Greenbrier Reports Fiscal Third Quarter 2011 Results; Concludes New Revolving Credit Facility

LAKE OSWEGO, Ore., July 8, 2011 /PRNewswire/ -- The Greenbrier Companies (NYSE: GBX) today reported results for its fiscal third quarter ended May 31, 2011.

Third Quarter Highlights

Financial Highlights:

  • Revenues for the third quarter of 2011 were $317 million, up from $207 million in the prior year's third quarter.
  • Adjusted EBITDA for the quarter was $25.7 million, or 8.1% of revenues, compared to $25.9 million, or 12.5% of revenues in the third quarter of 2010.
  • Net loss for the quarter was $3.3 million or $0.14 per diluted share, compared to net earnings of $4.6 million, or $0.23 per diluted share, in the prior year's third quarter.(1)
  • Excluding a one-time charge of $10.0 million pre-tax, $6.0 million after-tax, for costs associated with the retirement of $235 million of senior unsecured notes during the quarter, net earnings were $2.7 million, or $0.10 per share.

Liquidity Summary:

  • The Company ended the quarter with $34.3 million of cash and $112.2 million of committed additional borrowing capacity.
  • Greenbrier extended debt maturity dates, lowered its interest costs, and increased its liquidity through:
    • the sale during the quarter of $230 million of 3.5% senior convertible notes due 2018, and
    • a five-year, $245 million revolving line of credit, which closed on June 30, 2011, and replaces the $100 million credit facility that would have matured November 2011.  In connection with this financing, Greenbrier fully repaid $72 million outstanding under its term loan due June 2012 with affiliates of WL Ross & Co. LLC.  

Railcar Deliveries and Backlog:

  • New railcar deliveries in the third quarter of 2011 were 2,200 units, compared to 700 units in the third quarter of 2010.
  • Greenbrier's new railcar manufacturing backlog as of May 31, 2011 was 13,600 units with an estimated value of $1.05 billion, compared to 9,500 units valued at $720 million at February 28, 2011.  

(1) Net earnings (loss) is now referred to in the Consolidated Statements of Operations, in accordance with GAAP, as "Net earnings (loss) attributable to controlling interest".

Discussion of Quarterly Results and Outlook

William A. Furman, president and chief executive officer, said, "As anticipated, we returned to profitability during the quarter, excluding the one-time charge associated with retiring our $235 million senior unsecured notes.  However, these results did not fully meet our expectations, principally due to a temporary shortage of castings in North America and a temporary delay in certification of railcars in Europe, which dampened new railcar deliveries by about 300 units. In addition, about $2 million of certain other non-recurring general & administrative costs were incurred during the third quarter."  

Furman added, "Business momentum continues in what we believe is the early stage of an upturn in the markets we serve.  Revenue in our Manufacturing and Wheel Services, Refurbishment & Parts segments and lease rates on our lease fleet have grown for the third consecutive quarter, driven by stronger demand for our products and services. Business visibility continues to improve, particularly in new railcar manufacturing, where we are experiencing a cyclical recovery and benefitting from the strength of our diversified and expanded product portfolio and the ramping up of additional capacity. Since the beginning of our fiscal year, we have received new railcar orders for over 14,000 units, 6,400 of which were received during the third quarter.  We are also on track with our plans to open an additional production line in July 2011 that will provide more capacity and a lower cost manufacturing footprint. We currently expect to deliver around 9,300 new railcars in fiscal 2011."  

Furman concluded, "We remain on track to achieve our fiscal 2011 objectives. In the fourth quarter, we will continue to focus on expanding gross margins, improving working capital usage and operational efficiencies, meeting increased demand and enhancing our leasing platform. We expect to produce increased earnings leverage as we continue to benefit from operating at higher plant utilization levels, and achieve economies of scale.  Our recent debt refinancing strengthened our balance sheet and will save us over $10 million in annual pre-tax interest expense."

