The Greenbrier Companies
Financial Highlights
Fourth Quarter:
-- Revenues for the quarter were $230 million, down $132 million vs. the
prior year's fourth quarter.
-- Net earnings for the quarter were $6.7 million, or $.37 per diluted
share vs. $7.4 million, or $.45 per diluted share, in the prior year's
fourth quarter.
-- Results for the quarter include severance costs, write-off of loan
fees and warrant amortization expense of $2.5 million, net of tax, or
$.14 per diluted share. Results for the quarter also include tax
benefits of $6.8 million, or $.37 per diluted share, related to a
reversal of a deferred tax liability and deemed liquidation of a
foreign subsidiary for tax purposes.
-- EBITDA for the quarter was $23.7 million, or 10.3% of revenues,
compared to $33.7 million, or 9.3% of revenues in the fourth quarter
of 2008.
Fiscal 2009:
-- Revenues for the year were down 21%, to $1.0 billion, reflecting the
impact of the economic recession on all business segments.
-- Net loss for 2009 was $54.1 million, or $3.21 per diluted share, vs.
prior year's net earnings of $19.5 million, or $1.19 per diluted
share. The 2009 results include special charges, net of tax, of $51.0
million, or $3.03 per diluted share. The 2008 results include special
charges of $2.3 million, or $.14 per diluted share, with no related
tax benefit. Special charges for fiscal 2009 relate to the impairment
of a portion of the Company's goodwill, while fiscal 2008 special
charges were associated with closure costs of the Company's Canadian
railcar manufacturing facility.
-- EBITDA before special charges for fiscal 2009 was $65.9 million, or
6.5% of revenues, vs. 2008 EBITDA before special charges of $116
million, or 9.0% of revenues.
Liquidity:
-- The Company ended the year with $76 million of cash and $106 million
of committed additional borrowing capacity.
-- Net debt was reduced by $35 million during the quarter and $102
million during the year.
Deliveries and Backlog:
-- New railcar deliveries in the fourth quarter of 2009 were 900 units,
compared to 1,800 units in the fourth quarter of 2008.
-- Total new railcar deliveries were 3,700 units in fiscal 2009, compared
to 7,300 units in fiscal 2008.
-- Greenbrier's new railcar manufacturing backlog as of August 31, 2009
was 13,400 units valued at $1.16 billion, compared to 14,100 units
valued at $1.25 billion as of May 31, 2009. Based on current
production plans, approximately 2,400 units in backlog are scheduled
for delivery in 2010.
-- Marine backlog was $126 million as of August 31, 2009 and $145 million
as of May 31, 2009.
Fourth Quarter Results
Revenues for the fourth quarter of fiscal 2009 were $230.4 million, down from $362.0 million in the prior year's fourth quarter. Gross margin for the quarter was 14.0% compared to 11.9% in the prior comparable period. EBITDA was $23.7 million, or 10.3% of revenues for the quarter, compared to $33.7 million, or 9.3% of revenues in the prior year's fourth quarter. Net earnings were $6.7 million, or $.37 per diluted share, for the quarter, compared to net earnings of $7.4 million, or $.45 per diluted share for the same period in 2008.
Backlog and GE Multi-Year Contract
Approximately 11,500 units, or 85% of the Company's new railcar backlog as of August 31, 2009, are subject to a long term contract with General Electric Railcar Services ("GE"). 8,500 of these units, to be built over a five-year period commencing in mid 2011, are subject to our fulfillment of certain conditions. During calendar 2008, GE advised the Company of its desire to substantially reduce, delay or otherwise cancel deliveries under the contract, and we are currently in discussions with GE about a contract modification. Greenbrier continues to deliver and GE continues to accept and pay for railcars under the contract. As of October 31, 2009, 328 tank cars and 200 hopper cars have been delivered under the contract.
Discussion of Quarterly Results
William A. Furman, president and chief executive officer, said, "Stronger performance in our Manufacturing and Leasing & Services segments and a favorable tax rate led to a sequential improvement in our quarterly operating results. Our diversification efforts continue to pay off and reduce the effects of the economic downturn. Yet the markets in which we operate remain challenging. For example, year-to-date rail loadings in North America are down about 18%, and a significant portion of the entire North American railcar fleet remains idle. In this environment, we continue to scale our operations and control costs, manage the Company for cash flow and liquidity, and prudently deploy capital. During the quarter, we paid down net debt by an additional $35 million."
