NYSE: GBX - Amazon S3 GBX 2Q17 Earnings Slides & Supplemental Information Investor Contact: ......
Transcript of NYSE: GBX - Amazon S3 GBX 2Q17 Earnings Slides & Supplemental Information Investor Contact: ......
NYSE: GBX2Q17 Earnings Slides &
Supplemental Information
Investor Contact: [email protected]: www.gbrx.com
1
Safe Harbor Statement
UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: This presentation may contain forward-looking statements, including any statements that are not purely statements of historical fact. Greenbrier uses words such as “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 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 rail car or railroad regulation; and issues arising from investigations ofwhistleblower 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, 2016 and Greenbrier’s Quarterly Report on Form 10-Q for the fiscal quarter ended November 30, 2016, 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.
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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.
Leasing and Services
Wheels, Repair and
Parts
Manufacturing
$749
$2,096
$102
$322
$92
$261
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
2006 2016
$ in
mill
ions
(% o
f Tot
al R
even
ue)
Leasing &Services
Wheels & Parts Manufacturing
3
$943
$2,680
(10%)(11%)
(79%)
(12%)
(78%)
(10%)
100% = 88,116 unitsSeptember 30, 2006*
100% = 66,681 unitsDecember 31, 2016
Revenue
FY 2017 Guidance of
$2.0 - $2.4 billion
North American Industry Backlog
Resulting in Revenue and Share Growth
Source: RSI ARCI, public filings (January 2017)* September 30, 2006 represents the prior industry backlog peak
GBX, 33%
ARI, 6%RAIL, 6%
TRN, 44%
Others, 11%
GBX, 13%
ARI, 21%
RAIL, 14%
TRN, 36%
Others, 16%
0%
20%
40%
60%
80%
100%
$5.73
$(1.00)
$-
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
2010 2011 2012 2013 2014 2015 2016
Adjusted EPS(1)
20.3
0.0
3.0
6.0
9.0
12.0
15.0
18.0
21.0
24.0
2010 2011 2012 2013 2014 2015 2016
Deliveries (000’s of units)$2,680
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
2010 2011 2012 2013 2014 2015 2016
Revenue
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Consolidated Financial Trends ($ in millions)
(1) Adjusted EPS & Adjusted EBITDA exclude Goodwill impairment, Restructuring charges and other Special Items (2) Net debt is defined as Gross debt plus debt discount less Cash(3) FY 2017 EPS Guidance excludes $0.17 of convertible interest expense as well as any expected benefit of Greenbrier-Astra Rail,
additional Brazil investments and MUL
FY 2017Guidance
~14,000 - 16,000 units
FY 2017 Guidance (3)
$3.25-$3.75
FY 2017 Guidance of $2.0 - $2.4 billion
Positive trend expected to
continue in FY 2017
5.5x
4.6x
2.7x2.0x
1.1x0.5x 0.2x
0.0x
2.0x
4.0x
6.0x
8.0x
2010 2011 2012 2013 2014 2015 2016
Net Debt(2) to Adj. EBITDA(1)
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
2011A 2012A 2013A 2014A 2015A 2016A 2017F 2018F 2019F 2020F 2021F
Covered hopper Boxcar Tanks Intermodal Flat cars (auto) Coal Other hoppers / gondolas
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Flexibility Key in Changing Demand Environment
Long-term average: ~50,000 units
Source: FTR Associates – Rail Equipment Outlook (March 2017)
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Greenbrier’s Railcar Backlog ($ in millions except per unit values)
Backlog Units 12,100 16,200 13,400 5,300 15,400 10,700 14,400 31,500 41,300 27,500 25,800 22,600
In 2Q FY 2017, Greenbrier received orders for 700 units valued at approximately $50 million.
Provides Earnings Visibility
$830
$1,440 $1,160
$420
$1,230 $1,200 $1,520
$3,330
$4,710
$3,190 $2,970 $2,440
$69
$89 $87 $79 $80
$112 $106 $106
$114 $116 $115 $108
$-
$20
$40
$60
$80
$100
$120
$140
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
$5,000
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 1Q 17 2Q 17
Average Sales Price/Unit
($ in thousands)Back
log
Valu
e($
in m
illio
ns)
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2Q FY 2017 Key Metric Highlights
Backlog 22,600 units valued at $2.44 billion
Diverse backlog reflects a broad range of cartypes including various-sized covered hoppers, non-energy tank cars, boxcars, gondola cars, automotive carrying railcars and intermodal units
Included in backlog are an aggregate of 3,800 covered hopper railcars for use in energy related sand transportation. We reached satisfactory agreements with our customers to produce 1,000 of these units in 2017 and 2018, with the remaining units to be produced thereafter.
