Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

Form 10-Q

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

for the quarterly period ended May 31, 2014

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

for the transition period from                      to                     

Commission File No. 1-13146

 

 

THE GREENBRIER COMPANIES, INC.

(Exact name of registrant as specified in its charter)

 

Oregon   93-0816972

(State of

Incorporation)

 

(I.R.S. Employer

Identification No.)

One Centerpointe Drive, Suite 200, Lake Oswego, OR   97035
(Address of principal executive offices)   (Zip Code)

(503) 684-7000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer   ¨    Accelerated filer   x
Non-accelerated filer   ¨    Smaller reporting company   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)     Yes  ¨    No  x

The number of shares of the registrant’s common stock, without par value, outstanding on June 26, 2014 was 27,485,046 shares.


THE GREENBRIER COMPANIES, INC.

 

Forward-Looking Statements

From time to time, The Greenbrier Companies, Inc. and its subsidiaries (Greenbrier or the Company) or their representatives have made or may make forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including, without limitation, statements as to expectations, beliefs and strategies regarding the future. Such forward-looking statements may be included in, but not limited to, press releases, oral statements made with the approval of an authorized executive officer or in various filings made by us with the Securities and Exchange Commission, including this filing on Form 10-Q. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. These forward-looking statements rely on a number of assumptions concerning future events and include statements relating to:

 

   

availability of financing sources and borrowing base for working capital, other business development activities, capital spending and leased railcars for syndication (sale of railcars with lease attached);

 

   

ability to renew, maintain or obtain sufficient credit facilities and financial guarantees on acceptable terms;

 

   

ability to utilize beneficial tax strategies;

 

   

ability to grow our businesses;

 

   

ability to obtain lease and sales contracts which provide adequate protection against changes in interest rates and increased costs of materials and components;

 

   

ability to obtain adequate insurance coverage at acceptable rates;

 

   

ability to obtain adequate certification and licensing of products; and

 

   

short-term and long-term revenue and earnings effects of the above items.

The following factors, among others, could cause actual results or outcomes to differ materially from the forward-looking statements:

 

   

fluctuations in demand for newly manufactured railcars or marine barges;

 

   

fluctuations in demand for wheels, repair & parts;

 

   

delays in receipt of orders, risks that contracts may be canceled during their term or not renewed and that customers may not purchase the amount of products or services under the contracts as anticipated;

 

   

ability to maintain sufficient availability of credit facilities and to maintain compliance with or to obtain appropriate amendments to covenants under various credit agreements;

 

   

domestic and global economic conditions including such matters as embargoes or quotas;

 

   

U.S., Mexican and other global political or security conditions including such matters as terrorism, war, civil disruption and crime;

 

   

growth or reduction in the surface transportation industry;

 

   

ability to maintain good relationships with our labor force, third party labor providers and collective bargaining units representing our direct and indirect labor force;

 

   

steel and specialty component price fluctuations and availability, scrap surcharges, steel scrap prices and other commodity price fluctuations and availability and their impact on product demand and margin;

 

   

delay or failure of acquired businesses or joint ventures, assets, start-up operations, or new products or services to compete successfully;

 

   

changes in product mix and the mix of revenue levels among reporting segments;

 

   

labor disputes, energy shortages or operating difficulties that might disrupt operations or the flow of cargo;

 

   

production difficulties and product delivery delays as a result of, among other matters, inefficiencies associated with expansion or the start-up of production lines and new facilities or increased production rates, changing technologies, transfer of production between facilities or non-performance of alliance partners, subcontractors or suppliers;

 

   

interruption of our manufacturing operations as a result of lease termination or expiration;

 

   

ability to renew or replace expiring customer contracts on satisfactory terms;

 

   

ability to obtain and execute suitable contracts for leased railcars for syndication;

 

2


THE GREENBRIER COMPANIES, INC.

 

   

lower than anticipated lease renewal rates, earnings on utilization based leases or residual values for leased equipment;

 

   

discovery of defects in railcars or services resulting in increased warranty costs or litigation;

 

   

physical damage or product or service liability claims that exceed our insurance coverage;

 

   

commencement of and ultimate resolution or outcome of pending or future litigation and investigations;

 

   

natural disasters or severe weather patterns that may affect either us, our suppliers or our customers;

 

   

loss of business from, or a decline in the financial condition of, any of the principal customers that represent a significant portion of our total revenues;

 

   

competitive factors, including introduction of competitive products, new entrants into certain of our markets, price pressures, limited customer base, and competitiveness of our manufacturing facilities and products;

 

   

industry overcapacity and our manufacturing capacity utilization;

 

   

decreases or write-downs in carrying value of inventory, goodwill, intangibles or other assets due to impairment;

 

   

severance or other costs or charges associated with lay-offs, shutdowns, or reducing the size and scope of operations;

 

   

changes in future maintenance or warranty requirements;

 

   

ability to adjust to the cyclical nature of the industries in which we operate;

 

   

changes in interest rates and financial impacts from interest rates;

 

   

ability and cost to maintain and renew operating permits;

 

   

actions or failures to act by various regulatory agencies including potential environmental remediation obligations or changing tank car or other rail car regulation;

 

   

changes in fuel and/or energy prices;

 

   

risks associated with our intellectual property rights or those of third parties, including infringement, maintenance, protection, validity, enforcement and continued use of such rights;

 

   

expansion of warranty and product support terms beyond those which have traditionally prevailed in the rail supply industry;

 

   

availability of a trained work force at a reasonable cost and with reasonable terms of employment;

 

   

availability and/or price of essential raw materials, specialties or components, including steel castings, to permit manufacture of units on order;

 

   

failure to successfully integrate joint ventures or acquired businesses;

 

   

discovery of previously unknown liabilities associated with acquired businesses;

 

   

failure of or delay in implementing and using new software or other technologies;

 

   

the impact of cybersecurity risks and the costs of mitigating and responding to a data security breach;

 

   

ability to replace maturing lease and management services revenue and earnings with revenue and earnings from new commercial transactions, including new railcar leases, additions to the lease fleet and new management services contracts;

 

   

credit limitations upon our ability to maintain effective hedging programs;

 

   

financial impacts from currency fluctuations and currency hedging activities in our worldwide operations; and

 

   

changes in legislation and increased costs related to health care.

Any forward-looking statements should be considered in light of these factors. 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 identify forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from the results contemplated by the forward-looking statements. Many of the important factors that will determine these results and values are beyond our ability to control or predict. You are cautioned not to put undue reliance on any forward-looking statements. Except as otherwise required by law, we do not assume any obligation to update any forward-looking statements.

All references to years refer to the fiscal years ended August 31st unless otherwise noted.

 

3


THE GREENBRIER COMPANIES, INC.

PART I. FINANCIAL INFORMATION

Item 1. Condensed Financial Statements

Consolidated Balance Sheets

(In thousands, unaudited)

 

     May 31,
2014
    August 31,
2013
 

Assets

    

Cash and cash equivalents

   $ 198,492      $ 97,435   

Restricted cash

     9,468        8,807   

Accounts receivable, net

     181,850        154,848   

Inventories

     337,197        316,783   

Leased railcars for syndication

     96,332        68,480   

Equipment on operating leases, net

     274,863        305,468   

Property, plant and equipment, net

     215,942        201,533   

Goodwill

     57,416        57,416   

Intangibles and other assets, net

     79,012        78,971   
  

 

 

   

 

 

 
   $ 1,450,572      $ 1,289,741   
  

 

 

   

 

 

 

Liabilities and Equity

    

Revolving notes

   $ 18,082      $ 48,209   

Accounts payable and accrued liabilities

     356,541        315,938   

Deferred income taxes

     79,526        86,040   

Deferred revenue

     21,153        8,838   

Notes payable

     447,068        373,889   

Commitments and contingencies (Note 14)

    

Equity:

    

Greenbrier

    

Preferred stock - without par value; 25,000 shares authorized; none outstanding

     —          —     

Common stock - without par value; 50,000 shares authorized; 27,489 and 28,084 shares outstanding at May 31, 2014 and August 31, 2013

     —          —     

Additional paid-in capital

     239,124        259,864   

Retained earnings

     239,405        174,842   

Accumulated other comprehensive loss

     (2,384     (6,504
  

 

 

   

 

 

 

Total equity - Greenbrier

     476,145        428,202   

Noncontrolling interest

     52,057        28,625   
  

 

 

   

 

 

 

Total equity

     528,202        456,827   
  

 

 

   

 

 

 
   $ 1,450,572      $ 1,289,741   
  

 

 

   

 

 

 

The accompanying notes are an integral part of these financial statements

 

4


THE GREENBRIER COMPANIES, INC.

