Greenbrier Reports Record First Quarter Results

~ Posts EPS of $2.15

~~ Expands aggregate gross margin to 23%

07 Jan, 2016, 06:00 ET from The Greenbrier Companies, Inc. (GBX)

LAKE OSWEGO, Ore., Jan. 7, 2016 /PRNewswire/ -- The Greenbrier Companies, Inc. (NYSE: GBX) today reported financial results for its first fiscal quarter ended November 30, 2015.

First Quarter Highlights

  • Net earnings attributable to Greenbrier for the quarter were a record $69.4 million, or $2.15 per diluted share, on record revenue of $802.4 million
  • Adjusted EBITDA for the quarter was a record $161.8 million, or 20.2% of revenue.
  • New railcar backlog as of November 30, 2015 was 36,000 units with an estimated value of $4.14 billion (average unit sale price of $115,000), compared to 41,300 units with an estimated value of $4.71 billion (average unit sale price of $114,000) as of August 31, 2015.  
  • Diversified orders for 500 new railcars were received during the quarter. After quarter end, Greenbrier received orders for an additional 2,100 railcars, of which 1,300 units were disclosed in our order release on December 15, 2015.  The aggregate value of the cumulative orders for 2,600 new railcars is nearly $250 million, or an average sales price of approximately $96,000 per railcar.
  • New railcar deliveries totaled 6,900 units for the quarter, compared to 6,200 units for the quarter ended August 31, 2015.
  • Marine backlog as of November 30, 2015 was approximately $36 million.
  • Board declares a quarterly dividend of $0.20 per share payable on February 10, 2016 to shareholders of record as of January 20, 2016.
  • Repurchased 521,626 shares of common stock at a cost of $19.1 million during the quarter.  Since inception of the share repurchase program in October 2013, 2,673,165 shares have been repurchased at a cost of $123.7 million.  Board authorization for approximately $101.3 million remains available for further share repurchases.

Progress on Longer Term Financial Goals

  • Aggregate gross margin expanded to 23.0%, compared to 22.8% in the prior quarter, continuing above the goal of at least 20% gross margin by the second half of fiscal 2016.
  • First quarter annualized ROIC of 34.0% reflects record operating results. We remain on track to reach the goal of at least 25% ROIC for the second half of fiscal 2016. 

William A. Furman, Chairman and CEO said, "Greenbrier's first quarter results are the fourth consecutive quarter we have produced record-breaking performance. This accomplishment is a testament to the value of our integrated business model and our strategy to diversify our product offerings, create efficient, flexible manufacturing capacity in low-cost facilities and drive more value through our lease syndication model. Aggregate gross margin hit an all-time high of 23.0%, up 520 bps year-over-year, with our manufacturing and lease syndication activities continuing to lead the way."

Furman added, "We anticipate and are prepared for market conditions in which order and backlog levels will likely come down from their elevated energy-driven peak. We see positive continuing demand for a range of non-energy related railcars including automotive carrying railcars, large cube covered hoppers, non-energy tank cars and boxcars. We believe our strong backlog, geographic diversity and manufacturing flexibility will lead to another solid year of earnings and free cash flow in fiscal 2016."

Furman concluded, "While the markets where we compete may transition over the course of this year and into 2017, we have built a solid foundation for Greenbrier's future growth. Now serving customers on four continents, we are further diversifying our revenue base by growing our business outside North America. Greenbrier is a much different company today than it was just a couple of years ago. I strongly believe that Greenbrier has a great future ahead."

Business Outlook Based on current business trends, industry forecasts and production schedules for fiscal 2016, Greenbrier reaffirms previously provided guidance for:

  • Deliveries of approximately 20,000 – 22,500 units
  • Revenue will exceed $2.8 billion
  • Diluted EPS will be in the range of $5.65 to $6.15

We expect financial results to be weighted towards the first half of the year primarily due to line changeovers, product mix changes and lower production rates on certain lines in the second half of fiscal 2016.

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 FY16

Q4 FY15

Sequential Comparison – Main Drivers

Revenue

$802.4M

$765.5M

Up 4.8% primarily due to increased deliveries

Gross margin

23.0%

22.8%

Up 20 bps due to favorable product mix, favorable pricing and improved production efficiencies in the manufacturing segment

Selling and

administrative expense

$36.5M

$39.6M

Down 7.8% primarily due to timing of employee-related costs

Gain on disposition

of equipment

$0.3M

$0.4M

Timing of sales fluctuates and is opportunistic

Adjusted EBITDA

$161.8M

$147.6M

Up 9.6% driven by higher deliveries and gross margin

 