Marine backlog of ~$86 Million
Deliveries of 3,900 units including syndication activity of 550 units
34,100 31,200 27,500 25,800
22,600
2Q 16 3Q 16 4Q 16 1Q 17 2Q 17
Backlog
4,500 4,300
4,600
4,000 3,900
2Q 16 3Q 16 4Q 16 1Q 17 2Q 17
Total Deliveries
700 800
600 500 550
2Q 16 3Q 16 4Q 16 1Q 17 2Q 17
Syndicated Deliveries
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2Q FY 2017 Income Statement Highlights
Revenue to $566.3 million
Gross margin of 21.0%
Robust margin performance on lower deliveries
Adjusted EBITDA to $94.5 million
Adjusted EBITDA margin of 16.7%
Diluted EPS of $1.09
Continued focus on profitability
$669.1 $612.9 $595.2 $552.3 $566.3
2Q 16 3Q 16 4Q 16 1Q 17 2Q 17
Revenue ($ millions)
$108.2 $99.5 $104.4 $85.7 $94.5
2Q 16 3Q 16 4Q 16 1Q 17 2Q 17
Adjusted EBITDA ($ millions)
$1.41
$1.12 $1.06
$0.79
$1.09
2Q 16 3Q 16 4Q 16 1Q 17 2Q 17
Diluted EPS
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2Q FY 2017 Balance Sheet & Cash Flow Highlights
Positive Operating Cash Flow
5% increase in the quarterly dividend to $0.22 per share
Net Funded Debt reduced by ~$39 million to $29.5 million
Over $900 million of available liquidity
Significant flexibility
(1)Investment in Unconsolidated Affiliates included to reflect net investments in unconsolidated joint ventures
(2)Excludes debt discounts and issuance costs
$212.8
$45.4
$137.0
$29.0 $52.9
2Q 16 3Q 16 4Q 16 1Q 17 2Q 17
Operating Cash Flow ($ millions)
$(25.6)
$16.8
$73.6
$3.4
$(2.1)
2Q 16 3Q 16 4Q 16 1Q 17 2Q 17
Net Capital Expenditure & Invest. In Unconsol. Affiliates(1) ($ millions)
$114.0 $92.4
$81.3 $68.4
$29.5
2Q 16 3Q 16 4Q 16 1Q 17 2Q 17
Net Funded Debt (2) ($ millions)
Strategic Initiatives
Europe:
Greenbrier-Astra Rail proceeding as planned
Anti-trust approval received from two out of three jurisdictions
Expected closure in Fiscal Q3
Brazil:
Greenbrier-Maxion & Cruzeiro ownership increase expected to close in Fiscal Q3
Leasing:
Entered a Memorandum of Understanding with Mitsubishi UFJ Lease & Finance (MUL)
Provide 6,000 new railcars through 2020
MUL’s exclusive new railcar builder through 2023
Provide MUL a combination of lease syndications and used equipment
Formation of new asset management service entity with each company obtaining 50% ownership
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Manufacturing
Quarterly Trends
Revenue and Gross Margin % FY 17 Outlook
Reflects lower deliveries offset by beneficial international mix
Margin % increase due to product mix shifts and continued strong operating performance
Deliveries of 14,000 to 16,000 units
Capital expenditures are expected to be approximately $45 million, primarily related to enhancements of our existing manufacturing facilities
Formation of Greenbrier-Astra Rail -remaining regulatory approval anticipated and expect to close in fiscal Q3
($ in millions) 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17Revenues $ 454.5 $ 458.5 $ 484.6 $ 454.0 $ 445.5
Gross Margin $92.7 $105.7 $101.7 $97.5 $98.9
Gross Margin % 20.4% 23.1% 21.0% 21.5% 22.2%
Operating Margin % 17.3% 20.2% 18.5% 18.4% 19.2%
Capital Expenditures $9.3 $12.9 $15.7 $9.0 $6.2
New Railcar Backlog $3,960 $3,620 $3,190 $2,970 $2,440
New Railcar Backlog (units) 34,100 31,200 27,500 25,800 22,600Deliveries (units) 4,500 4,300 4,600 4,000 3,900
2Q Business Conditions
0%
4%
8%
12%
16%
20%
24%
$-
$0.4
$0.8
$1.2
$1.6
$2.0
$2.4
$ in
Bill
ions
Revenue Gross Margin