Consolidated Statements of Operations

(In thousands, except per share amounts, unaudited)

 

     Three Months Ended
May 31,
    Nine Months Ended
May 31,
 
     2014     2013     2014     2013  

Revenue

        

Manufacturing

   $ 425,583      $ 284,591      $ 1,132,811      $ 864,006   

Wheels, Repair & Parts

     140,663        131,167        390,604        355,219   

Leasing & Services

     27,039        17,905        62,441        52,978   
  

 

 

   

 

 

   

 

 

   

 

 

 
     593,285        433,663        1,585,856        1,272,203   

Cost of revenue

        

Manufacturing

     351,829        253,360        969,841        774,502   

Wheels, Repair & Parts

     129,825        120,476        365,740        325,086   

Leasing & Services

     14,856        9,808        34,090        26,542   
  

 

 

   

 

 

   

 

 

   

 

 

 
     496,510        383,644        1,369,671        1,126,130   

Margin

     96,775        50,019        216,185        146,073   

Selling and administrative expense

     34,800        25,322        89,034        76,364   

Net gain on disposition of equipment

     (5,619     (5,131     (14,686     (9,615

Goodwill impairment

     —          76,900        —          76,900   

Restructuring charges

     56        —          1,475        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) from operations

     67,538        (47,072     140,362        2,424   

Other costs

        

Interest and foreign exchange

     5,437        5,905        14,280        18,127   
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) before income taxes and earnings (loss) from unconsolidated affiliates

     62,101        (52,977     126,082        (15,703

Income tax expense

     (16,303     (2,729     (36,708     (12,905
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) before earnings (loss) from unconsolidated affiliates

     45,798        (55,706     89,374        (28,608

Earnings (loss) from unconsolidated affiliates

     298        82        272        (63
  

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings (loss)

     46,096        (55,624     89,646        (28,671

Net earnings attributable to noncontrolling interest

     (12,508     (406     (25,083     (3,093
  

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings (loss) attributable to Greenbrier

   $ 33,588      $ (56,030   $ 64,563      $ (31,764
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic earnings (loss) per common share

   $ 1.20      $ (2.10   $ 2.29      $ (1.20

Diluted earnings (loss) per common share

   $ 1.03      $ (2.10   $ 2.01      $ (1.20

Weighted average common shares:

        

Basic

     27,956        26,619        28,223        26,510   

Diluted

     34,001        26,619        34,268        26,510   

The accompanying notes are an integral part of these financial statements

 

5


THE GREENBRIER COMPANIES, INC.

Consolidated Statements of Comprehensive Income (Loss)

(In thousands, unaudited)

 

     Three Months Ended
May 31,
    Nine Months Ended
May 31,
 
     2014     2013     2014     2013  

Net earnings (loss)

   $ 46,096      $ (55,624   $ 89,646      $ (28,671

Other comprehensive income (loss)

        

Translation adjustment

     80        (1,761     3,402        279   

Reclassification of derivative financial instruments recognized in net earnings (loss) 1

     4        105        321        (790

Unrealized gain (loss) on derivative financial instruments 2

     (659     (1,325     454        (817

Other (net of tax effect)

     (4     5        (3     5   
  

 

 

   

 

 

   

 

 

   

 

 

 
     (579     (2,976     4,174        (1,323
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss)

     45,517        (58,600     93,820        (29,994

Comprehensive income attributable to noncontrolling interest

     (12,501     (374     (25,137     (3,102
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss) attributable to Greenbrier

   $ 33,016      $ (58,974   $ 68,683      $ (33,096
  

 

 

   

 

 

   

 

 

   

 

 

 

 

1 

Net of tax of effect of $0.1 million and $0.1 million for the three months ended May 31, 2014 and 2013 and $0.4 million and $0.1 million for the nine months ended May 31, 2014 and 2013.

2 

Net of tax of effect of $0.5 million and $0.3 million for the three months ended May 31, 2014 and 2013 and $0.2 million and $0.2 million for the nine months ended May 31, 2014 and 2013.

The accompanying notes are an integral part of these financial statements

 

6


THE GREENBRIER COMPANIES, INC.

Consolidated Statements of Equity

(In thousands, unaudited)

 

     Attributable to Greenbrier              
     Common
Stock
Shares
    Additional
Paid-in Capital
    Retained
Earnings
     Accumulated
Other
Comprehensive
Income (Loss)
    Total
Attributable to
Greenbrier
    Attributable to
Noncontrolling
Interest
    Total Equity  

Balance September 1, 2013

     28,084      $ 259,864      $ 174,842       $ (6,504   $ 428,202      $ 28,625      $ 456,827   

Net earnings

     —          —          64,563         —          64,563        25,083        89,646   

Other comprehensive income, net

     —          —          —           4,120        4,120        54        4,174   

Noncontrolling interest adjustments

     —          —          —           —          —          2,953        2,953   

Investment by joint venture partner

     —          —          —           —          —          419        419   

Joint venture partner distribution declared

     —          —          —           —          —          (5,077     (5,077

Restricted stock awards (net of cancellations and expense)

     46        11,599        —           —          11,599        —          11,599   

Unamortized restricted stock

     —          (12,610     —           —          (12,610     —          (12,610

Restricted stock amortization

     —          6,455        —           —          6,455        —          6,455   

Excess tax benefit from restricted stock awards

     —          109        —           —          109        —          109   

Repurchase of stock

     (641     (26,293     —           —          (26,293     —          (26,293
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Balance May 31, 2014

     27,489      $ 239,124      $ 239,405       $ (2,384   $ 476,145      $ 52,057      $ 528,202   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

     Attributable to Greenbrier              
     Common
Stock
Shares
     Additional
Paid-in Capital
    Retained
Earnings
    Accumulated
Other
Comprehensive
Loss
    Total
Attributable to
Greenbrier
    Attributable to
Noncontrolling
Interest
    Total Equity  

Balance September 1, 2012

     27,143       $ 252,256      $ 185,890      $ (6,369   $ 431,777      $ 21,868      $ 453,645   

Net earnings (loss)

     —           —          (31,764     —          (31,764     3,093        (28,671

Other comprehensive income (loss), net

     —           —          —          (1,332     (1,332     9        (1,323

Noncontrolling interest adjustments

     —           —          —          —          —          (1,954     (1,954

Investment by joint venture partner

     —           —          —          —          —          2,577        2,577   

Restricted stock awards (net of cancellations and expense)

     27         8,436        —          —          8,436        —          8,436   

Unamortized restricted stock

     —           (8,444     —          —          (8,444     —          (8,444

Restricted stock amortization

     —           5,257        —          —          5,257        —          5,257   

Excess tax benefit from restricted stock awards

     —           777        —          —          777        —          777   

Warrants exercised

     52         —          —          —          —          —          —     
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance May 31, 2013

     27,222       $ 258,282      $ 154,126      $ (7,701   $ 404,707      $ 25,593      $ 430,300   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these financial statements

 

7


THE GREENBRIER COMPANIES, INC.

Consolidated Statements of Cash Flows

(In thousands, unaudited)

 

     Nine Months Ended
May 31,
 
     2014     2013  

Cash flows from operating activities

    

Net earnings (loss)

   $ 89,646      $ (28,671

Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:

    

Deferred income taxes

     (6,745     (9,391

Depreciation and amortization

     30,824        31,523   

Net gain on disposition of equipment

     (14,686     (9,615

Accretion of debt discount

     —          2,455   

Stock based compensation expense

     6,454        4,843   

Goodwill impairment

     —          76,900   

Other

     3,341        (1,895

Decrease (increase) in assets:

    

Accounts receivable

     (26,226     (15,499

Inventories

     (21,722     (9,114

Leased railcars for syndication

     (25,420     22,067   

Other

     (2,491     338   

Increase (decrease) in liabilities:

    

Accounts payable and accrued liabilities

     36,507        (43,605

Deferred revenue

     12,258        (1,099
  

 

 

   

 

 

 

Net cash provided by operating activities

     81,740        19,237   
  

 

 

   

 

 

 

Cash flows from investing activities

    

Proceeds from sales of assets

     39,515        39,611   

Capital expenditures

     (34,522     (49,677

Increase in restricted cash

     (661     (2,629

Investment in and net advances to unconsolidated affiliates

     (1,253     (1,016

Other

     —          (3,582
  

 

 

   

 

 

 

Net cash provided by (used in) investing activities

     3,079        (17,293
  

 

 

   

 

 

 

Cash flows from financing activities

    

Net change in revolving notes with maturities of 90 days or less

     —          26,973   

Proceeds from revolving notes with maturities longer than 90 days

     34,674        31,847   

Repayments of revolving notes with maturities longer than 90 days

     (64,801     (26,877

Proceeds from issuance of notes payable

     200,000        —     

Repayments of notes payable

     (126,821     (57,592

Debt issuance costs

     (382     —     

Repurchase of stock

     (26,293     —     

Cash distribution to joint venture partner

     (3,109     —     

Investment by joint venture partner

     419        2,577   

Excess tax benefit from restricted stock awards

     109        777   

Other

     —          (8
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     13,796        (22,303
  

 

 

   

 

 

 

Effect of exchange rate changes

     2,442        (1,606

Increase (decrease) in cash and cash equivalents

     101,057        (21,965

Cash and cash equivalents

    

Beginning of period

     97,435        53,571   
  

 

 

   

 

 

 

End of period

   $ 198,492      $ 31,606   
  

 

 

   

 

 

 

Cash paid during the period for

    

Interest

   $ 12,816      $ 13,844   

Income taxes, net

   $ 41,643      $ 16,404   

Non-cash activity

    

Transfer of Inventories to Leased railcars for syndication

   $ 2,691      $ —     

Transfer of Leased railcars for syndication to Equipment on operating leases

   $ —        $ 4,640   

Transfer of Equipment on operating leases to Inventories

   $ —        $ 17,762   

Transfer of Property, plant and equipment, net to Intangibles and other assets, net

   $ —        $ 1,194   

The accompanying notes are an integral part of these financial statements

 

8


THE GREENBRIER COMPANIES, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1 – Interim Financial Statements

The Condensed Consolidated Financial Statements of The Greenbrier Companies, Inc. and Subsidiaries (Greenbrier or the Company) as of May 31, 2014, for the three and nine months ended May 31, 2014 and 2013 have been prepared without audit and reflect all adjustments (consisting of normal recurring accruals) that, in the opinion of management, are necessary for a fair presentation of the financial position and operating results and cash flows for the periods indicated. The results of operations for the three and nine months ended May 31, 2014 are not necessarily indicative of the results to be expected for the entire year ending August 31, 2014.

