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Greenbrier Reports First Quarter Results

~ Posts EPS of $0.54

~~ Orders for 5,400 units valued at $560 million

~~ Affirms FY 2019 guidance

LAKE OSWEGO, Ore., Jan. 9, 2019 /PRNewswire/ -- The Greenbrier Companies, Inc. (GBX) today reported financial results for its first fiscal quarter ended November 30, 2018.

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

First Quarter Highlights

  • Net earnings attributable to Greenbrier for the quarter were $18.0 million, or $0.54 per diluted share, on revenue of $604.5 million
  • Adjusted EBITDA for the quarter was $57.6 million, or 9.5% of revenue.
  • New railcar deliveries totaled 4,500 units for the quarter.
  • Diversified orders for 5,400 railcars were received during the quarter, valued at $560 million.  Book-to-bill of 1.2x for the quarter, marking the third consecutive quarter with a book-to-bill over 1.0x.
  • New railcar backlog was 27,500 units with an estimated value of $2.7 billion.
  • Board declares a quarterly dividend of $0.25 per share, payable on February 20, 2019 to shareholders of record as of January 30, 2019.
  • Board extends share repurchase program two years until March 2021 and increases authorization to $100 million.

William A. Furman, Chairman and CEO, said, "Greenbrier's performance in the first quarter of fiscal 2019 exceeded expectations and demonstrates the ability of our people to execute the Company's business plan.  Order activity was strong in the first quarter and comprised of a broad range of railcar types including double-stack intermodal units, tank cars and heavy-duty flat cars.  Importantly, 20% of all new railcar orders were received from markets outside North America.  We are confident in achieving our guidance for the year with approximately 90% of Greenbrier's fiscal 2019 production plan now booked with firm orders."

Furman concluded, "Greenbrier continues to see opportunities internationally, and expects international growth to continue from Europe and Brazil as the year progresses, with activity in the nations of the Gulf Cooperation Council and Eurasia growing over time.  A thoughtful approach to capital deployment emphasizes growth at scale designed to both reinforce the Company's position in core North American markets and expand in international railcar markets.  Developing a pipeline of talent to strengthen Greenbrier's workforce is another key strategic objective in fiscal 2019.  Greenbrier will continue to invest in its business and people, a strategic approach that serves the Company, our shareholders and our employees well."

Business Outlook

With 90% of fiscal 2019 production in backlog, and based on current business trends, Greenbrier affirms:

  • Deliveries will be approximately 24,000 – 26,000 units including Greenbrier-Maxion (Brazil) which will account for approximately 2,000 units
  • Revenue will exceed $3.0 billion
  • Diluted EPS will be $4.20 - $4.40

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 FY19

Q4 FY18

Sequential Comparison – Main Drivers

Revenue

$604.5M

$689.2M

Down 12.3% primarily due to lower volume of deliveries
including the timing of syndications

Gross margin

12.0%

15.4%

Down primarily due to product mix

Selling and

administrative expense

$50.4M

$51.3M

Down modestly due to lower employee related costs

Gain on disposition

of equipment

$14.4M

$4.6M

Continued rebalancing of lease portfolio

Adjusted EBITDA

$57.6M

$75.3M

Lower operating earnings

Effective tax rate

28.5%

20.1%

Reflects foreign discrete items and a change in the
geographic mix of earnings; Q4 includes $4.5 million
benefit related to a transition tax adjustment from the
2017 Tax Act

Earnings (loss) from

unconsolidated affiliates

$0.5M

($3.1M)

Improved performance in Brazil and dissolution of GBW

Net earnings attributable

to noncontrolling interest

$5.4M

$6.2M

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

Adjusted net earnings
attributable to

Greenbrier (1)

$18.0M

$26.4M

Lower operating earnings and higher tax rate partially
offset by higher earnings from unconsolidated affiliates

Adjusted diluted EPS (1)

$0.54

$0.80




(1)

Q1 FY19 includes no adjustments; Q4 FY18 excludes $4.5 million, or $0.14 per share, benefit related to a
transition tax adjustment from the 2017 Tax Act.

