The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Press release from PR Newswire

Greenbrier Reports Fiscal Fourth Quarter 2010 Results

Wednesday, November 10, 2010

Greenbrier Reports Fiscal Fourth Quarter 2010 Results06:00 EST Wednesday, November 10, 2010LAKE OSWEGO, Ore., Nov. 10, 2010 /PRNewswire-FirstCall/ -- The Greenbrier Companies (NYSE: GBX) today reported results for its fiscal fourth quarter ended August 31, 2010.Financial SummaryFourth Quarter:Revenues for the fourth quarter of 2010 were $181.4 million, down from $230.4 million in the prior year's fourth quarter.EBITDA before a special item for the quarter was $15.5 million, or 8.6% of revenues, compared to $23.7 million, or 10.3% of revenues in the fourth quarter of 2009.The Company's net earnings for the quarter were $7.7 million, or $.33 per diluted share, compared to net earnings of $6.1 million, or $.33 per diluted share, in the prior year's fourth quarter. (1)Results for the 2010 fourth quarter include earnings of $11.9 million, net of tax, or $0.50 per diluted share, related to a special non-cash item for the release of the liability related to the 2008 deconsolidation of the Company's former subsidiary, TrentonWorks(2). Net earnings for the prior year's fourth quarter included tax benefits of $6.8 million, or $.37 per diluted share, related to a reversal of a deferred tax liability and deemed liquidation of a foreign subsidiary for tax purposes.Fiscal 2010Revenues for the year were $764 million compared to $1.018 billion last year, reflecting lower manufacturing production levels and lower wheel sales volumes.EBITDA before a special item for fiscal 2010 was $72.1 million, or 9.4% of revenues, up from 2009 EBITDA before special charges of $65.9 million, or 6.5% of revenues.Net earnings for 2010 were $4.3 million, or $.21 per diluted share, compared to the prior year's net loss of $56.4 million, or $3.35 per diluted share.(1) The 2010 results include earnings related to a special item, net of tax, of $11.9 million, or $.59 per diluted common share.(2)  The 2009 results include special charges, net of tax, of $51.0 million, or $3.03 per diluted share.Liquidity Summary:The Company ended the year with $99 million of cash and $105 million of committed additional borrowing capacity.During 2010, the Company strengthened its balance sheet and raised net proceeds of $52.7 million from an equity offering of 4.5 million shares of common stock.Net debt was reduced by $2 million during the quarter and $76 million during the year.Segment Summary:New railcar deliveries in the fourth quarter of 2010 were 700 units, compared to 900 units in the fourth quarter of 2009.Total new railcar deliveries were 2,500 units in fiscal 2010, compared to 3,700 units in fiscal 2009.Greenbrier's new railcar manufacturing backlog as of August 31, 2010 was 5,300 units with an estimated value of $420 million, compared to 4,400 units valued at $370 million at May 31, 2010.  Subsequent to year end, additional orders for 3,200 units with an aggregate value of $200 million were received.Marine backlog was $10 million as of August 31, 2010. During the fourth quarter approximately $60 million of marine vessels were removed from backlog due to the current likelihood that these vessels may not be produced and sold due to current economic conditions.Discussion of Quarterly Results and OutlookWilliam A. Furman, president and chief executive officer, said, "In our fiscal 2010, economic forces continued to impede profit and EBITDA goals.  However, we achieved all four of our other key objectives identified at the beginning of the year. First, we arrived at a satisfactory conclusion regarding the GE new railcar contract modification in the first quarter. Second, we improved the operational efficiency of our facilities, while maintaining the flexibility to respond to market demand. One example of this flexibility occurred in the fourth quarter when we seamlessly shifted 175 workers from marine barge construction to new railcar production in support of new railcar orders and to address softness in the marine market. Third, we produced positive operating cash flow, reduced net debt by $76 million, and strengthened our balance sheet.  Finally, our fourth objective was to further leverage our integrated business model.  