1q14 earnings & supplemental informationmedia.oregonlive.com/business_impact/other/gbx 1q... ·...
TRANSCRIPT
0
NYSE: GBX 1Q14 Earnings &
Supplemental Information
Investor Contact:
Website:
www.gbrx.com
1
“SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: This presentation 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, restructuring plans, 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, 2013, 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.
2
Integrated Business Model
Greenbrier’s integrated business model delivers superior value to customers by creating customized freight car solutions over the entire life of a railcar. Our diversified portfolio of quality products and services enhances our financial performance across the business cycle.
3
Improves competitive position due to diverse product mix at lower-cost, flexible manufacturing facilities
Expands available market by increasing throughput and diversifying product portfolio while maintaining the quality customers demand
Diversifies business mix by expanding repair and wheel maintenance business - large aftermarket business provides stability throughout business cycles
Enhances leasing activities, capturing more value throughout the railcar life cycle
Greenbrier’s Integrated Model
4
Consolidated Financial Trends ($ in millions)
$1,756
$- $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 $2,000
$-
$400
$800
$1,200
$1,600
$2,000
2008 2009 2010 2011 2012 2013 2014
Revenue
FY 2014 Revenue to exceed $2.0
billion
11,600
0
2
4
6
8
10
12
14
16
0
4
8
12
16
2008 2009 2010 2011 2012 2013 2014
Deliveries (Units)
FY 2014 Deliveries to
exceed 15,000 units
5.3x
7.7x
5.5x
4.6x
2.7x 2.0x
0.0x
2.0x
4.0x
6.0x
8.0x
2008 2009 2010 2011 2012 2013 2014
Net Debt(2) to Adj. EBITDA(1)
(1) Adjusted EPS & Adjusted EBITDA exclude Goodwill impairment, Restructuring charges and other Special Items. See reconciliation later in the presentation.
(2) Net debt is defined as Gross debt plus debt discount less Cash
$2.00
$(1.00)
$(0.50)
$-
$0.50
$1.00
$1.50
$2.00
$2.50
$(1.00)
$(0.50)
$-
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
2008 2009 2010 2011 2012 2013 2014
Adjusted EPS(1) FY 2014 Guidance = $2.45 – 2.70
We expect the downward trend to continue in
FY 2014
5
Minimum 200 bps of gross margin enhancement, to 13.5% of Revenue (by 4Q of FY 2014) 110 bps improvement achieved through 1Q 14 reflects
• More lease syndication volume • Cost improvements and operating efficiencies • Favorable product mix • Progress will continue to be non-linear
Minimum $100 million of capital efficiency improvements (by 2Q of FY 2014) Substantially met goal and will exceed initial $100 million target
Reducing permanent capital invested in Leasing assets ($49 million to date)
Working capital efficiency improving (Inventory turns increased from 4.0x to 5.2x)
Reduced Net Debt by over $90 million from February 2013
As of January 6, 2014, repurchased over 110,000 shares for $3.4 million (average price of approximately $31/share)
Margin and Capital Efficiency Goals Update (Established April 2013)
6
In 2014, we will continue the strategic transition of Leasing & Services by:
Driving more leasing volume as an originator and underwriter
Increasing fee income by continuing to build on our strength in asset management
Pairing our asset management expertise with our maintenance and repair network
Leasing & Services Plays a Pivotal Role in Integrated Business Model
The unique combination of resources provided by Leasing & Services allows Greenbrier to deliver a desirable lifetime asset management solution to rail car owners.