Segment Summary


Q1 FY19

Q4 FY18

Sequential Comparison – Main Drivers

Manufacturing

  Revenue

$471.8M

$571.2M

Down 17.4% due to lower volume of deliveries

  Gross margin

11.4%

14.3%

Down primarily due to product mix 

  Operating margin (1)

7.8%

10.9%


  Deliveries (2)

4,200

5,600


Wheels, Repair & Parts

  Revenue

$108.5M

$85.8M

Up 26.5% primarily attributable to return of Repair locations

  Gross margin

7.0%

7.6%

Down due to repair volume inefficiencies

  Operating margin (1)

3.0%

4.3%


Leasing & Services

  Revenue

$24.2M

$32.2M

Down 24.8% due to lower volume of externally sourced
railcar syndications

  Gross margin

45.4%

54.9%

Down primarily due to increased railcar transportation costs

  Operating margin (1) (3)

72.4%

54.2%

Reflects higher level of gains on disposition of equipment due
to rebalancing of lease portfolio

  Lease fleet utilization

94.9%

94.4%




(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 2019 results.  In conjunction with this news release, Greenbrier has posted a supplemental earnings presentation to our website.  Teleconference details are as follows:

  • January 9, 2019
  • 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, Romania and Turkey that serves customers across Europe and in the nations of the Gulf Cooperation Council.  Greenbrier builds freight railcars and rail castings in Brazil through two separate strategic partnerships. We are a leading provider of freight railcar wheel services, parts, repair, refurbishment and retrofitting services in North America through our wheels, repair & parts business unit.  Greenbrier offers railcar management, regulatory compliance services and leasing services to railroads and related transportation industries in North America.  Through unconsolidated joint ventures, we produce industrial and rail castings, tank heads and other components.  Greenbrier owns a lease fleet of over 9,600 railcars and performs management services for 358,000 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 "affirms," "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, 2018, 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.

Adjusted EBITDA, Adjusted net earnings attributable to Greenbrier and Adjusted diluted EPS are not financial measures under generally accepted accounting principles (GAAP). These metrics are performance measurement tools commonly used by rail supply companies and Greenbrier. You should not consider these metrics in isolation or as a substitute for other financial statement data determined in accordance with GAAP. In addition, because these metrics are not a measure of financial performance under GAAP and are susceptible to varying calculations, the measures presented may differ from and may not be comparable to similarly titled measures used by other companies.

We define Adjusted EBITDA as Net earnings before Interest and foreign exchange, Income tax expense (benefit), Depreciation and amortization and excluding the impact associated with items we do not believe are indicative of our core business or which affect comparability. We believe the presentation of Adjusted EBITDA provides useful information as it excludes the impact of financing, foreign exchange, income taxes and the accounting effects of capital spending. These items may vary for different companies for reasons unrelated to the overall operating performance of a company's core business. We believe this assists in comparing our performance across reporting periods.

Adjusted net earnings attributable to Greenbrier and Adjusted diluted EPS excludes the impact associated with items we do not believe are indicative of our core business or which affect comparability. We believe this assists in comparing our performance across reporting periods.

THE GREENBRIER COMPANIES, INC.

Consolidated Balance Sheets

(In thousands, unaudited)








