Greenbrier Companies Inc (GBX) 2009 Q2 法說會逐字稿

Welcome to the Greenbrier Companies second quarter earnings release conference call.

(Operator Instructions).

At the request of the Greenbrier Companies, this conference 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, Chief Financial Officer and Treasurer.

Mr.

Rittenbaum, you may begin.

Good afternoon.

I'm also joined today by Bill Furman, our President and CEO.

Welcome to our fiscal 2009 second quarter conference call.

In advance, I apologize for a bit of a raspy and fading voice here.

On today's call we will discuss our results and make a few remarks about the quarter that ended February 28.

We will provide an outlook for 2009 and beyond and then after that we will open it up for questions.

First, as always, matters discussed in this conference call include forward-looking statements within the meaning of 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 statements made by or on behalf of Greenbrier.

Today, we report our second quarter revenues of $287 million, $27 million or 11% increase over the prior year second quarter and a net loss of $6.9 million or $0.41 per diluted share.

These results were impacted by a $9.9 million deferral of revenue and related margin on a portion of the sale price of certain railcars sold and paid for in full during the quarter.

A significant portion of this deferral was anticipated to be recognized as revenue, margin and pretax earnings in future periods.

In addition, the results include $1.4 million severance costs related to work force reductions and other cost cutting measures we announced in February.

A little bit more background on the sales transaction, the deferral of revenue.

From time to time we provide support on manufacturing transactions, particularly when we are sponsoring certain railcar types and introducing railcars into the market.

For example, during the second quarter we delivered 360 of our Auto-Max auto carrying railcar units to major North American railroad.

In this transaction, we guaranteed the purchase minimum earnings through December 31, 2011, the maximum potential obligation on these 360 units is $9.9 million.

This obligation the considered a reduction in revenue and recorded as deferred revenue.

The purchaser has agreed to utilize the railcars on a preferential basis and we are entitled to remarket cars when they are not being utilized by the purchaser.

Any earnings generated from the railcars will offset our obligation to be recognized as revenue, margin in future periods as I stated earlier, we believe our actual obligation will be significantly less than the $9.9 million.

There are an additional 140 railcars in our backlog under the same arrangement that will be delivered later this fiscal year and there is a maximum additional obligation for these railcars of $3.5 million.

This obligation was included in calculation of a loss contingency accrued this quarter on railcars in our backlog.

So, to state it simply, all the drag in future earnings from this entire order is now behind us and there is only upside as we place these cars in service and they generate revenues and margin.

We are highly focused on doing so along with our customer.

We continue to manage the Company for cash and liquidity.

During the quarter generated $78 million of cash from operating activities and paid down net debt by $70 million.

We expect this trend to continue in the quarters ahead and to have substantially, if not entirely, paid down our domestic lines of credit by fiscal year end.

The measures we have taken in order to reduce our borrowings and improve cash flow have been successful and we will continue to act without hesitation to further optimize our liquidity.

We continued constrain our net capital expenditures for 2009 to only those that are absolutely necessary.

These net expenditures have been reduced further to approximately $20 million compared to our previous expectations of $40 million and as compared to $63 million in 2008.

As well, we suspended the quarterly dividend in keeping with our policy of managing for cash and liquidity.

We continue to stress test our forecast under different scenarios for various financial covenant impacts as well as business impacts to ensure we take appropriate actions to run the business effectively and to maintain liquidity.

As we stated on numerous occasions, we believe we have adequate liquidity to manage through this very difficult environment.

As the end of February, we have $41 million of cash on the balance sheet and $84 million of additional borrowing capacity.

We have very little in the way of near term debt maturities with less than $25 million maturing in Europe and we believe we can more than adequately manage through the roll over of this maturing revolving debt in Europe.

Our $290 million revolving line of credit in North America matures in 2011, our first potential significant maturity of notes payable is in 2013 and is related to our $100 million convertible bonds.

We are currently in compliance with all of our financial covenants.

Furthermore, we have a strong relationship with our lead bank and our bank syndicate group, our lead bank being Banc of America, and we have long-standing relations throughout the group.

We will be proactive when necessary to remain in compliance with our loan covenants.

In this regard, it is likely that during the current quarter we will seek covenant amendments to our North American revolver to give additional operating flexibility and we are confident that we will be able to obtain those amendments.

Now, let me add some color on the quarter.

I will not go in to detail in each of the segments as it's spelled out in the press release, but I will do a little bit of a deeper dive here.

