The Greenbrier Companies
Third Quarter Highlights
Financial Highlights:
-- Revenues for the third quarter of 2010 were $211.5 million, down from
$244.4 million in the prior year's third quarter.
-- EBITDA for the quarter was $25.9 million, or 12.2% of revenues,
compared to $20.3 million, or 8.3% of revenues in the third quarter of
2009.
-- The Company's net earnings for the quarter were $4.6 million, or $0.23
per diluted share, compared to a net loss of $51.1 million, or $3.04
per diluted share, in the prior year's third quarter.(1)
-- Net earnings for the quarter include noncash charges of $1.2 million,
net of tax, or $0.06 per diluted share, for warrant amortization
expense and amortization of convertible debt discount, as well as a
net gain on extinguishment of debt of $0.8 million, net of tax, or
$0.04 per diluted share. Net loss for the prior year's third quarter
included noncash charges of $51.0 million, net of tax, or $3.03 per
diluted share, for the impairment of a portion of the Company's
goodwill, and $0.6 million, net of tax, or $0.03 per diluted share,
for amortization of convertible debt discount.
Liquidity Summary:
-- The Company ended the quarter with $117 million of cash and $106
million of committed additional borrowing capacity.
-- In May 2010, Greenbrier issued 4,500,000 shares of common stock at a
price of $12.50 per share, generating proceeds (net of expenses) of
$52.7 million.
-- The Company received a $14 million tax refund during the quarter
related to tax loss carry backs.
Segment Highlights:
-- New railcar deliveries in the third quarter of 2010 were 700 units,
compared to 800 units in the third quarter of 2009.
-- Greenbrier's new railcar manufacturing backlog as of May 31, 2010 was
4,400 units with an estimated value of $370 million.
-- Marine backlog was $75 million as of May 31, 2010.
-- Greenbrier commenced management of a lease fleet of nearly 4,000
railcars valued at approximately $230 million, acquired by the
newly-formed WL Ross-Greenbrier Rail Holdings I LLC (WLR-GBX).
(1) Net earnings (loss) is now referred to in the Consolidated Statements of Operations, in accordance with GAAP, as "Net earnings (loss) attributable to Greenbrier".
Discussion of Quarterly Results and Outlook
William A. Furman, president and chief executive officer, said, "Each of our business segments realized improved performance, leading us to a return to profitability and our highest pre-tax earnings since the fourth quarter of 2008. Both revenue and margin grew in the third quarter compared to the first two quarters of 2010. We are currently seeing some improvement in end-market demand for our rail products and services. In manufacturing, new railcar orders in the third quarter exceeded production, and in July, we reopened our Concarril facility for new railcar production as a result of increased demand. Our railcar repair shops are also operating at higher utilization levels than earlier this year, as railcars coming out of storage are in need of repair. Our lease fleet utilization also increased. Due to favorable market conditions, we sold railcars from our lease fleet and realized a gain of $3.1 million, positively affecting gross margins for our Leasing & Services segment. These asset sales occur as a normal course of our business, and over the past five years, gains on sale of equipment have averaged $8.0 million per year. Our third quarter results place us on solid footing to finish our fiscal year with positive momentum, and we continue to believe that the second half of 2010 will be stronger than the first half."
Furman also noted, "In addition to higher levels of revenues and earnings this quarter compared to the first two quarters of 2010, we continue to make headway on our key objectives in 2010. These include improving the operational efficiency of our facilities while maintaining the flexibility to respond to market demand, continuing to manage for cash flow and liquidity and enhancing our ability to fully leverage our integrated business model."
Furman concluded, "Leveraging our strategic relationship with WL Ross, WLR-GBX, owned by affiliates of WL Ross & Co., was formed in April 2010 and purchased a used lease fleet of 4,000 railcars, which are managed by Greenbrier. The acquisition of this portfolio allows us to further scale our fleet management operations, a core competency of Greenbrier, and to participate in the economic performance and upside of this portfolio."