Segment Details

The Manufacturing segment consists of marine and new railcar production in Europe and North America. Manufacturing segment revenue for the third quarter was $173.5 million, compared to $77.9 million in the third quarter of 2010. The revenue increase was primarily due to higher railcar deliveries, somewhat offset by a change in railcar product mix with lower per unit sales prices. New railcar deliveries in the current quarter were 2,200 units, up from 700 units in the same quarter last year. Manufacturing gross margin for the third quarter was 8.5% of revenue, compared to 11.5% in the third quarter of 2010. The gross margin decline was due principally to a marine and new railcar product mix which had less favorable pricing, as the prior period contained multi-year contracts entered into prior to the downturn.   Although the current quarter benefitted from economies of operating at higher production levels, margins were impacted by inefficiencies associated with temporary shortages of castings.

The Wheel Services, 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 $126.3 million, compared to $111.2 million in the third quarter of 2010. The revenue increase was primarily due to higher sales volumes, principally related to the Company's wheel service business, a product mix with a higher average sales price and metal scrapping programs that were just ramping up in the prior comparable period.  Gross margin for the Wheel Services, Refurbishment & Parts segment was 12.0% of revenues, compared to 13.1% of revenues in the same quarter last year. The decrease was primarily the result of a change in product mix and higher freight costs associated with severe weather at some of our locations.

The Leasing & Services segment includes results from the Company-owned lease fleet of approximately 9,000 railcars and from fleet management services provided for approximately 214,000 railcars. Revenue for this segment was $17.5 million, compared to $18.3 million in the same quarter last year.  Leasing & Services' gross margin for the quarter was 47.0% of revenues, compared to 45.8% of revenues in the same quarter last year. The increase was primarily a result of higher rents earned on leased railcars for syndication, partially offset by the discontinuation of a certain management services contract. Lease fleet utilization was 96.8%, compared to 94.5% in the same period last year.

Selling and administrative costs were $22.6 million for the quarter, or 7.1% of revenues, versus $17.5 million, or 8.4% of revenues, for the same quarter last year. The increase was primarily due to employee-related costs which include the partial restoration of previous salary reductions taken during the downturn and increases in incentive compensation, revenue-based fees paid to our joint venture partner in Mexico due to both higher activity levels and a contractual increase in fee percentages, and higher research and development costs associated with our manufacturing products.

Gains on disposition of equipment, previously included in revenue, were $1.7 million for the quarter, compared to $4.0 million for the same quarter last year.  The current quarter includes a $.3 million gain from disposition of leased assets and $1.4 million from insurance proceeds related to the January 2009 fire at one of our wheel facilities.  The prior comparable period includes a $3.1 million gain from disposition of leased assets and $0.9 million from insurance proceeds related to the 2009 fire.  Assets from Greenbrier's lease fleet are periodically sold in the normal course of business in order to take advantage of market conditions, manage risk and maintain liquidity.

Interest and foreign exchange expense was $9.8 million for the quarter, compared to $10.8 million for the same period in 2010. During the quarter, $235.0 million of senior unsecured loans at 8⅜% were repaid and replaced with $230.0 million of convertible debt at 3.5%.

Liquidity Update

During the quarter, the Company enhanced and optimized its balance sheet, cash flow and liquidity through the sale of $230 million of 3.5% senior convertible notes due 2018, which were convertible into shares of Greenbrier common stock at an initial conversion price of $38.05 per share.  The proceeds were used to fully retire $235 million of outstanding 8⅜% Senior Notes due 2015. The difference in cash interest expense between the newly issued notes and the retired notes will be over $10 million annually.  A charge of $10.0 million was recorded to Other costs during the third quarter for the write-off of unamortized debt acquisition costs, prepayment premiums and other costs associated with the full retirement of the $235 million senior unsecured notes.

Subsequent to quarter end, Greenbrier completed the refinancing of its North American credit facility and fully repaid $72 million outstanding under a term loan due June 2012.  The new facility is a five-year, $245 million revolving line of credit maturing June 30, 2016.  Borrowings under the facility currently bear interest at Libor + 2.50%.  During the fourth quarter, the Company expects to take a one-time charge of about $6 million, pre-tax, related to the early retirement of the term loan and revolving line of credit.

As a result of these refinancings, the Company extended its average loan maturity date from three to five years and added nearly $75 million of liquidity and borrowing capacity.  As previously noted, the Company will also realize $10 million per annum in cash interest savings.