7
Diversified Revenue Streams
Strong Balance Sheet & Liquidity
Solid Railcar Backlog
Strong balance sheet and positive free cash flow trend
Clear Path to Growth and Shareholder Value
Positive trends in average sales price and continued strength in new orders
Unique model that enhances financial performance across the cycle, with powerful cross selling opportunities
Strategic Initiatives
Initiatives to improve gross margins and capital efficiency
8
1Q FY14 Key Financials*
Revenue $490.4 million Increased revenue reflects increased deliveries
Gross margin 12.6% Higher margin attributable to Manufacturing operating efficiencies, lease syndications and favorable product mix
Adjusted EBITDA of $50.0 million* Continued strong operating performance Adjusted EBITDA margin of 10.2%
Backlog 13,500 units valued at $1.43 billion
Excluding Restructuring charge: Diluted EPS of $0.51 Economic EPS of $0.56
Strong Positive Free Cash Flow Net debt to Adjusted LTM EBITDA of 1.8x Almost $400 million of available liquidity $14.7
$84.4
$36.3
$141.3 $176.7
1Q 13 2Q 13 3Q 13 4Q 13 1Q 14
LTM Free Cash Flow* ($ millions)
$34.0 $36.8 $40.0
$52.1 $50.0
1Q 13 2Q 13 3Q 13 4Q 13 1Q 14
Adjusted EBITDA* ($ millions)
$415.4 $423.2 $433.7
$484.2 $490.4
1Q 13 2Q 13 3Q 13 4Q 13 1Q 14
Revenue ($ millions)
*Excludes Goodwill impairment in 3Q 13 and Restructuring charges in 4Q FY13 and 1Q FY14.
9
Solid Railcar Backlog ($ in millions except per unit values)
Backlog Units 16,200 13,400 5,300 15,400 10,700 14,400 13,500
In 1Q FY14, Greenbrier received orders for 2,500 railcar units valued at $230 million. Subsequent to November 30, 2013, Greenbrier received orders for another 1,100 units valued at approximately $130 million.
$1,440
$1,160
$420
$1,230 $1,200
$1,520
$1,430
$89 $87
$79 $80
$112
$106 $106
$-
$20
$40
$60
$80
$100
$120
$-
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
Aug. 08 Aug. 09 Aug. 10 Aug. 11 Aug. 12 Aug. 13 Nov. 13
Average Sales P
rice/Unit
($ in thousands) Bac
klog
Val
ue
($ in
mill
ions
)
10
Manufacturing
Quarterly Trends
Revenue and Gross Margin % FY 14 Outlook
• Revenue increase reflects increased deliveries
• Margin improvement reflects improved operating efficiencies, strong syndication activity
• Continued strong order activity across broad range of car types
• Deliveries to exceed 15,000 units
• Stabilize tank car production rates and drive operating efficiency
• Capitalize on strong automotive new railcar demand
• Capital expenditures of $60 million
($ in millions) 1Q 13 2Q 13 3Q 13 4Q 13 1Q 14
Revenues $285.4 $294.0 $284.6 $351.7 $359.5
Gross Margin $26.9 $31.4 $31.2 $43.3 $48.0
Gross Margin % 9.4% 10.7% 11.0% 12.3% 13.4%
Capital Expenditures $8.3 $11.1 $8.8 $8.8 $3.9
Backlog $1,100 $1,300 $1,570 $1,520 $1,430
Backlog (units) 9,700 11,700 14,200 14,400 13,500 Deliveries (units) 2,900 2,700 2,500 3,500 3,700
1Q Business Conditions
0%
2%
4%
6%
8%
10%
12%
14%
$-
$200
$400
$600
$800
$1,000
$1,200
$1,400
2010 2011 2012 2013 LTM
$ in
mill
ions
Revenue Margin
Note: LTM equals twelve month period ended 11/30/13
11
Wheels, Repair & Parts
Quarterly Trends
Revenue and Gross Margin % FY 14 Outlook
• XX • XX • XX
• Sequential Revenue decrease reflects the mix of work
• Margin decrease reflects inefficiencies in certain Repair operations and certain costs not expected to recur
• Modest margin improvement reflecting completion of network rationalization initiative
• Expand tank car capabilities
• Expect cash restructuring charges of $1-2 million throughout remainder of FY 2014
• Capital expenditures of $10 million
($ in millions) 1Q 13 2Q 13 3Q 13 4Q 13 1Q 14
Revenues $112.1 $112.0 $131.2 $114.0 $113.4
Gross Margin $10.6 $8.8 $10.7 $7.6 $5.4
Gross Margin % 9.5% 7.9% 8.2% 6.7% 4.8%
Capital Expenditures $1.7 $2.3 $1.8 $1.6 $1.6
1Q Business Conditions
0%
2%
4%
6%
8%
10%
12%
$-
$100
$200
$300
$400
$500
$600
2010 2011 2012 2013 LTM
$ in
mill
ions
Revenue Margin
