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 February 29, 2008

o 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

(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 is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions 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     ______ (Do not check if a smaller reporting company)		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 March 28, 2008 was 16,366,250 shares.

THE GREENBRIER COMPANIES, INC.

PART I. FINANCIAL INFORMATION

Item 1. Condensed Financial Statements

Consolidated Balance Sheets
(In thousands, except per share amounts, unaudited)

		February 29,				August 31,
		2008				2007
Assets
Cash and cash equivalents		$	6,434			$	20,808
Restricted cash			2,680				2,693
Accounts receivable			176,069				157,038
Inventories			207,844				194,883
Assets held for sale			103,405				42,903
Equipment on operating leases			292,420				294,326
Investment in direct finance leases			8,649				9,040
Property, plant and equipment			119,632				112,813
Goodwill			169,001				168,987
Intangibles and other assets			72,263				69,258
		$	1,158,397			$	1,072,749
Liabilities and Stockholders’ Equity
Revolving notes		$	113,418			$	39,568
Accounts payable and accrued liabilities			253,263				239,713
Participation			738				4,355
Deferred income taxes			65,406				61,410
Deferred revenue			16,152				18,052
Notes payable			457,347				460,915
Minority interest			8,115				5,146
Commitments and contingencies (Note 13)			-				-
Stockholders’ equity:
Preferred stock - without par value; 25,000 shares authorized; none outstanding			-				-
Common stock - without par value; 50,000 shares authorized; 16,366 and 16,169 shares outstanding at February 29, 2008 and August 31, 2007			16				16
Additional paid-in capital			80,072				78,332
Retained earnings			166,731				165,408
Accumulated other comprehensive loss			(2,861	)			(166	)
			243,958				243,590
		$	1,158,397			$	1,072,749

The accompanying notes are an integral part of these statements.

2

THE GREENBRIER COMPANIES, INC.

Consolidated Statements of Operations
(In thousands, except per share amounts, unaudited)

		Three Months Ended								Six Months Ended
		February 29,				February 28,				February 29,				February 28,
		2008				2007				2008				2007
Revenue
Manufacturing		$	123,394			$	119,201			$	282,588			$	287,893
Refurbishment & parts			112,576				95,311				216,466				146,546
Leasing & services			23,603				25,466				46,898				52,161
			259,573				239,978				545,952				486,600
Cost of revenue
Manufacturing			118,225				115,822				268,790				277,509
Refurbishment & parts			94,396				80,114				182,347				125,121
Leasing & services			12,279				12,220				24,204				23,031
			224,900				208,156				475,341				425,661
Margin			34,673				31,822				70,611				60,939
Other costs
Selling and administrative			21,000				18,800				41,184				35,925
Interest and foreign exchange			9,854				10,416				20,273				20,056
Special charges			2,112				16,485				2,302				16,485
			32,966				45,701				63,759				72,466
Earnings (loss) before income taxes, minority interest and equity in unconsolidated subsidiaries			1,707				(13,879	)			6,852				(11,527	)
Income tax benefit (expense)			(1,904	)			8,229				(4,859	)			7,649
Earnings (loss) before minority interest and equity in unconsolidated subsidiaries			(197	)			(5,650	)			1,993				(3,878	)
Minority interest			1,367				42				1,741				40
Equity in earnings (loss) of unconsolidated subsidiaries			253				(463	)			331				(363	)
Net earnings (loss)		$	1,423			$	(6,071	)		$	4,065			$	(4,201	)
Basic earnings (loss) per common share		$	0.09			$	( 0.38	)		$	0.25			$	(0.26	)
Diluted earnings (loss) per common share		$	0.09			$	( 0.38	)		$	0.25			$	(0.26	)
Weighted average common shares:
Basic			16,290				15,982				16,230				15,972
Diluted			16,311				16,022				16,254				16,016

The accompanying notes are an integral part of these statements.

3

THE GREENBRIER COMPANIES, INC.

Consolidated Statements of Cash Flows
(In thousands, unaudited)