Certain notes and other information have been condensed or omitted from the interim financial statements presented in this Quarterly Report on Form 10-Q. Therefore, these financial statements should be read in conjunction with the Consolidated Financial Statements contained in the Company’s 2013 Annual Report on Form 10-K.

Management Estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires judgment on the part of management to arrive at estimates and assumptions on matters that are inherently uncertain. These estimates may affect the amount of assets, liabilities, revenue and expenses reported in the financial statements and accompanying notes and disclosure of contingent assets and liabilities within the financial statements. Estimates and assumptions are periodically evaluated and may be adjusted in future periods. Actual results could differ from those estimates.

Initial Adoption of Accounting Policies – In the first quarter of 2014, the Company adopted an accounting standard update regarding the testing of indefinite-lived intangible assets for impairment. This update was intended to reduce the cost and complexity of testing indefinite-lived intangible assets for impairment by providing entities with an option to perform a qualitative assessment to determine whether further impairment testing is necessary. This update impacted testing steps only and therefore the adoption did not have an impact on the Company’s Consolidated Financial Statements.

In the first quarter of 2014, the Company adopted an accounting standard update that amended prior reporting requirements with respect to comprehensive income by requiring additional disclosures by component about the amounts reclassified out of accumulated other comprehensive loss. The adoption of this accounting standard update did require additional disclosures, but did not have an impact on the Company’s financial position, results of operations or cash flows.

Prospective Accounting Changes – In May 2014, the Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) issued a jointly converged standard on the recognition of revenue from contracts with customers. The issued guidance converges the criteria for reporting revenue, as well as requiring disclosures sufficient to describe the nature, amount, timing, and uncertainty of revenue and cash flows arising from these contracts. Companies can transition to the standard either retrospectively or as a cumulative effective adjustment as of the date of adoption. The new standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. The Company plans to adopt this guidance beginning September 1, 2017. The Company is evaluating the impact of this standard on its consolidated financial statements and disclosures.

Share Repurchase Program – In October 2013, the Board of Directors authorized the Company to repurchase up to $50 million of the Company’s common stock. Under the share repurchase program, shares of common stock may be purchased on the open market or through privately negotiated transactions from time-to-time. The timing and amount of purchases will be based upon market conditions, securities law limitations and other factors. The share repurchase program does not obligate the Company to acquire any specific number of shares in any period. The share repurchase program expires April 30, 2015, but may be modified, suspended or discontinued at any time without prior notice. During the three and nine months ended May 31, 2014, the Company repurchased a total of 352,000 shares and 641,327 shares for approximately $16.0 million and $26.3 million.

 

9


THE GREENBRIER COMPANIES, INC.

 

Note 2 – Restructuring

During 2013, the Company implemented a restructuring plan to sell or close certain Wheels, Repair & Parts facilities to enhance margins and improve capital efficiency. Restructuring charges related to this plan, associated with the Company’s Wheels, Repair & Parts segment, totaled $0.1 million and $1.5 million for the three and nine months ended May 31, 2014 and were included in the Consolidated Statement of Operations.

 

(In thousands)    Accrual at
August 31,
2013
     Charged to
Expense
     Paid or
Settled
     Accrual at
May 31,
2014
 

Employee termination costs

   $ 1,409       $ 1,290       $ 2,699       $ —     

Other costs

     299         185         484         —     
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 1,708       $ 1,475       $ 3,183       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Note 3 – Inventories

Inventories are valued at the lower of cost (first-in, first-out) or market. Work-in-process includes material, labor and overhead. The following table summarizes the Company’s inventory balance:

 

(In thousands)    May 31,
2014
    August 31,
2013
 

Manufacturing supplies and raw materials

   $ 238,867      $ 217,182   

Work-in-process

     62,316        48,990   

Finished goods

     40,073        54,839   

Excess and obsolete adjustment

     (4,059     (4,228
  

 

 

   

 

 

 
   $ 337,197      $ 316,783   
  

 

 

   

 

 

 

 

10


THE GREENBRIER COMPANIES, INC.

 

Note 4 – Intangibles and Other Assets, net

Intangible assets that are determined to have finite lives are amortized over their useful lives. Intangible assets with indefinite useful lives are not amortized and are periodically evaluated for impairment.

The following table summarizes the Company’s identifiable intangible and other assets balance:

 

(In thousands)    May 31,
2014
    August 31,
2013
 

Intangible assets subject to amortization:

    

Customer relationships

   $ 66,288      $ 66,288   

Accumulated amortization

     (30,347     (26,964

Other intangibles

     5,071        4,967   

Accumulated amortization

     (4,415     (4,162
  

 

 

   

 

 

 
     36,597        40,129   

Intangible assets not subject to amortization

     912        912   

Investment in unconsolidated affiliates

     12,129        10,739   

Prepaid and other assets

     10,685        10,601   

Nonqualified savings plan investments

     10,086        7,687   

Debt issuance costs, net

     8,214        7,802   

Assets held for sale

     389        1,101   
  

 

 

   

 

 

 

Total intangible and other assets

   $ 79,012      $ 78,971   
  

 

 

   

 

 

 

Amortization expense for the three and nine months ended May 31, 2014 was $1.0 million and $3.6 million and for the three and nine months ended May 31, 2013 was $1.0 million and $3.3 million. Amortization expense for the years ending August 31, 2014, 2015, 2016, 2017 and 2018 is expected to be $4.5 million, $3.8 million, $3.8 million, $3.7 million and $3.4 million.

 

11


THE GREENBRIER COMPANIES, INC.

 

Note 5 – Revolving Notes

Senior secured credit facilities, consisting of three components, aggregated to $360.0 million as of May 31, 2014.

As of May 31, 2014, a $290.0 million revolving line of credit secured by substantially all the Company’s assets in the U.S. not otherwise pledged as security for term loans and maturing June 2016, was available to provide working capital and interim financing of equipment, principally for the U.S. and Mexican operations. Advances under this facility bear interest at LIBOR plus 2.25% or Prime plus 1.25% depending on the type of borrowing. Available borrowings under the credit facility are generally based on defined levels of inventory, receivables, property, plant and equipment and leased equipment, as well as total debt to consolidated capitalization and fixed charges coverage ratios.

As of May 31, 2014, lines of credit totaling $20.0 million secured by certain of the Company’s European assets, with various variable rates that range from Warsaw Interbank Offered Rate (WIBOR) plus 1.2% to WIBOR plus 1.5%, were available for working capital needs of the European manufacturing operation. European credit facilities are continually being renewed. Currently these European credit facilities have maturities that range from December 2014 through June 2015.

As of May 31, 2014, the Company’s Mexican joint venture had two lines of credit totaling $50.0 million. The first line of credit provides up to $20.0 million and is secured by certain of the joint venture’s accounts receivable and inventory. Advances under this facility bear interest at LIBOR plus 2.5%. The Mexican joint venture will be able to draw amounts available under this facility through January 2015. The second line of credit provides up to $30.0 million and is fully guaranteed by each of the joint venture partners, including the Company. Advances under this facility bear interest at LIBOR plus 2.0%. The Mexican joint venture will be able to draw against this facility through January 2015.

As of May 31, 2014, outstanding borrowings under the senior secured credit facilities consisted of $6.9 million in letters of credit under the North American credit facility and $18.1 million outstanding under the Mexican joint venture credit facilities.

As of August 31, 2013, outstanding borrowings under the senior secured credit facilities consisted of $6.8 million in letters of credit under the North American credit facility and $48.2 million outstanding under the Mexican joint venture credit facilities.

Note 6 – Accounts Payable and Accrued Liabilities

 

(In thousands)    May 31,
2014
     August 31,
2013
 

Trade payables

   $ 205,805       $ 163,490   

Other accrued liabilities

     62,104         70,691   

Accrued payroll and related liabilities

     50,128         42,047   

Accrued maintenance

     13,382         11,420   

Income taxes payable

     11,945         13,094   

Accrued warranty

     9,718         12,128   

Other

     3,459         3,068   
  

 

 

    

 

 

 
   $ 356,541       $ 315,938   
  

 

 

    

 

 

 

 

12


THE GREENBRIER COMPANIES, INC.

