Greenbrier Reports First Quarter Results

Date

Fri, Jan 6, 2017 06:00 AM

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LAKE OSWEGO, Ore., Jan. 6, 2017 /PRNewswire/ -- The Greenbrier Companies Inc., (NYSE: GBX) today reported financial results for its first fiscal quarter ended November 30, 2016.

First Quarter Highlights

  • Net earnings attributable to Greenbrier for the quarter were $25.0 million, or $0.79 per diluted share, on revenue of $552.3 million
  • Adjusted EBITDA for the quarter was $85.7 million, or 15.5% of revenue.
  • Cash provided by operating activities totaled $29.0 million for the quarter.
  • Diversified orders for 2,400 new railcars were received during this quarter, valued at over $230 million, or an average price of approximately $98,000 per railcar.
  • New railcar backlog as of November 30, 2016 was 25,800 units with an estimated value of $2.97 billion (average unit sale price of $115,000). Included in backlog are 3,800 covered hopper railcars for use in energy related sand transportation, of which 2,500 units, scheduled for production in 2018, are for a customer who is negotiating with us to modify the order.
  • New railcar deliveries totaled 4,000 units for the quarter, compared to 4,600 units for the quarter ended August 31, 2016.
  • Marine backlog as of November 30, 2016 was approximately $103 million.
  • Board declares a quarterly dividend of $0.21 per share, payable on February 16, 2017 to shareholders as of January 26, 2017.
  • Greenbrier is negotiating to exercise its option to increase its equity position in Brazilian railcar manufacturing joint venture, Greenbrier-Maxion, to 60%.

William A. Furman, Chairman and CEO, said, "Greenbrier's fiscal 2017 is off to a strong start with solid financial performance delivered during a demanding first quarter. We had healthy manufacturing margins on lower deliveries, a testament to the strength of our manufacturing and leasing operations. We continue to execute on our strategy of focusing on our core North American operations while pursuing targeted investments in international markets."

Furman continued, "Brazil's economic, business and political conditions have improved and forecasts indicate continued GDP improvement in 2017. Greenbrier's operations in Brazil and our relationship with our partners continue to grow.  For the quarter ended November 30, 2016, our Brazilian railcar manufacturing joint venture Greenbrier-Maxion received orders and awards for over 2,000 railcars, which are not included in Greenbrier's reported orders. We have accelerated discussions to increase our interest in the Brazil operations with an incremental investment of nearly $24 million, which will be used to pay down high cost debt. Our facilities in Brazil include the largest railcar assembly plant in South America along with a castings facility. The need for high quality transportation equipment is poised to grow based in part on railcar fleet demographics with a high percentage of the fleet being older or obsolete."

Furman added, "As we pursue investments in growth opportunities, our solid financial returns in our core business in North America and internationally along with our strong balance sheet remain critical. These provide us the flexibility to compete effectively today while continuing to invest domestically and internationally for tomorrow. In addition, changes in the global trade environment will require robust risk management."

Furman concluded, "Based on our first quarter results, regular communications with customers and current production schedules in North America, we are reaffirming our guidance for the year. We will continue to seek opportunities to diversify by accessing new global markets, while streamlining our cost structures to maximize profitability in North America."

Business Outlook

Based on current business trends, industry forecasts and production schedules for fiscal 2017, Greenbrier believes:

  • Deliveries will be approximately 14,000 – 16,000 units
  • Revenue will be $2.0$2.4 billion
  • Diluted EPS will be in the range of $3.25 to $3.75

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 FY17

Q4 FY16

Sequential Comparison – Main Drivers

Revenue

$552.3M

$595.2M

Down 7.2% primarily due to fewer deliveries

Gross margin

20.4%

20.1%

Up 30 bps due to product mix shifts

Selling and administrative expense

$41.2M

$40.6M

Up 1.5% due to employee related costs including long-term incentive compensation and increased legal and consulting costs

Gain on disposition of equipment

$1.1M

$4.5M

Decrease reflects more normalized levels; Q4 included insurance recovery proceeds from 2015 fire losses

Adjusted EBITDA

$85.7M

$104.4M

Lower revenue and operating margin

Effective tax rate

28.7%

24.1%

Reflects a change in the geographic mix of earnings  

Loss from unconsolidated affiliates

($2.6M)

($0.8M)

Challenging after-markets operating environment in North America and high debt costs in Brazil

Net earnings attributable to noncontrolling interest

$23.0M

$26.8M

Change driven primarily by timing of deliveries from our GIMSA JV

Net earnings attributable to Greenbrier

$25.0M

$33.6M


Diluted EPS

$0.79

$1.06


Segment Summary


Q1 FY17

Q4 FY16

Sequential Comparison – Main Drivers

Manufacturing

  Revenue

$454.0M

$484.6M

Reflects fewer deliveries as production rates have slowed offset somewhat by marine activity

