NYSE: GBX
May 2015
Investor Contact: Investor.Relations@gbrx.com Website: www.gbrx.com
NYSE: GBX May 2015 Investor Contact: Investor.Relations@gbrx.com - - PowerPoint PPT Presentation
NYSE: GBX May 2015 Investor Contact: Investor.Relations@gbrx.com Website: www.gbrx.com Safe Harbor Statement UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: This presentation may contain forward-looking statements, including
Investor Contact: Investor.Relations@gbrx.com Website: www.gbrx.com
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
“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 in 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 are not indicative of our financial results; uncertainty or changes 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
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, inefficiencies associated with expansion or start-up of production lines or increased 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
insurance coverage; train derailments or other accidents or claims that could subject us 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 of whistleblower complaints; 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, 2014, 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
Asset-light model Owned fleet 8,300 units Managed Fleet 241,000 units
Three business units working together
Aftermarkets Leasing & Services Manufacturing Wheels & Parts – nine wheel service locations and four railcar part reconditioning locations GBW Railcar Services - 50/50 JV provides repair services across 34 locations Leading manufacturer of railcars in North America and Europe Leading domestic manufacturer
New railcar backlog of $4.78 billion Marine backlog of ~$80 million
1,000 1,500 2,000 2,500 1994 2014 $ millions
Historical Revenue
IPO IPO
Data as of 2/28/2015
Leasing & Services Aftermarkets - Wheels & Parts GBW Railcar JV
Manufacturing
Robust rail cycle driven by current business and industry trends Broadening product demand across cycles Changing tank car regulatory environment Provides customized solutions Transformational initiatives create growth platform
model
diversification
American aftermarket repair network
Diverse revenue and earnings stream Strong railcar backlog Positive financial trends and outlook Strategic initiatives to drive shareholder value
30 35 40 45 50 Millions
N.A. Freight Traffic
Source: FTR Associates – Rail Equipment Outlook (March 2015)
10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 100,000 2009 2010 2011 2012 2013 2014 2015F 2016F 2017F 2018F 2019F Units
North American Rail Car Deliveries
Shale oil and gas revolution drives early stages Changing tank car regulatory environment Broadening demand growth in:
Aging fleet Strong railroad balance sheets and capital expenditure budgets
Source: FTR Associates – Rail Equipment Outlook (March 2015)
Long-term average: ~50,000 units
Source: FTR Associates – Rail Equipment Outlook (March 2015)
Different car types have different cycles
10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 100,000 2011A 2012A 2013A 2014A 2015F 2016F 2017F 2018F 2019F
Covered hopper Boxcar Tanks Intermodal Flat cars (auto) Coal Other hoppers / gondolas
Long-term average: ~50,000 units
1.35 1.45 1.55 1.65 1.75 1.85 1.95 Millions
U.S. Rail Tonmiles
Source: FTR Associates – Rail Equipment Outlook (March 2015)
Wheel demand driven by stabilizing coal traffic, crude oil unit trains and intermodal traffic growth Increasing ton miles and equipment upgrades drive repair spending Approaching substantial tank car maintenance cycle Changing tank car regulatory environment
335,000 Total Tank Cars 272,000 DOT-111 Non-Pressurized 252,000 Pre-Petition 96,000 Non- Hazardous 58,000 Crude & Ethanol 23,000 Other Flammable 75,000 Other Hazardous 20,000 Petition 2,000 Non- Hazardous 15,000 Crude & Ethanol 3,000 Other Flammable 63,000 Pressurized
“Pre-Petition” represents tank cars ordered prior to October 2011 built to the long-established industry standard. “Petition” represents the industry standard voluntarily adopted by AAR, for cars ordered after October 2011.
Source: DOT NPRM June 2014, RSI, AAR
Pre-petition cars reflect the current government tank car standards (adopted in 1971). Petition cars refer to the P-1577 standards that were adopted by AAR circular CPC-1232 for all cars ordered after October 1, 2011 (also known as “Good Faith” cars).