		Six Months Ended
		February 29,				February 28,
		2008				2007
Cash flows from operating activities
Net earnings (loss)		$	4,065			$	(4,201	)
Adjustments to reconcile net earnings (loss) to net cash used in operating activities:
Deferred income taxes			3,996				(2,587	)
Depreciation and amortization			16,519				16,178
Gain on sales of equipment			(2,006	)			(5,775	)
Special charges			2,302				16,485
Minority interest			(1,681	)			(40	)
Other			(120	)			146
Decrease (increase) in assets (net of acquisitions):
Accounts receivable			(12,269	)			(28,988	)
Inventories			(2,639	)			(23,533	)
Assets held for sale			(66,960	)			(32,224	)
Other			(3,168	)			(2,057	)
Increase (decrease) in liabilities (net of acquisitions):
Accounts payable and accrued liabilities			(1,271	)			3,884
Participation			(3,617	)			(8,717	)
Deferred revenue			(4,082	)			(5,276	)
Net cash used in operating activities			(70,931	)			(76,705	)
Cash flows from investing activities
Principal payments received under direct finance leases			179				340
Proceeds from sales of equipment			6,414				64,662
Investment in and net advances to unconsolidated subsidiary			347				115
Acquisitions, net of cash acquired			-				(264,470	)
Decrease (increase) in restricted cash			547				(481	)
Capital expenditures			(15,998	)			(78,352	)
Net cash used in investing activities			(8,511	)			(278,186	)
Cash flows from financing activities
Changes in revolving notes			64,259				219,777
Proceeds from issuance of notes payable			12				(71	)
Repayments of notes payable			(4,183	)			(3,246	)
Repayment of subordinated debt			-				(1,267	)
Dividends			(2,605	)			(2,557	)
Stock options and restricted stock awards exercised			1,743				1,648
Excess tax benefit (expense) of stock options exercised			(3	)			1,772
Investment by joint venture partner			4,650				1,650
Net cash provided by financing activities			63,873				217,706
Effect of exchange rate changes			1,195				460
Decrease in cash and cash equivalents			(14,374	)			(136,725	)
Cash and cash equivalents
Beginning of period			20,808				142,894
End of period		$	6,434			$	6,169
Cash paid during the period for
Interest		$	17,134			$	16,206
Income taxes		$	2,125			$	1,888
Supplemental disclosure of non-cash activity:
Assumption of Rail Car America capital lease obligation		$	-			$	119
Seller receivable netted against acquisition note		$	503			$	-
Pension plan adjustment		$	6,913			$	-
Supplemental disclosure of acquisitions (see note 2)
Assets acquired, net of cash		$	-			$	(312,449	)
Liabilities assumed			-				41,926
Acquisition note payable			-				3,000
Cash acquired			-				3,053
Acquisitions, net of cash acquired		$	-			$	264,470

The accompanying notes are an integral part of these statements.

4

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 February 29, 2008 and for the three and six months ended February 29, 2008 and February 28, 2007 have been prepared without audit and reflect all adjustments (consisting of normal recurring accruals except for special charges) which, in the opinion of management, are necessary for a fair presentation of the financial position and operating results for the periods indicated. The results of operations for the three and six months ended February 29, 2008 are not necessarily indicative of the results to be expected for the entire year ending August 31, 2008. Certain reclassifications have been made to the prior period’s Consolidated Financial Statements to conform to the current year presentation.

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 2007 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 July 2006, the Financial Accounting Standards Board (FASB) issued interpretation (FIN) No. 48, Accounting for Uncertainties in Income Tax – an Interpretation of FASB Statement No. 109. This interpretation clarifies the accounting for uncertainties in income tax provisions. The Company adopted the provisions of FIN 48 on September 1, 2007. At the adoption date, the Company identified certain tax benefits taken for which a reserve for uncertain tax positions was required under FIN 48. The total amount of this reserve, including interest and penalties, is $11.8 million, of which $8.9 million is associated with purchase accounting adjustments on the acquisition of Meridian Rail Holdings Corp. These amounts had previously been reserved under Statement of Financial Accounting Standard (SFAS) No. 5 with the exception of $0.1 million which was recorded as an adjustment to retained earnings in the three months ended November 30, 2007. The Company recorded additional interest expense of $0.5 million relating to reserves for uncertain tax provisions in the first half of fiscal year 2008. Interest and penalties related to income taxes are not classified as a component of income tax expense. When unrecognized tax benefits are realized, the benefit related to deductible differences attributable to ordinary operations will be recognized as a reduction of income tax expense. The benefit related to deductible differences attributable to purchase accounting may result in a reduction to goodwill. Within the next 12 months the Company expects a decrease of approximately $9.0 million in the current FIN 48 reserve, with a corresponding reduction in goodwill of $8.2 million and selling and administrative expenses of $0.8 million.

Prospective Accounting Changes - In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. This statement defines fair value, establishes a framework for measuring fair value and enhances disclosures about fair value measurements. The measurement and disclosure requirements are effective for the Company for the fiscal year beginning September 1, 2008. In January 2008, the FASB issued FASB Staff Position (FSP) FAS 157-b to defer SFAS No. 157’s effective date for all non-financial assets and liabilities, except those items recognized or disclosed at fair value on an annual or more frequently recurring basis. This position is effective for the Company beginning September 1, 2009. Management is evaluating whether there will be any impact on the Consolidated Financial Statements from the adoption of SFAS No. 157.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities which is effective for the Company beginning September 1, 2008. SFAS No. 159 permits entities to choose to measure many financial assets and financial liabilities at fair value rather than historical value. Unrealized

THE GREENBRIER COMPANIES, INC.

gains and losses on items for which the fair value option is elected are reported in earnings. Management is evaluating the alternatives allowed pursuant to the adoption of SFAS No. 159.