First is anticipated, we did see sequential improvement in our refurbishment in parts margins from Q1 of this year as a result of cost reduction efforts and the bottoming of scrap prices.

We anticipate we will be able to keep margins below double digits in the quarters ahead as we continue to realize benefits from our cost reduction efforts.

You may recall in January our Wheel facility in Washington, Illinois, was extensively damaged by fire.

Substantially, all the work scheduled to be completed at this facility has been shifted to other Wheel facilities in our network and we have not experienced significant disruptions in service to our customers.

We believe we are adequately covered by insurance for this event, though it will be some time before the claim is actually settled and capacity is brought back up.

Turning to leasing and services, our fleet utilization was 94.3% during the quarter compared to 93.3% at the end of our first quarter.

Current quarter includes $1.1 million of gains on equipment sales -- excuse me, by the prior year second quarter includes $1.2 million of gains.

While we expect realize higher gains on equipment sales during the balance of the year through higher trading activity, overall gains this year are expected to be lower than historic levels.

We also entered in to a major management services contract during the quarter to manage 80,000 railcars for a large North American leasing company.

While the direct revenue and margins from this contract are not overly material, we believe a future opportunity with this customer and our integrated business model have great potential.

Now on to manufacturing.

Marine manufacturing and our European operations continue to perform well.

Our manufacturing operating performance this quarter actually improved over our first quarter.

As when you exclude the contingency reserves we took this past quarter of $9.9 million related to one contract previously discussed, our margins were $3.5 million from the manufacturing operations for the quarter.

As I said before, we now have this drag behind us.

We are expecting that our manufacturing margin to be closer to break even in Q3 and then turning positive in Q4.

As we previously stated, in North America we still plan to shutter our Concarril facility in July and the production of new boxcars at Gunderson in June, and at that time at Gunderson here in Portland we will focus solely on railcar furbishment and marine, and out new railcar production in North America will be concentrated a GIMSA, our joint venture facility in Mexico.

Several months ago we announced various cost cutting measures for which we said we would anticipate $60 million of annualized cost savings.

These cost cutting initiatives are showing traction and we expect this trend to continue.

We are prepared to take additional steps, if necessary.

I'm now going to turn the call over to Bill and then we will open it up for your questions.

Thank you, Mark.

At the risk of sounding like a broken record, I'm going to begin comments by talking about the significant progress we are making in terms of managing, maintaining, and having a robust risk management program for liquidity and for improvement of our balance sheet.

In addition to the significant debt pay downs for the quarter, which Mark and the press release referenced, we continue to reduce G&A overhead costs and these costs as a percentage of revenue are falling and the management of working capital decisions that we have made to shutter cash negative components of our manufacturing segment as well as scaling other segments of our business to present market realities, all of these will reinforce our goal to be out of our bank revolver by the end of the fiscal year and to delever our balance sheet as appropriate.

I think it's very important to remind all stakeholders whether these are customers, employees, shareholders, or those who have entrusted us with loans that we are very focused on getting through this downturn and emerging as a very strong company.

It's important for you to focus on a few fundamental facts.

One fact is that our balance sheet, while we have a high degree of debt, has debt that has rollover risk minimized and reasonably friendly covenants.

Mark has addressed the fact that we are aggressively responding to the risk that we can identify, and we are managing for liquidity.

In our balance sheet we have a high preponderance of the balance sheet in leased railcars in the leasing unit.

These assets can sustain higher debt and they are self-liquidating.

Our manufacturing segment, which produces a great portion of our revenue, a significant portion of our revenue, also is producing a drag on GAAP earnings but presently under the current strategy, the strategy we follow in all downturns is now throwing off considerable cash.

As we liquidate inventories and further scale back operations to a much reduced level while retaining the capability to ramp back up when market conditions are more favorable, we believe our other units and with the platform in manufacturing will be poised to recover when the opportunities arise.

We are very pleased with the progress we made in our joint venture facility at GIMSA in Mexico and while we have decided and are taking action now to shutter our other manufacturing facility in Mexico, we intend to concentrate the majority of production at that GIMSA facility.

In that regard, a great preponderance of the investment we have made in that facility is in secured loans, and we have a valuable option to acquire more shares in that facility should that become attractive in the future.

This a low cost manufacturing facility and we are currently producing high quality covered hopper cars and under the GE contract, tank cars, so we are very proud of what we achieved there and we are very pleased with what that facility is capable for doing for Greenbrier now and in the future.