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Wheels & Parts
Quarterly Trends
Revenue and Gross Margin %(1) FY 17 Outlook
Revenue increase primarily attributable to higher wheel volumes
Margin % increase due to efficiencies of higher volumes
Continue to be negatively impacted by challenging markets, lower, but improving, loadings
Expect these conditions will persist in the near term
Capital expenditures are expected to be approximately $5 million for maintenance and enhancements of our existing facilities
2Q Business Conditions
($ in millions) 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17Revenues $90.5 $78.4 $74.8 $69.6 $82.7
Gross Margin $9.1 $8.6 $5.2 $4.7 $7.2
Gross Margin % 10.0% 11.0% 7.0% 6.7% 8.7%
Operating Margin % 7.2% 7.4% 5.7% 4.2% 6.7%
Capital Expenditures $1.4 $3.4 $4.4 $1.2 $0.7
(1) Pre-2014 results include legacy Repair operations which were contributed to GBW Railcar JV in July 2014
0%
2%
4%
6%
8%
10%
12%
$-
$100
$200
$300
$400
$500
$600
$ in
Thou
sand
s
Revenue Gross Margin
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Leasing & Services
Quarterly Trends
Revenue and Gross Margin % FY 17 Outlook
Revenue reflects increased externally sourced railcar syndications
Margin % decrease due to higher volume of externally sourced railcar syndications, which typically have lower margins
Capital expenditures (including corporate) expected to be ~$15 million
Integration and growth of new Regulatory Services Group
2Q Business Conditions($ in millions) 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17Revenues $124.1 $75.9 $35.8 $28.6 $38.1
Gross Margin $18.1 $12.8 $12.7 $10.6 $12.9
Gross Margin % 14.6% 16.8% 35.5% 37.1% 33.8%
Operating Margin % 19.7% 10.9% 25.3% 25.8% 26.0%
Net Capital Expenditures ($37.6) ($0.8) $52.3 ($6.8) ($9.0)
Lease Fleet Utilization 95.4% 94.9% 91.0% 94.2% 93.8%
0%
10%
20%
30%
40%
50%
60%
70%
$-
$50
$100
$150
$200
$250
$300
$ in
Mill
ions
Revenue Gross Margin
14
GBW Railcar Services(1)
Quarterly Trends
Revenue FY 17 Outlook
Revenue and operating results reflect challenging operating environment, especially in general repair operations
Near-term demand headwinds expected to persist in the near term
2Q Business Conditions
($ in millions) 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17
Revenues $97.7 $95.7 $84.1 $70.3 $64.2
Earnings (loss) from operations $3.6 $3.0 ($0.5) ($4.6) ($6.9)
Total assets $247.7 $255.4 $247.6 $238.3 $227.2
(1)GBW Railcar Services reflected in the “Earnings from Unconsolidated Affiliates” line on the income statement
$-
$100
$200
$300
$400
2015 2016 LTM 2/28/17
$ in
mill
ions
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Quarterly Adjusted EBITDA Reconciliation
Supplemental DisclosureReconciliation of Net Earnings to Adjusted EBITDA(In millions, unaudited)
Quarter Ending
Feb. 29, 2016
May 31, 2016
Aug. 31, 2016
Nov. 30, 2016
Feb. 28, 2017
Net earnings $66.2 $59.5 $60.4 $48.0 $49.0
Interest and foreign exchange 1.4 3.7 2.9 1.7 5.7
Income tax expense 25.7 22.5 19.4 20.4 24.8
Depreciation and amortization 14.9 13.8 21.7 15.6 15.0
Adjusted EBITDA $108.2 $99.5 $104.4 $85.7 $94.5
See slide 19 for definition of Adjusted EBITDA
17
Annual Adjusted EBITDA Reconciliation
Supplemental DisclosureReconciliation of Net Earnings (loss) to Adjusted EBITDA(In millions, unaudited)
Year Ending August 31,
2010 2011 2012 2013 2014 2015 2016
Net earnings (loss) $8.3 $8.4 $61.2 ($5.4) $149.8 $265.3 $284.8