Tank Type Pre-Petition Petition Code DOT-111 CPC-1232 Effective Date (new cars) Nov-71 Oct-11 Max Gross Rail Load 263,000 286,000 Normalized Steel Heads & Shells No Yes Half-Inch Head Shields No Half or Full Height Head & Shell Thickness 7/16 inch 7/16 to 1/2 inch* Top Fittings Protection No Yes Half-Inch Ceramic Insulation No No Steel Jackets Some Some High Flow Pressure Relief Valve No Some Improved BOV Handle No No
*Depends on jacketing
Strong lease market as users seek flexibility Financial institutions seek yield and create opportunity for syndications and service contracts Trend of increasing private (“leasing/shipping companies”) railcar
Source: AAR – Railroad Equipment Outlook (August 2014)
52% 4% 44%
2005
Railroads TTX Private
39% 4% 57%
2014
Railroads TTX Private
Historical N.A. Railcar Fleet Ownership
13
Greenbrier is well-positioned to benefit from numerous tailwinds. Our diversified business model leaves Greenbrier relatively well-insulated from any major potential headwinds.
$749 $1,625 $102 $496 $92 $83
$0 $500 $1,000 $1,500 $2,000 $2,500
2006 2014
$ in millions (% of Total Revenue)
Leasing & Services WR&P Manufacturing
FY 2015 Guidance $2.6 – 2.7 billion
Greenbrier’s revenue has more than doubled since the prior new railcar delivery peak in 2006. $943 $2,204
(10%) (11%) (79%) (4%) (74%) (22%)
Backlog Units 5,300 15,400 10,700 14,400 31,500 46,000 In fiscal Q2, Greenbrier received orders for 10,100 railcar units valued at $1.09 billion. Year-to-date through February 28, 2015, Greenbrier has received orders for 24,200 units valued at $2.33 billion.
$420 $1,230 $1,200 $1,520 $3,330 $4,780 $79 $80 $112 $106 $106 $104
$- $20 $40 $60 $80 $100 $120 $- $1,000 $2,000 $3,000 $4,000 $5,000 $6,000
Average Sales Price/Unit ($ in thousands) Backlog Value ($ in millions)
Sixth Consecutive Quarter of Growth - Provides Strong Visibility
GBX, 14% ARI, 13%
RAIL, 8%
TRN, 48%
Others, 17%
0% 20% 40% 60% 80% 100%
100% = 79,038 units
Source: RSI ARCI, public filings
GBX, 30% ARI, 8% TRN, 41% Others, 21% 0% 20% 40% 60% 80% 100%
100% = 138,856 units
* RAIL has not reported and is included in “Others”
Covered Hoppers, 44% Tank Cars, 38%
Flat Cars, 3% Gondolas, 3% Open Hopper, 1% Intermodal, 8%
0% 20% 40% 60% 80% 100%
100% = 138,856 units
Source: RSI ARCI, public filings
Covered Hoppers, 33% Tank Cars, 46%
Flat Cars, 2% Gondolas, 6% Open Hopper, 5% Intermodal, 8%
0% 20% 40% 60% 80% 100%
100% = 79,038 units
$3.07 $(1.00) $- $1.00 $2.00 $3.00 $4.00 2009 2010 2011 2012 2013 2014 2015
Adjusted EPS(1)
16,200 0.0 4.0 8.0 12.0 16.0 20.0 2009 2010 2011 2012 2013 2014 2015
Deliveries (Units)
$2,204 $- $400 $800 $1,200 $1,600 $2,000 $2,400 2009 2010 2011 2012 2013 2014 2015
Revenue
(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
FY 2015 Revenue = ~ $2.6 -2.7 billion FY 2015 Revenue = ~ $2.6 -2.7 billion Deliveries = ~21,500 units Deliveries = ~21,500 units FY 2015 Guidance = $5.65 – $5.95 FY 2015 Guidance = $5.65 – $5.95 We expect the positive trend to continue in FY 2015 We expect the positive trend to continue in FY 2015
