)

Greenbrier Reports First Quarter Results

Date

Fri, Jan 5, 2018 06:00 AM

Share

~ Posts EPS of $0.83
~~ Announces orders of 3,200 railcars valued at over $290 million

LAKE OSWEGO, Ore., Jan. 5, 2018 /PRNewswire/ -- The Greenbrier Companies, Inc. (NYSE: GBX) today reported financial results for its first fiscal quarter ended November 30, 2017.

The Greenbrier Companies Logo (PRNewsfoto/The Greenbrier Companies, Inc.)

First Quarter Highlights

  • Net earnings attributable to Greenbrier for the quarter were $26.3 million, or $0.83 per diluted share, on revenue of $559.5 million
  • Quarterly results included $3.4 million ($2.3 million after-tax or $0.07 per diluted share) of expense related to resolution of litigation in a foreign jurisdiction.  Additionally, the tax rate for the quarter was 33.3% attributable to discrete items and the geographic mix of earnings.  Compared to the previous annual tax rate guidance of 29%, the impact of the higher quarterly rate is $0.07 per diluted share.
  • Adjusted EBITDA for the quarter was $76.9 million, or 13.7% of revenue.
  • Orders for 3,200 diversified railcars were received during this quarter, valued at over $290 million.
  • New railcar backlog as of November 30, 2017 was 26,500 units with an estimated value of $2.56 billion.
  • New railcar deliveries totaled 4,400 units for the quarter.
  • Board declares a quarterly dividend of $0.23 per share, payable on February 16, 2018 to shareholders as of January 26, 2018.

William A. Furman, Chairman and CEO, said, "Greenbrier advanced several key initiatives during the quarter and is on track to achieve our goals for the year.  While the new railcar market in North America is challenging, broad-based demand for Greenbrier's products and services remains steady and we expect will trend higher as we advance through fiscal 2018.  During the recent quarter, Greenbrier received 3,200 orders for a broad range of railcar types including covered hoppers, tanks, automotive carrying units and our first orders for open top hoppers for use in aggregate service.  Greenbrier's disciplined balance sheet management has resulted in a strong cash position and very low net debt, enabling us to invest strategically and return capital to shareholders. Good backlog visibility combined with a strong balance sheet provides the flexibility we need to build railcars when and where customers need them, across four continents."

Furman concluded, "Based on first quarter results, we are confident in our guidance for the year. As fiscal 2018 progresses, we will continue integration of our new manufacturing investments and will continue to expand internationally.  Greenbrier is well positioned to achieve its ambitious business objectives for fiscal 2018 as growth in North American and international markets drives increased revenues, deliveries and EPS compared to fiscal 2017."

Business Outlook

Based on current business trends, industry forecasts and production schedules for fiscal 2018, and excluding the expected benefits of the recent tax reform act, Greenbrier believes:

  • Deliveries will be approximately 20,000 – 22,000 units including Greenbrier-Maxion (Brazil) which will account for up to 10% of deliveries
  • Revenue will be $2.4$2.6 billion
  • Diluted EPS will be $4.00

As noted in the "Safe Harbor" statement, there are risks to achieving this guidance.  Certain orders and backlog in this release are subject to customary documentation and completion of terms.

Financial Summary


Q1 FY18

Q4 FY17

Sequential Comparison – Main Drivers

Revenue

$559.5M

$611.4M

Down 8.5% primarily due to lower volume of deliveries due to timing of syndications

Gross margin

16.0%

16.3%

Down 30 bps due to product mix shifts

Selling and

administrative expense

$47.0M

$47.1M

Down modestly due to lower employee related costs; includes foreign legal settlement expense

Gain on disposition

of equipment

($19.2M)

($4.9M)

Increase reflects rebalancing of lease portfolio

Adjusted EBITDA

$76.9M

$73.3M

Higher operating margin

Effective tax rate

33.3%

20.7%

Reflects foreign discrete items and a change in the geographic mix of earnings 

Loss from

unconsolidated affiliates

($2.9M)

($6.5M) (1)

Continued operating challenges at GBW

Net earnings attributable

to noncontrolling interest

($7.1M)

($8.5M)

Driven primarily by lower deliveries and timing of railcar syndications at our GIMSA JV

Adjusted net earnings attributable to Greenbrier

$26.3M

$27.3M


Adjusted diluted EPS

$0.83

$0.86


(1) Includes $3.5 million, net of tax, or $0.11 per share, impact associated with a non-cash goodwill impairment charge recorded by GBW.