November 30,

        2018

   August 31,

       2018

     May 31,

        2018

 February 28,

       2018

November 30,

        2017

Assets






   Cash and cash equivalents

$    462,797

$    530,655

$  589,969

$    586,008

$    591,406

   Restricted cash

8,872

8,819

9,204

8,875

8,839

   Accounts receivable, net 

306,917

348,406

322,328

321,795

315,393

   Inventories

492,573

432,314

396,518

408,419

411,371

   Leased railcars for syndication

233,415

130,926

158,194

168,748

130,991

   Equipment on operating leases, net

317,282

322,855

302,074

258,417

274,598

   Property, plant and equipment, net

461,120

457,196

424,035

429,465

426,961

   Investment in unconsolidated affiliates

58,682

61,414

75,884

98,009

101,529

   Intangibles and other assets, net

95,958

94,668

82,030

83,308

83,819

   Goodwill

77,508

78,211

70,347

69,011

67,783


$ 2,515,124

$ 2,465,464

$2,430,583

$ 2,432,055

$ 2,412,690







Liabilities and Equity






   Revolving notes

$       22,189

$      27,725

$     20,337

$         7,990

$        6,885

   Accounts payable and accrued liabilities

438,304

449,857

447,827

461,088

441,373

   Deferred income taxes

30,631

31,740

36,657

41,257

69,984

   Deferred revenue

108,566

105,954

102,919

85,886

120,044

   Notes payable, net

487,764

436,205

437,833

559,755

558,987

Contingently redeemable noncontrolling
interest

28,449

29,768

31,135

33,046

35,209

   Total equity - Greenbrier

1,257,631

1,250,101

1,225,512

1,095,447

1,032,557

   Noncontrolling interest

141,590

134,114

128,363

147,586

147,651

   Total equity

1,399,221

1,384,215

1,353,875

1,243,033

1,180,208


$ 2,515,124

$ 2,465,464

$2,430,583

$ 2,432,055

$ 2,412,690

 

THE GREENBRIER COMPANIES, INC.

Consolidated Statements of Income

(In thousands, except per share amounts, unaudited)






Three Months Ended
November 30,




2018


2017

Revenue






   Manufacturing


$

471,789


$         451,485

   Wheels, Repair & Parts



108,543


78,011

   Leasing & Services



24,191


30,039




604,523


559,535

Cost of revenue






   Manufacturing



417,805


380,850

   Wheels, Repair & Parts



100,978


72,506

   Leasing & Services



13,207


16,865




531,990


470,221







Margin



72,533


89,314







Selling and administrative



50,432


47,043

Net gain on disposition of equipment



(14,353)


(19,171)

Earnings from operations



36,454


61,442







Other costs






Interest and foreign exchange



4,404


7,020

Earnings before income tax and earnings (loss) from

   unconsolidated affiliates



32,050


54,422

Income tax expense



(9,135)


(18,135)

Earnings before earnings (loss) from

   unconsolidated affiliates



22,915


36,287

Earnings (loss) from unconsolidated affiliates



467


(2,910)







Net earnings



23,382


33,377

Net earnings attributable to noncontrolling interest



(5,426)


(7,124)







Net earnings attributable to Greenbrier


$

17,956


$           26,253







Basic earnings per common share:


$

0.55


$                0.90







Diluted earnings per common share:


$

0.54


$                0.83







Weighted average common shares:






Basic



32,640


29,332

Diluted



33,093


32,696







Dividends declared per common share


$

0.25


$                0.23

 

THE GREENBRIER COMPANIES, INC.

Consolidated Statements of Cash Flows

(In thousands, unaudited) 







Three Months Ended

 November 30,



2018

2017




Cash flows from operating activities:

    Net earnings


$

23,382


$      33,377

     Adjustments to reconcile net earnings to net cash used in operating
     activities:






      Deferred income taxes



(2,360)


(5,865)

      Depreciation and amortization



20,700


18,370

      Net gain on disposition of equipment



(14,353)


(19,171)

      Accretion of debt discount



1,076


1,024

      Stock based compensation expense



3,194


5,939

      Noncontrolling interest adjustments



3,920


(875)

      Other



286


477

      Decrease (increase) in assets:






          Accounts receivable, net



54,834


(35,510)

          Inventories



(63,045)


(16,311)

          Leased railcars for syndication



(116,726)


(35,541)

          Other



(392)


6,304

    Increase (decrease) in liabilities:






          Accounts payable and accrued liabilities



(10,949)


16,676

          Deferred revenue



3,314


(8,548)

