Greenbrier Companies (GBX)

[Enterprising Investor]

Greenbrier Reports Record Results for Fourth Quarter and Fiscal Year; Backlog Grows to Record 31,500 units
~ Posts Q4 EPS of $1.03, before gain on contribution to GBW

~~ Grows backlog by 5,100 units in quarter; receives orders for an additional 11,400 units after quarter end

~~ Issues 2015 earnings guidance of $4.25 to $4.55 per share

~~ Sets new goals of at least 20% aggregate gross margin and 25% ROIC by second half of fiscal 2016

LAKE OSWEGO, Ore., Oct. 30, 2014 /PRNewswire/ -- The Greenbrier Companies, Inc. (NYSE: GBX) today reported financial results for its fourth fiscal quarter and full year ended August 31, 2014.

Fourth Quarter Highlights

•Net earnings for the quarter were $33.7 million, or $1.03 per diluted share, excluding a non-cash gain of $13.6 million (net of tax) on contribution of our repair operations to GBW, on record revenue of $618.1 million.

•Net earnings attributable to Greenbrier for the quarter, which includes the gain on contribution to GBW, were $47.4 million, or $1.43 per diluted share.

•Record adjusted EBITDA for the quarter was $80.8 million, or 13.1% of revenue.

•Record railcar backlog as of August 31, 2014 was 31,500 units with an estimated value of $3.33 billion (average unit sale price of $106,000), compared to 26,400 units with an estimated value of $2.75 billion (average unit sale price of $104,000) as of May 31, 2014.

•Orders for 10,400 new railcars valued at $1.06 billion received during the quarter. After quarter end, Greenbrier received orders for an additional 11,400 units valued at nearly $1 billion.

•New railcar deliveries totaled 4,800 units for the quarter, compared to 4,300 units for the quarter ended May 31, 2014.

•Marine backlog as of August 31, 2014 totaled approximately $112 million.

•Formed GBW Railcar Services, LLC (GBW), a 50/50 joint venture with Watco Companies, LLC (Watco) focused on retrofitting, refurbishing and repairing railcars through a network of 38 shops across North America, including 14 sites certified for tank car retrofitting and repair. Greenbrier accounts for its interest in GBW under the equity method of accounting.

•Board declares a quarterly dividend of $0.15 per share payable on December 3, 2014 to shareholders of record as of November 12, 2014.

•To date, repurchased 1,017,562 shares of common stock completing the $50 million share repurchase program announced October 31, 2013.

•New $50 million share repurchase program authorized.

Fiscal Year 2014 Highlights
•Record net earnings, excluding gain on contribution to GBW and restructuring charges, were $99.3 million, or $3.07 per diluted share, on revenue of $2.2 billion.

•Adjusted EBITDA was a record $253.8 million or 11.5% of revenue.

•Achieved ROIC of 16.9% excluding gain on contribution to GBW and restructuring charges.

•New railcar deliveries totaled 16,200 units.

•Orders totaled 34,300 units valued at $3.42 billion across a
broad range of railcar types.

•Cash generated from operating activities was $136 million.

Strategic Initiatives

•Fourth quarter aggregate gross margin reached 17.2%, compared to 16.3% in the third quarter, surpassing our stated goal of a minimum 13.5% by the fourth quarter of fiscal 2014.

•Manufacturing gross margin reached a record 17.9% in the fourth quarter, driven by product mix, pricing, production efficiencies, and leasing strategy.

•Successfully met $100 million capital efficiency goal, driven by asset-light leasing model. Net debt has decreased nearly $149 million since February 2013 when goal was set.

•New goals set of at least 20% aggregate gross margin and 25% ROIC by the second half of fiscal 2016.

William A. Furman, Chairman and CEO, said, "We leveraged our integrated business model to achieve our best annual performance yet and are well positioned to continue to grow in 2015 and beyond. We are obtaining the highest level of new orders in Greenbrier's history. They are broad-based across many railcar types including tank cars, grain and sand covered hoppers, automotive, intermodal, boxcars, gondolas, and plastic pellet cars, among others. We also achieved record production levels and deliveries, all while improving operating efficiencies and enhancing our footprint in our manufacturing facilities. Our leasing business continues to grow and has been completely transformed into an asset-light model, as we syndicate increased volumes of leased railcars to multiple investors who have access to low-cost capital and who value Greenbrier's products and services. Our owned lease fleet has contracted by $85 million and railcars under our management have increased by 13,000 units since we announced this strategic initiative in April 2013. Our combined actions produced manufacturing gross margins in the fourth quarter of 17.9%, a nearly six percentage point increase from last year. With a diverse backlog of 31,500 units, of which less than 40% are tank cars, we have good visibility stretching into our fiscal 2016."