The competitive advantages of this model were successfully demonstrated with receipt of recent new railcar and railcar refurbishment orders which utilized our strengths in engineering and leasing to quickly take down transactions."The outlook for our new railcar manufacturing operations in North America continues to improve significantly.  We now have five production lines dedicated to new railcar manufacturing, compared to two lines less than six months ago.  We are well-positioned for the upturn, as rail traffic continues to improve and the economy continues to recover.  In the very near term, we anticipate that reduced demand for wheel services and marine vessels will limit earnings growth."Furman concluded, "For fiscal 2011, our objectives are: to improve gross margins steadily as the year progresses, focus on operational execution, continue to manage for cash flow and liquidity, continue to leverage our integrated business model, and return to meaningful profitability."Segment DetailsThe Wheel Services, Refurbishment & Parts segment, consisting of a network of 38 locations, provides wheel services, and repairs and refurbishes railcars and provides railcar parts across North America. Revenue for this segment in the current quarter was $90.6 million, compared to $102 million in the fourth quarter of 2009. The revenue decline was primarily a result of reduced demand for wheel services.  Gross margin for the Wheel Services, Refurbishment & Parts segment was 10.4% of revenues, compared to 13.1% of revenues in the prior comparable period.  The gross margin decrease was primarily the result of a less favorable product mix, lower production levels, and call-back and training of new workers in our repair portion of this business.The Manufacturing segment consists of marine and new railcar production in Europe and North America. Manufacturing segment revenue for the fourth quarter was $69.5 million, compared to $108.2 million in the fourth quarter of 2009. This revenue decline was primarily due to lower new railcar deliveries and a slowdown in marine production rates. Current quarter new railcar deliveries of 700 units were down from 900 units in the prior comparable period. Manufacturing gross margin for the fourth quarter was 10.8% of revenues, compared to 8.6% in the fourth quarter of 2009. The gross margin increase was primarily the result of a more favorable new railcar product mix and improved production efficiencies at our Mexican joint venture, partially offset by a significant decline in our marine business.The Leasing & Services segment includes results from the Company-owned lease fleet of approximately 8,000 railcars and from fleet management services provided for approximately 225,000 railcars. Revenue for this segment was $21.2 million for the quarter, compared to $20.2 million in the same quarter last year. Leasing & Services' gross margin for the quarter was 54.2% of revenue, compared to 48.1% of revenue in the same quarter last year. The increase from the prior year's fourth quarter was primarily a result of higher gains on sale of assets from the lease fleet.  Gains on lease fleet sales in the current quarter were $2.5 million, compared to $1.2 million in the fourth quarter of 2009.  Lease fleet utilization as of the end of the quarter was 94.4%, compared to 94.5% as of May 31, 2010, and 88.3% as of August 31, 2009.Selling and administrative costs were $19.2 million for the quarter, or 10.6% of revenues, versus $17.6 million, or 7.6% of revenues, for the same quarter last year. The increase from the prior period is primarily due to one-time import duties associated with certain purchases at one of our Mexican operations.Interest and foreign exchange expense was $10.1 million for the quarter, compared to $13.3 million for the same period in 2009.  The current quarter includes $1 million of gain on debt extinguishment.  The prior comparable period included a $0.9 million write-off of loan fees associated with the reduction in size of the Company's North American revolving credit facility.Business OutlookBased on current business trends, management anticipates that both revenues and EBITDA will be higher in fiscal 2011, compared to fiscal 2010, with the second half of the year being stronger than the first half of the year.  Management currently anticipates a net loss in the Company's first quarter and around break-even results for the second quarter.  