The Greenbrier Companies
Financial Summary
Fiscal Second Quarter Results:
-- Revenue for the second quarter was $287 million, up $27 million or 11%
versus the prior year's second quarter.
-- Net loss for the quarter was $6.9 million, or $.41 per diluted share,
compared to net earnings of $1.4 million, or $.09 per diluted share,
in the prior year's second quarter.
-- Results for the second quarter of 2009 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
portion of this deferral is anticipated to be recognized as revenue
and pre-tax earnings in future periods.
-- The results also include $1.4 million of severance costs associated
with reductions in work force.
-- EBITDA for the quarter was $9.4 million, or 3.3% of revenues, compared
to $23.6 million, or 9.1% of revenues in the second quarter of 2008.
-- Railcars under management grew by 80,000 units in the quarter, and now
total 217,000 units.
Liquidity:
-- The Company has approximately $84 million of committed additional
borrowing capacity and $41 million of cash as of February 28, 2009.
-- During the quarter, the Company reduced net debt by $70 million and
generated cash from operating activities of $78 million.
-- In keeping with the Company's current policy of managing for cash and
liquidity, Greenbrier has suspended payment of its quarterly dividend.
Deliveries and Backlog:
-- New railcar deliveries in the second quarter of 2009 were
approximately 1,300 units, consistent with the second quarter of 2008.
-- Greenbrier's new railcar manufacturing backlog as of February 28, 2009
was 15,100 units valued at $1.31 billion, compared to 15,900 units
valued at $1.39 billion as of November 30, 2008. Based on current
production plans, approximately 1,900 railcar units included in
backlog are scheduled for delivery in the second half of fiscal 2009.
-- Approximately 79% of the railcars in backlog are subject to a
long-term contract with General Electric Railcar Services Corporation.
GE has advised Greenbrier of its desire to substantially reduce, delay
or otherwise cancel railcar deliveries under the contract. Greenbrier
believes its contract with GE contains adequate protection in the
event of an attempted cancellation or renegotiation of railcar
deliveries. Importantly, the Company continues to deliver tank cars
under the GE contract.
-- Marine backlog as of February 28, 2009 was $173 million, compared to
$190 million as of November 30, 2008. Approximately $50 million in
marine backlog is scheduled for delivery in the remainder of fiscal
year 2009.
Second Quarter Results:
Total revenue for the second quarter of fiscal 2009 was $287 million, up from $260 million in the prior year's second quarter. Margin for the quarter was 5.6% of revenue compared to 13.4% of revenue in the prior comparable period. EBITDA was $9.4 million or 3.3% of revenue for the quarter, compared to $23.6 million or 9.1% of revenue in the prior year's second quarter.
Net loss for the second quarter of fiscal 2009 was $6.9 million, or $.41 per diluted share, compared to net earnings of $1.4 million, or $.09 per diluted share, in the prior year's second quarter. During the quarter, the Company delivered 360 railcar units to a major North American railroad for which it has guaranteed the purchaser minimum earnings through December 31, 2011, for which the maximum potential obligation is $9.9 million. The $9.9 million obligation is considered a reduction in revenue and recorded as deferred revenue. The purchaser has agreed to utilize the railcars on a preferential basis, and the Company is entitled to remarket the railcars when they are not being utilized by the purchaser during the obligation period. Any earnings generated from the railcars will offset the obligation and be recognized as revenue and margin in future periods. The Company believes its actual obligation will be less than $9.9 million.
William A. Furman, president and chief executive officer, said, "Our markets remain extremely challenging in light of the ongoing global economic downturn. Year-to-date rail loadings in North America are down 16.3%, and it is estimated that about 20% - 25% of North American railcar fleet is currently idle, as manufacturers worldwide drastically reduce or halt production. The less cyclical parts of our business, including Refurbishment & Parts, Leasing & Services, and Marine manufacturing, along with our European operations, remain more resilient and help to offset the impact of the downturn and its effect on our North American railcar manufacturing business. Nevertheless, we continue to manage our business prudently by scaling our operations and cost structure to match the current environment. By aggressively controlling costs, scaling our overall operations and reducing working capital levels, we were able to generate positive operating cash flow and pay down net debt by $70 million during the quarter. As we continue to manage the Company for cash, we anticipate this trend will continue in the quarters ahead."
