Greenbrier Reports Fiscal Third Quarter Results, Facilities Reductions and Leadership Changes

LAKE OSWEGO, Ore., July 1, 2013 /PRNewswire/ -- The Greenbrier Companies, Inc. (NYSE: GBX) today reported results for its third quarter ended May 31, 2013.

Third Quarter Financial Highlights                                                                                         

• Net earnings, excluding a non-cash goodwill impairment charge, were $15.7 million, or $.50 per diluted share, on revenue of $433.7 million, for the third quarter.
• A non-cash goodwill impairment charge of $71.8 million net of tax, or $2.60 per share, related to the Wheels, Repair & Parts segment, led to a net loss for the quarter of $56.0 million, or $2.10 per share.
• Adjusted EBITDA for the quarter was $39.6 million, or 9.1% of revenue.
• New railcar deliveries were 2,500 units in the third quarter.
• Since September 1, 2012, Greenbrier has received broadly-based orders for 13,500 railcar units valued at almost $1.3 billion, of which 1,400 units were received during the first quarter, 4,500 units during the second quarter, 5,500 units during the third quarter and 2,100 units subsequent to the May 31, 2013 quarter end.
• New railcar backlog as of May 31, 2013 was 14,200 units with an estimated value of $1.57 billion (average unit sale price of $111,000), compared to 11,700 units with an estimated value of $1.30 billion (average unit sales price of $111,000) as of February 28, 2013. 
• Proprietary Multi-Max™ automotive railcar was successfully launched in May.
• Marine backlog totaled $1.6 million as of May 31, 2013.  Subsequent to quarter end, orders for two additional smaller size marine vessels were received.  Strong demand is building for transportation of crude oil by barge.  Additionally, we are party to a letter of intent for 15 coal barges valued at $60 million, subject to significant permitting and other conditions.

Progress on Strategic Initiatives.

• Company addresses margins and ROIC in its underperforming Wheels, Repair & Parts segment:
  • Leadership changes implemented:  Rick Turner to lead Wheels & Strategic Execution; William Glenn to lead Repair & Parts.
  • Eight of 38 shop locations to be closed or sold; initiatives launched to significantly improve performance at six locations.
  • Actions expected to liberate $25 million of capital for this segment by December 31, 2013.
  • An additional $75 million of capital is expected to be liberated through working capital improvements of $25 million and refinements to the Company's leasing model of $50 million; Company accelerates goal to achieve these capital efficiencies no later than February 28, 2014.

William A. Furman, president and chief executive officer, said, "We are encouraged by the growth of our diverse backlog and robust order activity, with orders in the third quarter for 5,500 railcar units.  Since quarter end, we have received orders for an additional 2,100 railcar units, including a sizable double stack intermodal order for 1,500 units, about a third of which will be delivered in fiscal 2013, and the balance in fiscal 2014.  Approximately 37% of the total 7,600 units ordered since March 1, 2013 are for tank cars in North America, with the remainder of the orders in this time period consisting of a broad range of railcar types including various sizes of covered hoppers, automotive products, gondola cars and double stack intermodal cars."

Furman continued, "The automotive railcar market remains active and we are pleased by the enthusiastic customer response to Greenbrier's proprietary Multi-Max™ automotive railcar introduced in May.  We anticipate brighter prospects for intermodal railcar activity and downstream energy-related railcar products such as plastics, in fiscal 2014.  Our marine outlook is also improving, driven by strong customer inquiries related to transportation of crude oil by barge. "

"Company-wide, we are confident about our goals announced in April of improving gross margins by at least 200 basis points and liberating a minimum of $100 million of capital no later than August 31, 2014.  We are gaining traction on this $100 million goal and are now accelerating the timing of it to February 28, 2014.  In our Wheels, Repair & Parts segment, where we incurred a related $71.8 million (net of tax) goodwill impairment charge this quarter, we are taking decisive action with a focused effort to improve our performance both in the near term and over time.  This action is expected to liberate $25 million of capital by December 31, 2013 and improve gross margin and ROIC.  The planned sale or closing of the eight underperforming facilities in this segment by the end of the calendar year will eliminate a drag of approximately 100 basis points on segment gross margin and 30 basis points on Company-wide gross margin.  While we are currently focused on operational execution, we also believe there are significant opportunities to streamline general and administrative costs.  We will be taking initial steps to reduce these costs in the months ahead, and will announce specific reduction targets as part of our fourth quarter earnings release and 2014 outlook," Furman added.

Furman concluded.  "I remain confident in the long term strength of our integrated business model.  A combination of factors however, including a slower than anticipated ramp up of tank car production at our GIMSA facility and near term softness in the intermodal market affected deliveries, revenue and gross margin for the third quarter.  A $1.9 million pre-tax charge, ($1.6 million net of tax, or $.05 per share) related to certain balance sheet adjustments at a wheels and repair location also adversely impacted results for the quarter.  We are addressing these issues head-on and expect our new management team to quickly impact results." 

