Tuesday, July 07, 2009

Greenbrier Cos. 3Q earnings fall; spat with GE continues

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The Greenbrier Cos. Tuesday reported revenue of $244 million for its fiscal third quarter, ending May 31, down 36% from the comparable quarter in 2008. Earnings before special impairment charges for the quarter declined steeply to $600,000, or three cents per diluted share, compared with net earnings of $8.1 million, or 49 cents per diluted share, in the prior year’s third quarter.

Earnings before interest, taxes, depreciation and amortization, and also before special charges, was $20.3 million, or 8.3% of revenue, compared with $34.5 million, or 9.0% of revenue, in the third quarter of 2008, the company said.

Lake Oswego, Ore.-based Greenbrier Cos. noted several pre-tax conditions for the quarter, including $900,000 in pre-tax costs associated with reductions in work force and interest rate swap breakage costs.

New railcar deliveries in the third quarter of 2009 were approximately 800 units, compared with 2,200 units in the third quarter of 2008.

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Greenbrier Cos. President and CEO William A. Furman, in a statement, said, “Year-to-date rail loadings in North America are down about 20%, and it is estimated that about 20%-to-25% of the entire North American railcar fleet remains idle.  In this environment, we continue to scale our operations to reflect the current economic situation, control costs and expenditures, manage the company for cash flow, and seek to pay down debt.  During the quarter, we paid down net debt by an additional $19 million.  We expect this trend to continue in the fourth quarter.”

Greenbrier Cos. noted its dispute with GE Railcar Services Corp. has not been resolved,  stating GE seeks to “substantially reduce, delay or otherwise cancel deliveries under a multiyear contract to build 11,900 tank cars and covered hopper cars over an eight-year period, with a current value of $1.0 billion.  We are currently in discussions with GE.”

The company continued, “We believe GE is in breach of its obligations under our contract.  GE has recently instructed us to slow our production of railcars to a rate of production less than that required under our agreement and does not allow for efficient operations of our manufacturing facility, also as required under our agreement.” The moves were “unilateral” in nature, Greenbrier said.