Segment Details
The Refurbishment & Parts segment, consisting of a network of 37 locations, repairs and refurbishes railcars, and provides wheel services and railcar parts across North America. Revenue for this segment in the current quarter was $112.2 million, compared to $120.2 million in the third quarter of 2009. The revenue decline was due to lower wheel sales volumes, partially offset by improved scrap metal pricing and a $.9 million gain from insurance proceeds associated with a fire in January 2009 at one of our facilities. Gross margin for the Refurbishment & Parts segment was 13.8% of revenues, compared to 12.8% of revenues in the prior comparable period.
The Manufacturing segment consists of marine and new railcar production in North America and Europe. Manufacturing segment revenue for the third quarter was $77.9 million, compared to $106.0 million in the third quarter of 2009. Current quarter new railcar deliveries of 700 units were down from 800 units in the prior comparable period. Manufacturing gross margin for the third quarter was 11.5% of revenues, compared to 4.8% in the third quarter of 2009. The gross margin increase was primarily the result of a more favorable product mix and improved production efficiencies. In addition, the prior year's third quarter was negatively impacted by the accrual of a $2.1 million obligation of guaranteed minimum earnings under a certain contract, whereas the current quarter was positively impacted by $.8 million in revenue related to the remarketing of railcars under the same contract. In late May 2010, Greenbrier implemented a 4-day work week at its marine barge operation to reduce production rates as a result of current market conditions.
The Leasing & Services segment includes results from the Company-owned lease fleet of approximately 8,000 railcars and from fleet management services provided for approximately 225,000 railcars. Revenue for this segment was $21.4 million, compared to $18.3 million in the same quarter last year. This increase was attributable to pre-tax gains on the sale of leased equipment of $3.1 million in the quarter. Leasing & Services' gross margin for the quarter was 53.6% of revenue, compared to 34.1% of revenue in the same quarter last year. The increase from the prior year's third quarter was primarily a result of higher gains on sale of railcars from our lease fleet, which have no associated cost of revenue, increased lease fleet utilization and improved margins from management services mainly due to lower maintenance costs. Lease fleet utilization as of the end of the quarter was up sequentially to 94.5%, compared to 92.4% at February 28, 2010, and 92.1% at May 31, 2009.
In April 2010, WL Ross-Greenbrier Rail Holdings I LLC (WLR-GBX), an entity owned by affiliates of W.L. Ross & Co., was formed and acquired, from a third party, a lease fleet of nearly 4,000 railcars valued at approximately $230 million. The Company paid a fee to WLR-GBX for the right to perform certain management and advisory services and in exchange will receive management and other fee income and incentive compensation tied to the performance of WLR-GBX. This fee is accounted for under the equity method.
Selling and administrative costs were $17.5 million for the quarter, or 8.3% of revenues, versus $15.9 million, or 6.5% of revenues, for the same quarter last year. The increase from the prior period was primarily due to higher: travel and entertainment costs associated with increased activity levels, research & development costs in Europe associated with engineering and certification of new railcar designs, and IT and related costs associated with ongoing enterprise resource planning and improvement projects.
Interest and foreign exchange expense was $9.5 million for the quarter, compared to $11.7 million for the same period in 2009. The decrease was principally due to a foreign exchange loss of $2.5 million in the prior comparable period, compared to a $0.1 million foreign exchange gain in the current quarter. In addition the current quarter included a net gain on extinguishment of debt of $1.3 million. These items were partially offset by noncash charges of $1.1 million in the current quarter for warrant amortization expense, which commenced in the fourth quarter of 2009.