Management also expects that improving business trends in North American new railcar manufacturing will continue in fiscal 2011, with the effects of slower activity in its marine and wheel services operations partially dampening the positive railcar manufacturing trends in the first half of the year.The major drivers for the year will be improved volumes and margins in the Wheel Services, Refurbishment & Parts business segment and, in particular, a recovery in wheel volumes, and continuing momentum in new railcar sales.  The Company's Marine business is not expected to rebound until late in the fiscal year or early 2012.  Marine has been a significant source of margin and EBITDA in 2009 and 2010 and is anticipated to become so again when market conditions improve.Conference CallThe Greenbrier Companies will host a teleconference to discuss fourth quarter results.  Teleconference details are as follows:Wednesday, November 10, 20108:00 am Pacific Standard TimePhone : 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 November 27th at 402-220-3493.About Greenbrier CompaniesGreenbrier (www.gbrx.com), headquartered in Lake Oswego, Oregon, is a leading supplier of transportation equipment and services to the railroad industry. The Company 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 8,000 railcars, and performs management services for approximately 225,000 railcars."SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995:  This release may contain forward-looking statements. 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, 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 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 price fluctuations 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, 2009 and in our Quarterly Report on Form 10-Q for the fiscal quarter ended May 31, 2010, and in our prospectus supplement filed with the SEC.  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.EBITDA is not a financial measure under GAAP.  We define EBITDA as earnings from continuing operations before special charges, interest and foreign exchange, taxes, depreciation and amortization.  We consider net cash provided by operating activities to be the most directly comparable GAAP financial measure.  EBITDA is a liquidity measurement tool commonly used by rail supply companies and we use EBITDA in that fashion.  You should not consider EBITDA in isolation or as a substitute for cash flow from operations or other cash flow statement data determined in accordance with GAAP.  In addition, because EBITDA is not a measure of financial performance under GAAP and is susceptible to varying calculations, the EBITDA measure presented may differ from and may not be comparable to similarly titled measures used by other companies.(1) Net earnings (loss) is now referred to in the Consolidated Statements of Operations, in accordance with GAAP, as "Net earnings (loss) attributable to Greenbrier".(2)  The weighted average common shares outstanding for the fourth quarter 2010 differs from that for the full fiscal year, resulting in a different EPS impact for the two periods.THE GREENBRIER COMPANIES, INC.Condensed Consolidated Balance SheetsYears ended August 31,(In thousands, unaudited) Assets20102009   Cash and cash equivalents$         98,864$       76,187   Restricted cash2,5251,083   Accounts receivable  89,252113,371   Inventories185,604142,824   Assets held for sale31,82631,711   Equipment on operating leases, net302,663313,183   Investment in direct finance leases1,7957,990   Property, plant and equipment, net132,614127,974   Goodwill137,066137,066   Intangibles and other assets90,67996,902$    1,072,888$  1,048,291Liabilities and Equity   Revolving notes$           2,630$       16,041   Accounts payable and accrued liabilities181,638170,889   Losses in excess of investment in de-consolidated subsidiary-15,313   Deferred income taxes81,13669,199   Deferred revenue11,37719,250   Notes payable498,700525,149   Total equity Greenbrier285,938223,726   Noncontrolling interest11,4698,724   Total equity297,407232,450$    1,072,888$  1,048,291THE GREENBRIER COMPANIES, INC.Condensed Consolidated Statements of OperationsYears ended August 31,(In thousands, except per share amounts, unaudited)201020092008Revenue   Manufacturing$    295,566$    