Interest and foreign exchange 45.2 37.0 24.8 22.2 18.7 11.2 13.5
Income tax expense (benefit) (0.9) 3.5 32.4 25.1 72.4 112.2 112.3
Depreciation and amortization 37.5 38.3 42.4 41.4 40.4 45.1 63.4
Goodwill impairment - - - 76.9 - - -
Gain on contribution to GBW - - - - (29.0) - -
Loss (gain) on debt extinguishment
(2.1) 15.7 - - - - -
Special items (11.9) - - 2.7 1.5 - -
Adjusted EBITDA $76.1 $102.9 $160.8 $162.9 $253.8 $433.8 $474.0
See slide 19 for definition of Adjusted EBITDA
18
Annual Adjusted EPS Reconciliation
Year Ending August 31,
2010 2011 2012 2013 2014 2015 2016Net earnings (loss) attributable to Greenbrier $4.3 $6.5 $58.7 ($11.1) $111.9 $192.8 $183.2
Goodwill impairment (after-tax) - - - 71.8 - - -
Gain on contribution to GBW (after-tax)
- - - - (13.6) - -
Loss (gain) on debt extinguishment (after-tax)
(1.3) 9.4 - - - - -
Special items (after-tax) (11.9) - - 1.8 1.0 - -
Adjusted Net Earnings (loss) ($8.9) $15.9 $58.7 $62.5 $99.3 $192.8 $183.2
Weighted average diluted shares outstanding
20.2 26.5 33.7 34.2 34.2 33.3 32.5
Adjusted EPS ($0.44) $0.60 $1.91 $2.00 $3.07 $5.93 $5.73
Supplemental DisclosureReconciliation of Net Earnings (loss) Attributable to Greenbrier to Adjusted Net Earnings (loss)(In millions, except per share amounts, unaudited)
See slide 19 for definition of Adjusted EPS
19
Adjusted Financial Metric Definition
Adjusted Net Earnings (loss), Adjusted EBITDA, and Adjusted EPS are not financial measures under generally accepted accounting principles (GAAP). We define Adjusted Net Earnings (loss) as Net Earnings (loss) attributable to Greenbrier before goodwill impairment (after-tax), gain on contribution to GBW (after-tax), loss (gain) on debt extinguishment (after-tax) and special items (after-tax). We define Adjusted EBITDA as Net earnings (loss) before interest and foreign exchange, Income tax expense (benefit), goodwill impairment, gain on contribution to GBW, loss (gain) on debt extinguishment, special items, Depreciation and amortization. We define Adjusted EPS as Adjusted Net Earnings (loss) before interest and debt issuance costs (net of tax) on convertible notes divided by Weighted average diluted shares outstanding. We define Return on Invested Capital as Earnings from Operations less Cash paid for Income taxes, which is then annualized and divided by the sum of average Revolving notes plus Notes payable plus Total equity less Cash in excess of $40 million operating cash, which is averaged based on the quarterly ending balances. Adjusted Net Earnings (loss), Adjusted EBITDA, and Adjusted EPS are performance measurement tools used by rail supply companies and Greenbrier. 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 Adjusted EBITDA assists investors in understanding our underlying core operating performance and improves the period to period comparability. You should not consider Adjusted Net Earnings (loss), Adjusted EBITDA, and Adjusted EPS in isolation or as a substitute for other financial statement data determined in accordance with GAAP. In addition, because Adjusted Net Earnings (loss), Adjusted EBITDA and Adjusted EPS are not measures of financial performance under GAAP and are susceptible to varying calculations, these measures presented may differ from and may not be comparable to similarly titled measures used by other companies.
Investor Contact: [email protected]: www.gbrx.com
NYSE: GBX2Q17 Earnings Slides &
Supplemental Information