Segment Details
The Refurbishment & Parts segment, consisting of a network of 38 locations, repairs and refurbishes railcars and provides wheel services and railcar parts across North America. Revenue for this segment in the current quarter was $102.0 million, compared to $158.6 million in the fourth quarter of 2008. This segment generated 44% of total Company revenues for the fourth quarter. Gross margin for the Refurbishment & Parts segment was 13.1% of revenues, compared to 22.2% of revenues in the prior comparable period. Lower volumes and net scrap pricing, as well as a less favorable mix of repair and refurbishment work led to lower margins.
The Manufacturing segment consists of marine and new railcar production in North America and new railcar production in Europe. Manufacturing segment revenue for the fourth quarter was $108.2 million, compared to $180.7 million in the fourth quarter of 2008. Current quarter new railcar deliveries of 900 units were down from 1,800 units in the prior comparable period. Manufacturing gross margin for the fourth quarter was 8.6% of revenues, compared to negative 2.0% in the fourth quarter of 2008. Manufacturing gross margin improvement reflects marine labor efficiencies and a more favorable railcar mix, offset somewhat by lower plant utilization levels and $1.7 million of severance costs.
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. Revenue for this segment was $20.2 million, compared to $22.7 million in the same quarter last year. Leasing & Services gross margin for the quarter was 48.1% of revenue, compared to 50.0% of revenue in the same quarter last year. The revenue and gross margin decrease was principally due to lower lease fleet utilization and lower leasing rates on certain railcar leases. Lease fleet utilization as of the end of the quarter was 88.3%, as compared to 92.1% as of the end of the third quarter of 2009 and 95.2% as of the end of the fourth quarter of 2008. Gains on the sale of leased equipment were $1.2 million for the quarter, compared to $1.0 million for the fourth quarter of 2008.
Selling and administrative costs were $17.6 million for the quarter, or 7.6% of revenues, versus $20.5 million or 5.7% of revenues for the same quarter last year. The decrease in costs is principally due to cost reduction initiatives.
Interest and foreign exchange expense increased $1.8 million to $12.3 million for the quarter, compared to $10.5 million in the fourth quarter of 2008. Current quarter results include $1.1 million of amortization expense related to warrants issued as part of the WL Ross & Co strategic investment and a $0.9 million write-off of loan fees associated with the reduction in size of the Company's North American revolving credit facility. In addition, foreign exchange losses for the quarter were $1.0 million, as compared to $0.8 million in the fourth quarter of 2008. In fiscal 2010, warrant amortization expense is expected to be $4.5 million. Also, a convertible debt accounting methodology change, effective as of the beginning of fiscal 2010, will result in an additional $4.1 million of non-cash interest expense in fiscal 2010.
Furman continued, "2009 was a turbulent and challenging year for the economy and the markets in which we operate. Yet Greenbrier realized a number of operational and strategic accomplishments, including: 1) delivery of our first tank and covered hopper cars under the GE contract, meeting GE's high quality standards despite the stress of prolonged disputes with GE; 2) a record year in our marine operations; 3) significant growth in our fleet of managed railcars, which increased by 80,000 units; 4) an extension of a major wheel services contract with Union Pacific Railroad until Fall 2012; 5) improvement in our liquidity and a strengthening of our balance sheet, through the strategic investment by WL Ross & Co. and renegotiation of our revolving credit lines; 6) return to profitability of our European operations; 7) a reduction in net debt outstanding by $102 million; 8) a reduction in annual selling and administrative costs by almost $20 million; and 9) a near doubling of gross margins in the second half of fiscal 2009 over the first half."
Furman concluded, "These initiatives, combined with our recent expansion into less cyclical markets and improved manufacturing footprint, have allowed us to better weather the economic downturn, improve our competitive positioning, enhance and grow our integrated business model, improve liquidity and create a platform for future growth. While our outlook remains cautious in the near term, we continue to be optimistic about the long-term fundamentals that support rail and marine transportation."