In December 2007, the FASB issued SFAS No. 141R, Business Combinations. This statement establishes the principles and requirements for how an acquirer: recognizes and measures the assets acquired, liabilities assumed, and non-controlling interest; recognizes and measures goodwill; and identifies disclosures. This statement is effective for the Company for business combinations entered into on or after September 1, 2009.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements-an amendment of ARB No. 51. This statement establishes reporting standards for non-controlling interests in subsidiaries. This standard is effective for the Company beginning September 1, 2009. Management is evaluating the impact of this statement on its Consolidated Financial Statements.

Note 2 – Acquisitions

Rail Car America
On September 11, 2006, the Company purchased substantially all of the operating assets of Rail Car America (RCA), its American Hydraulics division and of Brandon Corp., its wholly owned subsidiary. RCA, a provider of intermodal and conventional railcar repair services in North America, operates from four repair facilities in the United States. RCA also reconditions and repairs end-of-railcar cushioning units through its American Hydraulics division and operates a switching line in Nebraska through Brandon Corp. The purchase price of the net assets consisted of $29.1 million of cash and a $3.0 million promissory note due in September 2008. The financial results of these operations since the acquisition are reported in the Company’s consolidated financial statements as part of the refurbishment & parts segment. The impact of this acquisition was not material to the Company’s consolidated results of operations; therefore, pro forma financial information has not been included.

The fair value of the net assets acquired from RCA was as follows:

(In thousands)
Accounts receivable		$	628
Inventories			7,830
Property, plant and equipment			22,053
Intangibles and other			4,102
Total assets acquired			34,613
Accounts payable and accrued liabilities			2,235
Notes payable			229
Total liabilities assumed			2,464
Net assets acquired		$	32,149

Meridian Rail Holdings Corp.

On November 6, 2006, the Company acquired 100% of the stock of Meridian Rail Holdings Corp. (Meridian) for $237.9 million in cash which includes the purchase price of $227.5 million plus working capital adjustments. Meridian is a leading supplier of wheel maintenance services to the North American freight car industry. Operating out of six facilities, Meridian supplies replacement wheel sets and axles to approximately 170 freight car maintenance locations where worn or damaged wheels, axles, or bearings are reconditioned or replaced. Meridian also performs coupler reconditioning and railcar repair at other facilities. The financial results since the acquisition are reported in the Company’s consolidated financial statements as part of the refurbishment & parts segment.

THE GREENBRIER COMPANIES, INC.

The fair value of the net assets acquired in the Meridian transaction was as follows:

(In thousands)
Cash and cash equivalents		$	3,053
Accounts receivable			20,221
Inventories			52,895
Property, plant and equipment			14,473
Goodwill			163,669
Intangibles and other			36,991
Total assets acquired			291,302
Accounts payable and accrued liabilities			40,013
Deferred income taxes			13,404
Total liabilities assumed			53,417
Net assets acquired		$	237,885

As a result of the allocation of the purchase price among assets and liabilities, $163.7 million in goodwill was recorded in the consolidated financial statements.

The unaudited pro forma financial information presented below for the six months ended February 28, 2007 has been prepared to illustrate Greenbrier’s consolidated results of operations had the acquisition of Meridian occurred at the beginning of the period presented. The financial information for the six months ended February 29, 2008 is included for comparison purposes only.

(In thousands)		Six Months Ended
		February 29,				February 28,
		2008				2007
Revenue		$	545,952			$	537,433
Net earnings (loss)		$	4,065			$	580
Basic earnings (loss) per share		$	0.25			$	0.04
Diluted earnings (loss) per share		$	0.25			$	0.04

The unaudited pro forma financial information is not necessarily indicative of what actual results would have been had the transaction occurred at the beginning of the fiscal year, and may not be indicative of the results of future operations of the Company.

Other Acquisitions

In April 2007, the Company acquired a leasing management services operation for $4.3 million whose operations were not material to the Company’s consolidated results of operations; therefore, proforma financial information has not been included. As a result of the allocation of purchase price among assets and liabilities, $3.1 million in goodwill was recorded.

Note 3 – Special Charges

In April 2007, the Company’s board of directors approved the permanent closure of the Company’s Canadian railcar manufacturing facility. As a result of the facility closure decision, special charges of $2.1 million and $2.3 million were recorded during the three and six months ended February 29, 2008 consisting of severance costs and professional and other fees associated with the closure.

Special charges of $16.5 million were recorded during the quarter ended February 28, 2007 for impairment of long lived assets at the Company’s Canadian railcar manufacturing facility. These charges consisted of $14.1 million

THE GREENBRIER COMPANIES, INC.

associated with property, plant and equipment, $1.3 million related to inventory and $1.1 million write-off of goodwill and other.