    Net cash used in operating activities



(97,119)


(39,654)

Cash flows from investing activities:






    Proceeds from sales of assets



34,497


75,060

    Capital expenditures



(28,677)


(29,893)

    Investment in and advances to unconsolidated affiliates



(11,393)


-

    Cash distribution from joint ventures



1,784


-

    Net cash provided by (used in) investing activities



(3,789)


45,167

Cash flows from financing activities:






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



(4,840)


2,561

    Proceeds from issuance of notes payable



225,000


2,138

    Debt issuance costs



(2,766)


-

    Repayments of notes payable



(173,453)


(2,809)

    Investment by joint venture partner



-


6,500

    Cash distribution to joint venture partner



(3,185)


(26,900)

    Dividends



(467)


(319)

    Tax payments for net share settlement of restricted stock



(4,747)


(5,061)

    Net cash provided by (used in) financing activities



35,542


(23,890)

    Effect of exchange rate changes



(2,439)


(1,736)

Decrease in cash and cash equivalents and restricted cash



(67,805)


(20,113)

Cash and cash equivalents and restricted cash






    Beginning of period



539,474


620,358

    End of period


$

471,669


$    600,245

Balance Sheet Reconciliation






    Cash and cash equivalents


$

462,797


$    591,406

    Restricted cash



8,872


8,839

    Total cash, cash equivalents and restricted cash as presented above


$

471,669


$    600,245

 

THE GREENBRIER COMPANIES, INC.

Supplemental Information

(In thousands, except per share amounts, unaudited)


Operating Results by Quarter for 2018 are as follows:


First


Second


Third


Fourth


Total











Revenue










   Manufacturing

$      451,485


$    511,827


$    510,099


$    571,175


$ 2,044,586

   Wheels, Repair & Parts

78,011


88,710


94,515


85,787


347,023

   Leasing & Services

30,039


28,799


36,773


32,244


127,855


559,535


629,336


641,387


689,206


2,519,464

Cost of revenue










   Manufacturing

380,850


429,165


427,875


489,517


1,727,407

   Wheels, Repair & Parts

72,506


80,708


85,850


79,266


318,330

   Leasing & Services

16,865


14,116


19,155


14,536


64,672


470,221


523,989


532,880


583,319


2,110,409











Margin

89,314


105,347


108,507


105,887


409,055











Selling and administrative expense

47,043


50,294


51,793


51,309


200,439

Net gain on disposition of equipment

(19,171)


(5,817)


(14,825)


(4,556)


(44,369)

Earnings from operations

61,442


60,870


71,539


59,134


252,985











Other costs










   Interest and foreign exchange

7,020


7,029


6,533


8,786


29,368

Earnings before income tax and earnings (loss)

   from unconsolidated affiliates          

54,422


53,841


65,006


50,348


223,617

Income tax benefit (expense)

(18,135)


11,301


(15,944)


(10,115)


(32,893)

Earnings before earnings (loss) from

   unconsolidated affiliates          

36,287


65,142


49,062


40,233


190,724

Earnings (loss) from unconsolidated affiliates

(2,910)


147


(12,823)


(3,075)


(18,661)

Net earnings

33,377


65,289


36,239


37,158


172,063

Net earnings attributable to

   noncontrolling interest

(7,124)


(3,647)


(3,288)


(6,223)


(20,282)

Net earnings attributable to Greenbrier

$        26,253


$      61,642


$      32,951


$      30,935


$    151,781











Basic earnings per common share (1)

$                0.90


$                2.10


$          1.03


$          0.95


$              4.92

Diluted earnings per common share (1) 

$                0.83


$                1.91


$          1.01


$          0.94


$              4.68



(1)

Quarterly amounts do 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 2024 Convertible Notes using the treasury stock method when dilutive, restricted stock units that are not considered participating securities, restricted stock units that are subject to performance criteria for which actual levels of performance above target have been achieved and the dilutive effect of shares underlying the 2018 Convertible Notes, during the periods in which they were outstanding, using the "if converted" method in which debt issuance and interest costs, net of tax, were added back to net earnings. The 2018 Convertible notes matured on April 1, 2018.