Turning back for a moment on the quarter, perhaps it would be interesting as a side note that we considered other accounting methods for the contract which, major contract which Mark has presented.

That is a very attractive deal for Greenbrier.

We could have potentially booked that contract under FIN 45 which would have allowed us to book the true estimated liability of the contract rather than the maximum liability.

However, in these uncertain times and consistent with GAAP and after considerable discussion with our accountants, we chose the more conservative and deliberate route.

Again, we are running the Company to manage and preserve liquidity, retire debt, and this is clear not only from our public statements from what we have said, but it's very vividly clear in the current quarter.

As Mark has indicated, we are conducting continued stress testing of our financial model.

We are have a highly liquid collateral base under our revolver and we feel that we have adequate liquidity and we will continue to take steps to enhance that liquidity moving forward.

Mark, I'm going to at that point turn it back to you.

I will be open to questions.

I would like to make one other remark about current market conditions.

In mentioning that our GE contract is a major portion of industry backlog, I continue to expect the manufacturing segment of our businesses and other businesses in North America to be under stress over the next year or two years.

We are well prepared for that.

Perversely, however, we resolve the issues we have disclosed with regard to the GE contract.

We see little affect of that resolution or those potential resolutions through the cash flow statements and even the P&L.

We believe that we have a very strong agreement but it does represent a very, very large proportion of the total published industry backlog.

There are a lot of analysts who believe that the stored card statistics in the US are approaching 500,000 cars.

I don't believe that we agree that the number is that high and we also believe the storage statistics do not tell the full story on the market.

I would be happy to answer questions on the subject if any of you are interested in further discussing that.

It's sufficient to say there are a large number of stored cars, velocity has improved.

With velocity and with a very healthy railroad business and in an era when, for a variety of reasons, railroads should be favored, we think we continue to be in a good long-term position at Greenbrier to benefit from the velocity features and our repair and refurbishment and wheel segments of the railcar business.

Mark, back to you.

Thank you, Bill.

Operator, we will go ahead and open it up for questions now.

(Operator Instructions).

The first question comes from Sandy Burns.

Good afternoon.

Could you just remind us what exactly was the debt-to-cap ratio for the second quarter and according to your calculation what was the ratio?

The debt-to-cap ratio is under our revolver is 75%, I didn't bring the -- right in front of me, it's straight off of the balance sheet of our revolving notes plus notes payable to those two line items.

And I believe it comes out to 72.1 -- or 0.721 and is the actual ratio and the required ratio is 0.75 or has to be below 0.75.

Then it steps down by 2.5% in the next quarter?

That is correct.

Okay.

Also, on the press release you gave the total revolver debt between the US and European facilities, could you just break that out for us even in rough numbers?

You are referring to the amount outstanding at the end of the quarter?

Yes, it was $101.5 million.

About $25 million of that was the European debt and the balance, the revolver or the North American and then of course there is $41 million of cash from the balance sheet as well.

Right.

Okay.

You discussed a little bit how you expect the US portion to be paid down to zero, and I guess given your EBITDA trends and reduced CapEx and interest, that is certainly pulling a lot of cash from other sources.

Is it fair to say is that mostly from sales of railcars similar to what you did in this quarter or are there other sources of cash that we should be thinking about?

I think working capital is one of the primary when you look at the cash flow statement that the reductions in working capital were some primary generators of that cash flow.

We expect that trend to continue.

Okay.

Do you expect also any other significant pools of railcar sales similar to what you had in this quarter?

No.

You're talking abut out of our lease fleet.

Correct.

No.

So that won't happen again.

Okay.

Just also, just to talk a little bit further about the cap structure.

The revolver, are there any railcars that are security for that or is that only secured by receivables and inventory?

The revolver is secured by all of our assets other than the assets all of our assets in North America, other than the assets that are pledged to the leasing term loan.

Okay.

Railcars specifically pledged to the leasing term loan.

Right.

That's an interesting point, Sandy.

Looking at that collateral pool we are underlying revolver, the parties in the revolver are the same parties principally that are in the senior secured loan which is leased assets and between the two of them, the loan is a very attractive facility, but between the two of them there is a approximately half a billion dollars of assets that are very liquid including leased assets, some of which are dedicated to the secured loan.

So I guess at this time are there any material unencumbered assets you could possibly use if necessary or it's all basically pledged the revolver and term loan?

When you say use or as necessary, we certainly have the flexibility in our loan agreements to operate the business and to -- we regularly sell assets and buy assets in the normal course of business, and we continue to be free to do that.

