaly due to a unique event. In addition, the current quarter benefited from higher earnings on certain utilization leases in a reversal of certain maintenance reserves on terminated leases.

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