 

Note 7 – Warranty Accruals

Warranty costs are estimated and charged to operations to cover a defined warranty period. The estimated warranty cost is based on the history of warranty claims for each particular product type. For new product types without a warranty history, preliminary estimates are based on historical information for similar product types. The warranty accruals, included in Accounts payable and accrued liabilities on the Consolidated Balance Sheets, are reviewed periodically and updated based on warranty trends and expirations of warranty periods.

Warranty accrual activity:

 

     Three Months Ended
May 31,
    Nine Months Ended
May 31,
 
(In thousands)    2014     2013     2014     2013  

Balance at beginning of period

   $ 10,673      $ 10,289      $ 12,128      $ 9,221   

Charged to cost of revenue, net

     170        667        1,418        3,279   

Payments

     (1,208     (904     (4,191     (2,540

Currency translation effect

     83        (69     363        23   
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance at end of period

   $ 9,718      $ 9,983      $ 9,718      $ 9,983   
  

 

 

   

 

 

   

 

 

   

 

 

 

Note 8 – Notes Payable

In March 2014, the Company refinanced approximately $125 million of existing senior term debt, due in March 2014 and May 2015, secured by a pool of leased railcars with new 6-year $200 million senior term debt also secured by a pool of leased railcars. The new debt bears a floating interest rate of LIBOR plus 1.75% with principal of $1.75 million paid quarterly in arrears and a balloon payment of $160 million due at maturity. An interest rate swap agreement was entered into on 50% of the initial balance to swap the floating interest rate of LIBOR plus 1.75% to a fixed rate of 3.7375%.

 

13


THE GREENBRIER COMPANIES, INC.

 

Note 9 – Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss, net of tax effect as appropriate, consisted of the following:

 

(In thousands)    Unrealized
Income
(Loss) on
Derivative
Financial
Instruments
    Foreign
Currency
Translation
Adjustment
    Other     Accumulated
Other
Comprehensive
Income (Loss)
 

Balance, August 31, 2013

   $ (1,053   $ (4,923   $ (528   $ (6,504

Other comprehensive income (loss) before reclassifications

     454        3,348        (3     3,799   

Amounts reclassified from accumulated other comprehensive income (loss)

     321        —          —          321   
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance, May 31, 2014

   $ (278   $ (1,575   $ (531   $ (2,384
  

 

 

   

 

 

   

 

 

   

 

 

 

The amounts reclassified out of Accumulated other comprehensive loss into the Consolidated Statements of Operations, with presentation location, was as follows:

 

(In thousands)   Three Months Ended
May 31, 2014
    Nine Months Ended
May 31, 2014
   

Location

(Gain) loss on derivative financial instruments:

     

Foreign exchange contracts

  $ (335   $ (575   Revenue

Interest rate swap contracts

    446        1,275      Interest and foreign exchange
 

 

 

   

 

 

   
    111        700      Total before tax
    (107     (379   Tax expense
 

 

 

   

 

 

   
  $ 4      $ 321      Net of tax
 

 

 

   

 

 

   

 

14


THE GREENBRIER COMPANIES, INC.

 

Note 10 – Earnings (Loss) Per Share

The shares used in the computation of the Company’s basic and diluted earnings (loss) per common share are reconciled as follows:

 

     Three Months Ended
May 31,
     Nine Months Ended
May 31,
 
(In thousands)    2014      2013      2014      2013  

Weighted average basic common shares outstanding (1)

     27,956         26,619         28,223         26,510   

Dilutive effect of 2018 Convertible notes (2)

     6,045         —           6,045         —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average diluted common shares outstanding (3)

     34,001         26,619         34,268         26,510   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) Restricted stock grants and restricted stock units, including some grants subject to certain performance criteria, are included in weighted average basic common shares outstanding when the Company is in a net earnings position. Shares outstanding exclude shares of unvested restricted stock and restricted stock units for the three and nine months ended May 31, 2013 due to a net loss.
(2) The dilutive effect of the 2018 Convertible notes are included for the three and nine months ended May 31, 2014 as they were considered dilutive under the “if converted” method as further discussed below. The dilutive effect of warrants and the 2018 Convertible notes were excluded for the three and nine months ended May 31, 2013 due to a net loss.
(3) The dilutive effect of the 2026 Convertible notes was included for the three months ended May 31, 2014 as the average stock price was greater than $48.05 however the dilutive impact was inconsequential. The dilutive effect of the 2026 Convertible notes was excluded for the nine months ended May 31, 2014 and the three and nine months ended May 31, 2013 as the stock price was less than $48.05 and therefore is considered anti-dilutive.

Dilutive EPS for the three and nine months ended May 31, 2014 was calculated using the more dilutive of two approaches. The first approach includes the dilutive effect of shares underlying the 2026 Convertible notes in the share count using the treasury stock method. The second approach supplements the first by including the “if converted” effect of the 2018 Convertible notes issued in March 2011. Under the “if converted” method, debt issuance and interest costs, both net of tax, associated with the convertible notes are added back to net earnings and the share count is increased by the shares underlying the convertible notes. The 2026 Convertible notes are included in the calculation of both approaches using the treasury stock method when the average stock price is greater than the initial conversion price of $48.05.

 

    Three Months Ended
May 31, 2014
    Nine Months Ended
May 31, 2014
 

Net earnings attributable to Greenbrier

  $ 33,588      $ 64,563   

Add back:

   

Interest and debt issuance costs on the 2018 Convertible notes, net of tax

    1,416        4,248   
 

 

 

   

 

 

 

Earnings before interest and debt issuance costs on convertible notes

  $ 35,004      $ 68,811   
 

 

 

   

 

 

 

Weighted average diluted common shares outstanding

    34,001        34,268   

Diluted earnings per share

  $ 1.03 (1)    $ 2.01 (1) 

 

(1) Diluted earnings per share was calculated as follows:

Earnings before interest and debt issuance costs (net of tax) on convertible notes

Weighted average diluted common shares outstanding

 

15


THE GREENBRIER COMPANIES, INC.

 

Note 11 – Stock Based Compensation

The value of restricted stock and restricted stock unit awards is amortized as compensation expense from the date of grant through the earlier of the vesting period or the recipient’s eligible retirement date. Awards are expensed upon grant when the recipient’s eligible retirement date precedes the grant date.

Compensation expense for restricted stock and restricted stock unit grants was $3.6 million and $6.5 million for the three and nine months ended May 31, 2014 and $2.0 million and $4.8 million for the three and nine months ended May 31, 2013. Compensation expense related to restricted stock and restricted stock unit grants is recorded in Selling and administrative expense and Cost of revenue on the Consolidated Statements of Operations.

Note 12 – Derivative Instruments

Foreign operations give rise to market risks from changes in foreign currency exchange rates. Foreign currency forward exchange contracts with established financial institutions are utilized to hedge a portion of that risk in Euro. Interest rate swap agreements are utilized to reduce the impact of changes in interest rates on certain debt. The Company’s foreign currency forward exchange contracts and interest rate swap agreements are designated as cash flow hedges, and therefore the effective portion of unrealized gains and losses is recorded in accumulated other comprehensive income or loss.

At May 31, 2014 exchange rates, forward exchange contracts for the purchase of Polish Zloty and the sale of Euro aggregated $66.0 million. Adjusting the foreign currency exchange contracts to the fair value of the cash flow hedges at May 31, 2014 resulted in an unrealized pre-tax gain of $0.6 million that was recorded in accumulated other comprehensive loss. The fair value of the contracts is included in Accounts payable and accrued liabilities when there is a loss, or Accounts receivable when there is a gain, on the Consolidated Balance Sheets. As the contracts mature at various dates through October 2015, any such gain or loss remaining will be recognized in manufacturing revenue along with the related transactions. In the event that the underlying sales transaction does not occur or does not occur in the period designated at the inception of the hedge, the amount classified in accumulated other comprehensive loss would be reclassified to the current year’s results of operations in Interest and foreign exchange.

At May 31, 2014, an interest rate swap agreement had a notional amount of $100.0 million and matures March 2020. The fair value of this cash flow hedge at May 31, 2014 resulted in an unrealized pre-tax loss of $1.3 million. The loss is included in Accumulated other comprehensive loss and the fair value of the contract is included in Accounts payable and accrued liabilities on the Consolidated Balance Sheets. As interest expense on the underlying debt is recognized, amounts corresponding to the interest rate swap are reclassified from Accumulated other comprehensive loss and charged or credited to interest expense. At May 31, 2014 interest rates, approximately $1.8 million would be reclassified to interest expense in the next 12 months.

 

16


THE GREENBRIER COMPANIES, INC.