Note 4 – Inventories

(In thousands)

		February 29,				August 31,
		2008				2007
Supplies and raw materials		$	127,847			$	111,957
Work-in-process			84,194				86,733
Lower of cost or market adjustment			(4,197	)			(3,807	)
		$	207,844			$	194,883

Note 5 – Assets Held for Sale

(In thousands)

		February 29,				August 31,
		2008				2007
Railcars held for sale		$	70,395			$	12,922
Railcars in transit to customer			15,455				8,958
Finished goods — parts			17,555				21,023
		$	103,405			$	42,903

Note 6 – Warranty Accruals

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

Warranty accrual activity:

(In thousands)		Three Months Ended								Six Months Ended
		February 29,				February 28,				February 29,				February 28,
		2008				2007				2008				2007
Balance at beginning of period		$	16,390			$	16,501			$	15,911			$	14,201
Charged to cost of revenue			401				1,722				1,312				2,665
Payments			(1,203	)			(988	)			(2,237	)			(1,658	)
Currency translation effect			279				(194	)			881				9
Acquisition			-				-				-				1,824
Balance at end of period		$	15,867			$	17,041			$	15,867			$	17,041

Note 7 – Revolving Notes

All amounts originating in foreign currency have been translated at the February 29, 2008 exchange rate for the following discussion.  Senior secured revolving credit facilities, consisting of two components, aggregated $339.8 million as of February 29, 2008.   A $290.0 million revolving line of credit is available through November 2011 to

THE GREENBRIER COMPANIES, INC.

provide working capital and interim financing of equipment for the United States and Mexican operations.  Advances under the U.S. facility bear interest at variable rates that depend on the type of borrowing and the defined ratio of debt to total capitalization.  Lines of credit totaling $49.8 million are available for working capital needs of the European manufacturing operation. These European credit facilities have maturities that range from April 30, 2008 through August 28, 2008. 

 As of February 29, 2008 outstanding borrowings under these facilities aggregated $113.4 million in revolving notes and $3.2 million in letters of credit, consisting of $66.4 million in revolving notes and $3.2 million in letters of credit outstanding under the United States credit facility and $47.0 million in revolving notes under the European credit facilities. Available borrowings for all credit facilities are generally based on defined levels of inventory, receivables, and leased equipment, as well as total debt to consolidated capitalization and interest coverage ratios which at February 29, 2008 levels would provide for maximum additional borrowing of $160.5 million. 

Note 8 – Comprehensive Income (Loss)

The following is a reconciliation of net earnings (loss) to comprehensive income (loss):

(In thousands)		Three Months Ended								Six Months Ended
		February 29,				February 28,				February 29,				February 28,
		2008				2007				2008				2007
Net earnings (loss)		$	1,423			$	(6,071	)		$	4,065			$	(4,201	)
Reclassification of derivative financial instruments recognized in net earnings (net of tax)			(24	)			(32	)			(48	)			(427	)
Unrealized gain on derivative financial instruments (net of tax)			501				253				494				286
Pension plan adjustment (1)			(6,913	)			-				(6,913	)			-
Foreign currency translation adjustment (net of tax)			1,349				(801	)			3,772				(448	)
Comprehensive income (loss)		$	(3,664	)		$	(6,651	)		$	1,370			$	(4,790	)

(1) The current year pension plan adjustment relates to retroactive legislation enacted by the Province of Nova Scotia, Canada requiring our Canadian subsidiary to contribute deficit funding and grow-in benefits to the pension plan for employees covered by a collective bargaining agreement at our Canadian manufacturing facility. The Company has not guaranteed any obligations of TrentonWorks and does not believe it will be liable for any of TrentonWorks’ liabilities.

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

(In thousands)		Unrealized
		Gains on								Foreign				Accumulated
		Derivative				Pension				Currency				Other
		Financial				Plan				Translation				Comprehensive
		Instruments				Adjustment				Adjustment				Income (Loss)
Balance, August 31, 2007		$	(239	)		$	(316	)		$	389			$	(166	)
Six months activity			446				(6,913	)			3,772				(2,695	)
Balance, February 29, 2008		$	207			$	(7,229	)		$	4,161			$	(2,861	)

THE GREENBRIER COMPANIES, INC.

Note 9 – Earnings Per Share

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

(In thousands)		Three Months Ended								Six Months Ended
		February 29,				February 28,				February 29,				February 28,
		2008				2007				2008				2007
Weighted average basic common shares outstanding			16,290				15,982				16,230				15,972
Dilutive effect of employee stock options			21				40				24				44
Weighted average diluted common shares outstanding			16,311				16,022				16,254				16,016

Weighted average diluted common shares outstanding includes the incremental shares that would be issued upon the assumed exercise of stock options. No options were anti-dilutive for the three and six months ended February 29, 2008 and February 28, 2007.

Note 10 – Stock Based Compensation

All stock options were vested prior to September 1, 2005 and accordingly no compensation expense was recorded for stock options for the three and six months ended February 29, 2008 and February 28, 2007. The value of stock awarded under restricted stock grants is amortized as compensation expense over the vesting period of two to five years. For the three and six months ended February 29, 2008, $0.9 million and $1.7 million in compensation expense was recognized related to restricted stock grants. For the three and six months ended February 28, 2007, $0.8 million and $1.5 million in compensation expense was recognized related to restricted stock grants.