Business Outlook
Given current industry trends, including depressed levels of railroad traffic and high levels of railcar storage, Greenbrier expects business to remain challenging in fiscal 2010, particularly for the Company's new railcar manufacturing operations. As a result, management anticipates that revenues will be lower in fiscal 2010 compared to fiscal 2009. However, the Company currently anticipates fiscal 2010 EBITDA will be higher than fiscal 2009 EBITDA before special charges due in part to higher expected gross margins in Greenbrier's Manufacturing and Refurbishment & Parts segments. Fiscal 2010 results are expected to include non-cash after-tax charges of $5.2 million, or $.27 per diluted share, related to warrant amortization expense and a change in accounting methodology for convertible bonds. Second half fiscal 2010 results are anticipated to be stronger than the first half, similar to what occurred in fiscal 2009.
Conference Call
The Greenbrier Companies will host a teleconference to discuss fourth quarter and fiscal year end results. Teleconference details are as follows:
-- Thursday, November 12, 2009
-- 8:00 am Pacific Standard 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 November 28, 2009 at 203-369-0929.
About Greenbrier Companies
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, INC.
Condensed Consolidated Balance Sheets
Years ended August 31,
(In thousands)
Assets 2009 2008
---- ----
Cash and cash equivalents $76,187 $5,957
Restricted cash 1,083 1,231
Accounts receivable 113,371 181,857
Inventories 142,824 252,048
Assets held for sale 31,711 52,363
Equipment on operating leases 313,183 319,321
Investment in direct finance leases 7,990 8,468
Property, plant and equipment 127,974 136,506
Goodwill 137,066 200,148
Intangibles and other assets 96,902 99,061
------ ------
$1,048,291 $1,256,960
========== ==========
Liabilities and Stockholders' Equity
Revolving notes $16,041 $105,808
Accounts payable and accrued liabilities 170,889 274,322
Losses in excess of investment in de-consolidated
subsidiary 15,313 15,313
Deferred income taxes 62,530 74,329
Deferred revenue 19,250 22,035
Notes payable 542,180 496,008
Minority interest 8,724 8,618
Stockholders' equity: 213,364 260,527
------- -------
$1,048,291 $1,256,960
========== ==========
THE GREENBRIER COMPANIES, INC.
Consolidated Statements of Operations
Years ended August 31,
(In thousands, except per share
amounts) 2009 2008 2007
Revenue
Manufacturing $462,496 $665,093 $738,424
Refurbishment & Parts 476,164 527,466 381,670
Leasing & Services 79,465 97,520 103,734
------ ------ -------
1,018,125 1,290,079 1,223,828
Cost of revenue
Manufacturing 458,733 653,879 680,908
Refurbishment & Parts 420,294 426,183 317,669
Leasing & Services 45,991 47,774 45,818
------ ------ ------
925,018 1,127,836 1,044,395
Margin 93,107 162,243 179,433
Other costs
Selling and administrative 65,743 85,133 83,414
Interest and foreign exchange 42,081 40,770 39,915
Special charges 55,667 2,302 21,899
------ ----- ------
163,491 128,205 145,228
Earnings (loss) before income tax,
minority interest and equity in
unconsolidated subsidiary
(70,384) 34,038 34,205
Income tax benefit (expense) 15,417 (18,550) (13,657)
------ ------- -------
Earnings (loss) before minority
interest and equity in
unconsolidated subsidiary
(54,967) 15,488 20,548
Minority interest 1,472 3,182 1,504
Equity in earnings (loss) of
unconsolidated subsidiary (565) 872 (42)
---- --- ---
Net earnings (loss) $(54,060) $19,542 $22,010
========= ======= =======
Basic earnings (loss) per common
share: $(3.21) $1.19 $1.37
Diluted earnings (loss) per common
share: $(3.21) $1.19 $1.37
Weighted average common shares:
Basic 16,815 16,395 16,056
Diluted 16,815 16,417 16,094
THE GREENBRIER COMPANIES, INC.