  Gross margin

21.5%

21.0%

Up 50 bps primarily due to product mix shifts

  Operating margin (1)

18.4%

18.5%


  Deliveries

4,000

4,600


Wheels & Parts

  Revenue

$69.6M

$74.8M

Down 7.0% primarily attributable to product mix shifts

  Gross margin

6.7%

7.0%

Down 30 bps reflecting continued challenging operating environment

  Operating margin (1)

4.2%

5.7%


Leasing & Services

  Revenue

$28.6M

$35.8M

Return to more normalized revenue levels

  Gross margin

37.1%

35.5%

Up 160 bps due to higher margins on externally sourced railcar syndications

  Operating margin (1) (2)

25.8%

25.3%


  Lease fleet utilization

94.2%

91.0%




(1)

See supplemental segment information on page 10 for additional information.

(2)

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 2017 results. In conjunction with this news release, Greenbrier has posted a supplemental earnings presentation to our website. 
Teleconference details are as follows:

  • January 6, 2017
  • 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 (www.gbrx.com), headquartered in Lake Oswego, Oregon, is a leading international supplier of equipment and services to the freight rail transportation markets. Greenbrier designs, builds and markets freight railcars in North America and Europe, we build freight railcars and rail castings in Brazil through a strategic partnership, and build and market marine barges in North America. Through our European manufacturing operations, we recently began delivery of US-designed tank cars in Saudi Arabia. In October 2016, we entered into an agreement with Astra Rail Management GmbH to form a new company, Greenbrier-Astra Rail, which will create an end-to-end, Europe-based freight railcar manufacturing, engineering and repair business. We expect this combination will be completed during 2017. We are a leading provider of wheel services, parts, leasing and other services to the railroad and related transportation industries in North America and a provider of freight railcar repair, refurbishment and retrofitting services in North America through a joint venture partnership with Watco Companies, LLC. Through other joint ventures we produce rail castings, tank heads and other railcar components. Greenbrier owns a lease fleet of over 8,500 railcars and performs management services for over 265,000 railcars.

"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995:  This press release may contain forward-looking statements, including statements regarding expected new railcar production volumes and schedules, expected customer demand for the Company's products and services, plans to adjust manufacturing capacity, restructuring plans, new railcar delivery volumes and schedules, changes in demand for the Company's railcar services and parts business, and the Company's future financial performance. 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 in 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 are not indicative of our financial results; uncertainty or changes in the credit markets and financial services industry; high levels of indebtedness and compliance with the terms of our 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 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 our insurance coverage; train derailments or other accidents or claims that could subject us to legal claims; actions or inactions by various regulatory agencies including potential environmental remediation obligations or changing tank car or other rail car 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 our Annual Report on Form 10-K for the fiscal year ended August 31, 2016, and our 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, we do not assume any obligation to update any forward-looking statements.

Adjusted EBITDA is not a financial measure under generally accepted accounting principles (GAAP).   We define Adjusted EBITDA as Net earnings before Interest and foreign exchange, Income tax expense, Depreciation and amortization. Adjusted EBITDA is a performance measurement tool commonly used by rail supply companies and Greenbrier. You should not consider Adjusted EBITDA in isolation or as a substitute for other financial statement data determined in accordance with GAAP. In addition, because Adjusted EBITDA is not a measure of financial performance under GAAP and is susceptible to varying calculations, this measure presented may differ from and may not be comparable to similarly titled measures used by other companies.

THE GREENBRIER COMPANIES, INC.

CONSOLIDATED BALANCE SHEETS
(In thousands, unaudited)



November 30,
2016

   August 31,
2016

May 31,
2016

 February 29,
2016

November 30,
2015

Assets






   Cash and cash equivalents

$    233,790

$    222,679

$    214,440

$    283,541

$    197,633

   Restricted cash

8,642

24,279

8,669

8,877

9,818

   Accounts receivable, net 

237,037

232,517

213,510

228,072

237,213

   Inventories

402,064

365,805

458,068

421,243

444,023

   Leased railcars for syndication

102,686

144,932

136,812

179,975

238,911

   Equipment on operating leases, net

305,586

306,266

232,791

235,171

252,641

   Property, plant and equipment, net

327,170

329,990

318,010

310,019

307,196

   Investment in unconsolidated affiliates

93,330

98,682

89,297

86,850

86,658

   Intangibles and other assets, net

63,780

67,359

68,648

70,709

73,333

   Goodwill

43,265

43,265

43,265

43,265

43,265


$ 1,817,350

$ 1,835,774

$ 1,783,510

$ 1,867,722

$ 1,890,691







Liabilities and Equity






   Revolving notes

$                -

$                -

$                -

$      75,000

$    163,888

   Accounts payable and accrued liabilities

345,776

369,754

370,652

401,010

384,670

   Deferred income taxes

54,123

51,619

50,390

55,204

63,483

   Deferred revenue

85,358

95,721

68,158

84,362

42,351

   Notes payable, net

300,331

301,853

304,434

319,952

321,844







   Total equity - Greenbrier

880,725

874,311

840,086

800,940

771,945

   Noncontrolling interest

151,037

142,516

149,790

131,254

142,510

   Total equity

1,031,762

1,016,827

989,876

932,194

914,455


$ 1,817,350

$ 1,835,774

$ 1,783,510

$ 1,867,722

$ 1,890,691

 


THE GREENBRIER COMPANIES, INC.


