Greenbrier Companies Reports First Quarter Results

LAKE OSWEGO, Ore., Jan. 8 /PRNewswire-FirstCall/ -- The Greenbrier Companies (NYSE: GBX) , a leading supplier of transportation equipment and services to the railroad industry, today reported financial results for its fiscal first quarter ended November 30, 2007.

    Highlights

    --  During the quarter Greenbrier entered the tank car market in North
        America through a multi-year order from GE Equipment Services for
        11,900 covered hopper and tank cars. The railcars will be delivered
        over an eight-year period commencing in the third calendar quarter of
        2008.
    --  Revenues increased 16% to $286 million, due principally to
        acquisition-related growth in the Company's refurbishment & parts
        segment.
    --  Net earnings for the quarter, were $2.6 million, or $.16 per diluted
        share, compared to $1.9 million, or $.12 per diluted share, for the
        same period in 2007.
    --  Results for the quarter were negatively impacted by $.16 per diluted
        share for: 1) special charges and other costs related to the Company's
        Canadian facility, which is shut down and in the process of being
        liquidated ($.11); and 2) foreign exchange losses ($.05).  In
        addition, the tax rate for the quarter was 57.5%, which compares to an
        anticipated rate for the remainder of the year of around 46%.
    --  EBITDA before special charges for the quarter was $24.5 million, or
        8.6% of revenues.
    --  New railcar manufacturing backlog grew to 22,200 units, valued at
        $1.73 billion as of November 30, 2007, compared to 12,100 units valued
        at $830 million as of August 31, 2007.
    --  New marine barge backlog was $102 million at November 30, 2007,
        compared to $110 million at August 31, 2007.

First Quarter Results:

Revenues for the 2008 fiscal first quarter were $286.4 million, compared to $246.6 million in the prior year's first quarter. EBITDA before special charges was $24.5 million, or 8.6% of revenues for the quarter, compared to $19.6 million, or 7.9% of revenues in the prior year's first quarter. Net earnings were $2.6 million, or $.16 per diluted share for the quarter, compared to net earnings of $1.9 million, or $.12 per diluted share for the same period in 2007.

New railcar manufacturing backlog was 22,200 units valued at $1.73 billion at November 30, 2007, compared to 12,100 units valued at $830 million at August 31, 2007. Based on current production plans, approximately 4,500 units in the November 30, 2007 backlog are scheduled for delivery during the balance of fiscal 2008. Marine backlog was $102 million as of November 30, 2007, compared to $110 million as of August 31, 2007.

William A. Furman, president and chief executive officer, said, "While we achieved year-over-year growth, we experienced an expected seasonal business slowdown on a sequential basis. Similar to last year, we anticipate improvement in our financial results as the year progresses with earnings more heavily weighted to the second half of the year. This anticipated earnings improvement is due principally to a more favorable product mix, cost reduction initiatives, and lower overall tax rate."

Results for the quarter were adversely affected by several factors, the aggregate affect of which was $.16 per diluted share. These factors were:

    --  Special charges and other costs related to our Canadian manufacturing
        facility, TrentonWorks, impacted EPS by $.11.  This facility is shut
        down and in the process of being liquidated, with completion expected
        by early in the third quarter of 2008.
    --  Foreign exchange losses (excluding those incurred at TrentonWorks and
        included above) impacted EPS by $.05.

In addition, the tax rate for the quarter was 57.5%, compared to an anticipated effective tax rate for the remainder of the year of around 46%, as the rate for the first quarter was impacted by adjustments to tax estimates. The 46% effective tax rate for the balance of 2008 compares to a 40% effective rate in 2007. This change in the 2008 effective rate is due to the geographical mix of pre-tax earnings and losses, minimum tax requirements in certain local jurisdictions and operating losses for certain operations with no related accrual of tax benefit.