Financial Summary

Segment Summary

Strategic Initiatives
On April 4, 2013, Greenbrier presented its plan to increase gross margins by at least 200 basis points and reduce capital employed in its operations by at least $100 million before the end of its fiscal year 2014.  The timing of the capital reduction goal has been accelerated to February 28, 2014.  Definitive structural and leadership changes to its underperforming Wheels, Repair & Parts segment were announced today in a separate press release.  These actions include the sale or closure of eight facilities and a commitment to significant improvements to six other underperforming sites, as well as the appointment of two new leaders of the segment.  This reorganization is expected to improve gross margin and yield at least $25 million of capital by December 2013.  The remaining $75 million of our capital liberation goals consists of working capital improvements of $25 million, primarily in Manufacturing, and refinements to our leasing model which will remove leasing assets from our balance sheet and generate at least $50 million of capital.

Business Outlook
Based on current business trends, including lower than anticipated demand for new intermodal railcars in 2013 and slower than anticipated ramp up of tank car production, management is revising its outlook for fiscal 2013.  Management currently anticipates in 2013 that the Company's new railcar deliveries will be between 11,750 and 12,250 units, revenue to be in the range of $1.75 to $1.80 billion, adjusted EBITDA to be in the range of $150 to $155 million (excluding any restructuring costs), and net capital expenditures (gross capital expenditures less proceeds from lease fleet sales) to be reduced to approximately $25 million, down significantly from previous expectations of approximately $95 million.  The Company also anticipates that cash restructuring costs associated with its facilities reductions and leadership changes announced today will be in the range of $3.0 – $5.0 million over the next 2 – 3 quarters.  This range does not include future non-cash gains or losses from facilities reductions, as these amounts are not presently determinable.

Conference Call
Greenbrier will host a teleconference to discuss its third quarter results and the restructuring and reorganization of its Wheels, Repair & Parts segment.  In conjunction with this news release and the news release detailing the Company's reported results for its third quarter ended May 31, 2013, Greenbrier has posted a supplemental earnings presentation to our website.  Teleconference details are as follows:

• July 2, 2013
• 8:00 a.m. 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 webcast replay will be available for 30 days.  Telephone replay will be available through July 20, 2013, at 203-369-0134.

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 four 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 36 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 9,400 railcars, and performs management services for approximately 228,000 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 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," "goal," "contemplates," "expects," "intends," "plans," "projects," "hopes," "seeks," "estimates," "could," "would," "will," "may," "can," "designed to," "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 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, production of new railcar types, 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, 2012, 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.

Net earnings excluding goodwill effect, Adjusted EBITDA, Adjusted weighted average diluted common shares outstanding, Adjusted diluted earnings per common share and Economic earnings per share excluding goodwill are not financial measures under generally accepted accounting principles (GAAP). We define Net earnings excluding goodwill effect as Net earnings (loss) attributable to Greenbrier before goodwill impairment (after-tax). 

We define Adjusted EBITDA as earnings attributable to Greenbrier before interest and foreign exchange, income tax expense, goodwill impairment (pre-tax), depreciation and amortization. 

We define Adjusted weighted average diluted common shares outstanding as Weighted average diluted common shares outstanding plus the dilutive effect of common stock equivalents related to warrants, restricted stock, restricted stock units and convertible notes to the extent that they are considered dilutive in the Adjusted diluted earnings per dilutive share calculation.

We define Economic earnings per common share excluding goodwill effect as Net earnings excluding goodwill effect divided by the sum of weighted average basic common shares outstanding, including the dilutive effect of restricted stock, restricted stock units and warrants. This calculation excludes the dilutive effect of the shares underlying the 2018 bonds under the "if converted" method, which is included in the calculation of Diluted EPS.

We define Diluted earnings per common share excluding goodwill effect as Net earnings excluding goodwill effect before interest and debt issuance costs (net of tax) on convertible notes divided by Adjusted weighted average diluted common shares outstanding. Net earnings excluding goodwill effect, Adjusted EBITDA, Adjusted weighted average diluted common shares outstanding, Diluted earnings per common share excluding goodwill effect and Economic earnings per common share excluding goodwill effect are performance measurement tools used by Greenbrier. You should not consider Net earnings excluding goodwill effect, Adjusted EBITDA, Adjusted weighted average diluted common shares outstanding, Diluted earnings per common share excluding goodwill effect and Economic earnings per common share excluding goodwill effect in isolation or as a substitute for other financial statement data determined in accordance with GAAP. In addition, because Adjusted EBITDA, Diluted earnings per common share excluding goodwill effect  and Economic earnings per common share excluding goodwill effect are not measures of financial performance under GAAP and are susceptible to varying calculations, the Adjusted EBITDA, Diluted earnings per common share excluding goodwill effect and Economic earnings per common share excluding goodwill effect measures presented may differ from and may not be comparable to similarly titled measures used by other companies.

Diluted earnings per share excluding goodwill effect for the three months ended May 31, 2013 and dilutive earnings per share for the three months ended February 28, 2013 was calculated using the more dilutive of two approaches.  The first approach includes the dilutive effect of outstanding warrants and shares underlying the 2026 Convertible notes in the share count using the treasury stock method.  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.  The 2026 Convertible notes would only be included in the calculation of both approaches if the current stock price is greater than the initial conversion price of $48.05 using the treasury stock method.

SOURCE The Greenbrier Companies, Inc. (GBX)