Effective tax rate

31.3%

26.9%

Reflects a change in the geographic mix of earnings and in GIMSA JV earnings, and the effects of discrete items  

Net earnings attributable

to noncontrolling interest

$29.3M

$31.1M

Driven by timing of deliveries and margin from our GIMSA JV

Net earnings

$69.4M

$66.9M

Diluted EPS

$2.15

$2.02

 

Segment Summary

Q1 FY16

Q4 FY15

Sequential Comparison – Main Drivers

Manufacturing

  Revenue

$698.7M

$657.5M

Up 6.3% primarily due to increased deliveries

  Gross margin

23.7%

23.0%

Up 70 bps due to favorable product mix, favorable pricing and improved efficiencies

  Operating margin(1)

22.0%

21.0%

  Deliveries

6,900

6,200

Wheels & Parts

  Revenue

$78.7M

$84.6M

Down 7.0% primarily attributable to lower wheel and component volumes

  Gross margin

7.3%

10.8%

Down 350 bps primarily due to lower volumes and a decrease in scrap metal prices

  Operating margin (1)

4.3%

7.8%

Leasing & Services

  Revenue

$25.0M

$23.4M

Up 6.8% primarily due to higher volume of maintenance management railcars

  Gross margin

53.6%

62.0%

Down 840 bps primarily due to railcar transportation and storage costs

  Operating margin (1) (2)

39.8%

43.6%

  Lease fleet utilization

89.0%

96.6%

Impacted by tank cars and recent portfolio acquisition; utilization is 97% excluding these items

(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 2016 results. In conjunction with this news release, Greenbrier has posted a supplemental earnings presentation to our website.  Teleconference details are as follows:

  • January 7, 2016
  • 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 supplier of transportation equipment and services to the railroad industry. Greenbrier builds new railroad freight cars in manufacturing facilities in the U.S., Mexico and Poland and marine barges at our U.S. manufacturing facility. Greenbrier sells reconditioned wheel sets and provides wheel services at locations throughout the U.S. We recondition, manufacture and sell railcar parts at various U.S. sites. Through GBW Railcar Services, LLC, a 50/50 joint venture with Watco Companies, LLC, freight cars are repaired and refurbished at over 30 locations across North America, including more than 10 tank car repair and maintenance facilities certified by the Association of American Railroads. Greenbrier owns a lease fleet of over 10,000 railcars and performs management services for over 250,000 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; 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, 2015, 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.

Annualized ROIC is calculated by taking year to date Earnings from operations, less cash paid for income taxes, net, which is then annualized and divided by the average balance of the sum of the Revolving notes, plus Notes payable, plus Total equity, less cash in excess of $40 million.  The average is calculated based on the quarterly ending balances.

THE GREENBRIER COMPANIES, INC.

Consolidated Balance Sheets (In thousands, unaudited)

November 30, 2015

August 31, 2015

May 31, 2015

February 28, 2015

November 30, 2014

Assets

   Cash and cash equivalents

$    197,633

$    172,930

$    122,783

$    145,512

$    118,958

   Restricted cash

9,818

8,869

8,912

8,722

9,170

   Accounts receivable, net 

237,213

196,029

214,890

207,488

191,532

   Inventories

444,023

445,535

426,655

418,590

372,039

   Leased railcars for syndication

238,911

212,534

213,197

198,010

177,221

   Equipment on operating leases, net

252,641

255,391

257,962

261,234

264,615

   Property, plant and equipment, net

307,196

303,135

285,570

271,977

258,303

   Investment in unconsolidated affiliates

86,658

87,270

91,217

71,225

72,342

   Intangibles and other assets, net

76,157

65,554

62,664

64,386

61,937

   Goodwill

43,265

43,265

43,265

43,265

43,265

$ 1,893,515

$ 1,790,512

$ 1,727,115

$ 1,690,409

$ 1,569,382

Liabilities and Equity

   Revolving notes

$    163,888

$      50,888

$      92,507

$      90,563

$      46,527

   Accounts payable and accrued liabilities

384,670

455,213

405,544

417,844

374,509

   Deferred income taxes

63,483

60,657

75,572

77,632

81,808

   Deferred revenue

42,351

33,836

24,209

28,287

27,067

   Notes payable

324,668

326,429

346,279

441,326

443,303

   Total equity - Greenbrier

771,945

732,838

672,396

541,491

519,884

   Noncontrolling interest

142,510

130,651

110,608

93,266

76,284

   Total equity

914,455

863,489

783,004

634,757

596,168

$ 1,893,515

$ 1,790,512

$ 1,727,115

$  1,690,409

$ 1,569,382

 

THE GREENBRIER COMPANIES, INC.