7.7x 5.5x 4.6x 2.7x 2.0x 1.1x 0.0x 2.0x 4.0x 6.0x 8.0x 2009 2010 2011 2012 2013 2014 2015
Net Debt(2) to Adj. EBITDA(1)
$105 $105 $192 $299 $304 $321 $243 $76 $99 $50 $54 $97 $185 $146 $181 $204 $242 $353 $401 $506 $388
2009 2010 2011 2012 2013 2014 2/28/2015
7.7x 5.5x 4.6x 2.7x 2.0x 1.1x 1.2x 0.0x 2.0x 4.0x 6.0x 8.0x
2009 2010 2011 2012 2013 2014 LTM 2/28/2015
Net Funded Debt(2) / Adjusted EBITDA(1) Liquidity Summary ($ in millions)
(1) Adjusted EBITDA exclude gain on contribution to GBW, restructuring charges, goodwill impairment and other special items (2) Net debt is defined as funded debt less cash
Gross Margin Enhancement Aggregate gross margin of at least 20% by the second half of FY 2016 Capital Efficiency Return on Invested Capital (“ROIC”) of at least 25% by the second half of FY 2016
11.5% 16.3% 17.2% 17.8% 19.9% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% Q2 14 Q3 14 Q4 14 Q1 15 Q2 15
Aggregate Gross Margin
11.2% 27.1% 19.8% 11.0% 27.3% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% Q2 14 Q3 14 Q4 14 Q1 15 Q2 15
Return on Invested Capital
Strong balance sheet and positive free cash flow trend
Positive trends in average sales price and continued strength in new
Unique model that enhances financial performance across the cycle, with powerful cross selling opportunities Initiatives to improve gross margins and capital efficiency
15,200 26,400 31,500 41,200 46,000 2Q 14 3Q 14 4Q 14 1Q 15 2Q 15
Backlog
3,400 4,300 4,800 4,000 5,200 2Q 14 3Q 14 4Q 14 1Q 15 2Q 15
Total Deliveries
700 900 1,100 1,800 1,700 2Q 14 3Q 14 4Q 14 1Q 15 2Q 15
Syndicated Deliveries
Backlog 46,000 units valued at $4.78 billion
valued at $1.09 billion
about 15% of backlog
types including boxcars, medium covered hoppers, non-energy tank cars, intermodal and gondola cars
Delivery of 5,200 units
increased over 140% over the last year while overall deliveries have increased ~50%
$502.2 $593.3 $618.1 $495.1 $630.1 2Q 14 3Q 14 4Q 14 1Q 15 2Q 15
Revenue ($ millions)
$44.9 $78.0 $80.8 $67.2 $102.7 2Q 14 3Q 14 4Q 14 1Q 15 2Q 15
Adjusted EBITDA* ($ millions)
$0.51 $1.03 $1.03 $1.01 $1.57 2Q 14 3Q 14 4Q 14 1Q 15 2Q 15
Diluted EPS*
Growth in: Revenue to $630.1 million
Gross margin to 19.9%
and pricing, and improved operating efficiencies
Adjusted EBITDA to $102.7 million
Diluted EPS to $1.57
*Excludes Restructuring charges in FY14 and gain on contribution to GBW in 4Q FY14.
$80.3 $14.9 $54.2 $(53.8) $46.0 2Q 14 3Q 14 4Q 14 1Q 15 2Q 15
Operating Cash Flow(1) ($ millions)
$(4.6) $7.1 $33.5 $31.7 $24.8 2Q 14 3Q 14 4Q 14 1Q 15 2Q 15
Net Capital Expenditure & Invest. In
$254.2 $266.7 $273.3 $370.9 $386.4 2Q 14 3Q 14 4Q 14 1Q 15 2Q 15
Net Funded Debt ($ millions)
Positive Operating Cash Flow
increased WC needs associated with higher production and syndication volumes.