Business Outlook
Based on current industry trends, Greenbrier expects business visibility for the balance of 2010 to remain limited. Management continues to anticipate that revenues will be lower in 2010 compared to 2009. EBITDA excluding special charges, however, is expected to be modestly higher in 2010 compared to 2009, due in part to higher expected gross margins in Greenbrier's Manufacturing segment. Similar to previous years, operating results for the second half of the year are anticipated to be stronger compared to the first half. While the outlook remains cautious in the near term, the Company continues to be optimistic about the long-term fundamentals that support rail and marine transportation.
Conference Call
The Greenbrier Companies will host a teleconference to discuss third quarter results. Teleconference details are as follows:
-- Thursday, July 8, 2010
-- 8:00 am Pacific Daylight Time
-- Phone: 1-630-395-0143, 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 July 24th at 203-369-3748.
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 37 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 8,000 railcars, and performs management services for approximately 225,000 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 "anticipates," "believes," "forecast," "potential," "contemplates," "expects," "intends," "plans," "seeks," "estimates," "could," "would," "will," "may," "can," and similar expressions to identify forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to certain risks and uncertainties that could cause actual results to differ materially from the results contemplated by 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" and "Forward Looking Statements" in our Annual Report on Form 10-K for the fiscal year ended August 31, 2009 and in our Quarterly Report on Form 10-Q for the fiscal quarter ended May 31, 2010, and in our prospectus supplement and other documents filed with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's opinions only as of the date hereof. Except as otherwise required by law, we do not assume any obligation to update any forward-looking statements.
EBITDA is not a financial measure under GAAP. We define EBITDA as earnings from continuing operations before non-cash portion of special charges, interest and foreign exchange, taxes, depreciation and amortization. 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 financial 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
(In thousands, unaudited)
May 31, August 31,
Assets 2010 2009(1)
---- ------
Cash and cash equivalents $116,595 $76,187
Restricted cash 1,715 1,083
Accounts receivable 111,999 113,371
Inventories 166,582 142,824
Assets held for sale 23,011 31,711
Equipment on operating leases 304,560 313,183
Investment in direct finance leases 7,368 7,990
Property, plant and equipment, net 127,128 127,974
Goodwill 137,066 137,066
Intangibles and other assets 94,695 96,902
$1,090,719 $1,048,291
========== ==========
Liabilities and Equity
Revolving notes $11,753 $16,041
Accounts payable and accrued liabilities 179,248 170,889
Losses in excess of investment in de-
consolidated subsidiary 15,313 15,313
Deferred income taxes 85,029 69,199
Deferred revenue 11,104 19,250
Notes payable 506,382 525,149
Stockholders' equity -Greenbrier 272,711 223,726
Noncontrolling interest 9,179 8,724
Total equity 281,890 232,450
------- -------
$1,090,719 $1,048,291
========== ==========
(1) As adjusted for the effects of Accounting Standards Codification
(ASC) 470 - 20 Debt - Debt with Conversion and other Options with
respect to the Company's outstanding convertible debt. This guidance
was effective for the Company on September 1, 2009 and requires
retrospective application. The prior year presentation was adjusted
to conform to the adoption of ASC 810-10-65 Consolidation -
Transition related to SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements -an amendment of ARB No. 51.
THE GREENBRIER COMPANIES, INC.