Business Outlook

Based on current business trends, management continues to anticipate that both revenues and Adjusted EBITDA will be higher in the fourth quarter than the third quarter of 2011. Management anticipates the Company will continue to be profitable in the fourth quarter of the year and for the year as a whole, excluding any one-time charges associated with the early retirement of debt.  Profitability will be driven by continued new railcar delivery momentum, production efficiencies, an optimized balance sheet and anticipated higher wheel services and repair volumes.

Conference Call

The Greenbrier Companies will host a teleconference to discuss third quarter results.  Teleconference details are as follows:

  • Friday, July 8, 2011
  • 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 23 at 402-220-2146.

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. Greenbrier 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 214,000 railcars.

"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995:  This release may contain forward-looking statements, including statements regarding the Company's anticipated use of proceeds from its convertible notes offering, expected new railcar production volumes and schedules, expected customer demand for the Company's products and services, plans to increase manufacturing capacity, new railcar delivery volumes and schedules, growth 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," "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 in the results contemplated by the forward-looking statements. Factors that might cause such a difference include, but are not limited to, reported backlog is not indicative of our financial results; 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, 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; 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, 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, 2010 and in our Quarterly Report on Form 10-Q for the fiscal quarter ended February 28, 2011, 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 earnings (loss) attributable to Greenbrier before gain (loss) on extinguishment of debt, interest and foreign exchange, income tax expense (benefit), 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, the Adjusted 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)


Assets


May 31,
2011


August 31,
2010


  Cash and cash equivalents


$         34,302


$       98,864


  Restricted cash


2,217


2,525


  Accounts receivable, net  


143,491


89,252


  Inventories


289,740


204,626


  Leased railcars for syndication


58,316


12,804


  Equipment on operating leases, net


314,106


302,663


  Investment in direct finance leases


123


1,795


  Property, plant and equipment, net


150,091


132,614


  Goodwill


137,066


137,066


  Intangibles and other assets


88,290


90,679




$    1,217,742


$  1,072,888








Liabilities and Equity






  Revolving notes


$          13,897


$         2,630


  Accounts payable and accrued liabilities


261,361


181,638


  Deferred income taxes


75,860


81,136


  Deferred revenue


5,821


11,377


  Notes payable


496,828


498,700








  Total equity Greenbrier


351,456


285,938


  Noncontrolling interest


12,519


11,469


  Total equity


363,975


297,407




$    1,217,742


$  1,072,888





THE GREENBRIER COMPANIES, INC.


Consolidated Statements of Operations

(In thousands, except per share amounts, unaudited)




Three Months Ended
May 31,


Nine Months Ended
May 31,




2011


2010


2011


2010


Revenue










 Manufacturing


$      173,487


$       77,877


$      415,548


$      226,020


 Wheel Services, Refurbishment & Parts


126,317


111,242


333,600


297,870


 Leasing & Services


17,476


18,312


51,406


53,550




317,280


207,431


800,554


577,440












Cost of revenue










 Manufacturing


158,674


68,931


385,974


206,386


 Wheel Services, Refurbishment & Parts


111,202


96,725


299,026


263,398


 Leasing & Services


9,254


9,931


27,099


31,638




279,130


175,587


712,099


501,422












Margin


38,150


31,844


88,455


76,018












Selling and administrative


22,580


17,519


58,212


50,686


Gain on disposition of equipment


(1,678)


(4,024)


(6,148)


(5,659)












Earnings from operations


17,248


18,349


36,391


30,991












Other costs










 Interest and foreign exchange


9,807


10,811


30,646


34,328


 Loss (gain) on extinguishment of debt


10,007


(1,275)


10,007


(1,275)


Earnings (loss) before income taxes and loss from unconsolidated affiliates


(2,566)



8,813



(4,262)


(2,062)


Income tax benefit (expense)


301


(2,418)


812


1,025


Earnings (loss) before loss from unconsolidated affiliates


(2,265)


6,395


(3,450)


(1,037)












Loss from unconsolidated affiliates


(539)


(318)


(1,700)


(632)












Net earnings (loss)


(2,804)


6,077


(5,150)


(1,669)


Net earnings attributable to noncontrolling interest


(510)


(1,514)


(1,019)


(1,764)



Net earnings (loss) attributable to Greenbrier


$        (3,314)


$         4,563


$        (6,169)


$        (3,433)












Basic earnings (loss) per common share


$          (0.14)


$           0.25


$          (0.27)


$          (0.20)












Diluted earnings (loss) per common share


$          (0.14)


$           0.23


$          (0.27)


$          (0.20)












Weighted average common shares:










 Basic


24,127


18,220


22,893


17,477


 Diluted


24,127


20,058


22,893


17,477





THE GREENBRIER COMPANIES, INC.