Board declares quarterly dividend of $0.15 per share and continued execution under $75 million share repurchase program
at a cost of $23.8 million or an average price of $49.23 / share
repurchase program
Net Funded Debt trended up reflecting working capital needs associated with higher production and lease syndication volumes, increased net capital expenditures, and continued return of capital to shareholders
(1)Excludes Restructuring charges in FY14 and gain on contribution
to GBW in 4Q FY14
(2)Investment in Unconsolidated Affiliates included to reflect GBW
Railcar JV investments
Customer orders railcar to buy and use We build railcar and deliver it to customer Revenue recognized in Manufacturing segment
Customer orders railcar to lease We build railcar and lease it Railcars held temporarily on balance sheet generating interim lease income for GBX
Balance Sheet
Services segment
Railcars aggregated and sold (“syndicated”) to multiple third party investors (non-recourse to GBX)
lease
segment
Long term Management fees earned from investors on railcars after syndication
Fleet Information
Units
2014 May 31, 2014
2014
2014
2015 Long term owned units (“Equipment on operating lease”) 7,300 6,900 6,800 6,600 6,400 Short term owned units (“Railcars held for syndication”) 1,100 1,400 1,800 1,900 1,900 Total owned fleet 8,400 8,300 8,600 8,500 8,300 Managed fleet (units) 233,000 235,000 238,000 238,000 241,000
Owned & Managed Fleet
Owned Equipment on operating lease ‘right- sized’ over last 2 years
with over $70 million of Deferred Taxes related to the Lease fleet
Managed fleet services include railcar remarketing, maintenance management, car hire accounting and various other services
months as Syndication volume increased
fleet
Lease Syndication Model
Targeting ~$800 million of Syndication volume in FY 2015 One of two channels to market Dwell time of rent producing railcars on balance sheet (“Railcars held for Syndication”) averages 3 months, as railcar leases are aggregated and sold in bundles to investors In addition to premium pricing above direct sales, creates stream of multi-year management fee income Expands customer universe beyond Greenbrier’s traditional base
Quarterly Trends Quarterly Trends Revenue and Gross Margin % Revenue and Gross Margin % FY 15 Outlook FY 15 Outlook
deliveries
mix and pricing, improved efficiencies, and weakened Peso
totaled approximately $80.0 million
syndication channel
approximately $95 million in FY 2015, primarily related to capacity projects in Mexico, enhanced vertical integration and efficiency enhancements. Capacity projects include doubling of tank car capacity and moving from a leased facility to a lower cost owned facility.
($ in millions)
2Q 14 3Q 14 4Q 14 1Q 15 2Q 15
Revenues $347.8 $425.6 $492.1 $379.9 $505.2 Gross Margin $41.2 $73.8 $87.9 $63.9 $102.0 Gross Margin % 11.8% 17.3% 17.9% 16.8% 20.2% Operating Margin % 8.7% 14.4% 14.8% 13.7% 18.0% Capital Expenditures $6.2 $14.7 $31.2 $21.5 $19.5 New Railcar Backlog $1,540 $2,750 $3,330 $4,200 $4,780 New Railcar Backlog (units) 15,200 26,400 31,500 41,200 46,000 Deliveries (units) 3,400 4,300 4,800 4,000 5,200
2Q Business Conditions 2Q Business Conditions
0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% $- $0.2 $0.4 $0.6 $0.8 $1.0 $1.2 $1.4 $1.6 $1.8 $2.0
2010 2011 2012 2013 2014 LTM 2/28/15
$ in Millions Revenue Gross Margin
Quarterly Trends Quarterly Trends Revenue and Gross Margin %(1) Revenue and Gross Margin %(1) FY 15 Outlook FY 15 Outlook
product mix
scrap steel pricing; improvement expected in second half of FY 2015
approximately $10 million in FY 2015
performance
2Q Business Conditions 2Q Business Conditions