Revenue for the Refurbishment & Parts segment during the second quarter was $121.7 million, compared to $112.6 million in the second quarter of 2008. This segment consists of railcar repair and refurbishment, wheels services, and railcar parts from 38 locations in North America. The segment generated 43% of total Company revenue during the period, as revenue increased $9.1 million, or 8%, over the same period of last year. Most of this growth was due to the acquisition of American Allied Railway Equipment Company in the second half of 2008. This increase was offset somewhat by lower net scrap pricing and reduced volumes of repair work, which also contributed to lower segment margin this quarter.
Gross margin for the Refurbishment & Parts segment was 11.7% of revenue, as compared to 16.2% of revenue in the prior comparable period. The gross margin decline was primarily due to a less favorable mix of repair and refurbishment work, and lower net scrap pricing.
For the Manufacturing segment, revenue for the second quarter increased 18% to $145.6 million, compared to $123.4 million in the second quarter of 2008. New railcar deliveries during the second quarter were 1,300 units, the same as in the second quarter of the prior year. The current period includes a product mix with higher per unit sale prices partially offset by a $9.9 million reduction in revenue related to guarantee obligations.
Manufacturing gross margin for the second quarter was negative 4.4%, compared to positive 4.2% of revenues in the second quarter of 2008. Manufacturing gross margin was adversely affected by the $9.9 million charge for guarantee obligations, $.7 million of loss accruals on future production, severance of $.6 million, and lower plant utilization levels.
The Leasing & Services segment includes results from the Company's owned lease fleet of approximately 9,000 railcars and from fleet management services provided for approximately 217,000 railcars. The managed fleet grew by 80,000 units during the quarter, principally as the result of entering into a new management services contract with a major North American leasing company. Revenue for this segment was $19.9 million, compared to $23.6 million in the same quarter last year.
Leasing & Services gross margin for the quarter was 41.9% of revenue, compared to 48.0% of revenue in the same quarter last year. The revenue and gross margin decrease was principally due to lower lease fleet utilization, lower leasing rates on certain railcar leases, and reduced gains on sale of railcars from the lease fleet.
Selling and administrative costs were $16.3 million for the quarter, or 5.7% of revenues, versus $21.0 million or 8.0% of revenues for the same quarter last year. The decline is principally due to cost reduction initiatives. Severance of $.8 million is included in costs for the current quarter.
Plan to Improve Liquidity, Optimize Cost Structure and Reduce Capex
Furman continued, "We will continue to scale our operations to reflect the current economic environment, control costs and expenditures, manage the Company for cash flow, and seek to pay down debt. As part of our optimization efforts, we are suspending the payment of our quarterly dividend."
Business Outlook
Furman added, "Current market conditions continue to limit visibility, particularly for new railcar manufacturing in North America. We remain cautious on our outlook. The railroad supply industry has always been cyclical, and we are better prepared on several fronts to survive this down cycle compared to previous cycles. The Company has actively diversified its business model to improve its competitive position, to diversify its revenues into less cyclical segments of the supply industry, and enhance its integrated business model with higher margin businesses."
Furman concluded, "These changes to our strategy have drawn on and reinforce our core strengths in engineering, design, asset management, and marketing of railcar services. We expect these moves to continue to stabilize our overall business through the current economic downturn while providing a strong platform for growth when the economy recovers."
Mark Rittenbaum, executive vice president and chief financial officer, said, "We believe we have sufficient liquidity to meet our business needs and mitigate our exposure to near term debt rollovers, with only our European lines of credit aggregating $25 million maturing this year. Our $290 million revolving line of credit for North American operations matures in November 2011, and the first potential maturity date of any significant amount of our notes payable is May 2013. We will continue to manage for cash and anticipate that we will substantially or fully pay down our North American revolving line of credit by fiscal year end. Of course, we are cognizant of maintaining compliance with our loan covenants and will be proactive with our lenders when necessary to do so."