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



Three Months Ended
November 30,





2016


2015


Revenue







   Manufacturing


$

454,033


$        698,661


   Wheels & Parts



69,635


78,729


   Leasing & Services



28,646


24,999





552,314


802,389


Cost of revenue







   Manufacturing



356,555


533,033


   Wheels & Parts



64,978


73,002


   Leasing & Services



18,030


11,589





439,563


617,624









Margin



112,751


184,765









Selling and administrative



41,213


36,549


Net gain on disposition of equipment



(1,122)


(269)


Earnings from operations



72,660


148,485









Other costs







Interest and foreign exchange



1,724


5,436


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



 

70,936


 

143,049


Income tax expense



(20,386)


(44,719)


Earnings before earnings (loss) from unconsolidated affiliates



 

50,550


 

98,330


Earnings (loss) from unconsolidated affiliates



(2,584)


383









Net earnings



47,966


98,713


Net earnings attributable to noncontrolling interest



(23,004)


(29,280)









Net earnings attributable to Greenbrier


$

24,962


$          69,433









Basic earnings per common share:


$

0.86


$              2.36









Diluted earnings per common share:


$

0.79


$              2.15









Weighted average common shares:







Basic



29,097


29,391


Diluted



32,412


32,578









Dividends declared per common share


$

0.21


$              0.20


 


THE GREENBRIER COMPANIES, INC.


CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited) 





Three Months Ended

 November 30,




2016


2015

Cash flows from operating activities:






    Net earnings


$

47,966


$         98,713

    Adjustments to reconcile net earnings to net cash

      provided by (used in) operating activities:






      Deferred income taxes



2,756


3,019

      Depreciation and amortization



15,595


12,974

      Net gain on disposition of equipment



(1,122)


(269)

      Stock based compensation expense



5,343


5,301

     Noncontrolling interest adjustments



(3,781)


262

      Other



229


637

      Decrease (increase) in assets:






          Accounts receivable, net



(5,256)


(40,889)

          Inventories



(39,108)


(274)

          Leased railcars for syndication



34,295


(61,059)

          Other



8,893


(3,578)

    Decrease in liabilities:






          Accounts payable and accrued liabilities



(25,693)


(77,605)

          Deferred revenue



(11,111)


(723)

    Net cash provided by (used in) operating activities



29,006


(63,491)

Cash flows from investing activities:






    Proceeds from sales of assets



9,189


41,353

    Capital expenditures



(12,584)


(15,595)

    Decrease (increase) in restricted cash



15,637


(949)

    Cash distribution from unconsolidated affiliates



550


616

    Investment in and advances to unconsolidated affiliates



(550)


(1,866)

    Net cash provided by investing activities



12,242


23,559

Cash flows from financing activities:






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



-


113,000

    Repayments of notes payable



(1,750)


(1,761)

    Debt issuance costs



-


(4,493)

    Cash distribution to joint venture partner



(11,185)


(17,654)

    Repurchase of stock



-


(20,203)

    Dividends



(6,147)


(105)

    Excess tax benefit (deficiency) from restricted stock awards



(2,464)


2,827

    Other



-


(6)

    Net cash provided by (used in) financing activities



(21,546)


71,605

    Effect of exchange rate changes



(8,591)


(6,970)

    Increase in cash and cash equivalents



11,111


24,703

Cash and cash equivalents






Beginning of period



222,679


172,930

End of period


$

233,790


$       197,633













 


THE GREENBRIER COMPANIES, INC.


SUPPLEMENTAL INFORMATION
(In thousands, except per share amounts, unaudited)



Operating Results by Quarter for 2016 are as follows:



First


Second


Third


Fourth


Total











Revenue










   Manufacturing

$        698,661


$      454,531


$      458,494


$     484,645


$  2,096,331

   Wheels & Parts

78,729


90,458


78,417


74,791


322,395

   Leasing & Services

24,999


124,090


75,955


35,754


260,798


802,389


669,079


612,866


595,190


2,679,524

Cost of revenue










   Manufacturing

533,033


361,827


352,775


382,919


1,630,554

   Wheels & Parts

73,002


81,388


69,818


69,543


293,751

   Leasing & Services

11,589


105,973


63,175


23,045


203,782


617,624


549,188


485,768


475,507


2,128,087











Margin

184,765


119,891


127,098


119,683


551,437











Selling and administrative expense

36,549


38,244


43,280


40,608


158,681

Net gain on disposition of equipment

(269)