 

Fair Values of Derivative Instruments

 

     Asset Derivatives      Liability Derivatives  
     Balance sheet    May 31,
2014
     August 31,
2013
     Balance sheet    May 31,
2014
     August 31,
2013
 
(In thousands)    location    Fair Value      Fair Value      location    Fair Value      Fair Value  

Derivatives designated as hedging instruments

              

Foreign forward exchange contracts

   Accounts
receivable
   $ 838       $ 819       Accounts payable
and accrued liabilities
   $ 4       $ 342   

Interest rate swap contracts

   Other assets      —           —         Accounts payable
and accrued liabilities
     1,256         1,250   
     

 

 

    

 

 

       

 

 

    

 

 

 
      $ 838       $ 819          $ 1,260       $ 1,592   
     

 

 

    

 

 

       

 

 

    

 

 

 

Derivatives not designated as hedging instruments

     

Foreign forward exchange contracts

   Accounts
receivable
   $ 244       $ 223       Accounts payable
and accrued liabilities
   $ —         $ 40   

The Effect of Derivative Instruments on the Statement of Operations

 

Derivatives in cash flow hedging
relationships

   Location of gain (loss) recognized in
income on derivative
     Gain (loss) recognized in income on derivative
nine months ended May 31,
 
            2014      2013  

Foreign forward exchange contract

     Interest and foreign exchange       $ 230       $ (108

 

Derivatives in

cash flow
hedging
relationships

   Gain (loss) recognized
in OCI on derivatives
(effective portion)
nine months ended
May 31,
    Location of
gain (loss)
reclassified
from
accumulated
OCI into
income
   Gain (loss) reclassified
from accumulated OCI
into income
(effective portion)
nine months ended
May 31,
    Location of
gain in income
on derivative
(ineffective
portion  and
amount
excluded from
effectiveness
testing)
   Gain recognized on
derivative (ineffective
portion and  amount
excluded from
effectiveness testing)
nine months ended
May 31,
 
     2014     2013          2014     2013          2014      2013  

Foreign forward exchange contracts

   $ 1,558      $ (997   Revenue    $ 575      $ 1,927      Interest and foreign
exchange
   $ 684       $ 2,088   

Interest rate swap contracts

     (1,281     (47   Interest and foreign
exchange
     (1,275     (1,250   Interest and foreign
exchange
     —           —     
  

 

 

   

 

 

      

 

 

   

 

 

      

 

 

    

 

 

 
   $ 277      $ (1,044      $ (700   $ 677         $ 684       $ 2,088   
  

 

 

   

 

 

      

 

 

   

 

 

      

 

 

    

 

 

 

Note 13 – Segment Information

Greenbrier operates in three reportable segments: Manufacturing; Wheels, Repair & Parts; and Leasing & Services. The accounting policies of the segments are described in the summary of significant accounting policies in the Consolidated Financial Statements contained in the Company’s 2013 Annual Report on Form 10-K. Performance for each of these segments is evaluated based on earnings (loss) from operations. Corporate includes selling and administrative costs not directly related to goods and services and certain costs that are intertwined among segments due to the Company’s integrated business. Greenbrier’s management does not allocate Interest and foreign exchange or Income tax benefit (expense) for either external or internal reporting purposes. Intersegment sales and transfers are valued as if the sales or transfers were to third parties. Related revenue and margin are eliminated in consolidation and therefore are not included in consolidated results in the Company’s Consolidated Financial Statements.

 

17


THE GREENBRIER COMPANIES, INC.

 

The information in the following table is derived directly from the segments’ internal financial reports used for corporate management purposes.

 

For the three months ended May 31, 2014:              
     Revenue     Earnings (loss) from operations  
     External      Intersegment     Total     External     Intersegment     Total  

Manufacturing

   $ 425,583       $ —        $ 425,583      $ 61,116      $ —        $ 61,116   

Wheels, Repair & Parts

     140,663         3,783        144,446        5,524        473        5,997   

Leasing & Services

     27,039         9,334        36,373        14,582        9,334        23,916   

Eliminations

     —           (13,117     (13,117     —          (9,807     (9,807

Corporate

     —           —          —          (13,684     —          (13,684
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   $ 593,285       $ —        $ 593,285      $ 67,538      $ —        $ 67,538   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
For the nine months ended May 31, 2014:              
     Revenue     Earnings (loss) from operations  
     External      Intersegment     Total     External     Intersegment     Total  

Manufacturing

   $ 1,132,811       $ —        $ 1,132,811      $ 129,542      $ —        $ 129,542   

Wheels, Repair & Parts

     390,604         7,743        398,347        8,724        546        9,270   

Leasing & Services

     62,441         17,623        80,064        32,888        17,623        50,511   

Eliminations

     —           (25,366     (25,366     —          (18,169     (18,169

Corporate

     —           —          —          (30,792     —          (30,792
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   $ 1,585,856       $ —        $ 1,585,856      $ 140,362      $ —        $ 140,362   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
For the three months ended May 31, 2013:              
     Revenue     Earnings (loss) from operations  
     External      Intersegment     Total     External     Intersegment     Total  

Manufacturing

   $ 284,591       $ 27      $ 284,618      $ 21,551      $ —        $ 21,551   

Wheels, Repair & Parts (1)

     131,167         2,548        133,715        (70,242     29        (70,213

Leasing & Services

     17,905         2,853        20,758        9,427        2,851        12,278   

Eliminations

     —           (5,428     (5,428     —          (2,880     (2,880

Corporate

     —           —          —          (7,808     —          (7,808
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   $ 433,663       $ —        $ 433,663      $ (47,072   $ —        $ (47,072
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
For the nine months ended May 31, 2013:              
     Revenue     Earnings (loss) from operations  
     External      Intersegment     Total     External     Intersegment     Total  

Manufacturing

   $ 864,006       $ 7,229      $ 871,235      $ 58,595      $ (30   $ 58,565   

Wheels, Repair & Parts (1)

     355,219         11,632        366,851        (60,858     (225     (61,083

Leasing & Services

     52,978         9,700        62,678        27,164        9,697        36,861   

Eliminations

     —           (28,561     (28,561     —          (9,442     (9,442

Corporate

     —           —          —          (22,477     —          (22,477
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   $ 1,272,203       $ —        $ 1,272,203      $ 2,424      $ —        $ 2,424   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     Total assets  
     May 31,      August 31,  
     2014      2013  

Manufacturing

   $ 500,434       $ 401,630   

Wheels, Repair & Parts

     316,416         318,483   

Leasing & Services

     425,751         463,381   

Unallocated

     207,971         106,247   
  

 

 

    

 

 

 
   $ 1,450,572       $ 1,289,741   
  

 

 

    

 

 

 

 

(1) 

The three and nine months ended May 31, 2013 for Wheels, Repair & Parts includes a pre-tax non-cash impairment charge of $76.9 million.

 

18


THE GREENBRIER COMPANIES, INC.

 

Note 14 – Commitments and Contingencies

The Company’s Portland, Oregon manufacturing facility is located adjacent to the Willamette River. The Company has entered into a Voluntary Cleanup Agreement with the Oregon Department of Environmental Quality (“DEQ”) in which the Company agreed to conduct an investigation of whether, and to what extent, past or present operations at the Portland property may have released hazardous substances into the environment. The Company is also conducting groundwater remediation relating to a historical spill on the property which preceded its ownership.

In December 2000, the U.S. Environmental Protection Agency (EPA) has classified portions of the river bed of the Portland Harbor, including the portion fronting the Company’s manufacturing facility, as a federal “National Priority List” or “Superfund” site due to sediment contamination (the “Portland Harbor Site”). The Company and more than 140 other parties have received a “General Notice” of potential liability from the EPA relating to the Portland Harbor Site. The letter advised the Company that it may be liable for the costs of investigation and remediation (which liability may be joint and several with other potentially responsible parties) as well as for natural resource damages resulting from releases of hazardous substances to the site. At this time, ten private and public entities, including the Company (the “Lower Willamette Group” or “LWG”), have signed an Administrative Order on Consent (“AOC”) to perform a remedial investigation/feasibility study (“RI/FS”) of the Portland Harbor Site under EPA oversight, and several additional entities have not signed such consent, but are nevertheless contributing money to the effort. The EPA-mandated RI/FS is being conducted by the LWG and has cost over $110 million during a 14-year period. The Company has agreed to initially bear a percentage of the total costs incurred by the LWG in connection with the investigation. The Company’s aggregate expenditure has not been material during the 14-year period. Some or all of any such outlay may be recoverable from other responsible parties. The investigation is expected to continue for at least one more year.

Eighty-three parties, including the State of Oregon and the federal government, have entered into a non-judicial mediation process to try to allocate costs associated with the Portland Harbor site. Approximately 110 additional parties have signed tolling agreements related to such allocations. On April 23, 2009, the Company and the other AOC signatories filed suit against 69 other parties due to a possible limitations period for some such claims; Arkema Inc. et al v. A & C Foundry Products, Inc.et al, US District Court, District of Oregon, Case #3:09-cv-453-PK. All but 12 of these parties elected to sign tolling agreements and be dismissed without prejudice, and the case has now been stayed by the court, pending completion of the RI/FS. Although, as described below, the draft feasibility study has been submitted, the RI/FS will not be complete until the EPA approves it, which is not likely to occur until at least 2015.

