Publicly held corporations often have quarter earnings reports with investment professionals. They can be an unexpected source of information about railroading. Here for example are selected portions of GATX Corporation’s Second Quarter 2008 “Earnings Call” between company executives and investment company analysts held July 24, 2008. I provide the URL, and deliberately held my excerpts to under 400 words, to comply with their copyright conditions:
Rhonda S. Johnson - Director, GATX Investor Relations: “As noted in our press release our rail portfolio continued to perform well despite the weak market. Our utilization is still high at 98% thanks in part to an increase in scrapping. When a car comes off lease or into the shop for repairs we evaluate that car under our economic repair limit model to determine whether to repair or to scrap the car. With scrap prices almost 80% higher than scrap prices at year end more and somewhat younger rail cars are being designated for scrap. Gain from our scrapping activities are found in other income on our income statement.”
Q&A Session (excerpts):
John Hecht - JMP Securities: "I wonder if you could shed more detail on what assumptions you’re making embedded in your utilization and pricing assumptions for the second half of the year in your guidance? More detail about which, from a regional perspective, and do you expe
As recently as one year ago, there was a major investment in ethanol cars. That came to a big halt last fall, as did investment in the actual plants. It caught a number of fleets off guard. Unfortunately, as I understand it, those cars are pretty much for ethanol and would be somewhat difficult to convert.
Yesterday’s WSJ had an editorial indicating there are over 19 million ( YES MILLION) houses, apartments and condos which are not occupied. I dont know how many total housing units there are in the US, but it cant be much more than 100million in normal times. (note I determined that by dividing 300million population by 3 persons per household for a quick estimate…if anyone can provide accurate numbers it would be appreciated). Thus, it appears the lumber usage is going to be down for quite awhile.
Did you read the Trinity Industries report. I made it thru about 50% … interestingly they are converting 2 railcar manufacturing plants to Wind Tower plants for electric wind power generation. Leasing utilization is 99%, but the trend is for manufacturing of cars to slip a bit.
Did you happen to note the location of the two Trinity plants that will be converting? All I could find was that two plants will begin the conversion later this year. Jamie
Whereas it’s true that a lot of old tank cars may be scrapped, keep in mind that new standards for hazmat cars will be coming–and I suspect that it will be easier to build new cars to meet those standards than it would be to retrofit old ones. Don’t fill out the death certificates just yet.
Same with Center-partition flat cars: before a relatively new fleet is cut up for scrap, you’ll see alternative uses. The first to go will be the older cars, which have a lower capacity due to their shorter (60 feet vs. 73 feet) inside length.