Note: LTM equals twelve month period ended 11/30/13
12
Leasing & Services
Quarterly Trends
Revenue and Gross Margin % FY 14 Outlook
• Revenue and margin decrease reflects lower interim rents and strategy to reduce permanent capital in lease fleet
• Completed additional $13 million of capital liberation goal (~$49 million achieved to date)
• Continue growth of Syndication and Management Services activity
• Net capital expenditures of ($50) million [Gross capital expenditures of $10 million offset by equipment proceeds of $60 million]; Reflects strategy to reduce permanent capital in lease fleet
• Potential additional capital liberation by February 2014
($ in millions) 4Q 12 1Q 13 2Q 13 3Q 13 4Q 13 1Q 14 Revenues $18.3 $17.9 $17.2 $17.9 $18.5 $17.5 Gross Margin $8.7 $10.3 $8.1 $8.1 $9.4 $8.1
Gross Margin % 47.6% 57.4% 47.0% 45.2% 50.7% 46.3% Net Capital Expenditures $30.6 $5.0 ($15.3) ($10.7) ($35.0) ($13.0) Lease Fleet Utilization 93.5% 95.2% 97.5% 97.9% 97.4% 97.0%
Owned Fleet (units) 11,000 10,000 9,200 9,400 8,600 8,300 Managed Fleet (units) 219,000 221,000 225,000 228,000 224,000 231,000
1Q Business Conditions
38%
40%
42%
44%
46%
48%
50%
52%
$-
$20
$40
$60
$80
$100
2010 2011 2012 2013 LTM
$ in
mill
ions
Revenue Margin
Note: LTM equals twelve month period ended 11/30/13
13
Quarterly Adjusted EBITDA Reconciliation
(1) Adjusted EBITDA is not a financial measure under generally accepted accounting principles (GAAP). We define Adjusted EBITDA as Net earnings (loss) before interest and foreign exchange, income tax expense, goodwill impairment, restructuring charges, 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.
Supplemental Disclosure Reconciliation of Net Earnings (loss) to Adjusted EBITDA(1)
(In millions, unaudited) Three Months Ended
Nov. 30, 2012
Feb. 28, 2013
May 31, 2013
Aug. 31, 2013
Nov. 30, 2013
Net earnings (loss) $12.6 $14.4 ($55.6) $23.3 $23.0
Interest and foreign exchange 5.9 6.3 5.9 4.0 4.7
Income tax expense 4.6 5.6 2.7 12.2 10.5
Depreciation and amortization 10.9 10.5 10.1 9.9 10.9
Goodwill impairment - - 76.9 - -
Restructuring charge - - - 2.7 0.9 Adjusted EBITDA $34.0 $36.8 $40.0 $52.1 $50.0
14
Quarterly Economic EPS Reconciliation
Three Months Ended
Nov. 30, 2013
Aug. 31, 2013
Weighted average basic common shares outstanding 28,417 28,062
Dilutive effect of warrants - 366
Weighted average economic diluted common shares outstanding 28,417 28,428
Net earnings attributable to Greenbrier excluding restructuring charges $15,991 $22,497
Economic earnings per share $0.56 $0.79
Supplemental Disclosure Reconciliation of Basic Earnings Per Share to Economic Earnings Per Share excluding restructuring charges(1)
(In thousands, except per share amounts, unaudited)
(1) Economic earnings per share excluding restructuring charges is not a financial measure under GAAP. Economic earnings per share excluding restructuring charges is used to measure the current economic impact of our Convertible Bonds due in 2018 that have a conversion strike price of $38.05/share, which exceeds our current stock price. We define Economic earnings per share excluding restructuring charges as Net earnings excluding restructuring charges divided by Weighted average basic common shares outstanding, including the dilutive effect of 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 earnings per share excluding restructuring charges. You should not consider Economic earnings per share excluding restructuring charges in isolation or as a substitute for other financial statement data determined in accordance with GAAP. In addition, because Economic earnings per share excluding restructuring charges is not a measure of financial performance under GAAP and is susceptible to varying calculations, the Economic earnings per share excluding restructuring charges measure presented may differ from and may not be comparable to similarly titled measures used by other companies.