A draft of the remedial investigation study was submitted to the EPA on October 27, 2009. The draft feasibility study was submitted to the EPA on March 30, 2012. The draft feasibility study evaluates several alternative cleanup approaches. The approaches submitted would take from 2 to 28 years with costs ranging from $169 million to $1.8 billion for cleanup of the entire Portland Harbor Site, depending primarily on the selected remedial action levels. The draft feasibility study suggests costs ranging from $9 million to $163 million for cleanup of the area of the Willamette River adjacent to the Company’s Portland, Oregon manufacturing facility, depending primarily on the selected remedial action level.

The draft feasibility study does not address responsibility for the costs of clean-up or allocate such costs among the potentially responsible parties, or define precise boundaries for the cleanup. Responsibility for funding and implementing the EPA’s selected cleanup will be determined after the issuance of the Record of Decision. Based on the investigation to date, the Company believes that it did not contribute in any material way to the damage of natural resources in the Portland Harbor Site and that the damage in the area of the Portland Harbor Site adjacent to its property precedes its ownership of the Portland, Oregon manufacturing facility. Because these environmental investigations are still underway, sufficient information is currently not available to determine the Company’s liability, if any, for the cost of any required remediation of the Portland Harbor Site or to estimate a range of potential loss. Based on the results of the pending investigations and future assessments of natural resource damages, the Company may be required to incur costs associated with additional phases of investigation or remedial action, and may be liable for damages to natural resources. In addition, the Company may be required to perform periodic maintenance dredging in order to continue to launch vessels from its launch ways in Portland, Oregon, on the Willamette River, and the river’s classification as a Superfund site could result in some limitations on future dredging and launch activities. Any of these matters could adversely affect the Company’s business and Consolidated Financial Statements, or the value of its Portland property.

 

19


THE GREENBRIER COMPANIES, INC.

 

We have also signed an Order on Consent with DEQ to finalize the investigation of potential onsite sources of contamination that may have a release pathway to the Willamette River. Interim precautionary measures are also required in the order and those are in the process of being completed. Our aggregate expenditure has not been material during the 14-year period. Some or all of any such outlay may be recoverable from other responsible parties.

From time to time, Greenbrier is involved as a defendant in litigation in the ordinary course of business, the outcome of which cannot be predicted with certainty. While the ultimate outcome of such legal proceedings cannot be determined at this time, management believes that the resolution of these actions will not have a material adverse effect on the Company’s Consolidated Financial Statements.

In accordance with customary business practices in Europe, the Company has $4.0 million in bank and third party warranty and performance guarantee facilities, all of which have been utilized as of May 31, 2014. To date no amounts have been drawn under these guarantee facilities.

As of May 31, 2014, the Mexican joint venture had $19.8 million of third party debt outstanding, for which the Company had guaranteed approximately $15.9 million.

As of May 31, 2014, the Company had outstanding letters of credit aggregating $6.9 million associated with facility leases and workers compensation insurance.

 

20


THE GREENBRIER COMPANIES, INC.

Note 15 – Fair Value Measures

Certain assets and liabilities are reported at fair value on either a recurring or nonrecurring basis. Fair value, for this disclosure, is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants, under a three-tier fair value hierarchy that prioritizes the inputs used in measuring fair value as follows:

 

Level 1 -    observable inputs such as unadjusted quoted prices in active markets for identical instruments;
Level 2 -    inputs, other than the quoted market prices in active markets for similar instruments, which are observable, either directly or indirectly; and
Level 3 -    unobservable inputs for which there is little or no market data available, which require the reporting entity to develop its own assumptions.

Assets and liabilities measured at fair value on a recurring basis as of May 31, 2014 were:

 

(In thousands)    Total      Level 1      Level 2 (1)      Level 3  

Assets:

           

Derivative financial instruments

   $ 1,082       $ —         $ 1,082       $ —     

Nonqualified savings plan

investments

     10,086         10,086         —           —     

Cash equivalents

     20,016         20,016         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 31,184       $ 30,102       $ 1,082       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

           

Derivative financial instruments

   $ 1,260       $ —         $ 1,260       $ —     

 

(1) Level 2 assets and liabilities include derivative financial instruments which are valued based on observable inputs. See Note 12 Derivative Instruments for further discussion.

Assets and liabilities measured at fair value on a recurring basis as of August 31, 2013 were:

 

(In thousands)    Total      Level 1      Level 2      Level 3  

Assets:

           

Derivative financial instruments

   $ 1,042       $ —         $ 1,042       $ —     

Nonqualified savings plan

investments

     7,687         7,687         —           —     

Cash equivalents

     1,004         1,004         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 9,733       $ 8,691       $ 1,042       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

           

Derivative financial instruments

   $ 1,632       $ —         $ 1,632       $ —     

 

21


THE GREENBRIER COMPANIES, INC.

 

Note 16 – Variable Interest Entities

March 2012 Agreement

In March 2012, the Company purchased a 1% interest in three trusts (the “Trusts”) which are 99% owned by a third party. As of August 31, 2013, the Company had completed the sale of railcars to the Trusts for an aggregate value of $99.6 million.

As of May 31, 2014, the carrying amount of the Company’s investment in the Trusts is $0.9 million, which is recorded in Intangibles and other assets, net on the Consolidated Balance Sheets.

May 2013 Agreement

In May 2013, the Company purchased an 8% interest in an entity that owns a portfolio of railcar assets that are leased to third parties; the remaining 92% is owned by a third party. In the first quarter of 2014, the Company sold 204 railcars to this entity for $16.0 million resulting in a total of 468 railcars manufactured by the Company and subject to operating leases sold for $39.2 million to this entity as of May 31, 2014.

As of May 31, 2014, the carrying amount of the Company’s investment in this entity is $3.1 million which is recorded in Intangibles and other assets, net on the Consolidated Balance Sheets.

 

22


THE GREENBRIER COMPANIES, INC.

 

Note 17 – Guarantor/Non-Guarantor

The convertible senior notes due 2026 (the Notes) issued on May 22, 2006 are fully and unconditionally and jointly and severally guaranteed by substantially all of Greenbrier’s material 100% owned U.S. subsidiaries: Autostack Company LLC, Greenbrier-Concarril, LLC, Greenbrier Leasing Company LLC, Greenbrier Leasing Limited Partner, LLC, Greenbrier Management Services, LLC, Greenbrier Leasing, L.P., Greenbrier Railcar LLC, Gunderson LLC, Gunderson Marine LLC, Gunderson Rail Services LLC, Meridian Rail Holding Corp., Meridian Rail Acquisition Corp., Meridian Rail Mexico City Corp., Brandon Railroad LLC, Gunderson Specialty Products, LLC and Greenbrier Railcar Leasing, Inc. No other subsidiaries guarantee the Notes including Greenbrier Union Holdings I LLC, Greenbrier MUL Holdings I LLC, Greenbrier Leasing Limited, Greenbrier Europe B.V., Greenbrier Germany GmbH, WagonySwidnica S.A., Zaklad Naprawczy Taboru Kolejowego Olawa sp. z o.o., Zaklad Transportu Kolejowego SIARKOPOL sp. z o.o., Gunderson-Concarril, S.A. de C.V., Greenbrier Rail Services Canada, Inc., Mexico Meridianrail Services, S.A. de C.V., Greenbrier Railcar Services – Tierra Blanca S.A. de C.V., YSD Doors, S.A. de C.V., Gunderson-Gimsa S.A. de C.V., Greenbrier, S.A. de C.V. and Greenbrier-Gimsa, LLC.

The following represents the supplemental consolidating condensed financial information of Greenbrier and its guarantor and non-guarantor subsidiaries, as of May 31, 2014 and August 31, 2013, for the three and nine months ended May 31, 2014 and 2013. The information is presented on the basis of Greenbrier accounting for its ownership of its wholly owned subsidiaries using the equity method of accounting. The equity method investment for each subsidiary is recorded by the parent in intangibles and other assets. Intercompany transactions of goods and services between the guarantor and non-guarantor subsidiaries are presented as if the sales or transfers were at fair value to third parties and eliminated in consolidation.

 

23


THE GREENBRIER COMPANIES, INC.

 

The Greenbrier Companies, Inc.

Condensed Consolidating Balance Sheet

May 31, 2014

(In thousands, unaudited)

 

     Parent      Combined
Guarantor
Subsidiaries
     Combined
Non-
Guarantor
Subsidiaries
     Eliminations     Consolidated  

Assets

             

Cash and cash equivalents

   $ 160,223       $ 60       $ 38,209       $ —        $ 198,492   

Restricted cash

     —           2,567         6,901         —          9,468   

Accounts receivable, net

     1,050         400,877         54,494         (274,571     181,850   

Inventories

     —           127,876         209,464         (143     337,197   

Leased railcars for syndication

     —           99,630         —           (3,298     96,332   

Equipment on operating leases, net

     —           273,241         3,821         (2,199     274,863   

Property, plant and equipment, net

     6,087         100,320         109,535         —          215,942   

Goodwill

     —           57,416         —           —          57,416   

Intangibles and other assets, net

     811,751         121,980         16,727         (871,446     79,012   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
   $ 979,111       $ 1,183,967       $ 439,151       $ (1,151,657   $ 1,450,572   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Liabilities and Equity

             

Revolving notes

   $ —         $ —         $ 18,082       $ —        $ 18,082   

Accounts payable and accrued

liabilities

     254,171         185,047         193,521         (276,198     356,541   

Deferred income taxes

     3,900         84,820         —           (9,194     79,526   

Deferred revenue

     39         19,393         1,677         44        21,153   

Notes payable

     244,856         200,463         1,749         —          447,068   

Total equity - Greenbrier

     476,145         694,244         173,048         (867,292     476,145   

Noncontrolling interest

     —           —           51,074         983        52,057   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total equity

     476,145         694,244         224,122         (866,309     528,202   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
   $ 979,111       $ 1,183,967       $ 439,151       $ (1,151,657   $ 1,450,572   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

24


THE GREENBRIER COMPANIES, INC.