Furman added, "A weaker overall economy, soft railcar loadings, and market saturation of certain freight car types are all factors contributing to caution on the part of our customers. As a result, we are experiencing an increasingly competitive new railcar market environment in North America. All new railcar builders in North America are feeling these effects, placing pressure on deliveries and margins. Our large backlog, efficient leasing capability, new railcar product line expansion, and stronger competitive footprint will keep us well positioned and very competitive in the new railcar marketplace."

First quarter revenues for the manufacturing segment were $159.2 million, down $9.5 million from $168.7 million in the first quarter of 2007. New railcar deliveries for the quarter were 1,900 units compared to 2,000 units in the prior comparable period. Revenues per unit decreased due to a change in product mix.

Manufacturing gross margin for the quarter was 5.4% of revenues, compared to 4.2% of revenues in the first quarter of 2007. The increase in margin was principally due to the prior period including negative margin and overhead costs from Greenbrier's Canadian facility that was permanently closed during the third quarter of 2007.

The refurbishment & parts segment includes results for 35 shop locations across North America. Revenues for this segment were $103.9 million, double the $51.2 million of revenue for the prior comparable period. This revenue growth was principally the result of the Meridian Rail Services acquisition which occurred late in the first quarter of 2007. Margins during the quarter for this segment were 15.3% of revenues, compared to 12.2% in the prior comparable period, as the current period included a more favorable product mix.

The leasing & services segment includes results from the Company's owned lease fleet of approximately 9,000 railcars and from fleet management services provided for approximately 138,000 railcars. Revenues for this segment were $23.3 million, compared to $26.7 million in the same quarter last year. Leasing & services margin was 48.8% of revenues, compared to 59.5% of revenues in the same quarter last year. Leasing & services revenue and margin declined principally due to lower gains on equipment sales, interim rent and interest income, all of which have no associated cost of revenue.

Business Outlook:

Furman continued, "The strategic steps taken in 2007 to improve our competitive position and build a stronger company that can perform more consistently through various economic cycles have already helped to stabilize performance and should serve us well in 2008 and beyond. Our competitive position in new railcar manufacturing in North America has improved and we remain focused on continuous improvement. We anticipate that our less cyclical business units, which include marine barge manufacturing, railcar repair & refurbishment, leasing, management services, and European new railcar manufacturing, should approach $800 million of revenues in 2008 and provide a source of stability to cash flow and earnings. We continue to seek opportunities to grow: marine barge, repair, refurbishment and parts; leasing; and management services."

Mark Rittenbaum, senior vice president & treasurer, said, "During the past quarter we have focused on initiatives which will provide a strong operating platform in 2008 and beyond. These initiatives include 1) working with major customers to solidify our new railcar production plans in 2008; 2) accelerating the timeline for liquidation of our loss-producing Canadian facility, which we intend to complete over the next three to four months; 3) focusing on cost reductions; 4) ensuring the successful start up of our new Greenbrier-GIMSA manufacturing operation in Mexico; and 5) improving operating results in Europe."

"We are confident these initiatives, along with a more favorable product mix, seasonally higher refurbishment & parts revenues, and anticipated lower overall tax rate will produce stronger financial results as the year progresses, particularly in the second half of 2008. However, we do not expect that earnings before special charges (net of tax) in 2008 will meet the $2.22 per diluted share realized in 2007, as we anticipate lower overall new railcar deliveries, lower gains on equipment sales, and a higher tax rate than in 2007."

Greenbrier (http://www.gbrx.com), headquartered in Lake Oswego, Oregon, is a leading supplier of transportation equipment and services to the railroad industry. The Company builds new railroad freight cars in its three 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 35 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 9,000 railcars, and performs management services for approximately 138,000 railcars.

"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: This release may contain forward-looking statements. Greenbrier uses words such as "anticipate," "believe," "plan," "expect," "future," "intend" and similar expressions to identify forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, fluctuations in demand for newly manufactured railcars or failure to obtain orders as anticipated in developing forecasts; loss of one or more significant customers; 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 price increases 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 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" on page 10 of Part I , Item 1a and "Forward Looking Statements" on page 28 of Part II of our Annual Report on Form 10-K for the fiscal year ended August 31, 2007. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's opinions only as of the date hereof. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements.