Segment Summary


Q1 FY18

Q4 FY17

Sequential Comparison – Main Drivers

Manufacturing

  Revenue

$451.5M

$508.5M

Down 11.2% due to lower volume of deliveries

  Gross margin

15.6%

16.3%

Down 70 bps primarily due to product mix shifts

  Operating margin (1)

11.7%

13.5%


  Deliveries (2)

4,000

5,200


Wheels & Parts

  Revenue

$78.0M

$75.1M

Up 3.9% primarily attributable to higher wheel and component volume

  Gross margin

7.1%

7.0%

Up 10 bps due to higher volume

  Operating margin (1)

3.1%

3.0%


Leasing & Services

  Revenue

$30.0M

$27.8M

Up 7.9% due to higher volume of externally sourced railcar syndications

  Gross margin

43.9%

42.1%

Up 180 bps primarily due to higher interim rent

  Operating margin (1) (3)

93.8%

27.2%

Driven by higher level of gains on disposition of equipment due to rebalancing of lease fleet

  Lease fleet utilization

91.8%

92.1%


(1) See supplemental segment information on page 9 for additional information.

(2) Excludes Brazil deliveries which are not consolidated into manufacturing revenue and margins.

(3) Includes Net gain on disposition of equipment, which is excluded from gross margin.

Conference Call

Greenbrier will host a teleconference to discuss its first quarter 2018 results. In conjunction with this news release, Greenbrier has posted a supplemental earnings presentation to our website. 
Teleconference details are as follows:

  • January 5, 2018
  • 8:00 a.m. Pacific Standard 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. 

About Greenbrier

Greenbrier­­, headquartered in Lake Oswego, Oregon, is a leading international supplier of equipment and services to global freight transportation markets. Greenbrier designs, builds and markets freight railcars and marine barges in North America. Greenbrier Europe is an end-to-end freight railcar manufacturing, engineering and repair business with operations in Poland and Romania that serves customers across Europe and in the nations of the GCC. Greenbrier builds freight railcars and rail castings in Brazil through two separate strategic partnerships. We are a leading provider of wheel services, parts, railcar management & regulatory compliance services and leasing services to railroads and related transportation industries in North America.  Greenbrier offers freight railcar repair, refurbishment and retrofitting services in North America through a joint venture partnership with Watco Companies, LLC. Through other unconsolidated joint ventures, we produce industrial and rail castings, tank heads and other components. Greenbrier owns a lease fleet of over 8,000 railcars and performs management services for 353,000 railcars. Learn more about Greenbrier at www.gbrx.com.