Note 11 – 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 Pound Sterling and 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 unrealized gains and losses are recorded in accumulated other comprehensive income (loss).

At February 29, 2008 exchange rates, forward exchange contracts for the sale of Euro aggregated $6.3 million and sale of Pound Sterling aggregated $12.7 million. Adjusting the foreign currency exchange contracts to the fair value of the cash flow hedges at February 29, 2008 resulted in an unrealized pre-tax gain of $0.5 million that was recorded in the line item accumulated other comprehensive income (loss). The fair value of the contracts is included in accounts payable and accrued liabilities on the Consolidated Balance Sheet. As the contracts mature at various dates through November 2008, 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 income (loss) would be reclassified to the current year’s results of operations.

At February 29, 2008 exchange rates, interest rate swap agreements had a notional amount of $9.8 million and mature in March 2011. The fair value of these cash flow hedges at February 29, 2008 resulted in an unrealized pre-tax loss of $0.5 million. The loss is included in accumulated other comprehensive income (loss) and the fair value of the contracts is included in accounts payable and accrued liabilities on the Consolidated Balance Sheet. As interest expense on the underlying debt is recognized, amounts corresponding to the interest rate swaps are reclassified from accumulated other comprehensive income (loss) and charged or credited to interest expense. At February 29, 2008 interest rates approximately $0.1 million would be reclassified to interest expense in the next 12 months.

THE GREENBRIER COMPANIES, INC.

Note 12 – Segment Information

Greenbrier currently operates in three reportable segments: manufacturing, refurbishment & 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 2007 Annual Report on Form 10-K. Performance is evaluated based on margin. Intersegment sales and transfers are accounted for at fair value as if the sales or transfers were to third parties. While intercompany transactions are treated like third-party transactions to evaluate segment performance, the revenues and related expenses are eliminated in consolidation and therefore do not impact consolidated results.

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

(In thousands)

		Three Months Ended								Six Months Ended
		February 29,				February 28,				February 29,				February 28,
		2008				2007				2008				2007
Revenue:
Manufacturing		$	172,417			$	156,263			$	347,851			$	340,682
Refurbishment & parts			113,806				96,938				219,083				149,952
Leasing & services			23,723				24,060				47,065				48,789
Intersegment eliminations			(50,373	)			(37,283	)			(68,047	)			(52,823	)
		$	259,573			$	239,978			$	545,952			$	486,600
Margin:
Manufacturing		$	5,169			$	3,379			$	13,798			$	10,384
Refurbishment & parts			18,180				15,197				34,119				21,425
Leasing & services			11,324				13,246				22,694				29,130
		$	34,673			$	31,822			$	70,611			$	60,939
Segment margin		$	34,673			$	31,822			$	70,611			$	60,939
Less: unallocated expenses:
Selling and administrative			21,000				18,800				41,184				35,925
Interest and foreign exchange			9,854				10,416				20,273				20,056
Special charges			2,112				16,485				2,302				16,485
Earnings (loss) before income tax expense, minority interest and equity in unconsolidated subsidiary		$	1,707			$	(13,879	)		$	6,852			$	(11,527	)

Note 13 – Commitments and Contingencies

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. The most significant litigation is as follows:

On April 20, 2004, BC Rail Partnership initiated litigation against the Company in the Supreme Court of Nova Scotia, alleging breach of contract and negligent manufacture and design of railcars which were involved in a 1999 derailment. No trial date has been set.

THE GREENBRIER COMPANIES, INC.

On November 3, 2004, and November 4, 2004, in the District Court of Tarrant County, Texas, and in the District Court of Lancaster County, Nebraska, respectively, litigation was initiated against the Company by Burlington Northern Santa Fe Railway (BNSF), one of our largest customers. BNSF alleges the failure of a supplier-provided component part on a railcar manufactured by Greenbrier in 1988, resulted in a derailment and a chemical spill. On June 24, 2006, the District Court of Tarrant County, Texas, entered an order granting the Company’s motion for summary judgment as to all claims. BNSF appealed the district court’s decision to the Texas State Court of Appeals which affirmed the prior court’s decision as to all claims. BNSF has petitioned the Texas Supreme Court for review.

Greenbrier and a customer, SEB Finans AB (SEB), have raised performance concerns related to a component that the Company installed on 372 railcar units with an aggregate sales value of approximately $20.0 million produced under a contract with SEB. On December 9, 2005, SEB filed a Statement of Claim in an arbitration proceeding in Stockholm, Sweden, against Greenbrier alleging that the cars were defective and could not be used for their intended purpose.  A settlement agreement was entered into effective February 28, 2007 pursuant to which the railcar units previously delivered were to be repaired and the remaining units completed and delivered to SEB. Current estimates of potential costs to Greenbrier do not exceed amounts accrued for warranty. As the terms of the settlement agreement continue to be implemented, the parties have requested that the suspended arbitration proceedings be terminated.