 

THE GREENBRIER COMPANIES, INC.

Supplemental Information

(In thousands, unaudited)


Segment Information


Three months ended November 30, 2018:










Revenue


Earnings (loss) from operations


External


Intersegment


  Total


External


Intersegment


Total

Manufacturing

$      471,789


$          6,201


$    477,990


$      36,855


$            433


$37,288

Wheels, Repair & Parts

108,543


15,981


124,524


3,247


312


3,559

Leasing & Services

24,191


5,999


30,190


17,513


5,452


22,965

Eliminations

-


(28,181)


(28,181)


-


(6,197)


(6,197)

Corporate

-


-


-


(21,161)


-


(21,161)


$      604,523


$                  -


$    604,523


$      36,454


$                  -


$  36,454










Three months ended August 31, 2018:










Revenue


Earnings (loss) from operations


External


Intersegment


  Total


External


Intersegment


Total

Manufacturing

$        571,175


$          33,904


$      605,079


$        62,312


$            3,905


$    66,217

Wheels, Repair & Parts

85,787


13,931


99,718


3,648


534


4,182

Leasing & Services

32,244


1,992


34,236


17,473


1,750


19,223

Eliminations

-


(49,827)


(49,827)


-


(6,189)


(6,189)

Corporate

-


-


-


(24,299)


-


(24,299)


$        689,206


$                    -


$      689,206


$        59,134


$                    -


$    59,134








Total assets




November 30,

2018


August 31,

2018

Manufacturing

$               998,820


$          1,020,757

Wheels, Repair & Parts

322,525


306,756

Leasing & Services 

691,389


578,818

Unallocated

502,390


559,133


$            2,515,124


$          2,465,464

 

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,
2018


August 31,

2018

Net earnings

$               23,382


$               37,158

Interest and foreign exchange

4,404


8,786

Income tax expense

9,135


10,115

Depreciation and amortization

20,700


19,195







Adjusted EBITDA

$               57,621


$            75,254






















Three Months
Ended

November 30,
2018

Backlog Activity (units)




Beginning backlog

27,400

Orders received (1)

5,400

Production held as Leased railcars for syndication

(1,100)

Production sold directly to third parties (1)

(4,200)

Ending backlog

27,500



Delivery Information (units)


Production sold directly to third parties (1)

4,200

Sales of Leased railcars for syndication

300

Total deliveries

4,500



(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,

2018

    August 31,
2018

Weighted average basic common shares outstanding (1)

32,640

32,663

Dilutive effect of convertible notes (2)

-

-

Dilutive effect of restricted stock units (3)

453

357

Weighted average diluted common shares outstanding

33,093

33,020



(1)

Restricted stock grants and restricted stock units that are considered participating securities, 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 2024 Convertible notes was excluded for the three months ended November 30, 2018 and August 31, 2018 as the average stock price was less than the applicable conversion price and therefore was considered anti-dilutive.

(3)

Restricted stock units that are not considered participating securities and 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.

 







Three Months Ended



November 30,
2018

August 31,

2018

Net earnings attributable to Greenbrier


$            17,956

$           30,935

Non-recurring Tax Act benefit(1)


-

(4,535)

Adjusted net earnings attributable to Greenbrier


$            17,956

$           26,400









Three Months Ended



November 30,
2018

August 31,

2018

Net earnings attributable to Greenbrier


$       17,956

$           30,935

Weighted average diluted common shares outstanding


33,093

33,020





Diluted earnings per share


$             0.54

$                  0.94

Non-recurring Tax Act benefit(1)


-

(0.14)

Adjusted diluted earnings per share


$             0.54

$                  0.80



(1)

Non-recurring benefit of $4.5 million in the three months ended August 31, 2018 related to the 2017 Tax Act.

 

Cision

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