Greenbrier announces enhancements to Greenbrier GIMSA joint venture agreement; reports progress on $1 billion liquidity target

The Greenbrier Companies, Inc., a leading international supplier of equipment and services to global freight transportation markets, today announced that it has amended its 50/50 joint venture agreement with Grupo Industrial Monclova, S.A. De C.V. (GIMSA), its manufacturing partner at Greenbrier GIMSA facilities in Monclova, Mexico. This and other measures will help Greenbrier achieve its goal of $1 billion in total liquidity.

William A. Furman, Chairman & CEO, commented, "Greenbrier is successfully executing the dual priorities of protecting the safety and health of employees and preserving the economic well-being of our enterprise in this challenging environment.  We continue to improve our financial liquidity, including the temporary restructuring of a key partnership at our railcar manufacturing joint venture in Mexico in a manner beneficial to both partners. Greenbrier has increased borrowing capacity and liquidity by almost $200 million since the end of its second quarter on February 29, 2020. We continue to reduce operating expenses and capital outflows, while reducing selling and administrative and other non-essential expenses.  Operations continue under national and local government "Essential Business" designations at all Greenbrier global locations in North America, Europe and South America."
Greenbrier GIMSA Joint Venture Enhancements
The new agreement with our joint venture partner is beneficial to both parties and ensures Greenbrier GIMSA continues as a North American leader in freight railcar manufacturing.  Under the new agreement, both partners will receive additional revenue and dividends for a 12-month period, based on Greenbrier GIMSA revenue beginning March 1, 2020 and ending February 28, 2021. Greenbrier estimates these changes to be accretive to its earnings by approximately $0.40 per share, with $0.25 per share coming in its fiscal 2020 second half.  
Liquidity Update and $1 Billion Target
In its fiscal second quarter earnings release, Greenbrier stated that it had initiated a range of proactive responses to address conditions in the rail equipment industry and the impact of the COVID-19 pandemic in order to, among other things, increase the company's financial liquidity, comprised of cash and borrowing availability, from $620 million to $1 billion. As part of this effort, Greenbrier improved financial liquidity during the first two months of the fiscal third quarter by generating $170 million in cash flow.  
Greenbrier's stronger financial liquidity has also been achieved through a combination of expanded borrowing capacity and spending reductions.  Greenbrier has reduced capital expenditures by $45 million in the second half of fiscal 2020 and is targeting another $40 million reduction in fiscal 2021. Annualized reductions in selling & administrative expense of over $30 million are expected. Greenbrier's business units are targeting $65 million in annual overhead reductions. Greenbrier has broadened its domestic borrowing base while also working to increase borrowing capabilities in Europe and Mexico. Greenbrier currently has credit lines globally of $700 million, of which $382 million is drawn down and is liquid.  Finally, a deferral of employer payroll taxes as permitted under the CARES Act will generate at least $9 million until the deferment period culminates at the end of calendar 2020.  The combination of the increase in financial liquidity and spending reductions as outlined above total approximately $1 billion compared to February 29, 2020 liquidity of $620 million, positioning Greenbrier to successfully navigate the current crisis and emerge stronger.