Management intends to vigorously defend its position in each of the open foregoing cases and believes that any ultimate liability resulting from the above litigation will not materially affect the Company’s Consolidated Financial Statements.

The Company is involved as a defendant in other litigation initiated in the ordinary course of business. 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.

When the Company acquired the assets of the Freight Wagon Division of DaimlerChrysler in January 2000, it acquired the contract to build 201 freight cars for Okombi, a European freight car leasing company. Subsequently, Okombi made breach of warranty and late delivery claims against the Company which grew out of design and certification problems. All of these issues were settled as of March 2004. Recently, new allegations have been made, the most serious of which involve cracks to the structure of the cars. Okombi has been required to remove all 201 freight cars from service, and a formal claim has been made against the Company. Legal and commercial evaluations are on-going to determine what obligation the Company might have, if any, to remedy the alleged defects.

Environmental studies have been conducted of the Company’s owned and leased properties that indicate additional investigation and some remediation on certain properties may be necessary. The Company’s Portland, Oregon manufacturing facility is located adjacent to the Willamette River. The United States Environmental Protection Agency (EPA) has classified portions of the river bed, including the portion fronting Greenbrier’s facility, as a federal “National Priority List” or “Superfund” site due to sediment contamination (the Portland Harbor Site). Greenbrier and more than 60 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 they 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, have signed an Administrative Order of Consent to perform a remedial investigation/feasibility study 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 study is expected to be completed in 2010. In May 2006, the EPA notified several additional entities, including other federal agencies that it is prepared to issue unilateral orders compelling additional participation in the remedial investigation. In addition, the Company has entered into a Voluntary Clean-Up Agreement with the Oregon Department of Environmental Quality 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 to the environment. The

THE GREENBRIER COMPANIES, INC.

Company is also conducting groundwater remediation relating to a historical spill on the property which antedates its ownership.

Because these environmental investigations are still underway, the Company is unable to determine the amount of ultimate liability relating to these matters. Based on the results of the pending investigations and future assessments of natural resource damages, Greenbrier 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 results of operations, or the value of its Portland property.

Prior to December 31, 2002, the Company entered into contingent rental assistance agreements, aggregating $6.9 million, on certain railcars subject to leases that have been sold to third parties. These agreements guarantee the purchasers a minimum lease rental, subject to a maximum defined rental assistance amount, over remaining periods up to five years. A liability is established and revenue is reduced in the period during which a determination can be made that it is probable that a rental shortfall will occur and the amount can be estimated. For the three and six months ended February 29, 2008 an accrual of $0.4 million and $1.0 million was recorded to cover future obligations and no accruals were recorded for the three and six months ended February 28, 2007. The accounting for any future rental assistance agreements will comply with the guidance required by FASB Interpretation (FIN) 45 which pertains to contracts entered into or modified subsequent to December 31, 2002.

A portion of leasing & services revenue is derived from “car hire” which is a fee that a railroad pays for the use of railcars owned by other railroads or third parties. Car hire earned by a railcar is usually made up of hourly and mileage components. Deprescription is a system whereby railcar owners and users have the right to negotiate car hire rates. If the railcar owner and railcar user cannot come to an agreement on a car hire rate then either party has the right to call for arbitration. In arbitration either the owner’s or user’s rate is selected and that rate becomes effective for a one-year period. There is some risk that car hire rates could be negotiated or arbitrated to lower levels in the future. This could reduce future car hire revenue for the Company which amounted to $6.6 million and $13.2 million for the three and six months ended February 29, 2008 and $6.1 million and $12.1 million for the three and six months ended February 28, 2007.

In accordance with customary business practices in Europe, the Company has $16.5 million in third party performance, advance payment and warranty guarantee facilities, all of which have been utilized as of February 29, 2008. To date no amounts have been drawn under these performance, advance payment and warranty guarantee facilities.

At February 29, 2008, an unconsolidated subsidiary had $5.6 million of third party debt, for which the Company has guaranteed 33% or approximately $1.9 million. In the event that there is a change in control or insolvency by any of the three 33% investors that have guaranteed the debt, the remaining investors’ share of the guarantee will increase proportionately.

The Company has outstanding letters of credit aggregating $3.2 million associated with facility leases and payroll.

Note 14 – Guarantor/Non Guarantor

The $235 million combined senior unsecured notes (the Notes) issued on May 11, 2005 and November 21, 2005 and $100 million of convertible senior notes issued on May 22, 2006 are fully and unconditionally and jointly and severally guaranteed by substantially all of Greenbrier’s material wholly owned United States 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 Holdings Corp., Meridian Rail Acquisition Corp., Meridian Rail Mexico City Corp., Brandon Railroad LLC and Gunderson Specialty Products, LLC. No other subsidiaries guarantee the Notes.