EBITDA is not a financial measure under GAAP. We define EBITDA as earnings from operations before special charges, interest and foreign exchange, taxes, depreciation and amortization. We consider net cash provided by operating activities to be the most directly comparable GAAP financial measure. EBITDA is a liquidity measurement tool commonly used by rail supply companies and we use EBITDA in that fashion. You should not consider EBITDA in isolation or as a substitute for cash flow from operations or other cash flow statement data determined in accordance with GAAP. In addition, because EBITDA is not a measure of financial performance under GAAP and is susceptible to varying calculations, the EBITDA measure presented may differ from and may not be comparable to similarly titled measures used by other companies.

The Greenbrier Companies will host a teleconference to discuss first quarter fiscal 2008 results. Teleconference details are as follows:

    Tuesday, January 8, 2008
    7:30 am Pacific Standard Time
    Phone #: 630-395-0143, Password: "Greenbrier"

Webcast Real-time Audio Access: ("Newsroom" at http://www.gbrx.com)

Please access the website 10 minutes prior to the start time. Following the call, a replay will be available on the same website. Telephone replay will be available through January 26, 2008 at 203-369-1940.

    THE GREENBRIER COMPANIES, INC.
    Condensed Consolidated Balance Sheets
    (In thousands, unaudited)

                                                     November 30,   August 31,
                                                         2007          2007
    Assets
      Cash and cash equivalents                         $6,685       $20,808
      Restricted cash                                    2,910         2,693
      Accounts receivable                              137,839       157,038
      Inventories                                      201,952       194,883
      Assets held for sale                              44,745        42,903
      Equipment on operating leases                    306,501       294,326
      Investment in direct finance leases                8,950         9,040
      Property, plant and equipment                    114,894       112,813
      Goodwill                                         169,001       168,987
      Intangibles and other assets                      68,833        69,258

                                                    $1,062,310    $1,072,749


    Liabilities and Stockholders' Equity
      Revolving notes                                  $52,598       $39,568
      Accounts payable and accrued liabilities         217,949       239,713
      Participation                                        617         4,355
      Deferred income taxes                             64,102        61,410
      Deferred revenue                                  13,447        18,052
      Notes payable                                    459,927       460,915

      Minority interest                                  5,643         5,146

        Commitments and contingencies (Note 12)

      Stockholders' equity:
      Preferred stock - without par value;
       25,000 shares authorized; none outstanding            -             -
      Common stock - without par value; 50,000
       shares authorized; 16,179 and 16,169 shares
       outstanding at November 30, 2007 and
       August 31, 2007                                      16            16
      Additional paid-in capital                        79,166        78,332
      Retained earnings                                166,618       165,408
      Accumulated other comprehensive loss               2,227          (166)
                                                       248,027       243,590

                                                    $1,062,310    $1,072,749



    THE GREENBRIER COMPANIES, INC.
    Condensed Consolidated Statements of Operations
    (In thousands, except per share amounts, unaudited)

                                                       Three Months Ended
                                                           November 30,
                                                        2007         2006
    Revenue
      Manufacturing                                   $159,194     $168,692
      Refurbishment & parts                            103,889       51,236
      Leasing & services                                23,295       26,695
                                                       286,378      246,623

    Cost of revenue
      Manufacturing                                    150,565      161,688
      Refurbishment & parts                             87,951       45,007
      Leasing & services                                11,925       10,811
                                                       250,441      217,506

    Margin                                              35,937       29,117

    Other costs
      Selling and administrative expense                20,184       17,124
      Interest and foreign exchange                     10,419        9,641
      Special charges                                      189            -
                                                        30,792       26,765
    Earnings before income taxes, minority interest
     and equity in unconsolidated subsidiaries           5,145        2,352