 

The Greenbrier Companies, Inc.

Condensed Consolidating Statement of Operations

For the three months ended May 31, 2014

(In thousands, unaudited)

 

     Parent     Combined
Guarantor
Subsidiaries
    Combined
Non-
Guarantor
Subsidiaries
    Eliminations     Consolidated  

Revenue

          

Manufacturing

   $ —        $ 211,921      $ 363,401      $ (149,739   $ 425,583   

Wheels, Repair & Parts

     —          142,625        —          (1,962     140,663   

Leasing & Services

     108        26,771        —          160        27,039   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     108        381,317        363,401        (151,541     593,285   

Cost of revenue

          

Manufacturing

     —          184,870        315,398        (148,439     351,829   

Wheels, Repair & Parts

     —          131,769        —          (1,944     129,825   

Leasing & Services

     —          14,876        —          (20     14,856   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     —          331,515        315,398        (150,403     496,510   

Margin

     108        49,802        48,003        (1,138     96,775   

Selling and administrative

     13,987        10,645        10,016        152        34,800   

Net gain on disposition of equipment

     —          (5,411     (205     (3     (5,619

Restructuring charges

     —          56        —          —          56   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) from operations

     (13,879     44,512        38,192        (1,287     67,538   

Other costs

          

Interest and foreign exchange

     2,918        1,417        1,102        —          5,437   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) before income taxes

and earnings (loss) from unconsolidated affiliates

     (16,797     43,095        37,090        (1,287     62,101   

Income tax (expense) benefit

     3,337        (11,506     (8,388     254        (16,303
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) before earnings (loss) from unconsolidated affiliates

     (13,460     31,589        28,702        (1,033     45,798   

Earnings (loss) from unconsolidated affiliates

     47,048        5,412        44        (52,206     298   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings (loss)

     33,588        37,001        28,746        (53,239     46,096   

Net (earnings) loss attributable to noncontrolling interest

     —          —          (12,830     322        (12,508
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings (loss) attributable to Greenbrier

   $ 33,588      $ 37,001      $ 15,916      $ (52,917   $ 33,588   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

25


THE GREENBRIER COMPANIES, INC.

 

The Greenbrier Companies, Inc.

Condensed Consolidating Statement of Operations

For the nine months ended May 31, 2014

(In thousands, unaudited)

 

    Parent     Combined
Guarantor
Subsidiaries
    Combined
Non-
Guarantor
Subsidiaries
    Eliminations     Consolidated  

Revenue

         

Manufacturing

  $ —        $ 617,120      $ 981,040      $ (465,349   $ 1,132,811   

Wheels, Repair & Parts

    —          395,537        —          (4,933     390,604   

Leasing & Services

    865        61,101        1        474        62,441   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    865        1,073,758        981,041        (469,808     1,585,856   

Cost of revenue

         

Manufacturing

    —          552,871        876,395        (459,425     969,841   

Wheels, Repair & Parts

    —          370,626        —          (4,886     365,740   

Leasing & Services

    —          34,152        —          (62     34,090   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    —          957,649        876,395        (464,373     1,369,671   

Margin

    865        116,109        104,646        (5,435     216,185   

Selling and administrative

    31,698        29,802        27,083        451        89,034   

Net gain on disposition of equipment

    —          (13,556     (820     (310     (14,686

Restructuring charges

    —          1,475        —          —          1,475   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) from operations

    (30,833     98,388        78,383        (5,576     140,362   

Other costs

         

Interest and foreign exchange

    8,751        3,180        2,349        —          14,280   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) before income taxes

and earnings (loss) from unconsolidated affiliates

    (39,584     95,208        76,034        (5,576     126,082   

Income tax (expense) benefit

    10,772        (31,059     (18,044     1,623        (36,708
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) before earnings (loss) from unconsolidated affiliates

    (28,812     64,149        57,990        (3,953     89,374   

Earnings (loss) from unconsolidated affiliates

    93,375        7,857        121        (101,081     272   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings (loss)

    64,563        72,006        58,111        (105,034     89,646   

Net (earnings) loss attributable to noncontrolling interest

    —          —          (27,362     2,279        (25,083
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings (loss) attributable to Greenbrier

  $ 64,563      $ 72,006      $ 30,749      $ (102,755   $ 64,563   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

26


THE GREENBRIER COMPANIES, INC.

 

The Greenbrier Companies, Inc.

Consolidating Statement of Comprehensive Income (Loss)

For the three months ended May 31, 2014

 

(In thousands)    Parent      Combined
Guarantor
Subsidiaries
     Combined
Non-
Guarantor
Subsidiaries
    Eliminations     Consolidated  

Net earnings (loss)

   $ 33,588       $ 37,001       $ 28,746      $ (53,239   $ 46,096   

Other comprehensive income (loss)

            

Translation adjustment

     —           73         7        —          80   

Reclassification of

derivative financial

instruments recognized in

net earnings (loss)

     —           276         (272     —          4   

Unrealized gain (loss) on

derivative financial

instruments

     —           139         (798     —          (659

Other (net of tax effect)

     —           —           (4     —          (4
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 
     —           488         (1,067     —          (579
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Comprehensive income (loss)

     33,588         37,489         27,679        (53,239     45,517   

Comprehensive (income) loss attributable to noncontrolling interest

     —           —           (12,823     322        (12,501
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Comprehensive income (loss) attributable to Greenbrier

   $ 33,588       $ 37,489       $ 14,856      $ (52,917   $ 33,016   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

 

27


THE GREENBRIER COMPANIES, INC.

 

The Greenbrier Companies, Inc.

Consolidating Statement of Comprehensive Income (Loss)

For the nine months ended May 31, 2014

 

(In thousands)    Parent      Combined
Guarantor
Subsidiaries
     Combined
Non-
Guarantor
Subsidiaries
    Eliminations     Consolidated  

Net earnings (loss)

   $ 64,563       $ 72,006       $ 58,111      $ (105,034   $ 89,646   

Other comprehensive income (loss)

            

Translation adjustment

     —           86         3,316        —          3,402   

Reclassification of

derivative financial

instruments recognized in

net earnings (loss)

     —           787         (466     —          321   

Unrealized gain (loss) on

derivative financial

instruments

     —           1,245         (791     —          454   

Other (net of tax effect)

     —           —           (3     —          (3
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 
     —           2,118         2,056        —          4,174   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Comprehensive income (loss)

     64,563         74,124         60,167        (105,034     93,820   

Comprehensive (income) loss attributable to noncontrolling interest

     —           —           (27,416     2,279        (25,137
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Comprehensive income (loss) attributable to Greenbrier

   $ 64,563       $ 74,124       $ 32,751      $ (102,755   $ 68,683   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

 

28


THE GREENBRIER COMPANIES, INC.

 

The Greenbrier Companies, Inc.

Condensed Consolidating Statement of Cash Flows

For the nine months ended May 31, 2014

(In thousands, unaudited)

 

(In thousands)    Parent     Combined
Guarantor
Subsidiaries
    Combined
Non-
Guarantor
Subsidiaries
    Eliminations     Consolidated  

Cash flows from operating activities:

          

Net earnings (loss)

   $ 64,563      $ 72,006      $ 58,111      $ (105,034   $ 89,646   

Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities:

          

Deferred income taxes

     (4,194     (1,789     (762     —          (6,745

Depreciation and amortization

     1,427        20,713        8,746        (62     30,824   

Net gain on disposition of equipment

     —          (13,556     (820     (310     (14,686

Stock based compensation expense

     6,454        —          —          —          6,454   

Other

     —          372        16        2,953        3,341   

Decrease (increase) in assets:

          

Accounts receivable

     36,573        (43,867     694        (19,626     (26,226

Inventories

     —          20,456        (42,225     47        (21,722

Leased railcars for syndication

     —          (28,371     —          2,951        (25,420

Other

     (1,220     81        (2,788     1,436        (2,491

Increase (decrease) in liabilities:

          

Accounts payable and accrued liabilities

     (22,404     9,143        31,774        17,994        36,507   

Deferred revenue

     (116     10,798        1,574        2        12,258   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     81,083        45,986        54,320        (99,649     81,740   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from investing activities:

          