"We have refocused our Wheels, Refurbishment & Parts segment. Our 22 railcar repair shops and Watco's 16 shops have been moved into GBW, where the scale of a 38-shop network and operational excellence will yield long-lasting competitive advantages. Demand for shop capacity and, in particular, tank car shop capacity to address the need for safe rail transport solutions is robust. The GBW network includes 14 shops specializing in tank car repair. Our wheels and parts business at a combined 13 locations is well positioned to produce growth, as the aftermarket for railcar wheels, parts and related services rises along with an expanding North American railcar fleet."

"Looking ahead, we will continue our balanced approach to capital allocation among (i) investments needed to drive efficiency and margin improvement through our organization, (ii) growth capital; and, (iii) returning capital to shareholders through dividends and share repurchases. We will accelerate capital investments in 2015, which will drive operational efficiencies and complete previously announced capacity projects at our facilities in Mexico. These projects include the transitioning from one leased facility in Sahagun, Mexico to an owned facility in Tlaxcala, Mexico, a doubling of our tank car capacity with the flexibility to also build other railcar types on these lines and enhanced vertical integration."

"We continue to pioneer efforts to improve safety in the rail industry with our Tank Car of the Future design and investments in capacity at GBW to retrofit older legacy tank cars. Last month we filed comments with the U.S. Department of Transportation (USDOT), which we expect will issue a final rule on tank car standards by year end. We are confident that Washington will recognize Greenbrier's Tank Car of the Future, as described in the USDOT's proposed rule, as the best design for safer transportation of crude, ethanol and other flammables in North America and that GBW is well positioned to retrofit older legacy tank cars at an accelerated pace. Swift and appropriate action will help reinforce America's longstanding priority to protect the public and preserve the natural environment, while taking care not to impede the economic prosperity associated with the energy renaissance in North America."

"I am proud of our employees, our shared achievements together and our successful completion of the strategic initiatives we announced 18 months ago. I'm confident in the balanced and integrated approach our leaders are taking in each segment of our business in 2015, and that this approach will enhance shareholder value over the long term," continued Furman.

Business Outlook

Furman concluded, "We ended August with over $505 million of liquidity from cash balances and available borrowings on revolving credit facilities. With a strong backlog, good industry fundamentals and positive outlook, we are investing in capital projects with high returns where we will quickly recoup our investments. We are also pursuing growth opportunities in areas core to our business that will diversify our revenue base throughout the cycle. The future looks bright for Greenbrier. We remain committed to operational excellence in each of our businesses and enhancing the long-term trajectory of key metrics, such as gross margins, EBITDA and ROIC."

Based on current business trends and industry forecasts in fiscal 2015, Greenbrier believes:

•Deliveries in FY15 will exceed 20,000 units

•Revenue will exceed $2.5 billion, which excludes revenue from GBW as it is accounted for under the equity method of accounting

•Diluted EPS will be in the range of $4.25 to $4.55

Similar to previous years, financial results in the second half of the year are expected to be stronger than the first half. Also, while gross margins are expected to increase overall, management does not believe its track will be linear.

In addition, the Company has established two new financial goals:
•Aggregate gross margin of at least 20% by the second half of fiscal 2016
•ROIC of at least 25% by the second half of fiscal 2016

[tables removed]

Conference Call

Greenbrier will host a teleconference to discuss its fourth quarter 2014 results. In conjunction with this news release, Greenbrier has posted a supplemental earnings presentation to our website. Teleconference details are as follows:

•October 30, 2014
•8:00 a.m. Pacific Daylight Time

•Phone: [phone], 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 November 15, 2014, at 1-402-280-9971.

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. We build new railroad freight cars in our 4 manufacturing facilities in the U.S. and Mexico and marine barges at our U.S. manufacturing facility. Greenbrier also sells reconditioned wheel sets and provides wheel services at 9 locations throughout the U.S. We recondition, manufacture and sell railcar parts at 4 U.S. sites. Greenbrier is a 50/50 joint venture partner with Watco Companies, LLC in GBW Railcar Services, LLC which repairs and refurbishes freight cars at 38 locations across North America, including 14 tank car repair and maintenance facilities certified by the Association of American Railroads. Greenbrier builds new railroad freight cars and refurbishes freight cars for the European market through our operations in Poland. Greenbrier owns approximately 8,500 railcars, and performs management services for approximately 238,000 railcars.

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