LAKE OSWEGO, Ore., July 1, 2013 /PRNewswire/ -- The Greenbrier Companies, Inc. (NYSE:GBX) today took a further step in its multi-step plan to enhance margins and improve capital efficiency by addressing inadequate margins and returns on invested capital in its Wheels, Repair & Parts segment. Greenbrier will sell or close eight of its 38 Wheels, Repair & Parts facilities. The Company is also implementing initiatives to improve profitability and reduce capital employed at another six facilities which are currently underperforming. Greenbrier expects to realize a minimum return of capital of $25 million by December 31, 2013 as a result of the actions announced today. Additionally, Greenbrier has appointed two new co-leaders for its Wheels, Repair & Parts segment effective with the June 30 th retirement of Timothy A. Stuckey, 62, as president of Greenbrier Rail Services. Stuckey has served in various leadership roles in his 26-year career with Greenbrier, and has led the Wheels, Repair & Parts segment since 1999.
The eight facilities that will be sold or closed are either non-core or otherwise underperforming. The six facilities that are identified for improvement will pursue margin enhancements through a combination of operational improvements and commercial initiatives including the negotiation of more balanced commercial terms with business partners. Additionally these six operations, along with all facilities in the Wheels, Repair & Parts segment, will be expected to meet increased targets for return on invested capital. If the expected improvement at these six facilities does not occur, those operations not measuring up will also be sold or closed.
"We have completed an in-depth review of each location in our entire 38 shop network to determine the actions announced today. The 14 facilities that have been identified for improvement, sale or closure employ nearly 600 people, with annual revenue of about $105 million and capital employed of approximately $55 million. The sale or closure of the eight identified facilities will eliminate a drag on segment gross margin of about 100 basis points, and Company-wide gross margin of about 30 basis points. We expect substantial margin growth at the operations we intend to improve and retain. Where substantial and targeted margin improvement is not attainable by the end of this calendar year, we will pursue further reductions in our capital employed in this business through the sale or closing of underperforming operations," said William A. Furman, President and CEO.
In connection with actions announced today, the Company anticipates it will incur pre-tax restructuring charges of about $3.0 – 5.0 million over the next 2 – 3 quarters. In the Company's third quarter ended May 31, 2013, the Company took a $76.9 million pre-tax, non-cash goodwill impairment charge relating to its Wheels, Repair & Parts segment.Greenbrier also announced that management of the Wheels, Repair & Parts segment will be co-led by two industry veterans, William Glenn and Rick Turner. Both executives will report to Furman. Stuckey will remain with Greenbrier as a consultant for the next year to aid the transition to new leadership and to assist with selected industry assignments. "Greenbrier appreciates Tim's dedication throughout his tenure with us. Since joining Greenbrier in 1987, Tim has been integral to our organization in multiple key assignments. I appreciate Tim's assistance with the new leaders of the Wheels, Repair & Parts segment as we enter a critical new phase for this business," Furman stated. "Tim helped create our Wheels, Repair & Parts business and guided these operations from inception into a period of remarkable expansion. We thank him for his contributions to Greenbrier's growth and diversification."
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