Consolidated Statements of Operations
(In thousands, except per share amounts, unaudited)
Three Months Ended Nine Months Ended
May 31, May 31,
2010 2009(1) 2010 2009(1)
--- ------ --- ------
Revenue
Manufacturing $77,877 $105,986 $226,020 $354,278
Refurbishment & Parts 112,186 120,190 299,497 374,150
Leasing & Services 21,392 18,272 57,582 59,281
------ ------ ------ ------
211,455 244,448 583,099 787,709
Cost of revenue
Manufacturing 68,931 100,847 206,386 359,772
Refurbishment & Parts 96,725 104,859 263,398 331,613
Leasing & Services 9,931 12,049 31,638 35,525
----- ------ ------ ------
175,587 217,755 501,422 726,910
Margin 35,868 26,693 81,677 60,799
Other costs
Selling and
administrative 17,519 15,886 50,686 48,131
Interest and foreign
exchange 9,536 11,710 33,053 32,627
Special charges - 55,667 - 55,667
27,055 83,263 83,739 136,425
Earnings (loss) before
income taxes and loss
from unconsolidated
affiliates 8,813 (56,570) (2,062) (75,626)
Income tax benefit
(expense) (2,418) 5,217 1,025 11,820
------ ----- ----- ------
Earnings (loss) before
loss from
unconsolidated
affiliates 6,395 (51,353) (1,037) (63,806)
Loss from
unconsolidated
affiliates (318) (457) (632) (274)
---- ---- ---- ----
Net earnings (loss) 6,077 (51,810) (1,669) (64,080)
Net (earnings) loss
attributable to
noncontrolling
interest (1,514) 687 (1,764) 1,606
------ --- ------ -----
Net earnings (loss)
attributable to
Greenbrier $4,563 $(51,123) $(3,433) $(62,474)
====== ======== ======= ========
Basic earnings (loss)
per common share $0.25 $(3.04) $(0.20) $(3.71)
Diluted earnings (loss)
per common share $0.23 $(3.04) $(0.20) $(3.71)
Weighted average common
shares:
Basic 18,220 16,840 17,477 16,840
Diluted 20,058 16,840 17,477 16,840
(1) As adjusted for the effects of ASC 470 - 20 Debt - Debt with
Conversion and other Options with respect to the Company's
outstanding convertible debt. This guidance was effective for the
Company on September 1, 2009 and requires retrospective application.
The prior year presentation was adjusted to conform to the adoption
of ASC 810-10-65 Consolidation - Transition related to SFAS No. 160,
Noncontrolling Interests in Consolidated Financial Statements -an
amendment of ARB No. 51.
THE GREENBRIER COMPANIES, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands, unaudited)
Nine Months Ended
May 31,
2010 2009(2)
---- ------
Cash flows from operating activities
Net loss(1) $(1,669) $(64,080)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Deferred income taxes 17,084 (11,538)
Depreciation and amortization 27,967 28,259
(Gain) loss on sales of equipment (4,032) 63
Special charges - 55,667
Accretion of debt discount 6,701 2,840
Gain on extinguishment of debt (2,266) -
Other 2,798 940
Decrease (increase) in assets:
Accounts receivable (1,615) 58,068
Inventories (25,943) 63,098
Assets held for sale 9,252 13,592
Other 4,419 218
Increase (decrease) in liabilities: -
Accounts payable and accrued liabilities 11,352 (52,991)
Deferred revenue (7,824) (4,895)
------ ------
Net cash provided by operating activities 36,224 89,241
------ ------
Cash flows from investing activities
Principal payments received under direct
finance leases 358 319
Proceeds from sales of equipment 14,794 4,488
Investment in unconsolidated subsidiary (650) -
Contract placement fee (6,050) -
Decrease (increase) in restricted cash (632) 431
Capital expenditures (28,266) (33,505)
Net cash used in investing activities (20,446) (28,267)
------- -------
Cash flows from financing activities
Changes in revolving notes (2,130) (28,184)
Net proceeds from issuance of notes payable 1,712 -
Repayments of notes payable (28,357) (15,348)
Net proceeds from equity offering 52,725 -
Dividends - (2,001)
Investment by joint venture partner - 1,400
Other 28 2,909
Net cash provided by (used in) financing
activities 23,978 (41,224)
------ -------
Effect of exchange rate changes 652 (8,683)
Increase in cash and cash equivalents 40,408 11,067
Cash and cash equivalents
Beginning of period 76,187 5,957
------ -----
End of period $116,595 $17,024
======== =======
(1) Before net earnings/loss attributable to noncontrolling interest
(2) As adjusted for the effects of ASC 470 - 20 Debt - Debt with
Conversion and other Options with respect to the Company's
outstanding convertible debt. This guidance was effective for the
Company on September 1, 2009 and requires retrospective application.