* Excluding gain on contribution to GBW, operating margin is 2.7% for Q4 FY 2014
($ in millions)
2Q 14 3Q 14 4Q 14 1Q 15 2Q 15
Revenues
$136.5 $140.7 $105.0 $86.6 $102.6
Gross Margin
$8.6 $10.8 $6.8 $9.8 $9.9
Gross Margin %
6.3% 7.7% 6.5% 11.3% 9.6%
Operating Margin %
2.6% 3.9% 30.3%* 9.2% 7.8%
Capital Expenditures
$1.7 $2.5 $3.0 $1.8 $1.7
0% 2% 4% 6% 8% 10% 12% $- $100 $200 $300 $400 $500 $600
2010 2011 2012 2013 2014 LTM 2/28/15
$ in Thousands Revenue Gross Margin
(1) Historical results include legacy Repair operations
which were contributed to GBW Railcar JV in July 2014
Quarterly Trends Revenue and Gross Margin % FY 15 Outlook
third party produced railcars
margin syndication of third party produced railcars in Q1 and increased interim rents driven by increased syndication activity
second half FY 2015
managed assets associated with syndication and management services activity
approximately $25 million in FY 2015 (Gross capital expenditures of $35 million, including corporate expenditures, offset by equipment proceeds of approximately $10 million)
2Q Business Conditions
($ in millions)
2Q 14 3Q 14 4Q 14 1Q 15 2Q 15
Revenues
$17.9 $27.0 $21.0 $28.5 $22.3
Gross Margin
$8.1 $12.2 $11.3 $14.4 $13.4
Gross Margin %
45.0% 45.1% 53.7% 50.6% 60.3%
Operating Margin %
53.8% 53.9% 38.9% 38.8% 44.1%
Net Capital Expenditures ($12.5)
($10.0) ($13.3) $5.9 $0.5
Lease Fleet Utilization
97.6% 97.9% 98.2% 98.1% 99.5%
38% 40% 42% 44% 46% 48% 50% 52% $- $20 $40 $60 $80 $100
2010 2011 2012 2013 2014 LTM 2/28/15
$ in Thousands Revenue Gross Margin
Supplemental Disclosure Reconciliation of Net Earnings to Adjusted EBITDA
(In millions, unaudited)
Quarter Ending
2013
2014 May 31, 2014
2014
2014
2015 Net earnings $23.0 $20.5 $46.1 $60.1 $36.0 $61.0 Interest and foreign exchange 4.7 4.1 5.4 4.4 3.1 1.9 Income tax expense 10.5 9.9 16.3 35.7 16.1 29.4 Depreciation and amortization 10.9 9.9 10.1 9.6 12.0 10.4 Gain on contribution to GBW
0.9 0.5 0.1
$50.0 $44.9 $78.0 $80.8 $67.2 $102.7
See slide 39 for definition of Adjusted EBITDA
Supplemental Disclosure Reconciliation of Net Earnings (loss) to Adjusted EBITDA
(In millions, unaudited)
Year Ending August 31, 2009 2010 2011 2012 2013 2014 Net earnings (loss) ($57.9) $8.3 $8.4 $61.2 ($5.4) $149.8 Interest and foreign exchange 45.9 45.2 37.0 24.8 22.2 18.7 Income tax expense (benefit) (16.9) (0.9) 3.5 32.4 25.1 72.4 Depreciation and amortization 37.6 37.5 38.3 42.4 41.4 40.4 Goodwill impairment 55.7
Loss (gain) on debt extinguishment
15.7
1.5 Adjusted EBITDA $64.4 $76.1 $102.9 $160.8 $162.9 $253.8
See slide 39 for definition of Adjusted EBITDA
Year Ending August 31, 2009 2010 2011 2012 2013 2014 Net earnings (loss) attributable to Greenbrier ($56.4) $4.3 $6.5 $58.7 ($11.1) $111.9 Goodwill impairment 51.0
Loss (gain) on debt extinguishment (after-tax)
9.4
1.0 Adjusted Net Earnings (loss) ($5.4) ($8.9) $15.9 $58.7 $62.5 $99.3 Weighted average diluted shares outstanding 16.8 20.2 26.5 33.7 34.2 34.2 Adjusted EPS ($0.32) ($0.44) $0.60 $1.91 $2.00 $3.07
See slide 39 for definition of Adjusted EPS
Supplemental Disclosure
Reconciliation of Net Earnings (loss) Attributable to Greenbrier to Net Earnings Excluding Goodwill Impairment, Gain on Contribution to GBW, Loss (gain) on Debt extinguishment and Special Items
(In millions, except per share amounts, unaudited)
Adjusted Net Earnings (loss), Adjusted EBITDA, Return on Invested Capital 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
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. 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
Investor Contact: Investor.Relations@gbrx.com Website: www.gbrx.com