Consolidated Statements of Operations

(In thousands, except per share amounts, unaudited)

Three Months Ended

November 30

2015

2014

Revenue

   Manufacturing

$          698,661

$        379,949

   Wheels & Parts

78,729

86,624

   Leasing & Services

24,999

28,485

802,389

495,058

Cost of revenue

   Manufacturing

533,033

316,037

   Wheels & Parts

73,002

76,872

   Leasing & Services

11,589

14,081

617,624

406,990

Margin

184,765

88,068

Selling and administrative

36,549

33,729

Net gain on disposition of equipment

(269)

(83)

Earnings from operations

148,485

54,422

Other costs

Interest and foreign exchange

5,436

3,141

Earnings before income tax and earnings from unconsolidated affiliates

 

143,049

 

51,281

Income tax expense

(44,719)

(16,054)

Earnings before earnings from

   unconsolidated affiliates

 

98,330

35,227

Earnings from unconsolidated affiliates

383

755

Net earnings

98,713

35,982

Net earnings attributable to noncontrolling interest

(29,280)

(3,196)

Net earnings attributable to Greenbrier

$           69,433

$          32,786

Basic earnings per common share:

$               2.36

$              1.19

Diluted earnings per common share:

$               2.15

$              1.01

Weighted average common shares:

Basic

29,391

27,665

Diluted

32,578

33,713

Dividends declared per common share

$               0.20

$              0.15

 

THE GREENBRIER COMPANIES, INC.

Consolidated Statements of Cash Flows

(In thousands, unaudited) 

Three Months Ended

 November 30

2015

2014

Cash flows from operating activities:

    Net earnings

$       98,713

$       35,982

    Adjustments to reconcile net earnings to net cash

      used in operating activities:

      Deferred income taxes

3,019

607

      Depreciation and amortization

12,974

12,050

      Net gain on disposition of equipment

(269)

(83)

      Stock based compensation expense

5,301

3,411

      Noncontrolling interest adjustments

262

12,952

      Other

637

152

      Decrease (increase) in assets:

          Accounts receivable, net

(40,889)

7,806

          Inventories

(274)

(67,642)

          Leased railcars for syndication

(61,059)

(54,732)

          Other

(3,578)

2,211

    Increase (decrease) in liabilities:

          Accounts payable and accrued liabilities

(77,605)

(13,032)

          Deferred revenue

(723)

6,488

    Net cash used in operating activities

(63,491)

(53,830)

Cash flows from investing activities:

    Proceeds from sales of assets

41,353

2,073

    Capital expenditures

(15,595)

(31,314)

    Increase in restricted cash

(949)

(30)

    Cash distribution from unconsolidated affiliates

616

-

    Investment in and advances to unconsolidated affiliates

(1,866)

(2,500)

    Net cash provided by (used in) investing activities

23,559

(31,771)

Cash flows from financing activities:

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

113,000

15,000

    Proceeds from revolving notes with maturities longer than 90 days

-

23,056

    Repayments of revolving notes with maturities longer than 90 days

-

(4,610)

    Repayments of notes payable

(1,761)

(1,758)

    Debt issuance costs

(4,493)

    Decrease in restricted cash

-

11,000

    Cash distribution to joint venture partner

(17,654)

(2,275)

    Repurchase of stock

(20,203)

(21,730)

    Dividends

(105)

-

    Excess tax benefit from restricted stock awards

2,827

2,970

    Other

(6)

-

    Net cash provided by financing activities

71,605

21,653

    Effect of exchange rate changes

(6,970)

(2,010)

    Increase (decrease) in cash and cash equivalents

24,703

(65,958)

Cash and cash equivalents

Beginning of period

172,930

184,916

End of period

$       197,633

$       118,958

 

THE GREENBRIER COMPANIES, INC.

Supplemental Information

(In thousands, except per share amounts, unaudited)

 

Operating Results by Quarter for 2015 are as follows:

First

Second

Third

Fourth

Total

Revenue

   Manufacturing

$        379,949

$      505,241

$      593,376

$     657,485

$  2,136,051

   Wheels & Parts

86,624

102,640

97,407

84,566

371,237

   Leasing & Services

28,485

22,268

23,823

23,414

97,990

495,058

630,149

714,606

765,465

2,605,278

Cost of revenue

   Manufacturing

316,037

403,227

465,658

506,492

1,691,414

   Wheels & Parts

76,872

92,768

89,645

75,395

334,680

   Leasing & Services

14,081

8,844

10,017

8,889

41,831

406,990

504,839

565,320

590,776

2,067,925

Margin

88,068

125,310

149,286

174,689

537,353

Selling and administrative expense

33,729

32,899

45,595

39,568

151,791

Net gain on disposition of equipment

(83)