"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995:  This press release may contain forward-looking statements, including any statements that are not purely statements of historical fact. Greenbrier uses words such as "anticipates," "believes," "forecast," "potential," "goal," "contemplates," "expects," "intends," "plans," "projects," "hopes," "seeks," "estimates," "strategy," "could," "would," "should," "likely," "will," "may," "can," "designed to," "future," "foreseeable future" 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, reported backlog and awards that are not indicative of Greenbrier's financial results; uncertainty or changes in the credit markets and financial services industry; high levels of indebtedness and compliance with the terms of Greenbrier's indebtedness; write-downs of goodwill, intangibles and other assets 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; policies and priorities of the federal government regarding international trade, taxation and infrastructure; sovereign risk to contracts, exchange rates or property rights; 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 or specialty component price fluctuations and availability 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, costs or inefficiencies associated with expansion, start-up, or changing of production lines or changes in production rates, changing technologies, transfer of production between facilities or non-performance of alliance partners, subcontractors or suppliers; ability to obtain suitable contracts for the sale of leased equipment and risks related to car hire and residual values; integration of current or future acquisitions and establishment of joint ventures; succession planning; discovery of defects in railcars or services resulting in increased warranty costs or litigation; physical damage or product or service liability claims that exceed Greenbrier's insurance coverage; train derailments or other accidents or claims that could subject Greenbrier to legal claims; actions or inactions by various regulatory agencies including potential environmental remediation obligations or changing tank car or other railcar or railroad regulation; and issues arising from investigations of whistleblower complaints; all as may be discussed in more detail under the headings "Risk Factors" and "Forward Looking Statements" in Greenbrier's Annual Report on Form 10-K for the fiscal year ended August 31, 2017 and Greenbrier's other reports on file with the Securities and Exchange Commission. 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, Greenbrier does not assume any obligation to update any forward-looking statements.

THE GREENBRIER COMPANIES, INC.

CONSOLIDATED BALANCE SHEETS
(In thousands, unaudited)



November 30,

        2017

   August 31,

       2017

     May 31,

        2017

 February 28,

       2017

November 30,

        2016

Assets






   Cash and cash equivalents

$    591,406

$    611,466

$    465,413

$    545,752

$    233,790

   Restricted cash

8,839

8,892

8,753

8,696

8,642

   Accounts receivable, net 

315,393

279,964

267,830

295,844

237,037

   Inventories

411,371

400,127

414,012

381,439

402,064

   Leased railcars for syndication

130,991

91,272

149,119

98,398

102,686

   Equipment on operating leases, net

274,598

315,941

315,976

298,269

305,586

   Property, plant and equipment, net

426,961

428,021

330,471

325,325

327,170

   Investment in unconsolidated affiliates

101,529

108,255

110,058

90,762

93,330

   Intangibles and other assets, net

83,819

85,177

68,930

68,228

63,780

   Goodwill

67,783

68,590

43,265

43,265

43,265


$ 2,412,690

$ 2,397,705

$ 2,173,827

$ 2,155,978

$ 1,817,350







Liabilities and Equity






   Revolving notes

$         6,885

$         4,324

$                -

$                -

$                -

   Accounts payable and accrued liabilities

441,373

415,061

339,001

372,321

345,776

   Deferred income taxes

69,984

75,791

80,482

65,589

54,123

   Deferred revenue

120,044

129,260

82,006

85,441

85,358

   Notes payable, net

558,987

558,228

532,638

532,596

300,331

Contingently redeemable noncontrolling interest

35,209

36,148

-

-

-

   Total equity - Greenbrier

1,032,557

1,018,130

986,221

942,084

880,725

   Noncontrolling interest

147,651

160,763

153,479

157,947

151,037

   Total equity

1,180,208

1,178,893

1,139,700

1,100,031

1,031,762


$ 2,412,690

$ 2,397,705

$ 2,173,827

$ 2,155,978

$ 1,817,350

 

THE GREENBRIER COMPANIES, INC.

CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts, unaudited)



Three Months Ended

November 30,





2017


2016


Revenue







   Manufacturing


$

451,485


$         454,033


   Wheels & Parts



78,011


69,635


   Leasing & Services



30,039


28,646





559,535


552,314


Cost of revenue







   Manufacturing



380,850


356,555


   Wheels & Parts



72,506


64,978


   Leasing & Services



16,865


18,030





470,221


439,563









Margin



89,314


112,751









Selling and administrative



47,043


41,213


Net gain on disposition of equipment



(19,171)


(1,122)


Earnings from operations



61,442


72,660









Other costs







Interest and foreign exchange



7,020


1,724


Earnings before income tax and loss from unconsolidated affiliates



54,422


70,936


Income tax expense



(18,135)


(20,386)


Earnings before loss from unconsolidated affiliates



36,287


50,550


Loss from unconsolidated affiliates



(2,910)


(2,584)