About Greenbrier
Greenbrier (www.gbrx.com), headquartered in Lake Oswego, Oregon, is a leading supplier of transportation equipment and services to the railroad industry. The Company builds new railroad freight cars in its three manufacturing facilities in the U.S. and Mexico and marine barges at its U.S. facility. It also repairs and refurbishes freight cars and provides wheels and railcar parts at 38 locations across North America. Greenbrier builds new railroad freight cars and refurbishes freight cars for the European market through both its operations in Poland and various subcontractor facilities throughout Europe. Greenbrier owns approximately 9,000 railcars, and performs management services for approximately 217,000 railcars.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: This release may contain forward-looking statements. Greenbrier uses words such as "anticipate," "believe," "plan," "expect," "future," "intend" and similar expressions to identify forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, turmoil in the credit markets and financial services industry; high levels of indebtedness and compliance with the terms of our indebtedness; write-downs of goodwill in future periods; sufficient availability of borrowing capacity; fluctuations in demand for newly manufactured railcars or failure to obtain orders as anticipated in developing forecasts; loss of one or more significant customers; customer payment defaults or related issues; actual future costs and the availability of materials and a trained workforce; failure to design or manufacture new products or technologies or to achieve certification or market acceptance of new products or technologies; steel price fluctuations and scrap surcharges; changes in product mix and the mix between segments; labor disputes, energy shortages or operating difficulties that might disrupt manufacturing operations or the flow of cargo; production difficulties and product delivery delays as a result of, among other matters, changing technologies or non-performance of subcontractors or suppliers; ability to obtain suitable contracts for the sale of leased equipment and risks related to car hire and residual values; difficulties associated with governmental regulation, including environmental liabilities; integration of current or future acquisitions; succession planning; all as may be discussed in more detail under the headings "Risk Factors" on page 11 of Part I , Item 1a and "Forward Looking Statements" on page 3 of our Annual Report on Form 10-K for the fiscal year ended August 31, 2008. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's opinions only as of the date hereof. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements.
EBITDA is not a financial measure under GAAP. We define EBITDA as earnings from continuing operations before special charges, interest and foreign exchange, taxes, depreciation and amortization. We consider net cash provided by operating activities to be the most directly comparable GAAP financial measure. EBITDA is a liquidity measurement tool commonly used by rail supply companies and we use EBITDA in that fashion. You should not consider EBITDA in isolation or as a substitute for cash flow from operations or other cash flow statement data determined in accordance with GAAP. In addition, because EBITDA is not a measure of financial performance under GAAP and is susceptible to varying calculations, the EBITDA measure presented may differ from and may not be comparable to similarly titled measures used by other companies.
The Greenbrier Companies will host a teleconference to discuss first quarter of fiscal year 2009 results. Teleconference details are as follows:
Wednesday, April 8, 2009
2:00 pm Pacific Daylight Time
Phone #: 630-395-0143, Password: "Greenbrier"
Real-time Audio Access: ("Newsroom" at http://www.gbrx.com/)
Please access the site 10 minutes prior to the start time. Following the call, a replay will be available on the same website for 30 days. Telephone replay will be available through April 26, 2009 at 203-369-1541.
THE GREENBRIER COMPANIES, INC.
Condensed Consolidated Balance Sheets
(In thousands, unaudited)
February 28, August 31,
Assets 2009 2008
Cash and cash equivalents $41,066 $5,957
Restricted cash 516 1,231
Accounts receivable 137,358 181,857
Inventories 204,218 252,048
Assets held for sale 45,289 52,363
Equipment on operating leases 315,884 319,321
Investment in direct finance leases 8,221 8,468
Property, plant and equipment 128,670 136,506
Goodwill 192,733 200,148
Intangibles and other assets 93,743 99,061
$1,167,698 $1,256,960
Liabilities and Stockholders' Equity
Revolving notes $101,474 $105,808
Accounts payable and accrued
liabilities 228,238 274,322
Losses in excess of investment in
de-consolidated subsidiary 15,313 15,313
Deferred income taxes 77,872 74,329
Deferred revenue 19,995 22,035
Notes payable 488,073 496,008
Minority interest 9,158 8,618
Stockholders' equity: 227,575 260,527
$1,167,698 $1,256,960
THE GREENBRIER COMPANIES, INC.