THE GREENBRIER COMPANIES, INC.

The following represents the supplemental consolidating condensed financial information of Greenbrier and its guarantor and non guarantor subsidiaries, as of February 29, 2008 and August 31, 2007 and for the three and six months ended February 29, 2008 and February 28, 2007. 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 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.

The condensed consolidating statement of cash flows for the six months ended February 28, 2007 has been restated to correct the presentation of transactions that are settled on a net basis through the Company’s intercompany payables and receivables. The Company had previously presented intercompany advances and investment in subsidiaries between the parent and its guarantor and non-guarantor subsidiaries as operating activities. These transactions should have been presented in financing and investing activities. As any changes in the classification between operating, investing and financing are eliminated in consolidation, there is no impact to the consolidated statement of cash flows for the six months ended February 28, 2007.

THE GREENBRIER COMPANIES, INC.

The Greenbrier Companies, Inc.

Condensed Consolidating Balance Sheet
February 29, 2008
(In thousands, unaudited)

										Combined
						Combined				Non-
						Guarantor				Guarantor
		Parent				Subsidiaries				Subsidiaries				Eliminations				Consolidated
ASSETS
Cash and cash equivalents		$	(2,607	)		$	-			$	9,041			$	-			$	6,434
Restricted cash			-				-				2,680				-				2,680
Accounts receivable			169,047				(35,733	)			42,755				-				176,069
Inventories			-				103,845				103,999								207,844
Assets held for sale			-				83,130				20,135				140				103,405
Equipment on operating leases			-				294,250				-				(1,830	)			292,420
Investment in direct finance leases			-				8,649				-				-				8,649
Property, plant and equipment			3,187				77,496				38,949				-				119,632
Goodwill			-				168,865				-				136				169,001
Intangibles and other assets			456,530				88,646				4,565				(477,478	)			72,263
		$	626,157			$	789,148			$	222,124			$	(479,032	)		$	1,158,397
LIABILITIES AND STOCKHOLDERS’ EQUITY
Revolving notes		$	66,400			$	-			$	47,018			$	-			$	113,418
Accounts payable and accrued liabilities			(31,710	)			178,740				106,233				-				253,263
Participation			-				738				-				-				738
Deferred income taxes			6,473				62,392				(3,385	)			(74	)			65,406
Deferred revenue			1,009				6,427				8,716				-				16,152
Notes payable			340,027				103,566				13,754				-				457,347
Minority interest			-				-				(13	)			8,128				8,115
STOCKHOLDERS’ EQUITY			243,958				437,285				49,801				(487,086	)			243,958
		$	626,157			$	789,148			$	222,124			$	(479,032	)		$	1,158,397

THE GREENBRIER COMPANIES, INC.

The Greenbrier Companies, Inc.
     Condensed Consolidating Statement of Operations
     For the three months ended February 29, 2008
     (In thousands, unaudited)

										Combined
						Combined				Non-
						Guarantor				Guarantor
		Parent				Subsidiaries				Subsidiaries				Eliminations				Consolidated
Revenue
Manufacturing		$	-			$	78,046			$	125,065			$	(79,717	)		$	123,394
Refurbishment & parts			-				112,562				14				-				112,576
Leasing & services			203				23,515				-				(115	)			23,603
			203				214,123				125,079				(79,832	)			259,573
Cost of revenue
Manufacturing			-				75,526				123,035				(80,336	)			118,225
Refurbishment & parts			-				94,384				12				-				94,396
Leasing & services			-				12,294				-				(15	)			12,279
			-				182,204				123,047				(80,351	)			224,900
Margin			203				31,919				2,032				519				34,673
Other costs
Selling and administrative			7,863				8,681				4,457				(1	)			21,000
Interest and foreign exchange			6,854				1,586				1,529				(115	)			9,854
Special charges			-				-				2,112				-				2,112
			14,717				10,267				8,098				(116	)			32,966
Earnings (loss) before income taxes, minority interest and equity in earnings (loss) of unconsolidated subsidiaries			(14,514	)			21,652				(6,066	)			635				1,707
Income tax (expense) benefit			7,033				(8,776	)			(105	)			(56	)			(1,904	)
			(7,481	)			12,876				(6,171	)			579				(197	)
Minority interest			-				-				6				1,361				1,367
Equity in earnings (loss) of unconsolidated subsidiaries			8,904				1,011				-				(9,662	)			253
Net earnings (loss)		$	1,423			$	13,887			$	(6,165	)		$	(7,722	)		$	1,423

THE GREENBRIER COMPANIES, INC.