Net earnings



33,377


47,966


Net earnings attributable to noncontrolling interest



(7,124)


(23,004)









Net earnings attributable to Greenbrier


$

26,253


$           24,962









Basic earnings per common share:


$

0.90


$                0.86









Diluted earnings per common share:


$

0.83


$                0.79









Weighted average common shares:







Basic



29,332


29,097


Diluted



32,696


32,412









Dividends declared per common share


$

0.23


$                0.21


 

THE GREENBRIER COMPANIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited) 





Three Months Ended
November 30,





2017


2016









Cash flows from operating activities:







    Net earnings


$

33,377


$         47,966


    Adjustments to reconcile net earnings to net cash

      provided by (used in) operating activities:







      Deferred income taxes



(5,865)


2,756


      Depreciation and amortization



18,370


15,595


      Net gain on disposition of equipment



(19,171)


(1,122)


      Accretion of debt discount



1,024


-


      Stock based compensation expense



5,939


5,343


     Noncontrolling interest adjustments



(875)


(3,781)


      Other



477


229


      Decrease (increase) in assets:







          Accounts receivable, net



(35,510)


(5,256)


          Inventories



(16,311)


(39,108)


          Leased railcars for syndication



(35,541)


34,295


          Other



6,304


8,893


    Increase (decrease) in liabilities:







          Accounts payable and accrued liabilities



16,676


(22,873)


          Deferred revenue



(8,548)


(11,111)


    Net cash provided by (used in) operating activities



(39,654)


31,826


Cash flows from investing activities:







    Proceeds from sales of assets



75,060


9,189


    Capital expenditures



(29,893)


(12,584)


    Decrease in restricted cash



53


15,637


   Cash distribution from unconsolidated affiliates



-


550


    Investment in and advances to unconsolidated affiliates



-


(550)


    Net cash provided by investing activities



45,220


12,242


Cash flows from financing activities:







    Net changes in revolving notes with maturities of 90 days or less



2,561


-


    Proceeds from issuance of notes payable



2,138


-


   Repayments of notes payable



(2,809)


(1,750)


   Investment by joint venture partner



6,500


-


    Cash distribution to joint venture partner



(26,900)


(11,185)


    Dividends



(319)


(6,147)


    Tax payments for net share settlement of restricted stock



(5,061)


(2,820)


    Excess tax deficiency from restricted stock awards



-


(2,464)


    Net cash used in financing activities



(23,890)


(24,366)


    Effect of exchange rate changes



(1,736)


(8,591)


    Increase (decrease) in cash and cash equivalents



(20,060)


11,111


Cash and cash equivalents







Beginning of period



611,466


222,679


End of period


$

591,406


$       233,790
















 

THE GREENBRIER COMPANIES, INC.

SUPPLEMENTAL INFORMATION

(In thousands, except per share amounts, unaudited)


Operating Results by Quarter for 2017 are as follows:



First


Second


Third


Fourth


Total













Revenue











   Manufacturing

$          454,033


$       445,504


$       317,104


$       508,547


$   1,725,188


   Wheels & Parts

69,635


82,714


85,231


75,099


312,679


   Leasing & Services

28,646


38,064


36,826


27,761


131,297



552,314


566,282


439,161


611,407


2,169,164


Cost of revenue











   Manufacturing

356,555


346,653


245,228


425,531


1,373,967


   Wheels & Parts

64,978


75,497


77,985


69,876


288,336


   Leasing & Services

18,030


25,207


26,247


16,078


85,562



439,563


447,357


349,460


511,485


1,747,865













Margin

112,751


118,925


89,701


99,922


421,299













Selling and administrative expense

41,213


39,495


42,810


47,089


170,607


Net gain on disposition of equipment

(1,122)


(2,090)


(1,581)


(4,947)


(9,740)


Earnings from operations

72,660


81,520


48,472


57,780


260,432













Other costs











   Interest and foreign exchange

1,724


5,673


7,894


8,901


24,192


Earnings before income tax and earnings (loss) from unconsolidated affiliates          

70,936


75,847


40,578


48,879


236,240


Income tax expense

(20,386)