462,496$    665,093   Wheel Services, Refurbishment & Parts390,061476,164527,466   Leasing & Services78,82379,46597,520764,4501,018,1251,290,079Cost of revenue   Manufacturing268,395458,733653,879   Wheel Services, Refurbishment & Parts344,522420,294426,183   Leasing & Services41,36545,99147,774654,282925,0181,127,836Margin110,16893,107162,243Other costs   Selling and administrative 69,93165,74385,133   Interest and foreign exchange43,13445,91244,320   Special items(11,870)55,6672,302101,195167,322131,755Earnings (loss) before income tax and earnings (loss) from   unconsolidated affiliates8,973(74,215)30,488Income tax benefit (expense)95916,917(17,159)Earnings (loss) before earnings (loss) from   unconsolidated  affiliates9,932(57,298)13,329Earnings (loss) of unconsolidated affiliates(1,601)(565)872Net earnings (loss)8,331(57,863)14,201Net (earnings) loss attributable to noncontrolling interest(4,054)1,4723,182Net earnings (loss) attributable to Greenbrier$          4,277$     (56,391)$     17,383Basic earnings (loss) per common share:$            0.23$         (3.35)$          1.06Diluted earnings (loss) per common share:$            0.21$         (3.35)$          1.06Weighted average common shares:Basic18,58516,81516,395Diluted20,21316,81516,417THE GREENBRIER COMPANIES, INC.Condensed Consolidated Statements of Cash FlowsYears ended August 31,(In thousands, unaudited)201020092008Cash flows from operating activities:Net earnings (loss)$        8,331$   (57,863)$   14,201Adjustments to reconcile net earnings (loss) to net cash    provided by operating activities:     Deferred income taxes15,052(13,299)11,528     Depreciation and amortization37,51137,66935,086     Gain on sales of equipment(6,543)(1,167)(8,010)     Special items(11,870)55,6672,302     Accretion of debt discount8,5814,9483,550     Gain on extinguishment of debt(3,218)--     Other4,2373,583390Decrease (increase) in assets excluding acquisitions:      Accounts receivable22,43058,521(7,621)      Inventories(44,276)98,751(29,692)      Assets held for sale(177)21,841(10,621)      Other7,1711,157(2,700)Increase (decrease) in liabilities excluding acquisitions:      Accounts payable and accrued liabilities12,777(86,514)21,801      Deferred revenue(7,445)(2,829)1,904Net cash provided by operating activities42,561120,46532,118Cash flows from investing activities:     Principal payments received under direct finance leases390429375     Proceeds from sales of equipment22,97815,55514,598     Investment in and advances to (from) unconsolidated affiliates(927)-858     Contract placement fee(6,050)--     Acquisitions, net of cash acquired--(91,166)     De-consolidation of subsidiary--(1,217)     Decrease (increase) in restricted cash(1,442)(109)2,046)     Capital expenditures(38,989)(38,847)(77,644)     Other(130)-- Net cash used in investing activities(24,170)(22,972)(152,150)Cash flows from financing activities:     Net changes in revolving notes with maturities of 90 days or less(11,934)(81,251)55,514     Proceeds from revolving notes with maturities longer than 90 days5,698--     Repayments of revolving notes with maturities longer than 90 days(5,698)--     Net proceeds from issuance of notes payable2,04069,76849,613     Repayments of notes payable(38,267)(16,436)(6,919)     Net proceeds from equity offering52,708-     Investment by joint venture partner-1,4006,600     Dividends paid-(2,001)(5,261)     Other293,9733,931Net cash provided by (used in) financing activities4,576(24,547)103,478Effect of exchange rate changes(290)(2,716)1,703Increase (decrease) in cash and cash equivalents22,67770,230(14,851)Cash and cash equivalentsBeginning of period76,1875,95720,808End of period$      98,864$     76,187$     5,957THE GREENBRIER COMPANIES, INC.Supplemental InformationQuarterly Results of Operations (Unaudited)Operating results by quarter for 2010 and 2009 are as follows:(In thousands, except per share amounts)FirstSecondThirdFourthTotal2010RevenueManufacturing$   60,078$   88,065$   77,877$   69,546$     295,566Wheel Services, Refurbishment &  Parts92,98394,329112,18690,563390,061Leasing & Services18,63217,55621,39221,24378,823171,693199,950211,455181,352764,450Cost of revenueManufacturing55,84781,60868,93162,009268,395Wheel Services, Refurbishment &  Parts83,28683,38796,72581,124344,522Leasing & Services10,91810,7899,9319,72741,365150,051175,784175,587152,860654,282Margin21,64224,16635,86828,492110,168Other costsSelling and administrative 16,20816,95817,51919,24669,931Interest and foreign exchange11,11212,4069,53610,08043,134Special items---(11,870)(11,870)27,32029,36427,05517,456101,195Earnings (loss) before income tax and  loss from unconsolidated affiliates(5,678)(5,198)8,81311,0368,973Income tax benefit (expense)2,500944(2,418)(67)959Loss from unconsolidated affiliates(183)(131)(318)(969)(1,601)Net earnings (loss)(3,361)(4,385)6,07710,0008,331Net loss (earnings) attributable to  noncontrolling interest117(367)(1,514)(2,290)(4,054)Net earnings (loss) attributable to Greenbrier$       (3,244)$       (4,752)$         4,563$       7,710$         4,277Basic earnings (loss) per common  share:$         (0.19)$         (0.28)$           0.25$        0.35$           0.23Diluted earnings (loss) per common  share:$         (0.19)$         (0.28)$           0.23$        0.33$           0.21(1)(1) Quarterly amounts do not total to the year to date amount as each period is calculated discretely. The dilutive effect of common stock equivalents is excluded from per share calculations for the first and second quarters due to a net loss for those periods.THE GREENBRIER COMPANIES, INC.Supplemental InformationQuarterly Results of Operations (Unaudited)FirstSecondThirdFourthTotal2009RevenueManufacturing$    102,717$     145,574$     105,986$     108,219$      462,496Wheels Services, Refurbishment &  Parts132,279121,681120,190102,014476,164Leasing & Services21,13319,87718,27220,18379,465256,129287,132244,448230,4161,018,125Cost of revenueManufacturing106,923152,003100,84798,960458,733Wheel Services, Refurbishment &   Parts119,326107,427104,85988,682420,294Leasing & Services11,92911,54712,04910,46645,991238,178270,977217,755198,108925,018Margin17,95116,15526,69332,30893,107Other costsSelling and administrative 15,98016,26515,88617,61265,743Interest and foreign exchange11,7719,14611,71013,28545,912Special items--55,667-55,66727,75125,41183,26330,897167,322Earnings (loss) before income tax and  earnings (loss) from unconsolidated  affiliates(9,800)(9,256)(56,570)1,411(74,215)Income tax benefit4,9061,6985,2175,09616,917Earnings (loss) from unconsolidated affiliates434(251)(457)(291)(565)Net earnings (loss)(4,460)(7,809)(51,810)6,216(57,863)Net loss (earnings) attributable to  noncontrolling interest568351687(134)1,472Net earnings (loss) attributable to Greenbrier$       (3,892)$       (7,458)$      (51,123)$        6,082$      (56,391)Basic earnings (loss) per common share:$         (0.23)$         (0.45)$         (3.04)$        0.36$         (3.35)Diluted earnings (loss) per common share:$         (0.23)$         (0.45)$         (3.04)$        0.33$         (3.35)(1) Quarterly amounts do not total to the year to date amount as each period is calculated discretely. The dilutive effect of common stock equivalents is excluded from per share calculations for the first three quarters and the year ended August 31, 2009 due to a net loss for those periods.THE GREENBRIER COMPANIES, INC.Supplemental DisclosureReconciliation of Net earnings (loss) attributable to Greenbrier to Adjusted EBITDA(1)(In thousands, unaudited)Year ended August 31,20102009Net earnings (loss) attributable to Greenbrier$      4,277$     (56,391)Interest and foreign exchange43,13445,912Income tax benefit(959)(16,917)Depreciation and amortization37,51137,669Special Items (non-cash portion)(11,870)55,667Adjusted EBITDA $    72,093$   65,940Three months endedAugust 31, 2010August 31, 2009Net earnings attributable to Greenbrier$     7,710$     6,082Interest and foreign exchange10,08013,285Income tax expense (benefit)67(5,096)Depreciation and amortization9,5449,410Special Items (non-cash portion)(11,870)-Adjusted EBITDA $     15,531$     23,681(1) "EBITDA" (earnings (loss) attributable to Greenbrier before the non-cash portion of special items, interest and foreign exchange, taxes, depreciation and amortization) is a useful liquidity measurement tool commonly used by rail supply companies and Greenbrier.  It should not be considered in isolation or as a substitute for financial statement data prepared in accordance with generally accepted accounting principles.SOURCE The Greenbrier CompaniesFor further information: Mark Rittenbaum of The Greenbrier Companies, +1-503-684-7000