Greenbrier Companies, Inc. (The) (GBX)

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The Greenbriar Companies, Inc. (GBX)

Q2 2010 Earnings Call

April 7, 2010 11:00 am ET


William Furman – President, Chief Executive Officer

Mark Rittenbaum – Executive Vice President, Chief Financial Officer


Paul Bodnar – Longbow Research

J. B. Groh – D. A. Davidson

[Joe Box – Keybanc]

John Parker – Jefferies

Art Hatfield – Morgan Keegan

[Philip Faccelli – Cantor Fitzgerald]

[Wayne Archembauld – Monarch Partners]

[Daniel Max – Chase]



Welcome to the 2010 earnings conference call. (Operator Instructions) At this time, I would like to turn the conference call over to Mr. Mark Rittenbaum, Executive Vice President and Chief Financial Officer.

Mark Rittenbaum

Good morning and welcome to Greenbriar’s fiscal second quarter 2010 conference call. On today’s call, I’m joined by Bill Furman our CEO and also sitting in on our call is one of our new directors, Victoria McManus who is based out of New York and joined the Board in May of last year.

On today’s call, we’ll discuss results and make a few remarks about the quarter that ended and then we’ll update our outlook for 2010, and after that, we’ll open it up for questions.

But first, as always, matters discussed in this conference call include forward-looking statements and I’d like to remind you that these statements are within the meaning of the Private Securities and Litigation Reform Act of 1995. Throughout our discussion today, we’ll describe some of the important factors that could cause our actual results in 2010 and beyond to differ materially from those expressed in any of our forward-looking statements and I invite you to look at the statements and risks factors as they appear in our SEC filings.

With that behind us, today we did report our results for the second quarter. I’d like to remind investors that when you look at our statement of operations, that the accounting world has decided to change a convention that has been in place since the beginning on mankind and net earnings and losses are now referred to as net earnings attributable to controlling interest, but it really is comparing apples to apples to what used to be know net income or net loss or the bottom line.

So we reported a net loss attributable to controlling interests for the quarter of $4.8 million or a loss of $.28 per share on revenues of $200 million. The results for the quarter include a noncash charge of $1.3 million net of tax or $0.08 a share related to amortization expense and amortization of convertible debt discount.

These charges are included in interest expense in our income statement, and excluding these charges, our loss per share would have been $0.20. These non-cash charges will continue to appear through the third quarter of our fiscal 2013.

As anticipated, the results for the quarter were weaker than our first quarter. We expect it to be our weakest quarter of the year, and in fact the second half of the year will be significantly stronger than the first half. And for the year as a whole, our outlook and guidance has not changed from the prior quarter where we do expect we will have modestly EBITDA before special charges for the year on lower revenues that in our fiscal 2009.

Now let me address some highlights for the quarter. To supplement the year over year comparisons you’ll find in the financial tables in the press release, I’ll add color on a sequential basis, that is related to comparing the second quarter of this year to the first quarter of this year.

In our refurbishing and parts segment on a sequential basis, compared to Q1, revenue increased modestly primarily due to improving business trends and higher scrap metal prices, both of which are consistent with improved macro economic trends.

Gross margin for this segment was 11.6% of revenue, essentially flat with Q2 of last year but up sequentially from Q1 of this year, again due to the same reasons I just mentioned, improving economic macro climate and higher scrap prices.

While we would prefer mix of business more weighted towards refurbishment rather than repairs, our shops are becoming increasingly full as cars are pulled out of storage and in need of repair as the economy recovers.

We are also bringing back workers as a result to address the increased activity levels. We expect that over time, as the recovery is sustained, the mix of work load will become more favorable and weighted towards refurbishment. As well, well volume should increase.

Now turning to our manufacturing segments, results improved from last quarter and we are pleased with the performance of this segment throughout; that is both with the performance of new rail car in North America and Europe and with our marine manufacturing business.

New rail car deliveries of 800 units were more than double the 350 units in Q1 and year to date new rail car deliveries are 1,150 units and we anticipate delivering 2,600 units for the entire fiscal year.

Overall, our gross margin for the second quarter was 7.3% of revenue, up a bit from the 7% of revenue we experienced in Q1 and our ability to ability to maintain the margins in the 7% to 8% range for the balance of the year will partly depend on maintaining marine production rates at current levels and Bill will speak to this a bit more in his comments.

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