Proceeds from sales of assets

     —          38,509        1,006        —          39,515   

Capital expenditures

     (3,543     (9,929     (21,050     —          (34,522

Decrease (increase) in restricted cash

     —          (660     (1     —          (661

Investment in and net advances to unconsolidated affiliates

     (91,939     (7,710     (1,253     99,649        (1,253
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) investing activities

     (95,482     20,210        (21,298     99,649        3,079   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from financing activities:

          

Net changes in revolving notes with maturities of 90 days or less

     —          —          —          —          —     

Proceeds from revolving notes with maturities longer than 90 days

     —          —          34,674        —          34,674   

Repayment of revolving notes with maturities longer than 90 days

     —          —          (64,801     —          (64,801

Intercompany advances

     137,633        (139,741     2,108        —          —     

Proceeds from notes payable

     —          200,000        —          —          200,000   

Repayments of notes payable

     —          (126,400     (421     —          (126,821

Debt issuance costs

     —          (382     —          —          (382

Repurchase of stock

     (26,293     —          —          —          (26,293

Cash distribution to joint venture partner

     —          —          (3,109       (3,109

Investment by joint venture partner

     —          —          419        —          419   

Excess tax benefit from restricted stock awards

     109        —          —          —          109   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     111,449        (66,523     (31,130     —          13,796   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Effect of exchange rate changes

     —          362        2,080        —          2,442   

Increase in cash and cash equivalents

     97,050        35        3,972        —          101,057   

Cash and cash equivalents

          

Beginning of period

     63,173        25        34,237        —          97,435   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

End of period

   $ 160,223      $ 60      $ 38,209      $ —        $ 198,492   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

29


THE GREENBRIER COMPANIES, INC.

 

The Greenbrier Companies, Inc.

Condensed Consolidating Balance Sheet

August 31, 2013

(In thousands)

 

     Parent      Combined
Guarantor
Subsidiaries
     Combined
Non-
Guarantor
Subsidiaries
     Eliminations     Consolidated  

Assets

             

Cash and cash equivalents

   $ 63,173       $ 25       $ 34,237       $ —        $ 97,435   

Restricted cash

     —           1,907         6,900         —          8,807   

Accounts receivable, net

     37,623         217,268         54,412         (154,455     154,848   

Inventories

     —           151,023         165,855         (95     316,783   

Leased railcars for syndication

     —           68,827         —           (347     68,480   

Equipment on operating leases, net

     —           304,234         3,809         (2,575     305,468   

Property, plant and equipment, net

     2,112         103,315         96,106         —          201,533   

Goodwill

     —           57,416         —           —          57,416   

Intangibles and other assets, net

     716,029         118,541         13,515         (769,114     78,971   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
   $ 818,937       $ 1,022,556       $ 374,834       $ (926,586   $ 1,289,741   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Liabilities and Equity

             

Revolving notes

   $ —         $ —         $ 48,209       $ —        $ 48,209   

Accounts payable and accrued liabilities

     137,631         178,662         154,096         (154,451     315,938   

Deferred income taxes

     8,093         86,610         —           (8,663     86,040   

Deferred revenue

     155         8,546         98         39        8,838   

Notes payable

     244,856         126,863         2,170         —          373,889   

Total equity - Greenbrier

     428,202         621,875         141,945         (763,820     428,202   

Noncontrolling interest

     —           —           28,316         309        28,625   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total equity

     428,202         621,875         170,261         (763,511     456,827   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
   $ 818,937       $ 1,022,556       $ 374,834       $ (926,586   $ 1,289,741   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

30


THE GREENBRIER COMPANIES, INC.

 

The Greenbrier Companies, Inc.

Condensed Consolidating Statement of Operations

For the three months ended May 31, 2013

(In thousands, unaudited)

 

     Parent     Combined
Guarantor
Subsidiaries
    Combined
Non-
Guarantor
Subsidiaries
    Eliminations     Consolidated  

Revenue

          

Manufacturing

   $ —        $ 143,411      $ 251,120      $ (109,940   $ 284,591   

Wheels, Repair & Parts

     —          133,069        —          (1,902     131,167   

Leasing & Services

     310        17,596        (1     —          17,905   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     310        294,076        251,119        (111,842     433,663   

Cost of revenue

          

Manufacturing

     —          129,348        234,390        (110,378     253,360   

Wheels, Repair & Parts

     —          122,316        —          (1,840     120,476   

Leasing & Services

     —          9,830        —          (22     9,808   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     —          261,494        234,390        (112,240     383,644   

Margin

     310        32,582        16,729        398        50,019   

Selling and administrative

     9,903        7,771        7,648        —          25,322   

Net gain on disposition of equipment

     —          (4,214     (723     (194     (5,131

Goodwill impairment

     —          76,900        —          —          76,900   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) from operations

     (9,593     (47,875     9,804        592        (47,072

Other costs

          

Interest and foreign exchange

     4,124        1,001        780        —          5,905   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) before income taxes and earnings (loss) from unconsolidated affiliates

     (13,717     (48,876     9,024        592        (52,977

Income tax (expense) benefit

     3,960        (4,716     (1,568     (405     (2,729
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) before earnings (loss) from unconsolidated affiliates

     (9,757     (53,592     7,456        187        (55,706

Earnings (loss) from unconsolidated affiliates

     (46,273     3,317        11        43,027        82   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings (loss)

     (56,030     (50,275     7,467        43,214        (55,624

Net (earnings) loss attributable to noncontrolling interest

     —          —          (383     (23     (406
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings (loss) attributable to Greenbrier

   $ (56,030   $ (50,275   $ 7,084      $ 43,191      $ (56,030
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

31


THE GREENBRIER COMPANIES, INC.

 

The Greenbrier Companies, Inc.

Condensed Consolidating Statement of Operations

For the nine months ended May 31, 2013

(In thousands)

 

     Parent     Combined
Guarantor
Subsidiaries
    Combined
Non-
Guarantor
Subsidiaries
    Eliminations     Consolidated  

Revenue

          

Manufacturing

   $ —        $ 473,213      $ 690,319      $ (299,526   $ 864,006   

Wheels, Repair & Parts

     —          363,799        —          (8,580     355,219   

Leasing & Services

     787        52,208        —          (17     52,978   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     787        889,220        690,319        (308,123     1,272,203   

Cost of revenue

          

Manufacturing

     —          431,221        646,924        (303,643     774,502   

Wheels, Repair & Parts

     —          333,823        —          (8,737     325,086   

Leasing & Services

     —          26,617        —          (75     26,542   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     —          791,661        646,924        (312,455     1,126,130   

Margin

     787        97,559        43,395        4,332        146,073   

Selling and administrative

     30,014        23,309        23,041        —          76,364   

Net gain on disposition of equipment

     —          (7,781     (1,276     (558     (9,615

Goodwill impairment

     —          76,900        —          —          76,900   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) from operations

     (29,227     5,131        21,630        4,890        2,424   

Other costs

          

Interest and foreign exchange

     12,207        2,870        3,251        (201     18,127   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) before income taxes and earnings (loss) from unconsolidated affiliates

     (41,434     2,261        18,379        5,091        (15,703

Income tax (expense) benefit

     16,645        (24,086     (3,964     (1,500     (12,905
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) before earnings (loss) from unconsolidated affiliates

     (24,789     (21,825     14,415        3,591        (28,608

Earnings (loss) from unconsolidated affiliates

     (6,975     3,755        27        3,130        (63
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings (loss)

     (31,764     (18,070     14,442        6,721        (28,671

Net (earnings) loss attributable to noncontrolling interest

     —          —          (1,570     (1,523     (3,093
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings (loss) attributable to Greenbrier

   $ (31,764   $ (18,070   $ 12,872      $ 5,198      $ (31,764
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

32


THE GREENBRIER COMPANIES, INC.

 

The Greenbrier Companies, Inc.

Consolidating Statement of Comprehensive Income (Loss)

For the three months ended May 31, 2013

 

(In thousands)    Parent     Combined
Guarantor
Subsidiaries
    Combined
Non-
Guarantor
Subsidiaries
    Eliminations     Consolidated  

Net earnings (loss)

   $ (56,030   $ (50,275   $ 7,467      $ 43,214      $ (55,624

Other comprehensive income (loss)

          

Translation adjustment

     —          81        (1,842     —          (1,761

Reclassification of derivative financial instruments recognized in net earnings (loss)

     —          260        (155     —          105   

Unrealized loss on derivative financial instruments

     —          (16     (1,309     —          (1,325

Other (net of tax effect)

     —          —          5        —          5   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     —          325        (3,301     —          (2,976
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss)

     (56,030     (49,950     4,166        43,214        (58,600

Comprehensive income attributable to noncontrolling interest

     —          —          (351     (23     (374
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss) attributable to Greenbrier

   $ (56,030   $ (49,950   $ 3,815      $ 43,191      $ (58,974
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

33


THE GREENBRIER COMPANIES, INC.

 

The Greenbrier Companies, Inc.

Consolidating Statement of Comprehensive Income (Loss)

For the nine months ended May 31, 2013

 

(In thousands)    Parent     Combined
Guarantor
Subsidiaries
    Combined
Non-
Guarantor
Subsidiaries
    Eliminations     Consolidated