The prior year presentation was adjusted to conform to the adoption
of ASC 810-10-65 Consolidation - Transition related to SFAS No. 160,
Noncontrolling Interests in Consolidated Financial Statements -an
amendment of ARB No. 51.
THE GREENBRIER COMPANIES, INC.
Consolidated Statements of Cash Flows
(in thousands, unaudited)
Three Months Ending
May 31,
2010 2009(2)
---- ------
Cash flows from operating activities:
Net earnings (loss) (1) $6,077 $(51,810)
Adjustments to reconcile net earnings
(loss) to net cash provided by
operating activities:
Deferred income taxes 9,357 (14,345)
Depreciation and amortization 9,351 9,275
(Gain) loss on sales of equipment (3,081) 421
Special charges - 55,667
Accretion of debt discount 2,442 961
Gain on extinguishment of debt (2,266) -
Other 1,309 663
Decrease (increase) in assets:
Accounts receivable 1,298 29,366
Inventories (11,343) 34,476
Assets held for sale (2,609) 5,031
Intangibles and other 2,151 83
Increase (decrease) in liabilities:
Accounts payable and accrued
liabilities 18,162 (30,912)
Deferred revenue (2,414) (5,457)
------ ------
Net cash provided by operating
activities 28,434 33,419
------ ------
Cash flows from investing activities
Principal payments received under
direct finance leases 123 108
Proceeds from sales of equipment 11,725 3,088
Purchase of property and equipment (8,650) (18,357)
Decrease (increase) of restricted cash (566) 187
Contract placement fee (6,050) -
Investment in unconsolidated
subsidiary (200) -
---- ---
Net cash used in investing activities (3,618) (14,974)
------ -------
Cash flows from financing activities:
Changes in revolving notes (3,671) (39,467)
Repayments of notes payable (24,316) (7,954)
Net proceeds from equity offering 52,725 -
Other 28 495
Net cash provided by (used in)
financing activities 24,766 (46,926)
------ -------
Effect of exchange rate changes (894) 4,439
Increase (decrease) in cash and cash
equivalents 48,688 (24,042)
Cash and cash equivalents
Beginning of period 67,907 41,066
------ ------
End of period $116,595 $17,024
======== =======
(1) Before net earnings/loss attributable to noncontrolling interest
(2) As adjusted for the effects of ASC 470 - 20 Debt - Debt with
Conversion and other Options with respect to the Company's
outstanding convertible debt. This guidance was effective for the
Company on September 1, 2009 and requires retrospective application.
The prior year presentation was adjusted to conform to the adoption
of ASC 810-10-65 Consolidation - Transition related to SFAS No. 160,
Noncontrolling Interests in Consolidated Financial Statements -an
amendment of ARB No. 51.
THE GREENBRIER COMPANIES, INC.
Supplemental Disclosure
Reconciliation of Net earnings (loss) attributable to Greenbrier to
Adjusted EBITDA (1)
(In thousands, unaudited)
Three Months Ended Nine Months Ended
------------------ -----------------
May 31, May 31,
------- -------
2010 2009 2010 2009
---- ---- ---- ----
Net earnings (loss)
attributable to
Greenbrier $4,563 $(51,123) $(3,433) $(62,474)
Interest and foreign
exchange 9,536 11,710 33,053 32,627
Income tax expense
(benefit) 2,418 (5,217) (1,025) (11,820)
Depreciation and
amortization 9,351 9,274 27,967 28,259
Special charges (non-
cash portion) - 55,667 - 55,667
Adjusted EBITDA $25,868 $20,311 $56,562 $42,259
======= ======= ======= =======
(1) "EBITDA" (earnings (loss) attributable to Greenbrier before the
non-cash portion of 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 financial 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, +1-503-684-7000, for The Greenbrier Companies
Web Site: http://www.gbrx.com/