(24,858)


(8,656)


(10,114)


(64,014)


Earnings before earnings (loss) from unconsolidated affiliates          

50,550


50,989


31,922


38,765


172,226


Earnings (loss) from unconsolidated affiliates

(2,584)


(1,988)


(681)


(6,511)


(11,764)


Net earnings

47,966


49,001


31,241


32,254


160,462


Net earnings attributable to noncontrolling interest

(23,004)


(14,465)


1,582


(8,508)


(44,395)


Net earnings attributable to Greenbrier

$           24,962


$         34,536


$         32,823


$        23,746


$      116,067













Basic earnings per common share (1)

$                  0.86


$                    1.19


$                 1.12


$                 0.81


$               3.97


Diluted earnings per common share (1)

$                  0.79


$                    1.09


$                 1.03


$                 0.75


$               3.65




(1)

Quarterly amounts do not total to the year to date amount as each period is calculated discretely. Diluted earnings per common share excludes the dilutive effect of the 2024 Convertible Notes, since the average stock price was less than the applicable conversion price and therefore was considered anti-dilutive, but includes restricted stock units that are subject to performance criteria, for which actual levels of performance above target have been achieved, using the treasury stock method when dilutive and the dilutive effect of shares underlying the 2018 Convertible Notes using the "if converted" method in which debt issuance and interest costs, net of tax, were added back to net earnings.

 

THE GREENBRIER COMPANIES, INC.

SUPPLEMENTAL INFORMATION
 (In thousands, unaudited)


Segment Information


Three months ended November 30, 2017:











Revenue


Earnings (loss) from operations


(In thousands)

External


Intersegment


  Total


External


Intersegment


Total


Manufacturing

$           451,485


$             16,804


$         468,289


$           52,969


$               4,186


$      57,155


Wheels & Parts

78,011


7,732


85,743


2,418


748


3,166


Leasing & Services

30,039


1,605


31,644


28,190


1,372


29,562


Eliminations

-


(26,141)


(26,141)


-


(6,306)


(6,306)


Corporate

-


-


-


(22,135)


-


(22,135)



$           559,535


$                      -


$         559,535


$           61,442


$                       -


$       61,442












Three months ended August 31, 2017:





















Revenue


Earnings (loss) from operations



External


Intersegment


  Total


External


Intersegment


Total


Manufacturing

$           508,547


$                       -


$         508,547


$           68,723


$                       -


$       68,723


Wheels & Parts

75,099


7,468


82,567


2,282


341


2,623


Leasing & Services

27,761


3,772


31,533


7,541


3,497


11,038


Eliminations

-


(11,240)


(11,240)


-


(3,838)


(3,838)


Corporate

-


-


-


(20,766)


-


(20,766)



$           611,407


$                       -


$         611,407


$           57,780


$                       -


$      57,780


 




Total assets



 

(In thousands)



November 30,

2017


August 31,

2017



Manufacturing

$               915,918


$             914,450



Wheels & Parts

262,349


236,315



Leasing & Services 

535,847


535,323



Unallocated

698,576


711,617




$            2,412,690


$          2,397,705



The results of operations for GBW, which are shown below, are not reflected in the above tables as the investment is accounted for under the equity method of accounting.


As of and for the

Three Months Ended     



November 30,
 
2017    


August 31,
2017 



Revenue

$                 58,000


$                56,300



Loss from operations

$                 (5,700)


$               (15,400)



Total assets

$               204,300


$              206,000














During the three months ended August 31, 2017, GBW performed an interim goodwill test as sales and profitability trends declined beyond what was anticipated. As a result, GBW recorded a pre-tax impairment loss of $11.2 million. GBW is accounted for under the equity method of accounting, therefore our share of the non-cash impairment loss recognized by GBW was $3.5 million after-tax ($0.11 per share) and is included as part of Earnings (loss) from unconsolidated affiliates on our Consolidated Statement of Income.