(10,746)


(311)


(4,470)


(15,796)

Earnings from operations

148,485


92,393


84,129


83,545


408,552











Other costs










   Interest and foreign exchange

5,436


1,417


3,712


2,937


13,502

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

143,049


90,976


80,417


80,608


395,050

Income tax expense

(44,719)


(25,734)


(22,449)


(19,420)


(112,322)

Earnings before earnings (loss) from unconsolidated affiliates          

98,330


65,242


57,968


61,188


282,728

Earnings (loss) from unconsolidated affiliates

383


974


1,564


(825)


2,096

Net earnings

98,713


66,216


59,532


60,363


284,824

Net earnings attributable to noncontrolling interest

(29,280)


(21,348)


(24,180)


(26,803)


(101,611)

Net earnings attributable to Greenbrier

$        69,433


$         44,868


$        35,352


$      33,560


$     183,213











Basic earnings per common share (1)

$             2.36


$            1.54


$            1.22


$          1.15


$           6.28

Diluted earnings per common share (1)

$             2.15


$            1.41


$            1.12


$          1.06


$           5.73



(1)

Quarterly amounts may not total to the year to date amount as each period is calculated discretely. Diluted earnings per common share includes the dilutive effect of the 2026 Convertible Notes and 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, 2016:










Revenue


Earnings (loss) from operations

(In thousands)

External


Intersegment


  Total


External


Intersegment


Total

Manufacturing

$           454,033


$                       -


$         454,033


$          83,341


$                       -


$       83,341

Wheels & Parts

69,635


7,201


76,836


2,894


612


3,506

Leasing & Services

28,646


5,334


33,980


7,390


5,250


12,640

Eliminations

-


(12,535)


(12,535)


-


(5,862)


(5,862)

Corporate

-


-


-


(20,965)


-


(20,965)


$           552,314


$                      -


$         552,314


$           72,660


$                       -


$       72,660

 

Three months ended August 31, 2016:










Revenue


Earnings (loss) from operations


External


Intersegment


  Total


External


Intersegment


Total

Manufacturing

$           484,645


$             83,563


$         568,208


$           89,879


$             23,358


$     113,237

Wheels & Parts

74,791


8,362


83,153


4,228


447


4,675

Leasing & Services

35,754


2,657


38,411


9,055


2,657


11,712

Eliminations

-


(94,582)


(94,582)


-


(26,462)


(26,462)

Corporate

-


-


-


(19,617)


-


(19,617)


$           595,190


$                       -


$         595,190


$           83,545


$                       -


$       83,545

 


Total assets


 November 30,


     August 31,

(In thousands)

2016


2016

Manufacturing

$              729,361


$           701,296

Wheels & Parts

279,971


275,599

Leasing & Services

471,957


516,147

Unallocated

336,061


342,732


$           1,817,350


$         1,835,774

 

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,


 August 31,



2016


2016


Revenue

$                 70,300


$                84,100


Loss from operations

$                 (4,600)


$                    (500)


Total assets

$               238,300


$              247,600











 

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,

2016


      August 31,

       2016

Net earnings

$             47,966


$           60,363

Interest and foreign exchange

1,724


2,937

Income tax expense

20,386


19,420

Depreciation and amortization

15,595


21,664







Adjusted EBITDA

$             85,671


$        104,384







 




Three Months
Ended
November 30,
2016

Backlog Activity (units)




Beginning backlog

27,500

Orders received

2,400

Production held as Leased railcars for syndication

(600)

Production sold directly to third parties

(3,500)

Ending backlog

25,800



Delivery Information (units)


Production sold directly to third parties

3,500

Sales of Leased railcars for syndication

500

Total deliveries

4,000

 

THE GREENBRIER COMPANIES, INC.

SUPPLEMENTAL INFORMATION

(In thousands, except per share amounts, unaudited)


Reconciliation of common shares outstanding and 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,
2016

August 31,
2016

Weighted average basic common shares outstanding (1)

29,097

29,079

Dilutive effect of convertible notes (2)

3,258

3,250

Dilutive effect of performance awards (3)

57

118

Weighted average diluted common shares outstanding

32,412

32,447






(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 was included 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, 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 2026 Convertible notes and performance based restricted stock units 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 issued in March 2011. 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.

 


Three Months Ended


November 30,
2016

August 31,
2016

Net earnings attributable to Greenbrier

$          24,962

$        33,560

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

$          25,695

$       34,293

Weighted average diluted common shares outstanding

32,412

32,447




Diluted earnings per share

$             0.79

$           1.06

 

SOURCE The Greenbrier Companies, Inc. (GBX)