Right.

But I guess to the extent -- but I guess are there any assets that you could use to raise additional capital for if you so desired or all the railcars essentially pledged to the revolver in the term loan and any proceeds from those sales would go to reduce that debt?

No.

The way you first stated it is more correct.

We could sell, specifically you are asking about leasing assets.

We could sell those leasing assets and then that would be a source of cash that would either be used to pay down the debt or reinvest in the business.

Sandy as long as we have adequate collateral under the formula for the collateral pool, we are free to sell assets in that pool in the normal course of business.

Right, okay, thank you very much.

Good luck.

Thank you.

Next question is from J.B.

Groh with D.

A.

Davidson.

Afternoon, guys.

First off, on the $20 million CapEx reduced budget, is that just basically a maintenance level, purely a maintenance level at that point?

Maintenance level is probably a bit below that, J.B.

There is also some investments in systems that we are making this year that we are continuing to go ahead with for a longer term benefit but the true maintenance relating to the operations is probably closer to the $15 million to $17 million number rather than $20 million.

Okay.

So there is even a little wiggle room there.

Okay.

I think last quarter you mentioned that there was a boxcar order that was canceled subsequent to last quarter's end, is that reflected in that new backlog number?

We reinstated a portion of that order by negotiating with the customer and that renegotiated position is reflected in current production in backlog.

So the bottom line is the gross number may be a little bit higher than 500 orders, gross order number may be a little bit higher than 500 but it is not 800?

Correct.

To be clear, J.B., at the end of February we had pulled that order out, the order that was canceled.

I'm sorry, at the end of November we pulled that out and then it was reinstated in the February backlog, the portion that -- the portion of the order that was reinstated is now included in the February backlog.

So it was canceled in the -- it was canceled in the November backlog number but it has been reinstated so the 500 orders that I see for this quarter includes some new boxcars that were renegotiated, is that correct?

Yes.

The portion of that -- there is a portion of the orders when you say 500 new railcar orders, there are orders other than just boxcars.

Right.

Okay.

I'm just trying to get kind of a net number.

Okay.

Then, I'm still having a little trouble understanding the order with the deferred revenue.

What would the gross margin impact be had you recognized that $10 million in revenue?

Can you repeat that, J.B.?

Sure.

You deferred this $10 million in revenue, what sort of margin impact did that have?

That went straight to margin.

All margin?

Straight to margin.

Now that's exactly right.

It was reduction of revenue of the $9.9 million which was the full liability but all the costs are included in there.

So that $9.9 million you could essentially add that back to your manufacturing margin.

Look at an adjusted number.

Look at the true manufacturing margin of building the products that are in manufacturing barges and marine, yes, that would be a true margin from manufacturing.

So because you took the conservative road you showed a lot.

Had you played it a little loosely, you could have showed a profit in manufacturing.

I want to be clear, J.B., I thought you were asking a slightly different question from actually building the equipment.

There is a $9.9 million maximum obligation.

We do believe that there will be some of that obligation that we will ultimately be responsible for.

We believe it will be substantially less than $9.9 million.

Let's be clear about that.

We are using what we concluded was appropriate GAAP accounting.

We had considered an alternate accounting which also one could make a case for under FIN 45 that if we had used that we would have actually recognized a profit on the cars through that method in the quarter and we would have been close to break even for the quarter.

So we where are using a conservative accounting because, A, it's required under GAAP and, B, we want to be fully compliant with GAAP and, C, it is more conservative and, therefore, in an uncertain world it is more appropriate to use a more conservative policy.

It will have the traverse affect, we believe, under our operating model and under the provisions of this contract which we find quite attractive to help us introduce a new product.

It gives us a reserve fleet out of which to market and bridge cars and we believe that we will have considerable income in the future periods that will come directly back in to margin.

So how many quarters does that impact take?

Well, the it goes through December 2011.

So it could be -- in some cases the obligation could be extinguished earlier.

Basically, I think what you are getting to, J.B., is that the benefits of this more likely are to be bled in over time between now and December 2011.

We received the cash for the cars as if we sold them.

And we are simply dealing what we could have dealt with by reserves, we are -- the cars as they are delivered are either put in storage for a future customer.

We are working on a number of contracts for this advanced car type.

Then we will have sales, we presume, we have future sales of that car type as well.

Again, it's compliance with GAAP.

We expect it to produce, we already have the cash and the real question is from a cash flow perspective, how much will we have to pay out under these agreements which are very attractive, but and we are booking the full liability under GAAP.