Condensed Consolidated Statements of Cash Flows

(In thousands, unaudited)





Nine Months Ended
May 31,





2011


2010


Cash flows from operating activities







 Net loss



$                 (5,150)


$               (1,669)


 Adjustments to reconcile net loss to net cash provided by (used in) operating activities:







   Deferred income taxes



(5,276)


17,084


   Depreciation and amortization



28,174


27,967


   Gain on sales of equipment



(2,901)


(4,032)


   Accretion of debt discount



5,446


6,701


   Stock based compensation expense



4,961


4,264


   Loss (gain) on extinguishment of debt (non-cash portion)



2,868


(1,275)


   Other



91


(1,467)


   Decrease (increase) in assets:







     Accounts receivable



(51,427)


(1,615)


     Inventories



(83,293)


(27,195)


     Leased railcars for syndication



(48,465)


10,504


     Other



5,834


3,428


   Increase (decrease) in liabilities:







     Accounts payable and accrued liabilities



77,273


11,352


     Deferred revenue



(5,442)


(7,824)


 Net cash provided by (used in) operating activities



(77,307)


36,223


Cash flows from investing activities







 Principal payments received under direct finance leases



52


358


 Proceeds from sales of equipment



14,179


14,794


 Investment in and advances to unconsolidated affiliates



(979)


(650)


 Contract placement fee



-


(6,050)


 Decrease (increase) in restricted cash



308


(632)


 Capital expenditures



(59,689)


(28,266)


 Net cash used in investing activities



(46,129)


(20,446)


Cash flows from financing activities







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



3,694


(7,828)


 Proceeds from revolving notes with maturities longer than 90 days



13,373


5,698


 Repayments of revolving notes with maturities longer than 90 days



(6,194)


-


 Proceeds from issuance of notes payable



231,250


1,821


 Debt issuance costs



(7,857)


(109)


 Repayments of notes payable



(238,569)


(28,357)


 Gross proceeds from equity offering



63,180


56,250


 Expenses from equity offering



(420)


(3,525)


 Other



26


29


 Net cash provided by financing activities



58,483


23,979


Effect of exchange rate changes



391


652


Increase (decrease) in cash and cash equivalents



(64,562)


40,408


Cash and cash equivalents







Beginning of period



98,864


76,187


End of period



$                 34,302


$              116,595





THE GREENBRIER COMPANIES, INC.


Supplemental Disclosure

Reconciliation of Net loss attributable to Greenbrier to Adjusted EBITDA (1)

(In thousands, unaudited)





Three Months Ended
May 31,


Nine Months Ended
May 31,




2011


2010


2011


2010

Net earnings (loss) attributable to Greenbrier

$    (3,314)



$      4,563


$      (6,169)


$       (3,433)

Loss (gain) on extinguishment of debt

10,007


(1,275)


10,007


(1,275)

Interest and foreign exchange

9,807


10,811


30,646


34,328

Income tax expense (benefit)

(301)


2,418


(812)


(1,025)

Depreciation and amortization

9,548


9,351


28,174


27,967











Adjusted EBITDA

$    25,747


$   25,868


$     61,846


$      56,562











(1) Adjusted EBITDA is not a financial measure under generally accepted accounting principles (GAAP). We define Adjusted EBITDA as earnings (loss) attributable to Greenbrier before loss (gain) on extinguishment of debt, interest and foreign exchange, income tax expense (benefit), 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, the Adjusted EBITDA measure presented may differ from and may not be comparable to similarly titled measures used by other companies.



SOURCE The Greenbrier Companies, Inc. (GBX)



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