    Income tax expense                                  (2,956)        (580)
    Earnings before minority interest and equity
     in unconsolidated subsidiaries                      2,189        1,772

    Minority interest                                      375           (2)
    Equity in earnings of unconsolidated subsidiaries       78          100

    Net earnings                                        $2,642       $1,870

    Basic earnings per common share                      $0.16        $0.12

    Diluted earnings per common share                    $0.16        $0.12

    Weighted average common shares:
      Basic                                             16,172       15,961
      Diluted                                           16,198       16,010



    THE GREENBRIER COMPANIES, INC.
    Condensed Consolidated Statements of Cash Flows
    (In thousands, unaudited)

                                                        Three Months Ended
                                                            November 30
                                                         2007         2006
    Cash flows from operating activities:
      Net earnings                                      $2,642       $1,870
      Adjustments to reconcile net earnings to net
       cash used in operating activities:
         Deferred income taxes                           2,692          303
         Depreciation and amortization                   8,256        7,526
         Gain on sales of equipment                       (780)      (3,222)
         Special charges                                   189            -
         Other                                            (242)          40
         Decrease (increase) in assets
          excluding acquisitions:
           Accounts receivable                          23,564       (8,029)
           Inventories                                    (232)      (1,379)
           Assets held for sale                         (8,501)     (15,342)
           Other                                           503          351
         Increase (decrease) in liabilities
          excluding acquisitions:
           Accounts payable and accrued liabilities    (27,005)     (17,547)
           Participation                                (3,738)         396
           Deferred revenue                             (6,118)      (6,906)
      Net cash used in operating activities             (8,770)     (41,939)

    Cash flows from investing activities:
      Acquisitions, net of cash acquired                     -     (264,470)
      Principal payments received under
       direct finance leases                                88          229
      Proceeds from sales of equipment                   1,422       20,833
      Investment in and advances to unconsolidated         176          137
       joint venture
      Increase (decrease) in restricted cash               140         (436)
      Capital expenditures                             (14,475)     (30,458)
      Net cash used in investing activities            (12,649)    (274,165)

    Cash flows from financing activities:
      Changes in revolving notes                         6,677      186,608
      Proceeds from issuance of notes payable                -          (69)
      Repayments of notes payable                       (1,331)        (931)
      Repayment of subordinated debt                         -         (821)
      Proceeds from minority interest                      600        1,200
      Stock options exercised and
       restricted stock awards                             783          877
      Excess tax benefit of stock options exercised         51          869
      Net cash provided by financing activities          6,780      187,733

      Effect of exchange rate change                       516         (164)
    Decrease in cash and cash
      equivalents                                      (14,123)    (128,535)

    Cash and cash equivalents
      Beginning of period                               20,808      142,894

      End of period                                     $6,685      $14,359



    THE GREENBRIER COMPANIES, INC.
    Supplemental Disclosure
    Reconciliation of Net Cash Provided by Operating Activities to EBITDA (1)
    (In thousands, unaudited)

                                                         Three Months Ended
                                                            November 30
                                                         2007          2006

    Net cash used in operating activities              $(8,770)     $(41,939)
    Changes in working capital                          21,527        48,456
    Deferred income taxes                               (2,692)         (303)

    Gain on sales of equipment                             780         3,222
    Other                                                  242           (40)
    Income tax expense                                   2,956           580
    Interest and foreign exchange                       10,419         9,641

    EBITDA from operations before special charges      $24,462       $19,617

    (1) "EBITDA" (earnings from operations before special charges, interest
         and foreign exchange, taxes, depreciation and amortization) is a
         useful liquidity measurement tool commonly used by rail supply
         companies and Greenbrier.  It should not be considered in isolation
         or as a substitute for cash flows from operating activities or cash
         flow statement data prepared in accordance with generally accepted
         accounting principles.