Okay.

Thank you.

That helps.

(Operator Instructions).

And the next question comes from Steve Barger from KeyBanc Capital Markets.

Hi.

Good afternoon.

Hi Steve.

I missed the very first part of the q-and-a.

I know you were talking about the amendments.

I want to go back to that.

You said you do need to seek amendments.

Is that correct, to avoid a violation?

We said that we would be proactive in seeking amendments to give us flexibility to alleviate the concern about our covenants.

Okay.

But if you can generate cash in the back half like you did this quarter and you are expecting to be out of the revolver by the end of the fiscal year, is that strictly a function of the stepdown in 2Q?

In our revolver there is a couple of financial ratio tests, there is a debt to capitalization test and EBITDA to interest test, not straight off of financials but as defined.

While we expect to be out of the revolver, it's still a good thing to have a revolver for working capital needs.

We want to make sure that when we need the revolver, we will have the flexibility that we desire.

Naturally, we do not want a revolver that has covenants that have any possibility of tripping under different stress testing models and prudence simply suggests if you paid off your revolver, you will have a revolver hanging out there that could blow up in your face with some unexpected event, not that we are living in an environment where anything unexpected might occur.

Right.

This is not an eminent issue.

It's your being proactive in terms of taking care of any potential problems.

We have not tripped any covenants in the current quarter.

I wish I had a crystal ball to tell what the future operating environment would be.

I think we are being prudent, as you say.

Okay.

How much is reasonable to expect to come out of working cap in the back half or how much cash do you think you can possibly generate?

I don't think we want to give a granular answer to that.

What we are doing that's creating this dynamic is that our manufacturing segment is a drag in the Company from a cash perspective and a GAAP earnings perspective and it's consuming in the high levels of operations a lot of cash.

And so we are simply running that cash out and in paying down debt.

When we build back up, that's where we will need the revolver again and we will have other opportunities to enhance capital, we believe, and delever during more positive time.

J.

B., what Bill is referring to, of course, we are operating at higher production levels then manufacturing tends to draw on cash to maintain the working capital necessary to do that, now that we are operating at the lower levels, the working capital turns and manufacturing is throwing off a lot of cash.

Right.

Have you done anything with the $41 million that was on the balance sheet at the end of the quarter or any of the incremental $22 million?

No, other than either maintaining in cash or paying down the revolver being one of those places.

Other than normal working capital sources and uses.

Right.

Would you consider retiring any other debt out there, any of the bonds or anything like that?

I think at the current time we certainly are looking at our capital structure and various options open to us, we are focused on -- our primary focus right now is maintaining liquidity.

We are looking at all the obvious things what not to look at, those facilities have very interesting features and they are attractive in the current market.

It's good to maintain liquidity and on one hand it would be good to delever the balance sheet.

They seem to concern people.

They are attractive and we -- so we are evaluating very thoroughly.

Yes.

Just seems like a pretty big opportunity given where they are trading.

Right.

Or where they seem to be trading.

Yes.

Have scrap prices improved at all since the end of the last quarter to where they are no longer a drag or are they still depressed?

Still depressed.

We expect the export market to improve but we think the domestic market is still full of inconsistencies and I think that it's likely to improve over time.

That's been some what of a drag.

When you look at the dynamic between scrap prices and surcharges, they are still being passed through by some suppliers on preexisting contracts.

Okay.

Switching to the lease fleet for the minute.

Average lease life of three years, I believe.

Can you talk about what you are seeing on renewal rates for cars coming off lease?

It's a tough market.

Both new railcar prices and lease rates tend to provide the umbrella for used railcars and as we disclosed in the press release, there is a lot of equipment being parked right now.

When equipment comes up for renewal, which we are fortunate we have a diversified portfolio, but when equipment comes up for renewal, it's a buyer's market right now.

Right.

Right.

And you had mentioned that you had some thoughts about the numbers of 500,000 cars being parked.

Did I hear you correctly when you said that you thought the number was less than that?

Yes.

We believe the actual core number is closer to 400,000.

We think there might be some double counting, but we think there is probably 125,000 cars believe it or not in that category that have been added due to velocity improvements which are characteristic due to the downturn.

You got a heavy overhang on an industry that normally, if everyone behaved normally, I would have built 50,000, 60,000 cars per year for replacement.

So we had a surge, we got a surplus that needs to be worked off.

But the odd thing that is also in that mix is the car types.