The Greenbrier Companies, Inc.
     Condensed Consolidating Statement of Operations
     For the six months ended February 29, 2008
     (In thousands, unaudited)

										Combined
						Combined				Non-
						Guarantor				Guarantor
		Parent				Subsidiaries				Subsidiaries				Eliminations				Consolidated
Revenue
Manufacturing		$	-			$	180,475			$	252,547			$	(150,434	)		$	282,588
Refurbishment & parts							216,443				23				-				216,466
Leasing & services			661				46,464				-				(227	)			46,898
			661				443,382				252,570				(150,661	)			545,952
Cost of revenue
Manufacturing			-				174,098				245,167				(150,475	)			268,790
Refurbishment & parts			-				182,328				19				-				182,347
Leasing & services			-				24,235				-				(31	)			24,204
			-				380,661				245,186				(150,506	)			475,341
Margin			661				62,721				7,384				(155	)			70,611
Other costs
Selling and administrative			14,636				17,083				9,466				(1	)			41,184
Interest and foreign exchange			13,442				3,279				3,781				(229	)			20,273
Special charges			-				-				2,302				-				2,302
			28,078				20,362				15,549				(230	)			63,759
Earnings (loss) before income taxes, minority interest and equity in earnings (loss) of unconsolidated subsidiaries			(27,417	)			42,359				(8,165	)			75				6,852
Income tax (expense) benefit			14,454				(16,972	)			(2,315	)			(26	)			(4,859	)
			(12,963	)			25,387				(10,480	)			49				1,993
Minority interest			-				-				6				1,735				1,741
Equity in earnings (loss) of unconsolidated subsidiaries			17,028				1,747				-				(18,444	)			331
Net earnings (loss)		$	4,065			$	27,134			$	(10,474	)		$	(16,660	)		$	4,065

THE GREENBRIER COMPANIES, INC.

The Greenbrier Companies, Inc.
     Condensed Consolidating Statement of Cash Flows
     For the six months ended February 29, 2008
     (In thousands, unaudited)

						Combined				Combined
						Guarantor				Non-Guarantor
		Parent				Subsidiaries				Subsidiaries				Eliminations				Consolidated
Cash flows from operating activities:
Net earnings (loss)		$	4,065			$	27,134			$	(10,474	)		$	(16,660	)		$	4,065
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
Deferred income taxes			1,516				2,842				(428	)			66				3,996
Depreciation and amortization			258				13,021				3,271				(31	)			16,519
Gain on sales of equipment			-				(2,004	)			-				(2	)			(2,006	)
Special charges			-				-				2,302				-				2,302
Minority interest			-				-				(6	)			(1,675	)			(1,681	)
Other			(136	)			15				2				(1	)			(120	)
Decrease (increase) in assets
Accounts receivable			1				(13,356	)			1,086				-				(12,269	)
Inventories			-				(1,317	)			(1,322	)			-				(2,639	)
Assets held for sale			-				(60,748	)			(6,072	)			(140	)			(66,960	)
Other			411				(2,693	)			3,753				(4,639	)			(3,168	)
Increase (decrease) in liabilities
Accounts payable and accrued liabilities			(19,322	)			3,916				14,135				-				(1,271	)
Participation			-				(3,617	)			-				-				(3,617	)
Deferred revenue			(77	)			(624	)			(3,381	)			-				(4,082	)
Reclassifications (1)			(107	)			-				107				-				-
Net cash provided by (used in) operating activities			(13,391	)			(37,431	)			2,973				(23,082	)			(70,931	)
Cash flows from investing activities:
Principal payments received under direct finance leases			-				179				-				-				179
Proceeds from sales of equipment			-				6,414				-				-				6,414
Investment in and net advances to unconsolidated subsidiaries			(21,678	)			(1,069	)			-				23,094				347
Intercompany advances			(46,659	)			-				-				46,659				-
Decrease in restricted cash			-				-				547				-				547
Capital expenditures			(1,155	)			(6,577	)			(8,266	)			-				(15,998	)
Net cash provided by (used in) investing activities			(69,492	)			(1,053	)			(7,719	)			69,753				(8,511	)
Cash flows from financing activities
Changes in revolving notes			66,400				-				(2,141	)			-				64,259
Intercompany advances			-				41,325				5,334				(46,659	)			-
Proceeds from issuance of notes payable			-				12				-				-				12
Repayments of notes payable			(660	)			(2,868	)			(655	)			-				(4,183	)
Dividends			(2,605	)			-				-				-				(2,605	)
Stock options exercised			1,743				-				-				-				1,743
Tax expense of options exercised and restricted stock awards dividends			(3	)			-				-				-				(3	)
Investment by joint venture partner			-								4,650				-				4,650
Net cash provided by (used in) financing activities			64,875				38,469				7,188				(46,659	)			63,873
Effect of exchange rate changes			(21	)			15				1,213				(12	)			1,195
Increase (decrease) in cash and cash equivalents			(18,029	)			-				3,655				-				(14,374	)
Cash and cash equivalents
Beginning of period			15,422				-				5,386				-				20,808
End of period		$	(2,607	)		$	-			$	9,041			$	-			$	6,434