(121)

(720)

(406)

(1,330)

Earnings from operations

54,422

92,532

104,411

135,527

386,892

Other costs

   Interest and foreign exchange

3,141

1,929

4,285

1,824

11,179

Earnings before income tax and earnings (loss)

from unconsolidated affiliates          

 

51,281

 

90,603

 

100,126

 

133,703

 

375,713

Income tax expense

(16,054)

(29,372)

(30,783)

(35,951)

(112,160)

Earnings (loss) from unconsolidated affiliates

755

(185)

982

204

1,756

Net earnings

35,982

61,046

70,325

97,956

265,309

Net earnings attributable to noncontrolling interest

 

(3,196)

 

(10,695)

 

(27,514)

 

(31,072)

 

(72,477)

Net earnings attributable to Greenbrier

$        32,786

$         50,351

$        42,811

$      66,884

$     192,832

Basic earnings per common share (1)

$             1.19

$            1.86

$            1.54

$          2.23

$           6.85

Diluted earnings per common share (1)

$             1.01

$            1.57

$            1.33

$          2.02

$           5.93

(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, 2015:

Revenue

Earnings (loss) from operations

External

Intersegment

  Total

External

Intersegment

Total

Manufacturing

$          698,661

$          -

$        698,661

$       153,704

$          -

$    153,704

Wheels & Parts

78,729

6,816

85,545

3,403

684

4,087

Leasing & Services

24,999

6,709

31,708

9,958

6,709

16,667

Eliminations

-

(13,525)

(13,525)

-

(7,393)

(7,393)

Corporate

-

-

-

(18,580)

-

(18,580)

$          802,389

$          -

$        802,389

$        148,485

$          -

$    148,485

 

Three months ended August 31, 2015:

Revenue

Earnings (loss) from operations

External

Intersegment

  Total

External

Intersegment

Total

Manufacturing

$          657,485

$         -

$        657,485

$        138,319

$         -

$    138,319

Wheels & Parts

84,566

6,807

91,373

6,577

585

7,162

Leasing & Services

23,414

19,067

42,481

10,210

19,067

29,277

Eliminations

-

(25,874)

(25,874)

-

(19,652)

(19,652)

Corporate

-

-

-

(19,579)

-

(19,579)

$          765,465

$          -

$        765,465

$        135,527

$         -

$    135,527

 

Total assets

 November 30

     August 31,

(In thousands)

2015

2015

Manufacturing

$              656,505

$           675,409

Wheels & Parts

302,164

291,798

Leasing & Services

631,699

549,073

Unallocated

303,147

274,232

$           1,893,515

$         1,790,512

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,

          2015                               2015     

Revenue

$                 96,000

$                95,200

Earnings from operations

$                   2,400

$                     300

Total assets

$               245,700

$              239,900

 

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,

2015

      August 31,

       2015

Net earnings

$             98,713

$           97,956

Interest and foreign exchange

5,436

1,824

Income tax expense

44,719

35,951

Depreciation and amortization

12,974

11,898

Adjusted EBITDA

$         161,842

$        147,629

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, the Adjusted EBITDA measure presented may differ from and may not be comparable to similarly titled measures used by other companies.

 

Three Months

Ended

   November 30,

2015

Backlog Activity (units)

Beginning backlog

41,300

Orders received

500

Production held as Leased railcars for syndication

(600)

Production sold directly to third parties

(5,200)

Ending backlog

36,000

Delivery Information (units)

Production sold directly to third parties

5,200

Sales of Leased railcars for syndication

1,700

Total deliveries

6,900

 

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,

2015

         August 31,

         2015

Weighted average basic common shares outstanding (1)

29,391

30,040

Dilutive effect of convertible notes (2)

3,177

3,192

Dilutive effect of performance awards (3)

10

165

Weighted average diluted common shares outstanding

32,578

33,397

(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. The dilutive effect of the 2026 Convertible notes are included in the Weighted average diluted common shares outstanding as the average stock price during the period exceeded the conversion price of $48.05.

(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, using the treasury stock method, associated with shares underlying the 2026 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 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,

     2015

     August 31,

     2015

Net earnings attributable to Greenbrier

$          69,433

$        66,884

Add back:

Interest and debt issuance costs on the 2018 Convertible 

     notes, net of tax

 

496

 

744

Earnings before interest and debt issuance costs on

     convertible notes

 

$          69,929

 

$       67,628

 

Weighted average diluted common shares outstanding

 

32,578

 

33,397

Diluted earnings per share

$             2.15

$           2.02

 

SOURCE The Greenbrier Companies, Inc. (GBX)



RELATED LINKS

http://www.gbrx.com