Condensed Consolidated Statements of Cash Flows
Years ended August 31,
(In thousands) 2009 2008 2007
---- ---- ----
Cash flows from operating
activities:
Net earnings (loss) $(54,060) $19,542 $22,010
Adjustments to reconcile net
earnings to net cash
provided by operating activities:
Deferred income taxes (11,799) 12,919 10,643
Depreciation and amortization 37,669 35,086 32,826
Gain on sales of equipment (1,167) (8,010) (13,400)
Special charges 55,667 2,302 21,899
Minority interest (1,294) (3,128) (1,604)
Discount accretion 1,117 - -
Other 3,405 336 205
Decrease (increase) in assets
excluding acquisitions:
Accounts receivable 58,521 (7,621) (17,883)
Inventories 98,751 (29,692) 14,260
Assets held for sale 21,841 (10,621) 4,378
Other 1,157 (2,700) (411)
Increase (decrease) in liabilities
excluding acquisitions:
Accounts payable and accrued
liabilities (86,514) 21,801 (24,600)
Deferred revenue (2,829) 1,904 (1,996)
------ ----- ------
Net cash provided by operating
activities 120,465 32,118 46,327
------- ------ ------
Cash flows from investing
activities:
Principal payments received under
direct finance leases 429 375 511
Proceeds from sales of equipment 15,555 14,598 119,695
Investment in and net advances to
unconsolidated subsidiaries - 858 (849)
Acquisitions, net of cash acquired - (91,166) (268,184)
De-consolidation of subsidiary - (1,217) -
Decrease (increase) in restricted
cash (109) 2,046 (454)
Capital expenditures (38,847) (77,644) (137,294)
------- ------- --------
Net cash used in investing
activities (22,972) (152,150) (286,575)
------- -------- --------
Cash flows from financing
activities:
Changes in revolving notes (81,251) 55,514 15,007
Net proceeds from issuance of notes
payable 69,768 49,613 99,441
Repayments of notes payable (16,436) (6,919) (5,388)
Repayment of subordinated debt - - (2,091)
Investment by joint venture partner 1,400 6,600 6,750
Dividends paid (2,001) (5,261) (5,144)
Stock options and restricted stock
awards exercised 5,085 4,007 3,489
Excess tax benefit (expense)of
stock options exercised (1,112) (76) 3,719
------ --- -----
Net cash provided by (used in)
financing activities (24,547) 103,478 115,783
------- ------- -------
Effect of exchange rate changes (2,716) 1,703 2,379
Increase (decrease) in cash and
cash equivalents 70,230 (14,851) (122,086)
Cash and cash equivalents
Beginning of period 5,957 20,808 142,894
----- ------ -------
End of period $76,187 $5,957 $20,808
======= ====== =======
THE GREENBRIER COMPANIES, INC.
Supplemental Information
Quarterly Results of Operations (Unaudited)
Operating results by quarter for 2009 and 2008 are as follows:
(In thousands, except per share amounts)
First Second Third Fourth Total
----- ------ ----- ------ -----
2009
Revenue
Manufacturing $102,717 $145,574 $105,986 $108,219 $462,496
Refurbishment
& Parts 132,279 121,681 120,190 102,014 476,164
Leasing &
Services 21,133 19,877 18,272 20,183 79,465
------ ------ ------ ------ ------
256,129 287,132 244,448 230,416 1,018,125
Cost of
revenue
Manufacturing 106,923 152,003 100,847 98,960 458,733
Refurbishment
& Parts 119,326 107,427 104,859 88,682 420,294
Leasing &
Services 11,929 11,547 12,049 10,466 45,991
------ ------ ------ ------ ------
238,178 270,977 217,755 198,108 925,018
Margin 17,951 16,155 26,693 32,308 93,107
Other costs
Selling and
administrative 15,980 16,265 15,886 17,612 65,743
Interest and
foreign
exchange 10,846 8,192 10,749 12,294 42,081
Special
charges - - 55,667 - 55,667
--- --- ------ --- ------
26,826 24,457 82,302 29,906 163,491
Earnings
(loss)
before
income tax,
minority
interest and
equity in
unconsolidated
subsidiary (8,875) (8,302) (55,609) 2,402 (70,384)
Income tax
benefit 4,544 1,324 4,841 4,708 15,417
Minority
interest 568 351 687 (134) 1,472
Equity in
earnings
(loss) of
unconsolidated
subsidiary 434 (251) (457) (291) (565)
Net earnings
(loss) $(3,329) $(6,878) $(50,538) $6,685 $(54,060)
======= ======= ======== ====== =========
Basic
earnings
(loss) per
common
share: $(0.20) $(0.41) $(3.00) $0.40 $(3.21)
Diluted
earnings
(loss) per
common
share: $(0.20) $(0.41) $(3.00) $0.37 $(3.21) (1)
(1) Quarterly amounts do not total to the year ended amount as each
quarter is calculated discretely. The dilutive effect of common stock
equivalents is excluded from per share calculations for the first three
quarters and the year ended August 31, 2009 due to a net loss for those
periods.