Consolidated Statements of Operations
(In thousands, except per share amounts, unaudited)
Three Months Ended Six Months Ended
February 28, February 29, February 28, February 29,
2009 2008 2009 2008
Revenue
Manufacturing $145,574 $123,394 $248,292 $282,588
Refurbishment
& Parts 121,681 112,576 253,960 216,466
Leasing &
Services 19,877 23,603 41,010 46,898
287,132 259,573 543,262 545,952
Cost of revenue
Manufacturing 152,003 118,225 258,926 268,790
Refurbishment
& Parts 107,427 94,396 226,754 182,347
Leasing &
Services 11,547 12,279 23,476 24,204
270,977 224,900 509,156 475,341
Margin 16,155 34,673 34,106 70,611
Other costs
Selling and
administrative 16,265 21,000 32,245 41,184
Interest and
foreign
exchange 8,192 9,854 19,038 20,273
Special charges - 2,112 - 2,302
24,457 32,966 51,283 63,759
Earnings (loss)
before income
taxes, minority
interest and
equity in
unconsolidated
subsidiaries (8,302) 1,707 (17,177) 6,852
Income tax benefit
(expense) 1,324 (1,904) 5,868 (4,859)
Earnings (loss)
before minority
interest and
equity in
unconsolidated
subsidiaries (6,978) (197) (11,309) 1,993
Minority interest 351 1,367 919 1,741
Equity in earnings
(loss) of
unconsolidated
subsidiaries (251) 253 183 331
Net earnings
(loss) $(6,878) $1,423 $(10,207) $4,065
Basic earnings
(loss) per
common share $(0.41) $0.09 $(0.61) $0.25
Diluted earnings
(loss) per
common share $(0.41) $0.09 $(0.61) $0.25
Weighted average
common
shares:
Basic 16,694 16,290 16,694 16,230
Diluted 16,694 16,311 16,694 16,254
THE GREENBRIER COMPANIES, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands, unaudited)
Six Months Ended
February 28, February 29,
2009 2008
Cash flows from operating activities
Net earnings (loss) $(10,207) $4,065
Adjustments to reconcile net
earnings (loss) to net cash
provided by (used in) operating
activities:
Deferred income taxes 3,543 3,996
Depreciation and amortization 18,984 16,519
Gain on sales of equipment (358) (2,006)
Special charges - 2,302
Minority interest (860) (1,681)
Other 217 (120)
Decrease (increase) in assets:
Accounts receivable 28,702 (12,269)
Inventories 28,622 (2,639)
Assets held for sale 8,561 (66,960)
Other 135 (3,168)
Increase (decrease) in liabilities:
Accounts payable and accrued
liabilities (22,079) (4,888)
Deferred revenue 562 (4,082)
Net cash provided by (used in)
operating activities 55,822 (70,931)
Cash flows from investing activities
Principal payments received under
direct finance leases 211 179
Proceeds from sales of equipment 1,400 6,414
Investment in and net advances to
unconsolidated subsidiary - 347
Decrease in restricted cash 244 547
Capital expenditures (15,148) (15,998)
Net cash used in investing
activities (13,293) (8,511)
Cash flows from financing activities
Changes in revolving notes 11,283 64,259
Proceeds from issuance of notes payable - 12
Repayments of notes payable (7,394) (4,183)
Dividends (2,001) (2,605)
Stock options and restricted stock
awards exercised 2,414 1,743
Excess tax benefit (expense) of stock
options exercised - (3)
Investment by joint venture partner 1,400 4,650
Net cash provided by financing
activities 5,702 63,873
Effect of exchange rate changes (13,122) 1,195
Increase (decrease) in cash and
cash equivalents 35,109 (14,374)
Cash and cash equivalents
Beginning of period 5,957 20,808
End of period $41,066 $6,434
THE GREENBRIER COMPANIES, INC.
Supplemental Disclosure
Reconciliation of Net Cash Provided by (Used in) Operating Activities to EBITDA before special charges (1)
(In thousands, unaudited)
Three Months Ended Six Months Ended
February 28, February 29, February 28, February 29,
2009 2008 2009 2008
Net cash provided
by (used in)
operating
activities $78,196 $(62,161) $55,822 $(70,931)
Changes in working
capital (74,967) 72,479 (44,503) 94,006
Deferred income
taxes (1,021) (1,304) (3,543) (3,996)
Gain on sales of
equipment 69 1,226 358 2,006
Other (78) (19) (217) 120
Minority interest 351 1,578 860 1,681
Income tax expense
(benefit) (1,324) 1,903 (5,868) 4,859
Interest and foreign
exchange 8,192 9,854 19,038 20,273
Adjusted EBITDA from
operations before
special
charges $9,418 $23,556 $21,947 $48,018
(1) "EBITDA" (earnings from continuing operations before special
charges, interest and foreign exchange, taxes, depreciation and
amortization) is a useful liquidity measurement tool commonly
used by rail supply companies and Greenbrier. It should not be
considered in isolation or as a substitute for cash flows from
operating activities or cash flow statement data prepared in
accordance with generally accepted accounting principles.
First Call Analyst:
FCMN Contact: margaret.vallejos@gbrx.com
SOURCE: The Greenbrier Companies
CONTACT: Mark Rittenbaum of The Greenbrier Companies, +1-503-684-7000
Web Site: http://www.gbrx.com/