THE GREENBRIER COMPANIES, INC.

SUPPLEMENTAL INFORMATION
(In thousands, excluding backlog and delivery units, unaudited)


Reconciliation of Net earnings to Adjusted EBITDA





Three Months Ended



November 30,
2017


August 31,

2017


Net earnings

$               33,377


$               32,254


Interest and foreign exchange

7,020


8,901


Income tax expense

18,135


10,114


Depreciation and amortization

18,370


18,513


GBW goodwill impairment

-


3,522









Adjusted EBITDA

$               76,902


$            73,304


 




Three Months
Ended

November 30,
2017


Backlog Activity (units)





Beginning backlog

28,600


Orders received (1)

3,200


Production held as Leased railcars for syndication

(1,400)


Production sold directly to third parties (1)

(3,900)


Ending backlog

26,500





Delivery Information (units)



Production sold directly to third parties (1)

3,900


Sales of Leased railcars for syndication

500


Total deliveries

4,400




(1)

Includes Greenbrier-Maxion, our Brazilian railcar manufacturer, which is accounted for under the equity method


 

THE GREENBRIER COMPANIES, INC.

SUPPLEMENTAL INFORMATION

 (In thousands, except per share amounts, unaudited)


Reconciliation of common shares outstanding, adjusted net earnings attributable to Greenbrier and adjusted diluted earnings per share


The shares used in the computation of the Company's basic and diluted earnings per common share are reconciled as follows:


Three Months Ended


November 30,

2017

    August 31,
 2017

Weighted average basic common shares outstanding (1)

29,332

29,323

Dilutive effect of convertible notes (2)

3,331

3,321

Dilutive effect of performance awards (3)

33

58

Weighted average diluted common shares outstanding

32,696

32,702




(1)

Restricted stock grants and restricted stock units, including some grants subject to certain performance criteria, are included in weighted average basic common shares outstanding when the Company is in a net earnings position.



(2)

The dilutive effect of the 2018 Convertible notes are included in the Weighted average diluted common shares outstanding as they were considered dilutive under the "if converted" method as further discussed below.



(3)

 Restricted stock units subject to performance criteria, for which actual levels of performance above target have been achieved, and are included in Weighted average diluted shares outstanding when the company is in a net earnings position.

Diluted earnings per share was calculated using the more dilutive of two approaches.  The first approach includes the dilutive effect of using the treasury stock method, associated with shares underlying the 2024 Convertible notes and performance based restricted stock units that are subject to performance criteria, for which actual levels of performance above target have been achieved. The second approach supplements the first by including the "if converted" effect of the 2018 Convertible notes. Under the "if converted method" debt issuance and interest costs, both net of tax, associated with the convertible notes are added back to net earnings and the share count is increased by the shares underlying the convertible notes.  The 2024 Convertible notes are included in the calculation of both approaches using the treasury stock method when the average stock price is greater than the applicable conversion price.


         Three Months Ended


November 30,
2017

August 31,

2017

Net earnings attributable to Greenbrier

$           26,253

$         23,746

GBW goodwill impairment

                N/A

3,522

Adjusted net earnings attributable to Greenbrier

$           26,253

$          27,268




Three Months Ended


November 30,
2017

August 31,

2017

Net earnings attributable to Greenbrier

$        26,253

$        23,746

Add back:



Interest and debt issuance costs on the 2018 Convertible notes, net of tax

733

733

Earnings before interest and debt issuance costs on convertible notes

$        26,986

$         24,479

Weighted average diluted common shares outstanding

32,696

32,702




Diluted earnings per share

$             0.83

$                 0.75

GBW goodwill impairment(1)

                N/A

0.11

Adjusted diluted earnings per share

$             0.83

$             0.86



(1)

GBW goodwill impairment of $3.5 million, net of tax, divided by weighted average diluted common shares outstanding of 32,702 for the three months ended August 31, 2017.

 

SOURCE The Greenbrier Companies, Inc. (GBX)