First Second Third Fourth Total
----- ------ ----- ------ -----
2008
Revenue
Manufacturing $159,194 $123,394 $201,825 $180,680 $665,093
Refurbishment &
Parts 103,889 112,576 152,367 158,634 527,466
Leasing &
Services 23,295 23,603 27,914 22,708 97,520
------ ------ ------ ------ ------
286,378 259,573 382,106 362,022 1,290,079
Cost of revenue
Manufacturing 150,565 118,225 200,813 184,276 653,879
Refurbishment &
Parts 87,951 94,396 120,442 123,394 426,183
Leasing &
Services 11,925 12,279 12,218 11,352 47,774
------ ------ ------ ------ ------
250,441 224,900 333,473 319,022 1,127,836
Margin 35,937 34,673 48,633 43,000 162,243
Other costs
Selling and
administrative 20,184 21,000 23,407 20,542 85,133
Interest and
foreign
exchange 10,419 9,854 9,990 10,507 40,770
Special charges 189 2,112 - 1 2,302
--- ----- --- --- -----
30,792 32,966 33,397 31,050 128,205
Earnings before
income tax,
minority
interest and
equity in
unconsolidated
subsidiary 5,145 1,707 15,236 11,950 34,038
Income tax
expense (2,956) (1,904) (7,573) (6,117) (18,550)
Minority
interest 375 1,367 272 1,168 3,182
Equity in
earnings of
unconsolidated
subsidiary 78 253 191 350 872
Net earnings $2,642 $1,423 $8,126 $7,351 $19,542
====== ====== ====== ====== =======
Basic earnings
per common
share: $0.16 $0.09 $0.49 $0.45 $1.19
Diluted
earnings per
common share: $0.16 $0.09 $0.49 $0.45 $1.19
THE GREENBRIER COMPANIES, INC.
Supplemental Disclosure
Reconciliation of Net Cash Provided by Operating Activities to EBITDA(1)
(In thousands, unaudited)
Year ended August 31,
2009 2008
---- ----
Net cash provided by
operating activities
$120,465 $32,118
Changes in working capital (36,377) 29,231
Special charges (55,667) (2,302)
Deferred income taxes 11,799 (12,919)
Gain on sales of equipment 1,167 8,010
Other (3,405) (336)
Minority interest 1,294 3,128
Income tax expense (benefit) (15,417) 18,550
Interest and foreign currency 42,081 40,770
------ ------
Adjusted EBITDA from operations
before special charges $65,940 $116,250
======= ========
Three months ended
August 31, August 31,
2009 2008
---------- ----------
Net cash provided by
operating activities $31,224 $12,158
Changes in working capital (14,954) 6,938
Deferred income taxes 1,373 (3,737)
Gain on sales of equipment 1,230 1,012
Other (2,453) (439)
Minority interest (324) 1,171
Income tax expense (benefit) (4,709) 6,118
Interest and foreign currency 12,294 10,507
------ ------
Adjusted EBITDA from Operations
before special charges $23,681 $33,728
======= =======
(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: emily.jenkins@gbrx.com
SOURCE: The Greenbrier Companies
CONTACT: Mark Rittenbaum of The Greenbrier Companies, +1-503-684-7000
Web Site: http://www.gbrx.com/