The shares used in the computation of the Company’s basic and economic earnings per common are reconciled as follows:
15
Annual Adjusted EBITDA Reconciliation
(1) Adjusted EBITDA is not a financial measure under generally accepted accounting principles (GAAP). We define Adjusted EBITDA as Net earnings (loss) before interest and foreign exchange, income tax expense (benefit), goodwill impairment , loss (gain) on debt extinguishment, special items, 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.
Supplemental Disclosure Reconciliation of Net Earnings (loss) to Adjusted EBITDA(1)
(In millions, unaudited) Twelve Months Ended
Aug. 31, 2008
Aug. 31, 2009
Aug. 31, 2010
Aug. 31, 2011
Aug. 31, 2012
Net earnings (loss) $14.2 ($57.9) $8.3 $8.4 $61.2
Interest and foreign exchange 44.3 45.9 45.2 37.0 24.8
Income tax expense (benefit) 17.2 (16.9) (0.9) 3.5 32.4
Depreciation and amortization 35.0 37.6 37.5 38.3 42.4
Goodwill impairment - 55.7 - - -
Loss (gain) on debt extinguishment - - (2.1) 15.7 -
Special items 2.3 - (11.9) - -
Adjusted EBITDA $113.0 $64.4 $76.1 $102.9 $160.8
16
Annual Adjusted EPS Reconciliation Supplemental Disclosure Reconciliation of Net Earnings (loss) Attributable to Greenbrier to Net Earnings Excluding Goodwill Impairment, Loss (gain) on Debt extinguishment and Special Items
(In millions, except per share amounts, unaudited)
(1) Net earnings (loss) excluding goodwill impairment, loss (gain) on debt extinguishment and special items is not a financial measure under GAAP. We define Net earnings (loss) excluding goodwill impairment, loss (gain) on debt extinguishment and special items as Net earnings (loss) attributable to Greenbrier before goodwill impairment (after-tax), loss (gain) on debt extinguishment (after-tax) and special items (after-tax). Net earnings (loss) excluding goodwill impairment, loss (gain) on debt extinguishment and special items is a performance measurement tool used by Greenbrier. You should not consider this metric in isolation or as a substitute for other financial statement data determined in accordance with GAAP.
(2) Adjusted diluted earnings per share is not a financial measure under GAAP. We define Adjusted diluted earnings per share as Net earnings (loss) excluding goodwill impairment, loss (gain) on debt extinguishment and special items before interest and debt issuance costs (net of tax) on convertible notes divided by Weighted average diluted shares outstanding. Adjusted diluted earnings per share is a performance measurement tool used by Greenbrier. You should not consider this metric in isolation or as a substitute for other financial statement data determined in accordance with GAAP. In addition, because Adjusted diluted earnings per share is not a measure of financial performance under GAAP and is susceptible to varying calculations, the Adjusted diluted earnings per share measure presented may differ from and may not be comparable to similarly titled measures used by other companies.
Twelve Months Ended
Aug. 31, 2008
Aug. 31, 2009
Aug. 31, 2010
Aug. 31, 2011
Aug. 31, 2012
Net earnings (loss) attributable to Greenbrier $17.4 ($56.4) $4.3 $6.5 $58.7
Goodwill impairment (after-tax) - 51.0 - - -
Loss (gain) on debt extinguishment (after-tax) - - (1.3) 9.4 -
Special items (after-tax) 2.3 - (11.9) - -
Net earnings (loss) excluding Goodwill impairment, loss (gain) on debt extinguishment & Special items(1) $19.7 ($5.4) ($8.9) $15.9 $58.7
Weighted average diluted shares outstanding 16.4 16.8 20.2 26.5 33.7
Adjusted Diluted EPS(2) $1.20 ($0.32) ($0.44) $0.60 $1.91