There is not -- it's not a homogeneous mix.

There are some kinds of cars that are obsolete, some cars that ought to be scrapped.

Companies are not scrapping cars at low scrap prices.

All of those forces are somewhat artificially inflaming people and that's where people get these glum faces.

Having gone through many, many downturns, I still believe this is not as bad as the downturns we saw in the mid 80s when orders came to almost nothing and backlogs dwindled to nothing and pure manufacturing plays were nothing.

So these things tend to recover, the railroads themselves are very healthy.

All we got to do is endure through this, throw off cash, pay down debt and dodge any of the bullets that come our way.

We also want to have a plan to have capital adequacy and strength, including delevering if there are ways to do that, to emerge with our model to take advantage of opportunities.

Okay.

And just one other to that kind of the point about utilization of the class 1's.

Are you seeing them still -- are you seeing them take repair work in-house to keep some of their own employees busy, can you kind of talk about the mix of refurb to repair business?

In a normalized condition they defer maintenance.

They do exactly what you say they tend to and that comes back to haunt them.

It's very difficult to avoid.

They are interested in velocity.

They keep their running fleet very -- it's moving very fast.

That's good for the Wheel business, that's good for the repair business and it ultimately will be good for the refurbishment business.

We, in the last quarter or two, are diverting resources to jump start some programs because when this type of environment exists there are a lot of opportunities to help railroads with suboptimal equipment patterns and some of the deferred maintenance can actually be value destructive for the railroads and we have had great successes in the past stimulating refurbishment programs for our car shops.

In fact, our strategy for Gunderson, our facility in Portland, is to do more furbishment, emphasize marine and as the opportunities exist to run one new car line.

We are currently running boxcars, we are not sure that we will be able to sustain that line.

Right.

Okay.

I think there was some acquisition benefit to the parts business.

Do you know what the organic growth rate if the after market was?

If you will bear with me a minute, I believe I have what the acquisition related piece is here with the balance of the growth piece.

We may have to get back to you on that.

I don't think Mark --

About 9 -- about $17 million of revenues was from the acquisition, what you actually see is some decline there.

Part of that because the overall growth was less than $17 million.

Part of that decline is the lower scrap pricing receiving on the Wheels and as was talked about before some of the repair business and particularly the refurbishment side of the business is down some.

Okay.

Thanks very much, gentlemen.

Thank you.

Next question is from [Todd Maiden] with QDB&T Capital Mortgage.

Good morning.

Good afternoon, guys.

You didn't go in to the mortgage business did you, Todd?

No.

I was actually already in the mortgage business prior to this.

I had a little flashback there for a minute.

Just a couple of quick things.

One, the work force reductions that you reference severance costs associated with those, were those more on production line employees or was it headquarters?

It was a combination we broke out in the release the breakout of the costs between manufacturing in G&A expense, but this would include both corporate and line people and then support in the manufacturing operations too.

By sheer numbers of reductions it is, unfortunately, of course the case -- by sheer numbers but the breakout is pretty even between cost of sales and G&A expense to severance costs.

Might also note that we made (inaudible) in direct compensation at all levels with most senior levels receiving a 12.5% cut back in salaries, we froze salary adjustments, we froze other benefits, I took a voluntary reduction of my salary, we probably picked up $5 million a year from a lot of corporate overhead.

We reduced corporate overhead considerably and we are continuing to look at opportunities to reduce headcount and overhead at the facilities as we scale back and at corporate.

Okay.

All right.

And then on the fiscal Q1 call I think you talked about there were 2900 units scheduled for delivery in 2009 with 800 that had been delivered so far, then we are looking at 1300 in this quarter.

Are we kind of -- has that 2900 number, obviously it's changed given the deliveries you had.

But do I back off the 800 deliver from Q1 and the 1300 from this quarter, have there been other slots filled?

Are we kind of looking at an 800 number for the remainder of the year?

No.

I mean we disclosed in the release what we expect to deliver for the balance of the year.

And what we said we expect to deliver for the balance of the year is 1900 cars, so when we said 2900 cars last quarter, I don't have it in front of me.

If you are quoting correctly that we said 2900, then that would have included in some expectations about orders and so on, our outlook for the year.

Now what we are anticipating is 1900 cars for the balance of the year.

Okay.

All right, thank you.

At this time, there is are no further questions.

Thank you, operator, and thank you for attending our call.

We appreciate the interest and look forward to talking to you again next quarter.

Bye-bye.